Monday, April 18, 2016

Jake is Rich. He Pays Taxes. Part 2

So what is rich? Well many people think it's anyone who makes more than they do which is really just hidden jealousy in my opinion. The IRS and society actually agree for the most part its anyone with income over $250k. Also we hear quite a bit that rich people don't pay taxes. Well we started to put that false claim to rest in a previous post. Now I'll finish off the ridiculous propaganda once and for all. RICH PEOPLE PAY A LOT OF TAXES.

For this post we have Jake making $175k/yr as the CEO for the same medium sized company Erin works for. Jake isn't part of the 1%, but he does make it within the top 20% of all Americans. Jake owns a $750,000 home and must pay all the same taxes as his co-worker Erin.  Jake has total expenditures subject to sales tax of 41,331. To keep things simple we are assuming the following facts. For one Jake is only taking the standard deduction and not itemizing(which he likely would do). Nor are we making any adjustments to gross income before the standard deduction is taken. Also we are assuming Jake has health insurance through his work. He is the boss so it is very likely he has it as a benefit.  So let's see what the total amount of taxes for 2015 will be.

Federal Income Tax*$39,187
Social Security 6.2%**$7,347
Medicare 1.45%$2,538
State Income Tax 3.5%***$5,905
State Sales Tax 7%$2,893
Property Tax 1.18%$8,850
Misc Excise Taxes/Fees$350
Tax as % Gross Income38.32%

Quite the staggering amount when you think about it. Jake actually paid more in total taxes than most people make for the year.  His total tax burden comes to roughly 38% of his gross pay.  Seems more than reasonable to me. Put another way Jake pays enough in taxes for two families of 4 to live off $33k/yr if they were to receive full government assistance.  That is more than enough to provide basic living, food, transportation, and health care.

 As tax season comes to an end and the campaign trail heats up hopefully you can see past the rhetoric more clearly.  We all pay taxes no matter what.  Asking one person to shoulder more in reality isn't fair. We are all created equal right? I'm pretty sure the Bible and our Declaration of Independence state that as an absolute fact. So why is it our tax code determines we are not equal?  

*Jake was given the standard deduction and personal exemption in calculating his taxes.
**Social Security taxes for 2015 are capped at incomes up to $118,500
***Calculated using the federal standard deduction.

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