“Middle-class families shouldn’t pay higher taxes than millionaires and billionaires. That’s pretty straightforward. It’s hard to argue against that,” President Obama said yesterday. I agree with Obama on this one. Then I read an interesting Fact Check piece titled: Are Rich Taxed Less than Secretaries?
According to this article, the data tells a different story. Stephen Ohlemacher writes, “…the wealthiest people in America pay a lot more in taxes than the middle class or the poor… They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.”
So just how big is the million dollar earner group and what percentage do they fork up to Uncle Sugar? In 2009, 237,000 households filed taxes with the IRS in amounts of $1 million or more in income. Of that amount less than 1% paid no taxes at all.
This year households who are in the millionaire earners club will pay an average of 29.1% of their income in federal taxes which includes income and payroll taxes. As a point of comparison, this year those who make between $40-50k will pay about 12.5% on average. Those making $50-$75k will pay on average 15% of their income in federal taxes.
The gist of Buffett’s and Obama’s complaint is that investment income is taxed at a maximum of 15% versus the highest income tax bracket of 35%. Those who make most of their money on investment income, like Warren Buffett who only earns about $100k in salary, make out like bandits.
Also helpful to Buffet is his buy and long-term hold strategy. You only get taxed on your investments when income is realized through a taxable event like a dividend or selling a stock.
I happen to be a Republican who feels that those who are fortunate enough to earn $1 million/year should step up to the plate and pay more. If that means higher taxes on investment income, so be it.
Let’s just not pretend there is more than a handful of secretaries out there who are paying at a higher tax rate than Warren Buffett. Let’s not also fool ourselves that the relative small group of 237,000 Americans who earn a million dollars or more can get us out of a multi-trillion dollar problem.
