Mitt Romney's Tax Plan

[Kestrel]

I dont see someone who makes $14k a year paying property taxes, local are usually adjusted by income level (at least here they are.. and that would be below poverty level) so she probably wouldnt pay those...

One of the biggest tax misconceptions is that low income people pay little or nothing in property taxes, since they usually don't pay them directly. That's because most low income people (below retirement age) rent instead of owning their homes.

In states with a homestead exemption on property taxes, renters actually pay much higher property taxes than homeowners. The homestead exemption is meant to make the property tax a progressive tax, but winds up hitting landlords the hardest since income properties are automatically disqualified from the exemption. Landlords, of course, either pass these increases right along to their tenants or get out of the rental business.

I remember being in a "back to school night" meeting where the school principal (who held a doctorate degree but seemed to have skipped math) encouraged everyone to vote "yes" on the property tax increase. She told the parents that, since many of them were renters, they paid no property tax. So the parents could vote for the rich people to pay for new stuff at the schools and their children would get the new stuff for free. The tax increase passed, then all these "I don't pay property tax" parents wondered why their rents suddenly jumped.

[Pantherphil]

These debates about who pays what rate always make my head spin. The analysis is always incomplete and simplistic. Too many political partisans trying to make sound bite talking points.
Renters generally don't pay property taxes directly (although some rental agreements for single family homes do make the tenant responsible for paying taxes directly to the town)-- the landlord generally pays the tax but the rent charged to the tenant is designed to enable the landlord to pay that tax. So the renter is paying the property tax indirectly. But at least in my State, a low income renter can qualify for a "circuit breaker" rebate on his income tax return which may mitigate that burden..
Residential property owners do pay property taxes but they may qualify for local homestead or reduced assessments or from a state rebate program for low income folks. We have a "circuit breaker" program for low income homeowners and local assessors can "abate" the property taxes of those who are "unable to contribute to the public charges." In theory, folks with more valuable properties pay a higher property tax than those with less valuable properties. But in any given town there may be anomalies in property valuations which cause apparent injustices and there may be gross differences in property tax burdens from one local assessing district to another. A taxpayer with a home in a town with a lot of valuable business property may pay less than a taxpayer with a comparable home in a town with less valuable properties. That's why folks look at local tax rates when they think about purchasing a home in a particular community.
Note that "commercial" landowners often pay higher property tax bills (which are passed through to the renters) so, in the absence of a circuit breaker program, the poor renter may actually have a higher effective property tax burden than the poor homeowner.
So there are lots and lots of variables in determining whose paying property taxes.

It is true that many low income workers, particularly those with children, may not be subject to actually paying any federal or state [u]income [/u]taxes because the available personal exemptions, standard and itemized deductions, child care tax credits, educational tax credits, earned income credits, and other allowable credits eliminate any actual tax liability-- any income tax withheld is essentially refunded and many get back more than they paid in due to the available refundable credits. Plus, many low income taxpayers receive additional benefits which are not counted as income-- disability payments, food stamps, a portion of Social Security, etc. So the fact of the matter is that folks can have a fairly substantial cash inflow without having to pay any income taxes.

Even poor wage earners pay Social Security, FICA, OASDI, and other payroll taxes, and these are often a signficant burden on a family. (13.3% of income this year with the 2% reduction in the employee's portion). Again, there's a fair amount of confusion due to the structure of the Social Security "contribution" in which half is withheld from the employee's paycheck and the other half is paid by the employer.

Self employed folks are subject to the self employment tax on their self employment income. Again, your talking about 13.3% off the top. A lot of the low income folks that I do pro bono work really get caught with this one. Their "employer" misclassifies them as "independent contractors" rather than take responsibility for payroll taxes and employee benefits even though the work that many of these folks do as "contractors" such as house cleaning, clerical work and billing, on line sales, drywall hanging, painting, and other construction trades could easily be reclassed as work performed by "employees." I've had to help out a number of fishermen who were shocked to learn in January that they needed to come up with the self employment tax on their earnings. On the other hand, that 13.3% self employment tax can do the poor self employed a world of good by enabling the worker to earn covered quarters of employment for Social Security retirement, disability and survivor benefits.

Of course, we Quatloosians know that there are a fair number of folks out there working in the underground economy who consider self employment taxes and income taxes optional and these folks can sometimes fly under the radar screen for a while.

Low income folks do pay sales taxes in many states but there are often exemptions for "necessities" such as food, clothing, residential electricity, home hearing fuel, etc. These exemptions vary from State to State so it's hard to tell how much of a bite the sales tax actually takes from a given taxpayer. At least in theory, the rich will pay more sales taxes in the aggregate because they will buy more and they will buy more products which are not exempt. But as a percentage of cash available, it's not always easy to define the sales tax burden.

Low income folks with automobiles will pay a variety of taxes and excises which again will vary from State to State. In my state there is no personal property tax but there is a sales tax applicable when you buy a car and a vehicle excise tax which is assessed annually on a scale based on the age and MSRP of the vehicle. A poor person driving an old beater will pay a low tax, the rich guy in his BMW will pay more for the privilege. We all pay fuel taxes which are essentially a function of how much we drive. We all pay registration fees.

Folks pay a whole passel of specialized excise taxes-- tobacco, alcohol, meals and lodging, amusements, etc. -- which vary from State to State and there are a whole bunch of hidden taxes and charges (look at your telephone and electric or cable television bill for some examples of hidden taxes and fees).

And we all may be charged for other government services and fees which, while technically not taxes, are a governmental imposition. (For example, I pay my Town a dog license fee, a transfer station access fee, a municipal water district assessment (even though I'm not currently on the public water line they are "ready to serve"), a fishing license, and probably a few other direct fees that I haven't remembered). I had to pay a building permit fee last summer to put an addition on my barn and I also had to pay an "inspection fee" for the electrical and water hookups. At the super market I pay a bottle deposit, an electric battery disposal fee, an appliance disposal fee for many bulky waste items such as refrigerators, a waste oil disposal fee, a "trash bag" fee to buy the mandatory "trash bags" required by our recycling program,and a variety of other fees and charges which the supermarket collects for the government.

So we need to get away from these simplistic claims that over half of Americans "don't pay taxes" and look at the issues more closely.

When you count in everything, a lot of us are paying a lot more taxes than we think we're paying when we fill in our Form 1040 and look at the income tax line.

[webhick]

I dont see someone who makes $14k a year paying property taxes, local are usually adjusted by income level (at least here they are.. and that would be below poverty level) so she probably wouldnt pay those and our state taxes are based entirely off of federal returns, right down to the EIC, which she would qualify for.

Little quibble here: EIC cuts off at $13,660 for single with no kids. And the closer you get to that limit, the less of it you actually get. Last year, off $13,172 in income, EIC was only $37 and I paid $368 in taxes. It's a simple return with no kids and the standard deduction.

I stand corrected. Was that gross or AGI? Does your state carry over EIC and poverty level adjustment like Maryland does?

Gross. I am also not on any assistance, government or otherwise. NH has no state income tax, which they make up for in property taxes - which as others have pointed out is reflected in my rent. My one bedroom apartment runs $750/mo, no utilities included. And it's not even up to code.

[JamesVincent]

So we need to get away from these simplistic claims that over half of Americans "don't pay taxes" and look at the issues more closely.

When you count in everything, a lot of us are paying a lot more taxes than we think we're paying when we fill in our Form 1040 and look at the income tax line.

The arguments that are coming out in the media and among all the "heads" are that the "super rich" arent paying enough income tax. Every American that buys something pays a tax somewhere. I smoke therefore I pay an excise tax on cigarettes, I live in Maryland so I pay a higher one then most states. I drive my truck so I pay a gas tax, it doesnt get the best mileage in the world so I pay a lot of that tax. I buy stuff for me and the kids so I pay a sales tax, 6% here in MD. We go to state parks when we can so we pay a fee to get in on weekends for the state to supposedly maintain the parks. Everything we do is taxed or has a fee assessed somewhere.

Im self-employed and have been for years so I get to pay a tax for the privilege of working for myself, I also get to write some of the other stuff off. Which makes sense since Im the one that has to put the money out to begin with, just like any business owner. There is no argument that everyone in this country pays taxes somewhere, you have to if you live and do anything in it unless you are completely on welfare and live in Section 8 housing and live off of foodstamps and other government subsidies. My son gets SSDI, as far as Im aware of I pay taxes on it this year since Im still working and it gets counted as income.

As far as what the arguing is all about, you have a whole segment of society that is convinced that people like Buffet either pay no taxes at all or pay very little, while in fact the pay a great deal of what income this country uses to operate. And are using examples of a $14k secretary paying 37% income tax to make him seem an evil person, not all other taxes combined, which we all pay, income tax. Without actually going through and doing her refund for her on the tables for 2001-2012 the standard deduction is $5800 which would make her AGI $8200 which would drop her to the lowest tax table and get her an EIC of $416. Without knowing how much she had actually paid in over the year, unless she claimed like 3 and didnt have 2 dependants, I dont see how she would have owed anything and wouldnt get a refund.

[webhick]

Without actually going through and doing her refund for her on the tables for 2001-2012 the standard deduction is $5800 which would make her AGI $8200 which would drop her to the lowest tax table and get her an EIC of $416. Without knowing how much she had actually paid in over the year, unless she claimed like 3 and didnt have 2 dependants, I dont see how she would have owed anything and wouldnt get a refund.

A few quibbles:
1. In order to qualify for EIC, both the AGI and the earned income (includes gross wages) have to be below the threshold.
2. AGI consists of wages, taxable interest, unemployment and certain kinds of dividends. The standard deduction doesn't even factor into it. The deduction does, on the other hand, factor into taxable income.
3. I didn't say I owed the government and I didn't say I didn't get a refund.

You know, all they'd have to do to even the tax rates out is to drop the standard deduction to $0. That would squarely place me at 15% which is what the rumor is that rich folk pay. Still don't quite see how anyone came to the 37% conclusion. Would have liked to see the workpapers on that.

[Number Six]

More good books recommended by David Cay Johnston, focussed on taxation and corporations:

http://prospect.org/article/three-big-tax-lies

[JamesVincent]

Without actually going through and doing her refund for her on the tables for 2001-2012 the standard deduction is $5800 which would make her AGI $8200 which would drop her to the lowest tax table and get her an EIC of $416. Without knowing how much she had actually paid in over the year, unless she claimed like 3 and didnt have 2 dependants, I dont see how she would have owed anything and wouldnt get a refund.

A few quibbles:
1. In order to qualify for EIC, both the AGI and the earned income (includes gross wages) have to be below the threshold.
2. AGI consists of wages, taxable interest, unemployment and certain kinds of dividends. The standard deduction doesn't even factor into it. The deduction does, on the other hand, factor into taxable income.
3. I didn't say I owed the government and I didn't say I didn't get a refund.

Ill think of something else to say when Im done flossing with my shoelace.

[Number Six]

Good article that goes into the details on how taxes are skewed:

http://www.nytimes.com/2012/02/18/busin ... f=business

[jg]

My son gets SSDI, as far as Im aware of I pay taxes on it this year since Im still working and it gets counted as income.

No, you will not include in individual income or pay tax on the SSDI that is given to your son.
Your son will include in individual income and pay tax on the SSDI; but only if his other income is more than $25,000 for the year.

See http://www.irs.gov/newsroom/article/0,, ... 91,00.html for more information.