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Friday, November 28, 2014 / PROGRESSIVE JOURNALISM FOR POSITIVE ACTION
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Happy Tax Day and Why the Top 1 Percent Pay a Much Lower Tax Rate than You

Robert Reich
NationofChange / Video Report
Published: Wednesday 16 April 2014
Robert Reich has a special Tax Day message, explaining why the wealthiest 1 percent pay a much lower tax rate than the rest of us—and what we can do about it.

It’s tax time again, April 15, when our minds turn toward paying the taxes we owe or possibly getting a tax refund. But what we don’t think about enough is whether our tax system is fair. The richest 1 percent of Americans are now getting the largest percent of total national income in almost a century. So you might think they’d pay a much higher tax rate than everyone else. 

But you’d be wrong. Many millionaires pay a lower federal tax rate than many middle-class Americans.

Some don’t pay any federal taxes at all. That’s because they‘re allowed to deduct from their taxable income such things as large interest payments on mortgages for huge homes, also the costs of business entertainment and conferences  (aka vacations at golf resorts), and gold plated health care plans.

Some also take advantage of tax loopholes that let them park some of their earnings in offshore tax havens like the Bahamas or the Netherlands Antilles.

And other loopholes that allow them to treat some income as capital gains – subject to a much lower tax rate than ordinary income. If you happen to be a hedge-fund or private-equity manager, there’s a capital gains loophole designed especially for you.

Consider the Social Security payroll tax and the situation is even more lopsided. That tax applies to every dollar of income up to a cap — which this year is $117,000. Anything earned above the cap is not subject to Social Security taxes at all – meaning anyone with a high income pays a much smaller percentage of it in Social Security taxes than most people do.

Put these all together and you see why Warren Buffet, the second richest person in America, pays a lower tax rate than his secretary, as he readily admits.

State and local taxes are even more regressive. The poorest fifth of Americans pay an average state and local tax rate of over 11 percent, while the richest fifth pay only 5.6 percent. This isn’t small change. State and local taxes account for about 40 percent of all government revenues. 

Believe it or not, Republicans want to make all this worse by cutting taxes on the wealthy even more. Paul Ryan’s new budget doesn’t just slice Medicare, education, and food stamps. It also lowers the top federal tax rate to 25 percent. 

When the rich are let off the hook in all these ways, the rest of America has to pay more in taxes to make up the difference – or have services cut because government doesn’t have the funds.

This article was originally posted on Robert Reich's blog.



Author pic
ABOUT Robert Reich

 

ROBERT B. REICH, one of the nation’s leading experts on work and the economy, is Chancellor’s Professor of Public Policy at the Goldman School of Public Policy at the University of California at Berkeley. He has served in three national administrations, most recently as secretary of labor under President Bill Clinton. Time Magazine has named him one of the ten most effective cabinet secretaries of the last century. He has written thirteen books, including his latest best-seller, “Aftershock: The Next Economy and America’s Future;” “The Work of Nations,” which has been translated into 22 languages; and his newest, an e-book, “Beyond Outrage.” His syndicated columns, television appearances, and public radio commentaries reach millions of people each week. He is also a founding editor of the American Prospect magazine, and Chairman of the citizen’s group Common Cause. His widely-read blog can be found at www.robertreich.org. Robert Reich's new film, "Inequality for All" is available on DVD
and blu-ray, and on Netflix in February.

I was waiting for the...and

I was waiting for the...and what we can do about it...but in this article it just tells us how the rich use loopholes. Does that mean we need to find out what the loopholes are and use them too? And when speaking of the loopholes, HOW can and why does the congress not do away with loopholes!!! What the?

No offense but you had the

No offense but you had the com and still couldn't do anything! If the democratic party has not come up with a solution then why would it now you may be able to
hold the status quo for a few more years and the republicans might not get all that they want but you have not come up with any good solutions either.
Wheres the brilliant newcomers with fresh new ideas for prosperity for all citizens.
If either party cant lead then they need to get out of the way.
How about real estate raffles instead of the thirty year mortgage? How about aquaponics in each city for safe food sources and much less water consumption. How about chicken farms in every city for safe free range chickens all providing jobs and low cost food and less carbon from transporting. All three of these ideas put money in the hands of average citizens to spend in the local economy but neither party has anything close to that they do have the same old arguments with no new solutions. So the rich can keep their money but they do need to get out of the way pretty please and so do you.

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