Are The Wealthy Paying Their Fair Share?

There has been much talk about taxes this campaign season, what it will do, who it will affect, what is fair, as well as a controversy over the definition of “rich”. Let’s take a look at a random figure, say $250,000. Let’s call that rich. How would they fare if the Bush tax cuts were rolled back?

When the subject of taxes has come up, naturally the main focus (at least for this presidential campaign) has been on federal taxes. But individuals and businesses are being taxed from all sides already, so to add to this burden would…well let’s do the math.

We’ll pick a random state-like California. Ok, let’s take a small business owner making $250,000 a year in sunny California. Assuming the Bush tax cuts are rolled back, this person would be in a 39% federal tax bracket. That stings, but if you’re making 250k…The state would like a piece of the pie as well. Our small business owner will be paying 9.3% in state income taxes in California. A little more than a sting now. Pile on a sales tax of 7.25%, with local governments adding on to that and our small business owner is getting less rich by the minute. We can’t forget the gas tax, which for this example is 45.5 cents a gallon in California. Throw in property taxes, various municipal taxes, and our theoretical business owner is being hit from all sides.

But wait! This is a business owner, and as such, that business is subject their own set of taxes. What about employer payroll taxes?
Employer Payroll Taxes
Companies are responsible for paying their portion of payroll taxes. These payroll taxes are an added expense over and above the expense of an employee’s gross pay. The employer-portion of payroll taxes include the following:

* Social Security taxes (6.2% up to the annual maximum)
* Medicare taxes (1.45% of wages)
* Federal unemployment taxes (FUTA)
* State unemployment taxes (SUTA)

FICA Taxes
FICA stands for the Federal Insurance Contributions Act. The FICA tax consists of both Social Security and Medicare taxes. Social Security and Medicare taxes are paid both by the employees and the employer. Both parties pay half of these taxes. Employees pay half, and employers pay the other half. Together both halves of the FICA taxes add up to 15.3%. The 15.3% FICA tax is broken down as follows:

* Social Security (Employee pays 6.2%)
* Social Security (Employer pays 6.2%)
* Medicare (Employee pays 1.45%)
* Medicare (Employer pays 1.45%)

Now if our business owner falls on hard economic times, and the business isn’t doing as well as it normally would (it could happen), then at least some of these payroll taxes will be coming from-well, that would be an internal business decision.

In this theoretical(?) scenario, just the federal and state income taxes brings down the gross of 250k to $129,250. A far cry from the original income. Home prices are high in California. That kind of income may not even qualify you for a home loan.

How about responsible government spending in lieu of taxes? Mission Impossible.

The World Of rjjrdq

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This entry was posted in America, Money and tagged , . Bookmark the permalink.

2 Responses to Are The Wealthy Paying Their Fair Share?

  1. I couldn’t have said it better myself!

    Jesse W.
    http://www.subprimeblogger.com

  2. Pingback: Dem Hack Declares Republicans Terrorists « rjjrdq's America II

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