September 22, 2008
IN RESPONSE TO MY EARLIER "SHARED SACRIFICE" POST, reader Cheryl Drury suggests an interesting analogy:
Totally agree with you on this, and have been saying it (to myself, big help) for a long time. I think everyone should pay something like the lesser of 10% of some sort of AGI and $100. Just something. Insurance companies learned this lesson a long time ago: with even a minmal co-pay, say $5, the doctor's service is much more highly valued. With any co-pay, the rate of use of the insurance, just looking at numbers of appointments, drops off sharply. Then the difference in utilization rates between a $5 and a $10 co-pay is much, much smaller.
In my experience with volunteer organizations, if you can get people to pay even a very small amount for an activity they are FAR more likely to show up. There is just something about a buy-in that gives people an emotional stake in the event. Think what a more informed electorate we MIGHT have if everyone had to just pay a little.
Especially if what they paid varied according to how much Congress spent. And here's a related proposal: "Taxes should be paid by check, by taxpayers. Indeed, if I could have my way, election day and tax day would be the same day and the back of your check would be your ballot."
Meanwhile, reader Mark Howell writes:
If my federal taxes are any indication then the middle class is almost certainly not paying its "Fair Share" of federal taxes. My tax position is utterly ordinary. Married with three kids, gross annual income of approx $68K. I take only the standard deductions (no Schedule A) and received the Child Tax Credit for all three children. My total tax bite for each of the last three years was approximately $900/year, or barely over 1%.
So Obama and McCain can talk all they want about cutting taxes for the middle class but, in reality, there's just not much left to cut. The really big hits to my pocketbook come from FICA and, now, orthodontia.
Promise free braces and they might score a lot of votes . . . .
UPDATE: Some readers wonder if Mark Howell can be right about his taxes. If not, he'll probably be hearing from the IRS sooner or later.
ANOTHER UPDATE: Reader Rob Pinson emails:
Former student (and tax attorney) here. Mark's taxes sound about right. First, he takes the standard deduction which knocks his taxable income from 68K to around 56K. Then, he takes FIVE personal exemptions, each around 3400, which knocks it down further to 39K. Assuming no other deductions, his approximate tax on this amount is about 12% (or even less)--around $4500. The child tax credit may be $3000, reducing his tax to $1500. He may have a couple of additional deductions/credits in there. But $900 does not sound that wrong. I have a far higher income but my total tax will be about a third of what my gross income indicates because of personal exemptions, home mortgage deductions, state taxes, child tax credit, etc. For my area, I am upper-class, I think my taxes are pretty darn good given my gross income level.
I'm not as pleased with my taxes. But the Insta-Wife does them, so she gets much more upset than I do. And reader Dan Woodbury emails:
The Bush tax cuts were a boon to the middle class and everyone as a matter of fact. The lower tax rates helped but the biggest factor was the child tax credit. The credit used to be phased out by the time AGI hit $50K. With the Bush tax cut one could benefit with an AGI over $100K, making it possible for a family to earn 6 figures and pay roughly 2% of their AGI in income tax.
I don’t know who is paying taxes in America but middle class families are not doing much of the heavy lifting. Actually I do know who is paying taxes – all those multimillionaire CEOs, Hollywood stars, high-priced doctors and attorneys and pro-athletes. And rich single folks. God bless them for their tax paying generosity. Do they appreciate how patriotic they are? I do.
I think everyone should pay.
MORE: Howell emails:
Crap, Glenn. I was just quoting 1040 numbers off the top of my head. After seeing it splashed all over the web I went back to dig out my 2007 return and my W2. Some clarifications.
The $68K gross is correct, however,
1) Cost of medical insurance, about $6K, is pretax which brings the Social Security wages down to $62K.
2) Forgot to include the 401K Contribution, another $6K, which brings the taxable down close to
$56K, which is number reflected on my W2. Added odds and ends bring the total income up to $59K.
Other than that though ... nothing remarkable. Just the standard deduction, the five exemptions for each family member and the three child tax credits. Total tax bill: $969.
Approximately 10% of my total orthodontia bill. By this time next month all three kids will be in braces.
Ugh. Happily, the Insta-Daughter has naturally straight teeth.