January 26, 2012
By Joseph J. Thorndike
So what did we learn from Mitt Romney’s tax returns? On one level, not much. The guy makes a lot of money. Big deal. He shows no wage or salary income; instead, he lives off his investment income. Again, big deal.
All in all, the Romney returns — all 500-plus pages of them — are a predictable yawn, at least for anyone seeking scandal and salacious detail.
Still, their release is important. On one level, it provides a measure of reassurance that the candidate is playing the tax game straight, if perhaps a bit aggressively.
But the real value of Romney’s disclosure is educational. Tax returns of the rich and famous have a way of highlighting important policy issues that often get ignored in public debate.
In the 1930s, for instance, President Franklin D. Roosevelt leaked the names of well-heeled tax avoiders, as well as details from their tax returns, hoping it would grease the skids for progressive tax reform. The gambit worked.
Rich, Gingrich and crazy rich
And in 1969, when the Treasury Department disclosed that 155 high-income households had paid no income taxes, the resulting uproar started the nation on its long and unhappy journey to the modern alternative minimum tax. And that was without specific details about the identities of those taxpayers.
September 20th, 2011
The Huffington Post
By: Stephen Ohlemacher
President Barack Obama makes it sound as if there are millionaires all over America paying taxes at lower rates than their secretaries.
“Middle-class families shouldn’t pay higher taxes than millionaires and billionaires,” Obama said Monday. “That’s pretty straightforward. It’s hard to argue against that.”
The data tell a different story. On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. 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.
There may be individual millionaires who pay taxes at rates lower than middle-income workers. In 2009, 1,470 households filed tax returns with incomes above $1 million yet paid no federal income tax, according to the Internal Revenue Service. That, however, was less than 1 percent of the nearly 237,000 returns with incomes above $1 million.
In his White House address Monday, Obama called on Congress to increase taxes by $1.5 trillion as part of a 10-year deficit reduction package totaling more than $3 trillion. He proposed that Congress overhaul the tax code and impose what he called the “Buffett rule,” named for billionaire investor Warren Buffett.
The rule says, “People making more than $1 million a year should not pay a smaller share of their income in taxes than middle-class families pay.”
“Warren Buffett’s secretary shouldn’t pay a higher tax rate than Warren Buffett. There is no justification for it,” Obama said. “It is wrong that in the United States of America, a teacher or a nurse or a construction worker who earns $50,000 should pay higher tax rates than somebody pulling in $50 million.”
Buffett wrote in a recent piece for The New York Times that the tax rate he paid last year was lower than that paid by any of the other 20 people in his office.
This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.
Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.
Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.
The latest IRS figures are a few years older – and limited to federal income taxes – but show much the same thing. In 2009, taxpayers who made $1 million or more paid on average 24.4 percent of their income in federal income taxes, according to the IRS.
Those making $100,000 to $125,000 paid on average 9.9 percent in federal income taxes. Those making $50,000 to $60,000 paid an average of 6.3 percent.
Obama’s claim hinges on the fact that, for high-income families and individuals, investment income is often taxed at a lower rate than wages. The top tax rate for dividends and capital gains is 15 percent. The top marginal tax rate for wages is 35 percent, though that is reserved for taxable income above $379,150.
With tax rates that high, why do so many people pay at lower rates? Because the tax code is riddled with more than $1 trillion in deductions, exemptions and credits, and they benefit people at every income level, according to data from the nonpartisan Joint Committee on Taxation, Congress’ official scorekeeper on revenue issues.
The Tax Policy Center estimates that 46 percent of households, mostly low- and medium-income households, will pay no federal income taxes this year. Most, however, will pay other taxes, including Social Security payroll taxes.
“People who are doing quite well and worry about low-income people not paying any taxes bemoan the fact that they get so many tax breaks that they are zeroed out,” said Roberton Williams, a senior fellow at the Tax Policy Center. “People at the bottom of the distribution say, but all of those rich guys are getting bigger tax breaks than we’re getting, which is also the case.”
Treasury Secretary Timothy Geithner was pressed at a White House briefing on the number of millionaires who pay taxes at a lower rate than middle-income families. He demurred, saying that people who make most of their money in wages pay taxes at a higher rate, while those who get most of their income from investments pay at lower rates.
“So it really depends on what is your profession, where’s the source of your income, what’s the specific circumstances you face, and the averages won’t really capture that,” Geithner said.
April 6, 2010
By: Kim Dixon
The Internal Revenue Service could tap individual tax returns to collect fines against people who fail to buy health insurance as required under recently enacted healthcare legislation, the U.S. tax commissioner said on Monday.
Most individuals are required to get health insurance under the new law, or face penalties that would be phased in over time. By 2016, people without coverage could see fines of 2 percent of their income.
Subsidies would help poorer people buy coverage, and states would set up exchanges to allow individuals and small groups shop for insurance.
People who do not comply would be levied penalties, and if they don’t pay them the penalties could be taken out of their tax refunds.
“There has been some insinuation about how we are going to approach our job,” IRS Commissioner Douglas Shulman said after speaking at the National Press Club.
Under the new law, the IRS cannot seize assets or levy fines, so Shulman said refunds were the most obvious option to collect penalties.
The new law aims to expand coverage to about 32 million uninsured Americans.
Last month, President Barack Obama signed the legislation, which passed both houses of Congress with backing only from his fellow Democrats. Republicans have been attacking the bill ever since, calling it an overreach of government power.
Representative Dave Camp, a senior Republican on the tax-writing Ways and Means committee in the U.S. House of Representatives, issued a report shortly after its passage arguing that law “dangerously expands IRS authority.”
“The individual mandate would create millions of captive customers for health insurance companies, with the IRS acting as the enforcement agency for those companies,” Camp’s report asserted.
Shulman also dismissed claims by Republicans that the government would need to hire 16,500 agents to enforce the new rules.
“That is a made up number. The only official numbers come from the IRS, which I have to sign off on. We don’t have a number yet,” Shulman said.
A staffer for Republicans, which circulated the 16,500 estimate, defended it on Monday.
The staffer said the number was based on an estimate by the Congressional Budget Office that $10 billion would be needed to implement the law over a decade, subtracting $1 billion for administration costs.
“If it’s not 16,500, how many thousands of people will the IRS have to hire to enforce their portion of the bill?,” the aide, who was not authorized to be quoted by name, said. “How is the IRS going to spend billions of dollars in taxpayer money to enforce its portion of the bill?”
Shulman, appointed by former President George W. Bush and retained by Obama, said the U.S. health department and insurance companies would determine if individuals have purchased acceptable levels of coverage.
“There are not going to be IRS agents having discussions with the American people about the intimate details of their health insurance,” Shulman said.
None of the provisions related to individual taxpayers come into force this year, with most phased in in 2013 and 2014, he said.