Americans are under-taxed

It must be nice to be paid to just spin figures and pull stuff out of your ass all day.

I like how it addresses just 1 type of tax, federal..

...and still it fails to address Alternative Minimum Tax (even AMT post-patch) at how someone can actually have a higher federal effective tax vs their own marginal tax in high tax paying states..

did they even consult with a CPA on this advertorial?

"...and still it fails to address Alternative Minimum Tax (even AMT post-patch) at how someone can actually have a higher federal effective tax vs their own marginal tax in high tax paying states.."

Your math skills have to be really, really, really bad to think that could ever happen.

since AMT apparently doesn't exist in this advertorial, a 15%/25% marginal tax rate filer that gets income pushed to the 26%/28% apparently 'non-existent' AMT brackets must still be paying marginal of 15/25, right?.. yes let's leave that tidbit out.. and the additional SE tax for all those getting a second/wkend job to shell out more to bureaucrats, that technically isn't part of regular "federal taxes" for this advertorial right? cherry pick, let's.

should be an award for those who cite dubious sources - jason and rs would be running neck and neck for sh*t in and sh*t out.

mcclatchy newspapars, now thats journalism.

*newspapers*

hol4 : While the AMT can definitely be a bummer for people that pay high state/local taxes, the math doesn't come close to working for your conclusion that someone would pay

Unless you're in a really esoteric AMT position like income on non-exercised ISOs or who derives almost all of their money through otherwise tax-exempt bonds, I don't think it's a stretch to say that there's no one who would otherwise be paying a 15% marginal rate who is actually paying the AMT. In fact, it would take a very odd set of circumstances to get someone from the 25% bracket into the AMT. If you think this can happen, propose some scenario where you actually think it shows up.

jordyn..so what is it, you first suggest it can't happen.. now you backpeddle and imply it's rare?

"In fact, it would take a very odd set of circumstances to get someone from the 25% bracket into the AMT."

-like having kids?

-having work deductions > 2% AGI?

-claiming retired parents as dependents?

-paying higher property taxes compared to national average?

-having work related tuition claimed on Schedule A?

-paying city tax?

-living in a (relatively) high tax state (yes because states aren't raising them now for more income)?

..notice how non of the above just affect "high income earners" or special "odd" cases which aren't even mentioned

you get households < $150,000 in tri-state get hit with AMT post-patch.

..please sit down with your CPA, as your limited understanding of AMT shines brightly..

..where is AMT even mentioned in the advertorial?

but tbh, you don't deserve further response since you've already shown yourself as someone with another agenda...

..as you've already flat out lied back-peddled.. first it's impossible for the situation to happen and now it's "rare"?

***you get households < $150,000 (that's < $75k for EACH spouse) in tri-state get hit with AMT post-patch.

hol4: I'm still waiting for an example set of numbers that would make your original assertion true. You don't even need to try to make the 15% bracket work; you just need to show an example of how the numbers would work such that your effective rate is higher than your marginal rate.

I hate the AMT as well (as long as we're talking political leanings--it's basically a tax on blue states) but let's get real about its actual effects.

The AMT IS is the numbers. These are all based ACTUAL taxes paid. Did you guys even READ the article?

Jason: There's some discussion of rates in the article. I think that's what hol4 is taking issue with, or at least I'm giving him the benefit of the doubt. I agree that most of the numbers are talking about personal income taxes in aggregate.

hol4: I decided to help you out and do some math for you. This is a very favorable scenario for your point of view, and demonstrates how far off base your original assertion was. Assume a family of 6, married filing jointly. Mom and Dad end up with an AGI of $200,000. For simplicity's sake, I decided on a highly over-stated NYC+NY tax rate of 10%, or $20K. In addition to the 4 kids, the parents take care of two of the grandparents, so there's a total of 6 dependents. On top of that, there's $10K of real estate taxes (I guess they paid in cash--no mortgage interest since it's also deductible under the AMT) and slightly more than $11K of work-related expenses.

These people definitely pay the AMT--it's about a quarter of their total tax bill ($9,725 of $36,413)--but even though they are at the *very* top of the 25% tax bracket and take about every common disallowed deduction/exemption, their effective tax rate is still only 18.2%, so nowhere near being higher than their marginal rate.

..again, no idea why you keep cherry picking #'s or speaking on a subject you obv have limited knowledge on, please speak with (or fire) your CPA ..

inputting those numbers in 2010 program one gets to your total tax exactly at $36,413 dollar for dollar..one gets AMT of $9,081 (used $11,200 net work expenses from your example in sch A)

marginal at 28%, and effective at 26.08%, so far so good

...never minding the fact that property taxes in your example are quite low for 6 people but let's play along..

now let's assume not everyone is not so rich as in your world and let's give them $10,000 mtge interest paid..

marginal 25%
effective 25.59%

...and this can never happen per your above statement? had one spouse had a 1099 immaterial to the 200k AGI, that would even add SE tax which would make the spread grow larger..

now let's take another example as not everyone is privy to pay cash on a house, your highness...

couple MFJ 130k AGI combined 5 dependents (instead of 6 to help you out), same 10k property taxes, 15k mtge interest paid, just above 11k work expenses from your work example...

marginal 15%
effective 18.18%

..and this is using MFJ, the bucket with (generally) the best tax rates.. and this is assuming no consulting gig, which would make the spread grow larger with SE tax..

"Your math skills have to be really, really, really bad to think that could ever happen."

how much should i bill you for helping you with your own incompetency?

The article is speaking about the EFFECTIVE rate of income taxes actually paid in aggregate, not nominal or statutory rates. Net of deductions, credits, etc. It includes the AMT.

Think of all the people and corporations that pay NO INCOME TAX?
We don't need higher taxes, just one big flat tax.

hol4--FYI, I was cherry-picking numbers because I was trying to get to a scenario where people would actually end up at the very top end of the 25% bracket--in other words, to make it as favorable as possible to your position. Feel free to come up with your own example (which you have).

But your math doesn't actually work using the popular system of numbers that we use in the real world. For example, if you're paying $36K in taxes on $200K in income, that's an 18% tax rate, not 26%. You figure that out by taking 36,000 and dividing by 200,000 and multiplying by 100. Try it out. Since mortgage interest is deductible under both the AMT and the normal tax scheme, mortgage interest dollars will reduce AMT liability faster than it will regular liability, so I have no idea where your subsequent figures come from.

Maybe post the actual numbers that you're seeing rather than rates so we can help you do the division.

36k taxes is based on TAXABLE INCOME...

...TAXABLE INCOME = AGI??

AGI in your example is 200k...

..i feel embarrassed for you.

please find a different CPA. you've been cheated if he's taxing you based on AGI..

i hope he enjoyed his european trip/chelsea hooker thanks to your ignorance.

hol4 -- Sorry, but that's ridiculous. You don't do comparisons of effective tax rates based on taxable income. Look at all of the data published on effective tax rates. It's all based on AGI*. It doesn't make any sense to compare two different tax schemes on the taxable income for only one scheme since (obviously) they treat portions of income as taxable. But sure, if that was your original point you're right--as long as you define the words "effective tax rate" to be something different than what most people will expect that they mean.

* Here, for example, is the data from the anti-tax tax foundation. You'll notice the effective tax rate data is based on AGI; see Table 8. Jason's original article makes the same assumption:

http://www.taxfoundation.org/taxdata/show/250.html#Data

Lots of people, like the CBO and this guy actually use total income as opposed to AGI, which is even farther away from your definition:

http://www.bargaineering.com/articles/calculating-full-tax-burden.html

"We don't need higher taxes, just one big flat tax."

... what we really need are higher taxes via one big flat tax on excessive income, superimposed on a highly progressive taxation system. If only the Internal Revenue Service could implement such a tax ... what a wonderful world it would be.