Showing posts with label income tax. Show all posts
Showing posts with label income tax. Show all posts
Saturday, December 17, 2011
Friday, December 9, 2011
Analysis of Jon Huntsman’s Individual Income Tax Plan
Analysis of Jon Huntsman’s Individual Income Tax Plan
Summary
The plan eliminates all deductions and credits and reduces the tax rates to 8, 14 and 23 percent. As with the other flat/flatter tax plans, this gives huge tax breaks to those with high incomes, while those with low incomes lose money. In between, benefits increase as income increases and family size decreases.
- The plan is one version of The Zero Plan from the Simpson-Bowles Fiscal Commission.
- It reduces the number of marginal tax rates from 6 to 3.
- It also lowers the rates to 8, 14 and 23 percent.
- However, these lower rates don’t necessarily result in a tax cut because the plan also eliminates all deductions, exemptions and credits.
- Families rely on tax credits, deductions and exemptions to significantly reduce their taxes.
- Lower income households receive tax credits, such as the Earned Income Tax Credit, which give them extra money, even if they don’t pay any income tax.
- A family of 5 with a $20,000 income loses over $8,000 under the plan.
- Basically, the plan benefits those who use very few deductions, credits and exemptions, such as a single individual taking only the standard deduction.
- Families with children tend to lose money because they have available tax credits, deductions and exemptions.
- Those who currently itemize their deductions don't gain as much.
- Higher income taxpayers receive large tax cuts, regardless of family size or deductions.
- Tax cuts get smaller as family size increases and income decreases.
What is Jon Huntsman’s Individual Income Tax Plan?
Here is how Huntsman describes his plan:
Gov. Huntsman supports a version of the plan crafted by the Fiscal Commission, headed by Erskine Bowles and Alan Simpson, commonly known as the "zero plan". Rather than nibble around the edges of the existing tax code, he will introduce a revenue-neutral plan that eliminates all deductions and credits in favor of three drastically lower rates of 8%, 14% and 23%.
http://www.jon2012.com/issues/jobs-economy-tax-reform
Huntsman uses the Simpson-Bowles tax plan, specifically The Zero Plan which eliminates all deductions and credits. This plan replaces the 10 and 15 percent brackets with an 8 percent bracket; the 25 and 28 percent brackets with a 14 percent; and the 33 and 35 percent brackets with a 23 percent bracket.
These are the current 2010 tax rates:
Gov. Huntsman supports a version of the plan crafted by the Fiscal Commission, headed by Erskine Bowles and Alan Simpson, commonly known as the "zero plan". Rather than nibble around the edges of the existing tax code, he will introduce a revenue-neutral plan that eliminates all deductions and credits in favor of three drastically lower rates of 8%, 14% and 23%.
http://www.jon2012.com/issues/jobs-economy-tax-reform
Huntsman uses the Simpson-Bowles tax plan, specifically The Zero Plan which eliminates all deductions and credits. This plan replaces the 10 and 15 percent brackets with an 8 percent bracket; the 25 and 28 percent brackets with a 14 percent; and the 33 and 35 percent brackets with a 23 percent bracket.
These are the current 2010 tax rates:
Tax Rate | Single |
Married filing
jointly or qualifying widow/widower |
Married filing
separately |
Head of
household |
10%
|
Up to $8,375
|
Up to $16,750
|
Up to $8,375
|
Up to $11,950
|
15%
|
$8,376 - $34,000
|
$16,751 - $68,000
|
$8,376 - $34,000
|
$11,951 - $45,550
|
25%
|
$34,001 - $82,400
|
$68,001 - $137,300
|
$34,001 - $68,650
|
$45,551 - $117,650
|
28%
|
$82,401 -$171,850
|
$137,301 - $209,250
|
$68,651 - $104,625
|
$117,651 - $190,550
|
33%
|
$171,851 – $373,650
|
$209,251 - $373,650
|
$104,626 - $186,825
|
$190,551 - $373,650
|
35%
|
$373,651 or more
|
$373,651 or more
|
$186,826 or more
|
$373,651 or more
|
These are the 2010 tax rates as they would have been under Huntsman's plan:
Tax Rate | Single |
Married filing
jointly or qualifying widow/widower |
Married filing
separately |
Head of
household |
8%
|
Up to $34,000
|
Up to $68,000
|
Up to $34,000
|
Up to $45,550
|
14%
|
$34,001 - $171,850
|
$68,001 - $209,250
|
$34,001 - $104,625
|
$45,551 - $190,550
|
23%
|
$171,851 or more
|
$209,251 or more
|
$104,626 or more
|
$190,551 or more
|
These are marginal rates. This means different portions of the total income are charged different rates. For example, a single person making $100,000 is not taxed at 14 percent (which would be $14,000 in taxes.) Their first $34,000 is taxed at 8 percent ($2,720.) Their next $66,000 is taxed at 14 percent ($9,240.) So their total tax is only $11,960, which is 11.96 percent instead of 14 percent.
To calculate the taxes under Jon Huntsman’s plan for 2010, the income was subtracted by a $3,650 exemption for the individual, spouse and children. Then it is subtracted by the standard deduction, which is $5,700 for singles and $11,400 for married filing jointly. The result is the taxable income. The tax brackets shown in the previous sections were used to calculate the tax. The first $34,000 ($68,000 for married) of taxable is taxed at 8 percent. After that, the taxable income is taxed at 14 percent, if there is any, and so on according to the rates.
Here is how much people would have paid under Jon Huntsman’s income tax plan in 2010:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($52) | ($852) | ($1,652) | ($2,452) | ($3,651) | ($5,051) | ($6,451) | ($7,851) | ($9,251) | ($10,651) | ($26,343) | ($95,343) | ($210,343) |
| 0 | $0 | ($104) | ($904) | ($1,704) | ($2,504) | ($3,304) | ($4,104) | ($4,904) | ($5,902) | ($7,302) | ($21,302) | ($87,787) | ($202,787) | |
| married | 1 | $0 | $0 | ($612) | ($1,412) | ($2,212) | ($3,012) | ($3,812) | ($4,612) | ($5,412) | ($6,791) | ($20,791) | ($86,947) | ($201,947) |
| filing | 2 | $0 | $0 | ($320) | ($1,120) | ($1,920) | ($2,720) | ($3,520) | ($4,320) | ($5,120) | ($6,280) | ($20,280) | ($86,108) | ($201,108) |
| jointly | 3 | $0 | $0 | ($28) | ($828) | ($1,628) | ($2,428) | ($3,228) | ($4,028) | ($4,828) | ($5,769) | ($19,769) | ($85,268) | ($200,268) |
Red and in parenthesis means they pay taxes. Otherwise, they receive a refund in the amount shown.
Basically those who earn less than the standard deduction and exemption pay $0 in taxes. For single individuals, it is slightly less than $10,000. For families it's around between $20,000 and $30,000 depending on the number of children.
How Does Jon Huntsman’s Plan Compare to the Current Tax Code?
The 2010 taxes under the current tax code are calculated using only the standard deduction and personal exemptions. The Child Tax Credit and Earned Income Tax Credit were taken where possible. For those who itemize deductions, the average total itemized deductions from the IRS statistics for 2009 (which is the latest version) were used instead of the standard deduction.
Here is how much people would have gained under Huntsman’s income tax plan in 2010 if they only took the standard deduction:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($249) | $331 | $1,031 | $1,731 | $2,699 | $3,799 | $4,899 | $5,999 | $7,099 | $8,447 | $21,688 | $54,028 | $114,028 |
| 0 | ($457) | $27 | $229 | $657 | $1,357 | $2,057 | $2,757 | $3,357 | $3,992 | $4,892 | $17,706 | $50,977 | $110,977 | |
| married | 1 | ($4,050) | ($4,050) | ($2,525) | ($681) | $102 | $802 | $1,502 | $2,102 | $2,602 | $3,490 | $17,195 | $50,539 | $110,539 |
| filing | 2 | ($5,060) | ($7,036) | ($5,149) | ($2,843) | ($1,154) | ($454) | $246 | $846 | $1,346 | $2,089 | $16,684 | $50,393 | $110,101 |
| jointly | 3 | ($5,561) | ($8,216) | ($6,854) | ($4,546) | ($2,409) | ($1,709) | ($1,009) | ($409) | $91 | $687 | $16,644 | $51,232 | $109,663 |
Red numbers in parenthesis means they lose money under Jon Huntsman’s plan.
Here are the gains for those who also itemize their deductions at the average rate:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($315) | ($818) | ($522) | $51 | $352 | $312 | $1,412 | $1,874 | $2,974 | $2,374 | $8,030 | $20,494 | $55,432 |
| 0 | ($457) | ($104) | ($166) | ($121) | $322 | $820 | $1,520 | $1,737 | $2,039 | $919 | $6,583 | $19,437 | $54,375 | |
| married | 1 | ($4,050) | ($4,050) | ($2,920) | ($1,277) | ($933) | ($436) | $264 | $482 | $982 | ($117) | $6,072 | $18,999 | $53,937 |
| filing | 2 | ($5,060) | ($7,036) | ($5,546) | ($3,393) | ($2,189) | ($1,691) | ($991) | ($774) | ($274) | ($1,154) | $5,652 | $19,078 | $53,499 |
| jointly | 3 | ($5,561) | ($8,216) | ($6,890) | ($5,096) | ($3,280) | ($2,947) | ($2,247) | ($2,029) | ($1,529) | ($2,190) | $5,250 | $19,917 | $53,061 |
Here are the numbers in a chart:
As with most flat taxes, the higher income taxpayers receive large tax cuts, and the lower income taxpayers lose money. However, for the single individuals and married couples with no children, as their income increases to around $20,000 and above they receive a tax cut, if they currently only take the standard deduction. The tax cuts grow larger as their income increases.
Although, if they currently itemize their deductions, the income level where they begin to get tax cuts is closer to $40,000 to $50,000.
Lower income families lose thousands of dollars because they don't receive refundable tax credits, like the Earned Income Tax Credit and the Child Tax Credit, which gives them refunds even when they pay no tax. That is why a family of 5 with a $20,000 income loses over $8,000 under the plan.
The Child Tax Credit is $1,000 per child, so a family with 3 children and an income of $80,000 still loses money, if they take the standard deduction. If they itemize at the average rate, they are losing money even at $100,000.
Although, if they currently itemize their deductions, the income level where they begin to get tax cuts is closer to $40,000 to $50,000.
Lower income families lose thousands of dollars because they don't receive refundable tax credits, like the Earned Income Tax Credit and the Child Tax Credit, which gives them refunds even when they pay no tax. That is why a family of 5 with a $20,000 income loses over $8,000 under the plan.
The Child Tax Credit is $1,000 per child, so a family with 3 children and an income of $80,000 still loses money, if they take the standard deduction. If they itemize at the average rate, they are losing money even at $100,000.
Basically, the plan benefits those who use very few deductions, credits and exemptions, such as a single individual taking only the standard deduction. Families with children tend to lose money because they have available tax credits, such as the Child Tax Credit and the Earned Income Credit. Those who currently itemize their deductions don't gain as much. The higher income taxpayers receive large tax cuts, and the tax cuts get smaller as family size increases and income decreases.
Link to this article:
http://articlesonpolitics.blogspot.com/2011/12/analysis-of-jon-huntsmans-individual.html
Link to this article:
http://articlesonpolitics.blogspot.com/2011/12/analysis-of-jon-huntsmans-individual.html
Analysis of Rick Perry’s Individual Income Tax Plan
Analysis of Rick Perry’s Individual Income Tax Plan
Summary
Rick Perry’s individual income tax plan is a 20 percent optional flat tax with a few deductions. Wealthy taxpayers will see huge tax cuts. Lower income taxpayers will pay the same. In between, some will gain depending on family size and current amount of deductions.
- It is an optional 20 percent flat tax.
- There is a $12,500 standard exemption for individuals and their dependents.
- It allows for the deduction of mortgage interest, charitable contributions, and state and local taxes.
- Wealthy taxpayers receive huge tax cuts under the plan.
- Low income taxpayers receive little or no tax cuts.
- In between, some will gain depending on family size and current amount of deductions.
- Married couples with children, who take all the deductions, may reach $50,000 to $80,000 without paying any tax, depending on family size and deductions.
- The flat tax is still progressive because of the exemptions and deductions, especially the $12,500 standard exemption.
- Anyone can deduct charitable contributions. This could lead to an increase in deductions for charitable contributions and possibly more people donating to charity.
What is Rick Perry’s Individual Income Tax Plan?
Rick Perry’s tax plan is an optional 20 percent flat tax. Like most flat taxes, he exempts income near the poverty threshold.
Lower- and middle-income families will be able to take advantage of an optional 20% flat tax rate that includes generous standard exemptions of $12,500 for individuals and their dependents, as well as deductions for mortgage interest, charitable contributions, and state and local taxes.
http://www.rickperry.org/cut-balance-and-grow-html/
Lower- and middle-income families will be able to take advantage of an optional 20% flat tax rate that includes generous standard exemptions of $12,500 for individuals and their dependents, as well as deductions for mortgage interest, charitable contributions, and state and local taxes.
http://www.rickperry.org/cut-balance-and-grow-html/
A single individual gets a $12,500 exemption. It appears that a married couple receives a $25,000 exemption, and families exempt $12,500 for each of their dependent children. That means a married couple with 2 children and an income at $50,000, or below, is paying $0 tax.
The plan also provides the option to deduct mortgage interest, charitable donations and state and local taxes.
After that, the leftover income is taxed at a flat 20 percent rate.
The plan also provides the option to deduct mortgage interest, charitable donations and state and local taxes.
After that, the leftover income is taxed at a flat 20 percent rate.
How much do people pay under Rick Perry’s Plan?
To calculate the taxes under Rick Perry’s plan, the income was subtracted by the $12,500 standard exemption ($25,000 for married couples and $12,500 per dependent or child.) For those who itemize, the average mortgage interest, state and local taxes and charitable contribution deductions were taken from the IRS statistics for 2009. Those with the standard deduction only deducted state and local taxes. The remainder is the taxable income, which was multiplied by 20 percent to get the total tax.
Here is how much people pay under Perry’s income tax plan in 2010 if they only took the standard exemption and the state and local tax deduction:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | $0 | ($858) | ($2,796) | ($4,685) | ($6,531) | ($8,340) | ($10,340) | ($12,057) | ($14,057) | ($15,279) | ($32,774) | ($86,706) | ($178,313) |
| 0 | $0 | $0 | ($296) | ($2,185) | ($4,031) | ($5,840) | ($7,840) | ($9,557) | ($11,557) | ($12,779) | ($30,274) | ($84,206) | ($175,813) | |
| married | 1 | $0 | $0 | $0 | $0 | ($1,531) | ($3,340) | ($5,340) | ($7,057) | ($9,057) | ($10,279) | ($27,774) | ($81,706) | ($173,313) |
| filing | 2 | $0 | $0 | $0 | $0 | $0 | ($840) | ($2,840) | ($4,557) | ($6,557) | ($7,779) | ($25,274) | ($79,206) | ($170,813) |
| jointly | 3 | $0 | $0 | $0 | $0 | $0 | $0 | ($340) | ($2,057) | ($4,057) | ($5,279) | ($22,774) | ($76,706) | ($168,313) |
Red and in parenthesis means they pay taxes. Otherwise, they receive a refund in the amount shown.
Here is how much people pay under Perry’s income tax plan in 2010 if they deduct mortgage interest, charitable contributions and state and local taxes (at the average rate):
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | $0 | $0 | ($726) | ($2,432) | ($4,207) | ($5,812) | ($7,812) | ($9,287) | ($11,287) | ($11,830) | ($27,145) | ($76,887) | ($163,185) |
| 0 | $0 | $0 | $0 | $0 | ($1,707) | ($3,312) | ($5,312) | ($6,787) | ($8,787) | ($9,330) | ($24,645) | ($74,387) | ($160,685) | |
| married | 1 | $0 | $0 | $0 | $0 | $0 | ($812) | ($2,812) | ($4,287) | ($6,287) | ($6,830) | ($22,145) | ($71,887) | ($158,185) |
| filing | 2 | $0 | $0 | $0 | $0 | $0 | $0 | ($312) | ($1,787) | ($3,787) | ($4,330) | ($19,645) | ($69,387) | ($155,685) |
| jointly | 3 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | $0 | ($1,287) | ($1,830) | ($17,145) | ($66,887) | ($153,185) |
In the first table, it shows how the standard exemption allows some taxpayers to avoid paying income tax. In the second table, it shows how the mortgage interest and charitable contribution deductions allow even more taxpayers to avoid paying taxes.
How Does Rick Perry’s Plan Compare to the Current Tax Code?
The 2010 taxes under the current tax code are calculated using only the standard deduction and personal exemptions. The Child Tax Credit and Earned Income Tax Credit were taken where possible. For those who itemize deductions, the average total itemized deductions from the IRS statistics for 2009 (which is the latest version) were used instead of the standard deduction.
Here is how much people would have gained under Perry’s income tax in 2010 if they only took the standard deduction:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($197) | $325 | ($113) | ($502) | ($181) | $510 | $1,010 | $1,793 | $2,293 | $3,819 | $15,257 | $62,665 | $146,058 |
| 0 | ($457) | $131 | $837 | $176 | ($170) | ($479) | ($979) | ($1,296) | ($1,663) | ($585) | $8,734 | $54,557 | $137,950 | |
| married | 1 | ($4,050) | ($4,050) | ($1,913) | $731 | $783 | $474 | ($26) | ($343) | ($1,043) | $2 | $10,212 | $55,780 | $139,173 |
| filing | 2 | ($5,060) | ($7,036) | ($4,829) | ($1,723) | $766 | $1,426 | $926 | $609 | ($91) | $590 | $11,690 | $57,294 | $140,395 |
| jointly | 3 | ($5,561) | ($8,216) | ($6,826) | ($3,718) | ($781) | $719 | $1,879 | $1,562 | $862 | $1,177 | $13,639 | $59,794 | $141,618 |
Red numbers in parenthesis means they lose money.
Here are the gains for those who also itemize their deductions at the average rate:
Here are the gains for those who also itemize their deductions at the average rate:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($263) | $34 | $404 | $71 | ($204) | ($449) | $51 | $438 | $938 | $1,195 | $7,228 | $38,950 | $102,590 |
| 0 | ($457) | $0 | $738 | $1,583 | $1,119 | $812 | $312 | ($146) | ($846) | ($1,109) | $3,240 | $32,836 | $96,476 | |
| married | 1 | ($4,050) | ($4,050) | ($2,308) | $135 | $1,279 | $1,764 | $1,264 | $807 | $107 | ($156) | $4,718 | $34,059 | $97,699 |
| filing | 2 | ($5,060) | ($7,036) | ($5,226) | ($2,273) | ($269) | $1,029 | $2,217 | $1,759 | $1,059 | $796 | $6,287 | $35,798 | $98,921 |
| jointly | 3 | ($5,561) | ($8,216) | ($6,862) | ($4,268) | ($1,652) | ($519) | $981 | $1,999 | $2,012 | $1,749 | $7,874 | $38,298 | $100,144 |
Let’s look at the numbers in a chart:
This is why the chart doesn't include $200,000 and above:
The most important thing to note is that this tax is optional, so nobody has to lose any money. As with most flat taxes, the wealthy get huge tax cuts, and the lower income taxpayers lose money. The numbers are all over the place, so it’s hard to see the pattern. The pattern is this: There are 3 major reasons that cause people to lose money (or not gain because it’s optional) under this plan.
The first major reason is that the plan does not include the Earned Income Tax Credit and the Child Tax Credit. These credits are refundable, which means the taxpayer gets more back than they paid. That is why most of the lower income taxpayers lose money under the plan, despite not owing any tax. They can’t take those tax credits anymore.
The next major reason is the exemptions and deductions. Under the plan, the first $12,500 is exempt from taxes. This exemption applies to the spouse and children, so a family of 5 doesn’t pay tax on their first $62,500. On top of that they can deduct mortgage interest, taxes and charitable contributions, so that family of 5 won’t start paying taxes until they make over $80,000. Once their income is high enough to pay taxes on it, they slowly lose the benefits because of the third major reason.
The third major reason is the 20 percent tax rate. For most taxpayers, a 20 percent flat tax is a tax increase. However, as described above, the plan allows them to exempt and deduct enough that the tax increase becomes a tax cut. As the income increases the tax increases overcome the deductions and the taxpayer loses money. This happens sooner for those who only take the standard deduction. Eventually, as the income increases, the 20 percent flat tax becomes a tax cut, and it continues to be a tax cut.
The first major reason is that the plan does not include the Earned Income Tax Credit and the Child Tax Credit. These credits are refundable, which means the taxpayer gets more back than they paid. That is why most of the lower income taxpayers lose money under the plan, despite not owing any tax. They can’t take those tax credits anymore.
The next major reason is the exemptions and deductions. Under the plan, the first $12,500 is exempt from taxes. This exemption applies to the spouse and children, so a family of 5 doesn’t pay tax on their first $62,500. On top of that they can deduct mortgage interest, taxes and charitable contributions, so that family of 5 won’t start paying taxes until they make over $80,000. Once their income is high enough to pay taxes on it, they slowly lose the benefits because of the third major reason.
The third major reason is the 20 percent tax rate. For most taxpayers, a 20 percent flat tax is a tax increase. However, as described above, the plan allows them to exempt and deduct enough that the tax increase becomes a tax cut. As the income increases the tax increases overcome the deductions and the taxpayer loses money. This happens sooner for those who only take the standard deduction. Eventually, as the income increases, the 20 percent flat tax becomes a tax cut, and it continues to be a tax cut.
The 20 Percent Flat Tax is Still Progressive
Here are the effective 2010 tax rates for those who only take the standard exemption and deduct the average state and local taxes:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | 0.00% | 4.29% | 9.32% | 11.71% | 13.06% | 13.90% | 14.77% | 15.07% | 15.62% | 15.28% | 16.39% | 17.34% | 17.83% |
| 0 | 0.00% | 0.00% | 0.99% | 5.46% | 8.06% | 9.73% | 11.20% | 11.95% | 12.84% | 12.78% | 15.14% | 16.84% | 17.58% | |
| married | 1 | 0.00% | 0.00% | 0.00% | 0.00% | 3.06% | 5.57% | 7.63% | 8.82% | 10.06% | 10.28% | 13.89% | 16.34% | 17.33% |
| filing | 2 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 1.40% | 4.06% | 5.70% | 7.29% | 7.78% | 12.64% | 15.84% | 17.08% |
| jointly | 3 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.49% | 2.57% | 4.51% | 5.28% | 11.39% | 15.34% | 16.83% |
Here are the effective 2010 tax rates for those who also deduct the average mortgage interest and charitable contributions:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | 0.00% | 0.00% | 2.42% | 6.08% | 8.41% | 9.69% | 11.16% | 11.61% | 12.54% | 11.83% | 13.57% | 15.38% | 16.32% |
| 0 | 0.00% | 0.00% | 0.00% | 0.00% | 3.41% | 5.52% | 7.59% | 8.48% | 9.76% | 9.33% | 12.32% | 14.88% | 16.07% | |
| married | 1 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 1.35% | 4.02% | 5.36% | 6.99% | 6.83% | 11.07% | 14.38% | 15.82% |
| filing | 2 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.45% | 2.23% | 4.21% | 4.33% | 9.82% | 13.88% | 15.57% |
| jointly | 3 | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 0.00% | 1.43% | 1.83% | 8.57% | 13.38% | 15.32% |
As with most of the flat taxes, this tax is not actually flat. It is progressive mostly because of the $12,500 standard exemption.
More Deductions of Charitable Contributions (and Possibly More Charitable Contributions)
There is an interesting difference here between this and the current tax code. Under the current tax code, the choice is between the standard deduction and itemized deductions, so a taxpayer can only deduct something if their itemized deductions are more than the standard deduction (typically that means they have a mortgage or large medical bills.) Under this plan, anyone can deduct charitable contributions.
This could lead to more people deducting their charitable contributions, and it may lead to more people giving to charity.
Link to this article:
http://articlesonpolitics.blogspot.com/2011/12/analysis-of-rick-perrys-individual.html
This could lead to more people deducting their charitable contributions, and it may lead to more people giving to charity.
Link to this article:
http://articlesonpolitics.blogspot.com/2011/12/analysis-of-rick-perrys-individual.html
Analysis of Ron Paul’s Individual Income Tax Plan
Analysis of Ron Paul’s Individual Income Tax Plan
Summary
Ron Paul proposes eliminating the individual income tax. This will give huge tax breaks to the wealthy and middle income taxpayers. However, this could end up costing lower income households thousands of dollars.
- Nobody pays any income tax.
- Ron Paul’s plan is actually similar to the other flat tax proposals.
- It gives huge tax breaks to the wealthy.
- It takes thousands of dollars away from lower income households because they lose refundable tax credits, like the Earned Income Tax Credit and the Child Tax Credit, which give refunds to those who pay no tax.
- A family of 5 with an income of $20,000 would lose over $8,000 in refundable tax credits.
- Besides that, everyone else receives large tax breaks. They get larger as income increases and family size decreases.
What is Ron Paul’s Individual Income Tax Plan?
Ron Paul's tax plan is to eliminate the income tax:
As President, Ron Paul will support a Liberty Amendment to the Constitution to abolish the income and death taxes. And he will be proud to be the one who finally turns off the lights at the IRS for good.
http://www.ronpaul2012.com/the-issues/taxes/
On the surface, it seems simple. However there are a few issues worth mentioning.
How much do people pay under Ron Paul’s Plan?
The income tax is eliminated, so everybody pays $0.
How Does Ron Paul’s Plan Compare to the Current Tax Code?
The 2010 taxes under the current tax code are calculated using only the standard deduction and personal exemptions. The Child Tax Credit and Earned Income Tax Credit were taken where possible. For those who itemize deductions, the average total itemized deductions from the IRS statistics for 2009 (which is the latest version) were used instead of the standard deduction.
Here is how much people would have gained under Ron Paul’s income tax plan in 2010 if they only took the standard deduction:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($197) | $1,183 | $2,683 | $4,183 | $6,350 | $8,850 | $11,350 | $13,850 | $16,350 | $19,098 | $48,031 | $149,371 | $324,371 |
| 0 | ($457) | $131 | $1,133 | $2,361 | $3,861 | $5,361 | $6,861 | $8,261 | $9,894 | $12,194 | $39,008 | $138,763 | $313,763 | |
| married | 1 | ($4,050) | ($4,050) | ($1,913) | $731 | $2,314 | $3,814 | $5,314 | $6,714 | $8,014 | $10,281 | $37,986 | $137,486 | $312,486 |
| filing | 2 | ($5,060) | ($7,036) | ($4,829) | ($1,723) | $766 | $2,266 | $3,766 | $5,166 | $6,466 | $8,369 | $36,964 | $136,500 | $311,208 |
| jointly | 3 | ($5,561) | ($8,216) | ($6,826) | ($3,718) | ($781) | $719 | $2,219 | $3,619 | $4,919 | $6,456 | $36,413 | $136,500 | $309,931 |
Red numbers in parenthesis means they lose money under Ron Paul’s plan.
Here are the gains for those who also itemize their deductions at the average rate:
| Children | $10,000 | $20,000 | $30,000 | $40,000 | $50,000 | $60,000 | $70,000 | $80,000 | $90,000 | $100,000 | $200,000 | $500,000 | $1,000,000 | |
| single | 0 | ($263) | $34 | $1,130 | $2,503 | $4,003 | $5,363 | $7,863 | $9,725 | $12,225 | $13,025 | $34,373 | $115,837 | $265,775 |
| 0 | ($457) | $0 | $738 | $1,583 | $2,826 | $4,124 | $5,624 | $6,641 | $7,941 | $8,221 | $27,885 | $107,223 | $257,161 | |
| married | 1 | ($4,050) | ($4,050) | ($2,308) | $135 | $1,279 | $2,576 | $4,076 | $5,094 | $6,394 | $6,674 | $26,863 | $105,946 | $255,884 |
| filing | 2 | ($5,060) | ($7,036) | ($5,226) | ($2,273) | ($269) | $1,029 | $2,529 | $3,546 | $4,846 | $5,126 | $25,932 | $105,185 | $254,606 |
| jointly | 3 | ($5,561) | ($8,216) | ($6,862) | ($4,268) | ($1,652) | ($519) | $981 | $1,999 | $3,299 | $3,579 | $25,019 | $105,185 | $253,329 |
Let’s look at the numbers in a chart:
This is why the chart doesn't include $200,000 and above:
Looking at both ends it seems very similar to the other plans. It gives huge tax cuts to the rich, and ends up costing the poor more money. The reason the poor lose so much money under Ron Paul’s plan is they currently receive refundable tax credits. In other words, they get money back even when they don’t pay taxes. The Earned Income Tax Credit and the Child Tax Credit give these households as refund check worth thousands of dollars.
Unique Features of the Plan
As previously mentioned, no income tax means eliminating taxes for a lot of people, but it also eliminates the refundable tax credits, such as the Earned Income Tax Credit (EITC) and the Child Tax Credit (CTC.) These credits provide refunds to those who already don't pay any income tax, especially lower income families. Low income families can usually eliminate their taxable income through exemption, deductions and credits.
After that, they rely on the EITC and the CTC to give them a refund. A large family can receive thousands of dollars in refunds. As shown in the tables, a family of 5 with a $20,000 income receives over $8,000 in refundable tax credits. They lose that money under Ron Paul's plan.
It's not just low income families. The EITC is typically for those near the poverty threshold, but the Child Tax Credit is available to middle income families. A family gets $1,000 per child in tax credits. If that family is able to reduce their tax to below $0 through that credit and other deductions, credits, exemptions, etc., they can get a refund for that amount. That is why a family with 3 children and an income of $60,000, who itemizes their deductions at the average rate for 2009, still loses over $500 under Ron Paul's plan.
It's not unusual. Most flat tax plans tend to ignore the EITC and the CTC.
Link to this article:
http://articlesonpolitics.blogspot.com/2011/12/analysis-of-ron-pauls-individual-income.html
Subscribe to:
Posts (Atom)