In a Wall Street Journal op-ed, Harvey Golub cries "Of my current income this year, I expect to pay 80%-90% in federal income taxes, state income taxes, Social Security and Medicare taxes, and federal and state estate taxes." This as a rebuttal to Warren Buffet's declaration that the wealthy should pay more in taxes.
It's not the first time we've heard this meme. Regrettably, while trying to avoid the Hannity show one night at the gym last year, I looked up from the elliptical to see the closed-captioning say something about Americans being "taxed at 50 to 60 percent." The highest tax rate in America is the top marginal tax rate on income. It's now at 32 percent. There is no possible scenario in which anyone would pay 50 percent of their income in taxes.
I'm suspecting this is their math.
Top Marginal Tax Rate - 32 percent
Social Security - 13 percent
Medicare Tax Rate - 6 percent
Capital Gains Tax Rate - 15 percent
Average State Income Tax Rate - 10 percent
Average Local Sales Tax - 7 percent
32 + 13 + 6 + 15 + 10 + 7 = 83
I'll be dammed - he's right.
Not really. We know that income tax rates are marginal. If we're lucky we pay 32 percent on every dollar over $250,000. Every dollar earned beneath that is taxed at a lower rate. Immediately the math is wrong. There's no way you would ever pay 32 percent on all your income.
The 13 percent figure for Social Security comes from the fact that employers match their employees dollar for dollar. Each pays 6.2 percent. Since Mr. Golub is a "job creator" we have to assume he pays both the employer and employee portions of the Social Security tax.
Not so fast. Social Security tax is capped at $106,000. If you make more than that, your tax rate is actually lower. Example: you made $212,000. Although you and your employer paid 12.4 percent on the first $106,000 and 0 percent on the second $106,000, your combined Social Security tax rate was 6.2 percent.
Again, math is wrong. And this guy ran a financial services company.
The same $106,000 cap is applied to the Medicare tax. So, effectively, poor people pay more of their income for Social Security and Medicare than the rich.
Thanks to a progressive tax structure and a system that allows us to write off expenses and charitable donations, the effective rate for the nation's wealthiest was about 17 percent. That is, if you made a million dollars, your tax bill was about $170,000. You still walk away with $830,000. Not bad for a year's work.
But most of the top 1 percent make their money from investments. These are not taxed as income, these are taxed as capital gains at a rate of 15 percent. And this is a big chunk of where the math breaks down. It's not like you're taxed 32 percent plus 15 percent on everything. Income and capital gains are mutually exclusive. Your money either comes from labor or it comes from investments. There is no double taxation.
We can only conclude that Mr. Golub is either an idiot or a tool. Given his focus-grouped, right-wing rehash of conservative talking points, he's a tool of the ruling class that refuses to pay its fair share.
But I continue to worry about the low-information voter who thinks Fox is news because it looks "newsy" who sees the scroll saying "Obama wants to tax 90 percent of your income." Thanks for the deception.
