Thousands of wealthy earners manage to zero out tax bills
- Thread starter Free Thinker
- Start date
Well said.
The headline reads, "Thousands of wealthy earners manage to zero out tax bills" but I think a more accurate headline is "Only a very tiny percentage of filers above $200,000 paid no federal income tax in 2009." By the article's own admission, less than 1% of these "wealthy" earners paid no federal income tax and the definition of "wealthy" is based on "expanded income."
Notably, "expanded income" includes the Foreign Tax Credit for taxes paid to other countries and the credit for prior minimum tax, which is tax paid in a previous tax year under the AMT regime that turned out to be a harsh result, such as if a taxpayer exercised incentive stock options but later sold the stock for a loss.
A very important fact the article doesn't state is that the $200,000 figure is based on filed TAX RETURNS which include married couples filing a joint return who may both work.
These are the most glaring things that appear after just scanning the 56-page report, but they are enough to make me conclude the article is a propaganda hack job to rile up the masses to help garner support for increasing taxes on the "wealthy."
Not only is it a tiny number (less than one percent), but there's no in-depth analysis in the article to show why those people paid no income taxes.
My neighbor, a guy who owns his own business, suffered through serious losses in 2008-2010. He financed those business losses out of his own pocket and kept his company going through some pretty tough times. His pass-through tax loss carry-forwards mean he won't have to pay personal income taxes for several years. Is that such a bad thing under the circumstances?
If he couldn't carry forward the losses to recover his investment he would have shut down his business and 35 people would have lost their jobs. Now you-know-who is trying to make him look like the bad guy because he didn't pay any income taxes last year.
Exactly. My reference to the Foreign Tax Credit and credit for prior minimum tax was to make that point. Such filers either paid tax to foreign jurisdictions and got credit for that on their federal tax returns to avoid double taxation OR paid tax to the IRS in prior years under the Alt-min tax regime that turned out to be unfair in light of eventual facts. In other words, these filers are indeed paying taxes on their income, just not to the U.S. (which taxes residents on worldwide income) or not to the IRS for that particular year 2009.
In your neighbor's case, he wouldn't be included as "wealthy" in the statistic as "expanded income" is based on adjusted gross income which is after losses from K-1's are allowed. But I agree with your sentiment that the devil is in the details.
The easiest way to get more of these "wealthy" people in the study to pay federal income tax would be to tax interest on debt obligations of states and municipalities which are tax-exempt. These are just subsidies to lower levels of government and offer very little benefit to buyers of these obligations vis-Ã -vis taxable investments, notwithstanding all the marketing behind municipal bonds. Of course, that will never happen in the current environment with so many states and municipalities underwater. It's easier to blame the "wealthy" buyers of these obligations for not paying tax on them.