Those are for AGI, after all deductions and exemptions and whatever.
Exactly.
And because of deductions and exemptions you get some income that doesn't count towards taxable income. (AGI is gross income, not what your tax is based on, see note at bottom of post)
What kind of deductions and exemptions (other than, say, personal or dependents) would the poor have? We are talking about someone with an AGI of $2000 paying 10% to the federal government. That is $2,000 that has to pay for expenses like food and gasoline and everything else.
No.
From your own post (and indirectly from the IRS)
"For incomes under $7,825
The tax rate is 10% of the amount over $0"
In other words, if your income is $2K, you owe no federal income taxes.
Only if your taxable income is above $7825, do you pay anything. And if your taxable is $7825, your actual income has to be higher than that.
Even if your single with no kids, and no deductions or exemptions whatsoever other than the standard deduction, you would have to have a gross income of at least $13,175 before you have an income tax liability of a penny.
Which 30%?
33% of all filers had no need to pay any tax according to IRS data.
Then you have to consider the people who didn't file and add that percentage. So 30% is really too low.
Just for fun, I used the IRS's EITC calculator to see what that might be. If you have $20K in income and $10K as AGI your EITC is a whole $190 for 2007.
If you are a single parent with $20K in gross income, you would file as a head of household and get a $7850 standard deduction.
irs.gov
That brings your taxable income down to $12,150.
On $12,150 in taxable income, you would owe $1,215 in taxes. But now we have to consider your kids. You get $1000 credit per child. I don't think its refundable (I may be wrong, but I'll assume its not), so it doesn't bring your taxes owed below zero, only to zero.
Then you get $4,716 in EITC, and that is refundable, so your net income tax is NEGATIVE $4,716.
hrblock.com
Now this was all about income tax burdens, but less consider payroll taxes as well. 7.650% of $20K is $1530.
Subtract $1530 from $4716 and you get a net income AND payroll tax burden of negative $3,186. In other words you before tax gross income is $20K and your after tax income is $23,186. And that assumes you have no other refundable credits.
Sure a family of three with only a bit more than $23K after tax income is going to really have it hard. That's a tough situation to be in, even if you make small amounts of non-taxed income or receive any charity on the side.
But the point issue isn't "the poor have a harder life than the rich", clearly they do. The issue is the next income tax on the poor in this case its negative. For many poor people its negative or zero.
And in a number of cases (including this one) even the net income and payroll tax burden is negative.
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Correction - Replaced "AGI" above with "taxable income" AGI is a measure of gross income, but isn't what you are taxed on.
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Taxable income by country
[edit] United States
In the United States, taxable income is defined in Internal Revenue Code 63. The section sets forth that taxable income means gross income (which is broadly defined in Internal Revenue Code 61) minus whatever deductions are allowed by that chapter of the IRC. Section 63(a) provides that individuals may take itemized deductions to determine their taxable income, which allows them to add up their deductible expenses such as college tuition and charitable donations and then subtract that amount from their taxable income. Alternatively, section 63(b) allows the taxpayer to take a standard deduction in determining their taxable income, which reduces their taxable income by an amount set forth elsewhere in the IRC and then further subtracts the deduction for personal exemptions.
Please note that "income" itself is not defined in the Internal Revenue Code. Gross income is defined in section 61 of the Code, and in the case law interpreting the Code.
[edit] Formulas
Section 63(a) taxable income = Gross Income - All deductions allowed (other than the standard deduction).
Section 63(b) taxable income = Adjusted Gross Income - Standard deduction (or Itemized deduction) - Personal exemptions.
en.wikipedia.org |
