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Related: Editorials & Other Articles, Issue Forums, Alliance Forums, Region ForumsWhy are people receiving social security having to pay taxes?
When large corporations and billionaires and millionaires paying zero in taxes? Democrats should message this to all seniors how they're being fleeced by the GOP.
mahatmakanejeeves
(57,283 posts)smirkymonkey
(63,221 posts)Especially when the very rich skate on taxes. People who are receiving such low income should not have to pay taxes.
Irish_Dem
(46,420 posts)mahatmakanejeeves
(57,283 posts)I'm trying to find as nonpartisan source as I can, but they all say pretty much the same thing. I provide a link to an Internal Revenue System publication.
OCTOBER 6, 2017
A closer look at who does (and doesnt) pay U.S. income tax
BY DREW DESILVER
As Congress and the White House pivot from trying to repeal the Affordable Care Act to overhauling the U.S. tax code, its helpful to take a closer look at how the tax system works presently in the context of its recent history.
Individual income taxes are the federal governments single biggest revenue source. In fiscal year 2017, which ended Sept. 30, the individual income tax was expected to bring in nearly $1.66 trillion, or about 48% of all federal revenues, according to the Office of Management and Budget. The corporate income tax was estimated to raise another $324 billion, or 9% of total federal revenue.
The rest of the federal governments revenue comes from a mix of sources, including Social Security and Medicare payroll taxes, excise taxes such as those on alcohol and gasoline, unemployment-insurance taxes, customs duties and estate taxes. Spending thats not covered by taxes is paid for by borrowing.
The individual income tax is designed to be progressive those with higher incomes pay at higher rates. A Pew Research Center analysis of IRS data from 2015, the most recent available, shows that taxpayers with incomes of $200,000 or more paid well over half (58.8%) of federal income taxes, though they accounted for only 4.5% of all returns filed (6.8% of all taxable returns).
By contrast, taxpayers with incomes below $30,000 filed nearly 44% of all returns but paid just 1.4% of all federal income tax in fact, two-thirds of the nearly 66 million returns filed by people in that lowest income tier owed no tax at all. (The IRS tax data used here are estimates based on a stratified probability sample of all returns.)
Nearly all income tiers above $100,000 paid higher shares of total income tax in 2015 than they did in 2000 (though the shares for many high-income groups fell in the early 2000s, following enactment of major tax cuts in 2001 and 2003). For example, the $2 million-and-higher group paid 20.4% of all tax in 2015, up from 17.2% in 2000. The share for the $200,000-to-under-$500,000 group rose to 20.6% from 14.9%. Some of those shifts may be due to changes in the tax laws or to whats known as bracket creep the phenomenon in which inflation pushes people into higher tax brackets.
Effective tax rates calculated as the total income tax owed divided by adjusted gross income also rise with income. On average, taxpayers making less than $30,000 paid an effective rate of 4.9% in 2015, compared with 9.2% for those making between $50,000 and under $100,000 and 27.5% for those with incomes of $2 million or more.
But the system starts to lose its progressivity at the very highest levels: In 2015, the effective rate peaked at 29.3% for taxpayers in the $2 million-to-under-$5 million group, then fell to 28.8% for the $5 million-to-under-$10 million group and 25.9% for those making $10 million or more.
{snip}
carpetbagger
(4,390 posts)That was what Trump's returns, the propublica leaked data, and others have shown. If you are rich, clearly getting richer by the day, and yet showing nothing on your AGI, no taxes. The standard way to do this is to put your money in a trust and live off loans from the trust, the trust can be shielded from taxes.
mahatmakanejeeves
(57,283 posts)I'm looking at a Form 1040 on my computer. I can see line 11, adjusted gross income. I don't know how that trick works. I can't imagine that I'd need to know how that trick works anytime soon.
{edited} I see an article from Propublica about avoiding estate taxes. Is that what you mean?
Secret IRS records show billionaires use trusts that let them pass fortunes to their heirs without paying estate tax. Will Congress end a tax shelter that has cost the Treasury untold billions?
by Jeff Ernsthausen, James Bandler, Justin Elliott and Patricia Callahan
Sept. 28, 10:45 a.m. EDT
ProPublica is a nonprofit newsroom that investigates abuses of power. The Secret IRS Files is an ongoing reporting project. Sign up to be notified when the next story publishes. Or text IRS to 917-746-1447 to get the next story texted to you (standard messaging rates apply).
Also: Do you have expertise in tax law, accounting or wealth management? Wed love to hear from you.
Its well known, at least among tax lawyers and accountants for the ultrawealthy: The estate tax can be easily avoided by exploiting a loophole unwittingly created by Congress three decades ago. By using special trusts, a rarefied group of Americans has taken advantage of this loophole, reducing government revenues and fueling inequality.
There is no way for the public to know who uses these special trusts aside from when theyve been disclosed in lawsuits or securities filings. Theres also been no way to quantify just how much in estate tax has been lost to them, though, in 2013, the lawyer who pioneered the use of the most common one known as the grantor retained annuity trust, or GRAT estimated they may have cost the U.S. Treasury about $100 billion over the prior 13 years.
As Congress considers cracking down on GRATs and other trusts to help fund President Joe Bidens domestic agenda, a new analysis by ProPublica based on a trove of tax information about thousands of the wealthiest Americans sheds light on just how widespread the use of special trusts to dodge the estate tax has become.
{snip}
carpetbagger
(4,390 posts)There are other vehicles to avoid income tax on your way to avoid estate taxes. I don't know them very well, my tax avoidance schemes, even making pretty good money as a doctor with a government agency, are maxing out 401 contributions, a medical savings account for copays, and before Trump messed with the deductions, doing all my charity on alternate years (i.e., Jan 1, 2015 and Dec 31, 2015, then no charity in 2016 taking the standard deduction, since my mortgage interest has never been very high). I think the biggest way they do it is to invest everything in their companies (real or paper), then they live off loans from the company. Same general idea.
On edit: the AGI is line 11, their goal is to pump up line 10 with enough deductions to make line 11 zero.
MichMan
(11,864 posts)carpetbagger
(4,390 posts)Hassin Bin Sober
(26,308 posts)Americas richest 400 families pay a lower tax rate than average taxpayer
The wealthiest 400 American families paid an 8.2% average rate on their federal individual income taxes from 2010 to 2018, according to a White House analysis published Thursday.
Those richest 400 families represent the top 0.0002% of all taxpayers, according to the White House report.
Their estimated tax rate, paid on $1.8 trillion of income over the nine-year period, is low relative to other taxpayers, according to the report, which was authored by economists in the Council of Economic Advisers and Office of Management and Budget.
By comparison, Americans paid an average 13.3% tax rate on their income in 2018, according to a Tax Foundation analysis. (This figure includes all taxpayers, including the wealthiest. It also doesnt factor annual investment gains, as the White House report does to account for overall wealth.)
Igel
(35,270 posts)That's how they do it.
We pay tax on income.
You're citing income tax paid by those with wealth.
At some point, you don't need the income. So you just let wealth appreciate. Even if it's in a trust, the trust can still be subject to taxes; the money put in the trust was taxed. When the money comes out of the trust it's taxed.
The way around that is to have the property placed in the trust. Then you don't need money taken out of the trust after all--you're sort of provided for discretely.
But then the trust pays property taxes and, when the house is sold, that's taxed. Inheritance taxes can be avoided, but still every cent removed from the trust is taxed. It's a clever way to avoid taxes, to average them and remove tax spikes, but it doesn't evade them.
My working class parents retired and set up a trust.
That's okay, though. Last year I paid the highest effective federal income tax rate I had in years, almost 8%. Usually it was around 6%. So, you know, that 8.2% was still higher than me (and our gross income last year was pushing $130k).
Hoyt
(54,770 posts)"Our primary estimate of 8.2 percent is much lower than commonly cited estimates of top Federal individual income tax rates. For example, the Joint Committee on Taxation (2021) estimates that the 2021 Federal individual income tax rate on the top 0.4 percent of families ranked by income (i.e., the 715,000 families with income over $1 million) will be 26 percent.
"Our analysis differs by (a) analyzing a smaller group of families (the top 0.0002 percent) ranked by wealth, and (b) including unrealized capital gains income in the income measure. See the end of the technical appendix for additional discussion of how our analysis compares to commonly cited estimates."
https://www.whitehouse.gov/cea/blog/2021/09/23/what-is-the-average-federal-individual-income-tax-rate-on-the-wealthiest-americans/
https://www.cnbc.com/2021/09/23/americas-richest-400-families-pay-a-lower-tax-rate-than-average-taxpayer.html
I do believe capital gains rates and estate taxes should be increased substantially.
mahatmakanejeeves
(57,283 posts)NT
Hassin Bin Sober
(26,308 posts)brooklynite
(94,294 posts)Last edited Mon Oct 11, 2021, 11:05 AM - Edit history (1)
What you meant to say is rich people dont pay enough in taxes (Ill agree) and some rich people dont pay any net taxes because of tax rules that Democratic Administrations didnt change.
As for Social Security, remember that its not a poor peoples income. Its an income stream for everyone and thus should be taxable.
3Hotdogs
(12,319 posts)Interesting though, I don't pay tax on the part of my pension that I paid into the fund. That is because it was already taxed.
jimfields33
(15,667 posts)Voltaire2
(12,939 posts)Tribetime
(4,681 posts)Voltaire2
(12,939 posts)It is not wages, not interest, not dividends.
Also not taxed at all until you have income over 32,000 if filing jointly.
Before 1984 or around there, ss benefits were not taxed at all. The tax thresholds were set as part of the truly horrible deal Tip ONeil made with Reagan to reform social security. The level of course was not inflation adjusted so while it started as a tax on the well off it is now a shitty cut in benefits for just about everyone.
PoliticAverse
(26,366 posts)duforsure
(11,884 posts)Not on SS who pay zero in taxes..Yet people retired getting SS are taxed, which used to pay zero ion SS received.
doc03
(35,292 posts)taxing SS was set in 1983 at around $35000 for a single person and $70000 for a married couple. That was a lot
of money in 1983 adjusted for inflation that would now be $97,000 and $195,000. Eventually everyone getting SS
will be paying tax on it if it isn't adjusted for inflation. Next year we are to get around a 6% increase in SS that will
be taxed and Medicare will no doubt go up leaving us with virtually nothing left of the COLA.
Voltaire2
(12,939 posts)And you get hit with the 85% tax.
It is an additional tax on basically all ss recipients who have a 401k or IRA.
doc03
(35,292 posts)what the threshold actually was. It is even worse than I thought. Yes I pay tax on all my pension
and IRA income which I have no problem with. But then I have to pay additional tax on my SS just because
I tried to give myself a decent retirement income. I believe last year I paid around an additional 30% on my
required minimum distribution from my IRA, because of that. Like I said give inflation in a few years most
everyone will be paying tax on 85% of their SS alone.
Voltaire2
(12,939 posts)Ive given up on our ability to fix any of this. Even when we win there is always enough opposition in our own party to block real change.
doc03
(35,292 posts)since 2003. We always get the same argument that millionaires should pay tax on SS. Myself I think it is wrong for anyone even millionaires to pay tax on what was a tax. But with inflation what seemed to be a lot of money back in 1983 is now far below the average income.
In another couple decades the average SS recipient will be paying tax on 85% of his SS. Since when did $35000 a year become rich.
PoliticAverse
(26,366 posts)Kaleva
(36,239 posts)I haven't had to pay taxes in years. One of the benefits of being just above the poverty line.
rampartc
(5,382 posts)passed by dem congress.
That is the correct answer.
mopinko
(69,981 posts)tho we could hike the threshold.
Klaralven
(7,510 posts)The percentage of Social Security benefits subject to Federal income tax is graduated depending on your total income from other sources.
https://www.ssa.gov/benefits/retirement/planner/taxes.html
Note also that the amount deducted from Social Security retirement benefits to pay for Medicare Part B also increases as your total income increases.
CurtEastPoint
(18,612 posts)doc03
(35,292 posts)Last edited Mon Oct 11, 2021, 09:06 AM - Edit history (1)
to 50% of SS income. Then Bill Clinton raised it to 85% I think. This started in 1983. There is a threshold of around $35000 for a single person and $70000 for a married couple. Once you surpass the threshold you start paying on your SS. The thing of it is that was set back in 1983 when $35000 or $70000 was a pretty high income. I am a retired steelworker. We deferred wage increases to get a pension when we retired and I saved money in a 401k now I am penalized for it. Last year I paid around $5000 in federal income tax on my SS. This may not affect that many people now but if the threshold is never raised for inflation most everyone will be paying.
Adjusted for inflation those thresholds would now be $97000 and $195000!
.
a step towards dismantling the new deal
karynnj
(59,495 posts)In addion if income is high enough, you pay taxes on up to 85 percent of your social security payment,
Let us say someone has an annunity paying $120,000 a year, a pension paying $50,000 and maximum social security because they earned more than the cap for years, shouldn't this lucky, but made up person pay taxes?
BSdetect
(8,994 posts)It's a form of hidden tax.
halfulglas
(1,654 posts)The Republicans demand we become "reasonable," but afterwards they and the MSM still paint us as the "radicals."
fescuerescue
(4,448 posts)Everyone has to pay a little, otherwise no one gets anything.
It's all a big circle.
RicROC
(1,203 posts)Talk about double taxation. The amount received by some people is already too low, and yes, it's based on their lifetime income. Which means, they were scraping for cash their whole lives and it perpetuates into their non- working years.
In the whole scheme of the economy, they were productive members of society and should finally be rewarded for their efforts.
fescuerescue
(4,448 posts)Pretty much all money gets taxed multiple times.
I do think that SS money should be tax free.
But it has been taxed for decades across Republican and Democratic administrations.
My favorite story around this when my friend worked for the IRS.
"It's so dumb. I get paid by the IRS. But on the same paycheck. they are "nope! we are keeping that part!"
doc03
(35,292 posts)to give me an income when I retire now I pay tax on my own money I paid into it!
Voltaire2
(12,939 posts)It is income tax and goes into general revenue.
Next excuse?
fescuerescue
(4,448 posts)Did you think that I make the tax laws for the last 4 decades?
You have the wrong person.
doc03
(35,292 posts)someone personally they don't give a f--. The threshold for paying tax on SS tax was set in 1983 at $35000
for a single and $70000 for a married couple and has never been adjusted for inflation. Those numbers would now be
$97,000 and $195,000 adjusted for inflation. F-- these people that say we are millionaires. Eventually everyone will be paying on their SS.
snort
(2,334 posts)Like paying an employee cash and then saying "Now hand some of that back".
Sounds like a way to reduce the amount of payout while making it look like you're totally not reducing the amount of payout. Or something.
Midnight Writer
(21,692 posts)More of the voodoo economics that we all still suffer from today.
Happy Hoosier
(7,209 posts)Republican assholes .
jimfields33
(15,667 posts)634-5789
(4,175 posts)Sibelius Fan
(24,392 posts)former9thward
(31,923 posts)Sibelius Fan
(24,392 posts)since his electoral margin was so wide.
former9thward
(31,923 posts)And there have been multiple times since then Congress could have changed those policies if they had wanted to.
lagomorph777
(30,613 posts)It makes no sense for the Government to send you a check, then make you send some of it back. If you want to stiff Seniors, just reduce the check. Cut out the SSA and IRS loop and overhead.
Sibelius Fan
(24,392 posts)Youre out of work, youre getting a government check equal to maybe a third of your normal pay, youve lost your employer-provided healthcare. I know, lets tax those benefits so we can give tax breaks to billionaires!
SYFROYH
(34,159 posts)Mary in S. Carolina
(1,364 posts)It was non taxable until Reagan decided to tax the poor and give to the rich....trickle down economics.
Javaman
(62,497 posts)there are two tax systems.
one heavily benefits the wealthy (loop holes, tax shelters, off shore accounts, trusts, etc), the other one fucks the rest of us.
Mysterian
(4,566 posts)We can't have nice things because half of our national wealth goes to the greedy war pigs.
SayitAintSo
(2,207 posts)doc03
(35,292 posts)SS and Bill Clinton increased it to 85%. So there is blame to go around on both sides. I made a comment a while
back about Bill Clinton being the best _______president we ever had and it was removed for breaking rules.
GoodRaisin
(8,905 posts)and airplanes.
Hortensis
(58,785 posts)of the wealthy that's not. Imo, allowing it by not voting to stop it, etc, is shameful, then complaining...where's my bat! As for complaining it's not fair that ordinary workers don't get to avoid taxes like the wealthy...
Imo, meeting our responsibiities to society is an honor and a duty. That we uphold our part of the social contract we benefit from is something to be proud of.
Everyone should pay their way, subject to their abilities. Personal income in the pockets of the wealthy should be taxed every bit as much as in our pockets, and taxed more as the good of society requires (see below!). But not less. Business taxes, maybe we can do some trading (often!) -- 300,000,000 citizens on one side of the table, 100,000 on the other.
Captain Stern
(2,199 posts)I think I'm maybe not understanding your question.
I'm pretty sure that most people understand that reaching the age where you receive social security benefits doesn't automatically mean we don't have to pay taxes.
I agree that there are a lot of folks that should be paying more taxes than they are, but I've never thought I should pay zero when I get to the age where I get social security.