Half of American tax payers earn less money then I do

[mdmc]

http://finance.yahoo.com/career-work/article/108460/how-your-income-stacks-up?mod=career-salary_negotiation

Where do you rank as a taxpayer? You may not feel rich earning $35,000 a year, but you're in the top half of taxpayers. Make $70,000, and you earn more than 75 percent of fellow taxpayers.

Even as the Great Recession ends, we know the economic wounds it inflicted will take years to heal. The national unemployment rate has breached 10 percent, and unemployment is higher than 12 percent in California and above 15 percent in Michigan. A new study from the Department of Agriculture found that nearly 50 million Americans struggled at some point in 2008 to get enough to eat.

More than 40 million Americans are officially living in poverty. And you might be surprised at how little income it takes to not be considered poor by the federal government. For 2008, the poverty threshold for a single person under age 65 was an income of $11,201, or less than $1,000 a month. For a family of four, the threshold was $21,834. For a family of six, $28,769.

With that perspective, you may wonder just how your income stacks up against that of your fellow citizens. New statistics from the IRS provide an answer. The numbers here come from an analysis of 2007 tax returns, the most recent ones that have been studied.

[Hello_Kitty]

1. The top 1% take in 6% of the total income and own 42% of the nation's wealth. eom

[mdmc]

2. and ya only need to earn $410k to make it to the top 1%

it is insane..

[Hannah Bell]

4. "adjusted income" = after all exemptions & deductions. real income = much higher.

& irs captures only ~70% of business & investment income.

Top 10% takes about half of all income.

http://www.nytimes.com/2007/03/29/business/29tax.html

[FLDCVADem]

7. No, it's not after deductions and exemptions

It's AGI, or adjusted gross income - that's before deductions and exemptions.

[marybourg]

8. But it IS after "adjustments" such as IRA contributions, HSA deductions,

and other health related deductions, penalty on CDs, alimony, student loan interest, tuition, so it's not exactly *gross* income. Many people have analogous expenses that don't happen to be "adjustments*.

[FLDCVADem]

12. Sorry, but you're wrong

Adjusted gross income is just that - adjusted gross. It's your wages/salary, plus any other taxable income you might have (interest, dividends, taxable retirement income, etc). That's adjusted gross income.

Deductions and exemptions are taken from adjusted gross income (AGI) to produce taxable income.

They are two totally different things and thus two completely different lines on the federal tax form.

[Statistical]

15. Nope maryburg is correct.

Look at a 1040.

http://www.irs.gov/pub/irs-pdf/f1040.pdf

Adjusted Gross income is line 37. There is a LOT of adjustments (like student loan interest, IRA, HSA, etc) subtracted BEFORE line 37. Plus there is a lot tax free in wages which never even gets on line 1 (401K contributions, medical, dental, disability insurance, life insurance).

Hence the name ADJUSTED gross income.

Someone with say $80K in ADJUSTED gross income likely is making $90K - $100K in wages/salary/bonus/etc.

Now theoretically they "could" be only making $80K if they had no IRA, no 401K, no tax free benefits paid from their paycheck (defined benefit, medical, dental, life, etc), and no student loan interest.

However in the real world most people with an AGI of $50K+ likely have gross income of $5K to $10K more.

[marybourg]

26. Really! Look at line 37- "adjusted gross income". Then look just above it

at lines 27-37 "adjustments to income" which are all the adjustments I listed. They are totaled on line 36, subtracted from line 22-"income" to give ta da - line 37 "adjusted gross income". Always best to go right to the source, in this case the actual 1040 tax return form.

[Statistical]

13. A LOT is taken out before you get to AGI.

Take a look at 1040 tax form (yeah I know most people use software but take a look).


http://www.irs.gov/pub/irs-pdf/f1040.pdf
Line 37 is the Federal Adjusted Gross Income (FAGI).

So while it doesn't include standard deduction it does include:
23 Educator expenses (see page 29) .......
24 Certain business expenses of reservists, performing artists, and fee-basis government officials. Attach Form 2106 or 2106-EZ
25 Health savings account deduction. Attach Form 8889 .
26 Moving expenses. Attach Form 3903 ......
27 One-half of self-employment tax. Attach Schedule SE .
28 Self-employed SEP, SIMPLE, and qualified plans ..
29 Self-employed health insurance deduction (see page 30)
30 Penalty on early withdrawal of savings ......
31 Alimony paid
32 IRA deduction (see page 31) ........
33 Student loan interest deduction (see page 34) ...
34 Tuition and fees deduction. Attach Form 8917 ...
35 Domestic production activities deduction. Attach Form 8903

The large common ones being #25 (up to $6000 for couple), #32 (up to $5000 per person), #33 (max $2500) #34 (max $4000) plus 401K contributions reduce wages directly so they reduce FAGI (as does other exempt benefits like medical, dental, life insurance, disability etc).

So for a high paying professional making $80K per year, paying $2000 in benefits, putting 5% into 401K = $4000, maxing IRA = $5000, paying down $30K in student loans = $1500, and has an HSA = $1500 would only have an FAGI of $66,000 instead of the $80,000 gross which is a substantial reduction.

[FLDCVADem]

16. Thank you, I do stand corrected on those items

But it does NOT include deductions (itemized or standard) and exemptions, which are normally the bulk of deductions.

[Statistical]

17. Correct. However especially for people making a decent wage

401K contributions plus all employer benefits plus IRA deductions plus student loan interest can be a substantial amount of "tax free" income thus lowering the AGI.

Between me and my wife our AGI "under reports" our combined gross income (always file joint) by about $19,000.

Of course now I am moving to Roth IRA so that number will be cut in half.

[Hannah Bell]

3. more than 6%. pretax income = ~23%.

http://www.cbpp.org/cms/index.cfm?fa=view&id=2908

[tbyg52]

5. Well, I guess the hubby and I are doing OK then, but

it doesn't make me feel rich - it makes me feel that the median is way too low.

[Speck Tater]

6. Aparently the calculator doesn't go below lowest 50%.

I make so little I don't even have to file a return, yet still it only told me I was in the lowest 50%.

[OHdem10]

9. Think about how this affects Health Insurance Reform.

This is why I have wondered how they think they will give all
the subsidies.

[truedelphi]

10. You have to wonder if the HCR scam was designed to fail

They Never investigated the highly inflated prices of the Big Insurance and Big Medical Interests, they merely said, "Hey we will do it. We will pay for all of this and we will offer subsidiizes, so please Mr And Mrs Average American, don't get your panties in a knot over this, it will all work out just fine. Trust us."

Meanwhile during the final weeks of the discussion abt HCR, we began to expand a war in Afghanistan.

Interesting aside - the day before the final Senate vote on HCR, Congress agreed to pay
for the new military budget, incluDing a WHOPPING 168 billion dollar bill for our wars in Iraq and Afghanistan.

But don't worry about that bill - after all is said and done, the penalites for not paying for the insurance premium mandates are expected to total some 166 billion bucks between 2013 and 2019!

[bobbolink]

11. Cool! The fines on mostly poorer people will pay for Afghanistan!

Well, now I feel much better about it all....

[truedelphi]

24. It is pretty neat how all the picture puzzle pieces fit so tightly together

And in the end the puzzle always ends up spelling out - Those who can least afford this can pay the most!

[bobbolink]

25. And yet..... where is poverty on the "progressive" list of priorities?

At the very end, if its even mentioned.

Yet, there is the expectation that we continue to take being ignored, and vote anyway.

BASTA!

[Hello_Kitty]

14. I'm wondering what kind of job market and economic projections they're using.

I'm afraid that by 2014, 1/4 of the country is going to be eligible for the Medicaid expansion!

[Kansas Wyatt]

18. A little secret...

The U.S. Government's poverty level is a sick joke on the American People, and those who make the rules, attend lavish parties of the Wealthy Elite and have multiple ties to Corporate America. The American Dream is a scam propped up and reinforced by the Corporate Media. Your elected representatives do not give a fuck about the American People.

The richest American should not have anymore say than the homeless person on the street.

[bbinacan]

19. "The richest American should not have anymore say than the homeless person on the street."

WTF? I just did the exercise and I'm in the top 10%. This category and above pays 71.2% of all income taxes. I'm taxed enough thank you very much.

[Hannah Bell]

20. top 10% takes half of all income. how much income tax do you *think* they should pay?

the bottom 90% takes 50% of income.

[Kansas Wyatt]

21. What makes you think you have special rights and privileges...

Over ANYONE else in this country?

I do not give a fuck if you are the richest person in the country.... You should not have anymore fucking say about policy in this country than the homeless on the street. Are you trying to argue that the rich should decide policy in this country?

Isn't that how we got in the current cluster fuck we are in today?

Well maybe we should go back to 95% tax rates, to get the filthy rich to reinvest back into this country, so they could avoid paying that high of rate. Wow, what a remarkable idea they had back in the fifties, to create an economic boom and build up the middle class.

[ipaint]

23. Same access to health care too.

Nothing special about the well off and elite. Lucky maybe but certainly not special.

[Tailormyst]

22. I bring in a little more then 40k for a family of 3.

In Mass that's living paycheck to paycheck. It would be impossible to survive at the poverty level here unless you had subsidized housing.