Tuesday, January 29, 2008

An example of our Federal Income tax system

As I have discussed the stupid Economic Stimulus package that Democrats and Republicans both broadly support I have told people that I am against giving a tax rebate to people who do not pay income taxes in the first place.

The Democrats LOWERED the income limit the Republicans wanted so that even more taxpayers can get the rebate who do not pay income taxes. The Republicans readily went along with this...

Several people (including Jeff Pruitt) have pointed out that some of the people in the lower income brackets who do not pay income taxes do pay payroll taxes; that is true.

I think this is best illustrated with a real world example.

The below family would have already qualified for a so called "Rebate" with the Republican proposal; the Democrats have lowered the income limits even further...

Lets assume we are discussing a family of four Americans living in Fort Wayne, Indiana. Lets assume this family consists of a married couple and their two dependent children who are both age 12. Lets say the Mom and Dad work and that they bring home a gross of $16,000 per year from their jobs. Lets assume they have no other income. Throughout the year they would have a grand total of $992 withheld from their paychecks for Social Security and they would have another $232 withheld for Medicare. This money is their personal contribution to Social Security and Medicare and their employers will make an equal contribution...

They would then bring home $14,776 if they elected to have their employer withhold no money for Federal income tax or State income tax (Which would be wise since they do not pay ANY).

Now lets say they come in to my office today with their W-2's and I prepare their Federal income taxes

This family would receive an Earned Income tax credit of $4716 and then a child tax credit of $638. They would get a Federal tax refund of exactly $5354. If they gave me their bank account information then $5354 would be directly deposited into their bank account by the IRS on February 8th!

So during the year $1224 is withheld from their paychecks and paid to Social Security and Medicare. At the end of the year they get a Federal Income tax refund of $5354.

So for the year they net will RECEIVE $4130 more then they paid in payroll taxes AND Federal income taxes combined!

Then along come the "Republicrats" in Washington and they want to send these people a "rebate" check. Based on what I have been able to read this family would receive a check for another $1800.

Both Republicans and Democrats agree that the above family should get a net $5930 payment from the IRS more then they have paid in payroll taxes and income taxes combined...

No wonder we are running budget deficits every year and Social Security and Medicare are going bankrupt!

Any questions?

Mike Sylvester

P.S. How does this sound to you Jeff Pruitt? Is this a fiscally sound proposal?

3 comments:

steve said...

If they are both only making 16 grand a year, they could use the extra money.

I agree, though, that the stimulus package is superfluous. But it also superfluous as wasteful spending goes. We can really talk about any real spending until we stop spending trillions in Iraq.

Jeff Pruitt said...

Mike,

I've been against this plan from the beginning so I'm not sure what else there is to say.

I think we need to quite borrowing money from foreign governments, including china, and start balancing our budget. I support a true balance budget amendment to the US Constitution...

Tim Zank said...

One word describes this debacle:

WELFARE