Re Oct. 1 letter from Larry Handeland, “Where government's money comes from”
In the second part of his letter, Mr. Handeland referenced effective tax rates paid by tax-paying individuals. I took his challenge and then reread his article. I can't decide if he was being facetious, was using flawed math skills, or was using sarcasm when he considered most tax payers to be in the 7 percent effective tax rate and those paying over 10 percent as being “exceptionally wealthy.”
On the other hand, maybe he honestly believed in what he wrote. Using his math formula and applying this to his definition of exceptionally wealthy (a tax payer having an effective tax rate over 10 percent), I guess I am considered exceptionally wealthy by his standards OR my taxes were done incorrectly -- neither of which is true.
Next I pulled out the IRS Federal Tax booklet for tax year 2011 and calculated the tax on various amounts for a single individua -- doing so twice -- once for being under 65 years of age and again for over 65 years of age, using only the federal standard deduction and personal exemption allowed with no itemized deductions and no children.
The total allowed for both the standard deduction and personal exemption if a person is under age 65 is $9,500. If the tax payer is over 65, then that amount increases to $10,950. The following are my calculations based on different levels of gross income for a single individual using Mr. Handeland's formula:
• $50,000 gross income, federal tax is: $6,244 (effective tax rate is 12.49 percent ); $45,000 gross income, federal tax is $4,994 (effective tax rate is 11.1 percent ), $40,000 gross income, federal tax is $4,146 (effective tax rate is 10.46 percent ); $35,000 gross income, the federal tax is $3,396 (effective tax rate is 9.7 percent, which is very close to the 10 percent definition). By paying an effective tax rate of 10 percent or above, are you exceptionally wealthy?
Singles over 65
(More allowed for standard deduction for seniors-see above):
• $50,000 gross income, federal tax is $5,881 (effective tax rate of 11.76 percent ); $45,000 gross income, federal tax is $4,686 (effective tax rate is 10.4 percent ); $40,000 gross income, federal tax is $3,929 (effective tax rate is 9.82 percent -- almost 10 percent ). By paying an effective tax rate of 10 percent or above, are you exceptionally wealthy?
If you fall within any of the single-person gross income brackets listed above, either being under or over the age of 65, do you consider yourself exceptionally wealthy? I would think not, especially with the price of gasoline at $3.50 per gallon, and food prices skyrocketing. And how much more in federal taxes will you pay if the current tax cuts are not extended? That possible scenario will definitely increase your effective tax rate-making you even more “exceptionally wealthy” according to Mr. Handeland.
The writer lives in Surfside Beach