Oh, this is a hot topic right now with the presidential elections looming and President Obama and Mitt Romney butting heads at every turn. There's all this talk about how much Romney made and how much he paid in taxes and how it's unfair that a teacher making $40,000 pays 20% of their income and Romney making $21M pays 13%.
Let's break that down a second:
20% of $40K is $8,000; which is a lot considering that it drops the person's income down to $32,000 a year or $2666.66 a month. Well, that's more than we take home supporting a family of 6. And, it's important to remember that if this teacher has kids they're claiming they're getting most if not ALL of that $8,000 back. Plus, anything they purchased for the classroom is a tax write off.
13% of $21M is $2,730,000. Nearly $3million.
But, that gives you a crappy over view of the tax system.
Let me give you some REAL numbers from REAL families.
In 2010 2.2% of my husband's income was taken out for taxes. At the end of the year, we filed our tax return, would you like to know how much we "paid"? ZERO! We got that 2.2% back AND then received more money back! Adding our tax return to our total earned income for 2010, 25% of the money we received for 2010 was tax return from OTHER tax payers. Granted, we did receive that in 2011.
Let's look at 2011 where Joe made a bit more money than 2010. (Note: 2010 was a REALLY crappy year for us income wise). Alright, in 2011 we made about $8K more than 2010, but still only paid 3.1% out over the course of the year. We got all of that back and more! Adding our tax return to our total earned income for 2011, 15% of our total money received for 2011 was tax return from OTHER tax payers!
I could go back to 2009 and 2008 which were even worse for us income wise than 2010 and show you an even greater amount of income we're making OFF of the government in taxes.
So, we pay 2-3% in taxes each month over the course of the year and then make an extra 15-25% from other tax payers.
Let me make this VERY clear: This happens to a LOT of lower-middle income families and lower income families! And if we don't file taxes, and try to allow the government to KEEP that 2-3% we get into trouble.
I can tell you that the tax return is nice. And without it, we would struggle more than we do with it. Tax returns have made it so that we were able to afford to buy decent reliable cars for our family. There's no way we could swing a car payment.
Anyways, this is why I think flat tax with no deductions is the best, and I benefit from the current system. If everyone paid say 10%, the teacher making $40K a year would be paying $4,000 in taxes, and Mitt Romney making $21M would pay $2.1M.
