In 1973 when Vice President Spiro Agnew resigned and pleaded "no contest" to criminal charges for tax evasion and money laundering, the tax rate for capital gains was much higher than it is today. By 1978 the maximum tax rate on capital gains was 49.9 percent.
Forbes.Com writes about the fiscal cliff deal "...it averted some of the feared, short-term draconian tax increases associated with going over the cliff..."
That's because capital gains tax rates only went up from 15% to 20%, and that is not considered to be draconian to the super-rich (the 0.01%). The Buffett Rule would have taxed all income above $1 million a year at 30%. But even that wouldn't have been near what the top 1% once paid back in the 1950's.
Out of a total of 151.4 million American workers, with the new tax deal only 586,000 actual "wage earners" will have their federal marginal income tax rates go up from 35% to 39.6% - - - the richest of the rich will have their tax rates go up from 15% to 20% - - - and all wage earners will have the reinstated FICA taxes to pay - - - but the richest of the rich don't pay Social Security and Medicare taxes on their "capital gains".
Single "wage earners" earning below $400,000 a year will see no federal income tax hikes, except for the reinstated payroll taxes for Social Security and Medicare. So in that regard, all "wage earners" will see a tax rise because of FICA taxes.).
Out of a total of 151.4 million American workers, only 586,000 actual "wage earners" will have their federal marginal income tax rates go up to 39.6% (less after adjusted gross income for tax deductions).
Only 0.39% of the entire workforce will be in the higher marginal tax bracket, but Republicans are touting this new tax deal as "the largest income tax rate increase in nearly two decades". Some said "the highest tax rate ever in history!" (But that is simply farther from truth than any other lie told in history.)
Do you know who will be taxed at the higher rate? Not nuclear scientists or neurosurgeons, it will be the CEOs of large corporations who have a base pay exceeding $400,000, but also have stock options worth millions and pay the lower capital gains tax rate. (look for some shifts in future base pay.)
Famous Hollywood movie actors and pro athletes will have to pay more in taxes too.
For single earners the higher tax rate only applies to income ABOVE $400,000 - - - the tax rate on someone's FIRST $400,000 earned remains the same. Only WAGE INCOME above that amount will be taxes at the higher rate, and CAPITAL GAINS income will be taxed at 20% over $400,000 but will remain at 15% under that amount.
Those who earn income from "capital gains" through the sale of stocks, dividends, real estate, SWAG investments (such as gold, wine, art), rental income, carried interest (such as Mitt Romney), etc, will see their meager 15% tax rate go up just a little, to 20%, not the top marginal rate of 39.6%.
In other words, the richest of the rich will still get the best tax deal (as always).
Below is a breakdown of the top 1% of wage earners , not the top 1%
of all income earners.
Source: http://www.ssa.gov/cgi-bin/netcomp.cgi?year=2011
The data below doesn't include those whose sole income is earned through capital gains or those who solely rely on government entitlements such as unemployment insurance, Social Security or TANF. The data below is only for those who have WAGES reported by employers on W-4 forms and pay FICA taxes.
| Net Compensation | Number of Wage Earners |
| 400,000.00 — 449,999.99 | 121,258 |
| 450,000.00 — 499,999.99 | 87,229 |
| 500,000.00 — 999,999.99 | 274,585 |
| 1,000,000.00 — 1,499,999.99 | 52,135 |
| 1,500,000.00 — 1,999,999.99 | 18,937 |
| 2,000,000.00 — 2,499,999.99 | 9,471 |
| 2,500,000.00 — 2,999,999.99 | 5,587 |
| 3,000,000.00 — 3,499,999.99 | 3,784 |
| 3,500,000.00 — 3,999,999.99 | 2,535 |
| 4,000,000.00 — 4,499,999.99 | 1,796 |
| 4,500,000.00 — 4,999,999.99 | 1,367 |
| 5,000,000.00 — 9,999,999.99 | 5,033 |
| 10,000,000.00 — 19,999,999.99 | 1,550 |
| 20,000,000.00 — 49,999,999.99 | 406 |
| $50 million a year and over | 93 |
| Total of all Wage Earners in the U.S. = 151,380,749 | Top 1% of the Wage Earners = 585,766 |
* 50% of all American workers net less than $27,000 a year. The average "HOUSEHOLD" income is $50,000 a year - and 80% of all "HOUSEHOLDS" have two wage earners.
The Rich have always had (and still do) the Better Tax Deal
America's ultra-wealthy individuals, the top 1% (our American "captains of industry") have a much better tax deal than everyone else.
Capital gains and dividends (from "investment income") should be
taxed at the regular marginal income tax rate (the top rate now being 39.6%, not
20% (it used to be only 15% since 2003).
The $112,000 cap on Social Security taxes should be eliminated, almost everyone
else pays this tax on 100% of their earnings, billionaires don't.
All “investment income” (capital gains, etc.) should be taxed for Social
Security and Medicare...which is currently exempted. (although I think ObamaCare
might start imposing a tax on this income)
Loopholes should be eliminated and deductions capped (like Mitt Romney’s show
horse as a medical expense) and better over-sight of government spending is
needed...as well as hiring more IRS auditors to find wealthy tax evaders.
Bankers, CEOs and hedge fund managers will only pay a 20% capital gains tax
(before deductions) on their stocks, but working Americans who have their
pensions, IRAs and 401k plans invested in stocks are taxed at the regular
marginal tax rate.
TAX REFORM NOW
On the top .01%
Hi Bud... Actually there are some other tax increases on the 250K+ crowd. Exemptions and some deductions are reduced or eliminated. I've read that this will add 1-2% to the effective tax rate of people with incomes over 250K. (This would apply to people who get income from capital gains or dividends as well.)
ReplyDeleteAnd, you are right; there is a 3+% tax on capital gains over about 300,000 for Medicare.
This is not the best deal for the country, in my opinion; but I think it is a decent deal as 92% of these new taxes will fall on the upper 1%. Also the Republicans are up in arms about this deal, so it must not be that bad.