Ragin' Cajun wrote:I did adjust it but you insisted on the AGI basis and insisted only 1% of his income was not subject to the 15% rate, so I showed you the numbers based on your rationale because in YOUR words those deductions don't matter. And I even mentioned in the post the numbers were based on your rationale. You insisted on confusing the issue. I will illustrate a simple example of why your line of reasoning is flawed.
Fuzz and RaginCajun are employees of LibCon Inc and both have annual salaries of $100,000. Both of these very handsome gentleman are married to lovely women and have 2 beautiful children. The wives do not work so both have an AGI of $100,000.
Do we pay the same tax rate? According to you we will since we have the same AGI and deductions don't matter, yes?
Fuzz doesn't like charity so no donations, nor does he pay a mortgage. Total tax liability is therefore $8,869. Under your logic your effective rate is 8.8%. Actual effective rate is 11.98%. If the government based your tax calculation on your AGI you would have a tax bill of $16,163. Tell me which you want to pay?
Ragin loves him some God and has a mortgage so he has itemized deductions. Ragin's liability is $6,556. Under your logic the effective rate is 6.5%, whereas actual effective rate is 10.47%
OHHHHH NOOOOOOS. The deductions do impact how one could view potential tax rates of an individual, yes?
And again this is why the calculations you are bringing into the conversation, even though I calculated incorrectly in that first example, do not matter. Simply because the examples being brought into the conversation need to be COMPARED TO THE SAME THING.
Bottom line is it important when making comparisons that you compare the same stuff or no? Yes it is. Is your technically correct answer important to this, no. Charity and other deductions are legal and they are not taxes, though they can lower them. Gross income/taxes paid is an equal comparison because it shows just the tax burden on that gross income regardless of charity deductions, which is, as you have pointed out, a variable. For someone who is in the highest of income brackets a simple one gives more to charity therefore his tax rate is higher is not important because there is no change in tax bracket over an amount far far lower than the income we're talking about here. If you want to make the argument that Romney paid 17% fine, but then Buffet, Gates et al's income must be adjusted to get the same percentage as well. Now, if you want to do that, please, go right ahead. It would be interesting and we could do a great comparison. We don't though.