2995: Why Mitt Romney (and Swede) are wrong

I know I am going to lose most readers at the outset here. Two matters are involved, taxes and arithmetic. It’s not complicated, just harsh. So please bear with me.

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Above is the top portion of IRS form 941. It is the vehicle by which most government revenue is raised. It is seldom seen by the public, who are more familiar with their W-2’s and 1040’s.

It is frightening to talk to people about their taxes, as the level of ignorance is stunning. Perhaps the schools could educate kids in the basics … man, listen to me! Where is my head at? H&R Block, a company that exists primarily because of the ignorance of low-income Americans, would be out of business tomorrow if kids learned a scintilla of the basics of one of the most important economic aspects of their lives, their tax.

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Jumping to the actual calculations on the form (bear with me – it is not complicated!), pay special attention to lines 3, 5a, and 5c. These are the meat cutting lines that lop of the largest part of our income.

Line 3 is Federal income tax withheld from employee paychecks. This is the visible portion of the iceberg. For most people, it is the smallest part of their federal tax. It can be fiddled with on the 1040, and since over-withholding is built into the system, most people get a refund each year. (Tax preparers are judged by the size of refunds. Don’t be fooled. It matters.)

But the rubber meets the road on line 5a. This is the Social Security tax. Note that it is NOT the advertised 6.2% of your income withheld from your paycheck, but rather 12.4%. Where does the additional 6.2% come from? You. If you have ever heard the expression “hidden tax,” this is the mechanical means by which they pull it off. They call the additional 6.2% the “employer’s share,” but the employer has nowhere to go for the money but into the value produced by his employees. The additional 6.2% is detoured around your W-2. It’s hidden. Did I say that already?

Line 5c is the same magic, but a smaller tax , the Medicare tax. Employees see 1.45% taken from their check, but 941 demands 2.9%. Again, half is hidden.

Without showing my work, I’ll skip to the bottom line. Here is the percentage of income tax called “payroll tax” taken from all working Americans: 14.2%.* Note I said “payroll tax,” and not “income tax.”

You are not allowed to monkey with payroll tax on your 1040. It only appears on two lines there, one for self-employeds like me, and a rarely used line for people paying too much due to multiple jobs. 14.2% is hard-wired into our system. It is sacrosanct. It is added to your income tax. For most, this means that their top marginal tax rate is not the advertised 15%, but rather 29.2%.

Yes, most Americans pay almost 30% of their income in federal tax, and do not know it.

Oh yeah, two final things: That 14.2% is advertised as FICA, or Social Security and Medicare, but the money is thrown into the General Fund by a device called the “Unified Federal Budget,” invented while LBJ was in office to hide the true cost of the Vietnam War. Payroll tax is used for everything.

And finally, only wage earners and the self-employed pay the 14.2% tax. Investors are exempt.

The federal income tax is usually the smaller of the two taxes paid by most people. In fact, many don’t pay any income tax at all. But all of us pay the 14.2%. This allows the Mitt Romney’s and Big Swede’s of this world to complain that 47% of Americans pay no tax.

That’s bullshit, and why I wrote this. (And don’t even talk about sales, state income, property, gasoline taxes …)
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*If you’re interested, 15.3/107.65 = 14.2%.

About Mark Tokarski

Just a man who likes to read, argue, and occasionally be surprised.
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3 Responses to 2995: Why Mitt Romney (and Swede) are wrong

  1. rightsaidfred says:

    So the end of the blog is upon us. Sigh. Is psychological counseling available for those of us experiencing distress at the event?

    I viewed your blog like the church down the street. It was a nice place of goodwill; I went to it occasionally; I would tell the proprietor that I thought Lee Harvey Oswald acted alone, and he would tell me I needed to read the Good Books and get my mind right, or I was going to burn in Hell for eternity.

    I came to like you, but I couldn’t get on board with many of your beliefs. There are too many other things to consider, like the self-organized, “emergent” nature of societies. Attributing so many things to a cabal of conspirators doesn’t comport, in my view.

    But the personalized service here was awesome.

    What are the mechanics going forward? Can we troll the posts and fill the replies with spam and corrections? Do things go dark, eventually?

    Like

    • I came to like you too even as you dissed my most dearly held beliefs, but that is part of the reason I gave it up – my opinions, as with JFK, are evidence based. I can show you tons of material that blows the whole thing out of the water, but it doesn’t matter becasue you ‘thought’ Oswald acted alone, even as you have no evidence to support that notion. (Trust me – everything, the bullets, gun, money order, photos – all discredited in total, not just a matter of disagreement, but crushed without hope of redemption.) But that does not matter.

      So day in and day out, finding that 1) people won’t read something if they think they might disagree with it, 2) people will always take an authority figure’s testimony over evidence, and 3) people are afraid of the implications if just one of their dearly held beliefs is toppled – the whole wall might fall down. It was pointless. Swede, for example, who I’ve known since 2006, has not adjusted or modified one belief in his quiver since the 1970’s at least. Pogie refuses to even read comments, as they are often critical of him, and that makes him uncontrollably angry, a sign of deep brainwashing.

      But I miss it. Nothing yet to take its place.

      Like

    • PS – I think I will open up the comments again. Might as well allow some target practice.

      Like

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