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New ways the rich are hammered by taxes

The government is hitting the rich with more taxes, but is it fair?

By MSN Money Partner Feb 21, 2014 1:57PM

This post comes from Maryalene LaPonsie at partner site Money Talks News


Money Talks News on MSN MoneyIt's tax time and that means the rich better get ready to open their wallets to pay even more this year. Depending on where you fall on the political spectrum, that's a bit of news that could have you cheering or grumbling.


5 ways the rich are getting hammered

The tax code is ever evolving, and several provisions of the ironically named American Taxpayer Relief Act actually mean wealthy taxpayers are paying more.

Here are some of the new ways the rich may see their tax bill go up:
  • Special tax rate for top incomes. The top tax rate used to be 35 percent, but the American Taxpayer Relief Act added a new rate for those earning more than $400,000 on a single return or $450,000 on a joint return. Make money above those amounts, and you'll be sending 39.5 percent of it to Uncle Sam.
  • More capital gains tax. Most taxpayers will pay a 15 percent tax on long-term capital gains -- that is, profits made off the sale of investments held for more than a year. However, once you hit that $400,000/$450,000 income level, you'll start pitching in an extra 5 percent of your profits to the government. Individuals with incomes at those levels have a long-term capital gains tax rate of 20 percent.
  • Medicare surtax. Sometimes called the Medicare contribution tax, this tax comes compliments of health reform. If you have an adjusted gross income of more than $200,000 on a single return or $250,000 on a joint return, you could get hit with a 3.8 percent tax on investment income such as interest and dividends.
  • Medicare surtax for the self-employed. If you work for yourself and earn more than $200,000 or $250,000 on a single or joint return, respectively, you get to pay an extra 0.9 percent in Medicare tax. Lucky you!
  • Pease limitation. Finally, the American Taxpayer Relief Act reintroduced the Pease limitation, a provision that had been eliminated by the Bush-era tax cuts. Named for the congressman who helped create it, the Pease limitation restricts the ability of wealthy taxpayers to claim certain deductions. For 2013 taxes, this provision kicks in once your adjusted gross income hits $250,000 for single filers and $300,000 on a joint return.

How much do the rich really pay?

Oh, boo hoo, you say. The rich have plenty, and they are always weaseling their way out of taxes anyhow, right?


Wealthy woman © moodboard/CorbisHow much in income taxes do the wealthy pay? CNN reported last year:

The top 10 percent of taxpayers paid over 70 percent of the total amount collected in federal income taxes in 2010, the latest year figures are available, according to the Tax Foundation, a think tank that advocates for lower taxes. That's up from 55 percent in 1986.
The remaining 90 percent bore just under 30 percent of the tax burden. And 47 percent of all Americans pay hardly anything at all … .

That's just federal income tax and doesn't include payroll tax for Social Security and Medicare (which the vast majority of people pay), plus state taxes and all of the other taxes we face. When you add them all together, using figures from the Tax Policy Center and the Institute on Taxation and Economic Policy, Josh Barro at Business Insider wrote:

Earners in the top 1 percent pay about 43 percent of their incomes in tax. People in the middle quintile pay 25 percent. The poorest fifth pays 13 percent.

Finally, before you assume these one- and 10-percenters are living on luxury yachts and in million-dollar mansions, consider how little money it takes to be a top wage earner. According to 2011 IRS data, the top 1 percent have adjusted gross incomes of $388,905 per year or more. To be in the top 10 percent, you need an adjusted gross income of just $120,136 or more.


Good incomes to be sure, but definitely not enough to be vacationing in Tahiti 10 months of the year.


What do you think about the progressive tax system? Is it right for the rich to pay more since they make more?


More on Money Talks News

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544Comments
Feb 21, 2014 3:31PM
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we have a spending problem, not a taxation problem. stop the earmarks and pork!
Feb 21, 2014 3:56PM
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No ACCOUNTABILITY for the taxation money. They can not even tell you where it went
Feb 21, 2014 4:16PM
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It is not necessarily right that the rich pay so much in taxes but the middle and lower income people definitely can not afford it. If the middle class keeps disappearing the rich will pay 100% of the taxes. Also, the rich that depend on the middle class buying their products will end up poor too. Giving everything away does not work either, so both sides need to figure out the smart way to improve this scenario instead of their failed party lines. Compromising on the main party lines does not work either since both sides are usually wrong. The compromises just end up as bigger failure. If we only had politicians with a brain.
Feb 21, 2014 3:28PM
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Obama is trying to pass himself off as Robin Hood by stealing from the rich and giving it to the poor, but what he is really doing is making the middle class poor
Feb 21, 2014 3:48PM
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article says....... that's a bit of news that could have you cheering or grumbling......ok, cheering if your a so called compassionate, tolerant, diversity loving low info libtard who hates the rich and business (the hand that feeds) or grumbling if your a common blue color guy and realize punishing the job creators never works in human history. Hows greece doing? Heres what one great leader has to say, history (info), as always a low info libtards worst enemy.

You cannot help the poor by destroying the rich.

You cannot strengthen the weak by weakening the strong.

You cannot bring about prosperity by discouraging thrift.

You cannot lift the wage earner up by pulling the wage payer down.

You cannot further the brotherhood of man by inciting class hatred.

You cannot build character and courage by taking away people's initiative and independence.

You cannot help people permanently by doing for them, what they could and should do for themselves.

........Abraham Lincoln

Feb 21, 2014 5:36PM
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Everything just seems to be backwards. Do good in school, go to college, get good grades in college, land a good job, work you way up the ladder or even start your own business, make a lot of money from your own hard work and sweat. Your reward? Get your money taken from you in the form of higher taxes so the government can give it to others who just want to suck the system dry. On the other hand do nothing to get ahead, be content with where you are in life and never try to do better. What do you get? Subsidized health insurance, housing, food stamps, cash assistance and free child care service. I'm all for helping Americans helping Americans, and I realize that some people hit rough patches and they use government assistance for a short time until they get back on their feet, but if the federal government is looking for ways to save money, they should start looking at all the lazy bums that take advantage of all the government help programs and don't lift a finger to try and get a decent job.
Feb 21, 2014 3:32PM
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Taxes on wages (in any form – flat or progressive) are the greatest evil of our American Republic. When government is free to steal from you, there are no limits to waste and abuse in government. If a person chooses to work extra hours or two jobs in order to better provide for themselves or their family, they should not be penalized, but that is what happens. The more you make by working harder and longer, the more money is stolen from you, and given to those who spend their lives living off the hard work of others.

The revenue the government needs to provide legitimate constitutional services should be obtained primarily from a national sales tax instead of a tax on wages. All would pay based on consumption, the more you spend the more you pay. The more luxury you surround yourself with, the more you pay. Your choice. A national sales tax system would capture money spent by criminals and by illegal aliens who currently pay near zero in taxes. There would of course need to be exemptions: Cars (already have a federal excise tax) Primary Residence/Rental Properties (vacation homes would be subject to tax/rental profit would be taxed) Fresh Food (Preprocessed foods and prepared meals would be taxed – only fresh/fresh frozen/canned goods would be exempt) Insurance Premiums, Health Care & Certified Education.

Adding another layer of tax to a business would not be fair. Businesses would need to be compensated by keeping a portion of the tax to cover the expense of collection and reporting. A percentage of .20 to .05 would be fair.

Feb 21, 2014 3:59PM
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When Obama was first elected it was obvious to anyone with a lick of common sense that his goal was to "spread the wealth".  He even admitted it.


This is particularly important to him as he sees it as a way for more money to go from Whites to most minority groups. While a limited number of Whites will benefit under this goal, make no mistake about its real intentions of income redistribution from Whites to minority groups.


Obama has no real knowledge on substantive issues that would lead to improvement for everyone but he fully understands race and class resentment and how to manipulate it for his own goals.  Remember, he is from the Chicago school of politics and he was a good student. 


It is a very well thought out plan that the MSM refuses to address and Republicans are afraid to address.

Feb 21, 2014 4:50PM
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If I ran for office and offered people a dollar to vote for me, would that be wrong?  Would I be accused of 'bribery" or something similar?  How is that different from offering people free cell phones?  I think we the people, being more than 300 million should offer our 535 clowns and king  in Washington a free cell phone, a canoe and a chart to a distant island.
Feb 21, 2014 4:39PM
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In what is the government fair?  We are not supposed to discriminate.  However, the US government is probably the most discriminative group ever known to man.  Example:  State government officials set their own salary.  Who else does?  Alabama legislators put probably 90% of their state salaries under an "expense" shelter and pay no taxes, as I understand, on about 4100 dollars each month.  Who else does that other than government.  Florida legislators passed drug testing for workers but exempted themselves.  Who else does that other than government?  Washington elected officials have different insurance and pensions that are better as I understand.  Who else other than federal employees can do that? The US governent should be shut down for discrimination!!! I long for the day when Washington will be desolate.
Feb 21, 2014 3:53PM
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Oh by the way. The Social Security Tax went from 13.5 to 15.5 per cent in 2013.  What a suprise for those who are self employed.  Hope those who are self employed paid enough in quarterly payments so they don't get hit with an withholding penality.

Another plan by the Democrats to kill jobs.

Feb 21, 2014 3:33PM
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Everyone wants the rich ($250,000 is not rich) to pay a higher percentage of their income in taxes because they don’t think the rich pay enough. Well, how much is enough? If someone is paying hundreds of thousands if not millions of dollars in taxes already, why should they pay more? So what if it’s only 10, 12, or even 5 percent of their income. Why should someone who works harder and sacrifices more, pay more? It’s wrong, it’s unfair. Those paying millions are supporting those paying only a few hundred dollars. If that’s 20% of your income, maybe you just need to work harder? The rest of us are tired of supporting you. Would you rather have 10% of $100,000 or 5% of $250,000?

Feb 21, 2014 4:22PM
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I am not rich by any stretch of imagination but get hit to the point of pain each and every year for money to the freeloaders....makes me awful sick of our dumb a$$ politicians. Especially King Obama and his butt kissers......  
Feb 21, 2014 4:07PM
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Obama is trying to make everyone poor by destroying the small business engine of our economy. This is how he is going to redistribute the income by destroying it. At one point in his last campaign for re-election he stated "A vote for me is a vote for revenge". The liberal media did not even report it.
Feb 21, 2014 4:18PM
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As a member of the 99%, SUPPOSEDLY middle class, and retired after 40 years service, I really don't give a rat's **** about the wealthy, since I am fully occupied with paying my own tax due.
Feb 21, 2014 5:49PM
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it's a shame the idiot running our country isn't smart enough to run a 7-11
Feb 21, 2014 3:47PM
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What  percent of the FICA tax do the top 10 % of earners pay?
Feb 21, 2014 4:19PM
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The IRS Tax Code, written by legislative assistants to reps and senators has to be one of the most complicated documents ever written, if not the most.  Over 4 million words, 17,000 pages.  Former Sen. Baucus was a leading tax reformer, but he will be our ambassador to China.  A major loss. 
Feb 21, 2014 5:54PM
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Only in OBAMAS socialist, world is this fair.......we WORK damn hard for our money and we get penalized.  You want to skate by with very little effort and pay little taxes and NO federal taxes......then YOU are rewarded. The minority.....is now paying for the majority.  The middles class is going faster and faster down the drain, and Obama is smiling on his throne in D.C..  
Feb 21, 2014 7:51PM
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My husband died last year.  I am working to support myself and make too much money to claim widow death benefits .  Also when I retire I can claim mine or his and his is only 50% of what he would have gotten had he lived.  All that money he paid into SSI and I will never see a penny of it.  All that money he paid into medicare and I will never see any of it.  The SSI office looked like an immigration office.  Where is the justice in that?  Where is the fairness?  Work hard all your life and you can still get screwed.   He worked hard all his life and now I will get nothing of it.  
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