2/7/2013 3:00 AM ET|
Why you should pity Phil Mickelson
The golfer has a sweet swing but a sour view of the federal income tax. As a pro athlete, he pays a far higher rate than many on Wall Street.
Does Phil Mickelson have a legitimate beef when it comes to his taxes? The Hall of Fame golfer and one of the world's highest-paid athletes recently caused a stir when he threatened to move out of his native California -- and hinted at perhaps even retiring from golf -- because of his high state and federal tax rates.
Mickelson reportedly earned nearly $48 million last year. He was reacting in part to California's newly passed Proposition 30, which raises the state tax rate on people earning more than $1 million from 10.3% to 13.3%.
And as The Wall Street Journal recently reported, federal tax rates on income of more than $400,000 rose this year, from 35% to 39.6%. At the same time, according to the WSJ, "'Obamacare' levies a new 3.8% surtax on investment income and raises the Medicare tax by 0.9% on wages over $200,000. Limits on itemized deductions for high earners have also been reinstated, which will raise many athletes' marginal rates by one to two percentage points."
While "Lefty," as Mickelson is known, quickly backtracked and apologized for his comments, he also opened the door on something that a lot of affluent folks and their accountants already know: Rich people are not all equal when it comes to the taxes they pay.
"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63%," Mickelson said at the time.
Analysts believe his actual tax rate is closer to 50%, according to CNBC. But still, how does Mickelson end up paying about half his income in taxes when Mitt Romney, who's reportedly worth about $250 million, famously had a rate of around 14% on his 2011 taxes?
Or, to quote Salary.com, "How does a man worth hundreds of millions end up with a tax rate similar to that paid by a household earning $50,000 per year?"
One big difference is in their jobs. "If you look at someone like a professional athlete, they are earning their income through their services, through labor, similar to a construction worker," says Sharon Lassar, a director of the school of accountancy at the University of Denver's Daniels College of Business. "And income that is earned through labor is ordinary income that is subject to U.S. taxes today as high as 39.6%. That's after the legislation that was passed to deal with the fiscal cliff; it was lower before that."
In comparison, Romney's income likely came through capital gains -- the profits from selling assets such as real estate or stocks -- acquired through his partnership with firms that buy and sell other companies. "And the sale of those underlying companies is a capital gain; it generates a capital gain to the partnership," Lassar says.
Romney's income is taxed twice – first at the corporate level and a second time when reported on a personal income-tax return. As he said during his interview with "60 Minutes" last September, "One of the reasons why the capital-gains tax rate is lower is because capital has already been taxed once at the corporate level, as high as 35%."
The income Romney and others like him report on their federal tax returns comes mostly from capital gains, which currently are taxed at a high of 23.8%. But last year, before the fiscal-cliff legislation, they were taxed at a maximum of 15%. "And that's why Mitt Romney's tax rate was just under 15%," Lassar says, "because he also had charitable contributions and other items which reduced his taxable income."
"Essentially, the (federal) policy is this: If you have income from capital, we're going to tax it at a preferential rate," Joseph Newpol, a professor of law, taxation and financial planning at Bentley University in Waltham, Mass., explained to Salary.com. The government's rationale for that lower capital-gains tax rate, he says, is "to encourage people to invest in stocks, bonds and things like that because that's good for the economy, it creates jobs."
Romney also came under fire during his presidential campaign for not providing enough of his tax returns for public scrutiny. But Lassar says those returns wouldn't have provided much political ammunition to Romney's opponents, because they cannot really explain the tangled way that investment income is earned and taxed.
Others look at the discrepancy between what a top athlete and a world-class investor pay in taxes in a more pragmatic way.
"The Mitt-Lefty paradox has a simple explanation: In America, we tax work. And highly," Edward McCaffery, a professor of law, economics and political science at the University of Southern California, said recently on CNN.com. "We do not tax capital or wealth much at all. Indeed, if you have wealth already, taxes are essentially optional."
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I also believe we colectively as a nation pay too much in taxes. There are no real checks and balances to oversee how our government spends our money and who is taking advantage of it. Having said that, I also believe that there are many mega-wealthy corporations and individuals who do not pay their fair share. They hire highly paid lawyers and accountants to help them find every possible loophole to minimize their taxes and in a lot of cases they pay hardly anything at all.
Why is it that if 4% of the nation controls 90% of the capital, that same 4% pays only 65% of the nations revenue. Doesn't the equaton call for them to also pay 90%. So if the top 4% pay 65% of the nations revenue and the bottom 48% pay nopthing, then the middle 48% of the people in this country are still paying too much tax proportionally. What I mean is that lets say the bottom 48% of the people who pay nothing control only 1% of the nations capital the middle 48% control the remaining 9%. This is how this breaks down, Bottom 48% of population controls 1% of capital and pays nothing. Top 4% controls 90% of nations capital and pays 65%, and middle 48% controls 9% of nations capital and pays 35%. Who do you think is paying more than their share.
I sure won't shed any tears for Phil, if you make that kind of money , then you should pay more tax. The working man has kept this country going and the professional sports stars should pay through the nose because without the tv ratings they are no more than myself.
PAY IT PHIL and cry like you always have about something.
Bottom line, the phucking govt spends entirely way too much money and continues to tax the piss out of the American people. A refund on your taxes is considered income the following year, hells bells you pay taxes on it the first time through and then again the second time. That is just one example of thousands of scenarios. It has surpassed ridiculous, its insane, however the average "joe" doesn't realize and just goes along.
Its time to take back the country, go to the streets, be sane but forceful with our message.
WE'VE HAD ENOUGH!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!!
I take pity on Phil and on most all fellow Americas as we will all face a significant tax increase. I was speaking with a coworker about the amount of taxes that Phil has to pay, 64%, and his response was, "I don't feel bad at all for Phil. He has too much money that he does not know what to do with. No one needs that much money." My response was, "There is a single mother with two jobs and three kids thinking the same thing about us." He had no response.
I pay 9.5% in taxes. I am o.k. with that. But is also think there is now way, no matter how much you make, does the govt have a valid reason to half of a person salary.
The article should be "Why we should pity anyone that works for a living" we are all getting taxed to poverty. Federal tax, State tax, property tax, sales tax, County tax, Local tax, Gasoline tax, and not to mention all the taxes you see on your utility bills. The rich really are getting hammered by taxes. Capital gains taxes are taxes on the money you first earned to invest, then at the corporate level and finally capital gains. Not twice three times. Government workers are making big pay checks while the rest of the country struggles. It is B.S.
Or, , "How does a man worth hundreds of millions end up with a tax rate similar to that paid by a household earning $50,000 per year?"
This shows the stupidity of it all. Once you pay taxes on your income what's left is yours. So Mitt is smart enough not to blow everything he earns and saves it up to become rich. That use to be the name of the game. He's obviously smarter than "Salary.com"
WHAT'S FUNNY IS ALL THE LIBS WHO ARE SLAVES TO OBAMA AND DEMOS AND LIBOS AND
ALL THE BIG MOUTH LIBS ON TV WHO AREN'T AFFECTED BY HIS LEFT WING AGENDA! THEY
SPOUT OFF ABOUT TAXES AND PAYING FAIR SHARE BUT THEY DON'T PAY EITHER! BUT
HOW DID OBAMANITES FEEL WHEN HE JUST RAISED THEIR TAXES? AND NOW FIND OUT
OBAMACARE WILL COST EVERYBODY 2,000 OR MORE PER YEAR OR YOU'LL GET DUMPED
INTO OBAMA DEATH CARE SINGLE PAYER SYSTEM? BRAINWASHED DOPES! OBAMA AND
DEMOS ARE NOTHING BUT SLAVE MASTERS BUT SOCIALIST WITH COMMUNIST IDEALS!
AT LEAST REPUBLICANS ARE CAPITALIST AND BUSINESS AND CONSUMER FRIENDLY AND
BELIEVE IN SMALLER GOVT AND FREEDOM! NOT FREEDUMB LIKE OBAMA!
I applaud 'Lefty" for speaking out! We are over taxed just so the Government and it's croney politicians can waste it on junkets and their pay raises.. However I wanted to PUKE when "Lefty" apologised for his comments!!! He said it, so obviously he meant it. Why apologise for your beliefs or the way you feel? In my opinion "Political Correctness" is Cowardice... That's my opinion and I'm sticking to it..
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