Friday, August 29, 2014
FAIRFIELD-SUISUN, CALIFORNIA
99 CENTS

Make tax decisions based on facts

sievers column sig

By
From page B7 | December 23, 2012 |

As we sit in the middle of the debate on the “fiscal cliff,” some observations are relevant. So here are some points to help you make sense of the discussion.

Cutting spending is always difficult because people have become involved in the programs that might disappear. The task for Congress is to set priorities, determine the merits of the programs and whether to reduce or eliminate them. As we have seen over the years, cutting budgets is remarkably hard. The alternative is to increase revenues, mainly through tax increases.

Social engineering is one objective of the tax system with the central premise that those who have lots of money should pay more tax. So for years we have had progressive tax brackets, currently from 10 percent to 35 percent. The demographics are interesting, also. Based on the most recent annual IRS report, from 108 million tax returns filed in 2008, only 319,000 showed income in excess of $1 million and only 120,000 in excess of $2 million.

Another interesting statistic shows how much of the total tax paid comes from each part of the tax paying population. Again from the IRS report, the top half by income of all taxpayers paid 97 percent of all taxes. The top quarter paid 86 percent of the total taxes, the top 10 percent paid 70 percent, the top 5 percent paid 60 percent of all taxes and the top 1 percent of taxpayers paid 40 percent of all taxes collected.

The most recent debate has focused on raising taxes for those with higher incomes, but which segment? What is the target for the increases?

The simple fact is that the higher income brackets have fewer and fewer people in them and as a result, less total money to tax. For example, if you look at taxpayers with incomes above $200,000, the total number of tax filings is only 4.3 million. The money above $200,000 in which you might increase tax is $1.8 trillion. Raising the tax on this amount by 5 percent would add only $90 billion or so to the Treasury.

In a similar fashion, at the $1 million level, there are only 319,000 filings and the total money available to tax is $619 billion. Raising the tax by 5 percent on this amount would only add $31 billion to the Treasury.

Neither of these options are enough to close the budget deficit. Indeed, taxing incomes above $1 million at 100 percent (taking all their money) would only yield $619 billion and even that is insufficient. Not to mention that such high tax rates are not sustainable because people will simply stop earning money if they keep little or none of it. Just look at the recent turmoil in France as an example.

As an alternative, consider looking at the larger population. The total income for those below $200,000 is about $3.6 trillion and $5.65 trillion for everyone. By simple arithmetic, we would need another $5,800 from everyone to raise the same amount. However, the scary part is that everyone, on average, would need to pay $9,400 more just to close the deficit.

The simple fact is that so many more taxpayers are in the low and middle brackets that a small percentage increase in their tax brackets raises much more money than large percentage changes on those in the high brackets. We as a society may choose not to raise the taxes at the lower end because we feel it is unfair, but that does not change the arithmetic. Raising the higher tax brackets is much less effective than small changes to the middle and low brackets because it affects so many more taxpayers.

As we face questions about assisting lower-income citizens and raising more revenue for the government, we need to separate the social and emotional discussion from the simple facts about where the potentially taxable money lies and who pays it in taxes now. Let us all try to make sound decisions but based on the right facts.

Mark Sievers, president of Epsilon Financial Group, is a certified financial planner with a master’s in business administration from UC Berkeley. Contact him at mark@wealthmatters.com.

LEAVE A COMMENT

Discussion | No comments

The Daily Republic does not necessarily condone the comments here, nor does it review every post. Read our full policy

.

Solano News

Hood-Courtland: Small towns boast interesting facts

By Susan Winlow | From Page: A1

 
Vallejo Symphony launches new season Sept. 21

By Amy Maginnis-Honey | From Page: B1

Opponents: State water plan will destroy Delta

By Susan Winlow | From Page: A1, 4 Comments | Gallery

 
New role for symphony conductor begins next year

By Amy Maginnis-Honey | From Page: B1

Prolific pears rule Courtland area

By Susan Winlow | From Page: A1 | Gallery

 
1 critical after 2 shot at Fairfield bus stop

By Jess Sullivan | From Page: A1, 9 Comments | Gallery

Dare Devil Chaos Coaster set for Six Flags debut in 2015

By Amy Maginnis-Honey | From Page: B1

 
Vallejo festival will celebrate Wilderness Act anniversary

By Amy Maginnis-Honey | From Page: B1

Candace Lightner: Founder of MADD, Armijo grad

By Tony Wade | From Page: A2

 
Suisun police plan holiday weekend checkpoint

By Amy Maginnis-Honey | From Page: A3, 1 Comment

 
No plea as Vacaville homicide suspect appears in court

By Jess Sullivan | From Page: A3, 3 Comments | Gallery

 
Vacaville man convicted of fifth DUI

By Jess Sullivan | From Page: A3, 7 Comments

 
 
Solano continues to deal with earthquake

By Barry Eberling | From Page: A4, 2 Comments

 
Bunting earns praise for role in paint case

By Barry Eberling | From Page: A5

 
Fairfield police log: Aug. 27, 2014

By Susan Hiland | From Page: A8

 
Suisun City police log: Aug. 27, 2014

By Susan Hiland | From Page: A8

Weather for Aug. 29, 2014

By Daily Republic | From Page: B14

 
.

US / World

Mom won’t be charged in school confrontation

By The Associated Press | From Page: A5

 
California Supreme Court pick confirmed

By The Associated Press | From Page: A5

Assembly approves statewide ban on plastic bags

By The Associated Press | From Page: A5, 1 Comment | Gallery

 
Feds to resume leasing for fracking in California

By The Associated Press | From Page: A5

High school buddies followed similar path to jihad

By The Associated Press | From Page: A6

 
Drugs killed Oklahoma inmate in troubled execution

By The Associated Press | From Page: A7

4 killed in New Mexico crash of medical flight

By The Associated Press | From Page: A8

 
US rebukes Oklahoma for ditching school standards

By The Associated Press | From Page: A8

Suit claims police brutality at Ferguson protests

By The Associated Press | From Page: A8, 1 Comment

 
Flight diverts to Boston over reclined-seat upset

By The Associated Press | From Page: A8

Testimony wraps up in former Va. governor trial

By The Associated Press | From Page: A8

 
Q&A: Few laws govern children at shooting range

By The Associated Press | From Page: A8

Gun tourism grows in popularity in recent years

By The Associated Press | From Page: A8

 
Obama sets no timeline for action on immigration

By The Associated Press | From Page: A8, 1 Comment

Obama rules out US military action in Ukraine

By The Associated Press | From Page: A9

 
UN Security Council meets on Ukraine crisis

By The Associated Press | From Page: A9

Russian columns enter Ukraine; leader urges calm

By The Associated Press | From Page: A9 | Gallery

 
A look at the Islamic State militants in Syria

By The Associated Press | From Page: A13

Jihadists kill dozens of captured Syrian soldiers

By The Associated Press | From Page: A13

 
UN: Ebola disease caseload could reach 20,000

By The Associated Press | From Page: A13

Attempt to call missing jet may alter search area

By The Associated Press | From Page: A13 | Gallery

 
Europe seeks role in postwar Gaza

By The Associated Press | From Page: A13 | Gallery

UN: Armed group detains 43 peacekeepers in Syria

By The Associated Press | From Page: A13

 
.

Opinion

More ways to help stop bullies

By Letter to the Editor | From Page: A11

 
How about keeping our ISIS plan secret?

By Bud Stevenson | From Page: A11, 10 Comments

 
Question of the week: Is US policy on hostages correct?

By Daily Republic | From Page: A11

What should the US do about the Islamic State?

By Ben Boychuk and Joel Mathis | From Page: A11, 1 Comment

 
.

Living

Community Calendar: Aug. 29, 2014

By Susan Hiland | From Page: A2

 
Today in History: Aug. 29, 2014

By The Associated Press | From Page: A2

How do I deal with my overweight cousin who smells like cat urine?

By Kathy Mitchell and Marcy Sugar | From Page: B13

 
Horoscopes: Aug. 29, 2014

By Holiday Mathis | From Page: B13

.

Entertainment

Week in preview Aug. 29-Sept. 4

By Amy Maginnis-Honey | From Page: B1

 
Review: ‘As Above’ so-so

By The Associated Press | From Page: B2

Review: Ex-007 actor spying again in ‘Nov. Man’

By The Associated Press | From Page: B2 | Gallery

 
Review: The case against binge-watching TV

By The Associated Press | From Page: B3 | Gallery

Entertainment calendar: Aug. 29, 2014

By Susan Hiland | From Page: B4

 
Jolie, Pitt wed privately at chateau in France

By The Associated Press | From Page: B5

TVGrid

By Daily Republic Syndicated Content | From Page: A9

 
.

Sports

Prep football preview: Rio Vista looks to get back to playoffs

By Marcus Lomtong | From Page: B7 | Gallery

 
Angels rally in 10th for 4-3 win over Oakland

By The Associated Press | From Page: B7

Record-setting Petit leads Giants past Rockies 4-1

By The Associated Press | From Page: B7 | Gallery

 
Borland returns pick for TD, 49ers beat Texans

By The Associated Press | From Page: B7 | Gallery

Carr’s 3 TDs lead Raiders past Seahawks 41-31

By The Associated Press | From Page: B7

 
Rise in flags makes NFL defenders wary of contact

By The Associated Press | From Page: B8

After Rice, NFL increases domestic violence bans

By The Associated Press | From Page: B8

 
USC coach accepts some blame in Shaw situation

By The Associated Press | From Page: B8

Williams overcomes 3 early double-faults to win at U.S. Open

By The Associated Press | From Page: B8 | Gallery

 
Mickelson in a bind with 4 straight playoff events

By The Associated Press | From Page: B8

Weakened US team aims for world basketball title

By The Associated Press | From Page: B8

 
Local youngster will play baseball on national stage

By Marcus Lomtong | From Page: B9, 1 Comment | Gallery

Week Zero prep football capsules

By Paul Farmer | From Page: B9

 
Signups for Friday, Aug. 29, 2014

By Paul Farmer | From Page: B10

Stewart returning to competition after fatal crash

By The Associated Press | From Page: B10 | Gallery

 
Sports on TV/Local sports for Friday, Aug. 29, 2014

By Paul Farmer | From Page: B11

This date in sports history for Friday, Aug. 29, 2014

By The Associated Press | From Page: B11

 
Power looks for elusive IndyCar title at Fontana

By The Associated Press | From Page: B14

.

Business

M235i revives classic BMW memories

By Ann M. Job | From Page: C1

 
Average US 30-year mortgage rate at 4.1 percent

By The Associated Press | From Page: B6

Obama touts revised economic growth numbers

By The Associated Press | From Page: B6

 
US economy grew at brisk 4.2 pct. rate in Q2

By The Associated Press | From Page: B6

Ukraine conflict weighs on markets; Retailers fall

By The Associated Press | From Page: B6

 
Abercrombie name to shrink from clothing

By The Associated Press | From Page: B6 | Gallery

Survey: Americans’ pessimism on economy has grown

By The Associated Press | From Page: B6

 
Apple to unveil next products at Sept. 9 event

By The Associated Press | From Page: B6 | Gallery

.

Obituaries

Frank W. Moy Jr.

By Nancy Green | From Page: A4, 1 Comment

 
Gary Allen Person

By Nancy Green | From Page: A4

Lois C. Clark

By Nancy Green | From Page: A4

 
.

Comics

Pickles

By Daily Republic Syndicated Content | From Page: B12

 
Beetle Bailey

By Daily Republic Syndicated Content | From Page: B12

Blondie

By Daily Republic Syndicated Content | From Page: B12

 
Baby Blues

By Daily Republic Syndicated Content | From Page: B12

Peanuts

By Daily Republic Syndicated Content | From Page: B12

 
Zits

By Daily Republic Syndicated Content | From Page: B12

B.C.

By Daily Republic Syndicated Content | From Page: B12

 
Rose is Rose

By Daily Republic Syndicated Content | From Page: B12

Frank and Ernest

By Daily Republic Syndicated Content | From Page: B12

 
Wizard of Id

By Daily Republic Syndicated Content | From Page: B12

Sally Forth

By Daily Republic Syndicated Content | From Page: B12

 
Garfield

By Daily Republic Syndicated Content | From Page: B12

Dilbert

By Daily Republic Syndicated Content | From Page: B12

 
Get Fuzzy

By Daily Republic Syndicated Content | From Page: B12

For Better or Worse

By Daily Republic Syndicated Content | From Page: B12

 
Baldo

By Daily Republic Syndicated Content | From Page: B12

Word Sleuth

By Daily Republic Syndicated Content | From Page: B13

 
Sudoku

By Daily Republic Syndicated Content | From Page: B13

Cryptoquote

By Daily Republic Syndicated Content | From Page: B13

 
Crossword

By Daily Republic Syndicated Content | From Page: B13