'Dismal' prospects: 1 in 2 Americans are now poor or low income

[MrsPete]

My point wasn't unique to cellphones. I do have a problem with someone saying they can't pay their mortgage yet have a family cellphone plan, cable tv and internet and are not willing to cut down expenses in any way. EVERYTHING is not a neccessity. Sometimes drastic measures are needed to get a budget back under control. By someone saying $60 a month for this or $100 a month for that isn't going to pay off my debt isn't getting it. These "neccessities" add up.

Well, that's obvious. Makes me think about my cousin who hadn't worked in months and months. What'd he do with his first back-to-work paycheck? He paid his "back" cable bills so they'd cut his service back on.

I'm much more concerned that bank of America and GE doesn't pay taxes than the family of 4 living on 25k a year.

If you understand the difference between total paid and percentage paid (and some people genuinely don't understand that difference), you know that these companies pay more total dollars (many more total dollars) than a middle-class family . . . yet they pay a lower percentage than that middle-class family. People like to throw out comments like this to make it appear that companies aren't paying taxes, but when you look at the facts, that's far from the truth.

Also, the family of four making 25K isn't middle-class. They're probably paying zero AND may even be getting Earned Income Credit back, so the comment really doesn't work on any level.

Margaret Thatcher

That's what happened in Greece and is happening in other European countries right now when they are less people working and the population is aging. They are not enough working citizens to foot the bill for the ever-growing government programs and "freebies"

Forget Greece and Europe! That's happening right here in America. Working professional people are choosing to have 1-2 children per family (the kids most likely to go to college, get high-paying jobs, pay taxes to support all the entitlement programs), so the work force is growing smaller, many of our high-tech jobs are going overseas (partly because companies can get cheaper workers overseas, partly because newly-graduated engineers, for example, are more plentiful in India than in America) . . . at the same time, the Baby Boomers are beginning to collect Social Security. WE are entering into the problem you're describing!

 

[Muushka]

Well, that's obvious. Makes me think about my cousin who hadn't worked in months and months. What'd he do with his first back-to-work paycheck? He paid his "back" cable bills so they'd cut his service back on. If you understand the difference between total paid and percentage paid (and some people genuinely don't understand that difference), you know that these companies pay more total dollars (many more total dollars) than a middle-class family . . . yet they pay a lower percentage than that middle-class family. People like to throw out comments like this to make it appear that companies aren't paying taxes, but when you look at the facts, that's far from the truth.

Also, the family of four making 25K isn't middle-class. They're probably paying zero AND may even be getting Earned Income Credit back, so the comment really doesn't work on any level.Forget Greece and Europe! That's happening right here in America. Working professional people are choosing to have 1-2 children per family (the kids most likely to go to college, get high-paying jobs, pay taxes to support all the entitlement programs), so the work force is growing smaller, many of our high-tech jobs are going overseas (partly because companies can get cheaper workers overseas, partly because newly-graduated engineers, for example, are more plentiful in India than in America) . . . at the same time, the Baby Boomers are beginning to collect Social Security. WE are entering into the problem you're describing!

Actually I am pretty sure GE does not pay any taxes. I am not sure about BOA.

But your statement holds true for the whining that people do about Warren Buffet paying less taxes than his secretary. Lower rate, yes. Less taxes? Nope.

And I agree, we are heading for a Greece-like economy at an alarming rate.

 

[Colleen27]

I'm much more concerned that bank of America and GE doesn't pay taxes than the family of 4 living on 25k a year.

Or more to the point, the millions of families living in between that 25K that qualifies for assistance and the top tax bracket... Again, this is one of those things that plays so well to outrage at the "entitlement mentality" with very little discussion of the fact that MOST of the 50% that don't pay income taxes aren't in the welfare/EITC bracket. They're middle class families living on a mid-to-high 5 figure income with children, a mortgage, and other big deductions, for whom a tax hike would mean the end of vacations, cutting back on purchasing habits, less saving for college and retirement, far less spending overall. And while it isn't popular to say, practicality sometimes outweighs fairness - 20 households earning 50K generate FAR more economic activity than one household earning 1M, and while equitable taxation is nice on paper it would devastate the consumer spending that drives our economy.

 

[crisi]

Or more to the point, the millions of families living in between that 25K that qualifies for assistance and the top tax bracket... Again, this is one of those things that plays so well to outrage at the "entitlement mentality" with very little discussion of the fact that MOST of the 50% that don't pay income taxes aren't in the welfare/EITC bracket. They're middle class families living on a mid-to-high 5 figure income with children, a mortgage, and other big deductions, for whom a tax hike would mean the end of vacations, cutting back on purchasing habits, less saving for college and retirement, far less spending overall. And while it isn't popular to say, practicality sometimes outweighs fairness - 20 households earning 50K generate FAR more economic activity than one household earning 1M, and while equitable taxation is nice on paper it would devastate the consumer spending that drives our economy.

And, of course, its a huge misstatement to say that these families don't pay taxes. Their SSI and sales tax burden (as a percentage of income) is far higher than mine (my husband and I both top out on SSI and we pay very little of our income in sales tax because we don't spend it). My property tax burden is relatively small as a percentage of our total income because we live in a relatively middle class home.

I paid a bigger percentage of my income in taxes when I made $30k a year than I do now.

 

[nunzia]

But they do create and destroy jobs just by being there. Whether they are creating jobs by spending money, or creating jobs by regulation (SOX created a ton of jobs within the private sector) or destroying jobs by taxing higher or insisting on benefits that make 3rd world labor more attractive, actions our government takes has a lot to do with jobs.

Personally, I don't think that jobs should be the only driver in making decisions (I like clean water and people making more than $3 a day), but I think its important to understand that many of the governments decisions have an effect on private sector labor. The government shouldn't be taking actions right now that have a negative impact on jobs and should be taking actions that have a positive impact on jobs - unless the other consequences of the action are significant enough to override the jobs concerns.

Excellent point..government meddling has destroyed many jobs and job sectors..and I want clean water and decent (although many disagree on what decent is) wages. The thing is, government can't just find the balance and stick to it..they have to continue grow for THEIR purposes, while it's in OUR best interests to keep them as small as possible so the battle rages on.

 

[nunzia]

Actually I am pretty sure GE does not pay any taxes. I am not sure about BOA.

But your statement holds true for the whining that people do about Warren Buffet paying less taxes than his secretary. Lower rate, yes. Less taxes? Nope.

And I agree, we are heading for a Greece-like economy at an alarming rate.

That whole Buffet thing came about by comparing apples to oranges. Buffet was paying on CAPTITAL GAINS which is a lower rate than income tax, so of course it looks skewed.

Love the Margaret Thatcher quote and so true..Also, agree with the nevermind Greece and all the countries 'over there' going through the pains of decades of poor money management by their governments..we are already them and no one really seems to give a hoot to get us out.

 

[Muushka]

And, of course, its a huge misstatement to say that these families don't pay taxes. Their SSI and sales tax burden (as a percentage of income) is far higher than mine (my husband and I both top out on SSI and we pay very little of our income in sales tax because we don't spend it). My property tax burden is relatively small as a percentage of our total income because we live in a relatively middle class home.

I paid a bigger percentage of my income in taxes when I made $30k a year than I do now.

I assume that you are earning a higher salary than $30K, right?

Can someone who can make this statement explain how that is possible?
I have heard others say the same thing, but never thought to ask how.

Is it more deductions? Smarter accountant? How is this possible?

Our income goes up and the percent on taxes goes up too.

 

[crashbb]

I assume that you are earning a higher salary than $30K, right?

Can someone who can make this statement explain how that is possible?
I have heard others say the same thing, but never thought to ask how.

Is it more deductions? Smarter accountant? How is this possible?

Our income goes up and the percent on taxes goes up too.

I assume that they are including more than income tax. If you live a state with sales tax, for example, they include that amount in their figure.

 

[Colleen27]

I assume that you are earning a higher salary than $30K, right?

Can someone who can make this statement explain how that is possible?
I have heard others say the same thing, but never thought to ask how.

Is it more deductions? Smarter accountant? How is this possible?

Our income goes up and the percent on taxes goes up too.

She was talking about total tax burden, not just income taxes.

When we were making 30K, we were paying 10% of our income in property taxes, about 3% in sales taxes, 15% in FICA (self-employed). On our current income the percentages we pay in sales and property taxes have dropped by more than our effective income tax rate (which is admittedly low, as a single income, average earning family with 3 children) so our total tax burden is a lower percentage of our income now than when we were starting out. And we haven't yet reached the point where we're maxing out FICA and getting some relief there; our lower rate is strictly that property tax consumes less of our income, we're saving more so paying sales tax on a smaller share, and we're getting credits/deductions that keep our income tax rate low.

 

[Colleen27]

That whole Buffet thing came about by comparing apples to oranges. Buffet was paying on CAPTITAL GAINS which is a lower rate than income tax, so of course it looks skewed.

It isn't apples to oranges, it is a valid question relative to the goals and methods of our taxation system. People are quick to cry "unfair" over progressive tax rates and claim they punish success, but at the same time defend higher tax rates for people who work for their money than for people who live on unearned income.

 

[crisi]

I assume that you are earning a higher salary than $30K, right?

Can someone who can make this statement explain how that is possible?
I have heard others say the same thing, but never thought to ask how.

Is it more deductions? Smarter accountant? How is this possible?

Our income goes up and the percent on taxes goes up too.

When I made $30k, I paid social security on the first dollar and the last dollar- some of my income was self employment and I paid both halves, 6% income tax on a LOT of my income because at $30k I spent pretty much every penny I made, shielded very little of my income from income tax in a 401k, was single, lived in a house that was a lot of house for my income and paid property taxes accordingly. My federal income tax bill was small, as was my state income tax bill - but the taxes I paid in SSI, sales, property, and fees (fees were huge, car tags, the $4 extra on a phone bill) made up a significant percentage of my income.

My husband and I max out our SS, so we only pay it on the first $108k in salary. Not all our income is salary - there are capital gains and dividends. We shelter income in 401ks because we can afford to and do so at the maximum. My husband defers compensation as well. I can also afford to take advantage of a high deductible medical account and shelter another $6k. I moved, but my property taxes in my larger house are a smaller proportion of my income than it was. I have kids and get deductions there.

As a percentage of income, my overall tax burden has dropped now that I'm "rich" than back when I was middle class. I'm a recipient of the Bush era tax cuts, too - that helped.

 

[ilovemk76]

And, of course, its a huge misstatement to say that these families don't pay taxes. Their SSI and sales tax burden (as a percentage of income) is far higher than mine (my husband and I both top out on SSI and we pay very little of our income in sales tax because we don't spend it). My property tax burden is relatively small as a percentage of our total income because we live in a relatively middle class home.

I paid a bigger percentage of my income in taxes when I made $30k a year than I do now.

You seemed to gloss over that fact that those who make the least get the best return on their money with SS.

 

[Acklander]

You seemed to gloss over that fact that those who make the least get the best return on their money with SS.

Those who live longest get the best return on their social security investment.

Personally, I don't see where much is being glossed over. If someone works for next to minimum wage for 50 years they probably didn't get a chance to sock much of it away in their 401k before they retired and then get to live off what social security pays. I'm sure they're laughing it up on how they pulled one over on the rest of us who aren't getting as big of a return on our social security investment.

 

[leahjade]

I paid a bigger percentage of my income in taxes when I made $30k a year than I do now

Then you had a lousy accountant - FACTS ARE:

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

 

[crisi]

Those who live longest get the best return on their social security investment.

Personally, I don't see where much is being glossed over. If someone works for next to minimum wage for 50 years they probably didn't get a chance to sock much of it away in their 401k before they retired and then get to live off what social security pays. I'm sure they're laughing it up on how they pulled one over on the rest of us who aren't getting as big of a return on our social security investment.

And their SS payout will be less than mine. Social Security payouts are indexed to income. People making minimum wage would get less than $1000 a month for SS. I'm supposed to get $2300 a month.

 

[crisi]

Then you had a lousy accountant - FACTS ARE:

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

I'm my own accountant, but perhaps you'd better reread. I'm referring to total tax burden, not just income taxes. Some taxes - Social Security and sales taxes, are very regressive.

 

[Muushka]

When I made $30k, I paid social security on the first dollar and the last dollar- some of my income was self employment and I paid both halves, 6% income tax on a LOT of my income because at $30k I spent pretty much every penny I made, shielded very little of my income from income tax in a 401k, was single, lived in a house that was a lot of house for my income and paid property taxes accordingly. My federal income tax bill was small, as was my state income tax bill - but the taxes I paid in SSI, sales, property, and fees (fees were huge, car tags, the $4 extra on a phone bill) made up a significant percentage of my income.

My husband and I max out our SS, so we only pay it on the first $108k in salary. Not all our income is salary - there are capital gains and dividends. We shelter income in 401ks because we can afford to and do so at the maximum. My husband defers compensation as well. I can also afford to take advantage of a high deductible medical account and shelter another $6k. I moved, but my property taxes in my larger house are a smaller proportion of my income than it was. I have kids and get deductions there.

As a percentage of income, my overall tax burden has dropped now that I'm "rich" than back when I was middle class. I'm a recipient of the Bush era tax cuts, too - that helped.

OK, that is where I go wrong. I always assume that people are comparing income tax bills and not all the other taxes.

I really wish these loopholes would be closed to make a more level playing field.
We need a flat tax!!
Can you tell we don't have enough deductions to even do the long form?????
Either that or we are just not creative enough!


PS thank you for explaining it to me, makes sense.

 

[MrsPete]

Those who live longest get the best return on their social security investment.

Yeah, but since we only have limited ability to control how long we live (skip smoking, eat and drink in moderation, exercise frequently -- but the bus still might smash you flat), we can't really plan for that in the same way we can plan other financial details.

Then you had a lousy accountant - FACTS ARE:

This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent.

If you only consider income taxes, you'd be partially right -- you've simplified income taxes a bit, but let that go.

In reality, income federal income taxes are only a portion of our tax burden:

We also pay state taxes, sales taxes (perhaps to the state, the county, and the city), property taxes, gas taxes, inheritance taxes, unearned income taxes, and eventually death taxes. While federal income taxes ARE dependant upon one's income, most of these other taxes are set in stone. For example, when you pull up to the gas pump, you see one set price (and a good portion of that price is tax) -- you pay it regardless of whether you're unemployed or a CEO earning millions each year.

And their SS payout will be less than mine. Social Security payouts are indexed to income. People making minimum wage would get less than $1000 a month for SS. I'm supposed to get $2300 a month.

You're totally right, but it's still impossible to know who's going to get "the biggest payout". If you collect $2300/month but live only a year after you begin collecting, you might still collect less than the person who gets only $1000/month but who lives 40 years after beginning to collect.

However, we have no control over that whole situation.

We need a flat tax!!

I sooooo agree with this. Every American needs to pay into the system, needs to feel accountable for our collective needs. We all need to be invested in paying for our government.

 

[Colleen27]

Every American needs to pay into the system, needs to feel accountable for our collective needs. We all need to be invested in paying for our government.

While that sounds nice in theory the reality is that a flat tax represents a massive tax hike for most Americans and would torpedo both consumer spending and saving rates. Median income Americans don't have 20% of their income to spare, and our nation has thrived and prospered for centuries without every American paying for our government via income taxes. In fact the idea that everyone should be paying is only a recent development in popular thought.

 

[StuckInKS]

I'm sure they are on medicaid and food stamps so that wage should be livable.

I just had to say, there is no way a 3 person (or even 4 or 5 person) family making $44K is eligible for food stamps. A friend, who also has a family of 7, was on food stamps for a time last year and their cut off was $3,600/mo, which is $43,200 a year. Medicaid maybe, food stamps no.