Tax Policy Center developed an interactive tool that analyzes the 2011 federal income tax returns of President Barack Obama, Vice President Joe Biden, Mitt Romney, and a typical middle-class married couple with children. The interactive tool displays the sources of income, taxable income, income tax liability, tax composition, and finally the effective tax rate. President Obama, Vice President Biden, and Mitt Romney all three reported income that put them in the top 5% of American households, but they ended up with very different effective tax rates. Two key factors that contributed to this difference in effective tax rates are the sources of income and the amount of deductions and exemptions.
All of President Obama’s income was taxed at the ordinary income rates, but he had deductions and exemptions amounting to 37.1% of his income, which helped reduce his effective tax rate. All of Vice President Biden’s income was taxed at ordinary income rates, and he only had deductions and exemptions amounting to 17.9% of his income, which resulted in him having the highest effective tax rate of the three. Mitt Romney had the best of both worlds with more than half of his income being taxed at preferred rates, and his deductions and exemptions amounted to 27.3% of his income. The interactive tool shows how three taxpayers in the same tax bracket can end up with very different effective tax rates.
Tax Policy Center Interactive Tool
In his 2011 State of the Union Address, President Obama stated that American taxpayers would be able to use an online tool to see how their federal tax dollars are spent. The receipt tool allows you to enter your federal tax burden or select an income estimate, and then it shows exactly how much of your federal tax dollars are spent on different expenditures.
Your 2011 Federal Taxpayer Receipt
Tax Foundation’s MyTaxBurden estimates your federal income tax burden under a variety of scenarios. Scenario 1 is the full expiration of all Bush-era and Obama tax cuts. Scenario 2 is the full extension of these tax cuts. Scenario 3 is President Obama’s plan to partially extend these tax cuts for families earning under $250,000 per year and single filers earning under $200,000 per year. This calculator will give you an estimate of your 2013 federal income tax burden.
Many Americans wish they could not only be as wealthy as Mitt Romney, but also use the tax planning strategies he has utilized to have such a low effective tax rate. Citizens for Tax Justice published a report with tax planning ideas taken from reviewing Mitt Romney’s previous tax returns. These tax planning ideas are:
- Don’t work for a living
- If you do work, disguise your compensation as capital gains
- Give to charity – but not cash
- Give to charity – but not now
- Give to charity – your own
- Use offshore investment vehicles
- Invest in sexier financial instruments
- Borrow money only to invest
- Be aggressive in your tax planning
- But don’t do anything illegal
For the complete report see this link
The Joint Committee on Taxation reported that the “Buffett Rule” would generate less than $5 billion per year for a total of less than $47 billion over the next eleven years. From these numbers, the “Buffett Rule” would barely put a dent into the $7 trillion projected federal budget deficit during that period.
More “Buffett Rule” Coverage
Gasoline prices continue to rise so I thought it would be useful to look at the gasoline taxes in each state. New York has the highest gasoline tax rate of $0.49 per gallon while Alaska has the lowest gasoline tax rate of $0.08 per gallon. On top of the state and local gasoline taxes, the federal government taxes gasoline at $0.184 per gallon. The average gasoline tax when adding in the federal taxes is $0.488 per gallon.
For Tax Foundation data on state gasoline tax rates see this link
For state, local, and federal gasoline taxes depicted on a map see this link