Larry's Rants

Death of the American Taxpayer by Marginal Tax Rate

2010-10-07T10:20:00.000-07:00

Death of the American Taxpayer

by “MARGINAL TAX RATES”

as told by Larrythetaxguy

The concept of marginal tax rate is not taught in schools, nor understood by most of us. I truly believe that governments do not want us to know the impact. I also believe that collectively they do not understand what it is.

We are generally not taught to spend from our after tax income, line 43 of your tax return. I would like to discuss a serious financial matter. MARGINAL TAX RATE = WHAT YOUR NEXT DOLLAR EARNED IS TAXED. The next dollar earned by a single person with taxable income of $33,950 (married at $67,900) may be taxed at 49.8%. Their federal tax rate is 25%, he will pay 7.65% social security, if he is self employed he will pay an additional 7.65%, his state tax rate is 6.5% and when he spends that dollar the sales tax will be 5.6% . Travel and communication dollars are usually taxed at an additional 5-6%.

To buy A loaf of bread at $2.25 one would need to earn $4.25

A gallon of gas at $2.75 one would need to earn $5.19

A flat screen TV at $760 one would need to earn $1434

A new car at $28,000 one would need to earn $52,830

A vacation at $6500 one would need to earn $12,264

Daycare at $10,000 one would need to earn $18,867

Do you understand why it may seem impossible to get out of debt, especially credit card debt at 15-21%.

Wage and self employment income is taxed at 6.2% on the first $106,800. Taxes are paid on all earnings for medicare at 1.45%. This is paid from the time you earn income (age 16) through any age, regardless if you are collecting social security yourself.

Cities and counties add taxes (cities in Michigan, New York and New Jersey) which increases the marginal tax rate. Many communities add fees for services, rather than calling them taxes. Regardless, its money taken from each dollar we earn. What happens when the federal rates return to 70% and the state and local fees creep to 30%. Fuel tax is currently over 20%.

I am providing you with a valuable tool (attached) to build a financially successful family and household. Information is used from your current tax return to determine your monthly available cash, after federal, state and social security taxes. Insert your adjusted gross income, then subtract your taxes as listed. Divide the net spendable by 12 to determine your monthly cash available. Set your budget from this amount.

This should be taught in second grade. When your child comes home with their Halloween candy you can begin to explain this concept. Let’s say they bring home 100 pieces of candy. Explain that they were very successful and they need to give you 25 of them for the federal tax. This money goes to keep us safe and able to drive to grandma’s house at Christmas. It also goes to people who do not earn enough to take care of their family so we give them our money, called earned income credit. Next explain that they must pay 15 candy bars for social security. This means that these pieces go to pay grandma and grandpa. Even though grandma and grandpa paid money in while they worked, it was given to others. They must also give you 6.5 pieces of candy for the State of Wisconsin. This goes to plow our roads and pay for our education. You can now explain the math.

Your child came home with 100 pieces of candy. 46.5 pieces go to allow us to live free as Americans, but some goes to other people who do not work as hard as you do. That leaves you 53.5 pieces of candy for yourself. Please enjoy them.

Wisconsin only state to set tax trap for Roth IRA's

2009-12-08T12:54:00.000-08:00

Wisconsin has set a tax trap for some who will follow the federal tax laws regarding Roth IRA conversions. Our representatives chose not to accept tax conversions. They chose to penalize those making over $100,000 because the penalty continues each year. It is appalling that they would give up the tax revenue and chose to punish those who use legitimate federal tax laws to plan for the future.

This will only change if we convince our elected officials to do the “right thing” for the residents of Wisconsin.

There are many factors that impact these decisions. The media and many financial representatives do not understand the full impact. The decisions are more accurately based on your tax situation now and later. Bring your questions to a tax professional.

Free Educational ROTH IRA Lunch and Learn

Germantown Tax Accountant Larry Rittberg and Bill Matt, CFP
will help address the important questions and concerns:

What is the Wisconsin ROTH IRA Tax Trap?

How might I be subject to Wisconsin tax penalties Forever?

How can I determine if I should convert an IRA to a Roth IRA in 2010?

What are the advantages and disadvantages of the Roth IRA?

Learn all about the federal and state tax laws?

Learn all about the best tax plan for you?

When: Wednesday December 16, 2009 at 9:30AM, Lunch following
Where: Germantown Library
RSVP: You may bring a guest but please RSVP FOR THIS EVENT!

When: Tuesday December 15, 2009 at 11AM, Lunch following
Where: North Shore Library, N. Port Washington Rd.
RSVP: You may bring a guest but please RSVP FOR THIS EVENT!

Please call 262-255-0494 today!

How much do you have to earn to rent a car = 4 times the rental fee (Taxed at 75+%)

2009-06-30T15:02:00.000-07:00

Arizona has one of the highest taxes and fees on rental cars, approx 28.8%

Wisconsin was approximately 20% and has now added an $18 fee per transaction.

In 2008 a married self employed person of middle income, taxable income of $65,100, is in the 25% tax bracket. This means that his marginal taxable income, "the next dollar earned" will be taxed at a 25% federal tax rate. Since he is self employed, he will pay almost 15% in self employment taxes. The state will tax at 6.5%. If he spends that money locally, it will generally have a 5.6% sales tax. That is a total of 52.1%. He only gets to spend 47.9 cents of a dollar earned.

I am planning a trip to Arizona. A rental car will be $630. The taxes and fees are $182. That is 28.8%.

Lets do the simple math:

federal tax rate 25%

SE Tax 15%

Wisconsin 6.5%

Rental car fees
and taxes 28.8%

Total taxes ===========
and fees 75.3%

Now anothe simple formula.

We need a net of $630.

You need to earn $2520 to net $630

Gross $2520

Tax 75% 1890
========
Left to spend $630

Can we afford any additional taxes or fees on our income.

I would like to hear from any politician on how we will be able to travel. Will this not kill tourism. How much can/will it go up. An increase of 5% means means you must earn $3,150 to pay for the $630 car rental.

Don't believe me, do the research and math. Try to prove this wrong.

I would like to hear from any politician on how the "rich" are being taxed.

I would welcome a comment from

Congressman Jim Sensenbrenner
Governor Jim Doyle
Senator Herb Kohl
Senator Russ Feingold

Memo to Senators Feingold and Kohl

2009-06-28T13:54:00.000-07:00

Please think carefully before voting for energy tax increases (CAP & TRADE) and any single payer healthcare.

There is no question that our health system is broke and there are more and more people without health care with these massive job losses.

A government run, Taxpayer paid system is not the answer. Even when the economy was going great Medicare was on the road to running out of money. With massive job losses, there is less payroll to pay govt funded paid by payroll tax projects.

It is not the rich that is taxed, it is the working class.

Behind all the rhetoric, the next dollar after a single person who earns $42,000 is taxed at 53%

fed 25%
SE 15%
WI 6.5
Milw
Sales 6.6
Total 53% Marginal tax rate that your next earned dollar is taxed.

If you travel it is an additional 5-10%. If you charge a trip for your family for $5,000, and and your next working dollars are taxed at a total of 60%, you have to earn $12,500 to pay it off. Ever wonder why you always feel behind.

Everything we buy and consume now has additional taxes and fees. Our property tax bills have additional fees that we cannot deduct. Our telephone, cell phone and utility bill have many additional taxes and fees. Wisconsin gasoline already contains over 50 cents in taxes.

I am a tax accountant. I have a retired client whose adjusted gross income is $24,000. He reached 70-1/2 and is required to take required minimum distributions. If he takes $1000 from his IRA, it causes more social security to be taxed. That $1000 is taxed at a federal/state rate of 22%. There is too much denial when we look at who is taxed. Can you explain this to these retired taxpayers.

A goverment run, taxpayer paid health care system needs extensive discussion and input, don’t do it behind the scenes. Only 50% of the adult population pays income taxes, these are the people affected by any tax increase, not the rich, not the 50% that do not pay taxes.

I encourage you to get out your last years tax return, add up your total federal, state, social security and property taxes paid.

http://www.larrythetaxguy.com/
Germantown, wi

About Larry Rittberg

2009-01-21T17:26:00.000-08:00

Learn more about Larry the Tax Guy and see why larry can save and make you money this tax season! Click here.

Time to schedule your appointment!

2009-01-21T16:53:00.000-08:00

It's that time of year again. 2008 tax season is upon us, so sign up quickly and reserve your appointment today by visiting our schedule page.

New website features launched!

2009-01-20T08:34:00.001-08:00

Hello everyone! We have recently had a few improvements made to our website. New scheduling services have been added and our Larry's Rants blog has been added to the site. We'd like to thank Prestige Development for their effort in getting these enhancements made prior to tax season!