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I just finished doing my friend's income tax.
He took in $40,000 of self-employed income, has $13,000 in adjustments (heal insurance and KEOGH deductions) and $14,000 in itemized deductions. AFter his $3,050 standard deduction, his taxable income is only $7,500.
Here is his tax liability:
Federal income tax = $771
Self-employment tax (Payroll tax) = $6,319
This is what Dubya NEVER talks about (but Krugman does.) The payroll tax is never talked about -- only income taxes. If you cut income taxes, the largest benefit goes to those who make the most. But if you leave the payroll tax the same (or increase it), the biggest hit goes on lower income people.
Marginal payroll tax rates:
Income up to $87,000 = 15.3%
Income over $87,000 = 2.9%
(Note to wage earners: You pay half, your employer pays half out of your "potential salary.")
The payroll tax is supposed to fund Social Security. Since the treasury has been emptied by The Cabal, all federal spending today is done by "borrowing" from Social Security, which has a surplus.
The bottom line: By financing the deficit through the looting of Social Security, it is those who make under $87,000 that are really getting the shaft. Dubya's cronies, on the other hand, just sit back and laugh because "income taxes are low."
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