Saturday, March 24, 2012

Paying one's fair share of taxes: who decides?

Less than a month to go before taxes are due. I got my return on its way yesterday, once again asking myself why some folks' fair share seems fairer than others.
My expertise in this arena is limited to my experience paying taxes as an individual wage earner (single, then married, now single again) and, for a time, as a small business owner. So, I’m coming at this as a layperson operating strictly off 2011 IRS tax tables, without the creativity available to wealthy persons assisted by tax attorneys.

Still, why should married persons qualify for lower tax rates?

High to low, here’s the hierarchy: married filing separately; single; head of household; married filing jointly. Hmm.

Having your wedding cake and eating it, too.

Married persons filing separately pay the highest rates, presumably as a gamer’s penalty for working the system to pay less and adding unnecessarily to the stack of returns in need of processing. That said, the difference doesn’t amount to much until you get into six figures.

Here’s an example for Chris, married filing separately, and Carol who is single.

·      At an arbitrary taxable income (IRS line 43) of $40,583, the table says Chris pays $6,269—$25 more than Carol who pays $6,244.

·      Up the income ladder, with taxable income of $121,748 Chris pays $28,904—$1,198 more than Carol who pays $27, 706. And the spread widens as earnings rise further.

I get all that. But check this out.

Marriage tax discount: why?

Married persons filing jointly—whether or not they have children—pay less than a single parent with children filing as head of household. Here’s the math using the same two arbitrary taxable incomes as above for Sara, single parent of Adam, and Chris and Christa, married and child-free.

·      With $40,583 on line 43, Sarah supporting her son Adam pays $5,479—$243 more than Chris and Christa who pay $5,236

·      With $121,748 on line 43, Sarah pays $25,275—$2,588 more than Chris and Christa who pay $22,687.

Does this make any sense to you?

No comments: