Tuesday, April 12, 2011

Let's Talk About Tax Baby

Here is what I learned today by reading the San Francisco Chronicle:

For the well-off, this could be the best tax day since the early 1930s: Top tax rates on ordinary income, dividends, estates and gifts will remain at or near historically low levels for at least the next two years. That's thanks in part to legislation passed in December 2010 by the 111th Congress and signed by President Obama...

For the 400 U.S. taxpayers with the highest adjusted gross income, the effective federal income tax rate - what they actually pay - fell from almost 30 percent in 1995 to just under 17 percent in 2007, according to the IRS.

And for the approximately 1.4 million people who make up the top 1 percent of taxpayers, the effective federal income tax rate dropped from 29 percent to 23 percent in 2008. It may seem too fantastic to be true, but the top 400 end up paying a lower rate than the next 1,399,600 or so...

Much of the top 400's income is from dividends and capital gains, generated by everything from appreciated real estate to stocks and the sale of family businesses. As Warren Buffett likes to point out, because most of his income is from dividends, his tax rate is less than that of the people who clean his office.


Read the rest by following the link above.