Romney’s Effective Tax Rate is Higher than Most

In  yesterday’s post I took on the media claim that Mitt Romney’s self-reported effective income tax rate of 15% is higher than what most middle class people pay. I showed how most of the people in the bottom half of the income scale actually get a reverse tax paid to them by the IRS, instead of paying a tax to the IRS as Romney does.

One reader posted a comment asking me, in effect, how much money a typical American household would have to earn before they pay an effective income tax rate as high as Romney’s.

Your wish is my command, loyal readers. I’ve run some numbers on effective federal income tax rates for married couples at different income levels. For these examples I’m assuming that the hypothetical couples in question make all their money from paychecks, not from investments.

First, let’s look at a married couple with two children earning a household income of $50,000, (rounding up from the median household income for all Americans, which the government says is $49,445). We’ll call them the Smiths. To make the math easier I assumed that this couple rents their home and does not itemize deductions; they just take the standard deduction. Their total tax bill for the year is a positive number, unlike that of the lower-income worker I profiled yesterday. This couple, very close to the exact middle of the American income scale, pays $1,325 for the year, for an effective rate of 2.7%.

Next I took the example of a married couple with two kids earning $100,000 per year; twice as much as the median income. We’ll call them the Johnsons.  This income level puts them in the top 20% of income earners, according to Census data on income. Since a couple at this level of earnings is likely to own a home and itemize deductions, I gave them a mortgage interest deduction of $22,000 for the year (roughly what you’d get with an $2,000 monthly mortgage payment, within the first few years  of the mortgage). I gave them a $3,000 deduction for state taxes paid; but nothing for deductable medical expenses, charitable deductions, etc. etc. Their tax for the year is $6,715, for an easy-to-figure effective tax rate of 6.7%.

Even a couple earning $100K with no kids, and no itemizable deductions of any kind, making all their income from wages, which are taxable at a higher rate than investment income, protecting nothing in an IRA, only pays an effective rate of 13.2%.

Romney’s 15% figure makes him more heavily taxed than just about anybody in what could be reasonably called the middle class. The figures, in other words, show that the media claims about middle class effective tax rates are completely false. Effective income tax rates higher than 15% are only paid by people who make big money.

Yes, I’m calling CBS News and MSNBC liars.

Conservatives and liberals can argue about who should pay what share of the federal taxes; that’s a matter of opinion.  But the press should not deceive the American people about what the current numbers are.

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