I am writing to provide calculations on actual tax liabilities of American workers and employers and to refute the demagoguery constantly repeated by the current occupant of the Oval Office and the Democrat Party. They wish to promote a class warfare issue and to treat those who have been successful as greedy and not paying their fair share of taxes.
It has always been the American way to be successful in our endeavors and to have a government and a society providing the opportunity to achieve that success. To pit one segment of our society against another for political gain is divisive and troublesome.
We are being led to believe that successful business owners who create jobs and new technologies are evil and must be punished by paying more taxes. We are also being led to believe that many of these executives fly in corporate jets and somehow the tax deductibility of legitimate business travel cheats other taxpayers. This rhetoric is from one who finds no problem in flying his wife from Washington to New York City for a night on the town, or for flying his wife and children to Spain on a vacation, both flights on military aircraft at significant expense to the American taxpayer.
The hypocrisy is overshadowed by the lack of foreseeable economic consequences if the Internal Revenue Code was amended to disallow the tax deduction mentioned above. The companies who build or lease private jets and the ancillary businesses who supply and support them would either vanish or dramatically be reduced in size, along with thousands of jobs.
My analysis given here includes the income tax liabilities as well as contributions to Medicare and the expected shortfall or surplus that each individual will create based on current health care needs and life expectancy. I utilize a 30-year work period with wages and the rate being consistent, and also use a factor of three as the ratio of medical costs to actual contributions, which is consistent with government data.
Let’s look at an average American worker and a business owner who fall into the upper 5 percent of taxpayers. Assume both taxpayers are married, have three children, file a joint return and live in New York State. The average taxpayer earns $85,000 a year while the upper income taxpayer earns $1 million.
The average worker has a combined annual federal and state tax liability of $6,625, which represents 7.79 percent of gross income. The upper income business owner incurs a combined liability of $333,264, or 33.53 percent of gross income.
The Social Security amount deducted from wages consists of two components, one of which is the Medicare amount of 1.45% and that tax has no ceiling i.e., wages are subject to the tax from the first to the last dollar of wages earned and that the employer must match the amount withheld from the employee.
If I continue my analysis of the two taxpayers, an amount of $1232.50 is withheld from the average worker per year and over a thirty year period, $73,950 is contributed to the Medicare system which includes the matching employer contribution. The higher wage earner contributes $870,000 to the system over the same period.
If we assume medical costs incurred for the average Medicare recipient is as stated above and we use a figure of $221,850 as the costs, the average worker creates a deficit of $147,900 to the system while the upper income earner leaves a surplus of $648,150 to the system.
I trust this provides some perspective of the actual facts rather than the rhetoric we hear from those such as Mr. Meinke and the President. In response to Mr. Meinke’s last two letters, he is wrong on several issues.
First, 46 percent of American taxpayers pay no federal tax. Secondly, the upper 5 percent of taxpayers who he feels must pay more do, in effect, pay 70 percent of the tax collected.
And lastly, Eric Cantor is a member of the House of Representatives, not a U.S. Senator.
The average American worker pays his or her fair share of taxes and the higher wage-earner pays substantially more as a percentage of income and a disproportionate share to the Medicare system.
If my example of the average salary paid to an average American worker is too high and the numbers are actually within the $60,000 to $70,000 range, the comparisons are even more disproportionate.
Mr. President, please get off the golf course and be a supporter of America, not a detractor.
Mr. Sullivan is a CPA who currently serves as Southold Town tax receiver. The Southold resident is up for reelection in the fall.