I'm preempting Bonus Bananas today to bring you guys this story so you'll have a little something to feel good about going into the weekend. I know most of us hate paying taxes and think we pay way too much, especially in New York. But I promise you this guy has you beat, and the ironic thing is that he didn't even know it.
Mitt Romney took some heat over only paying an effective 13.9% tax rate. So much so, that he took it upon himself to start claiming he actually paid a 50% tax rate, a claim so risible that it actually set a new high-water mark in the world of bullshit, which is no mean feat when you're a politician.
It was when I was running down that story that I discovered James Ross, a 58-year old PE guy from New York who paid an astounding 102% tax rate last year and didn't even realize it until he penciled it out.
“I had no idea I was paying such a high rate,” he told me when we spoke this week. “I had trouble believing this was possible. I called my accountant, and I said, ‘Do you realize I’m paying every penny I have in taxable income? I’m dipping into savings to pay my income tax.’ He said, ‘It’s unfortunate, but at your income level’ ” — with high earned income and large itemized deductions that Mr. Ross can’t take advantage of — “ ‘that’s just the way it is.’ ”
Turns out that his high level of income (but not quite high enough) puts him in a taxation "not-so-sweet" spot where he pays more in taxes than both those who make less than he and those who make more. He is literally paying every penny he makes in taxes, and then going into his savings to pay what that doesn't cover.
Ross makes over $1 million a year - the level at which New York disallows any itemized deductions. The only deduction he was allowed to take was for 50% of his charitable contributions, and to his credit he gave a generous 11% of his earnings to charity. All the city and state taxes force him into an A.M.T. nightmare with the feds, further exacerbating his tax woes.
So the next time you think you have it bad, imagine making zero dollars in income and having to cut a check from your savings to the government just for the privilege of drawing air in New York City.
And James, if you're reading this, call Mitt Romney ASAP. You need to hire his tax guy.
Have a great weekend guys.
My head might explode if I think about this for too long...
Total mind fuck... woah.
US tax system = useless
vomits
This is unreal.
How is this even possible?! Taxation should just be changed in the dictionary to "see: sodomization"
edit: got it, makes sense. Not sure if it's copmletely accurate to say he paid 102% of his income in taxes, in that case. Not saying he didn't get screwed, but still.
Still not paying his fair share - B. Obama
I don't get it. Can someone break it down? There is no way he pays 1.02 million in taxes when he makes 1 million. I would guess more like 450K...
Yeah, I doubt that he is paying his entire income to the government. With that said, NYC and NY State taxes are pretty high and then you factor in top Federal tax bracket with not deductions. I\'d say his total amount paid in taxes is over 50%.
Think its time to change the accountant.
I know, right ha.
lol
It\'s possible to pay more then you make. I\'m guessing he had one time over deprecation payments. One annoying part of acclerated deprecation.
Is it even possible to depreciate personal assets?
On a side note while listening to pandora I heard an add for a sex shop.
I can\'t even comprehend how this is possible. Get a new accountant.
This is pretty much what happened. Let's say he made $100 million. From this he had 80% or $80m in deductions making his taxable income $20m. He ended up paying 20.40m in taxes. So he actually ended up only paying around 20% on his total income for the year.
The original article is misleading. This article is misleading because the journalist doesn't know shit about accoutnting, but if you read through it they'll quietly say he actually really paid 20% (paragraph 10).
http://finance.yahoo.com/news/102-tax-rate-takes-cake-160010322.html
[quote=McMonkey]This is pretty much what happened. Let's say he made $100 million. From this he had 80% or $80m in deductions making his taxable income $20m. He ended up paying 20.40m in taxes. So he actually ended up only paying around 20% on his total income for the year.
The original article is misleading. This article is misleading because the journalist doesn't know shit about accoutnting, but if you read through it they'll quietly say he actually really paid 20% (paragraph 10).
http://finance.yahoo.com/news/102-tax-rate-takes-cake-160010322.html[/q…] Yup that explains it. So misleading. That's like me saying "On my salary of 100K, if I were allowed to deduct 80K worth of expenses in the year, I would be paying 150% tax on my taxable income"
[quote=McMonkey]This is pretty much what happened. Let's say he made $100 million. From this he had 80% or $80m in deductions making his taxable income $20m. He ended up paying 20.40m in taxes. So he actually ended up only paying around 20% on his total income for the year.
The original article is misleading. This article is misleading because the journalist doesn't know shit about accoutnting, but if you read through it they'll quietly say he actually really paid 20% (paragraph 10).
http://finance.yahoo.com/news/102-tax-rate-takes-cake-160010322.html[/q…]
How the hell are taxes calculated?
Total Income - Qualified Deductions = Adjusted Gross Income (AGI) - Deductions / Exemptions (Schedule A) = Taxable Income - Tax Credits (Charitable Contributions, etc..)
So it seems like the $1MM salary only limited the Tax Credits he could receive and nothing to do with Qualified or Schedule A Deductions. Therefore, McMonkey is correct. Then again I didn't do so hot in Individual Tax Accounting. Boggles my mind how people can do that for a living and not want to throw their dogs off their own roof.
Heh. I did a tax internship in my sophomore year of college. Wanted to toss myself out the window.
Never again.
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