There is now an online calculator so people can see what their taxes will be under the new GOP tax plan. Continue reading →
Our federal income tax code is progressive and has different tax rates based upon income brackets. More you make, the more taxes you pay. Continue reading →
The rich pay a lot in federal income taxes. Continue reading →
The federal government collects revenue from a variety of sources. The largest source is taxes on individuals’ income and payroll taxes, which together make up four-fifths of federal revenue. Individual income taxes are assessed against wage income and are progressive: that is, the tax rate someone pays increases as their income increases. Payroll taxes are a flat percentage of wage income. They are used to fund Social Security and portions of Medicare. Taxes on corporate profits, estate and gift taxes, excise taxes (a tax levied on a good or service), customs duties, and numerous other taxes comprise the remainder.
American Morning News interviewed Kay Bell from BankRate.com explaining a survey they with 1,003 adults and how they will spend their tax refund. USA Today posted the survey and here is how it broke down:
34% say they’ll use it to pay down debt
33% say they’ll save or invest the money
26% say they spend the extra cash on necessities such as food and utility bills
3% want to use it to live it up and go on vacation or a shopping spree
Here is another snapshot of Americans thinking on income taxes/tax refunds that would make Dave Ramsey shake his head at:
Some people view having extra money withheld from their paychecks for income tax as a way to save, says Bankrate.com tax analyst Kay Bell. But she advises against it because “the bank of Uncle Sam” pays no interest.
The rest of the article is here and has some more good stats obtained by the survey.
While baseball purist fans rejoice in spring training opening up, so do the players not just for the game but also their paychecks. Spring training camps are located in Arizona and Florida which helps players pay less since they are legally working in those states. This helps cushion the tax blow they receive from the states they play in during the regular season.
Sean Packard, CPA, who is Director of Tax at OFS. He specializes in tax planning and the preparation of tax returns for pro athletes shared this tax benefit with Forbes.com:
Spring training is an opportunity for players to escape state income taxes on roughly 20% of their income. Professional athletes pay taxes in all states in which they play. This is known as the “jock tax.” Most states calculate a player’s jock tax based on the number of duty days spent inside the state divided by the total days a player works.
Unlike most sports, where preseason training occurs near the team’s home, spring training takes place in one of two states, Florida or Arizona. Florida does not have an income tax and while Arizona does, it does not begin taxing professional athletes until the beginning of their teams’ regular season. This means that duty days spent in the state prior to the season do not count as taxable days. Holding spring training in these two tax havens can save elite players hundreds of thousands of dollars in state income taxes.
Packard provides an example of how money a player can save just at spring training.
The portion of Santana’s salary allocable to spring training under the duty day calculation is $5.355 million. If the Mets held spring training in New York instead of Florida, this income would be allocated to New York and subject to their 8.82% income tax. But because the Florida (and Arizona) climate is more conducive to baseball in February, Santana will save $472,000 in state income taxes.