There is nothing better for understanding what is going on than to look at a problem from both ends. Serendipity has given us those views. Our 2011 taxable income was very high -- the highest ever -- due to one-time influences. I earned my full salary during most of the year and received a substantial payment for accumulated annual leave when I retired in September. Knowing we were going to retire and move, we used 2011 to sell out the inventory in our home business. We bought essentially nothing for the business during the year -- all revenue, no expense and high income from the sell out. 2012 was completely different -- no salary or unusual one-time payments, we were fully retired -- plus no more home business. Our 2012 income consisted of pension payments plus dividends.
If the truth be known, our standard of living has increased, in large part because we took the initiative to move to a lower cost of living area. But the way the numbers worked out our income dropped 50 percent from 2011 to 2012. At the same time, our federal income taxes dropped a whopping 95 percent. Our 2012 effective tax rate is about 3 percent. Even though our income is still is comfortably above the national household median, the dollar amount of our tax bill is less than at any time since 1978, when I was still in school. If our income had dropped to the national median we wouldn't owe any taxes at all. In fact, due to child tax credits, the federal government would be cutting us a check. We would be part of Romney's 47 percent.
No comments:
Post a Comment