If a person has $500,000 in  annual income, how much should he/she pay in taxes?  Careful.  Think about this question before reading on.

If 100% of the amount is given to charity, then the answer might be zero. There is no taxable income.  If  the entire amount results from interest on municipal bonds (bonds to fund government projects, hospitals, schools), the answer may also be . . . . zero.   Income on municipal bonds is tax-free.  If the income is derived entirely from long-term capital gain, the answer is no more than 15% of the total less lawful deductions. If the income is derived from short-term capital gain or salary income, then the answer ranges from 10% to 35% of the total less deductions. 

Thus the answer to the question “how much tax is owedshould require an educated man or woman to respond “tell me more” rather than a numeric shot in the dark (or worse a demand that those with such income must pay a “fair share“).  As a lawyer, it is disconcerting that some people seem to have forgotten that the American tax code is the law of the land and not a “loophole.”   Should it matter how much a person earns in a year and pays in taxes, so long as these metrics are lawfully achieved?    What’s your “take”?      

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s