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by Joe Gokaho 2010.02.03 D3
This is the link to the "EITC" from the IRS website.
My main reason for opposing our current Earned Income Tax Credit is about the rules. It's all about AGI based.
Government wants us to rely on "government subsidy", not to work hard, because we might "earn too much" and loose EITC.
# # # #
Here are comparisons for "unjust" "unfairness" rules for qualifying EITC
# A A A #
Person A: has 2 qualifying children and makes $57,000 a year.
For Persona A takes standard deduction, the simple returns shows
that Persona A meets the EITC AGI threshold of $40,290 ($57,000 - 3 x exemption $3,700 - standard deduction $5,700 = $40,200)
Then person A get a check for $5,028, that makes
Person A earning = $57,000 and $5,028 tax free for a total $62,028/year
NOTE: EITC of $5,028 is equivalent to a W-2 wage 0f $6,905. //Note: FICA (6.2% & 1.45%) and federal income tax (10% for this tax bracket) or state income tax (CA 9.55%) //
# B B B #
Person B: has 2 qualifying children and he also makes $57,000 a year.
Person B decides take a part time job to supplement his income. The job pays $140 every weekends, That brings him a W-2 wages of $57,000 + $7,280 = $64,200
For Persona B takes standard deduction, the simple returns shows
The persona B has a AGI that EXCEEDS the EITC threshold of $40,290 ($64,200 - 3 x exemption $3,700 - standard deduction $5,700 = $47,400), so Person B doesn't get the $5,028 check.
For Person B, the real take home pay for that $140 weekend job, it only netted him $5,300 in his pocket.
Person B earning = $57,000 + $5,300 (after tax) = $62,300/year;
As is (do nothing) A earning = $57,000 and $5,028 = $62,028/year
# C C C #
Person C is making a bit more money that Person A and Person B, he pulls in $63,000 a year.
Person C figures out by contributing 10% of earning ($63,000) into his 401K plan will reduce his W-2 wages used for calculating AGI. The AGI is only $56,700 and Person C gets the EITC of $5,028
As (play with tax code) Person C earning = $63,000 + $5,138 (free) = $68,138
As (extra job) Person B earning = $57,000 + $5,300 (after tax) = $62,300/year;
As is (do nothing) A earning = $57,000 and $5,028 = $62,028/year
2. Why would Person C need more government assistance than Personal A? Person C is creating his personal wealth on tax payers back?
As is (do nothing) A earning = $57,000 and $5,028 = $62,028/year
# # Freaking stupid policy # #
1. Why would Person B take on an "extra job" to help out the family, when government is telling you stay home like Person A - he is better off by doing nothing? 2. Why would Person C need more government assistance than Personal A? Person C is creating his personal wealth on tax payers back?
3. Why would someone improving their skill set to get a better paying job (says from $57,000 year to $67,000); then discovering that all that hard work yields same amount of beef ?
# # Tea Party Idea # #
Let EITC to be "age" based, not AGI based, helping out family with kids by giving parents more money into their pockets toward child education or after school activities. We are not penalizing higher wage earner, instead they will create more jobs for the economy in the "eduction sector" by sending their children everywhere as "consumers".
1. EITC is not a "cash back" based. EITC is not indexed AGI tax bracket.
2. Dependents - children under 25, are entitled to "additional deduction" - all filing format - either 1040 (long or short), taking standard deduction or itemized deduction, filing single, married, or head of household.
3. The exemption deduction of $3,700 per person still applies.
4. After AGI calculation, additional $12,000 deduction can be applied for 1 child, $16,000 deduction for 2 children or $20,000 for 3 or more children.
For the middle class, the typical tax bracket is around 15% to 25% bracket range;
The saving (15% -25% tax bracket) of $1,800 to $3,000~ $200 /month for 1 child,
or Saving of (15% -25% tax bracket) of $2,400 to $4,000 ~ $267 / months for 2
or Saving of (15%-25% tax bracket) of $3,000 to $5,000 ~ $333 /months for 3 or more
I call this a supply side (non-government) stimulus plan. It's not just cash in the pocket, but rather it is a fair and meaningful tax cut for educating our kids.
Let EITC to be "age" based, not AGI based, helping out family with kids by giving parents more money into their pockets toward child education or after school activities. We are not penalizing higher wage earner, instead they will create more jobs for the economy in the "eduction sector" by sending their children everywhere as "consumers".
1. EITC is not a "cash back" based. EITC is not indexed AGI tax bracket.
2. Dependents - children under 25, are entitled to "additional deduction" - all filing format - either 1040 (long or short), taking standard deduction or itemized deduction, filing single, married, or head of household.
3. The exemption deduction of $3,700 per person still applies.
4. After AGI calculation, additional $12,000 deduction can be applied for 1 child, $16,000 deduction for 2 children or $20,000 for 3 or more children.
For the middle class, the typical tax bracket is around 15% to 25% bracket range;
The saving (15% -25% tax bracket) of $1,800 to $3,000~ $200 /month for 1 child,
or Saving of (15% -25% tax bracket) of $2,400 to $4,000 ~ $267 / months for 2
or Saving of (15%-25% tax bracket) of $3,000 to $5,000 ~ $333 /months for 3 or more
I call this a supply side (non-government) stimulus plan. It's not just cash in the pocket, but rather it is a fair and meaningful tax cut for educating our kids.
