Re:The Income Rich Take One For The Team. Thanks!
by gerhardi on Wednesday January 02, 2013 @06:25AM
(#4996170)
I find it weird that you can reduce charity contributions from taxation. Isn't it like grant for the rich to "choose where they pay their taxes"? And have nice dinners...
Re:The Income Rich Take One For The Team. Thanks!
by SatvikBeri on Wednesday January 02, 2013 @10:36AM
(#4997153)
Correct me if I'm wrong, but I believe charity contributions can only reduce your taxable income. For simplicity, let's say you have an income of $1M and a tax rate of 35%. Normally you'd pay $350k in taxes. If you donate $100k to charity, then you pay 35% * $900k = $315k in taxes, for a total payout of $415k.
The real picture is a bit more complicated than that due to variable tax rates, but I don't think there's a case where donating to charity doesn't increase your total payout, since you give up 100% of what you donate instead of whatever tax rate you'd have paid.
So when using Romney as an example, it is good to know that if he did not give this much to charity, the rate would be somewhere around 27%, maybe more if charity deductions avoided triggering some higher rates, etc. Average effective income tax rate (don't confuse with marginal!) for millionaires is 23%, for "middle class" is 20% and below (the figures is for tax year 2010, other years I imagine they may differ).