Ron Johnson Pays Half As Much In Taxes As He Claims | Wis.Community

Ron Johnson Pays Half As Much In Taxes As He Claims

Ron Johnson told George Will recently that he longed to go back to the Reagan years, when, "for a brief moment we were 72% free." This is, of course, a reference to the top Federal income rate being 28% during the Reagan years. (Which was 60% before Reagan and is now... SHUDDER... 35% and is set to go up to...SHUDDER... 39.6% next year.)

There is a big hole in Johnson's story though: He's not paying anywhere near 35% of his income toward Federal taxes. In fact, he's paying about half that number.

Ron Johnson had a gross income of at least 1.46 million in 2009 -- it was probably much more, but since he has refused to release his taxes, we don't know for sure. The only information we have to go on is his senate personal financial disclosure forms. But, for the sake of argument, let's assume that his gross income was actually 1.46 million. Of that, 1.46 million, only $650,000 (his salary from the plastic company) was taxed at the highest income tax rate of 35%.

The rest of his reported $230,000 was almost entirely from stock dividends, which are not taxed like ordinary income. They are taxed at 15%.

The rest of his $580,000 income wasn't taxed at all, because of a wide variety of tax credits and deductions.

So, let's add it up. He probably paid $227,500 on his salary, $34,500 on his dividend income, 0$ on the rest of his $580,000 income, for a grand total of $262,000.

That comes to a tax rate of 17.9%. (And again, its probably lower than that as we don't know his actual gross income.)

Even if we use Johnson's numbers of what his "taxable income" has been over the last five years, (which is what his gross income gets whittled down to after he is able to factor in numerous tax deductions and credits), the amount of federal income tax he has paid over the last five years is only 22.6%-- still a huge leap from the 35% he is claiming to pay. 

Plus, there is another huge elephant in the room. Johnson loaned himself (through his plastic company) several million dollars in 2004 and 2007 at a below-market interest rate of .69%. He did this for two reasons: 1) It reduced the profit margin of his plastic company (less corporate taxes) and 2) It was a way of getting income without paying the income tax rate of 35%.

But, let's not pick on just Johnson. Warren Buffett did a similar calculation of how much he pays in taxes and found that he pays a simlilarly low rate as Ron Johnson: 17%. Buffett also figured that his secretary pays about 30% of her income in Federal taxes.

The big difference, though, is that Buffett is pointing out the unfairness of paying a lower tax rate than his secretary and is calling for increased taxes on the wealthy, while Johnson is calling for MORE tax cuts for the wealthy.

In fact, a few days ago he complained that stimulus money should have been spent on tax cuts for the wealthy. Yes, even though the wealthiest 1% are wealthier now that at anytime in American history, giving them a tax cut and making them even wealthier is the best way to fix the economy.

Don't worry, though. Even though we've been sold this trickle down logic for the last 30 year and the exact opposite has occurred-- things will be different this time around...

Published

September 25, 2010 - 10:36am

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