2021 US Federal Tax Rates and Brackets

 The tax brackets were updated this year, so your income may be taxed at a different rate than last year. Here are the updated brackets:

2021 tax rates:

If your filing status is Single:

2021 Income:

$0 - $9,950 = 10%
(Up $250 or 2.58% from $0 - $9,700 last year.  See below for other 2020 rates and brackets)

$9,951 - $40,525 = 12%

$40,526 - $86,375 = 22%

$86,376 - $164,925 = 24%

$164,926 - $209,425 = 32%

$209,426 - $523,600 = 35%

$523,601 and over = 37%
(Up $13,300 or 2.58%  from  $510,301 and over last year)

See below for 2019 & 2020 tax rates and brackets

If your filing status is Married Filing Jointly (MFJ) or Qualifying Widow(er):

2021 Income:

$0 - $19,900 = 10%

$19,901 - $81,050 = 12%

$81,051 - $172,750 = 22%

$172,751 - $329,850 = 24%

$329,851 - $418,850 = 32%

$418,851 - $628,300 = 35%

$628,301 and over = 37%

If your filing status is Married Filing Separately (MFS):

2021 Income:

$0 - $9,950 = 10%

$9,951 - $40,525 = 12%

$40,526 - $86,375 = 22%

$86,376 - $164,925 = 24%

$164,926 - $209,425 = 32%

$209,426 - $314,150 = 35%

$314,151 and over = 37%

If your filing status is Head of Household (HH):

2021 Income:

$0 - $14,200 = 10%

$14,201 - $54,200 = 12%

$54,201 - $86,350 = 22%

$86,351 - $164,900 = 24%

$164,901 - $209,400 = 32%

$209,401 - $523,600 = 35%

$523,601 and over = 37%

2020 tax rates:

If your filing status is Single:

Income

$0 - $9,950 = 10%

$9,951 - $40,525 = 12%

$40,526 - $86,375 = 22%

$86,376 - $164,925 = 24%

$164,926 - $209,425 = 32%

$209,426 - $523,600 = 35%

$523,601 and over = 37%

If your filing status is Married Filing Jointly (MFJ) or Qualifying Widow(er):

Income

$0 - $19,900 = 10%

$19,901 - $81,050 = 12%

$81,051 - $172,750 = 22%

$172,751 - $329,850 = 24%

$329,851 - $418,850 = 32%

$418,851 - $628,300 = 35%

$628,301 and over = 37%

If your filing status is Married Filing Separately (MFS):

Income

$0 - $9,950 = 10%

$9,951 - $40,525 = 12%

$40,526 - $86,375 = 22%

$86,376 - $164,925 = 24%

$164,926 - $209,425 = 32%

$209,426 - $314,150 = 35%

$314,151 and over = 37%

If your filing status is Head of Household (HH):

Income

$0 - $14,100 = 10%

$14,101 - $53,700 = 12%

$53,701 - $85,500 = 22%

$85,501 - $163,300 = 24%

$163,301 - $207,350 = 32%

$207,350 - $518,400 = 35%

$518,401 and over = 37%

2019 tax rates:

If your filing status is Single:

Income

$0 - $9,700 = 10%

$9,701 - $39,475 = 12%

$39,476 - $84,200 = 22%

$84,201 - $160,725 = 24%

$160,726 - $204,100 = 32%

$204,101 - $510,300 = 35%

$510,301 and over = 37%

If your filing status is Married Filing Jointly (MFJ) or Qualifying Widow(er):

Income

$0 - $19,400 = 10%

$19,401 - $78,950 = 12%

$78,951 - $168,400 = 22%

$168,401 - $321,450 = 24%

$321,451 - $408,200 = 32%

$408,201 - $612,350 = 35%

$612,351 and over = 37%

If your filing status is Married Filing Separately (MFS):

Income

$0 - $9,700 = 10%

$9,701 - $39,475 = 12%

$39,476 - $84,200 = 22%

$84,201 - $160,725 = 24%

$160,726 - $204,100 = 32%

$204,101 - $306,175 = 35%

$306,176 and over = 37%

If your filing status is Head of Household (HH):

Income

$0 - $13,850 = 10%

$13,851 - $52,850 = 12%

$52,851 - $84,200 = 22%

$84,201 - $160,700 = 24%

$160,701 - $204,100 = 32%

$204,101 - $510,300 = 35%

$510,301 and over = 37%

Once we get more info about your income, we'll automatically calculate your rates and apply these changes to your refund.

How do tax brackets work?

Tax brackets show you the tax rate you'll pay on each portion of your income. For instance, as a taxpayer filing Single, the lowest tax rate of 10% is applied to the first $9,950 of your income in 2021. The next chunk of your income is then taxed at 12%, and so on, up to the top of your taxable income.

President Biden's Proposed 2021 Tax Plan

On May 28, 2021, the General Explanation of the Biden Administration’s Fiscal Year 2022 Revenue Proposals under the American Families Plan and American Jobs Plan were introduced. These are proposals at this point and are not yet law. 

This summary was prepared by an anonymous CPA who is about to retire, thus not looking for publicity or new clients.

The following are the key proposals: 

 TAX RATES 

Top marginal tax rate to go up from 37% to 39.6% effective for taxable years beginning on or after December 31, 2021, and the 39.6% marginal tax rate would apply to taxable income over $509,300 for married filing jointly and $452,700 for unmarried individuals. These would be indexed for inflation after 2022. 

CAPITAL GAINS 

Major changes in capital gains taxation. 

Currently, long term capital gains and qualified dividends are taxed at graduated rates under the individual income tax with 20% being the highest rate (and, if applicable, 23.8% including the net investment income tax for those above certain modified adjusted gross income). 

• Capital gains are taxable only upon realization (i.e., Sale or other disposition of an appreciated asset). 
• When a donor gives an appreciated asset to a donee during the donor’s life, the donor’s basis in the asset is the basis of the donor; in effect, the basis is carried over from the donor to the donee. There is no realization of capital gains by the donor at the time of the gift, and there is no recognition of capital gain or loss by the donee until the donee later disposes of that asset. 
• When an appreciated asset is held by a decedent at death, the basis of the asset for the decedent’s heir is adjusted (stepped up) to the fair market value of the asset at the date of the decedent’s death. Thus, any appreciation accruing during the decedent’s life on assets that are still held by the decedent at death avoids federal income tax. 

All of this is now changing under the Biden proposal. 

 The proposal relating to capital gains taxation are as follows:

1. Long term capital gains and qualified dividends of taxpayers with adjusted gross income of more than $1 million would be taxed as ordinary income as high as 43.4% including the net investment income tax, but only to the extent the taxpayer’s income exceeds $1 million ($500,000 for married filing separately). This would be indexed for inflation after 2022. The proposal says this would be effective after the date of the announcement meaning late April 2021. 
   
   
2. Transfers of appreciated property by gift or on death will be treated as a realization event. Under the proposal, the donor or deceased owner of an appreciated asset would realize a capital gain at the time of the transfer. For a donor, the amount of the gain realized would be the excess of the asset’s fair market value on the date of the gift over the donor’s basis in that asset. For a decedent, the amount of gain would be the excess of the asset’s fair market value on the decedent’s date of death over the decedent’s basis in that asset. The deemed owner of a revocable grantor trust would recognize gain on the unrealized appreciation in any asset distributed from the trust to any person other than the deemed owner or the U.S. spouse of the deemed owner. 
   
   
3. EXCEPTIONS:

a. Transfers to a U.S. spouse and charity – transfers by a decedent to a U.S. spouse or to a charity would carry over the basis of the decedent. Capital gains would not be recognized until the surviving spouse disposes the asset or dies. Distributions to charity will not generate a taxable gain. Transfers of appreciated assets to a split-interest trusts (i.e., CRUT, etc.) would generate a taxable capital gain with certain exclusions.  

b. Transfers of tangible property (except collectibles) and principal residence would not trigger any gain. The $250,000 per person exclusion under current law for capital gain on a principal residence would continue to apply.  

c. The Small Business Stock exclusion will continue to apply 

d. In addition to the exclusions above, the proposal would allow a $1 million per person exclusion from recognition of other unrealized capital gains on property transferred by gift or held at death. 

e. Payment of tax on the appreciation of certain family-owned and operated business would not be due until the interest in the business is sold or the business ceases to be family-owned and operated  

f. The proposal would allow a 15-year fixed rate payment plan for the tax on appreciated assets transferred at death, other than liquid assets such as publicly traded financial assets and other than businesses for which the deferral election is made. 

1031 LIKE KIND EXCHANGE 

Currently, owners of appreciated real property used in a trade or business or held for investments can defer gain on the exchange of the property for real property of a like kind. As a result, the tax on the gain is deferred until a later recognition event, provided that certain requirements are met. 

The proposal, effective for exchanges completed in taxable years beginning after December 31, 2021, would allow the deferral of gain up to an aggregate amount of $500,000 for each taxpayer ($1 million in the case of married individuals filing a joint return) each year for real property exchanges that are like kind. Any amounts in excess would be taxable in the year the taxpayer transfers the real property subject to the exchange. 

3.8% MEDICARE TAX 

Effective for taxable years beginning after December 31, 2021, the 3.8% Medicare Tax will apply to all income and earnings over $400,000. In particular, for taxpayers with adjusted gross income in excess of $400,000, the definition of net investment income tax would be amended to include gross income and gain from any trades or businesses that is not otherwise subject to employment taxes. Rules relating to limited partners and LLC members are also being revised. 

CARRIED INTEREST 

The proposal would generally tax as ordinary income a partner’s share of income on an “investment services partnership interest” in an investment partnership, regardless of the character of the income at the partnership level, if the partner’s taxable income from all sources exceed $400,000. Accordingly, such income would not be eligible for the reduced rates that apply to long-term capital gains. The proposal also subjects this type of income to self-employment tax. 

CORPORATE TAX RATES 

The proposal, effective for taxable years beginning after December 31, 2021, the income corporate tax rate will rise from 21% to 28%. 

OTHER KEY PROPOSALS 

• Make permanent the American Rescue Plan Expansion of the Premium Tax Credits 
• Make permanent the Expansion of the Earned Income Tax Credit for Workers without Qualifying Children 
• Make permanent American Rescue Plan Changes to the Child and Dependent Tax Credit Daniel C. Moreno, CPA June 3, 2021 
•  Extend the Child Tax Credit Increase through 2025 and make permanent full refundability
• Make permanent excess business loss limitations of noncorporate taxpayers
• Implement additional funding for tax administration 
• Introduce comprehensive financial accounting reporting to improve tax compliance 
• Increase oversight of paid tax return preparers 
• Enhance accuracy of tax information 
• Expand broker information reporting with respect to Crypto assets 
• Address taxpayer noncompliance with Listed Transactions 
• Other administrative matters 
• Various foreign, housing and infrastructure and energy related proposals 

AREAS NOT ADDRESSED IN THE PROPOSALS 

Surprisingly the following were not included in the proposal at this time:

• Elimination of the Section 199A 20% deduction on pass through income 
• Setting a cap on itemized deduction at 28% 
• Reducing the estate and gift tax exemption thresholds 
• Eliminating the $10,000 cap on the state and local tax deductions.

This summary was prepared by an anonymous CPA who is about to retire, thus not looking for publicity or new clients.

State and Local Sales Tax Rates Map for 2016

State and Local Combined Sales Tax Rates for 2016

This graphic shows the estimated, combined state and local sales tax rates for all 50 US states for the 2016 tax year.

These five states do not have statewide sales taxes: 

1. Alaska, 
2. Delaware, 
3. Montana, 
4. New Hampshire, and 
5. Oregon. 

Of these, Alaska and Montana allow local cities and/or counties to charge local sales taxes.

California (aka Taxifornia) has the highest state sales tax at 7.5% but 1% of that must be distributed to local cities so you could argue it should only be 6.5% on that map.

When you add in local taxes, several places have higher combined tax rates than California such as the city of Chigago with a combined sales tax rate of 10.25%

For more, see "State Income Tax Rates Map For 2016" California has highest rate @ 13.3%

 Kirk Lindstrom's Investment Letter

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For more information and details by state in tabular form, see State and Local Sales Tax Rates in 2016 at TaxFoundation.org

 Walczak, Jared. “Chicago Adopts Highest Sales Tax Among Major Cities.” Tax Foundation. July 16, 2015. http://taxfoundation.org/blog/chicago-adopts-highest-sales-tax-among-major-cities.

State Income Tax Rates Map For 2016

This graphic shows the state income tax rates for all 50 US states for the 2016 tax year.

The top rate is California with 13.3%!!

The bottom rate is a tie with 7 states that have no state income taxes.

 Kirk Lindstrom's Investment Letter

Don't Miss Out!

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I Was Wrong. High Taxes Only Bad for Manufacturing Jobs

I was wrong.... I used to think high tax rates for corporations were bad for all jobs. My argument was corporations would move from high tax places like the San Francisco Bay Area or New York City to cities, states and even countries with lower corporate taxes. This was only partially right and we have the housing and job boom in the San Francisco Bay Area as proof.

I blame Massive Pension Obligations for Runaway Growth and Gridlock.

If you live in the Bay Area or visited recently, you will see how the local governments are handling their massive pension debts. They sell our quality of life to developers who build MASSIVE housing projects for expensive housing for the new, high tech workers they allow into the area.

Some fight the conversion of low cost housing and business rentals to expensive homes for both altruistic (the poor who care for your kids need a place to live nearby) and selfish (less gridlock) reasons.  Cities allow massive, expensive housing to create gridlock as they need the tax dollars.  Do any locals benefit from 1B/1B apartments that cost over $5,000 a month to rent in what used to be a Sears parking lot?

• The Village on San Antonio Rates

This UGLY building blocks our once beautiful view of the mountains while contributing to the massive gridlock on San Antonio Road at the Palo Alto, Mountain View and Los Altos border.  I have no need for another place to buy a $50 lunch or a $5 coffee either.

While saying we need "affordable housing" they are in the process of closing down the trailer park in Palo Alto so the citizens, mostly low skilled "immigrants" who take care of the yards, homes and kids of the wealthy in the area. They live in tiny mobile homes here so they can send their kids to the great Palo Alto schools. Some in Palo Alto want them to stay and are trying to compensate the land owners via tax dollars to let the trailers stay. 

• See NONPROFIT GROUP HOPING TO SAVE BUENA VISTA MOBILE PARK IN PALO ALTO

This is land where they can easily build $2M condos in a huge high rise and raise a bundle of taxes since the location is but a short bike ride from Stanford and about equal distant from Google and Tesla, maybe 2 miles away.

Low rent housing and family business are getting pushed out and the cost to live here is soaring.

All the property taxes on the new development will pay the promised pensions. They know it is either do this or cut programs to generate the funds to fund the pension shortfalls.

It is gridlock all over the Bay Area....

I was wrong that massive taxes hurt jobs. 

I need to modify that to high taxes are bad for "working class jobs" such as manufacturing. 

When I started as a summer intern at HP in 1978, we had hundreds of workers doing assembly from chips to finished products.  These were great jobs that didn't require a college degree but had good pay and benefits.  Now none of these jobs are done here as Apple and HP build their products in China.

Cypress Semiconductor CEO TJ Rogers said on TV that he'd have to pay about 9% sales tax just to buy equipment to build a new fab here in Taxifornia... then there is the 2% a year property tax on the land and equipment.  

The super smart who built the internet or are building the new things today will just charge more for our services so we can live wherever we want. The people who came up with software to run Uber or Lyft get rich while the workers all around the World find out how little they are worth if people have the opportunity to look for price competition.

The VCs and CEOs can afford housing that doubles.  Two lots in the area recently sold for about $2M each and they were both torn down to build beautiful new homes that can probably sell for $3.5M to $4M.

• See Los Altos Real Estate Gains 12.9% in 2014

The realtors told me many paid cash and there are many with cash after $10M "liquidity events" such as Tesla, Facebook and Twitter IPOs... not to mention soaring Apple stock and massive Google stock options to insiders.

Rather than raise the minimum wage, which will drive more restaurants to follow the lead of Armadillo Willy's that eliminated wait staff long ago to save on total cost of the bill and save labor costs, we need to cut the corporate tax to zero or at least make it very low.  

Perhaps have a zero corporate tax rate for companies who manufacture as much in the US as they sell here while those who manufacture more overseas pay 25% to bring money earned overseas back to the US.    Companies will use the money to hire workers here and we can tax the workers to recover the taxes we were not going to get anyway as they continue to build overseas.  Fix the laws so individuals can't avoid our high, personal tax rates by becoming a corporation... 

What do you think?

Intuit Relents: TurboTax 2015 Deluxe Will Restore 2013 Features at No Charge

-------- Forwarded Message --------
Subject: Our apologies. We're fixing things.
Date: Thu, 5 Feb 2015 08:04:01 -0800
From: TurboTax
Reply-To: TurboTax
To: kirklindstrom@

Click to Read

My comments:

It is good they listened. I already bought TurboTax Deluxe and was one of the people who complained. They agreed to give me the higher priced version for my 2014 tax return but were going to require us to buy that version next year.

You should see all the terrible reviews on Amazon.com where they now only get 1.5 out of 5 stars for the Deluxe version:

=> TurboTax Deluxe 2014 Fed + State + Fed Efile Tax Software + Refund Bonus Offer - Win

Now you can get the cheaper Deluxe version and after Feb. 7, it will automatically upgrade you to the more expensive versions if you need the forms that used to be in Deluxe. If that doesn't work or you already paid, you can get a $25 refund as explained here.

CA Taxes Too High to Invest or Live Here. Just ask Phil Mickelson, Tiger Woods and Intel

In the last election, CA voters voted to enact a retroactive tax hike of an additional 3.0% on its richest citizens for all of 2012.  Those "only" making $250,000 a year will "only" have to pay an additional 1.0% for a total rate of 10.3% on ALL income (earned and capital gains are taxed at the same rate in Taxifornia.)  We also raised our sales taxes so I now pay 8.625% in Santa Clara county. 

Those making over $500,000 a year in California will pay the highest rate of 12.3% on 2012 and 2013 income.  I posted a full summary of the rates and changes here:

• California Tax Rates Post Proposition 30 for 2012 and 2013

Many have claimed some might get tired of this nonsense and leave the state.  This weekend, 42-year old PGA Tour star Phil Mickelson, with $67 million in PGA Tour earnings which does not count his endorsement income that can be far more, said he would make drastic changes because of higher Federal and California taxes.

"It's been an interesting off-season," Mickelson said. "And I'm going to have to make some drastic changes. I'm not going to jump the gun and do it right away, but I will be making some drastic changes."

Mickelson did not rule off just flat-out retiring from golf.  "I'm not sure what exactly, you know, I'm going to do yet," he said.

"I'll probably talk about it more in depth next week. I'm not going to jump the gun, but there are going to be some. There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn't work for me right now. So I'm going to have to make some changes.

"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63%. So I've got to make some decisions on what I'm going to do."

Mickelson could save as much as 12.3% just by moving to Florida where there is no state income tax.  He's on the road most of the year so staying in California might be more of a family decision.  From Phil Mickelson warns of ‘drastic changes’ because of state, federal tax situation

He acknowledged that he could end up leaving his home state of California. And he further agreed that the financial issues were the reason why he pulled out of an ownership team that purchased the San Diego Padres back in August.

This is the first I've heard of people making a decision NOT to invest in CA due to the higher taxes.

Today Tiger Woods, in his Tuesday morning news conference before this week's Farmers Insurance Open at Torrey Pines, said he agrees with Phil Mickelson.

"Well, I moved out of here back in '96 for that reason. I enjoy Florida, but also I understand what he was, I think, trying to say. I think he'll probably explain it better and in a little more detail."

Tiger Woods and girlfriend Lindsey Vonn

Of course, Intel builds its factories outside of CA even though its headquarters is here and the whole Silicon Valley used to be full of expensive (high property tax) chip making factories. They are almost all gone now... gone to states with lower tax rates.

 

Update 8/13/13:  Can I say "I told you so?"

Californians flee to Nevada to escape taxes, agents say

• George Ashley of the Nevada accounting firm Ashley Quinn said his company has "had at least 100 serious inquiries" from Californians interested in moving to the Nevada side since the passage of Proposition 30, including people with "large liquidity events" like the sale of a company or a lot of stock.
• Twelve of them have made the move, he said.
• Craig Zager of Coldwell Banker Select in Zephyr Cove, said he has represented 38 buyers this year for Nevada side homes, almost all of them, he said, Californians moving because of Proposition 30.
• Cerretti said she can "directly tie" three multimillion-dollar sales this year to the passage of Proposition 30. "I'm working with another lakefront buyer now who says that was it, they're not taking another penny of his money."

My guess is the higher tax rate, post Prop 30, more than makes up for losing a few rich folk, but it is something to consider when constantly looking at raising taxes to solve problems.

• California Tax Rates Post Proposition 30

Highlights of the Fiscal Cliff Deal

The big "good news" for me is this makes the tax rates PERMANENT so we can plan for the future. The big "bad news" for me is this deal is a "joke" in that it kicks the can down the road where the can is unsustainable budget deficits to fund out of control government spending.  See my article "SPY Soars As U.S. Borrowed 51.6¢ Of Every Dollar Spent In November 2012."

— Current tax rates would be permanently extended for singles making $400,000 or below, and permanently extended for couples making $450,000 or below;

— For singles, capital gains and dividends of $400,000 or below would be permanently taxed at 15 percent; capital gains and dividends above $400,000 would be permanently taxed at 20 percent;

— For couples, capital gains and dividends of $450,000 or below would be permanently taxed at 15 percent; capital gains and dividends above $450,000 would be taxed at 20 percent;

— The Alternative Minimum Tax would be permanently patched;

— Estates over $5 million would be taxed at 40 percent, and that tax rate would be permanently extended

—The payroll tax cut is allowed to lapse, so the employee portion of the Social Security tax will return to 6.2% from 4.2%.

—The Act also extends some farm support schemes for a year to avert the "dairy cliff" that many feared would double the price of milk.

By making the Bush/Obama tax cuts permanent, the "deal" actually adds about $4 trillion to the deficit over the next decade.

The hope is to raise $600B in new revenue over 10 years. All in all, overall taxes will increase for over 75% of households in 2013, says the Tax Policy Center.

The "fiscal cliff" deal passed by 89 to 8 in the Senate then passed by 257 to 167 in the House of Representatives. 

President Obama thanked lawmakers from both parties for their votes, saying it allows him to "sign a law that raises taxes on the wealthiest 2 percent of Americans while preventing tax hikes that could have sent the economy back into recession."

Of course, taxes will probably go up in the future if Democrats were to control the white house, the Senate and the House of Representatives. Likewise, if the GOP can make some huge changes to control both the house and senate plus the white house, then taxes on the wealthy could go down again.

What we really need is fundamental changes that cap deductions at some "reasonable amount." By reasonable, I suggest not letting Mitt Romney buy his way into heaven with a taxpayer funded donation to his Mormon Church. Why should we fund that with a tax deduction? Likewise, I don't see why people living in low cost housing areas should subsidize my mortgage or the super high taxes we pay in Taxifornia or New York with deductions for these on federal taxes. I'd love to see the top rate lowered but then limit total deductions to some "reasonable" number like $50K a year which is high enough for most but it captures the excessive deductions of the very wealthy.

California 2012 & 2013 Tax Rates

Due to passage of Proposition 30, the tax rate for 2012 income in California is 13.3% for taxpayers with state taxable income in excess of $250,000.  This change from the November 6, 2012 election is retroactive to income earned for the full year, since January 1, 2012.  Here is a summary of 2012 and 2013 California tax rates.




State sales tax rates are also increasing another .25%, up to a new base-level sales tax rate of 7.5% (before county/city tax) for every California taxpayer beginning January 1, 2013.  Even the poor get to enjoy this portion of Prop 30.

In Santa Clara County, where I live, the current sales tax rate is 8.375%.  This goes up to 8.675% on January 1, 2013.

Don't forget property taxes.  You will probably pay $15,000 to $25,000 a year in property taxes if you buy a home in Cupertino, Los Altos or Palo Alto, cities with top schools.

1177 Orilla Ct

Los Altos, CA 940224 Beds 3 Baths

229 Florence St
Sunnyvale, CA 94086 - 4 Beds 2 Baths

This "average home" in Santa Clara County will have property taxes of about $10,000 in 2013!

Tax Cuts Explained with Beer

Suppose that every day, ten men go out for a beer and the bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this:

• The first four men (the poorest) would pay nothing.
• The fifth would pay $1.00
• The sixth would pay $3.00
• The seventh would pay $7.00
• The eighth would pay $12.00
• The ninth would pay $18.00
• The tenth man (the richest) would pay $59.00

So that's what they decided to do. The men drank in the bar every day and seemed quite happy with the arrangement, until one day the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20.00."

Drinks for the ten men now cost just $80.00.

The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers? How could they divide the $20 windfall so that everyone would get their "fair share?"

They realized that $20.00 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so:

• The fifth man, like the first four, now paid nothing (100% savings).
• The sixth now paid $2 instead of $3 (33% savings).
• The seventh now paid $5 instead of $7 (28% savings).
• The eighth now paid $9 instead of 12 (25% savings).
• The ninth now paid $14 instead of $18 (22% savings).
• The tenth now paid $49 instead of $59 (16% savings).
•  
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Each of the six was better off than before! And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20" declared the sixth man. He pointed to the tenth man, "But he got $10!"

"Yeah, that's right," shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't I get anything at all. The system exploits the poor!"

The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier.

For those who understand, no explanation is needed.

For those who do not understand, no explanation is possible.

G20 Rejects Bank Tax & Removes Fiscal Stimulus

Canada was successful with its effort to block a uniform bank tax on all members of the G20. This is a tax favored by the United States, the United Kingdom, Germany and France as a way to create a fund to dip into for emergencies without returning to tax payers for the funds.

Finance ministers that met in Busan, South Korea, on Saturday said in a communique that each country will be free to choose its own way of dealing with the issue.

Canada argued that banks in countries that acted responsibly and did not need their taxpayers to bail them out should not be punished for the sins of the others who did. Those in favor of the tax, especially Tim Geithner of the US, want all countries taxed equally so banks in the responsible countries that didn't need taxpayers to bail them out won't get a competitive advantage.

From Canada sways G20 to rethink bank tax

Canada has been lobbying world leaders for months that countries that didn't need to bail out their financial institutions during the recent crisis shouldn't have to punish their banks for what others did.

"It was apparent that most G20 members do not support the concept of a universal levy," said Finance Minister Jim Flaherty at the conclusion of the meeting.

"What there is agreement about is the following principle -- to the extent that a financial institution contributes to a financial crisis, then the financial institution should bear the cost of that contribution and not taxpayers.

"At the end of the day, different countries will choose different ways of reaching the goals ... but there is no agreement to proceed with an ex-ante tax."

Excerpts from G-20 and US: Going Separate Ways Highlights Prisoner’s Dilemma

Unlike last year when the U.S. swapped all sorts of favors for a coordinated global fiscal stimulus, this year the U.S. represented by Treasury Secretary Tim Geithner is receiving the cold shoulder. Finance ministers from around the world are happy to ‘go their own way’ in pursuit of what they believe to be their national interests.

Finance ministers of the world’s leading economies have been so spooked by the sovereign debt crisis that they have decided they can no longer wait until economies are growing strongly before they remove fiscal stimulus.

and

In a letter to the rest of the G20, Tim Geithner, US Treasury secretary, argued: “Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery”.

In private, G20 officials said that the US had been the country most concerned about the new austerity drive and feared for the momentum for global growth. In the meetings it had been frank in the meeting in calling for China to revalue the renminbi and for Germany to boost domestic demand, officials said.

Mr Geithner, himself, was open about his fears in his letter to the G20. “Concerns about growth as Europe makes needed policy adjustments threaten to undercut the momentum of the recovery,” he wrote, adding that fiscal tightening won’t “succeed unless we are able to strengthen confidence in the global recovery.”

You have to stand up and TAKE NOTE when other countries, especially some in Europe, say the US is taxing and spending too much and they won't play along

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