Here’s two numbers from my past:

2004 – $22,500 income, effective rate: 0%.

2007 – $50,000 income, effective rate: 4.82%

In neither of those two cases is Mitt Romney’s effective tax rate less than mine.  So he is not paying less than I am (in either percentage or absolute numbers).

Now, you could compare social security, medicare, and sales tax rates.  I would bet that I pay more in percentage than he does because his income is not coming from a salary but from investments and the amount of money he spends as a percentage of his total income is a lot less than mine.  But don’t complain about the effective tax rate when talking about those numbers as they are different.

Another “problem” that I read about is how his money is doing absolutely nothing so how can the Republican party say that lower taxes for the rich help the poor.  The real problem with that statement is that his money is doing a lot of stuff.  You don’t get interest for free.  Interest is from investing (either the bank is doing the investing or you are doing it yourself).  And that investing helps companies get loans and become successful.  Since Mitt Romney’s income is almost purely interest from investment, you can bet that the money is doing a LOT of stuff.

Do I think that the current tax system is fair?  No, I don’t.  I do feel that this “loophole” is problematic.  But closing it will also cause problems.  Most software companies give you equity as a form of compensation.  If you close this “loophole”, that compensation will be taxed a whole lot more than it currently is.  This will affect a lot of software developers and others that work for software companies.  It also will make it harder to get angel investment because the incentive will be gone.  Personally, I think that this “loophole” should probably be graded as well (just like ordinary income).  Depending on your income, the tax rate starts at 15% and then increases from there till it is slightly less than short term capital gains.

When I was first hired in the end of 2006, my annual salary was $50,000.  My wife, as a full time homemaker, had an annual salary of $0.  Add those together and our combined household income was $50,000.  According to wikipedia, that would put us a little above the national median ($46,242 in 2005) and a little below the Utah median ($55,179 for 2004-2006).

As an active member of The Church of Jesus Christ of Latter-day Saints, we donated 10% of our income as tithing plus a few hundred dollars as fast offerings.  We also contributed 6% of our income to a 401k plan.

I wouldn’t consider ourselves to be wealthy but we were definitely not hurting.  We were not debt free as we had a car loan and a time-share loan.  But we were not living paycheck to paycheck.  We were even able to save extra money away.  We were renting a little house and we had a car.  We ate wonderfully home cooked meals.  We had a beautiful 1 year old daughter.

So, can you live decently in a single-income family under $100,000 while contributing 10% of income to charity?  Yes!

And to put another nail in the coffin of the idea that you can’t donate 10% of income to charity while living under $100,000, I recently found a tax records from 2004.  We were recently married and we were both working part-time while going to college.  Our income that year was $22,500.  We still donated 10% of our income as tithing.  And we still were not living paycheck to paycheck.  We could save extra money a year, we had a nice lovely apartment with ~200 sq ft, and we had home cooked meals (in a kitchen that only fit one person).