In his Saturday column in the New York Times, Pulitzer-prize winning reporter James B. Stewart tallied up his tax rate and found it to be a shocking 74 percent of taxable income. Is he possibly the most taxed man in America, he wonders?
Tax rates have been much discussed of late, with Mitt Romney’s tax returns disclosing his 13.9 percent tax rate, and the appearance of Debbie Bosanek, Warren Buffett’s secretary, at the State of the Union address last week to boost President Obama’s push for more tax equity. Bosanek is reported to pay a 35.8 percent tax rate, while her famous boss says his rate is 17.4 percent of his taxable income.
How could Stewart’s rate be so stratospheric? After some research, he determined that his personal situation is “a near-perfect storm of punitive tax policies.” He lives in one of the highest tax districts in the country (New York City), earns his income (rather than getting it from capital gains or carried interest, a la Romney), doesn’t have a significant mortgage deduction and pays an unincorporated business tax on some of his income, like book royalties.
Even his very generous donation of 25 percent of his income to charity did only limited good (for his taxes, at least).
The high local and state income taxes he pays in New York help to make Stewart’s deductions (which include those taxes) high relative to his income and that activates the alternative minimum tax (AMT), a painful burden to those who bear it. Also, a burden that more of us will be bearing if changes aren’t made this year in Washington.