Families and Entrepreneurs make up top earners, income tax hits them hardest
A report released today by the Maine Heritage Policy Center shows that Maine’s high-earning individuals are working married couples with dual incomes and risk-taking entrepreneurs who create jobs. This is in stark contrast to recent cries denouncing supposed “tax cuts for the rich” in response to modest income tax relief passed last year.
The report, Who are Maine’s “Rich?” profiles various levels of income tax filers, and shows that those earners who are in the higher categories are primarily families and small business owners. Mainers who earn $200,000 or more are primarily married (86.6%) and many are business owners (45.2%). Because of the higher income, often a result of business income that is held to cover liabilities and make business investments, these so-called “rich” pay higher effective tax rates than filers who earn less.
“This report shows how important a reduced income tax burden is to hard-working Maine families and small businesses,” said Scott Moody, the Chief Economist for the Maine Heritage Policy Center. “The big government advocates on the left are yelling about tax cuts for the “rich” but what they don’t seem to understand is that the people helped most by income tax reductions are entrepreneurs who create jobs.”
The study uses a hypothetical situation of two different taxpayers – one is single and makes $50,000 and the other is a family of four who has two incomes, some business income, and some capital gains totaling $175,000. In this scenario, the “rich” taxpayer is taxed on $50,000 in business “profits” that won’t actually be received by the individual, but will instead be invested back into the company. Still, this business income, combined with the dual incomes of husband and wife, leave the “high-income” taxpayer with a 9.9% tax burden as percent of actual income, while the single taxpayer, earning $50,000, has a tax burden of just 5.7%.
“What we see consistently is that folks who are taxed at higher rates for their earnings are the very people we rely on to create jobs and move our economy forward,” said Moody. “When the Governor and Legislature did the smart thing and gave these job creators much needed tax relief, the calls came out from the left to “tax the rich” – well I have news for them, the “rich” are Maine small businesses and hard working families.”
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