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Local view: A graduated tax rate would ensure we all pay our fair share

There are many families like mine, led by parents who, after college, chose professions that wouldn't make them rich but that provided a comfortable life.

There are many families like mine, led by parents who, after college, chose professions that wouldn't make them rich but that provided a comfortable life.

Making the median income in Minnesota often requires both spouses to work. Making ends meet means purchasing an affordable home, taking care with credit, avoiding credit card debt, and having only the children who can be affordably raised.

After reading in the News Tribune about the Earned Income Credit, or EIC, and after hearing President Obama say he was going to help middle-class families by enacting additional tax credits, by making tax cuts permanent for those making less than $250,000, and by providing subsidies for those not covered by health insurance, I wondered: Who will pay?

As an experiment, I ran three scenarios using professional tax software to see what typical families might pay.

Here's what I ran:

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My family: Income of $55,000, married, filing jointly, 60 years old, no dependent children, taking a standard deduction with a $1,000 real estate tax deduction (applied to federal standard deduction), and an $800 Making Work Pay Credit (this year's stimulus payment).

"Neighbor 1": Income of $55,000, married, filing jointly, 40 years old, two preschoolers, a standard deduction with a $1,000 real estate tax deduction, an $800 Making Work Pay Credit, a maximum child care credit, a child tax credit and an additional child tax credit for those with children younger than 17.

And "Neighbor 2": Income of $55,000, married, filing jointly, 50, two college students, standard deduction with $1,000 real estate tax credit, an $800 Making Work Pay Credit, and the maximum education credit (American Opportunity Credit is a nonrefundable and refundable credit for education expenses).

Here's what I found out:

My family had a taxable income $35,300, with taxes of $3,664, cash from credits of $0 and a tax rate of 10.4 percent. Very fair, in my opinion.

Neighbor 1 had a taxable income of $28,000, taxes of $0, cash given to taxpayers from credits of $631 and a tax rate of negative 2.3 percent.

Neighbor 2 had a taxable income of $28,000, taxes of $0, cash given to taxpayers from credits of $2,431 and a tax rate of negative 8.9 percent.

So, in my scenarios, two families pay no federal taxes but receive payments from the government -- while my family pays enough taxes to cover my neighbors' tax credits with enough left over to send to the government to help pay the additional credits Obama is proposing.

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Who pays the rest? After middle-income families who do not qualify for credits have paid, the rest would have to be paid by families who made different choices, who worked hard and who earned more than $250,000. They would be taxed at rates up to 39.6 percent.

What are the rewards for putting in the effort to increase your income? I ran another scenario.

Family 1: Both spouses paid their own way through college, both spouses now work multiple jobs, they have one child, they purchased a modest home, and their combined income is $250,000. Their rewards: A taxable income of $226,650, taxes of $53,634 and a tax rate of 24 percent. This family's taxable income is 6.4 times my income, but this family would pay 14.6 times more in taxes. In addition, while I pay credits for two additional families, this family pays enough in credits to cover

35 additional families.

I'm not suggesting we not help the less fortunate. But how do we determine the truly needy? The current credits and tax rates are one size fits all.

I am suggesting we not redistribute the wealth. We need graduated tax rates, ensuring all Americans pay a fair share. The tax system must encourage work, responsibility for one's choices, and that no one is penalized for making good decisions or for working hard. The tax system must discourage the belief of entitlement.

Obama has been compared to Abraham Lincoln. Lincoln spoke of American life. He said: "I hold the value of life is to improve one's condition." Lincoln also said: "The man who labored for another last year this year labors for himself and next year he will hire others to labor for him."

The Obama administra-tion seemingly could rework Lincoln's quote to state: "The man who labored for himself this year, next year will labor for 35 others."

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Douglas Haertzen of Warba has been a volunteer tax preparer for senior citizens and for low- and moderate-income families for four years. He has a degree in forestry and a career as a timber sale contracting officer.

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