To the editor,
After reading the (Dr. Isadore Ramos letter) published on August 30, 2012 I feel obligated, as a certified tax professional, to clarify the tax-related comments made to ensure the public isn’t improperly swayed by a complex topic often misunderstood. The recent tax reform wasn’t a gave-a-way to the wealthy. First, a statement was made that “the state cut taxes to the top wage earners.”
Looking only at the Rhode Island (RI) income tax rate tables is misleading. A single “top wage earner” with over $373,650 had a maximum rate of 9.9% (really 6% due to the optional flat rate) in 2010 and 5.99% in 2011 (.01% rate reduction). A single taxpayer earning $35,000 had a maximum rate of 7% in 2010 and 3.75% in 2011 (3.25% rate reduction). Since most RI’ers are closer to $35,000 in annual wages than $373,650, most RI’ers received a bigger tax cut than “the top wage earners”. In addition, other tax rules exist to reduce tax benefits for “the top wage earners”. In 2010 “the top wage earners” who invested excess spending money to generate greater income from selling stocks, real estate, etc. lost their advantageous reduced capital gain rates. Although these rates still exists federally (one reason why you hear many wealthy pay a lesser average tax rate), in RI the rate equals their normal rate.
In 2011, RI eliminated itemized deductions (which affect “the top wage earners” most due to their higher mortgage interest, real estate/state tax deductions) and increased standard deductions. Most renters who can’t afford homes and senior citizens who paid off their mortgages aren’t affected by itemized deductions because they use standard deductions. Couples earning $60,000 using standard deductions received a $9,550 deduction in 2010 that jumped to $15,000 in 2011. Couples earning $120,000 with $30,000 in itemized deductions, received a $30,000 deduction in 2010 but only $15,000 in 2011 (same as $60,000 earner). Did you know couples who earned more than $195,000 lost their entire $15,000 standard deduction and entire $7,000 exemption deduction?
Second, a statement was made about the “raised car taxes on middle class families”. In reality, when the car tax phase-out ended, our city raised car taxes for everyone. Income isn’t factored in the car tax calculation, value is. A 2003 Ford generates a much lower tax bill than a 2012 BMW. Therefore, it makes sense higher income taxpayers were most affected since they often purchase higher valued vehicles. A few things to consider. Tough economic times force tax increases or expense cuts. We complain either way because we lose something. However, just because our economy isn’t where we want it to be, doesn’t mean it wouldn’t be worse in the hands of someone else. And, just because we don’t understand why decisions are made, doesn’t mean they’re wrong.
When in doubt, trust common sense. Difficult financial times require an experienced financial professional representing EP.
Ernest M. DeMeneses, CPA, MST, MBA
EMD Tax Consulting
To the editor,