Jonathan Krause's Taxation Misinformation

Yesterday we noted that local talk radio bloviator Jonathan Krause's numbers just didn't add up with regard to the tax burden sob story he unleashed on his readers. Well, we decided to crunch some more numbers to determine just how clueless the guy is and came up with some interesting results!

First, let's assume that the Krause household's annual income is $53,629.20. That's the figure we estimated given what Krause wants us to believe he pays in property taxes and the available public information. Now, once more, here's Krause's lament:

I told [a caller to the radio station] that my wife and I paid 28-percent of gross income in federal taxes and withholdings last year.

[snip]

I stunned our caller some more by telling him that I knew that I paid another 6.5% in state income taxes, a little less than 5% in property taxes and then another 5% on all of my purchases and 51.3-cents a gallon on gas. Again, sheer amazement that I would know the actual cost of taxes in my life.

Let's break down that argument mathematically:

28% + 6.5% + 5% + 5% = 44.5%

Krause would have you believe that 44.5% of his income goes to taxes. There's really no other way I can fathom reading that paragraph. That's how he sees his life: as one a relentless assault by the IRS. In terms of hard currency, Krause seems to believe that he personally contributed $23,864.99 to government coffers last year.

The fact of the matter is that this figure is grossly distorted. Let's look at each of the taxes he claims to be paying vs. what he's actually paying:

First are the federal taxes. Krause thinks he's paying 28% of his income to the Federal government, which would be $15,016.18. But yesterday we showed that he wasn't in the the 28% tax bracket (wasn't even close to it, really) and that he was, in fact, paying 25%. That would be $13,407.30. That's a difference of $1,608.88.

Now here's the kicker: We haven't even started to make deductions for work-related expenses, dependents, charitable donations or any of the other ungodly number of possible write-offs.

Let's just take one of the most basic standard deductions. Since we've assumed that Krause and his wife are filing jointly they can take a standard deduction of $11,400. That means even though Team Krause pulled in $53,629.20, the IRS will only tax $42,229.20 of their income. Therefore,

(25%) of $42,229.20 = $10,557.30.

And

$15,016.18 - $10,557.3 = $4,458.88

Remember: this is assuming that Krause makes no more deductions, which is highly unlikely.

Next comes the state taxes. Krause claimed that he paid 6.5% of his income in state taxes. That would mean $3,485.90. Of course, this is not actually true. According to the Wisconsin Department of Revenue, Krause is required to pay a baseline tax of $1,098.65 and then 6.5% of any income made over $20,440. Since,

$53,629.20 - $20,440 = $33,189.20

Krause is actually required to pay 6.5% of $33,189.20, which is $2,157.30. Then,

$2,157.30 + 1,098.65 = $3,255.95

Whereas 6.5% of $54,629.20 is $3,485.90. That's what Krause thinks he's paying. There's not a significant difference between his perception and reality in this case ($229.85), but it's still less.

Moving on to the sales tax. Krause says he pays 5% on everything he buys. This is incorrect. Groceries are exempt from the sales tax. That's not a small thing. Now, if Krause is an average American -- as he likes to fashion himself -- he spends 5.6% of his annual income of groceries, according to the USDA. Given what we estimate his income to be, that would be $3,003.11. Then,

(5%) of $3,003.11 = $150.16

So that's $150.16 cents he's not paying in sales tax every year.

As for the gas tax he whines about, he wins no sympathy from us. Krause has said in past that he drives a Jeep Wrangler. Most later models of that vehicle get about 15 miles per gallon in the city and 20 on the highway. That's pretty poor gas mileage. In fact, if Krause drives his Jeep 12,000 miles in a year, like the average American apparently does, he'll end up paying $410.40 in gas taxes. If he drove a car with average gas mileage (say, 21 miles to the gallon), he would only spend $293.14. He'd save himself $117.26. If he drove 2007 Honda Civic Hybrid, a car that's not nearly as pretentious as a Prius yet still has an average of 50 miles per gallon for both city and highway, he would only pay $123.12 in gas taxes. That's a savings of $287.28. Krause claims to "live and breathe the 'Jeep Lifestyle'," whatever that means -- but on behalf of grateful tax-payers everywhere I would like to thank him for subsidizing the highways for those of us who drive cars with better gas mileage.

So let's add it all up (and just to be nice, we'll let the gas thing slide). Recall that Krause claims his tax burden is a whopping 39.5% and $21,183.54 of his income. That's before we figure in the sales tax, which Krause thinks applies to everything he buys and assumes he's never gone on vacation outside Wisconsin or purchased anything online from an out-of-state vendor or other buying habits I have no inclination to speculate upon.

But above we've shown that Krause is actually incorrect in his estimations and that his levy is less by

$4,458.88 + $229.85 + $150.16 = $4,838.89

And

$21,183.54 - $4,838.89 = $16,344.65

That's actually only 30.5% of what we estimated his salary to be, a 22% discrepancy between perception and reality. That's a substantial disconnect. Let me emphasize once more that this figure can only go down since it doesn't include any further deductions. It's entirely possible that Krause could compile enough deductions to bump him down into the next lowest tax bracket at which point Uncle Sam would only ask for 15% of his income. Yes, there's still the matter of the sales tax, but there's not much more I can discuss on that front given the dearth of information at hand.

I think it's reasonable to assume that at the end of the day Krause pays significantly less than 30% of his income on federal, state, property and, yes, even sales tax. There are just far too many perfectly legal and acceptable exemptions, loopholes and other tricks that allow people to sidestep paying their taxes. The tax code is full of them ... a minor detail that Krause conveniently forgets.

There's a larger point to this that Kruase misses entirely. In the original post Krause was berating a caller who didn't seem to have the first idea how much of his income was devoted to taxes. As it turns out, neither does Krause. The point he seems to miss entirely is that just like there are people in this world who are oblivious to their own tax burden, there are also those whom walk this earth and see taxation where there is none (or at least very little). Krause is one of these people.

Krause wants his listeners/readers to think that he and, by extension, they shell out upwards of 44% of their income to the tax man every year. That's just not true. The reality, as we've shown above, is probably closer to half that amount. One of the things that irritates me to no end about the anti-tax tirades of folks like Krause is that, even though they complain about taxes and they become quite when it comes time to provide concrete examples. I know it's rude to as ask how much someone makes -- or at least that's how I was raised -- but anti-tax fetishists really should start making their own taxes more transparent so we can all see just how burdensome they are, because I have a very hard time believing that Krause doles out 40% in taxes.