February 5, 2012
NY Times: The Man Who Pays a 102% Tax Rate
James Ross, 58, is a founder and managing member of Rossrock, a Manhattan-based private investment firm that focuses on commercial real estate and distressed commercial mortgages. “I realize I am very fortunate, and in fact I am a member of the 1%,” Mr. Ross wrote in an e-mail. His résumé is studded with elite institutions: Yale, Columbia Law School and stints at the law firms Cravath, Swaine & Moore in New York and Holland & Hart in Denver. Since his company fits the category of private equity, he even has carried interest, the kind of incentive compensation that enabled Mitt Romney to pay such a low tax rate.
Yet Mr. Ross told me that he paid 102% of his taxable income in federal, state and local taxes for 2010. “My entire taxable income, plus some, went to the payment of taxes,” Mr. Ross said. “This does not include real estate taxes, sales taxes and other taxes I paid for 2010.” When he told friends and family, they were “astounded,” he said.
In the midst of a national debate over tax rates and policy, I lifted the veil last week on my income tax rates for 2010, a year in which I paid 37% of my adjusted gross income (total income minus things like retirement contributions) in federal, state and city income taxes and 74% of my taxable income (after deductions like state and local taxes). ...
That doesn’t mean Mr. Ross pays more in taxes than he earns. His total tax as a percentage of his AGI was 20%, which is much lower than mine. That’s because Mr. Ross has so many itemized deductions. Since taxable income is what’s left after itemized deductions like mortgage interest, charitable contributions, and state and local taxes are subtracted, it will nearly always be smaller than adjusted gross income and demonstrates how someone can pay more than 100% of taxable income in tax. ...
A disproportionate number of high-rate taxpayers appear to be self-employed and many are professionals, such as lawyers, doctors, dentists and architects with mostly earned income rather than dividends and capital gains. Some are in the upper 1%, but most aren’t. ...
And for those of you who questioned how I could be a business columnist and yet be such a sap, James Cramer, the host of “Mad Money” on CNBC and founder of the financial Web site TheStreet.com, disclosed that he paid a higher rate than I do. He forwarded an e-mail from his accountant estimating that he paid 45 to 50% of his AGI in income taxes in 2010.
(Hat Tip: Karla Simon.)
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I don't believe the facts presented in this story. Plus, this taxpayer needs a new preparer.
"Mr. Ross said he asked his accountant what he could do. “He said, ‘Fire everyone here and move to Florida.’”
Posted by: Woody | Feb 5, 2012 12:05:06 PM
The 102 percent tax rate in the NYT article was misleading to say the least. Even so, if Ross is among the "1 percent," the AMT is working as originally designed in his case.
Posted by: Jake | Feb 5, 2012 5:05:05 PM
This is sort of misleading it should be calculated as a percent of economic income
Posted by: mike livingston | Feb 6, 2012 6:16:45 AM
Until people like Mr. Ross and Mr. Stewart actually release their tax returns so we can see what is going on, their claims should be treated for what they are, supported statements contrary to fact or logic.
Does this statement
"That doesn’t mean Mr. Ross pays more in taxes than he earns. His total tax as a percentage of his AGI was 20%, which is much lower than mine. That’s because Mr. Ross has so many itemized deductions. Since taxable income is what’s left after itemized deductions like mortgage interest, charitable contributions, and state and local taxes are subtracted, it will nearly always be smaller than adjusted gross income and demonstrates how someone can pay more than 100% of taxable income in tax. ..."
make any sense to anyone in the tax area? Isn't the income tax rate applied to taxable income, or did they change that while no one was looking.
It is true that tax returns are private, but if you are going to go public with your tax claims to make a point, you are obligated to release the information.
Trust but verify I believe is the appropriate phrase here. Just because someone says something is true doesn't make it true.
Posted by: David R | Feb 6, 2012 11:25:45 AM
Please show your work NYT.
Posted by: Dave | Feb 6, 2012 12:19:29 PM
And yet, with much more publicity around his claim, TPC did not see fit to publish a similar critique of Warren Buffett who used exactly the same denominator in his comparison between himself and his secretary.
Posted by: dui lawyers los angeles | Feb 13, 2012 11:50:01 AM