The Ely miner. [volume] (Ely, Minn.) 1895-1986, 1938-01-13
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|OIAIE IAA
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net income for 1887 would be taxed $40
were it not for the fact that the law
allows him a $40 deduction from his
tax, leaving him nothing to pay. Such
an individual, Mr.. Burkman explained,
does not need file a return.
But if his net income is $1,001, he
will pay 2-cent tax, computed as fol-
loWS:The rate on the first $1,000 is
per cent, or $40. The rate on the Sec
ond $1,000 is 2 per cent. That means
that the 2 per cent rate applies to all
fractions of $1,000, and in this case
would mean per cent of 81 or cents
The total tax would be $1,000, but since
there is $40 deduction allowed him
the net tax would be cents
The law specifies that a taxpayer
make whatever deductions are allowed
| from his gross income and then COM
pute the tax. If unmarried with no de-
pendentS, he may deduct $40 from the
tax arrived at and pay the state the re-
mainedr. If married, and with no de-
pendents, he may deduct $50 from the
tax and pay the state the remainder.
may deduct If unmarried but regarded
as the head of his household, the tax
payer many deduct $50. In either in
stance, he can deduct SIS for each de-
pendent aside from his wife or the cir
~ IS
| his household.
What Can Be Deducted
| Deductible from the total income in
the new law are property taXes-auto-
mobile license fees, state gasoline taxes,
federal income taxes, medical dental,
hospital and other expense for healing
services, interest on Indebtedness, such
as mortgages, contributions to chart
table institution up to Is per cent of
the taxpayers income, net losses from
securities up to $4,000 and worthless,
uncollectable debts.
The old law permitted deduction of
i dividends from the portion of bust
ness done in Minnesota by business
firms. This has been eliminated from
the new law.
Some examples might clear up doubt
full points:
| Take a married man with two chill
dren. His 1887 earnings totaled So, 500.
He paid 500 taxes on his home, spent
500 for medical service, $50 for hos
pital service, $50 for dental work, paid
state automobile license fee of $40
and $40 in state gasoline taxes. He also
paid $3.50 interest on mortgage, gave
| $40 to charity and had stock worth
| So 900 which he sold for $4,000. He paid
no federal income tax
| Totaling the taxes and other ex-
penseS he finds he spent $48O, which
added to his $500 loss in selling his
stocks makes total of $3.50. Deducted
from his gross income of $500, he is
left with net taxable income of ST. $50.
He forgets about the deductions for
his family for the time being and COM
puteS his tax as being $40 on the first
| ST 900 under the l per cent rate, plus
5000 on the remaining $500 at the
| 2 per cent rate, for total of 5000. He
finds himself exempt from the tax be-
from the net tax for being married
man and an additional $40 for his two
children. He paid no tax under the
old law.
| But suppose he had no dental or
medical expenses during the year,
owned no home, car or stock, gave
nothing to charity and found that his
$500 total income also was his net
income. He would then compute a tax
of $40 on the first $1,000; $40 on the
second $1,000 and SIS on the $500 in
the third ST. 900 bracket, which is at the
rate of per cent, for total tax of
S45. He would deduct the $50 for being
married man and $40 for his two
children, making total deduction of
$40. His net tax, therefore, would be
| SIS. He would have no tax to pay under
the old law.
The Case of Single Man
Or take an unmarried man with no
| dependents, who earned $500 during
| the year. Say he owns no property but
a car on which he paid a $40 license
fee and paid like sum in state gaso-
| line taxes. He spent $500 for medical
service, $50 in hospital fees and $50 for
dental work. He had no stocks He
paid $40 federal income tax. These
items would total $780, deductible from
| the $4,000 income and leaving a net
| taxable income of $2,270. He would
compute his tax at $40 on the first
81 900, $40 on the second $1,000 and
$50 on the $270 remaining His total
gross tax would be $3.50, but under the
law he would be allowed a $40 de-
duction to make his net tax payment
to the state, $28.10. Under the old tax
law he would pay $1O.88.
The reason for these differences in
that under the old law, a taxpayer was
allowed $1,000 credit from his total
income if unmarried and $4,000 if mar
ried, plus $3.50 for each dependent. In
addition, the rates in each bracket over
$1,000 were considerably lower than
under the new law The old rates were
per cent on the first 81 900 of taxable
income; l II per cent on the second,
" per cent on the third, ~ per cent
on the fourth, 2 per cent on the fifth,
2R per cent on the sixth, per cent on
the seventh, 81 per cent on the eighth,
4 per cent on the ninth, Az per cent
on the tenth, and per cent on each
thousand over $4,000.