In 2012 I made about $6500 selling my 99 cent books through Amazon and Barnes & Noble (I get about 35 cents a book). On the plus side, the extra income offset the effective salary cut provided by Governor Scott of Florida. On the minus side, this royalty income is taxed using the self-employment rate. In 2012, the self employment tax rate was 13.3%. In 2013 it will be 15.3%. In contrast, Mitt Romney pays taxes at under 15%. If I only got royalties from non-work sources (like copyrights), I’d be paying much less.
Without this income, my tax software reported that I’d get back about $2400. With this income, I’ll be getting back $36. So Uncle Sam gets a nice chunk of my book income.
On the plus side, my modest stock returns were taxed at an incredibly low rate. This is not surprising since capital gains taxes cap out at 15%. Yes, I do endeavor to plow as much money as I can into increasing my capital gains. And into my IRA.
I’m not mentioning this to brag about my modest success as a writer nor to weep about my taxes. Rather, I am bringing this up to explain why I fully accept that the idea that the tax system in the United States needs to be overhauled. I have, of course, had a general commitment to the idea that the tax system is a needlessly complicated mess packed with unfairness. However, really seeing the disparities in the tax system shows there is a problem. After all, I am taxed rather differently for my normal wages, for my self-employed income, for my capital gains, and for my interest income. It seems rather odd to have so many different tax rates based not on the amount of income but where it comes from. After all, income should (in general) be treated as equal-after all, it is all income. It should not matter that a specific dollar came from my writing, my stock, my savings interest or my job.
Not surprisingly, income from work has high tax rates relative to the others (especially capital gains). Of course, this makes sense: congress members and their supporters make most of their money in the areas that enjoy the lower taxes while people who work for a living pay higher rates. However, this disparity in rates is unfair and should be changed.
I do also see the appeal of having lower taxes. When asked how I’ll handle the tax increase for this year, I had to say the obvious: I’ll have to spend less. Of course, I also recognize that there are legitimate expenditures for the state and, as a citizen, I am obligated (and proud) to contribute to the general good. I am not, of course, keen on having my money wasted. I only wish the politicians thought the same way.
While it will cost me more in taxes, I still encourage everyone to buy my books: My Amazon Author Page