A question about the "rich paying their fair share" charge...

[Argo]

You don't see any because you aren't rich as we have told spidey. You two are in the same boat as the rest of us who aren't making millions+ a year.

The reason they talk about 250k is because there aren't enough tax brackets right now. So you get lumped in with those making 100 times more than you. But you have to remember at 250k is where those tax increases were supposed to start, and if taxes were cut at a rate below you, you might end up paying less in taxes even though the rate you are in increased. Also the increase shouldn't be much at all untill quite a long way past that top tax rate mark. Especially if lower tax rates have gone down or more deductions can be made.

Though the main problem is that the top tax bracket hasn't moved up the way it should have. You have a huge increase from 0-200k, then it just stops... We need to get more tax brackets for those making millions and 10's of millions.

Then there is capitol gains tax rates.

Then why not attack loopholes instead of raising taxes? As long as those loopholes remain, all raising taxes will do is hurt people who do not get to use those loopholes. I also would love to have those loopholes enumerated somewhere...

 

[Atreus21]

Yes, percentage of total income paid is a better metric. But then there is the issue you raised about the difficulty of quantifying state income and sales taxes. I suspect, but do not have the data to verify one way or another, that the "upper middle" income region is where the highest percentage of income is paid, and that the "wealthy" pay considerably less as a percentage of their income, due to loopholes, the lower capital gains rate, and the regressiveness of sales and payroll taxes. However, until we have all the information we can't really say for sure.

Just FYI, I included the percentage of total income paid metric in the revised OP.

 

[fisheerman]

Does anyone know of the loopholes that the "rich" wage earners get excluding the long term capitol gains (if you consider that a loophole)? Not talking about corporate/business perks that aren't personal tax loopholes.

I was getting ready to ask the same question.

 

[soundforbjt]

Corporate & Business perks\loopholes have to be taken in account, if that's how they "earn" their income.

Nothing stopping the CEO using the Co. jet for personal use, or the business owner using a company car for personal use, usually.

 

[highland145]

Corporate & Business perks\loopholes have to be taken in account, if that's how they "earn" their income.

Nothing stopping the CEO using the Co. jet for personal use, or the business owner using a company car for personal use, usually.

O.K. but not all of the rich are CEOs/business owners so what else is there?

 

[fisheerman]

Corporate & Business perks\loopholes have to be taken in account, if that's how they "earn" their income.

Nothing stopping the CEO using the Co. jet for personal use, or the business owner using a company car for personal use, usually.

So if I have a business and i have a company car then that should be taxed as income?

Next thing you know they will be wanting to tax my employer provided health care...........oh wait! (had to throw that in...haha)

 

[soundforbjt]

O.K. but not all of the rich are CEOs/business owners so what else is there?

Then it goes back to capital gains tax rates being too low.

 

[soundforbjt]

So if I have a business and i have a company car then that should be taxed as income?

Next thing you know they will be wanting to tax my employer provided health care...........oh wait! (had to throw that in...haha)

If it's used for personal use, then yes.

The company car should only be used for "real" business use only. The fuel purchased for a personal car should not be charged to the company. There's all kinds of perks, charging a suit for a wedding and then wearing it to work once, so you can write it off, etc.

 

[highland145]

Then it goes back to capital gains tax rates being too low.

Others? Maybe the fica income cap($106K) but I don't know what the max benefits are for the highest earners or if they'd get more because they paid significantly more.


As an aside, I might could see long term gains taxed higher if long term losses could all be taken instead only the -$3K/year cap(?).

 

[alkemyst]

Then it goes back to capital gains tax rates being too low.

It then goes back to many at the $150k to $500k aren't pulling in much capital gains.

 

[Atreus21]

Then it goes back to capital gains tax rates being too low.

35% for short term gains and 15% for long term gains doesn't strike me as being particularly low.

 

[Craig234]

Corporate & Business perks\loopholes have to be taken in account, if that's how they "earn" their income.

Nothing stopping the CEO using the Co. jet for personal use, or the business owner using a company car for personal use, usually.

People who use the corporate jet for personal travel should have the law require them to declare the cost, if not the value, of the trip as personal income.

The law actually requires them only to count the value of a first class plane ticket - a fraction of the amount - as income. This is the 'corporate jet loophole'.

Of course, the private jet industry loves it - lot easier to sell 'business' jets.

 

[Craig234]

So can we dispense with the whole notion that the rich don't pay their fair share and move on as a society?

What part of 'the GOP politicians standing in the way of the rich paying their fair share' did you not understand?

 

[Fern]

Does anyone know of the loopholes that the "rich" wage earners get excluding the long term capitol gains (if you consider that a loophole)? Not talking about corporate/business perks that aren't personal tax loopholes.

I'm a tax CPA and I can think of only one real loopholes ATM.

First off, the term "loophole" is badly misused in this forum. A loophole is where something 'slips' through a 'hole' in tax law and thereby gets some unintended (tax) benefit or favorable tax treatment. An example of this is the Carried Interest Provision ("CIP") that fund managers get. From a little research into the CIP, it appears that there is no law authorizing this, rather a combination of other tax laws, mostly aimed at other things, work together in concert to create the so-called CIP.

Otherwise, the vast majority of tax breaks (usually referred to here erroneously as loopholes) are benefits specifically and purposeful enacted by Congress to encourage some result or behavior. E.g., the mortgage interest deduction put in place by Congress is to encourage home ownership (i.e., they want people to buy a house, it's good for economy). Same thing for credit for research and development expenses, or quick write off/expensing of equipment used for business.

Otherwise, many things referred to (erroneously) as loopholes are illegal and constitute (criminal or civil) tax evasion. Much of these revolve around the use of foreign countries and foreign trusts.

Fern

 

[highland145]

Thanks Fern. So other than possibly the 15% gains tax or maybe the fica cap I mentioned, are there legal ways the "rich" wage earners can cut their tax liability (substantially or not) that the normal guy can't? Again, assuming no corporate/business perks being abused.

Edit: Wouldn't the AMT eliminate a lot of deductions for the "rich?"

 

[Atreus21]

What part of 'the GOP politicians standing in the way of the rich paying their fair share' did you not understand?

The "rich don't pay their fair share" implication. That's the part I didn't understand.

 

[Fern]

Yes, percentage of total income paid is a better metric. But then there is the issue you raised about the difficulty of quantifying state income and sales taxes. I suspect, but do not have the data to verify one way or another, that the "upper middle" income region is where the highest percentage of income is paid, and that the "wealthy" pay considerably less as a percentage of their income, due to loopholes, the lower capital gains rate, and the regressiveness of sales and payroll taxes. However, until we have all the information we can't really say for sure.

I'm against including SS taxes in the issue. Under tax theory I do not believe it an actual 'income tax'. IMO, it's more of a forced contribution to a retirement plan and set of insurance policies (e.g., disability).

I wouldn't include sales tax or r/e tax either, neither are relevant in a discussion of national (income) tax policy since neither are national taxes, and are used for purposes different from (national) income tax. For similar reasons I would exclude state level income tax. States are not bound by the constitutional requirement that taxes be "proportional", thus they have revenue options the federal govt does not and this, to some extent, may unusually influence their income tax policy.

I think we'd find that many people making a million or more $'s actually do pay a very high rate. Musicians/recording artists, prof athletes, actors, TV personalities, highly commissioned sales people, and top level execs who either don't receive stock options, or whose stock options had no value all pay at the highest rate.

However, and assuming they invest smart, eventually their overall rate may be diluted due to the lower rate on LT cap gains they get on investment income and dividends. (ST w/b taxed at 35%). However, they will stay pay the maximum on their main income (music royalties, salary for athletes and actors etc.)

Aside from hedge fund managers, we will have a small population of the uber wealthy who may not work but exist only to collect investment income. This is mostly inherited money, such as the Gores and Hiltons. Originally, the estate tax was designed to address this group but Congress, being what it is, has screwed it up and made it possible to avoid (tax avoidance is perfectly legal).

LT capital gains, as we presently calculate them, should NOT be taxed as regular income. Inflation is not income. Assets held over a long period will carry substantial amounts of inflation. The answer is simply to adjust for inflation, then tax the real gain at ordinary (high) rates. Again, this fault lies with Congress. IMO, there is no reason a person who holds an asset for 366 days should get the same break, ostensibly for inflation, as a person who held their asset for 20 yrs.

There are simply to few CPA's in Congress IMO.

Fern

 

[Craig234]

The "rich don't pay their fair share" implication. That's the part I didn't understand.

His post said the rich don't pay their fair share. It just said that the REASON they don't is not that they won't do it, but that the Republicans have blocked higher rates.

 

[bfdd]

the very top does not pay their fair share. they avoid paying as much as they can, by lobbying for different tax rates on different ways of making income, like capitol gains. All income should be taxed the same rate for everyone, regardless of how it is made. This would solve a huge majority of our problems as tax rates WOULD COME DOWN for the majority, while others would see a tax burden they didn't have before(talking bout teh poor here).

I don't see the issue with the tax burden on the poor though. I believe it would be much easier to convince people to support social programs, as long as they were planned out well enough and could ACTUALLY BE PAID FOR, for those who are less fortunate because they will see that even those who are less fortunate than them are still contributing SOMETHING, and that something happens to be the same rate %, to further society.

 

[Fern]

Thanks Fern. So other than possibly the 15% gains tax or maybe the fica cap I mentioned, are there legal ways the "rich" wage earners can cut their tax liability (substantially or not) that the normal guy can't? Again, assuming no corporate/business perks being abused.

Not really, at least can't think of any ATM. And because of their high income level, many of the deductions/credits available to the rest of us are denied them.

I occasionally hear of some fancy sounding scheme such as offshored foreign trusts, but IMO these are clearly illegal and their only hope is avoiding detection by the IRS. If they ever saw the light of tax court they'd certainly lose. BTW: The IRS is now making a huge push to go after offshored money and investments; it appears to be their number 1 priority.

Edit: Wouldn't the AMT eliminate a lot of deductions for the "rich?"

Yes.

The AMT was originally designed for another purpose. Years ago, even though we had higher rates, we had all kinds of other deductions. The AMT was designed to ensure people paid paid some minimum level of income tax (thus the name "alternative minimum tax"). Currently it serves mostly to phase out deductions, such as that for state income taxes, for higher income types.

The only other thing of much significance it does is to accelerate tax on Incentive Stock Options ("ISO"). When you hear of these huge salaries for CEO's typically most of it is in the form of ISO's, with a much smaller portion being actually cash salary. Later, when the ISO income is taxed regularly, the AMT amount is credited.

Fern

 

[spidey07]

Not really, at least can't think of any ATM. And because of their high income level, many of the deductions/credits available to the rest of us are denied them.

I occasionally hear of some fancy sounding scheme such as offshored foreign trusts, but IMO these are clearly illegal and their only hope is avoiding detection by the IRS. If they ever saw the light of tax court they'd certainly lose. BTW: The IRS is now making a huge push to go after offshored money and investments; it appears to be their number 1 priority.



Yes.

The AMT was originally designed for another purpose. Years ago, even though we had higher rates, we had all kinds of other deductions. The AMT was designed to ensure people paid paid some minimum level of income tax (thus the name "alternative minimum tax"). Currently it serves mostly to phase out deductions, such as that for state income taxes, for higher income types.

The only other thing of much significance it does is to accelerate tax on Incentive Stock Options ("ISO"). When you hear of these huge salaries for CEO's typically most of it is in the form of ISO's, with a much smaller portion being actually cash salary. Later, when the ISO income is taxed regularly, the AMT amount is credited.

Fern

You get it. I keep saying this, most all deductions are not available to me. Pisses me off. I've got mortgage and charity,, that's it. We've got 15k/yr in education expense that we simply aren't allowed to deduct because "you make too much money". That's WRONG! The phase-outs are WRONG.

Glad you can explain the difference between qualified and/or NSO stock options, frequently that IS taxed as normal income (of course depends on what kind of options they are). No loophole or tax break. I've had both and was rightly pissed when it was taxed as regular income and not capgains when exercised.

But thanks for putting to rest the lies of the "rich" have all these loopholes and tax breaks. Because if there are, I surely want to take advantage of said loopholes if they can be pointed out.

And now Obama wants to take what little deductions I have left, along with the SS HCE cap? Well...fuck him.

 

[nonlnear]

Not really, at least can't think of any ATM. And because of their high income level, many of the deductions/credits available to the rest of us are denied them.

I occasionally hear of some fancy sounding scheme such as offshored foreign trusts, but IMO these are clearly illegal and their only hope is avoiding detection by the IRS. If they ever saw the light of tax court they'd certainly lose. BTW: The IRS is now making a huge push to go after offshored money and investments; it appears to be their number 1 priority.

It's one thing to say there aren't a lot of legal ways to generate personal income with a lowered tax liability, but people generally don't care if the deed to their vacation home is in their personal name or in the name of a corporation that has nominally "business" uses for said property. There definitely are plenty of ways to get personal use out of very expensive assets without having any tax liability on the income that would be necessary for mere mortals to use equivalent toys. Take a vacation with a good friend aka "business partner"? You don't have to bother paying yourself the income necessary to take said trip in the first place.

If I take home $700,000 per year in income, pay 20% average taxes on it, and my business incurs $2m in expenses that just happen to be enjoyable, that wouldn't enter into anyone's calculation of how effectively I had reduced my tax liability. I just have a slightly under-performing business that just happens not to make much profit. *shrug* Yes, people easily cross the line and get caught when they get too aggressive with this stuff but it can be done perfectly legitimately too.

 

[bfdd]

deductions and tax breaks are wrong, they shouldn't exist. they create inequality.

 

[Ausm]

That's before tax breaks and loopholes

Find me a rich person that actually pays that amount in taxes and I will show you someone who isn't rich.

:thumbsup::thumbsup::thumbsup:

 

[Engineer]

I already explained how he has raised my taxes, the medicare tax on capital gains and additional tax on income over 250.

I also pointed out his proposed tax increases - SS HCE cap, elimination of mortgage and charity deductions. The ONLY tax decrease I have seen is the SS cut which works out to 2k a year. I don't get that making work pay shit.

You had the Bush tax cuts extended for two years so yes, he has cut more than just SS for you. Also, you have not had your taxes raised yet and will not until 2013. Stop with the bullshit.