Taxes

[Muse]

I don't have an under the hood idea of the current tax debate, however I need to understand an issue or two:

1. When they are talking about higher tax rates for people making over $250,000, $400,000, $500,000 or $1,000,000 per year are they not saying that those rates would kick in for money a "household" would make past those thresholds? IOW, the money made before the threshold (whatever it is) is taxed at the rate that applies to those who make less (total) than the threshold figure?

2. I heard on the news last night that it's being proposed to increase inheritance tax rates from 35% to 55% for estates over $1,000,000. Does the same concept apply? IOW, the amount over $1,000,000 would be taxed at the higher rate, the amount below it at the lower rate?

I can't imagine that these would be any other way but I haven't been hearing these ideas in the discussions that I've heard.
- - - -
Just to throw another log on the fire, I wonder why they don't have "graduated" income taxes. I've heard the term, do not know to what it applies, but it seems to me a more equitable situation if income tax rates would increase gradually instead of by quantum leaps. Using such a concept would IMO inject an element of sanity into what is otherwise an unfortunately insane fiscal discussion. IOW, have no thresholds at all, but a smooth curve. Yeah, I have a math degree.

There are other ideas I have, but I'll leave it at that for right now. What are your ideas?

 

[dmcowen674]

Does any of the above apply to you?

 

[Muse]

Does any of the above apply to you?

All of it applies to American citizens, so yeah. And you? Where/who are you?

 

[IronWing]

Marginal income tax rates apply at the margin. The first X dollars is taxed at rate A. The next Y dollars is taxed at rate B and so on. This is a graduated income tax scheme. It is flatter now than it used to be with fewer brackets and with a lower top end rate than we've seen in decades.

 

[Muse]

Marginal income tax rates apply at the margin. The first X dollars is taxed at rate A. The next Y dollars is taxed at rate B and so on. This is a graduated income tax scheme. It is flatter now than it used to be with fewer brackets and with a lower top end rate than we've seen in decades.

Thank you, yes that makes sense, otherwise it would be nuts.

I still like my smooth rate increase concept rather than the quantum leap system they have. Would it be all that hard for people to understand?

 

[shady28]

Does any of the above apply to you?

The thought process that leads to that question just shows how brain-dead 80% of America really is.

Most of the time you look at a chart of income, it's in "constant dollars", ie adjusted for inflation. That tends to show stagnant wages.

In non-adjusted dollar terms, here are some median household income numbers for the US from census.gov :

1990 : 35,353

2000 : 50,732

2009 : 60,088

I would hope what I'm implying would be clear, but since it's probably flying right over your head here's the gist :

Even if it doesn't affect you now, it WILL, in fact logic such as yours from previous generations *ALREADY HAS AFFECTED YOU*. This is the problem with *increasing* a *tax RATE*. Note the emphasis on *RATE*.

The idea behind a rate is that, as people make more money, so does the government.

What is not discussed is that as the median income goes up over time due to *DECLINING VALUE OF THE CURRENCY*, the *GRADUATED TAX* system puts an increasingly large tax burden on *EVERYONE*.

Or do you think the government adjusts tax rates based on the median income? HAH!

Go ahead. Tax people with income over 250k. For that matter, tax the crap out of people with household income over 100k. If you want to make it a *REAL* class war, tax anyone with household income over 75k - that's less than half the population.

And to prove the point - note the amount above shows that US income went up about 80% in 20 years (1990-2009).

In that same time, what do you suppose happened with TAX REVENUE????

It went from under 2 Trillion / yr to OVER 6 TRILLION / yr. ie, FOR AN 80% INCREASE IN HOUSEHOLD INCOME - we got TAXED OVER 300% MORE!

 

[piasabird]

There is a problem with this kind of thinking. One is that costs have risen with the rising income median at about the same percentage. Look at the price of consumer goods in 1990 compared to 2009 or even in 2012. The problem with Census data is that it is only a predictor of the past. As stock brokers would say past performance has no direct affect on future expectations. Not many people predicted the real estate crash and its affects in 2008 through today. So post 2009 figures may actually fall. Also a Mean could be thrown off and misleading about what the average household makes. If the average of the rich rises, the average of the poor could be falling also. This is why you have to look at the complet picture. There is also a problem with the regional dispairity in income. Populations that live or work in large cities often have a higher income level and a higher cost of living.

As an example you could look at a state like Illinois. About 50% of the population leaves in the greater Chicago Area and has a higher income. However, why should they have the right with their higher income to raise the taxes on everyone else making less money in the other 50% of the state? So the Median would be rather misleading.

 

[piasabird]

Household income is misleading. Divide that by two for individual average income. So if it is 60k that is the income usually of the 2 parents. It could be the income of one person, or each adult could be making about $30k (Chicken Feed), or one could be making around $45k and the other $15k. This is whay household income is misleading for single parent households. It might make a lot of sense to know the income by number of wage earners. Then you could get the average income when there are 2 wage earners (Husband and Wife), and the income by single parent families. Knowing the ratio might be useful also.

In Chicago the Per Capita Income (One person) is $27,940
The household figure is $47,371
However, the IL figures were higher. This means people in Chicago make less than in the sub-urbs.

http://quickfacts.census.gov/qfd/states/17/1714000.html

21.4 population under pov level in Chicago
13.1 population under pov level in Illinois
14.3 population under pov level in USA
14.4 population under pov level in California

Makes me wonder how they average the locations with no residents etc.

I imagine every state has their own figures. The census data says the income was based on 2007-2011 Fin data.

 

[CPA]

First off, everyone needs to know that taxes will be raised under two circumstances in 2013 regardless of what happens with the fiscal cliff:

1) Medical FSA contribution limits were reduced from $5K annually, to $2,500. So, it doesn't matter how much money you make, if you were contributing above $2,500 in 2012, you will be hit with higher taxes in 2013 because of the reduced amount you can contribute.

2) A medicare surcharge of 0.9% for all income over $200K.

Both of these are a result of Obamacare. Both effect people making less than $250K.

 

[JACKHAMMER]

The thought process that leads to that question just shows how brain-dead 80% of America really is.

Most of the time you look at a chart of income, it's in "constant dollars", ie adjusted for inflation. That tends to show stagnant wages.

In non-adjusted dollar terms, here are some median household income numbers for the US from census.gov :

1990 : 35,353

2000 : 50,732

2009 : 60,088

I would hope what I'm implying would be clear, but since it's probably flying right over your head here's the gist :

Even if it doesn't affect you now, it WILL, in fact logic such as yours from previous generations *ALREADY HAS AFFECTED YOU*. This is the problem with *increasing* a *tax RATE*. Note the emphasis on *RATE*.

The idea behind a rate is that, as people make more money, so does the government.

What is not discussed is that as the median income goes up over time due to *DECLINING VALUE OF THE CURRENCY*, the *GRADUATED TAX* system puts an increasingly large tax burden on *EVERYONE*.

Or do you think the government adjusts tax rates based on the median income? HAH!

Go ahead. Tax people with income over 250k. For that matter, tax the crap out of people with household income over 100k. If you want to make it a *REAL* class war, tax anyone with household income over 75k - that's less than half the population.

And to prove the point - note the amount above shows that US income went up about 80% in 20 years (1990-2009).

In that same time, what do you suppose happened with TAX REVENUE????

It went from under 2 Trillion / yr to OVER 6 TRILLION / yr. ie, FOR AN 80% INCREASE IN HOUSEHOLD INCOME - we got TAXED OVER 300% MORE!

You do realize that the tax brackets are adjusted according to CPI correct? You also realize that there are more people now, and more people paying yields more money in taxes, even if no income increase happens. The reasoning you just used is wrong. Seems like you are raging a bit, but don't have a firm grasp on the math.

 

[JACKHAMMER]

First off, everyone needs to know that taxes will be raised under two circumstances in 2013 regardless of what happens with the fiscal cliff:

1) Medical FSA contribution limits were reduced from $5K annually, to $2,500. So, it doesn't matter how much money you make, if you were contributing above $2,500 in 2012, you will be hit with higher taxes in 2013 because of the reduced amount you can contribute.

2) A medicare surcharge of 0.9% for all income over $200K.

Both of these are a result of Obamacare. Both effect people making less than $250K.

Aye. The first one hits the middle class especially hard, considering the costs of most family plans.

 

[Jhhnn]

Marginal income tax rates apply at the margin. The first X dollars is taxed at rate A. The next Y dollars is taxed at rate B and so on. This is a graduated income tax scheme. It is flatter now than it used to be with fewer brackets and with a lower top end rate than we've seen in decades.

It's also regressive wrt tippy-top filers, because of the flat 15% rate on investment income. A person working for $150K/yr can pay a higher tax rate than somebody earning $15M/yr. Witness Mitt.

 

[s0me0nesmind1]

Places that have expensive standards of living (IE: Expensive California cities, New York, Chicago, etc) yet the lowest average salary are hilarious. It's the general acceptance of failure that has occurred in this nation. We were once an ever expanding nation because of people who realized they wanted a better life. Now we are stuck in our major cities... leaving the rural one's to stay at the level they are at instead of nationally expanding - creating more jobs - creating more infrastructure - creating more interest - thriving the economy.

It's funny, our entire country was made on the premise of packing up your shit to go find a better life. Due to the programs we have, people are now mighty comfy that someone else will take care of them. If they don't take care of them - keep bitchin' - you will eventually get it.

 

[s0me0nesmind1]

First off, everyone needs to know that taxes will be raised under two circumstances in 2013 regardless of what happens with the fiscal cliff:

1) Medical FSA contribution limits were reduced from $5K annually, to $2,500. So, it doesn't matter how much money you make, if you were contributing above $2,500 in 2012, you will be hit with higher taxes in 2013 because of the reduced amount you can contribute.

2) A medicare surcharge of 0.9% for all income over $200K.

Both of these are a result of Obamacare. Both effect people making less than $250K.

Seriously? Who the fuck thinks that 2.5k less on FSA is going to make the damn bit of difference? 0.000000000000000000000000000000000000000000000000000000000000000000000000001%?

Your average person doesn't even know what an FSA is, much less take advantage of it - and to rich people that liberals always want to jump in the pockets of that is a rain drop in a 2 ton bucket.

 

[cybrsage]

All of it applies to American citizens, so yeah. And you? Where/who are you?

A rich guy stole his mom from his dad and now he hates everyone who is rich...or at least he acts like that happened. Another possible theory is that he is just batshit insane.

 

[cybrsage]

First off, everyone needs to know that taxes will be raised under two circumstances in 2013 regardless of what happens with the fiscal cliff:

1) Medical FSA contribution limits were reduced from $5K annually, to $2,500. So, it doesn't matter how much money you make, if you were contributing above $2,500 in 2012, you will be hit with higher taxes in 2013 because of the reduced amount you can contribute.

2) A medicare surcharge of 0.9% for all income over $200K.

Both of these are a result of Obamacare. Both effect people making less than $250K.

Liar, Obama promised not to raise taxes on the non-rich...therefor it did not happen.

 

[Lemon law]

No one is mention the fact that the GWB era tax cuts are automatically expiring on 1/1/2013. Therefore everyone will pay higher tax rates in every tax bracket. The democrats offer to extend those tax cuts up to incomes of $250,000 and the republicans fight tooth and nail to to keep those tax cuts in place for those making up to a Million/yr. And if no fiscal cliff deal is reached by 12/31/2012, neither side will get their way, as ALL WILL pay higher tax rates.

Nor is that the only fiscal cliff danger, because huge Federal spending cuts will be required in both military and social program spending.

Cuts so large that its likely to throw our fragile US economy into a steep recession or depression. And then the problem becomes, as the size of the USA economic output becomes much smaller, so do incoming taxes. As we should further note, the Clinton economy that balanced the US budget did so at higher pre GWB tax rates.

As our real problem, IMHO, is that too large of a share of national wealth is concentrating in too few hands. Leaving everyone else less fortunate earning less and therefore spending less. As the generous tax deductions now allow corporations earning in the billions/yr, to pay no taxes at all.

 

[classy]

All the talk of tax rates is really irrelevant. The problem with our tax code has been the loop holes. And until they are addressed, the talk of taxes is really just fluff. The tax loop holes, shelters, etc really is the problem. When a business or person who makes a million dollars, have an effective true tax rate in many cases less than 10%, there is a problem. I don't believe 250K makes a family rich though. I believe 350K or more puts a family or business in a different light. I also think the small business argument is a bunch of nonsense as well.

 

[ShintaiDK]

Progressive tax system with fixed loopholes. Thats the way forward.

Right now the US is closer to, if not already, a regressive tax system. And thats directly crazy.

 

[shady28]

...
As our real problem, IMHO, is that too large of a share of national wealth is concentrating in too few hands. Leaving everyone else less fortunate earning less and therefore spending less. As the generous tax deductions now allow corporations earning in the billions/yr, to pay no taxes at all.

This is really the only thing that matters and is true.

The problem here is that the people that wealth is concentrating to do not make 250k/yr.

Think about it. Two successful engineers can easily make 250k/yr. A union card toting airline pilot and a doctor can make that. Heck, a Teamster driving a crane in the port of LA or Long Beach can pull down 200k/yr all by him/her self.

So you're going to stick it to the most successful of the middle class.

And that "average CEO makes 400x the average worker" is a LIE.

The 400X number comes from the FORTUNE 500 COMPANIES. Limit it to the largest 500 companies in the world, and yes they average ~20 mil / yr to run the 500 largest companies on the planet.


And you know what? Increasing the rate won't do jack crap to those people. The only way to stop what they are doing is to close the loopholes.

The real problem is that neither democrat nor republican politicians are talking about that, nor are they planning to do any such thing. Instead, they're going to target successful upper middle class professionals and small business owners, ie the people in that 200k - 500k range.

I actually would not have an issue with significantly high tax rates on the TRUE ultra-rich. The problem as I noted is that it would do nothing. When people who make 50 Mil/yr only pay a 10% tax rate, clearly the rate isn't working anyway, so the Dems idea is to raise the tax rate to 39% on people who make 250k??

Fix the loop holes FIRST.

 

[silverpig]

Thank you, yes that makes sense, otherwise it would be nuts.

I still like my smooth rate increase concept rather than the quantum leap system they have. Would it be all that hard for people to understand?

A smooth rate system would be hard to calculate. You couldn't get your average Joe to do it on paper unless there was a giant table that came along with your tax forms that said something like:


Take your taxable income from part A and multiply by your tax rate listed below:

Income | tax rate
<$20k 0%
20,100 0.1%
20,200 0.2%
...
22,000 2.0%
22,100 2.1%
...
etc

 

[ShintaiDK]

The problem here is that the people that wealth is concentrating to do not make 250k/yr.

Think about it. Two successful engineers can easily make 250k/yr. A union card toting airline pilot and a doctor can make that. Heck, a Teamster driving a crane in the port of LA or Long Beach can pull down 200k/yr all by him/her self.

So you're going to stick it to the most successful of the middle class.

I assume they still pay a lower tax for everything under 250K? Then the effect is rather minimal until you get quite abit higher.

 

[shady28]

I assume they still pay a lower tax for everything under 250K? Then the effect is rather minimal until you get quite abit higher.

Why do it at that range in the first place?

I mean, if the logic is to stick it to the ultra-rich, why not stick it to them. Why piss around even with people who make 300, 400, 500k? ESPECIALLY when we already know that the rate has little to no effect on people who really make a lot - like 2, 5, 10 mil /yr.

As I said, because you can't. Joe six pack can't even identify the issue, much less have anything constructive to input into it. It reminds me of the LA riots. The middle class is rioting so it mugs its own, because it's completely unable to even identify what / who is making things the way they are. Meanwhile the real ultra-rich sit on the side and snicker.

 

[werepossum]

Places that have expensive standards of living (IE: Expensive California cities, New York, Chicago, etc) yet the lowest average salary are hilarious. It's the general acceptance of failure that has occurred in this nation. We were once an ever expanding nation because of people who realized they wanted a better life. Now we are stuck in our major cities... leaving the rural one's to stay at the level they are at instead of nationally expanding - creating more jobs - creating more infrastructure - creating more interest - thriving the economy.

It's funny, our entire country was made on the premise of packing up your shit to go find a better life. Due to the programs we have, people are now mighty comfy that someone else will take care of them. If they don't take care of them - keep bitchin' - you will eventually get it.

I'm sure part of this is our expanded safety net - the better the safety net, the more people see it as a hammock. But another big part is our loss in manufacturing jobs, many of which were suitable for virtually anyone in good health regardless of education and often directly rewarded according to work volume. The fewer such jobs exist, the less there is reason to move.

Seriously? Who the fuck thinks that 2.5k less on FSA is going to make the damn bit of difference? 0.000000000000000000000000000000000000000000000000000000000000000000000000001%?

Your average person doesn't even know what an FSA is, much less take advantage of it - and to rich people that liberals always want to jump in the pockets of that is a rain drop in a 2 ton bucket.

Um, approximately six million workers have Flexible Spending Accounts. It was about 8 million when Obama took office, but he's been chipping away at it, plus with fewer jobs there are fewer FSAs and some with FSAs have been cut back to lesser insurance. Still, six million American workers is nothing to sneeze at. My own small company has Health Savings Accounts, a cheaper version of FSAs but one where my contributions don't disappear at the end of the year. Obamacare raised my deductible from $2,400 to $3,400 in one year. This is all part of driving primary private insurance out of existence so that we can all enjoy being on Medicaid/Medicare.

 

[ShintaiDK]

Why do it at that range in the first place?

I mean, if the logic is to stick it to the ultra-rich, why not stick it to them. Why piss around even with people who make 300, 400, 500k? ESPECIALLY when we already know that the rate has little to no effect on people who really make a lot - like 2, 5, 10 mil /yr.

As I said, because you can't. Joe six pack can't even identify the issue, much less have anything constructive to input into it. It reminds me of the LA riots. The middle class is rioting so it mugs its own, because it's completely unable to even identify what / who is making things the way they are. Meanwhile the real ultra-rich sit on the side and snicker.

People making 300-500K are rich in my view.

In Denmark we have something we call toptax in our progressive system. Its around the 81K$ mark and alot of people pay toptax to put it mildly. But its not the big issue as you portrait it. Because you have to remember that for the entire income below, you dont pay it. So the effective taxrate aint changed much until you start to essentially earn ridicious amount of money.

Also how many american families even earn above 250K? Not that many.

Back in the 40s and 50s and early 60s. the US tax system actually had a system against money hoarding and the crazy wages. There was up to some 90% top tax. The economy in the US was blooming back then. After it was removed, what happend? Downturn and a more unequal society started to emerge. managers and directors etc increased the wage differences between themselves and the employees with over 30x. Everytime that happens its the man on the floor that loses. the result today is that 400 americans sit on the same wealth as the rest of the 300million. That means they are 750000 times more wealthy than the average of the rest. And its destroying the economy and society.

The same applies for corporate money hoarding that aint released into productive investments. Apples huge cashpile for example is invested in a hedgefund that is directly damaging to regular people.

Another example would be this, 2000 to 2006 was a booming time. Yet barely any americans benefitted from it. However those that did really took their slice of the cake.