"Going John Galt" To Avoid Higher Taxes

[BPSCG]

President Barack Obama's tax proposal -- which promises to increase taxes for those families with incomes of $250,000 or more -- has some Americans brainstorming ways to decrease their pay in an attempt to avoid paying higher taxes on every dollar they earn over the quarter million dollar mark.

A 63-year-old attorney based in Lafayette, La., who asked not to be named, told ABCNews.com that she plans to cut back on her business to get her annual income under the quarter million mark should the Obama tax plan be passed by Congress and become law.

"We are going to try to figure out how to make our income $249,999.00," she said.

"We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan," she added. "Why kill yourself working if you're going to give it all away to people who aren't working as hard?"
Link (http://abcnews.go.com/Business/Economy/story?id=6975547&page=1).

The phenomenon has a name - "Going John Galt (http://drhelen.blogspot.com/2008/10/going-john-galt.html)."

[joobz]

Link (http://abcnews.go.com/Business/Economy/story?id=6975547&page=1).

The phenomenon has a name - "Going John Galt (http://drhelen.blogspot.com/2008/10/going-john-galt.html)."
So, this person will cut back their earnings to under 250k, because they'd be taxed more on what they make over 250k? That sounds....dumb.

[Jeff Corey]

A CPA explained various plans could place caps on deductions for big items like mortgage interest or state income taxes for families making over $250,000.

[rwguinn]

So, this person will cut back their earnings to under 250k, because they'd be taxed more on what they make over 250k? That sounds....dumb.
It's like this:
Taxes on 249K =$50000 (approx)
Taxes on 250K= $70000 (WAG)
$1000 in income costs you $20000. (The reason for the big drop is loos of deductions--e.g., this year I lost the college expense, Student loan, and IRA deductions because of a 20K raise--and my taxes doubled from 2007)
You becha I quit then.
Many engineers (age 65+) do this when they are on Soc. Security. They contract out till they earn the limit where Soc. Sec. starts dropping off

[joobz]

A CPA explained various plans could place caps on deductions for big items like mortgage interest or state income taxes for families making over $250,000.
Which makes sense, but I didn't think that was the plan. I thought Obama was raising the >250k rate.

[BPSCG]

So, this person will cut back their earnings to under 250k, because they'd be taxed more on what they make over 250k? That sounds....dumb.Well, if half of every dollar you make above $250,000 goes to the government (between federal and state income taxes and Social Security/Medicare taxes), you might decide you don't want to work for half pay any more.

I'm not a tax expert, but what would happen in the example of the dentist on the first page of the linked story? She's probably incorporated. So her practice pays taxes, and she pays 50% of her salary above $250,000 in taxes also. At some point, maybe she just decides the additional tax burden isn't worth working ten-hour days any more, and she'd rather have more free time.

Question: Remember the Alternative Minimum Tax? The idea (back in the 1970s, IIRC) was to make sure that about a half-dozen millionaires who somehow managed to legally escape paying any federal income tax at all paid their fair share.

The problem with the AMT was that it wasn't indexed. People's salaries increased over the years, but the AMT table wasn't adjusted for inflation. As a result, more and more people got caught up in the AMT, until a tax law that was supposed to catch a very small number of people was hitting millions of people.

Obama's tax hike is only supposed to be on people making over $250,000. Is that $250,000 indexed? Or will millions of two-earner households be paying his higher tax rate ten years from now?

[geni]

So, this person will cut back their earnings to under 250k, because they'd be taxed more on what they make over 250k? That sounds....dumb.

Depends how you cut back. If it means cutting back on a couple of hours work a week then it may make sense if you feel you want more leasure time since the cost of giveing up those hours will have just gone down. However if you are actualy "brainstorming ways to decrease" your pay then it probably isn't worthwhile.

[Travis]

Isn't sabotaging your own productivity out of a spiteful hate of taxes kinda.....counter-productive? Wouldn't it be much more constructive to use this as an incentive to earn even more?

[quixotecoyote]

It's like this:
Taxes on 249K =$50000 (approx)
Taxes on 250K= $70000 (WAG)

Evidence?

[joobz]

Well, if half of every dollar you make above $250,000 goes to the government (between federal and state income taxes and Social Security/Medicare taxes), you might decide you don't want to work for half pay any more.

I'm not a tax expert, but what would happen in the example of the dentist on the first page of the linked story? She's probably incorporated. So her practice pays taxes, and she pays 50% of her salary above $250,000 in taxes also. At some point, maybe she just decides the additional tax burden isn't worth working ten-hour days any more, and she'd rather have more free time.
Sounds fine. having more free time, means more time to spend, maintaining/increasing the economy. Seems like a win-win to me.

Question: Remember the Alternative Minimum Tax? The idea (back in the 1970s, IIRC) was to make sure that about a half-dozen millionaires who somehow managed to legally escape paying any federal income tax at all paid their fair share.

The problem with the AMT was that it wasn't indexed. People's salaries increased over the years, but the AMT table wasn't adjusted for inflation. As a result, more and more people got caught up in the AMT, until a tax law that was supposed to catch a very small number of people was hitting millions of people.

Obama's tax hike is only supposed to be on people making over $250,000. Is that $250,000 indexed? Or will millions of two-earner households be paying his higher tax rate ten years from now?
I think that's a very good question. My guess is that it isn't indexed, but by the same token none of the tax brakets are, correct?

[joobz]

Depends how you cut back. If it means cutting back on a couple of hours work a week then it may make sense if you feel you want more leasure time since the cost of giveing up those hours will have just gone down. However if you are actualy "brainstorming ways to decrease" your pay then it probably isn't worthwhile.
You could also "cut back" but reinvesting into the business. This would save taxes, stimulate the economy....

[GStan]

It's like this:
Taxes on 249K =$50000 (approx)
Taxes on 250K= $70000 (WAG)
$1000 in income costs you $20000. (The reason for the big drop is loos of deductions--e.g., this year I lost the college expense, Student loan, and IRA deductions because of a 20K raise--and my taxes doubled from 2007)
You becha I quit then.
Many engineers (age 65+) do this when they are on Soc. Security. They contract out till they earn the limit where Soc. Sec. starts dropping off

I thought they removed these kinds of situations from the tax code. And that now you would pay something like this:
249K income = 50K taxes
250K income = 50K taxes on 249K plus X (increased rate) on additional 1K
Is this not correct? Does the tax code still have the kinds of anomalies rw is describing?

[rwguinn]

Evidence?
All I can give you is my own situation.
a 20K raise cost me 25k in taxes, mainly through loss of deductions.

[Magyar]

SO, let me get this straight a few greedy bast*rd who make 5 times the average income of US couple ( NOTE not a single person but the average income of a married couple) and almost 100% that he has been doing soe for decades is pissing and moaning that he has to step up to the plate and pay (is it really 50% ?) more taxes when the country is circling the toilet bowl? and I am supposed to feel sorry for you???

Now I can see this IF you are - have to admit a rather small percentage - one of those who is literally on the cusp. IF you wrok your but off you could clear $260-270 this year as opposed to passing on a few jobs adn having a cushie 30 hour week for the month of nov and Dec and maybe taking the holidays off. And if you can afford to do that, I am supposed to feel sorry for you? No this is not calss envy it's just that what I am hearing is the whinning of the privaliged and "let them eat cake BS"

Why is there NEVER any personal responsibility and sacrifice from the rich towards their nation - it's ALWAYS about what will happen to my mansion? Poor me they want to take away my lamouge when there is a world wide recession if not depression.


As I'm writting this a thought just came to me!

Maybe the republicans (might as well say that, they'll never give a dem credit for it)
FINALLY came up with an ACTUAL plan that makes the jelly mans trickle down theory work.

'Cause I am here to tell you that I and several sub-contractors I know will be MORE than HAPPY to take the work from any of these poor, abused and picked on people, in my industry, who have to suffer SO much from the fact that their business will make $250K PPOFIT. Otherwise SUCK IT, SHUT UP and quit WHINING.

[Magyar]

SO, let me get this straight a few greedy bast*rd who make 5 times the average income of US couple ( NOTE not a single person but the average income of a married couple) and almost 100% that he has been doing so for decades is pissing and moaning that he has to step up to the plate and pay (is it really 50% ?) more taxes when the country is circling the toilet bowl? While by every measure out there the averge worker has been losing money in real income for decades. and I am supposed to feel sorry for you???

Now I can see this IF you are - have to admit a rather small percentage - one of those who is literally on the cusp. IF you wrok your but off you could clear $260-270 this year as opposed to passing on a few jobs adn having a cushie 30 hour week for the month of nov and Dec and maybe taking the holidays off. And if you can afford to do that, I am supposed to feel sorry for you? No this is not calss envy it's just that what I am hearing is the whinning of the privaliged and "let them eat cake BS"

Why is there NEVER any personal responsibility and sacrifice from the rich towards their nation - it's ALWAYS about what will happen to my mansion? Poor me they want to take away my lamouge when there is a world wide recession if not depression.


As I'm writting this a thought just came to me!

Maybe the republicans (might as well say that, they'll never give a dem credit for it)
FINALLY came up with an ACTUAL plan that makes the jelly mans trickle down theory work.

'Cause I am here to tell you that I and several sub-contractors I know will be MORE than HAPPY to take the work from any of these poor, abused and picked on people, in my industry, who have to suffer SO much from the fact that their business will make $250K PPOFIT. Otherwise SUCK IT, SHUT UP and quit WHINING.

[quixotecoyote]

All I can give you is my own situation.
a 20K raise cost me 25k in taxes, mainly through loss of deductions.

I believe you.

My question is regarding 2 out of the 3 deduction losses you mentioned. Both the college expense and student loan deductions are meant to defray the cost of education for the less well off so they can afford to move up in/enter the workplace with a chance of advancement.

How is it you're already getting $20k raises while still claiming college expenses to the extent that losing the deduction puts you so far in the hole? I can think of a few scenarios, but they are generally back to school/post-bac situations where you're already making enough that it isn't worth quitting over.

[rwguinn]

I believe you.

My question is regarding 2 out of the 3 deduction losses you mentioned. Both the college expense and student loan deductions are meant to defray the cost of education for the less well off so they can afford to move up in/enter the workplace with a chance of advancement.

How is it you're already getting $20k raises while still claiming college expenses to the extent that losing the deduction puts you so far in the hole? I can think of a few scenarios, but they are generally back to school/post-bac situations where you're already making enough that it isn't worth quitting over.
I am putting a kid through school. Lots of us do that-- I make too much for him to get grants, Student loans are limited, and don't cover all of tuition and books. Since I don't want to make it totally painless for him, he will repay the loans he gets, but I will pay interest on them while he is in school.
Additionally, one of the things that happens is the "Floors" on health costs and non-reimbursed employee expenses go up, but my out-of-pocket expenses did not --so I lose a fair amount of those, also.

[Holler Hoojer]

I thought they removed these kinds of situations from the tax code. And that now you would pay something like this:
249K income = 50K taxes
250K income = 50K taxes on 249K plus X (increased rate) on additional 1K
Is this not correct? Does the tax code still have the kinds of anomalies rw is describing?

In general, that's correct. Wealthy people frequently have tax "shelters" that change their incremental tax rate, but I suspect the attorney is guilty of hyperbole.

[quixotecoyote]

I am putting a kid through school. Lots of us do that-- I make too much for him to get grants, Student loans are limited, and don't cover all of tuition and books. Since I don't want to make it totally painless for him, he will repay the loans he gets, but I will pay interest on them while he is in school.
Additionally, one of the things that happens is the "Floors" on health costs and non-reimbursed employee expenses go up, but my out-of-pocket expenses did not --so I lose a fair amount of those, also.

I get what you're saying, but I'm not sure the tax structure is supposed to focus of accommodating parents help their kids like that. I could be wrong. My parts helped me the first two years of college, but when I realized the expense to them, I covered the rest of it graduate school with loans and jobs.

I'm not sure parents should be those kinds of breaks to pay for children's college. Not sure they shouldn't either, but it's not something I've formed a strong opinion on.

[rwguinn]

I get what you're saying, but I'm not sure the tax structure is supposed to focus of accommodating parents help their kids like that. I could be wrong. My parts helped me the first two years of college, but when I realized the expense to them, I covered the rest of it graduate school with loans and jobs.

I'm not sure parents should be those kinds of breaks to pay for children's college. Not sure they shouldn't either, but it's not something I've formed a strong opinion on.
How else does it happen?
If tuition and books are $10K, plus living expenses, and the kid can only get $3000 in Student loans, How does that work?
The tax set-up is that he is a dependent until age 25 or he graduates college. He wanted to go independent and make it on his own--with essentially zero income, he was eligible for enough to cover everything, with work-study.
But the determination is from FASFA, which showed him as a dependent the year before, with my income being the basis for financial aid.
Lose-lose, all the way.

[Disbelief]

Why is there NEVER any personal responsibility and sacrifice from the rich towards their nation - it's ALWAYS about what will happen to my mansion? Poor me they want to take away my lamouge when there is a world wide recession if not depression.


How much sacrifice do you want? Doesn't the top 25% of earners pay over 75% of the total tax burden?

[toddjh]

I agree that it's dumb that a small increase in income should result in a larger (dollar-wise) increase in tax. However, I'm not at all convinced that that's actually the case here. I think it's more likely that we have a handful of vocal idiots who don't understand how taxes work, and a news agency who saw an opportunity to create interest with a fake controversy. I'd like to see someone back up the deduction argument with actual data before I accept it.

Doesn't the top 25% of earners pay over 75% of the total tax burden?

Even if that's true, it doesn't mean anything without knowing how much more that 25% segment makes, compared to the other 75%. A flat or even regressive tax could produce that result if the distribution of income is highly skewed.

[rwguinn]

I agree that it's dumb that a small increase in income should result in a larger (dollar-wise) increase in tax. However, I'm not at all convinced that that's actually the case here. I think it's more likely that we have a handful of vocal idiots who don't understand how taxes work, and a news agency who saw an opportunity to create interest with a fake controversy. I'd like to see someone back up the deduction argument with actual data before I accept it.



Even if that's true, it doesn't mean anything without knowing how much more that 25% segment makes, compared to the other 75%. A flat or even regressive tax could produce that result if the distribution of income is highly skewed.
I'm sure I could play some games with it and get the AGI down a bit to where it wasn't such a pain, and do it legally.
I also have to admit that the changed circumstances may be more complex that I think they are. But I can see that for some individuals, the situation can be as dramatic as or worse than my own. I'm having a professional look at it to see what I missed. It's hard to believe that this is true.

[toddjh]

I'm sure I could play some games with it and get the AGI down a bit to where it wasn't such a pain, and do it legally.
I also have to admit that the changed circumstances may be more complex that I think they are. But I can see that for some individuals, the situation can be as dramatic as or worse than my own. I'm having a professional look at it to see what I missed. It's hard to believe that this is true.

Well, maybe I've missed something, but all I see is one post citing a secondhand account of someone else speculating that the new tax rates could result in unspecified deduction problems.

I'm sure your difficulties are real (my wife faced similar problems), but...they already existed before Obama took office, didn't they? I'm still waiting to see some evidence that his proposals will cause the same kind of problem.

[dudalb]

At least they are not going Ragnar Dannsekjold.

[Disbelief]

Even if that's true, it doesn't mean anything without knowing how much more that 25% segment makes, compared to the other 75%. A flat or even regressive tax could produce that result if the distribution of income is highly skewed.

I don't have time to check all the stats, so I can only go on ballpark figures. But, the top 25% earned 65% of the cash and paid 83% of the taxes, with the higher up you go , the greater the discrepancy.

[ServiceSoon]

I don't make $250,000, but I still don't blame people who would cut back to reduce their tax burden. If working harder means paying a higher percentage of taxes then why work harder. Especially if you are making close to where that tax increase occurs.


Even if that's true, it doesn't mean anything without knowing how much more that 25% segment makes, compared to the other 75%. A flat or even regressive tax could produce that result if the distribution of income is highly skewed.The income is highly skewed between the top 5% and top 25% of income earners. That isn't the point of this discussion. The point is why should somebody give up a higher percentage of their time and labor because they make more money?

[toddjh]

I don't make $250,000, but I still don't blame people who would cut back to reduce their tax burden. If working harder means paying a higher percentage of taxes then why work harder. Especially if you are making close to where that tax increase occurs.

Because they still make more money?

The income is highly skewed between the top 5% and top 25% of income earners. That isn't the point of this discussion. The point is why should somebody give up a higher percentage of their time and labor because they make more money?

Because it represents less of a hardship to them, and the money goes a longer way. Unless you're advocating the complete elimination of all taxes, you'll have to face some variant of that question no matter what.

Also because the alternative results in an ever-increasing disparity of wealth in society. You may not have a problem with that, but I do.

[rwguinn]

Because they still make more money?


Because at some point, the return on the additional effort ceases to be attractive (Bad ROI)


Because it represents less of a hardship to them, and the money goes a longer way. Unless you're advocating the complete elimination of all taxes, you'll have to face some variant of that question no matter what.

Also because the alternative results in an ever-increasing disparity of wealth in society. You may not have a problem with that, but I do.
Not everyone is driven by greed.
Wealth is not taxed ($ in the bank this year cannot be taxed next year) (except things like real property--land, houses, etc)
Only the earnings on wealth are taxed

[Cavemonster]

Heck, I think this is great.

a) If people making over 250k are cutting back their business.
b) And there is actual demand for that business.
c) That lets those 1/4mill earners relax a little
d) Makes room in the market for new small businesses to fill the demand.
e) Spreads the wealth around.

I don't see this as a bad thing at all.

[jj]

Well I have to say that a substantial change in the marginal rate might create some willingness in me to have my spouse retire early...

[toddjh]

Because at some point, the return on the additional effort ceases to be attractive (Bad ROI)

That's assuming there's a strong correlation between income and effort. After a certain point, most extremely rich people make money through financial manipulation rather than actually producing or creating anything.

Anyway, it seems weird to me that people are freaking out about this now. They're acting like those making over $250,000 a year weren't taxed before. The U.S. has had a progressive tax scheme since the civil war. The marginal tax rate on high-income brackets under Reagan was way higher than what Obama's proposing.

Wealth is not taxed ($ in the bank this year cannot be taxed next year) (except things like real property--land, houses, etc) Only the earnings on wealth are taxed

Wealth generates income. Millionaires don't keep their money in a shoebox.

[BPSCG]

Anyway, it seems weird to me that people are freaking out about this now. They're acting like those making over $250,000 a year weren't taxed before. See my earlier question:

Obama's tax hike is only supposed to be on people making over $250,000. Is that $250,000 indexed? Or will millions of two-earner households be paying his higher tax rate ten years from now? I've been asking around (not only here), and haven't gotten an answer yet.

Because if that $250,000 isn't indexed for inflation, more and more people are going to be paying the higher rates every year. It would amount to a stealth tax increase on the middle class. There have been criticisms of Obama's economic plan that the tax increases on the wealthy - where "wealthy" means people making over $250,000 a year today - won't be enough to pay for it all. But if, over the years, inflation has the effect of defining "wealthy" down, then the middle class starts getting hit.

[toddjh]

See my earlier question:

I've been asking around (not only here), and haven't gotten an answer yet.

Because if that $250,000 isn't indexed for inflation, more and more people are going to be paying the higher rates every year.

I don't know. It's a fair question. But here's another fair question: when have tax rates gone untouched long enough for this to become an issue? The AMT is a good point, but marginal rates are usually fiddled with by every administration and congress. I find it unlikely that Obama's tax rates will go without revision long enough for this to have a major effect.

[Cavemonster]

See my earlier question:

I've been asking around (not only here), and haven't gotten an answer yet.

Because if that $250,000 isn't indexed for inflation, more and more people are going to be paying the higher rates every year. It would amount to a stealth tax increase on the middle class. There have been criticisms of Obama's economic plan that the tax increases on the wealthy - where "wealthy" means people making over $250,000 a year today - won't be enough to pay for it all. But if, over the years, inflation has the effect of defining "wealthy" down, then the middle class starts getting hit.

How long do you think it would take for 250k to become middle class? Whether or not this plan spells out adjustments, new tax plans are not a rarity, we're doing one now, Bush instituted tax cuts. Just about every new president adjusts taxes. So would 250k become middle class in less than 4years? Even less than 8?

[joobz]

Heck, I think this is great.

a) If people making over 250k are cutting back their business.
b) And there is actual demand for that business.
c) That lets those 1/4mill earners relax a little
d) Makes room in the market for new small businesses to fill the demand.
e) Spreads the wealth around.

I don't see this as a bad thing at all.
Coupled with the fact that more "downtime" from the business usually translates into increased personal spending, I can only assume that this will be good for the economy over all.


Now, we are making the implicit assumption that those who would "fill in" the demand are of equal skill and ability, which may not be the case.

[Magyar]

How much sacrifice do you want? Doesn't the top 25% of earners pay over 75% of the total tax burden?

Well, toddjh already kind of beat me to it. But I am not really interested in talking about percentages. That's a straw man the rich use to deflect the issue.

In real dollars 90% of the US workers and I'd say 100% of the lower middle class has been losing money/standard of living for the last 30 years by any REAL measure. The ONLY single solitary class that has been increasing their wealth is that top rank.
AND NO I don't buy the BS that it's due to hard work. If that were the case then the
"masters of the universe" wall street gang of a few years ago would have seen all this mess coming and done something about it.

While we could have a debate about how or why the really poor should or should not pay taxes. I say if the rich are the only ones whose standard of life and wealth increases then I don't have ANY problems having them PAY 100% of the taxes. ESPECIALLY when they do nothing for the rest of us - ala -cayman island bank accounts, investing in 3rd world dictatorships and sending jobs to sweatshops.


Since the jellybean man we have been fed the meme about If only we give to the rich they will invest and create jobs yadda yadda ya - there is ZERO proof of this. They've had a free ride, not it's time to pay the piper because the alternative is a slide towards Mexico and other 3rd world countries where the middle class vanishes, the few rich have to live in barrackaded compounds and the poor live in shanty towns a flavellas.

[Magyar]

I am putting a kid through school. Lots of us do that-- I make too much for him to get grants, Student loans are limited, and don't cover all of tuition and books. Since I don't want to make it totally painless for him, he will repay the loans he gets, but I will pay interest on them while he is in school.
Additionally, one of the things that happens is the "Floors" on health costs and non-reimbursed employee expenses go up, but my out-of-pocket expenses did not --so I lose a fair amount of those, also.

I can understand your pain and I am not doubting that there are/will be people who are going to be caught on the razors edge. BUT even there you are in a far better position to do something about it ala - turn the raise down if it is financially detrimental - hire a good tax accountant etc as opposed to say the single mom who is trying to better her self making 18 or 20K and because she gets a raise can no longer be eligible for wic or health care etc but is told to just stop being a lazy letch on society and do something.

[theprestige]

How interesting.

Magyar, it sounds like you're saying:
1. I should work harder than I already do (more hours, more days, whatever).
2. I should benefit less from the additional hard work I do, and you should benefit more.
3. If I disagree with 1 and 2, and instead prefer not to work harder; then I am evil and hateful and mean and greedy; also, then I am depriving you of benefits that you are entitled to.

Is that about right?

[rwguinn]

Damn. I didn't know that.
I attributed my increase in wealth and personal comfort as just reward for spending 80+ hours a week getting better and better at what I do, combined with lots of sacrifice on the part of myself and my parents 30 years ago so that I could get the education I needed to be productive.
Having to miss a lot of my son's 2nd and 4th grade years, as well as most of his senior year due to job transfers/lay-offs was absolutely no hardship at all:rolleyes:
Don't try to BS us who actually earn what we have. My father raised 4 kids on never more that $15000 a year, and we all went to college with his help.

[Walter Wayne]

How long do you think it would take for 250k to become middle class? Whether or not this plan spells out adjustments, new tax plans are not a rarity, we're doing one now, Bush instituted tax cuts. Just about every new president adjusts taxes. So would 250k become middle class in less than 4years? Even less than 8?
The beauty of compount inflation. At 3%/year, in 4 years 220k would be become 250k, or in 8 years you can turn 200k into 250k. Of course right now, salleries are probably going to remain low. 200k may not be middle class, but it's not 250k by a long shot.

In Canada, we used to have a rule that if inflation was below a certain percentage, that didn;t recalculate the tax bracket. This saves a bunch of money for the government, but the result was that after a few years of low inflation new university grads were getting jobs at close to the top tax bracket.

Walt

[BPSCG]

I don't know. It's a fair question. But here's another fair question: when have tax rates gone untouched long enough for this to become an issue? The AMT is a good point, but marginal rates are usually fiddled with by every administration and congress. I find it unlikely that Obama's tax rates will go without revision long enough for this to have a major effect.

How long do you think it would take for 250k to become middle class? Whether or not this plan spells out adjustments, new tax plans are not a rarity, we're doing one now, Bush instituted tax cuts. Just about every new president adjusts taxes. So would 250k become middle class in less than 4years? Even less than 8?You're both saying pretty much the same thing: "Oh, don't worry,they'll adjust the tax rates so it continues to soak only the rich."

There are two problems with this reasoning:

1) The AMT, after all the criticism, is still not indexed for inflation;
2) Obama wants to introduce nationalized health care. The cost will be staggering. There is no way he'll be able to pay for that and the stimulus and the bank bailout and the mega-insurance companies bailout and the Detroit bailout and the defaulting homeowners bailout without keeping taxes high.

But he would have you believe we're going to pay for all this by just raising the taxes a little bit on the top 5% of all earners. I'd insert the laughing dog here, but this is no laughing matter.

[toddjh]

You're both saying pretty much the same thing: "Oh, don't worry,they'll adjust the tax rates so it continues to soak only the rich."

No, that's not what I'm saying. It's entirely possible Obama intends a "stealth" tax increase. If it's really going to be used to move toward universal healthcare like the rest of the civilized world, then I say it's an experiment worth trying. I'm on the fence regarding universal healthcare, but I do think it's an option that should be explored.

What I was saying is that, even if Obama doesn't intend to modify the tax brackets, he has at most 8 years to do it his way, and there's a limited amount he can do in that timeframe. Not no amount, but a limited amount. The sky is not falling. Some other president will do his own kind of fiddling in 2013 or 2017.

[Cavemonster]

BPSG
I think there's a problem in considering the bailouts as all long term costs. They are loans or buyouts, and over the period of time that 250k would become middle class either a certain chunk of that money will come back, or a big chunk of those businesses will fail leading to a deflationary environment where even less people are making 250k and we've all got worse economic problems to worry about.

As for nationalized health care, we already pay more per citizen on health care costs to the government than most countries that do have nationalized health care. So if our nationalization costs are "staggering" it's due to more poor management, not the act of nationalization.

[joobz]

The cost will be staggering.
The cost of health care is already staggering. the current insurance scheme is not sustainable.

[ZirconBlue]

You know, I've read Atlas Shrugged, but I don't remember the part where John Galt (or anyone else) fiddles with their income to avoid paying taxes. If they really wanted to "go John Galt", they should go hide in a Rocky Mountain retreat for a few years.

[Magyar]

How interesting.

Magyar, it sounds like you're saying:
1. I should work harder than I already do (more hours, more days, whatever).
2. I should benefit less from the additional hard work I do, and you should benefit more.
3. If I disagree with 1 and 2, and instead prefer not to work harder; then I am evil and hateful and mean and greedy; also, then I am depriving you of benefits that you are entitled to.

Is that about right?


Wow, either you are reading some else's post or I was WAY unclear.
If you're of the taxes is thievery, I consider that woo and we really have nothing to talk about. Taxes are, well lets say a necessary evil, for our society to exist and to allow you and your parents to have been able to work hard. Thus you gain more benefits from it so you should pay more for it. Yea I know sounds like each according to his need, trouble with that is that EVEN Adams (not Marx) saw this as a necessity or at least a possibility.


Now for your list,

1) NO, You should work EXACTLY as much or as little as you like! I worked in the tech industry through the 80's and 90's and like you did 70-80 hour weeks to rake in the bucks.
After my son was born I decided that being a father who was actually around was more important than the extra $70-80K I could make. we had to adjust to the consequences of that. You seem an intelligent person, you make what ever decision you deem best for you, but live with the consequences.

2) welcome to a free society where taxation is part of the way a country stays free and pays for infrastructure. When and IF you can show any benefit other than lining your pocket more than the rest of society for giving the wealthy more than any one else I am all ears --- ;
There are literally dozens of books I am aware of that have documented in detail how radically the US tax system is skewed towards the wealthy. I am sure that there are dozens more I've never heard of. The ONLY rebuttal I've heard from the tax the rich LESS crowd on this is some old lame 2 part answer
1-trickle down
2-class warfare blah blah
SO when you have ACTUAL REAL evidence that the rich ACTUALLY pay more you MAY have an issue but I doubt it.

3) strawman - I never said you shouldn't work harder See answer to 1)
I didn't say I am entitled. I said that if you are so upset about the extra money you make/get taxed above 250 there are plenty of people who are willing to do the work.
This was re the OP who claimed that he will work less.(his personal choice no one is forcing him)

you are "evil and greedy" well I don't really think so, but you are being dishonest because you make it sound like this dilemma of making above or below a certain amount and how it affects your tax burden is somehow unique to the rich and is some kind of conspiracy against the rich and that is a LIE! Every person who has a tax burden around the next step up in the tax table deals with this. from the guy working at the local gas station to the CEO.

[Beerina]

At least they are not going Ragnar Dannsekjold.

:)

[joobz]

You know, I've read Atlas Shrugged, but I don't remember the part where John Galt (or anyone else) fiddles with their income to avoid paying taxes. If they really wanted to "go John Galt", they should go hide in a Rocky Mountain retreat for a few years.
That was the part where she lost me in the book.
In order for her Utopia to work, they had to have an unlimited source of energy.

[Cavemonster]

The beauty of compount inflation. At 3%/year, in 4 years 220k would be become 250k, or in 8 years you can turn 200k into 250k. Of course right now, salleries are probably going to remain low. 200k may not be middle class, but it's not 250k by a long shot.

In Canada, we used to have a rule that if inflation was below a certain percentage, that didn;t recalculate the tax bracket. This saves a bunch of money for the government, but the result was that after a few years of low inflation new university grads were getting jobs at close to the top tax bracket.

Walt

So longer than 8 years for 250k to be near the middle class? And again that's expecting 3% inflation at a time when a slowing economy could create deflation. If in 8 years, the next president doesn't readjust taxes, then he/she'll be pretty unique.

[TragicMonkey]

I'd be happy to switch salaries with the lady, if she's that unsatisfied with her tax burden.

[Metullus]

This has actually caused us to restructure our business - we don't know what will be coming down the road so we have to build flexibility into our plans. One partnership is becoming three, two of which will be contracting for work with the third. We will likely be adjusting our billing rates on a quarterly basis (instead of annually) so that the likely tax consequences will not impact the partners' after-tax net. Our clients will be shouldering the tax burden and not us. Given that the majority of our clients are public agencies I am not certain what the net benefit to the government any tax increase will be in our case. It is yet another make-work program for CPAs.

Interesting note: In the period since my strokes curtailed my ability to work my after tax net per hour billed has increased by more than 16% (adjusted for rate increases).

[balrog666]

Avoiding excessive taxation is a necessary aspect of any modern business plan.

[Skeptic]

I've got the perfect solution.

Send me all your spare money.

You'll make less than $250,000 a year, I'll gladly pay all the taxes on the extra money, the government gets paid the same amount, everybody's happy.

[Damien Evans]

It's like this:
Taxes on 249K =$50000 (approx)
Taxes on 250K= $70000 (WAG)
$1000 in income costs you $20000. (The reason for the big drop is loos of deductions--e.g., this year I lost the college expense, Student loan, and IRA deductions because of a 20K raise--and my taxes doubled from 2007)
You becha I quit then.
Many engineers (age 65+) do this when they are on Soc. Security. They contract out till they earn the limit where Soc. Sec. starts dropping off

Wrong. The tax only applies to your earnings above 250K, so the difference between 249 and 250K will be at most a couple hundred bucks.

[rwguinn]

Wrong. The tax only applies to your earnings above 250K, so the difference between 249 and 250K will be at most a couple hundred bucks.
Please learn to read.
LOSS OF DEDUCTIONS is the key phrase, there.
"You are too rich to get these deductions that you used to get"

[Travis]

Suppose someone stood to make $1million but so hated the idea of 50% of the 250k+ earnings going to taxes that will help the "little people" that they take the paycut to $249k. They are actually losing out on $300k+ but they think its a necessary sacrifice to keep the "little people" down in their place.

What do we call such a person?

Because my friend up in Reno just told me over the phone that that's what he'd do if he were in that position. Of course this friend is also stockpiling a bunker with weapons and food because he wants to be a despotic ruler if Armageddon ever comes.

[theprestige]

Travis, what if such a person was deeply suspicious of the premise that giving the government a lot of money translates into a lot of help for the "little people", and wished very strongly to avoid participating in and enabling what they perceived to be a deeply broken system?

[balrog666]

Suppose someone stood to make $1million but so hated the idea of 50% of the 250k+ earnings going to taxes that will help the "little people" that they take the paycut to $249k. They are actually losing out on $300k+ but they think its a necessary sacrifice to keep the "little people" down in their place.

What do we call such a person?

Because my friend up in Reno just told me over the phone that that's what he'd do if he were in that position. Of course this friend is also stockpiling a bunker with weapons and food because he wants to be a despotic ruler if Armageddon ever comes.


The "little people" can stand in line for their unearned beans and bread behind everyone I value and love! Let's see how far I can spread it before it goes bad. Any guesses on how far that will go? :p

[balrog666]

Travis, what if such a person was deeply suspicious of the premise that giving the government a lot of money translates into a lot of help for the "little people", and wished very strongly to avoid participating in and enabling what they perceived to be a deeply broken system?


Well said!

[Random]

You're both saying pretty much the same thing: "Oh, don't worry,they'll adjust the tax rates so it continues to soak only the rich."

There are two problems with this reasoning:

1) The AMT, after all the criticism, is still not indexed for inflation;
The GOP has proven to be highly resistant to adjusting the AMT for inflation. They want it removed outright, but if middle-class Americans are no longer threatened by it, the GOP loses its main talking point.

2) Obama wants to introduce nationalized health care. The cost will be staggering. There is no way he'll be able to pay for that and the stimulus and the bank bailout and the mega-insurance companies bailout and the Detroit bailout and the defaulting homeowners bailout without keeping taxes high.

Taxes may have to go up to support a Universal Healtcare system. But if I pay 10% of my income for health insurance and 25% to taxes, and Obama can change that to 30% taxes and "free" universal healthcare, is that really a bad thing for me?

[quixotecoyote]

Please learn to read.
LOSS OF DEDUCTIONS is the key phrase, there.
"You are too rich to get these deductions that you used to get"

What income level based deductions are people still getting at $249k?

[joobz]

Well said!
Not really, because what if a person is deeply suspicious of the premise that a free market will provide the greatest opportunity for a everyone to realize thier full potential and won't be corrupted into a class based society where one must be born into success to be successful.

[Cavemonster]

Not really, because what if a person is deeply suspicious of the premise that a free market will provide the greatest opportunity for a everyone to realize thier full potential and won't be corrupted into a class based society where one must be born into success to be successful.

I very much agree with the sentiment, but expressed like that it falls down with a list of successful people who began life in poverty, and it would be a long list.

I'd think it more accurate to say that economic success correlates more strongly in general with factors outside an individual's control than it does with hard work and talent.

[quixotecoyote]

I very much agree with the sentiment, but expressed like that it falls down with a list of successful people who began life in poverty, and it would be a long list.

I'd think it more accurate to say that economic success correlates more strongly in general with factors outside an individual's control than it does with hard work and talent.

You might say that factors within one's control are often necessary but not sufficient.

[rwguinn]

What income level based deductions are people still getting at $249k?
Good point. Not having reached that lofty goal, I dunno.
I do know that IRA goes away at 108K AGI, and college costs at about 20K or so above that...

[joobz]

I very much agree with the sentiment, but expressed like that it falls down with a list of successful people who began life in poverty, and it would be a long list.

I'd think it more accurate to say that economic success correlates more strongly in general with factors outside an individual's control than it does with hard work and talent.
Yes. I was simply demonstrating that the oversimplification of the anti-government view is as silly as the free market view. Both are open to abuse.

[Jeff Corey]

I agree. The factors might include being born into at middle class family with stable employment and a shot at going to college, for the first time in the family history. Or being a Bush or Kennedy with a lot of free rides. As opposed to my friend Elwood Goodson, who had to fight his way up to make his way.

[Jeff Corey]

What income level based deductions are people still getting at $249k?

In NY, NYS income tax is deductable from federal tax.. Not income based, but correlated with income, property or real estate tax is too. As is the deduction for interest on the mortgage on your $200,00 castle, moat included. A wild guess - $33,851.

[Dr Adequate]

The phenomenon has a name - "Going John Galt (http://drhelen.blogspot.com/2008/10/going-john-galt.html)." Well, let us know when society collapses for want of lawyers.

[Wowbagger]

Who is John Galt?
(Forgive the obligatory inquiry.)

[jj]

Who is John Galt?
(Forgive the obligatory inquiry.)

Well, if you play Halley's 5th, I might be able to remember...

[kallsop]

SO, let me get this straight a few greedy bast*rd who make 5 times the average income of US couple ( NOTE not a single person but the average income of a married couple) and almost 100% that he has been doing soe for decades is pissing and moaning that he has to step up to the plate and pay (is it really 50% ?) more taxes when the country is circling the toilet bowl? and I am supposed to feel sorry for you???



Will you feel the same way when those rich greedy bast*rds cut back and stop hiring, lay off a few? The Obama tax policy is all about his vision of "fairness", not about sound economic policy. Obama stated in the election campaign that raising taxes on the wealthy will harm the economy, but he'll do it anyway. How's that for a plan?

Obama is shifting the tax burden from where it is now, about 38% of wage earners pay no federal tax, up to around 50%. I think the bigger picture is that the fewer and fewer who are carrying the load of paying for Obama's spending binge and divisive tax structure understand that the quickest way out of the mess is to stop spending and make this a one term presidency. I was thinking of buying a new car but have come to the light and will wait a few more years. My other big ticket spending plans are on a firm hold. Obama can spend all he wants, it just won't be from my pocket. I think that's the attitude that is driving the $250K/year folks to cut back. By the way, I'm not $250K/year rich but have no hatred of those "rich bast*rds" of which you speak. I won't go as far as tax cheats like Geithner, although if I knew there would be no penalties and a promotion...

Economic SwindleUS '09 - New Bad Deal identifies the start of the Obama Depression.

[Dr Adequate]

Will you feel the same way when those rich greedy bast*rds cut back and stop hiring, lay off a few? The Obama tax policy is all about his vision of "fairness", not about sound economic policy. Obama stated in the election campaign that raising taxes on the wealthy will harm the economy, but he'll do it anyway. Quote, please?

Obama is shifting the tax burden from where it is now, about 38% of wage earners pay no federal tax, up to around 50%. I think the bigger picture is that the fewer and fewer who are carrying the load of paying for Obama's spending binge and divisive tax structure understand that the quickest way out of the mess is to stop spending and make this a one term presidency. I was thinking of buying a new car but have come to the light and will wait a few more years. My other big ticket spending plans are on a firm hold. I take it you'll still be spending on the essentials, such as cyanide and Kool-Aid?

Economic SwindleUS '09 - New Bad Deal identifies the start of the Obama Depression. Wow, we went from one depression to another without any recovery in between.

[NewtonTrino]

Things like ROTH ira's etc. drop off pretty quickly. I find pretty much the only deduction I qualify for is the mortgage interest one. Pretty much everything else is phased out by my level. So there are definitely discontinuities in the tax curve in places due to this stuff.

[KoihimeNakamura]

Just some quick comments before I have to leave work

1) Obama has said no UHC. It seems he might expand Medicare a little, but it'll be too little to do much

2) I know rguinn's pain well. I'm living on my own, but I am still (thanks FASFA) considered a dependent by them... even though I filed for myself this year.

3) A lot of those "50%" are like me and make less than lower middle class a year (I'm firmly in the 'poor' bracket)

[politas]

"We are going to try to figure out how to make our income $249,999.00," she said.

"We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan," she added. "Why kill yourself working if you're going to give it all away to people who aren't working as hard?"

Link (http://abcnews.go.com/Business/Economy/story?id=6975547&page=1).

The phenomenon has a name - "Going John Galt (http://drhelen.blogspot.com/2008/10/going-john-galt.html)."Sounds to me like this person is planning to spread the wealth in a different way. If they reduce their income to stay under $250,000, some other dentist, presumably one who is currently earning less, will pick up the business.

Personally, I think that any tax plan which encourages people earning such absurdly large incomes to voluntarily reduce their income is a good one.

[Random]

Obama is shifting the tax burden from where it is now, about 38% of wage earners pay no federal tax, up to around 50%.

This is just wrong. Leaving aside issues of state sales taxes, gas taxes, and other point of sale fees which people can't get out of if they tried, there is also the issue of payroll taxes, which disproportionally affect lower-income workers. There are a lot of workers who pay more in payroll taxes than they pay in federal income taxes, but this fact is left out of GOP squawking points. Perhaps you thought you had it covered with "federal tax", but you were not specific enough.

Secondly, as far as "dispropotionate income tax" whining goes, I usually stop caring about the whining of the rich when I look at what portion of the money they made. Wow, the top 50% of Americans paid 95% of all the income taxes! That sounds scary until you realize that they made 87% of the money. Factor in payroll taxes which fall primarily on the poor and you find that we effectively have a flat tax.

[Damien Evans]

Please learn to read.
LOSS OF DEDUCTIONS is the key phrase, there.
"You are too rich to get these deductions that you used to get"

I learned to read many years ago. I read Tolkien for breakfast. The fault was not mine. You said the Tax difference was 20,000 dollars, then you started talking about deductions. Your taxes did not change by 20,000 dollars from 249 to 250K. Your deductions did. Learn to write. And until you realise what you're actually writing, it might be smarter not to have a go at anyones reading comprehension.

[Damien Evans]

In NY, NYS income tax is deductable from federal tax.. Not income based, but correlated with income, property or real estate tax is too. As is the deduction for interest on the mortgage on your $200,00 castle, moat included. A wild guess - $33,851.

That's a lot of money.

[Delvo]

Not really, because what if a person is deeply suspicious of the premise that a free market will provide the greatest opportunity for a everyone to realize thier full potential and won't be corrupted into a class based society where one must be born into success to be successful.Then THAT person would be logically consistent and honest in handing over lots of money to the government. But that wouldn't have any relevance to the person whose description you were responding to (who doesn't think that sending money to the government helps "little people"). That other person's different premise leads to different perfectly logical actions, so then minimizing the amount of money sent to the government is still consistent and honest. You did not counter that person's decision; you just provided another premise by which some other person would have arrived at a different one.

Obama has said no UHC.He's kept saying repeatedly that he DOES want it. I haven't heard him contradict himself about that once, but if he has, that's still not very convincing of the idea that he won't do it (or try to).

[politas]

In NY, NYS income tax is deductable from federal tax.. Not income based, but correlated with income, property or real estate tax is too. As is the deduction for interest on the mortgage on your $200,00 castle, moat included. A wild guess - $33,851.

And does that deduction suddenly become unavailable when a person's salary goes over $250,000? Or at any income level, for that matter? If not, then it is irrelevant to the question.

What income based deductions are you still receiving at $249,000 income, which are lost at $250,000?

And for that matter, what kind of messed up system do you Americans have that makes deductions just disappear suddenly, rather than reducing gradually as income increases, so that an increase in income always gives you more after-tax money? You can't blame OBama's proposed tax increase on over $250,000 income earners for that bit of messed-up legislation.

[TragicMonkey]

Perhaps the thinking is that people making above a certain amount of money don't need deductions as badly as people making less? There's got to be a line somewhere. I don't think Oprah and my parents need to write off their mortgage interest equally badly. (As for me, I don't even make enough money to buy a house to begin with, so ironically I'm too poor to deduct anything at all. Except the whopping $200 interest on my student loan.)

[politas]

Perhaps the thinking is that people making above a certain amount of money don't need deductions as badly as people making less? There's got to be a line somewhere. I don't think Oprah and my parents need to write off their mortgage interest equally badly. (As for me, I don't even make enough money to buy a house to begin with, so ironically I'm too poor to deduct anything at all. Except the whopping $200 interest on my student loan.)Well, that is certainly the rational for having certain deductions limited to particular income ranges.

Now, in Australia, the amount able to be deducted for such things (or the amount rebated for rebates) is reduced gradually as income rises, with the calculation carefully geared so that earning an extra dollar in income never causes your after tax income to decrease.

[rwguinn]

Someone lend me something to wipe the egg off my face, please?
1. Read the instructions
2. 1099 != W2
3. outgo != Income
4 Hire somebody who knows what he's doing
5 READ THE INSTRUCTIONS
I blew it, OK?

[Jeff Corey]

And does that deduction suddenly become unavailable when a person's salary goes over $250,000? Or at any income level, for that matter? If not, then it is irrelevant to the question.

What income based deductions are you still receiving at $249,000 income, which are lost at $250,000?

And for that matter, what kind of messed up system do you Americans have that makes deductions just disappear suddenly, rather than reducing gradually as income increases, so that an increase in income always gives you more after-tax money? You can't blame OBama's proposed tax increase on over $250,000 income earners for that bit of messed-up legislation.

http://www.politico.com/news/stories/0209/19391.html

[Hittman]

SO, let me get this straight a few greedy bast*rd who make 5 times the average income of US couple ( NOTE not a single person but the average income of a married couple) and almost 100% that he has been doing soe for decades is pissing and moaning that he has to step up to the plate and pay (is it really 50% ?) more taxes when the country is circling the toilet bowl? and I am supposed to feel sorry for you???

You don't have it straight. A hard working person who made a huge investment in education and a huge investment in building a business is trying to maximize their income under a stupid and inept tax code.

How long do you think it would take for 250k to become middle class?

Hard to say without knowing how bad the hyperinflation is going to be, or how long it will last. It could be as little as a year or two.

AND NO I don't buy the BS that it's due to hard work.

So you think you get to that income level by being lazy?

1) Obama has said no UHC. It seems he might expand Medicare a little, but it'll be too little to do much

And you believe him? He recently expanded SCHIP to redefine poverty as someone making $63k a year, all funded on the backs of tobacco users. The poorest of them, who roll their own to save money, saw the tax on RYO tobacco go from $1/lb to $24/lb. So a $20k smoker who rolls his own gets at 2400% tax increase to support the larvae of someone making more than three times as much.

This is likely how he'll get UHC – the frog in the pot trick.

[linusrichard]

What astonishes me about this, is that this "John Galt" business is all in reaction to an increase in the top marginal rate of, what, 4.6%? Which brings taxes up to what they were under Bush 41 and Clinton, and, as was pointed out on another thread, significantly lower than they were under Ford, Nixon, and Eisenhower (and presumably the Democrats in between as well). Someone making $300,000 is going to be paying an additional $2300 next year, and because of that, they're going to reduce their income by $50,000? They're going to take a loss of $47,700 just on "principle"? $47,700 is slightly less than I will make next year, and way more than I have ever made in my life so far. So if you're going to tell me you're going to just toss away $47,700, you can't expect me to feel real sorry for having asked you to pay an additional $2300.

But, I guess it's because, as I was saying in that other thread, apparently 35% is "not Socialism" and 39.6% is "Socialism." (And that's the marginal tax rate!)

[Jeff Corey]

What astonishes me about this, is that this "John Galt" business is all in reaction to an increase in the top marginal rate of, what, 4.6%? Which brings taxes up to what they were under Bush 41 and Clinton, and, as was pointed out on another thread, significantly lower than they were under Ford, Nixon, and Eisenhower (and presumably the Democrats in between as well). Someone making $300,000 is going to be paying an additional $2300 next year, and because of that, they're going to reduce their income by $50,000? They're going to take a loss of $47,700 just on "principle"? $47,700 is slightly less than I will make next year, and way more than I have ever made in my life so far. So if you're going to tell me you're going to just toss away $47,700, you can't expect me to feel real sorry for having asked you to pay an additional $2300.

But, I guess it's because, as I was saying in that other thread, apparently 35% is "not Socialism" and 39.6% is "Socialism." (And that's the marginal tax rate!)

From the article linked in post#86, above:
"In a move that reprises several pitched Washington battles, Obama is proposing to limit the federal tax deduction for state and local taxes. He would cap most itemized deductions at 28%, effectively hiking federal taxes further on families making more than roughly $250,000. Taxpayers in higher brackets, whose federal income tax rate is set to rise as high as 39.6% in 2011, would lose up to a quarter of their current deductions."

[linusrichard]

From the article linked in post#86, above:
"In a move that reprises several pitched Washington battles, Obama is proposing to limit the federal tax deduction for state and local taxes. He would cap most itemized deductions at 28%, effectively hiking federal taxes further on families making more than roughly $250,000. Taxpayers in higher brackets, whose federal income tax rate is set to rise as high as 39.6% in 2011, would lose up to a quarter of their current deductions."

The intersection between people I've heard talking about the change in deductions and people I've heard talking about going John Galt has exactly one member. Rwguinn, in this thread, and he wasn't even talking about himself.

Anyway, throw in the deductions, and it only changes the numbers, not the point. The point is still - these people still propose to voluntarily take a net loss much larger than what their tax increase would have been. And that's fine if that's what they want to do, but I just hope people who are in a position where they are able to voluntarily take a net loss of tens of thousands of dollars in order to make a statement about "Socialism" don't expect a ton of sympathy from ordinary people.

Oh wait, they do (http://www.youtube.com/watch?v=uHRppvbiahM).
(ETA: I guess that's not fair. Tigerhawk whines plenty, but as far as I know, he's not down for the John Galt.)

[Jeff Corey]

The intersection between people I've heard talking about the change in deductions and people I've heard talking about going John Galt has exactly one member. Rwguinn, in this thread, and he wasn't even talking about himself.

Anyway, throw in the deductions, and it only changes the numbers, not the point. The point is still - these people still propose to voluntarily take a net loss much larger than what their tax increase would have been...
No. For example, going from $249k t0 $250k and losing one forth of your $60k in exemptions would cost you about $6k in extra taxes, for a loss of $5k.

[Jeff Corey]

The intersection between people I've heard talking about the change in deductions and people I've heard talking about going John Galt has exactly one member. Rwguinn...
Go to post#3.

[balrog666]

The intersection between people I've heard talking about the change in deductions and people I've heard talking about going John Galt has exactly one member. Rwguinn, in this thread, and he wasn't even talking about himself.

Anyway, throw in the deductions, and it only changes the numbers, not the point. The point is still - these people still propose to voluntarily take a net loss much larger than what their tax increase would have been. And that's fine if that's what they want to do, but I just hope people who are in a position where they are able to voluntarily take a net loss of tens of thousands of dollars in order to make a statement about "Socialism" don't expect a ton of sympathy from ordinary people.

Oh wait, they do (http://www.youtube.com/watch?v=uHRppvbiahM).
(ETA: I guess that's not fair. Tigerhawk whines plenty, but as far as I know, he's not down for the John Galt.)


Not at all. People simply change their behavior at the extremes in response to the disincentive of diminished returns. So there will be less expansion of business, fewer financial risks taken, and, of course, fewer jobs created. I guess, according to the Dhims, that's just what the economy needs during a recession.

[linusrichard]

No. For example, going from $249k t0 $250k and losing one forth of your $60k in exemptions would cost you about $6k in extra taxes, for a loss of $5k.
Okay, assuming you're right, that means something for those who are trying to figure out whether to make $249k or $250k or $251k. And - again assuming you're right, if there's anything in the tax code that makes you take home less when you earn more, that's almost certainly stupid. I'll be on your side on that one, if you're right. But I'm not talking about someone making $250k trying to get down to $249k. I'm talking about people like Sharon Poczatek, who is trying to get her income down from $320k to $249k. Is she going to take home more if she makes $320k less taxes, or $249k less taxes?
Go to post#3.
Fair enough. I still haven't seen it outside this thread.
Not at all. People simply change their behavior at the extremes in response to the disincentive of diminished returns.
This strains my credulity. I'm expected to believe that, under the current plan, someone who makes, say, $320k, does so because, if she gets to take home 65%* of the $70k above $250k, it's worth it, but it wouldn't be worth it to take home 65%* of $71k above $250k. And I'm further expected to believe that she won't find it worth it to take home 61.4%* of anything above $250k? I submit that someone who makes $320k does so because she can't figure out how to make $321k. And that's going to be true whether the top marginal tax rate is 35% or 39.6%, unless she happens to be a John Galt nut.


* less state and local taxes, etc.
So there will be less expansion of business, fewer financial risks taken, and, of course, fewer jobs created. I guess, according to the Dhims, that's just what the economy needs during a recession.
Yeah, it'll be a real shame when taxes go up a tiny bit and all this awesome business expansion and job creation stops.

[Travis]

Travis, what if such a person was deeply suspicious of the premise that giving the government a lot of money translates into a lot of help for the "little people", and wished very strongly to avoid participating in and enabling what they perceived to be a deeply broken system?

Not this guy. He's often talked about how, if he could save somebody else's life with giving just $10, and he knew for sure it work and not be stolen or misused, that he wouldn't. He'd let that person die because his money is for him and him only.

I await the day he barricades himself in a compound and declares himself to be an independent country.

[Jeff Corey]

Okay, assuming you're right, that means something for those who are trying to figure out whether to make $249k or $250k or $251k. And - again assuming you're right, if there's anything in the tax code that makes you take home less when you earn more, that's almost certainly stupid. I'll be on your side on that one, if you're right. But I'm not talking about someone making $250k trying to get down to $249k. I'm talking about people like Sharon Poczatek, who is trying to get her income down from $320k to $249k. Is she going to take home more if she makes $320k less taxes, or $249k less taxes.
Assuming I'm right? I did the high school math on it and my CPA concurred. He has clients who are transferring their primary residences out of NY to one of the low tax, low service states to avoid this. Others moved to Costa Rica.

[technoextreme]

I am putting a kid through school. Lots of us do that-- I make too much for him to get grants, Student loans are limited, and don't cover all of tuition and books. Since I don't want to make it totally painless for him, he will repay the loans he gets, but I will pay interest on them while he is in school.
Additionally, one of the things that happens is the "Floors" on health costs and non-reimbursed employee expenses go up, but my out-of-pocket expenses did not --so I lose a fair amount of those, also.
Bad,stupid,idiotic, and moronic example because that system is oddly perplexing in such weird ways. My parents make too much money for the government. The thing is that my dad works in a supermarket. The only reason why the government thinks he makes too much money is that he has perfect credit.

[BenBurch]

Have fun being a loser, then, if you want to "Go John Galt" you can join the Truthers in their economic boycott and live in Mom's Basement.

[linusrichard]

Assuming I'm right? I did the high school math on it and my CPA concurred. He has clients who are transferring their primary residences out of NY to one of the low tax, low service states to avoid this. Others moved to Costa Rica.

Obviously people are going to pay less taxes in a jurisdiction with lower tax rates. That proves nothing, and isn't what we're talking about. What would be relevant would be if your CPA has clients who are voluntarily reducing their gross income in order to increase their net income, in the same jurisdiction.

ETA: (And even that would only be relevant tangentially of course.)

[Jeff Corey]

It is what we are talking about. With different rules targeting people to pay higher taxes,, they will attempt to avoid that. You don't have to be B. F. Skinner to figure that out. The point is that the so called John Galt ploy may save some people some money by not making more money. Or other ploys, like deferred compensation, up to $15k/year.

[linusrichard]

It is what we are talking about. With different rules targeting people to pay higher taxes,, they will attempt to avoid that. You don't have to be B. F. Skinner to figure that out. The point is that the so called John Galt ploy may save some people some money by not making more money. Or other ploys, like deferred compensation, up to $15k/year.

You're mixing two things together in this post:

1 - the idea that people will attempt to increase their net income by avoiding taxes. We aren't talking about this because it is so obvious that it is not worth talking about.

2 - the idea that people can, under Obama's new tax plan, increase their net income by decreasing their gross income. I am willing to accept for the sake of argument, that somebody right on the border between tax brackets might be able to realize a small net increase by implementing a small gross decrease. (E.g., your example of realizing a net $5k increase by reducing your gross income from $250k to $249k.) That's what the "assuming you're right" referred to. What I don't believe is that anyone can increase their net income by decreasing their gross income $70,000.

Hopefully you can see how anecdotal evidence of people moving to lower-tax states and countries relates only to #1, and not to #2.

[Jeff Corey]

No. Because I was referring to different strategies, thus "other ploys". The word "other" should tell you that I wasn't conflating them.

[Delvo]

assuming you're right, if there's anything in the tax code that makes you take home less when you earn more, that's almost certainly stupid.There's more to it than that. It can cease to be worth it even if the net income still goes up. Earning more money takes one kind of sacrifice or another... hours of work, resources invested, property put at risk, whatever... and the question anybody has to answer for himself/herself is whether going through with that is worth the money (s)he'll get back for it. Even when looking at a straight marginal difference in taxes without loss of deductions, the tax increase means spending or giving up the same amount gets you less benefit. If the benefit you get for whatever you're spending or giving up goes low enough, it can easily cease to be worth it even while it's still above zero.

[GreNME]

Travis, what if such a person was deeply suspicious of the premise that giving the government a lot of money translates into a lot of help for the "little people", and wished very strongly to avoid participating in and enabling what they perceived to be a deeply broken system?

I wouldn't disagree that the system is broken, but the dispute would be about whether the current measures being taken are an attempt to repair the system or break it further.

As a matter of fact, considering that simple concepts like minimum wage don't even keep up with inflation while top earners have been consistently been earning above inflation on the average, I'd say that the system is probably far more broken than the hypothetical person might believe. I don't have anything against top earning-- I'd like to eventually be earning at least close to that earning level at some point-- but the problem of inequity is a whole lot greater than the problem of lower earnings on the top end at this point. So while I'd like to see both inequities addressed it's clearly not going to happen with the polar extreme arguments from either party, so it seems like the current hybridized method-- because despite the partisan punditry, the current methods being used have elements from both political ideologies-- is at least different in that regard. I don't necessarily think that method is going to fix things either, but I would like see to something other than the typical histrionics from one side or the other about how their opposing side's methodologies when both have done their fair share to eff things up (and then some).

As for "going John Galt," that sort of antisocial behavior deserves the misery that seems to go along with it.

[toddjh]

There's more to it than that. It can cease to be worth it even if the net income still goes up. Earning more money takes one kind of sacrifice or another... hours of work, resources invested, capital put at risk, whatever... and the question anybody has to answer for himself/herself is whether going through with that is worth the money you'll get back for it.

If we were talking about the marginal rate going from 0% to 90%, then I'd agree it would be a major concern. But we're talking about, what, a 4% increase, and only on the top bracket? Not to mention that the cuts in the lower tax brackets will still result in lower overall taxes for people who make very close to the $250k cutoff.

Plus, the people who make absolutely huge gobs of money -- the ones for whom this increase is mainly intended -- make most of their money through financial manipulation. They spend most of their time deciding how to spend their money most effectively, not working to make more. They pay others to do the investing for them, for the most part. As long as they can still turn a profit after paying their financial managers, a higher tax rate will have minimal effect on their behavior.

Third, the tax rates Obama is proposing are quite a bit lower than the rates we saw through most of the twentieth century, under Republicans and Democrats alike. Productivity didn't plummet then, so I don't think there's that much cause for concern now.

And finally, as others have pointed out, if the new tax rates encourage the very wealthy to cut back on their hours a bit, that's not entirely a bad thing for the economy. It lets others who can't afford to take some time off pick up the slack.

[kallsop]

Taxes may have to go up to support a Universal Healtcare system. But if I pay 10% of my income for health insurance and 25% to taxes, and Obama can change that to 30% taxes and "free" universal healthcare, is that really a bad thing for me?


If your care is rationed (Sorry Mr. Random, we already completed our allotment of chemotherapies for this year, and besides, there are younger patients to take care of first), is that a smart saving? Obama wants to lower costs, which is a noble aim. The devil is in the details. Obama is printing money for bank bailouts, pork stimulus, paying mortgages, and all manner of things. Do you really believe he's going to cut costs anywhere? Obama intends to have energy costs go much higher, and hyperinflation will make $1 today soon be worth 50c. How's that going to work out for you?

Now the equation becomes - today you pay 10% of your income for health insurance and 25% to taxes, and Obama can change that to 40% taxes and "free" universal healthcare with waiting lists and the increasing mediocrity we see in other nations government run health care.

Or maybe you'll be one of the lucky underachievers who expects only the "wealthy" to pick up the tax burden and pay for your health care?

[Damien Evans]

If your care is rationed (Sorry Mr. Random, we already completed our allotment of chemotherapies for this year, and besides, there are younger patients to take care of first), is that a smart saving? Obama wants to lower costs, which is a noble aim. The devil is in the details. Obama is printing money for bank bailouts, pork stimulus, paying mortgages, and all manner of things. Do you really believe he's going to cut costs anywhere? Obama intends to have energy costs go much higher, and hyperinflation will make $1 today soon be worth 50c. How's that going to work out for you?

Now the equation becomes - today you pay 10% of your income for health insurance and 25% to taxes, and Obama can change that to 40% taxes and "free" universal healthcare with waiting lists and the increasing mediocrity we see in other nations government run health care.

Or maybe you'll be one of the lucky underachievers who expects only the "wealthy" to pick up the tax burden and pay for your health care?

http://www.inflationdata.com/inflation/Inflation_Rate/CurrentInflation.asp

Yes because 0.09% is soo hyperinflation.

[Tsukasa Buddha]

If your care is rationed (Sorry Mr. Random, we already completed our allotment of chemotherapies for this year, and besides, there are younger patients to take care of first), is that a smart saving? Obama wants to lower costs, which is a noble aim. The devil is in the details. Obama is printing money for bank bailouts, pork stimulus, paying mortgages, and all manner of things. Do you really believe he's going to cut costs anywhere? Obama intends to have energy costs go much higher, and hyperinflation will make $1 today soon be worth 50c. How's that going to work out for you?

Now the equation becomes - today you pay 10% of your income for health insurance and 25% to taxes, and Obama can change that to 40% taxes and "free" universal healthcare with waiting lists and the increasing mediocrity we see in other nations government run health care.

Or maybe you'll be one of the lucky underachievers who expects only the "wealthy" to pick up the tax burden and pay for your health care?

Evidence? Evidence? Evidence? Evidence? Evidence? Evidence?

I think that covers all your crazy assertions...

[linusrichard]

There's more to it than that. It can cease to be worth it even if the net income still goes up. Earning more money takes one kind of sacrifice or another... hours of work, resources invested, property put at risk, whatever... and the question anybody has to answer for himself/herself is whether going through with that is worth the money (s)he'll get back for it. Even when looking at a straight marginal difference in taxes without loss of deductions, the tax increase means spending or giving up the same amount gets you less benefit. If the benefit you get for whatever you're spending or giving up goes low enough, it can easily cease to be worth it even while it's still above zero.

This makes a ton of sense in theory, but it doesn't make sense to explain Galters like the dentist who's trying to get from $320k to $249,999.

Not that I like repeating myself, but:

I'm expected to believe that, under the current plan, someone who makes, say, $320k, does so because, if she gets to take home 65%* of the $70k above $250k, it's worth it, but it wouldn't be worth it to take home 65%* of $71k above $250k. And I'm further expected to believe that she won't find it worth it to take home 61.4%* of anything above $250k? I submit that someone who makes $320k does so because she can't figure out how to make $321k. And that's going to be true whether the top marginal tax rate is 35% or 39.6%, unless she happens to be a John Galt nut.


* less state and local taxes, etc.

[GreNME]

Evidence? Evidence? Evidence? Evidence? Evidence? Evidence?

I think that covers all your crazy assertions...

I'm sure there are plenty (http://www.foxnews.com/) of places (http://www.nypost.com/) where you can find "evidence" from some (http://www.glennbeck.com/) people (http://www.billoreilly.com).

[NoZed Avenger]

So longer than 8 years for 250k to be near the middle class? And again that's expecting 3% inflation at a time when a slowing economy could create deflation. If in 8 years, the next president doesn't readjust taxes, then he/she'll be pretty unique.

With the spending budgeted, I would not predict deflation. I think that by the end of the year we'll have an inflation trend. If it is not handled carefully, it could hit the double digits again. The numbers at 10% are considerably different after only 2-3 years.

[GreNME]

If inflation hits double-digits again it's not going to be due to government spending, it's going to be due to the last few years of declining economic stability. I don't think government spending is going to help it, but it's not going to cause it. However, I think at least some of the government spending at this point is aimed at trying to stimulate the mechanisms that might help it. Whether it works or not remains to be seen, and obviously opinions vary.

Personally, it (the government spending) seems to me to be a very Hoover-esque way of addressing the problem.

[BPSCG]

Perhaps the thinking is that people making above a certain amount of money don't need deductions as badly as people making less? There's got to be a line somewhere. I don't think Oprah and my parents need to write off their mortgage interest equally badly.I'm always annoyed when I see this kind of thing.

You don't need income above a certain amount, therefore you should have no problem with handing it over to the government.

Some people like to save the money they don't need day-to-day, so they won't have to count on the government's taking care of them when they can't work any more.

I know, they're stupid, because everyone knows the government will always take care of you.

[GreNME]

I don't think that's what TragicMonkey was trying to say. The plain fact is that disposable income hurts a whole lot less when taxed than does non-disposable. I'm not saying that I think that fact gives government carte blanche to screw over all disposable income, but I am saying that I shed fewer tears for the $250k earner taking a tax hit than I do the $25k earner taking a tax hit. Respectively, that means one is spending less on luxuries for the year, while the other is spending less on necessities. That's not saying that one is more or less deserving of money than the other, it's saying that the realities of cost-of-living need to be considered.

That said, I don't think the tax system makes sense in its current form, and it's gotten so convoluted and artificially complex that any intent with the progressive taxation is fairly negated by the overcomplexity of it. People in different tax brackets aren't even given deductions on charitable giving at the same rate as each other, and there have been only a few adjustments to the brackets themselves to properly adjust for inflation when more are needed. The only way the tax code as it's laid out now doesn't hurt you is if you're in the lower-, lower-middle, or high-upper-classes as far as income, and it's not like everyone can climb up into those higher levels of income easily in the first place.

[Jeff Corey]

I thought "disposable income" was what was left of your gross after taxes, and "discretionary income" was what left of that after you paid for essentials like food, rent, heat. etc.

[rwguinn]

I don't think that's what TragicMonkey was trying to say. The plain fact is that disposable income hurts a whole lot less when taxed than does non-disposable. I'm not saying that I think that fact gives government carte blanche to screw over all disposable income, but I am saying that I shed fewer tears for the $250k earner taking a tax hit than I do the $25k earner taking a tax hit. Respectively, that means one is spending less on luxuries for the year, while the other is spending less on necessities. That's not saying that one is more or less deserving of money than the other, it's saying that the realities of cost-of-living need to be considered.

That said, I don't think the tax system makes sense in its current form, and it's gotten so convoluted and artificially complex that any intent with the progressive taxation is fairly negated by the overcomplexity of it. People in different tax brackets aren't even given deductions on charitable giving at the same rate as each other, and there have been only a few adjustments to the brackets themselves to properly adjust for inflation when more are needed. The only way the tax code as it's laid out now doesn't hurt you is if you're in the lower-, lower-middle, or high-upper-classes as far as income, and it's not like everyone can climb up into those higher levels of income easily in the first place.
Where do you think the money that the 25K/year guys make comes from?
At least in part, those so-called "Luxuries" create the jobs that keep things moving.

If I decide to save my "disposable" income, instead of flying to Disneyland this year, it doesn't do much to the economy.
When a few thousand people do the same, it starts to hurt 1) Travel Agents, 2) hotels, 3) airlines, 4) airline workers, 5) Boeing, 6) restaraunt workers...
It is interlocking, and even Wal-mart will feel the pinch if everybody bails out on "luxuries".
Do you really need that TV, or that new computer, or even that stack of CD-R's?

[jj]

Agreed with rwguinn. On the other hand, for the last two weeks, CostCo has been swarmed on Saturday and Sunday.

I've been trying to buy a BlueRay player, and you know what? Nobody has them in stock. Now, I fear two things:

1) people bought them faster than expected
and
2) The manufacturers are afraid to make more because of the recession.

Classic start to runaway inflation due to outright fear.

[gdnp]

Obviously people are going to pay less taxes in a jurisdiction with lower tax rates. That proves nothing, and isn't what we're talking about. What would be relevant would be if your CPA has clients who are voluntarily reducing their gross income in order to increase their net income, in the same jurisdiction.

Moving your residence won't help unless your income is passive. If you earn income, you pay taxes first in the state where it is earned. So a dentist in Massachusetts could save on taxes by moving his home and office to New Hampshire, but if he just moves his home, he will still end up paying Mass state tax on the money he earns in MA. If he moves his office to NH, he may save on taxes, but on the other hand if his business falls he may not come out ahead.

[linusrichard]

Moving your residence won't help unless your income is passive. If you earn income, you pay taxes first in the state where it is earned. So a dentist in Massachusetts could save on taxes by moving his home and office to New Hampshire, but if he just moves his home, he will still end up paying Mass state tax on the money he earns in MA. If he moves his office to NH, he may save on taxes, but on the other hand if his business falls he may not come out ahead.

Yes, thank you. I should have been more precise - I should have said something more along the lines of - obviously people are going to pay less taxes if they are subject to taxation by a jurisdiction with lower taxes.

(My point was that if you're going to claim that people can increase their net income solely by lowering their gross income, you can't back that claim up with examples of people increasing their net income by moving.)

[gdnp]

I'd say that for every $320 K earner who decides to cut back his work hours to decrease his income to $250 K just to spite the government, there will be a dozen more who are scrambling to increase their income to $335 K so that they can pay their increased taxes without giving up on that vacation or new BMW. Or to replenish their retirement accouts that they have seen halve in value.

[balrog666]

I'd say that for every $320 K earner who decides to cut back his work hours to decrease his income to $250 K just to spite the government, there will be a dozen more who are scrambling to increase their income to $335 K so that they can pay their increased taxes without giving up on that vacation or new BMW. Or to replenish their retirement accouts that they have seen halve in value.


Except that the absolute number scrambling to make $335K will be reduced after this stupid tax increase.

[linusrichard]

Except that the absolute number scrambling to make $335K will be reduced after this stupid tax increase.

At the risk of sounding like a broken record, this is just not plausible. You really think there are people out there who say:

"I would love to make $335k as long as I can keep at least 65%* of the portion of it above $250k, but I am not interested in making $335k if I can only keep 61.4%* of the portion of it above $250k."

If Obama were proposing to raise the rate to 90%, or from 10%, then you might have something. As it is, I just don't buy it.

Also, open question: If Obama is lowering taxes on people who make less than $250k, won't that lower the taxes on the portion of income below $250k, for people who make more than $250k? Or am I missing something?

* less state and local taxes, etc.

[gdnp]

Except that the absolute number scrambling to make $335K will be reduced after this stupid tax increase.

As I say, I doubt it. There may be a few who wish to cut off their noses to spite their faces, but most such people aren't very bright and thus are not in the tax bracket in question.

I myself plan on seeking out additional opportunities as I am anticipating a pay cut next year, which when combined with the increased taxes will probably significantly decrease my discretionary income at a time when my second of 3 children is approaching college and my retirement funds have lost half their value.

Cut my discretionary income and I'm going to want to earn more, not less.

[GreNME]

I thought "disposable income" was what was left of your gross after taxes, and "discretionary income" was what left of that after you paid for essentials like food, rent, heat. etc.

I think you're correct and that I got it mixed up. Mea culpa there.

[GreNME]

Where do you think the money that the 25K/year guys make comes from?
At least in part, those so-called "Luxuries" create the jobs that keep things moving.

Ahh, the classic "should be thanking [the rich]" argument. That thinking only jibes if you think everything works on the trickle-down Reaganomics model.

If I decide to save my "disposable" income, instead of flying to Disneyland this year, it doesn't do much to the economy.
When a few thousand people do the same, it starts to hurt 1) Travel Agents, 2) hotels, 3) airlines, 4) airline workers, 5) Boeing, 6) restaraunt workers...
It is interlocking, and even Wal-mart will feel the pinch if everybody bails out on "luxuries".
Do you really need that TV, or that new computer, or even that stack of CD-R's?

No, you really don't need them unless they're broken, but that's beside the point, and a perfect example of the faulty emotional argument you're presenting in order to try to put forth as some kind of realistic number. However, when one actually does the numbers, the impact on the real economy (macro-economics) the argument you make from the personal economy (micro-economics) doesn't translate as a significant difference. But let me explain...

First, let's look at your specific example of a "few thousand people" deciding to not visit Disneyland this year. Going by the 2007 number as a rough estimate[WP (http://en.wikipedia.org/wiki/Disneyland)], let's just say that somewhere between 13 million and 14 million people might visit this year. That "few thousand people" begins to look mighty insignificant-- less than a tenth of one percent-- using those numbers. Even if the number dropped to 9 million in FY2009, which would be a huge decline for the park, those "few thousand people" would still fall under one percent of the visitors.

But wait! There's more!

The number of people making over $250k in the United States is roughly less than 2% of the population [WP (http://en.wikipedia.org/wiki/Household_income_in_the_United_States)]. I suppose I could do the old statistics exercise and visit the blp.gov and available census info to get more discrete numbers, but I'm hoping we can agree that Wikipedia at least gives a reasonable ballpark number coming in at an even 1.5%. So, given that, we have something like 4.5 people (rounded) who stand to be affected by the tax changes in question. The other 300-something-million people still need to spend money, but the difference is that the lower you go on income, the less you see spent on luxuries. Additionally, the luxuries you're going to see spent in the above-$250k bracket are not going to be comprised mostly of the more conventional spending like trips to Disney for the summer, they're instead going to be spent on redecorating a house, or a new luxury SUV (or in more flamboyant cases a Maserati), or a boat, and so on-- mostly niche markets. Meanwhile, everyone else is spending primarily on more common luxuries-- televisions, iPods, computers, and (lately) more economic autos-- along with the staple necessities like clothes, food, and utilities. The economy isn't going to be stimulated by the spending in the more niche markets available primarily to the above-$250k crowd-- we're not staying in a recession because some people can't drop cash down on the new Mercedes-- but the consumption part of the economy stands a far greater chance if the tax policy is weighted toward favoring the most common purchases and consumption out there: entertainment (movies, games, sports, etc.), common consumer items (computers/software, TVs, etc.), necessities (food, clothes, utility costs), and other sundry items, including even more economical automobiles and home improvements. The reason that favoring the larger group of consumers is likely to have more economic impact in the broad sense than favoring the 1.5% of those whose income is remarkably higher is a matter of scale: industries are sustained by quantity, not by the quality of the purchaser's bank book, and right now whole industries are what happen to be at stake, not a nation of individual private property owners who have no connection to each other.

It all comes down to pragmatism. Unless a real argument can be made about why those 4.5 million should be allowed to avoid paying the same in taxes that they did 15 years ago-- in other words, before the progression of tax cuts and tax breaks that arose within the last 8-10 years-- then I'm not going to be very sympathetic to the emotional appeals. Twenty years ago George H.W. Bush also raised taxes after years of his predecessor giving tax breaks and spending in a deficit, and despite the fact that he lost the election I'm certain that a number of those in his party were defending him tooth and nail in his run against Clinton. I'm equally certain those who were doing that and are still in Congress today wouldn't dream of considering G.H.W. Bush's actions a similar type of pragmatism to what's being done now, which to me strikes me as the height of partisan hypocrisy-- it's only acceptable (however grudgingly) if "our guy" does it. The deficit-spending madness and continuing tax breaks despite an economy dropping (since at least 2007, and definitely between 2002-2005) are what led to this mess in the first place, and for those making above $250k to conveniently forget that they were already paying this level of taxes before all the cuts began 8-10 years ago is either feigned naivete or wanton ignorance, but either way it's not far removed from the partisan nonsense. We're past the period where supply-side economics were attempted a second time in three decades, and in both instances the presidential administration who ran with the supply-side ball left the economy in poor shape. The current plan seems to be aimed more at trying a demand-side approach to see if it helps, and the attempts at "going Galt" in response comes across as nothing less than petulant, obstructionist, and short-sighted.

-----

Agreed with rwguinn. On the other hand, for the last two weeks, CostCo has been swarmed on Saturday and Sunday.

I've been trying to buy a BlueRay player, and you know what? Nobody has them in stock. Now, I fear two things:

1) people bought them faster than expected
and
2) The manufacturers are afraid to make more because of the recession.

Classic start to runaway inflation due to outright fear.

Places like Costco and Walmart and Target are going to be where most of the buying that keeps the (consumer) economy going right now. There's going to be inflation no matter what anyone tries to do at this point, so the goal is to try to minimize it and still promote availability of opportunities for people to make use of their money (per the classic economic paradigm of "don't stuff it in your mattress"). As for the blu-ray, my guess is that it has more to do with shipping or delivery issues than it does with a run on blu-ray players. I can go get one today if I really wanted one with no problem.

-----

Except that the absolute number scrambling to make $335K will be reduced after this stupid tax increase.

Taking a look back only 15-20 years shows a history precisely the opposite of your prediction. Care to quantify the statement with reasons to support it? It would be much appreciated.

[rwguinn]

words=blame the "Rich" and simplistic economics lesson
.
I surrender. It's all my family's fault. Come and get me.

[balrog666]

At the risk of sounding like a broken record, this is just not plausible. You really think there are people out there who say:

"I would love to make $335k as long as I can keep at least 65%* of the portion of it above $250k, but I am not interested in making $335k if I can only keep 61.4%* of the portion of it above $250k."

If Obama were proposing to raise the rate to 90%, or from 10%, then you might have something. As it is, I just don't buy it.

Also, open question: If Obama is lowering taxes on people who make less than $250k, won't that lower the taxes on the portion of income below $250k, for people who make more than $250k? Or am I missing something?

* less state and local taxes, etc.


You miss the point again.

It isn't that people won't want to make money and won't seek it; it's a question of how much extra effort they are willing to put forth to make extra money when it will be taxed at higher rates and with other associated costs (further deduction losses).

.

[GreNME]

I surrender. It's all my family's fault. Come and get me.

So, in other words, you have no actual arguments, just emotional pleading.

Consider me unimpressed, and a little bit amused at your intentionally getting what I was saying wrong.

[GreNME]

You miss the point again.

It isn't that people won't want to make money and won't seek it; it's a question of how much extra effort they are willing to put forth to make extra money when it will be taxed at higher rates and with other associated costs (further deduction losses).

.

My guess is that people will make the same kinds of efforts they always have. The people I know who are over the threshold of $250k aren't sweating bullets over it. Most of the people I've seen, heard, or read making a big deal of this don't qualify anyway.

[balrog666]

Taking a look back only 15-20 years shows a history precisely the opposite of your prediction. Care to quantify the statement with reasons to support it? It would be much appreciated.


Really?

You really think higher taxes provide higher incentives to earn money?

:rolleyes:

[GreNME]

Really?

You really think higher taxes provide higher incentives to earn money?

:rolleyes:

Why the misdirection? Taxes don't exist as incentives to earn money, so your statement makes no sense.

[rwguinn]

So, in other words, you have no actual arguments, just emotional pleading.

Consider me unimpressed, and a little bit amused at your intentionally getting what I was saying wrong.
Since what I spend, and how I spend it have no impact whatsoever on the economy, I don't see any point to arguing with a socialist.
Bu'bye

[GreNME]

Since what I spend, and how I spend it have no impact whatsoever on the economy, I don't see any point to arguing with a socialist.
Bu'bye

Again you show a knack for getting completely wrong what I said, but when you have no argument I guess that's the best you can do.

[gdnp]

Really?

You really think higher taxes provide higher incentives to earn money?



I do. Believe it or not, it is possible to get used to a lifestyle that requires an income of 300K per year or more, and that lifestyle may not be as flamboyant as you would like to believe. If you raise such a person's taxes, you decrease their discretionary income. If they want to maintain their current lifestyle, they need to earn more money.

[Rolfe]

Not sure how bad things are round here, but I've been trying to find a cleaner.


The woman who worked for the people I bought the house from found another job in the handful of weeks it took me to get moved in
The woman who has the highest profile in the village has a waiting list - and it isn't moving, she says her existing clients are all contracting for extra hours
A woman who advertised that she had Tuesday afternoons free didn't show up after arranging to come to see me - and the advert vanished
Finally, success - a woman has a two-hour slot that will be free in 2 or 3 weeks once her temporary contract's housemaid has come back from holiday in the USA.

No sign of tightening belts round here.

Rolfe.

[balrog666]

I do. Believe it or not, it is possible to get used to a lifestyle that requires an income of 300K per year or more, and that lifestyle may not be as flamboyant as you would like to believe. If you raise such a person's taxes, you decrease their discretionary income. If they want to maintain their current lifestyle, they need to earn more money.


Actually, I believe you don't have the foggiest idea what you are posting about.

[gdnp]

Actually, I believe you don't have the foggiest idea what you are posting about.

Well then, you would be wrong. Again.

When your income reaches 300K, feel free to get back to me.

[Magyar]

Things like ROTH ira's etc. drop off pretty quickly. I find pretty much the only deduction I qualify for is the mortgage interest one. Pretty much everything else is phased out by my level. So there are definitely discontinuities in the tax curve in places due to this stuff.

may I suggest
http://www.amazon.com/Free-Lunch-Wealthiest-Themselves-Government/dp/1591841917

As stated before, one of 100s of books and papers out there documenting the BS that is the whine from the rich about how they are so abused when it comes to paying taxes.

[GreNME]

You socialist. :p

[balrog666]

Well then, you would be wrong. Again.

When your income reaches 300K, feel free to get back to me.


I've been there and done that. Your turn.

[GreNME]

Okay, that was funny.

And to be fair, I'm working on my turn (at $300k), and will be sure to report in when it happens.

But don't hold your breath. I'm not. ;)

[gdnp]

I've been there and done that. Your turn.

Well then, you must have been towards the upper end of the pay scale for mathematical physicists. I'll take your word for it.

Regardless, you are still wrong.

[GreNME]

With all due respect, gdnp, he's not so much wrong because he disagrees with your assessment. The fact is that taxes are neither an incentive or disincentive to making more money. I'm also pretty sure that balrog666 is aware that someone with a real opportunity to make $300k a year instead of $240k a year claiming that taxes are a disincentive as opposed to a money management issue is a moron. What I'm fairly sure the point of contention is here is that the money management issue is, to balrog666, going to become more difficult to the point where fewer people will be equipped to deal with it, thus feeling like they're taking a larger percentage hit than they would being under the $250k mark.

I'm not disagreeing with that part of what he said. I'm pointing out that taxes are not meant to be an incentive or disincentive. The only difference between that alteration of the tax bracket and the one just below it is a matter of addressing it properly. If the person making the money isn't already addressing it properly below $250k then they're going to see the same problems, but if they follow the same preparation strategies (or thinking) that they did moving into that lower bracket then they should be prepared. What I think balrog666 is disagreeing with here is that those same methods are going to be less useful with the change. I don't necessarily disagree with that except that the methods to deal with the change aren't going to be appreciably different from the methods used 15-20 years ago, so it's not like people making that kind of money don't have a point of reference.

[daredelvis]

From the article linked in post#86, above:
"In a move that reprises several pitched Washington battles, Obama is proposing to limit the federal tax deduction for state and local taxes. He would cap most itemized deductions at 28%, effectively hiking federal taxes further on families making more than roughly $250,000. Taxpayers in higher brackets, whose federal income tax rate is set to rise as high as 39.6% in 2011, would lose up to a quarter of their current deductions."

I'm sure this has been pointed out. You have taken a quote about an aggregate (those earning > $250k) and applied it to an individual case (one earning $250,001). Your conclusion is incorrect.

Daredelvis

[TraneWreck]

1) Please, please, PLEASE go Galt, idiots. I want the financial "geniuses" who thought it was brilliant to leverage millions of dollars against a poor dude in LA's $200k house to take a looooong vacation. GO. Get out. Go on strike, we will find a responsible, ethical college graduate to do your job for $65k. We will be better off.

2) I only read the first page and a half, so maybe this was addressed, but holy crapcakes, you guys really don't understand how taxes work?

You pay one rate of taxes on the first $249k, then you pay the higher marginal rate ONLY on the money you make over $250k. Otherwise people with an income of $260k would take home less money than those making $249k. This doesn't happen.

3) The biggest pussies in this country are those that complain about their taxes. We are going back to the top marginal tax rate we had during the Clinton administration. This isn't like some brand-new raping of the wealthy, it's simply a concession that things didn't go right during the Bush years.

You wimps are whining about a 3% increase of taxes ONLY on the money you make ABOVE $250k. So if you make $300k/year you will be giving the government an extra $1500. That's it, you babies. We are fighting two wars and going through a horrific economic crisis, and the so-called alpha males of out society are ready to flee the country over a few thousand dollars that they can easily spare.

To quote John Stewart, "**** YOU!"

[GreNME]

1) Please, please, PLEASE go Galt, idiots. I want the financial "geniuses" who thought it was brilliant to leverage millions of dollars against a poor dude in LA's $200k house to take a looooong vacation. GO. Get out. Go on strike, we will find a responsible, ethical college graduate to do your job for $65k. We will be better off.

That's what I'd like to see.

2) I only read the first page and a half, so maybe this was addressed, but holy crapcakes, you guys really don't understand how taxes work?

You pay one rate of taxes on the first $249k, then you pay the higher marginal rate ONLY on the money you make over $250k. Otherwise people with an income of $260k would take home less money than those making $249k. This doesn't happen.

Err, you're closer than some have been, but there are actually more rates than you've mentioned below the $249k mark. But yeah, for each bracket you're income is above, the rate goes up on just the income above the line of that bracket.

3) The biggest pussies in this country are those that complain about their taxes. We are going back to the top marginal tax rate we had during the Clinton administration. This isn't like some brand-new raping of the wealthy, it's simply a concession that things didn't go right during the Bush years.

You wimps are whining about a 3% increase of taxes ONLY on the money you make ABOVE $250k. So if you make $300k/year you will be giving the government an extra $1500. That's it, you babies. We are fighting two wars and going through a horrific economic crisis, and the so-called alpha males of out society are ready to flee the country over a few thousand dollars that they can easily spare.

Hey, man, people who have lots of money usually get that way by spending as little as they possibly can. I know a few 'millionaires' who still make a big deal about a few bucks despite having gobs of cash in reserves. There's something to be said for knowing how to not spend money (without going too far in that direction).

But, yeah, I think that people whining about 'going Galt' are wussies.

;)

[TraneWreck]

Err, you're closer than some have been, but there are actually more rates than you've mentioned below the $249k mark. But yeah, for each bracket you're income is above, the rate goes up on just the income above the line of that bracket.


You're right, I was just trying to focus on the brackets in question. The only tax increase (it's more like the end of a tax holliday than an actual hike) involves whatever money people make over $250k.


Hey, man, people who have lots of money usually get that way by spending as little as they possibly can. I know a few 'millionaires' who still make a big deal about a few bucks despite having gobs of cash in reserves. There's something to be said for knowing how to not spend money (without going too far in that direction).


The problem is that the people making the most money in this country (and therefore paying the most taxes) are also getting the greatest benefit from the system.

For example, who benefits from our tax-funded roads more? Me and my car that I drive four or five times a week, or Walmart and their legion of freight trucks. Who benefits more from our foreign excursions to insure oil access?

And yet these corporations pay little or no taxes.

http://reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

Obviously that's not the same as individual income, but whatever industry or business people making more than $250k a year are involved in is wholly supported by the American civil system.

As a lawyer I am constantly working through tax-financed systems. Companies and wealthy individuals avail themselves of those services at a rate that is vastly disproportionate to the amount of relative taxes paid. Yet this is viewed as a right or manifest destiny, they conveniently ignore that their litigation playgrounds are financed by everyone.

Add in the fact that wealthier individuals are more likely to hold large amounts of stock and the free-wheeling corporate system becomes a massive benefit that is for all practical purposes unique to the upper 2% of income-earners.

[BenBurch]

The well-off could not BE well-off without all of the many things paid for by taxes, and so it is entirely fair that they be taxed disproportionately.

[rwguinn]

...

The problem is that the people making the most money in this country (and therefore paying the most taxes) are also getting the greatest benefit from the system.

For example, who benefits from our tax-funded roads more? Me and my car that I drive four or five times a week, or Walmart and their legion of freight trucks. Who benefits more from our foreign excursions to insure oil access?

And yet these corporations pay little or no taxes...
Do not confuse issues. Roads and much infrastructure is NOT paid for out of Income Taxes, but by Usage Taxes


Fuel taxes in the United States (http://en.wikipedia.org/wiki/Fuel_taxes_in_the_United_States) vary by state. For the first quarter of 2008, the average state gasoline tax is 28.6 cents per US gallon, plus 18.4 cents per US gallon federal tax making the total 47 cents per US gallon (12.4 ¢/L). For diesel, the average state tax is 29.2 cents per US gallon plus an additional 24.4 cents per US gallon federal tax making the total 53.6 cents US per gallon (14.2 ¢/L) (From Wikipedia)
Some roads also charge a toll, which is used for maintenence and repair--and strangely, the toll is higher for tractor-trailers than it is for 4 wheeled vehicles.
Thus, the statement "And yet these corporations pay little or no taxes" is either 1) a statement from ignorance, or 2) an outright lie made to mislead.
The more fuel you use, the more you spend it create and maintain the roads you use to make money.

[TraneWreck]

Do not confuse issues. Roads and much infrastructure is NOT paid for out of Income Taxes, but by Usage Taxes


Well, the American Recovery and Reinvestment Act of 2009 allocated $2.25 billion for roads, and that money is coming from taxes paid generally.

Roads are paid for from a variety of taxes: sales taxes, real estate taxes, gas taxes, it will vary depending on where you live.

It is not the case that there is a direct correlation between usage and amount paid for roads.


Thus, the statement "And yet these corporations pay little or no taxes" is either 1) a statement from ignorance, or 2) an outright lie made to mislead.
The more fuel you use, the more you spend it create and maintain the roads you use to make money.


There's a reason I put a link in the post. Go ahead and click it. There's a ton of information about corporations and the taxes they pay. On average they pay 1/2 of the rate. This is because a significant portion of corporations pay no taxes at all.

"Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003. In the years they paid no income tax, these companies earned $102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury, totaling $12.6 billion. These companies' "negative tax rates" meant that they made more after taxes than before taxes in those no-tax years."

[rwguinn]

Well, the American Recovery and Reinvestment Act of 2009 allocated $2.25 billion for roads, and that money is coming from taxes paid generally.

Roads are paid for from a variety of taxes: sales taxes, real estate taxes, gas taxes, it will vary depending on where you live.

It is not the case that there is a direct correlation between usage and amount paid for roads.



There's a reason I put a link in the post. Go ahead and click it. There's a ton of information about corporations and the taxes they pay. On average they pay 1/2 of the rate. This is because a significant portion of corporations pay no taxes at all.

"Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003. In the years they paid no income tax, these companies earned $102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury, totaling $12.6 billion. These companies' "negative tax rates" meant that they made more after taxes than before taxes in those no-tax years."
Once more you are attempting to confuse the issue. Get off you high horse.
How much in fuel taxes, inventory taxes, and other taxes did they pay?
Income/profit is not the be-all and end-all.
Oh--and who gets these profits? Could it be ..
the stockholders? Many of whom are NOT rich?

[GreNME]

TraneWreck, I don't disagree with what you're saying. I was simply pointing out that things are necessarily so one-sided in terms of taxes and the wealthy. Plenty of wealthy people have no problem with the changes in tax code to be more similar to the 1990's, so I'm trying to point out that those like the person described in the OP are outliers who are using the changes in taxes as an excuse to avoid them. Not everyone who is wealthy is trying to game the system, as it were, and (I think) it's important to understand that.

[TraneWreck]

TraneWreck, I don't disagree with what you're saying. I was simply pointing out that things are necessarily so one-sided in terms of taxes and the wealthy. Plenty of wealthy people have no problem with the changes in tax code to be more similar to the 1990's, so I'm trying to point out that those like the person described in the OP are outliers who are using the changes in taxes as an excuse to avoid them. Not everyone who is wealthy is trying to game the system, as it were, and (I think) it's important to understand that.

I wasn't trying to disagree with you, I was just adding another point. I think you were on target.

[TraneWreck]

Once more you are attempting to confuse the issue. Get off you high horse.
How much in fuel taxes, inventory taxes, and other taxes did they pay?
Income/profit is not the be-all and end-all.
Oh--and who gets these profits? Could it be ..
the stockholders? Many of whom are NOT rich?

What do you mean the stockholders "get the profits?" That's an absurd claim. The stockholders make money when the stock rises and dividends are paid out. Executives, however, make money no matter what happens. Furthermore, there is no necessary correlation between the stock value of a company and their profits. Just because a business made a billion dollars, that doesn't mean the stockholders receive a proportional share of that profit.

On top of that, if you look at publicly traded companies, who are the primary stockholders? Who owns the controlling interest?

Sure corporations pay some consumption taxes, but I would love for you to show me how the 82 companies that paid zero income taxes for at least one year between 2001 and 2003 paid their fair share in consumption taxes when they made $102 billion in pretax profits and an additional $12 billion in rebates.

These companies make their money because they are located in the United States. Collectively we pay for the roads, we ensure the country is safe to do business both through policing and military action, we pay for a court system that corporations use in MASSIVE disproportion, we establish electrical grids, bring in energy, and provide endless other services that companies avail themselves of when they do business in the United States.

For those companies to pretend as though they shouldn't share those profits with the nation that provides them so much benefit WHILE we are fighting two wars and going through a financial crisis that is largely their fault, strikes me as being about as anti-American as you can get.

[rwguinn]

What do you mean the stockholders "get the profits?" That's an absurd claim. The stockholders make money when the stock rises and dividends are paid out. Executives, however, make money no matter what happens. Furthermore, there is no necessary correlation between the stock value of a company and their profits. Just because a business made a billion dollars, that doesn't mean the stockholders receive a proportional share of that profit.

On top of that, if you look at publicly traded companies, who are the primary stockholders? Who owns the controlling interest?

Sure corporations pay some consumption taxes, but I would love for you to show me how the 82 companies that paid zero income taxes for at least one year between 2001 and 2003 paid their fair share in consumption taxes when they made $102 billion in pretax profits and an additional $12 billion in rebates.

These companies make their money because they are located in the United States. Collectively we pay for the roads, we ensure the country is safe to do business both through policing and military action, we pay for a court system that corporations use in MASSIVE disproportion, we establish electrical grids, bring in energy, and provide endless other services that companies avail themselves of when they do business in the United States.

For those companies to pretend as though they shouldn't share those profits with the nation that provides them so much benefit WHILE we are fighting two wars and going through a financial crisis that is largely their fault, strikes me as being about as anti-American as you can get.
1. Exec pay != "corporate Profits"
2. They do share the profits. The people who get a share are called "Shareholders"--people who have invested their hard-earned money in the company stock, and who pay income taxes on that return.
To take that profit from the shareholders is about as anti-american as you can get, to coin a phrase.

[TraneWreck]

1. Exec pay != "corporate Profits"
2. They do share the profits. The people who get a share are called "Shareholders"--people who have invested their hard-earned money in the company stock, and who pay income taxes on that return.
To take that profit from the shareholders is about as anti-american as you can get, to coin a phrase.

Did you even read what I wrote?

1) Obviously, that's why I said, "Executives, however, make money no matter what happens." This means that executives will receive payment whether the company profits or not. So I don't really understand your point.

2) But not directly. If you own 10% of the shares of a company that makes $1 million in profit, that doesn't mean you've just made $100,000. Once again, I believe that was clear from my post, so you're either disengenous or stupid.

Who is "taking profit?" That's called a tax. That's reinvesting in the country that provided you with the opportunity to make that money in the first place.

Think of it this way: Let's say you wanted to sell ice-cream on a playground. You made the ice-cream, and sold it. I policed the area to make sure that no one robbed you, I maintained the quality of the playground to ensure that children kept coming, I monitored the ingrediants you were using so that the constituent parts of your product were safe, and I provided a forum for you to settle disputes with customers and competitors.

Would I be "taking your profits" if I said I needed 15% to keep providing those services to you?

[linusrichard]

2. They do share the profits. The people who get a share are called "Shareholders"--people who have invested their hard-earned money in the company stock, and who pay income taxes on that return.
To take that profit from the shareholders is about as anti-american as you can get, to coin a phrase.

This is plain wrong. Shareholders are called "shareholders" not because they get a share of the profits, but because they own a share of the corporation. They are also called "stockholders," especially in Delaware. Sometimes, the corporation will pay a dividend to shareholders, so that's like sharing the profits, but there are other things the corporation can do with the profits if it wants - there is generally no legal obligation to pay dividends, and even if they do pay dividends, they don't divide up all their profits among their shareholders.

[GreNME]

You're obviously wrong. And a socialist. :p

[rwguinn]

You're obviously wrong. And a socialist. :p
Suppose you actually ADD something to the discussion.
yes--they cann do things like expand the business, buy other businesses--a lot of things, all of which improve the position , which drives the stock price up or down.
Personally, I've never figured out why corporations are so damn enamored with stockholders anyway. If they were a girlfriend/boyfriend, they'd dump the fickle bastards in a minute...:)

[linusrichard]

Personally, I've never figured out why corporations are so damn enamored with stockholders anyway. If they were a girlfriend/boyfriend, they'd dump the fickle bastards in a minute...:)

Well, there are a few reasons, but one obvious one is that, frequently, the people who run the corporations (the directors and officers) happen to be stockholders.

[GreNME]

Suppose you actually ADD something to the discussion.
yes--they cann do things like expand the business, buy other businesses--a lot of things, all of which improve the position , which drives the stock price up or down.
Personally, I've never figured out why corporations are so damn enamored with stockholders anyway. If they were a girlfriend/boyfriend, they'd dump the fickle bastards in a minute...:)

You're the one who decided to stop responding to me by accusing me of being socialist. Doctor: heal thyself.

I've posted a whole bunch of stuff you've decided not to respond to. Accusing me of not contributing isn't really giving the impression that you're bothering to read what people disagreeing with you are writing.

[ServiceSoon]

For example, who benefits from our tax-funded roads more? Me and my car that I drive four or five times a week, or Walmart and their legion of freight trucks. Who benefits more from our foreign excursions to insure oil access?The people benefit just as much from infrastructure as businesses. It is a vital part to promoting the "general welfare" of the country. How did you come to the conclusion that businesses benfit more from infrastructure than individuals do? How do you measure something like that?

The Wal-mart vehicles travel on roads more than individuals so they pay a higher fuel tax. For the past quarter century this is where the funds came from to maintain the federal highways.

[TraneWreck]

The people benefit just as much from infrastructure as businesses. It is a vital part to promoting the "general welfare" of the country. How did you come to the conclusion that businesses benfit more from infrastructure than individuals do? How do you measure something like that?


Perhaps "benefit" is a poor word choice. Collectively, we pay for roads. They come from a whole host of different taxes. A company engaged in interstate commerce (or even one that does a lot driving within a city or state) uses those roads millions of times more than I do. I drive about 20 miles a week. Walmart's trucks rack up millions of times that. If they aren't "benefiting" more, they're certainly using our infrastructure FAR more than I can.

Take the court system. How many times did you engage in civil litigation this year? What percentage of time did judges, clerks, and related workers dedicate to your interests? Now think about institutions like the SEC and FDIC. They dedicate vastly more time and effort to top earning individuals and companies.

Do those companies pay a special court tax akin to the fuel tax that supports their use of the court system? Or do they avail themselves of a structure supported by the collective tax fund?

Look at the title of this thread. It's about people earning more than $250k a year wanting to go on strike because of a 3% increase in the top marginal income bracket. It's a roll back of Bush's tax cuts meaning the rate will be what it was under Clinton.

Going Galt means that these folks would rather go on strike than pay slightly more to the country who's civil structure allowed them to become wealthy. The bizarre assumption that underlies this perverse theory is that wealthy individuals and corporations are supporting the rest of us, so going on strike would leave us helpless.

You provided an example of a corporation barely satisfying its own consumption, much less paying for everyone else. It is a myth. They pay more than I do, and they get back more than I do.


The Wal-mart vehicles travel on roads more than individuals so they pay a higher fuel tax. For the past quarter century this is where the funds came from to maintain the federal highways.


Fuel taxes are ONE way highways are paid for. Others include tolls, real estate taxes, cigarette taxes, and many others. Just go to a given jurisdiction and study how they pay for their roads.

On a related issue, many companies require their truckers to pay tolls out of their pockets. Thus a great many truckers avoid toll roads. They drive on smaller highways instead. Those highways are maintained by local municipalities, and they are now basically going bankrupt trying to keep up with the damage caused by all of the trucks. Those fuel taxes aren't doing anything to pay for those roads.

Read this link:

http://reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

It details corporations that are basically paying ZERO income tax. I would argue that at a time of national crisis (two wars, economic disaster) those that have benefited the most from the collective effort of our nation should pay not MORE but their fair share to keep the system healthy.

[Random]

Hate to bring this up so late in the thread, but have we actually established that there will be a way under Obama's tax plan to have more money after taxes by making less money before taxes? And if so, is there any reason that can't be fixed?

I know that taxes will be going up for some, and certain deductions may be changed, but is there actually a portion of the new tax code that makes this possible, or all all the Galters just being ignorant crybabies?

[GreNME]

Read this link:

http://reclaimdemocracy.org/corporate_welfare/real_tax_rates_plummet.php

It details corporations that are basically paying ZERO income tax. I would argue that at a time of national crisis (two wars, economic disaster) those that have benefited the most from the collective effort of our nation should pay not MORE but their fair share to keep the system healthy.

For the non-link-following, I just want to highlight some of the things in the article you linked.

Ostensibly, the U.S. federal tax code requires corporations to pay 35 percent of their profits in income taxes.

But of the 275 Fortune 500 companies that made a profit each year from 2001 to 2003 and for which adequate information to draw conclusions is publicly available, only a small proportion paid federal income taxes anywhere near that statutory 35 percent tax rate. The vast majority paid considerably less.

And please note that this is just numbers from the Fortune 500 companies, not individuals or smaller companies (though smaller companies tend to get shafted and pay higher percentages).

The statistics are startling:

Eighty-two of the 275 companies, almost a third of the total, paid zero or less in federal income taxes in at least one year from 2001 to 2003. In the years they paid no income tax, these companies earned $102 billion in pretax U.S. profits. But instead of paying $35.6 billion in income taxes as the statutory 35 percent corporate tax rate seems to require, these companies generated so many excess tax breaks that they received outright tax rebate checks from the U.S. Treasury, totaling $12.6 billion. These companies' "negative tax rates" meant that they made more after taxes than before taxes in those no-tax years.
Twenty-eight corporations enjoyed negative federal income tax rates over the entire 2001-2003 period. These companies, whose pretax U.S. profits totaled $44.9 billion over the three years, included, among others: Pepco Holdings (-59.6 percent tax rate), Prudential Financial (-46.2 percent), ITT Industries (-22.3 percent), Boeing (-18.8 percent), Unisys (-16.0 percent), Fluor (-9.2 percent) and CSX (-7.5 percent), the company previously headed by current Secretary of the Treasury John Snow.
In 2003 alone, 46 companies paid zero or less in federal income taxes. These 46 companies told their shareholders they earned U.S. pretax profits in 2003 of $42.6 billion, yet they received tax rebates totaling $5.4 billion. Almost as many companies, 42, paid no tax in 2002, reporting $43.5 billion in pretax profits, yet receiving $4.9 billion in tax rebates. From 2001 to 2003, the number of no-tax companies jumped from 33 to 46, an increase of 40 percent.
In 2001, the Treasury paid corporations $40 billion in tax refunds, a third more than the 1998-2000 average.
Then in 2002 and 2003, after the law was changed to expand tax subsidies and make it easier for corporations to carry back excess tax breaks to earlier years, corporate tax refunds skyrocketed to an average of $63 billion a year - more than double the 1998-2000 average.

The fact that some of the largest companies are earning "negative tax rates" is highly applicable to the current conversation, because it flies in the face of many arguments being made that the system is being unfairly weighted against these companies now.

Corporate taxes paid for more than a quarter of federal outlays in the 1950s and a fifth in the 1960s. They began to decline during the Nixon administration, yet even by the second half of the 1990s, corporate taxes still covered 11 percent of the cost of federal programs. But in fiscal years 2002 and 2003, corporate taxes paid for a mere 6 percent of federal expenses.

This is incredibly interesting in light of the arguments that the wealthiest pay the most in taxes-- obviously that doesn't apply to the wealthiest companies.

In 2003, the range of industry tax rates was even greater, ranging from a low of -30.0 percent (a negative rate) up to a high of 27.9 percent.

Aerospace and defense companies enjoyed the lowest effective tax rate over the three years, paying only 1.6 percent of their profits in federal income taxes. This industry's taxes declined sharply over the three years, falling to -30.0 percent of profits in 2003.
Other very low-tax industries, paying less than half the statutory 35 percent tax rate over the entire 2001-2003 period, included: transportation (4.3 percent), industrial and farm equipment (6.2 percent), telecommunications (7.5 percent), electronics and electrical equipment (10.8 percent), petroleum and pipelines (13.3 percent), miscellaneous services (14.4 percent), gas and electric utilities (14.4 percent), computers, office equipment, software and data (16.0 percent), and metals & metal products (17.4 percent).
Not a single industry paid an effective tax rate of more than 29 percent, either for the entire three-year period or in any given year.

That last point is notable, because what kept that number so high was the fact that, as I said, smaller (which aren't always "small businesses," just smaller than the Fortune 500) companies in any given industry wind up paying percentages closer to the appropriate percent.

How they do it
There are myriad reasons why particular corporations paid low taxes. The key major tax-lowering items revealed in the companies' annual reports - plus some that are not disclosed - include:

Accelerated depreciation.
...

Stock options.
...

Tax credits.
...

Offshore tax sheltering.
...

And those are only a few of the ways they do it. Another common one left out tends to be "under"-reporting: not necessarily lying about their financials but working from the lowest-end possible when filing while reporting to their investors much higher numbers. This isn't necessarily an illegal practice, and in huge companies can mean differences in the millions (or, as the article states earlier on, up to half the profits, but I think that's a bit high).

Not surprisingly, corporations do not explicitly disclose their abusive tax sheltering in their annual reports. For example, Wachovia's extensive schemes to shelter its U.S. profits from tax are cryptically described in the notes to its annual reports merely as "leasing." It took extensive digging by PBS's Frontline researchers to discover that Wachovia's tax shelter involved pretending to own and lease back municipal assets in Germany, such as sewers and rail tracks, a practice heavily promoted by some accounting firms. Other tax shelter devices, such as abuses of "transfer pricing," also go unspecified in corporate annual reports. Nevertheless, corporate offshore tax sheltering is estimated to cost the U.S. Treasury anywhere from $30 billion to $70 billion a year, and presumably the effects of these shelters are reflected in the bottom-line results of what companies pay in tax.

If anyone remembers the presidential debates between Obama and McCain, the lower end of the cost of offshore tax shelters would have covered the pork spending McCain complained about (at $18b) nearly twice over, and much more than that on the high end. That's not even talking about typical tax sheltering that companies and individuals do that is perfectly legal and helps to reduce the taxes owed, that goes on every year by individuals and companies alike. Such numbers aren't available, as far as I know, but I'd bet that those would number in the hundreds of billions on the low end of the scale.

[GreNME]

Hate to bring this up so late in the thread, but have we actually established that there will be a way under Obama's tax plan to have more money after taxes by making less money before taxes? And if so, is there any reason that can't be fixed?

No, no one has established any such thing. Some have asserted it, but using inaccurate numbers to represent how much will accurately be taxed and by dismissing obvious things like tax shelters that make up for the limited deductions.

I know that taxes will be going up for some, and certain deductions may be changed, but is there actually a portion of the new tax code that makes this possible, or all all the Galters just being ignorant crybabies?

In my opinion, it's just being crybabies. Your mileage may vary.

[paiute]

"We have to find a way out where we can make just what we need to just under the line so we can benefit from Obama's tax plan," she added. "Why kill yourself working if you're going to give it all away to people who aren't working as hard?"

I have no available curse strong or scatalogical enough to adequately convey my sense of disgust at this person. I can take her in five minutes and point out twenty people who work as hard or harder than her but maybe do not work under the quasimonopoly that lawyers have created for themselves.