Pay as little taxes as you can?

[bad_LNIP]

The government doesn't get money from the voluntary contributions of people who have freely agreed to contribute. Taxes are governed by rules, and failure to obey the rules can result in fines and loss of your liberty (jail time).

Not just that we have no limits or controls on how they take it, but we have no control or limitations on what the government chooses to spend the money on.

Its like someone slamming down Turkish coffee mixed with Guinness beer in front of you, demanding you pay your "fair share" and rifling through your pockets if you refuse. Furthermore, what public benefits am I using if I am overseas?

 

[samclem]

Oh, they'll still take donations...
Americans donate $8 million to cut national debt - Nov. 20, 2012

I would like to meet some of these people. Apparently they don't know any person or any private charity who can do more good or more efficiently use their money than the US Government can. Those are some "true believers". . .

 

[samclem]

Furthermore, what public benefits am I using if I am overseas?

You may just find out if there's a noncombatant evacuation operation (NEO), you want to travel on that US passport, or if you get into legal trouble in your new offshore paradise.

 

[FUEGO]

The question is how hard are you going to work to ensure you don't contribute to the public services from which you benefit? And how proud are you of not paying your share? People like Fuego seem to be happy to take money from other taxpayers, but proud of contributing as little as they can. That means everyone else pays more. If you go out for drinks with your coworkers, do you buy a round, or slip off to to restroom when your turn comes up and hope they don't notice?

Well, I don't have coworkers any more and didn't particularly care to drink with them when I did have them.

But I invite my friends over for beers at my house all the time. I pay for the beers myself of course. A case of beer for all of us is cheaper than a couple of drinks at a bar, so it's very cost efficient (and the scenery is better and we can burn stuff in the fire pit).

Sometimes they bring a six pack, a bottle of wine, or a snack but I tell them not to worry about it. It's on me. It is, after all, a social time among friends and something I enjoy sharing voluntarily.

I don't understand how you linked an evening of hopped up fun with my buddies to a discussion of the IRC and our federal government's fiscal policies. Maybe you can enjoy a beer at my house some time and expand on that?

 

[daylatedollarshort]

If I was going to get worked up over people (since corporations are people, too!) I'd be more concerned with the people with billions in dollars of earnings not paying taxes:

20 big profitable US companies paid no taxes

"The biggest example during the second quarter is drugmaking giant Merck. The company had a negative effective tax rate during the second quarter of 7.5%, meaning it actually got a net tax credit. That's despite the fact that income before taxes at Merck soared 52% to $1.9 billion during the quarter.

Merck appears to be gaining on the tax front, in part, by the fact it earns profits in countries with lower tax rates."

 

[pb4uski]

Headlines like the above can be oh so misleading. While it is true that Merck's 2Q effective tax rate was negative due to some unusual transactions, their effective tax rates for 2013, 2012 and 2011 were 18.5%, 27.9% and 12.8% respectively.

See page 121 their 2013 10-K for details. http://www.merck.com/investors/financial-reports/home.html

 

[daylatedollarshort]

Headlines like the above can be oh so misleading. While it is true that Merck's 2Q effective tax rate was negative due to some unusual transactions, their effective tax rates for 2013, 2012 and 2011 were 18.5%, 27.9% and 12.8% respectively.

See page 121 their 2013 10-K for details. Investors

Merck wasn't in the headline. There are many news articles on billion dollar corporations like Apple paying little in taxes. Are they all incorrect?

How Does Apple Avoid Taxes? - Forbes

How Google and Apple Make Their Taxes Disappear
http://www.newsweek.com/2014/12/26/how-google-and-apple-make-their-taxes-disappear-291571.html

How Apple Sidesteps Billions in Taxes
http://www.nytimes.com/2012/04/29/b...x-states-and-nations.html?pagewanted=all&_r=0

You Pay Taxes, and Rich Corporations Don't
http://www.cnn.com/2014/07/16/opinion/pease-tax-avoidance

 

[Andre1969]

Isn't there an old saying that corporations don't pay taxes...people pay taxes? Don't the corporations simply raise prices when faced with higher taxes?

 

[eta2020]

For income between FIRE age and age 65 optimally I would like to get about 55k in Qualified Equity Dividends and lets say 50k in cash per year.

That would give me 105k of income with 0% Federal taxes and Obamacare subsidies .

 

[simple girl]

For income between FIRE age and age 65 optimally I would like to get about 55k in Qualified Equity Dividends and lets say 50k in cash per year.

That would give me 105k of income with 0% Federal taxes and Obamacare subsidies .

Are qualified dividends not counted in your MAGI?

 

[pb4uski]

No, all dividends are included in AGI and MAGI.

 

[samclem]

For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.

 

[daylatedollarshort]

For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.

And the 400% is O-MAGI, so these deductions, like HSAs, can give some added headroom:

http://laborcenter.berkeley.edu/pdf/2013/MAGI_summary13.pdf

 

[simple girl]

For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.

Thanks - I was thinking about cost-sharing for the OOP max (not subsidies for the premiums) and knew that was around $39K for a 2 person household.

 

[Davis65]

I don't understand how you linked an evening of hopped up fun with my buddies to a discussion of the IRC and our federal government's fiscal policies. Maybe you can enjoy a beer at my house some time and expand on that?

Fuego, I'm sorry for singling you out, and I would gladly join you for a beer (I'd even bring a six-pack with me) if I came to NC. I was reacting to the general tone of some of the discussion which is "isn't it cool that I can avoid paying tax to the federal government?" I think we have to keep in mind that we are the government. It may not feel like that a lot of the time, but if some people don't pay tax, others have to pay more. It's not like the government is going to make do with less. Either tax rates will go up, or we'll pass bigger deficits to pass onto the children and grandchildren. Someone has to pay.

The guy who excuses himself for the restroom as everyone is draining their glasses is pushing off the cost of the next round to other people. I recognize that a big part of the problem are the loopholes in the Tax Code that allow people with high income to avoid paying anything, while forcing working people to continue paying. But taking advantage of the loopholes shouldn't be a source of pride, as it sounds like it is to some people.

While avoiding federal tax doesn't mean these people are able to avoid state and local tax, it does mean that these people are not paying anything for the services that the federal government provides. Economists call this a "free-rider problem". there is another word that begins with "free" that some peole might use, but I'll leave it out of this discussion.

Sorry if I sound cranky about this, but it does irk to pay tax while people with much higher incomes brag about not paying tax.

 

[imoldernu]

Being poor helps... no Federal or State taxes since 1990. Funny... don't feel poor. Just following the rules and being honest.
The "tax" part may change a bit as we begin to withdraw taxable income. Even at that, taxes will be minimal.

Surprising how much thngs like homestead exemptions and tax freezes and available assistance to seniors has helped. All legal and provided by law... not as welfare, but just by understanding the rules. As state laws have tightened, many cutbacks, but many stil exist. Transpoortation subsiidies, free cell phones, medical prescription assistance, reduced drivers license costs and free legal help.. Surprisingly many of these benefits do/did not take into consideration net worth, but income. Some years ago, I checked to see the participation level, and found that less than 20% of those who were elegible, actually applied.

The other part of "no surprises" comes from Medicare and Social Security,which have served us so well over the later years. Not only has it made life feel more secure, but in all of those years, not a single problem of any kind.

 

[RunningBum]

Davis, I see this as people sharing money saving strategies. I stand by my earlier comment that the goal should be to have the most after-tax return, not to pay the fewest taxes possible. The primary reason is to get the best return, but I also don't have a problem paying my share of taxes--but I'll use every legal method to reduce what I pay.

As far as the drink analogy, many of us had been buying a few extra rounds for many years while working. If I've paid for more than my share of rounds over the years, I'm not going to apologize for walking away from the table once in awhile before the check comes. I've already paid a LOT of taxes to both the states I've lived in and the feds.

 

[pb4uski]

+1 for many years while I was working I paid more in taxes than the average person makes (gross) so I have no reservations of "taking advantage" of the code and paying relatively little taxes now.

 

[audreyh1]

Fuego, I'm sorry for singling you out, and I would gladly join you for a beer (I'd even bring a six-pack with me) if I came to NC. I was reacting to the general tone of some of the discussion which is "isn't it cool that I can avoid paying tax to the federal government?" I think we have to keep in mind that we are the government. It may not feel like that a lot of the time, but if some people don't pay tax, others have to pay more. It's not like the government is going to make do with less. Either tax rates will go up, or we'll pass bigger deficits to pass onto the children and grandchildren. Someone has to pay.

The guy who excuses himself for the restroom as everyone is draining their glasses is pushing off the cost of the next round to other people. I recognize that a big part of the problem are the loopholes in the Tax Code that allow people with high income to avoid paying anything, while forcing working people to continue paying. But taking advantage of the loopholes shouldn't be a source of pride, as it sounds like it is to some people.

While avoiding federal tax doesn't mean these people are able to avoid state and local tax, it does mean that these people are not paying anything for the services that the federal government provides. Economists call this a "free-rider problem". there is another word that begins with "free" that some peole might use, but I'll leave it out of this discussion.

Sorry if I sound cranky about this, but it does irk to pay tax while people with much higher incomes brag about not paying tax.

I think you're ignoring that folks who have amassed enough wealth to quit working and as a result have low income from tax efficient investments have already paid a huge amount in taxes. Folks who have amassed large amounts in tax deferred funds will pay plenty of income taxes as they withdraw that money to live off of in retirement. Income from investments is taxed differently from earned income in this country so it's not surprising to see retirees living off their investments have a greatly reduced tax rate. And some people choose to live on less and pay less taxes, and there is nothing wrong with that.

 

[eta2020]

For 2014, the 400% FPL MAGI for a 2 person household is $62,920 (in the continental US), so a $55K income (from dividends or any other taxable source) would still qualify for a not-inconsiderable subsidy.

Exactly!
That is what I meant. In fact it makes couple eligible to qualify for quite nice subsidy. While since it is qualified dividend you end up with no Federal Tax (If you don't have any other income)

 

[eta2020]

Davis, I see this as people sharing money saving strategies. I stand by my earlier comment that the goal should be to have the most after-tax return, not to pay the fewest taxes possible. The primary reason is to get the best return, but I also don't have a problem paying my share of taxes--but I'll use every legal method to reduce what I pay.

As far as the drink analogy, many of us had been buying a few extra rounds for many years while working. If I've paid for more than my share of rounds over the years, I'm not going to apologize for walking away from the table once in awhile before the check comes. I've already paid a LOT of taxes to both the states I've lived in and the feds.

Well for patient ones close to 100% equities is not only Tax efficient (qualified dividends) it is also generates best return.

 

[daylatedollarshort]

It's not like the government is going to make do with less. Either tax rates will go up, or we'll pass bigger deficits to pass onto the children and grandchildren. Someone has to pay.

Sure they could cut spending. Look at the U.S. budget side by side by category compared to other first world countries. Our defense budget in 2011 was more than the next top 13 nations combined:

America’s staggering defense budget, in charts - The Washington Post

As far as taxes are you talking lifetime or one year periods? Many of us paid more than our fair shares in the W2 years and will again once RMDs kick in.

When we go out with friends and family usually we all haggle over wanting to pick up whole tab - everyone usually offers to pay the entire bill. I don't think there is a direct comparison to paying for dinner for close friends or paying more in taxes to help offset Google and Apple's tax breaks. It's Apples and oranges.

 

[audreyh1]

Well for patient ones close to 100% equities is not only Tax efficient (qualified dividends) it is also generates best return.

Sure, but to tap into that portfolio to live off of, you have to sell a little, and the realized gains are taxable once your total income (AGI) exceeds $73K for married filing jointly.

But yes, if your only source of income is long-term realized gains and qualified dividends, you are tax-free for incomes under around $95K. That's how our tax code works.

 

[eta2020]

Sure, but to tap into that portfolio to live off of, you have to sell a little, and the realized gains are taxable once your total income (AGI) exceeds $73K for married filing jointly.

But yes, if that was your only source of income and it paid no dividends, you are tax-free for incomes under around $90K. That's how our tax code works.

I don't need to sell anything. I just need about 2 million in equities. That will pay 50k in dividends with minimal variation during market ups and downs and with dividend growth most likely exceeding inflation rate.

 

[audreyh1]

I don't need to sell anything. I just need about 2 million in equities. That will pay 50k in dividends with minimal variation during market ups and downs and with dividend growth most likely exceeding inflation rate.

Same difference - I was still modifying my post from above. Either way - long-term realized gains or qualified dividends or a combination of the two.