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Old 02-26-2009, 07:14 PM   #21
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A young women in my office said she and her friends have been discussing how to pay for Obama's government programs and have concluded that the most effective way of funding everything is simply to have everyone with > $5 million of wealth contribute the excess to the government. I kid you not--she really thinks this makes sense.

Who knows, maby we will get there. Many the number will be $10 mil or maby it will be $2 mil. There are really people that believe they can just create wealth by pulling a lever in a voting booth.
If I was an American who had that kind of money and I believed that that outcome would come to pass, I'd be long gone.

Disclaimer: I'm not a Merckin, I don't have that kind of $ and I don't believe it will happen.
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Old 02-26-2009, 07:42 PM   #22
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I guess they are re-incentivizing SAH(M/D). Pay higher taxes and still have to pay a fortune for Child care, no thank you... (I'm not close to that number yet, but we're still very young)
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Old 02-26-2009, 07:49 PM   #23
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I guess they are re-incentivizing SAH(M/D). Pay higher taxes and still have to pay a fortune for Child care, no thank you... (I'm not close to that number yet, but we're still very young)
You know, that wouldn't surprise me, seriously.

Social Security, as I mentioned the other day, is believed by many as being originally motivated by getting older folks out of the work force to create more job openings for others and reduce involuntary unemployment.

Perhaps if you make it punitive to be a two-income household -- especially with two healthy incomes -- maybe this would be a financial incentive to have a stay-at-home parent.

The only problem with that argument is that in the days of low job security, being a one-income couple puts you at much greater risk of total ruin in the case of a job loss. For some people, especially in this economy, that might be enough of an incentive.
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Old 02-26-2009, 09:03 PM   #24
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The proposed higher income penalty is for married filing jointly at $250k and for single at $200k. I agree if you are single and you earn $200k, you can be recognized as having an upper income. If both spouses work and earn $125k each, especially in high cost of living areas, they are not rich at all. Full text of the budget outline is here:

http://www.whitehouse.gov/omb/asset.aspx?AssetId=793

The three tax increase proposals are on page 129.

1. reinstate the 36 percent and 39.6 percent rates for those taxpayers earning over $250,000 (married) and $200,000 (single)
2. reinstate the personal exemption phaseout and limitation on itemized deductions for those taxpayers earning over $250,000 (married) and $200,000 (single)
3. Impose 20 percent rate on capital gains and dividends for those taxpayers earning over $250,000 (married) and $200,000 (single)
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Old 02-26-2009, 09:26 PM   #25
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As DW and I are within 60k of this number this year (projected) we are:

a) extremely grateful to be so gainfully employed but

b) more fearful of all the current deductions etc. that have faded away on us. We just did our taxes and instead of a fat return, this year we would have had to write a check had we not plunked money into DW's SEP IRA. So while the higher tax bracket at $250k will probably get us soon (we're only in our early 30's) I think all the phase outs and AMT is what's really going to hurt us, since after all, these brackets are on the margin.

We live in a high cost area where even now 300k doesn't get you much of a house, and 600k isn't that much nicer.
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Old 02-26-2009, 09:41 PM   #26
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Very much the same for me. There is a cost to being wary of capital gains though- I at least tend to leave profitable but arguably overpriced positions in place to avoid realizing gains. Then Kapow! No more gains to worry about.

Ha
By far, my biggest investment boo-boo's have resulted from waiting to sell equities or waiting to exercise company granted stock options for the purpose of postponing paying income tax on the gains. In 2006, delaying sales or exercises that I would have made other than for my irrational fear of paying the taxes resulted in painful losses in 2007 and 2008.

I wish I had the opportunity now to sell/exercise and pay those taxes!
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Old 02-26-2009, 09:58 PM   #27
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The proposed higher income penalty is for married filing jointly at $250k and for single at $200k. I agree if you are single and you earn $200k, you can be recognized as having an upper income. If both spouses work and earn $125k each, especially in high cost of living areas, they are not rich at all. Full text of the budget outline is here:

http://www.whitehouse.gov/omb/asset.aspx?AssetId=793

The three tax increase proposals are on page 129.

1. reinstate the 36 percent and 39.6 percent rates for those taxpayers earning over $250,000 (married) and $200,000 (single)
2. reinstate the personal exemption phaseout and limitation on itemized deductions for those taxpayers earning over $250,000 (married) and $200,000 (single)
3. Impose 20 percent rate on capital gains and dividends for those taxpayers earning over $250,000 (married) and $200,000 (single)
Help..... I can't find that info on page 129 which is a table of estimated tax receipts over time. Am I missing it there?
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Old 02-26-2009, 10:38 PM   #28
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Help..... I can't find that info on page 129 which is a table of estimated tax receipts over time. Am I missing it there?
Page 129 of the PDF. Page number 123 in the document. In the middle, starting with "Upper-income tax provisions dedicated to deficit reduction." It shows how the three provisions will help reduce the deficit over the next ten years, totaling $637 billion. It took me a while to find the info in the big document.
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Old 02-26-2009, 10:51 PM   #29
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Page 129 of the PDF. Page number 123 in the document. In the middle, starting with "Upper-income tax provisions dedicated to deficit reduction." It shows how the three provisions will help reduce the deficit over the next ten years, totaling $637 billion. It took me a while to find the info in the big document.
Thanks, found it! Looks like Pres Obama does believe in the so-called marriage penalty! A married couple filing jointly each making $200k will get nailed while two singles making $200k each sail over the horizon untouched by the new plan.

The other item I've been trying to understand and have been finding contradicting info on the web concerns the expiration of the Bush tax cuts. Some are saying that Obama will let them expire for everyone so that even folks well below the published "high imcome limits" will be paying more. But technically they're not tax increases, just the expiration of the Bush tax cuts. Then, he adds increases for those above the high income limits on top of that.
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Old 02-26-2009, 11:02 PM   #30
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Some are saying that Obama will let them expire for everyone so that even folks well below the published "high imcome limits" will be paying more. But technically they're not tax increases, just the expiration of the Bush tax cuts. Then, he adds increases for those above the high income limits on top of that.
That's not true. It says earlier in the document how previous budgets assume the Bush tax cuts will expire, AMT will not be patched, and cost of wars are not included, and how this budget does not make those assumptions.
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Old 02-26-2009, 11:08 PM   #31
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Hmmm...I thought higher taxes had no impact on behavior. Is it possible that higher tax rates could actually produce less revenue

Really, he's going to walk away from a $250k income because he'd have to pay what, maybe $10k more in taxes?
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Old 02-27-2009, 01:32 AM   #32
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That's not true. It says earlier in the document how previous budgets assume the Bush tax cuts will expire, AMT will not be patched, and cost of wars are not included, and how this budget does not make those assumptions.
Glad to hear that. Lots of folks on the net trying to sell the idea that Obama is going to let the Bush tax rates expire raising everyone's taxes, then increase the taxes of families earning more than $250k beyond that. That way he wouldn't be raising the taxes of the below $250k crowd, only letting their tax cuts expire.......

Lack of detail as to what the new numbers will be really leads to speculating and rumors. Wish he and his team would get the details out........
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Old 02-27-2009, 09:17 AM   #33
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Really, he's going to walk away from a $250k income because he'd have to pay what, maybe $10k more in taxes?
No. I am sure people will continue to work at full capacity no matter how much is extracted from them. Why not take 100% since it obviously doesn't reduce productivity?
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Old 02-27-2009, 10:27 AM   #34
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Really, he's going to walk away from a $250k income because he'd have to pay what, maybe $10k more in taxes?
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No. I am sure people will continue to work at full capacity no matter how much is extracted from them. Why not take 100% since it obviously doesn't reduce productivity?
Right.

This is an argument that often gets thrown out to support raising taxes on high income people (while the bottom 50% of filers pay less than 3% of the total fed income tax). But it tries to look at it as an all-or-nothing deal. Real life is not like that.

The fact is, the law of Supply and Demand has not been repealed. And it is a slope, not a brick wall. So yes, lowering the value of higher income will reduce the demand to earn that higher income. That is a fact, and it will and does happen. It can't be any other way.

I guess explanade doesn't look at the price of goods he/she buys, and do comparison shopping because, you know, they don't charge that much more in one store versus another. But I'm sure that's different.

BTW - I'm in favor of progressive tax rates. But I won't defend them with non-sensical arguments. And I also think it all gets a little silly to try to evaluate these marginal rates and such - our tax code is so complex with so many loopholes, if, and, buts that no one knows what anyone pays.

Trying to determine how much tax someone pays based on AGI is about as meaningful as trying to determine how much gas someone will used based on the mpg rating of their car (ooops, the govt thinks you can do that too!). Too many other factors at play.


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Old 02-27-2009, 10:34 AM   #35
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Really, he's going to walk away from a $250k income because he'd have to pay what, maybe $10k more in taxes?
Maybe most people wouldn't set it at that level, but everyone has their own thresholds over which they'd say "what's the use" of continuing to grind it out in the workforce.

We may all set that bar at different heights, but one thing is clear: the more the fruits of your labor are taxed away from you, the closer everyone is to deciding that laboring isn't worth it any more. At some point we could reduce the incremental value of work to the point where it seems like only a sucker (or someone who loves what they do) keeps working.

And frankly, the more we see the responsible bail out the irresponsible, the more we see producers forced to give their production to consumers, the more we take from the ant and give to the grasshopper, the more people we'll see deciding to become the grasshopper. And when that reaches a critical mass, IMO we're doomed.

I'm not against a safety net, especially in times like these -- but I am against a general shift in mentality that increasingly taxes production and heavily subsidizes (and therefore indirectly encourages) non-production. Tax increases on the successful and the increased means-testing of benefits and programs, I fear, could do just that.
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Old 02-27-2009, 10:50 AM   #36
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Am I the only one who thinks that discussing the new taxes is a distraction from the real issues? The general media gets side tracked by this because it allows others to frame the issues. ("Allow me to frame the issues and I will win the argument.")

The 2010 Spending is 3.552 Trillion - the deficit is 1.171* trillion - 63 Billion is an insignificant amount.



http://www.whitehouse.gov/omb/assets...ry_Tables2.pdf

* This is probably an understated amount.
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Old 02-27-2009, 10:53 AM   #37
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Am I the only one who thinks that discussing the new taxes is a distraction from the real issues? The general media gets side tracked by this because it allows others to frame the issues. ("Allow me to frame the issues and I will win the argument.")

The 2010 Spending is 3.552 Trillion - the deficit is 1.171* trillion - 63 Billion is an insignificant amount.
This is a different issue, but in the end probably more germane. Anyone who loves their kids and grandkids and wants to leave them a better world and a better chance to succeed should be outraged, IMO, at what we've been doing to them. We've done the partying with borrowed future prosperity, and they suffer the hangover.
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 02-27-2009, 10:59 AM   #38
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This is a different issue, but in the end probably more germane. Anyone who loves their kids and grandkids and wants to leave them a better world and a better chance to succeed should be outraged, IMO, at what we've been doing to them. We've done the partying with borrowed future prosperity, and they suffer the hangover.
But I want stock and housing prices to go up, dang it. And where's my SS? And don't touch my pension! And don't raise my taxes! And don't cut my programs...
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Old 02-27-2009, 11:39 AM   #39
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I'm just pointing out the math.

Because of an increase to the marginal rates, the $250k household would pay a few thousand more in taxes.

Does that really break the camel's back and get people to say, "Screw it, I'm not going to work for the Man anymore" and walk away from that income?

I think most Americans, who earn maybe a fifth of that income, would love to have that problem.

As for the merits of the tax policy, you can research the rates for the highest brackets over the history of this country and you'll see that the country managed to grow despite much higher rates.

The "taxes are going to kill the incentive to work and create jobs" warning has been cried far too often.
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Old 02-27-2009, 11:54 AM   #40
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I'm just pointing out the math.

Because of an increase to the marginal rates, the $250k household would pay a few thousand more in taxes.

Does that really break the camel's back and get people to say, "Screw it, I'm not going to work for the Man anymore" and walk away from that income?

I think most Americans, who earn maybe a fifth of that income, would love to have that problem.

As for the merits of the tax policy, you can research the rates for the highest brackets over the history of this country and you'll see that the country managed to grow despite much higher rates.

The "taxes are going to kill the incentive to work and create jobs" warning has been cried far too often.
With the proposed phaseout of itemized deductions, top marginal rates in CA will approach 60%. If the FICA cap is removed, the rates will be closer to 70% (remember that there is an employer portion to FICA). There is no question that people who have control over their earnings (think doctors and the self-employed) may decide that the additional 30 cents on the dollar is not worth the effort.

Is there no point at which you would say "enough" or (as long as iots not your money) are you willing to hand over an unlimited amount of wealth to the government?
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