Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 03-19-2010, 11:54 AM   #21
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by Gone4Good View Post
We had a thread on this already.

Investment income is already massively tax advantaged, even after the coming proposed changes. This increase won't have all of the dire consequences forecast.
Investment income includes small businesses that creat 80% of all new jobs created...any extra tax on capital will just slow jobs growth down, and keep us in economic turmoil for a lot longer.

Oh well, at least there will be a HUGE surge in govt jobs........

Quote:
Meanwhile deficit scolds should be happy that for the first time in at least a decade the government is proposing to actually pay for its policies (including the tax cuts that lowered rates to their current level).
Show me where the govt has DECREASED its spending in the past 30 years..........
__________________

__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 03-19-2010, 11:56 AM   #22
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
And for what it's worth, the worst "tax hike" I see in the plan isn't specifically a tax per se, but the removal of the subsidy for buying health insurance in the solidly middle class range of about $50-80K in annual income. If you have to buy your own policy and don't have a Megacorp plan, the loss of the subsidy amounts to something like 15 cents on every incremental dollar earned in this income range. That makes the effective "tax" rate on a marginal dollar earned even higher than for those earning over $250K -- combined with a 25% marginal federal income tax rate, the federal tax and loss of subsidy would effectively take 40 cents on the dollar. If you're self-employed as well and paying both "halves" of SS and Medicare taxes it "feels" like more than a 50% tax rate on self-employment income even on moderate taxable incomes in the $50-80K range.
__________________

__________________
"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)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Old 03-19-2010, 12:21 PM   #23
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,471
Quote:
Originally Posted by Gone4Good View Post
According to business week it starts in 2013 . . . so hurry up and harvest those gains!
Hey - thanks for the detail!

No problem - already harvested all the gains planned this year. Any additional harvesting this year will just be gravy (i.e. due to more than expected price appreciation).

Audrey
__________________
audreyh1 is offline   Reply With Quote
Old 03-19-2010, 12:44 PM   #24
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by FIRE'd@51 View Post
For a single person after the 250K exclusion, my math says the additional tax would be 21.75K ( 2.9% of 750K), and that's on top of 150K from the 20% capital gains tax, and this is assuming you had no other unearned income that would be subject to this tax. For marrieds it would be 14.5K due to the bigger exclusion. As I'm sure you know (I believe you have told us you live in northern NJ), a fairly modest home in the NYC suburbs (e.g. Westchester County) could easily have this kind of gain if the home had been purchased 20-30 years ago.

Not challenging your politics here - just trying to get the math straight .
For a single person wouldn't it be a $450K exclusion ($250K for the home and then $200K in gains).

Most people don't live in Westchester. And for those who do, 3.8% on a gain above some large number ($450-$750,000) isn't a great hardship.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-19-2010, 12:48 PM   #25
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by FinanceDude View Post
Investment income includes small businesses that creat 80% of all new jobs created...
Not necessarily.

Most small businesses are taxed at the individual income tax rate (check out Form C). Not only do they pay at the individual income tax rate, but they also pay an additional 15.3% in social security tax.

Corporate shareholders get the plumb tax treatment while mom and pop businesses get soaked.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-19-2010, 12:53 PM   #26
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by FIREdreamer View Post
Ordinary dividends are already taxed at the normal rate, only qualified dividends are taxed at a lower rate (And I didn't say anything about capital gains being taxed at a higher rate than earned income). But, it is my understanding that qualified dividends will be taxed at normal rates too starting in 2011, when the Bush tax cuts expire for high earners. So all dividends (except tax-exempt dividends) should be taxed as ordinary income starting next year (again for high earners only). So someone in the top tax bracket who currently pays 15% in taxes on qualified dividends will pay at least 39.6% in taxes on those same dividends starting in 2011 and 42.5% in taxes (39.6% federal income tax + 2.9% Medicare tax) on those dividends whenever the proposed Medicare tax goes into effect. That would be one hell of a tax increase.
You're absolutely right on the ordinary dividends. But I don't think so on the 2011 numbers. The Tax Foundation shows Long-term Capital Gains rates in 2011+ at 20%.**

** edit: You're right on both counts. The LT Gains rate is 20% in 2011 but the qualified dividend reverts to ordinary income rates under current law.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-19-2010, 01:00 PM   #27
Moderator Emeritus
 
Join Date: May 2007
Posts: 11,044
Quote:
Originally Posted by Gone4Good View Post
You're absolutely right on the ordinary dividends. But I don't think so on the 2011 numbers. The Tax Foundation shows 2011 Long-term Capital Gains rates at 20%.
Why do you keep talking about capital gains? I do not dispute that the LTCG rate will only increase to 20% next year. I never said otherwise. What I said is that qualified dividends that are currently taxed at the LTCG rate will be taxed at the ordinary income tax rate starting in 2011 (for high earners).
__________________
FIREd is offline   Reply With Quote
Old 03-19-2010, 01:03 PM   #28
Thinks s/he gets paid by the post
 
Join Date: Jan 2004
Posts: 2,049
Quote:
Originally Posted by Gone4Good View Post
Meanwhile deficit scolds should be happy that for the first time in at least a decade the government is proposing to actually pay for its policies (including the tax cuts that lowered rates to their current level).
Since most "fiscal conservatives" keep dodging the spending question, it seems the only answer is to raise taxes. Pay-as-you-go is the only sane response we've heard to our fiscal crisis.
__________________
eridanus is offline   Reply With Quote
Old 03-19-2010, 01:13 PM   #29
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by Gone4Good View Post
For a single person wouldn't it be a $450K exclusion ($250K for the home and then $200K in gains).
Nope. Did you read the article, or the quote from it in my post #7 above? It's not a marginal tax. Once triggered, it applies to all unearned income. That's what potentially makes it onerous for middle class folks.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 03-19-2010, 01:44 PM   #30
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
FinanceDude's Avatar
 
Join Date: Aug 2006
Posts: 12,484
Quote:
Originally Posted by eridanus View Post
Since most "fiscal conservatives" keep dodging the spending question, it seems the only answer is to raise taxes. Pay-as-you-go is the only sane response we've heard to our fiscal crisis.
As a fiscal conservative, I will agree that when elected, almost always so-called "fiscal conservatives" go into a coma and start doing the opposite. However, am I supposed to believe that a Congress that passed the biggest pork-laden bill in recent memory are suddenly going to "buckle down" and "pay-as-you-go"...........I doubt it!

As far as the health care debate goes, this is not about health care, and most folks that are informed know that..........
__________________
Consult with your own advisor or representative. My thoughts should not be construed as investment advice. Past performance is no guarantee of future results (love that one).......:)


This Thread is USELESS without pics.........:)
FinanceDude is offline   Reply With Quote
Old 03-19-2010, 01:52 PM   #31
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by FIRE'd@51 View Post
Nope. Did you read the article, or the quote from it in my post #7 above? It's not a marginal tax. Once triggered, it applies to all unearned income. That's what potentially makes it onerous for middle class folks.
Quote:
Originally Posted by FIRE'd@51 View Post
From the article:

Earning even a single dollar more than $200,000 in adjusted gross income will slap the 2.9 percent tax on every dollar of a taxpayer's investment income, creating a huge marginal rate spike that will most hurt middle-class earners, as opposed to the super rich, says the Journal.

Looks like the sale of a home in a high-priced area could trigger this tax.
Except that isn't how the law is written. Now that Murdoch has taken over the paper it's starting to look like the WSJ is adopting the reporting habits of Fox News. Sad, and unfortunate.

But here's the text . . .


Quote:
2 ‘‘SEC. 1411. IMPOSITION OF TAX.
3 ‘‘(a) IN GENERAL.—Except as provided in subsection
4 (e)—
5 ‘‘(1) APPLICATION TO INDIVIDUALS.—In the
6 case of an individual, there is hereby imposed (in ad
7 dition to any other tax imposed by this subtitle) for
8 each taxable year a tax equal to 3.8 percent of the
9 lesser of—
10 ‘‘(A) net investment income for such tax
11 able year, or
12 ‘‘(B) the excess (if any) of—
13 ‘‘(i) the modified adjusted gross in
14 come for such taxable year, over
15 ‘‘(ii) the threshold amount.
The threshold amount is the $250K for married folks and $200K for singles. So if a single person has $201K in AGI, the tax applies to the LESSER of net investment income or ($201K - $200K). So in this case, only $1K gets taxed at 3.8%. And with housing gains, because between $250K and $500K is excluded from AGI, this is a pretty high threshold.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-19-2010, 02:47 PM   #32
Full time employment: Posting here.
 
Join Date: May 2008
Posts: 589
Very interesting, that changes the situation a lot. I hate sleazy reporting that misreports key facts. This drastically lowers my opinion of the WSJ, it really does look like they are becoming like Fox News (and Yahoo news).

The biggest concern then (for 99% of people), would be capital gains on their houses/property that exceed 250k for singles/500k for married, AND exceeds further exceeds their basis in the property.

I think people have been completely ignoring basis when discussing housing. In reality, taxable gains work like this Gain - Basis - Single/Married Exclusion = Taxable gain/Investment Income.

Take a $1M dollar house bought by a couple it was bought for $400K (basis), they then apply their $500K exclusion, and end up with only $100K (capital gain). This may be enough to push them up to the 250K mark, if they have 150K of other income, but this is only a maybe. We would have to be talking massive capital gains in order to trigger this tax. This tax could also be avoided (such as by those in California), by not selling the house and letting someone inherit it upon their death, which would result in their basis getting stepped up to its present worth.

The only major effect I can see from this, is a slight slow-down on the prices of homes in California/Manhattan, and some other highly inflationary real estate areas.
__________________
plex is offline   Reply With Quote
Old 03-19-2010, 04:22 PM   #33
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,277
Thanks gone4good... I had not read the story.. nor anything else on this, but I would not have believed that they would tax everything up to $250K (or $200K)... just by being over $1... it does not make sense and no politician (IMO) would vote for it.. that is the fastest way to get booted out of office, and these guys are not that stupid...



I do think that ziggy has an interesting point... but what are you going to do When you subsidize something, taking it away by making more money does cost someone... but I would rather see this than try and pay for everybody's insurance...

Then again, this is already in the tax code for a number of items.. so another is not any different.
__________________
Texas Proud is online now   Reply With Quote
Old 03-19-2010, 04:36 PM   #34
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by Texas Proud View Post
I do think that ziggy has an interesting point... but what are you going to do When you subsidize something, taking it away by making more money does cost someone... but I would rather see this than try and pay for everybody's insurance...
It is an argument for single payer . . . and not the only, or even best, one.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-19-2010, 04:55 PM   #35
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Jun 2005
Posts: 8,619
So if I am upper middle class with an AGI of $195K, then I have nothing to worry about. Sounds good to me.
__________________
LOL! is offline   Reply With Quote
Old 03-19-2010, 04:59 PM   #36
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,282
Quote:
Originally Posted by Gone4Good View Post
We had a thread on this already.
Hey, I remember that thread!

Quote:
Investment income is already massively tax advantaged, ...
Hey, I recall coming to a far different conclusion!

Like, an investment can lose buying power, yet still be taxed at a gain. With advantages like that, who needs enemies


-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 03-19-2010, 05:00 PM   #37
Thinks s/he gets paid by the post
FIRE'd@51's Avatar
 
Join Date: Aug 2006
Posts: 2,315
Quote:
Originally Posted by Gone4Good View Post
Except that isn't how the law is written. Now that Murdoch has taken over the paper it's starting to look like the WSJ is adopting the reporting habits of Fox News. Sad, and unfortunate.

But here's the text . . .


The threshold amount is the $250K for married folks and $200K for singles. So if a single person has $201K in AGI, the tax applies to the LESSER of net investment income or ($201K - $200K). So in this case, only $1K gets taxed at 3.8%. And with housing gains, because between $250K and $500K is excluded from AGI, this is a pretty high threshold.
I'm not trying to defend the WSJ, but note that their article was dated March 17. Also, the rate they used was 2.9%, not 3.8%. It appears there have been changes made by the House to Obama's recommended additions to the Senate bill, and these changes were unavailable at the time the WSJ published their article, so the WSJ based their article on Obama's recommendations. Whether the application of the rate, once triggered, applied to all investment income, or just that over 200K (or 250K) was in Obama's recommendation, or the WSJ simply got it wrong, I don't know.
__________________
I'd rather be governed by the first one hundred names in the telephone book than the Harvard faculty - William F. Buckley
FIRE'd@51 is offline   Reply With Quote
Old 03-19-2010, 05:41 PM   #38
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Gone4Good's Avatar
 
Join Date: Sep 2005
Posts: 5,381
Quote:
Originally Posted by ERD50 View Post
Hey, I recall coming to a far different conclusion!

Like, an investment can lose buying power, yet still be taxed at a gain. With advantages like that, who needs enemies


-ERD50
Sure, if you look at a very specific case you can come to that conclusion. But you act as if that specific case was the norm, which it isn't. You also ignore the benefits of tax deferral on appreciating assets. And you ignore tax advantages of dividends. So yes, in an isolated case designed specifically to make a point it is possible to construct a scenario where a capital asset is treated worse than earned income.
__________________
Retired early, traveling perpetually.
Gone4Good is offline   Reply With Quote
Old 03-19-2010, 05:52 PM   #39
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Sep 2005
Location: Northern IL
Posts: 18,282
Quote:
Originally Posted by Gone4Good View Post
Sure, if you look at a very specific case you can come to that conclusion.
No, I used a specific case to help illustrate the point. In *any* case, inflation is a very real factor that isn't considered in the Cap Gains tax calculation. And since the 'norm' is positive inflation, I don't think the example is outside the norm in any way.

-ERD50
__________________
ERD50 is online now   Reply With Quote
Old 03-20-2010, 01:48 AM   #40
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 13,277
Quote:
Originally Posted by Gone4Good View Post
It is an argument for single payer . . . and not the only, or even best, one.
With all the fraud they are showing on the Fleecing of America series on the news.... I have a great one against single payer...

I do not think the number is right... but they suggested that the total fraud over the next decade will be 1 trillion... that sounds way to high to me...

One of the prosecutors said he could use IIRC all 277 attorneys working 24/7 and still not get to all of the fraud cases in Florida.... so maybe when you factor in the cost of prosecuting and the actual fraud and putting them in prison (if they even do any time) maybe it could approach that number... I still think not though....
__________________

__________________
Texas Proud is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Anthem huge rate hike free4now FIRE and Money 21 05-03-2010 06:35 PM
Is the worst behind us? REWahoo FIRE and Money 32 02-26-2009 02:51 PM
Dr. Doom - The worst is yet to come shotgunner FIRE and Money 20 10-27-2008 09:08 PM
Your worst moments / worst failures? Nords Other topics 28 07-13-2007 12:03 AM
worst accident you ever had mathjak107 Other topics 6 09-04-2006 05:34 PM

 

 
All times are GMT -6. The time now is 12:11 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.