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Old 08-01-2011, 11:33 AM   #41
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Not trying to be contentious, simply clarifying the definition of "free".
You're absolutely right! But that is why their taxes are so high...to fund all of the government programs.
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Old 08-01-2011, 12:10 PM   #42
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I'm going to try to look at this beyond the purview of politics and current events and look at it from the standpoint of history, sociology, political science and philosophy.

I guess I'd go beyond discussion of the word "fair" and suggest a different way to look at it -- what's in the best interests of the long-term sustainability of our system and of providing economic and political stability to the republic.

To me that's at least part of the justification of a progressive income tax; regardless of the "fairness" issue it seems to me that many nations (and empires) have been been toppled because the distribution of wealth became too concentrated. Witness France in 1789, Russia in 1917 and Cuba in 1959 among other examples (the latter two into much more despotic regimes). To that end, there is at least some incentive for the upper classes to want to avoid creating an "angry peasants with torches and pitchforks" situation where the concentration of wealth -- the gap between haves and have-nots -- becomes intolerably large for the masses.

Now we aren't there yet, but the shrinking of the middle class -- with more of these folks becoming "have nots" than "haves" -- is still a cause for concern. I'm not suggesting massive tax hikes on "the rich" here, but I do think "the rich" should at least factor in the stability and security of the current economic and political system in formulating their opinions on where tax rates should be. Beyond a certain point, lower may not be better if it results in a larger and larger underclass growing more and more resentment.

It may or may not be "fair" to raise taxes on those of significant means. But to *some* degree, it might -- *might* -- help defuse a potentially explosive situation if more and more of the middle class keeps getting knocked down into the class of the more desperate folks. Because if we reach a critical mass of folks who feel they have little or nothing to lose.......
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Old 08-01-2011, 12:33 PM   #43
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Old 08-01-2011, 12:48 PM   #44
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Who's taxes are so high. The rich. I don't think so. Taxes are at the 50 - 60 year low for the wealthy. Our Wealthy have the lowest tax rate in basically the world. So who's who's taxes are so high.

to fund all the government programs? If you remove all the governement programs except Military, Social Security, Medicare, and the debt, there would probalby only need to be a 1% income tax. If we understand that Social Security and Medicare should be self sufficent, that leaves the military and the debt causing the bulk of our need for taxes.

If you start to derode these other government programs, are you going to reduce the FBI, the air trafic controlers, the security at our airports, at our boarders.

Are you going to get rid of unemployment (which is also a special tax paid for mostly by corporations, not the rich) insurance.

So I really don't believe that our rich is paying for all these unessarary programs and that they are paying too much.


During the late 90's we had a higher income tax and we had a very healthy economy. Rich were making more money in the market place to cover any extra taxes they might of been paying. We were actually having a budget surplus.

But early in the 00's it was decided that if we lower the taxes at the upper level of income, this would create more jobs and a even stronger economy reducing the debt even more. Of course we call can see that this did not work and help lead us to the situation we are in today.

If we are truely insterested in reducing the debt, we first must concentrate on increasing employment.

I find it funny calling the rich Job Creaters. I have in that position and if you give me more mony I can not spend it on anything else, and there are more people in much better positions then I am. If the gain more in the market place are they going to buy things. NO. They will put it in the stock market. Will this cause the economy to get stronger. NO. It might cause stocks to go up, but not because the companys are actualy doing something productive. This will end up creating a bubble and ultimately lead to yet another crash.





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You're absolutely right! But that is why their taxes are so high...to fund all of the government programs.
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Old 08-01-2011, 12:56 PM   #45
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And for those of you ready to call me a thief, I've lived in Texas since 82, and my wife was born and lived there all her life.
You're not a thief, you're just smarter than some of us.........
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Old 08-01-2011, 12:56 PM   #46
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I guess I'd go beyond discussion of the word "fair" and suggest a different way to look at it -- what's in the best interests of the long-term sustainability of our system and of providing economic and political stability to the republic.
I pretty much agree, but I think we need to take a fresh view of some of that.

I think that those past 'empires' toppled because the 'have nots' were really suffering. Today, I understand that the average 'poor' person has cable, several color TVs, X-Box, etc. Of course, some people are genuinely hurting.

IOW, I'm not so sure that the distribution of wealth is as important as how well-off the lower class is. Just the other day, and extremely liberal friend of ours was getting all worked up over a family that she knows is on the 'free lunch' program at school (which also waives most fees), and she was talking about how this family just came back from a tropical vacation, sits outside the school in the new, huge SUV guzzling gas while their A/C is running and they are gabbing on their cell phone, waiting to pick up their kid. Even though we are at near opposite ends politically, we both agreed this hurts getting help to the people who really need it.

But like I said earlier, we could certainly have rising rates on income as it goes far above that $250,000 point. I don't know how much it would really help (need to do the math - how much is 'there'?), but it seems reasonable to me, and probably a good thing psychologically.

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Old 08-01-2011, 12:58 PM   #47
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We were actually having a budget surplus.
Based on projections of unsustainable stock market and GDP growth, but I digress..........
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Old 08-01-2011, 12:58 PM   #48
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Great post, great perspective Ziggy, as usual...
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Old 08-01-2011, 01:00 PM   #49
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Because if we reach a critical mass of folks who feel they have little or nothing to lose.......
Two words:

Egypt
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Old 08-01-2011, 01:03 PM   #50
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During the late 90's we had a higher income tax and we had a very healthy economy. Rich were making more money in the market place to cover any extra taxes they might of been paying. We were actually having a budget surplus.

But early in the 00's it was decided that if we lower the taxes at the upper level of income, this would create more jobs and a even stronger economy reducing the debt even more. Of course we call can see that this did not work and help lead us to the situation we are in today.
This comes up time and time again. It is not cause/effect, there were/are other factors at play that outweigh tax rates. The economy boomed in the 90's - do you seriously think that if we lowered taxes then, that economic rise would have halted?

We need a sticky FAQ on this one....

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Old 08-01-2011, 01:45 PM   #51
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Recently, I have been reading about legal tax dodges. One that I thought was interesting involved creating a dummy corporation overseas, declaring the money on this offshore account, shielding it from US taxes, then repatriating the money. Some of our best known lawmakers use this ruse. Raising taxes is only part of the problem. Artful dodgers are a deeper problem.
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Old 08-01-2011, 01:56 PM   #52
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I am not talking about the tax breaks etc. that are given... but the services of the gvmt... IOW, the cost of the military to protect our country is basically the same for every citizen... same for most of the other gvmt entities...

This means the rich are paying a LOT more for the gvmt services they receive than the poor... heck, the poor are actually being paid by the gvmt to receive these services...

While you may be right the the cost to protect the country is the same for each citizen, the rich have much more to "protect".
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Old 08-01-2011, 01:59 PM   #53
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Recently, I have been reading about legal tax dodges. One that I thought was interesting involved creating a dummy corporation overseas, declaring the money on this offshore account, shielding it from US taxes, then repatriating the money. Some of our best known lawmakers use this ruse. Raising taxes is only part of the problem. Artful dodgers are a deeper problem.
Artful dodgers is what got Willie Nelson in hot water (via his very expensive tax accountants at a top 5 acct firm) and Enron, among many others....no thank you on the dodge, I'll pay my taxes and sleep well at night.
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Old 08-01-2011, 02:08 PM   #54
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I'm going to try to look at this beyond the purview of politics and current events and look at it from the standpoint of history, sociology, political science and philosophy.

I guess I'd go beyond discussion of the word "fair" and suggest a different way to look at it -- what's in the best interests of the long-term sustainability of our system and of providing economic and political stability to the republic.

To me that's at least part of the justification of a progressive income tax; regardless of the "fairness" issue it seems to me that many nations (and empires) have been been toppled because the distribution of wealth became too concentrated. Witness France in 1789, Russia in 1917 and Cuba in 1959 among other examples (the latter two into much more despotic regimes). To that end, there is at least some incentive for the upper classes to want to avoid creating an "angry peasants with torches and pitchforks" situation where the concentration of wealth -- the gap between haves and have-nots -- becomes intolerably large for the masses.

Now we aren't there yet, but the shrinking of the middle class -- with more of these folks becoming "have nots" than "haves" -- is still a cause for concern. I'm not suggesting massive tax hikes on "the rich" here, but I do think "the rich" should at least factor in the stability and security of the current economic and political system in formulating their opinions on where tax rates should be. Beyond a certain point, lower may not be better if it results in a larger and larger underclass growing more and more resentment.

It may or may not be "fair" to raise taxes on those of significant means. But to *some* degree, it might -- *might* -- help defuse a potentially explosive situation if more and more of the middle class keeps getting knocked down into the class of the more desperate folks. Because if we reach a critical mass of folks who feel they have little or nothing to lose.......
Just a thought on the potentially explosive situation brewing. I agree, except that the resentment will be toward government employees and their pensions, not the "rich". Someday, the average Joe is going to look around and wonder why he is working 20 years longer than his neighbor, fireman Johnny.
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Old 08-01-2011, 02:31 PM   #55
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I think we are going to have to trim back some of the deductions that the upper middle/lower upper folks get.

The amount of income that can be removed from your taxable income is gettting a little silly.

My wife discovered that she actually has access to both a 403b and a 457 plan, and that there is no rule against funding them both to 16.5k.

So our deductions could look something like this next year--

49.5k for tax deferred income
7.5k for mortgage interest
2.5k for property taxes
7k for state income taxes
3k for charity
7k personal exemption
3k exemption for our new munchkin (is that the right amount)
12k for child care tax credit (credit of 3k, about equivalent to a 12k deduction?)

That's about 90k in income that we can avoid taxes on, although I don't know if we will be able to actually make our finances work while saving that much. I'm really tempted to try, though .

Worst case, we fund some of our living expenses out of savings.

I think we will pay less in taxes than many people with half our incomes. My single buddy who rents is getting a little bitter about subsidizing my house and child, since he makes a lot less than me.

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But like I said earlier, we could certainly have rising rates on income as it goes far above that $250,000 point. I don't know how much it would really help (need to do the math - how much is 'there'?), but it seems reasonable to me, and probably a good thing psychologically.
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Old 08-01-2011, 03:03 PM   #56
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Here is a method I have thought up over the years:

Calculate an indexed cost basis for each asset sold using an inflation factor. This factor can be capped. The indexed gain/loss is sale minus indexed cost. The nominal gain/loss is sale minus actual cost.

(1) If there is an indexed gain, then use the indexed gain for tax purposes.

(2) If there is a nominal loss, then use the nominal loss for tax purposes.

(3) If there is a nominal gain and an indexed loss, then use zero for tax purposes.

It isn't perfect, but it doesn't give away the store, either. And it discourages short-term trading (just over one year holding period) just to capture the current LTCG rate.
Why so complicated? Just compute the change in value (gain or loss) after indexing for inflation, that's value on which the person pays tax. It doesn't matter if the individual had a nominal gain: if the value of the investment declined after adjusting for inflation, then it truly lost value and he should get to claim every penny of that as reduction to income from other sources (wages, other investment income, carry forward to future years, etc).
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Old 08-01-2011, 03:07 PM   #57
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My wife discovered that she actually has access to both a 403b and a 457 plan, and that there is no rule against funding them both to 16.5k.
I have never understood why this is allowed (does she also get a public pension?) and yet the 401K limit is a puny $16,500. With market returns looking very bad over the next decade, and SS questionable for those of us in our 40s, the need to put away more in a 401K and IRAs is crucial.

If you paid off your student loans and really started saving at age 30 (typical) in 2001 by maxing 401K and IRA, you might have $300,000 or so today if you are age 40. Continuing to save $21,500 a year (401K + IRA) is just not going to provide a very decent retirement if SS is taken away and you don't have a pension. *Maybe* by age 60 you will have 1 million or so, but I bet it won't have the purchasing power many think it will.

Getting the 401K limit raised to something significant, like $30,000 probably isn't going to happen though. I guess we better hope SS keeps paying 100% even for those of us in our 40s.
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Old 08-01-2011, 03:18 PM   #58
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. . . yet the 401K limit is a puny $16,500. With market returns looking very bad over the next decade, and SS questionable for those of us in our 40s, the need to put away more in a 401K and IRAs is crucial.
Saving money for retirement may be crucial, but it doesn't have to be in 401Ks or IRAs. If we're going to get the federal budget balanced, the spending has to be reigned in and the tax code made rational (fewer special treatment categories/exemptions/deductions, lower rates). So, I'd be asking more low income people to pay at least something in FIT, and I can't do that and justify allowing the first 80K of a couple's income to be non-taxed because they happened to use it in ways the government favors. People can and should save money for their own later use without special tax treatment. If it is earned income, it should be taxed. That's how we can bring some equity to the system and, in the bargain, help the economy get healthy.
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Old 08-01-2011, 03:28 PM   #59
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Saving money for retirement may be crucial, but it doesn't have to be in 401Ks or IRAs. If we're going to get the federal budget balanced, the spending has to be reigned in and the tax code made rational (fewer special treatment categories/exemptions/deductions, lower rates). So, I'd be asking more low income people to pay at least something in FIT, and I can't do that and justify allowing the first 80K of a couple's income to be non-taxed because they happened to use it in ways the government favors. People can and should save money for their own later use without special tax treatment. If it is earned income, it should be taxed. That's how we can bring some equity to the system and, in the bargain, help the economy get healthy.
Unless you want to go heavy on the risk side of things by keeping a large amount of stocks in your taxable account, you need a decent amount of tax deferred space to hold bonds. I would like to hold 80% TIPS but just do not have the room in 401K or IRA for that. When TIPS are adjusted for inflation, the adjustment is taxed as income each year. Very hard to grow retirement savings like this.

Perhaps instead of cutting SS, they should increase it such that everyone can retire at age 62 with enough money for a decent living. They could pay for this by eliminating all public pensions, tax deferred accounts, and caps on SS tax. If you want a better living, you have the option of taxable account, but you always have SS to fall back on and it will provide a comfortable retirement. No more 401K, Roth, 403B, etc.
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Old 08-01-2011, 03:36 PM   #60
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That's about 90k in income that we can avoid taxes on...
Avoid? No. Defer? Yes.

Tax deferral on 40x programs is not avoidance. Somewhere along the road, you will have to pay an (unknown rate) tax.

As far as mortgage, etc. you are getting (just a general observation) a 50 cent credit on $1 in interest paid. Better than nothing, but being debt free is the target.

Just my $.02 (and it's not taxable )...
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