Poll: Future Tax Rates Will Be Higher

[Midpack]

There are often threads in which an OP assumes higher taxes in the future, followed by several others posting 'future taxes are unknowable' - as if it's foolish to plan for any increase. While the specifics are indeed unknowable, assuming taxes will be higher over the next 30 years seems like almost a given to me.

Does anyone think future taxes on a given income will go lower?

At the very least I assume taxes will remain the same, though that seems highly unlikely IMO. Then it only remains how much higher taxes to plan for, that's the only unknowable IMO.

Note I mean higher net taxes, not how/where the increases will come. Higher rates, lower thresholds, reduced benefits/COLAs, new fees/taxes, sales taxes, Fed/state/county/city - there are endless sources/"disguises."

If you do a Google search, most of the articles I see project higher taxes in the decades ahead. Some brave authors even estimate how much!

[Sorry, missed the poll option...] Subsequently saved by W2R, thanks.

 

[Senator]

I did not see the poll, but tax rates will definitely be higher. For various reasons.

 

[DrRoy]

Flat at best, or higher is my vote.

 

[Ready]

I think federal taxes will be higher, but I hope California taxes won't get any higher. They already seem crazy high to me, especially when capital gains are taxed as ordinary income in California.

I hope to be in a much lower tax bracket once I stop generating earned income though, and will use that period to convert IRAs to Roth IRAs while delaying social security as long as possible. But I do expect the rates to be higher when I get to that point, unless something drastically changes in this country.

 

[Major Tom]

Yes, I think that taxes will become higher over the long term (assume you're talking about federal income taxes).

Definitely higher.

 

[W2R]

[Sorry, missed the poll option...]

We can add a poll for you. Just let us know what options you want to provide. Just "yes", "no", and "other"?

 

[Midpack]

Yes, I think that taxes will become higher over the long term (assume you're talking about federal income taxes).

Definitely higher.

I don't expect state or local taxes to stay the same either, at least for planning purposes. There are public pension and other state/local spending deficits all over the country. Something has to give doesn't it?

 

[RunningBum]

Overall, I think net taxes will increase. However, some of those threads may not be talking about net overall taxes. If you are talking about Roth conversions, you are looking at fed/state incomes taxes for your potential brackets only. Increased sales or property taxes have nothing to do with that, nor do high end tax increases for most of us. So it seems like you are asking a question that is different from the assumption you are trying to refute, but maybe you are looking at different threads than me.

 

[ziggy29]

There are about 18 trillion reasons why realistically taxes will need to rise. That said, I have no way to know whether it will all be in the form of income taxes or if there will be VATs and national sales taxes, more user fees, or some combination thereof.

As for state taxes, the fact that there are 50 different states "competing" for taxpayers will, to some degree, temper any desire for tax increases in many cases.

 

[samclem]

I expect overall USG taxation of Americans will result in more "income" to the federal government.

I expect that the share of those taxes paid by the typical E-R.Org devotee will be higher in future years than they are at present.

 

[Midpack]

Overall, I think net taxes will increase. However, some of those threads may not be talking about net overall taxes. If you are talking about Roth conversions, you are looking at fed/state incomes taxes for your potential brackets only. Increased sales or property taxes have nothing to do with that, nor do high end tax increases for most of us. So it seems like you are asking a question that is different from the assumption you are trying to refute, but maybe you are looking at different threads than me.

What Federal-State-Local taxes are you confident won't increase over the next 30 years?

 

[W2R]

We can add a poll for you. Just let us know what options you want to provide. Just "yes", "no", and "other"?

Oh well. Several posts but no answer, so I'll just add these options for the poll. It can be edited later.

 

[Major Tom]

I don't expect state or local taxes to stay the same either, at least for planning purposes. There are public pension and other state/local spending deficits all over the country. Something has to give doesn't it?

Agreed. Something has to give. Collectively, we like nice stuff, and that has to be paid for, sooner or later (usually later).

 

[GrayHare]

Net federal income taxes will probably increase, but how that happens is anyone's guess, and a guess is of little use for timing IRA conversions. If ordinary rates go up, converting to Roth now makes sense. However perhaps ordinary rates will go down and cap gain rates will go up, in which case one should not hurry converting to Roth.

 

[frayne]

As convoluted and complex as our tax system is I don't see rates going anywhere but up. There is just too much lobbying money at play to see meaningful change to the tax code. I think increases will be incrementally small for most brackets.

 

[Gone4Good]

I'd like to add a "The details matter" option to the poll.

 

[mickeyd]

Of course taxes will increase. They always do.

 

[ejman]

My WAG is that Fed income tax rates will not go up significantly on account of very determined opposition to such happening but there will be all kinds of other creative taxing mechanisms that will compensate for that.

 

[2017ish]

I'd like to add a "The details matter" option to the poll.

That's how I interpreted option 3. And definitely agree that the details matter. Hence, what may be my longest post on this forum...

For Federal Gov and many states, either spending goes down or revenues will have to go up by one means or another. Philosophically, I'd like to see spending cut, but am not holding my breath. To just address the revenue side (and just scratching the surface of options): Theoretically, GDP expansion could provide it with no changes in the I.R.C. (as long as spending went up more slowly than GDP) Adjustment to bracket indexing (and the return of inflation) could do it. So could a VAT or other national sales tax, assuming one can constitutionally be implemented. So could retention of present rates (or even cutting rates) while clearing out deductions and credits. (See the 1986 Act, which was much cleaner than what it has now evolved into.) A tax on remittances would lead to revenue without directly hitting most of us. And, of course, marginal rate increases.

As for state and local, it all depends where you are at. (Me, I'm glad we left Illinois for Tennessee!)

Basically, there are so many options that I don't try to model it. Some of the ways to increase revenue could harm the future me, others could assist, and still others would be neutral. The one thing that I do plan on is to achieve more tax diversification. (Thus, for me, fairly aggressive Roth conversions in years after we retire.)

 

[aaronc879]

My best guess is that taxes will go down for the very low income by way of increased standard deduction/exemption. Then the tax rates for everyone else will be increased so overall taxes will be higher in the future.

 

[Midpack]

My WAG is that Fed income tax rates will not go up significantly on account of very determined opposition to such happening but there will be all kinds of other creative taxing mechanisms that will compensate for that.

May be, but the net effect is the same for planning.

 

[MichaelB]

Total federal taxes have stayed between 15% - 17.5% of US GDP since the 50's despite endless rhetoric and copious amounts of hand wrenching and bloviating. They move above 17.5% late in economic growth cycles, and fall below 15% when we fall into recession. My guess is taxes will remain in that range for the rest of my life.

The one thing that would change that is health care.

At a state level, I would expect to see total tax revenues increase a bit over current levels, but not much.

 

[Totoro]

I expect taxes on high incomes and wealth increase.

That is, unless we find a way to assign basic wealth to everyone and force them to only spend its proceeds - basically an extended version of pensions to fund basic income. In that case taxes may actually decrease.

Reason for the above is that most people (including myself) will find it harder and harder contribute to the economy. Those that can will earn ever more disproportionate amounts of income and wealth.

 

[Happyras]

So here are the facts that most people do not pay much tax;
ACTUAL INCOME TAX PAID
% of Americans Tax Liability
47% Poll Bar $0 (47% of Americans pay no income tax at all)
37% Poll Bar $1-$10,000
15% Poll Bar $10,000-$50,000
1% Poll Bar $50,000+

The top 5% most productive Americans pay 59% of all income tax collected by the Fed Government. Despite the media labeling this category of taxpayers as "wealthy" - over half of those most productive Americans are actually small business owners taxed at the personal income tax rates.

I don't worry as much about the tax rate, as the $$$$ we have to pay taxes on. This year as I retired from MegaCorp, our small business employed a few more than the prior tax year, and WHAMMY, we lost the Health Credit for small business. We paid too much to our employees labor, bonus and benefits and took a slight loss, and WHAMMY we get to pay tax on money we loaned to the business, and are disallowed from taking the loss on our 1040. The majority of taxes are paid by small business owners like us who file SubS and get subjected to all forms of tax rules specifically targeting our business. Large Corps have teams of legal and accountants who work all year to minimize their liability.

 

[Happyras]

Not meaning to be off topic, but I far more expect the rules to change more than the rates.