Tax on rich will bring in 63.67B per year

[youbet]

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!

 

[youbet]

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?

 

[thefinancebuff]

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.

 

[youbet]

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.

 

[thefinancebuff]

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.

 

[explanade]

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?

 

[youbet]

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........

 

[newporttony]

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?

 

[ERD50]

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?

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.


-ERD50

 

[ziggy29]

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.

 

[dex]

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/fy2010_new_era/Summary_Tables2.pdf

* This is probably an understated amount.
Bloomberg.com: Exclusive

 

[ziggy29]

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.

 

[HFWR]

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...

 

[explanade]

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.

 

[newporttony]

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?

 

[FIREd]

If, once our income passes $250K, it gets taxed at a much, much higher rate, then in effect I will be working for a dramatically lower hourly rate than I am right now. Why should I strive to maximize my income if it ends up benefiting the government more than it benefits me? At this point, I might see it more worthwhile to work less and enjoy other leisurely activities.

 

[FinanceDude]

If, once our income passes $250K, it gets taxed at a much, much higher rate, then in effect I will be working for a dramatically lower hourly rate than I am right now. Why should I strive to maximize my income if it ends up benefiting the government more than it benefits me? At this point, I might see it more worthwhile to work less and enjoy other leisurely activities.

Exactly what every small business wner in America is thinking right now. I predict government revenues will drop 15% this year, minimum.........

 

[ziggy29]

If, once our income passes $250K, it gets taxed at a much, much higher rate, then in effect I will be working for a dramatically lower hourly rate than I am right now. Why should I strive to maximize my income if it ends up benefiting the government more than it benefits me? At this point, I might see it more worthwhile to work less and enjoy other leisurely activities.

This goes back to what I said before about the incremental value of work. Beyond the income level needed to maintain a reasonable standard of living, if you have to bust your butt to keep only small incremental gains in standard of living, it no longer becomes worth the sacrifice.

 

[explanade]

I pay plenty in taxes.

And I live in Northern CA so I know about CA tax rates. I've looked at how much lower property, sales and income taxes are in NV and AZ.

Not to mention lower housing.

But the employment opportunities just aren't there. TX has lower taxes and their economy was booming last year, at least when oil was way over $100 a barrel. But it's TX.

Hey, Mexico has lower tax rates too. And Monaco has no income taxes. People who are earning that much should have some socked away and they can live where they like.

As for what most of the people who earn might do, if there are studies showing that for each incremental increase in the marginal rates, x percent of high earners quit their jobs and thus, leads to lower tax revenues, I'd like to see it.

 

[thefinancebuff]

As for what most of the people who earn might do, if there are studies showing that for each incremental increase in the marginal rates, x percent of high earners quit their jobs and thus, leads to lower tax revenues, I'd like to see it.

Nobody said they will quit their jobs. They will work less.

 

[ERD50]

... 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?

Well, since you didn't seem to absorb my previous answer about how the laws of Supply & Demand have not been repealed, and how it is a slope and not a brick wall, I'll give you the SIMPLE ANSWER you seem to want:

Yes, they will.

...

The "taxes are going to kill the incentive to work and create jobs" warning has been cried far too often.

Well some anecdotal evidence to illustrate (not prove):

I've known several bright ,motivated people who started their own small businesses and were very successful At some point, they got frustrated how much went to taxes, and how much risk they were taking to make that money. So they sold their businesses.

The people/companies that bought their business were not the same hard-working, motivated, bright people that started the business. Not too surprisingly, the businesses failed, people were let go, and Uncle Sam stopped collecting any taxes at all (and paid unemployment). I think this story plays out all across the country.

So my simple answer is: YES.

Just think about it, we want businesses to create jobs - that is what is going to grow the economy. So why de-motivate that very thing you want to encourage? We should be jumping up and clapping when some entrepreneur makes over $250,000, because he very likely had to be providing a valuable service/product to do it, and hire people to support the business. Yet, the govt wants to de-motivate that?

OK, I won't ask you to believe me. Just look at the market, and see what they think about this "stimulus" plan. If it seemed likely to grow the economy, wouldn't the market rise in anticipation of this growth?

Again, the simple answer is: YES. Yet, it keeps falling.

-ERD50

 

[ziggy29]

Nobody said they will quit their jobs. They will work less.

And take fewer risks, which saps the entrepreneurial spirit which creates so many of the small businesses that create the most new jobs in our economy today. When the risk stays the same but the reward declines, the incentive to take the risk starts to vanish.

I'm not denying that some tax increases may be necessary because of the crushing mountain of debt our grandkids are inheriting, but let's not pretend that it isn't a drag on economic activity.

 

[FIREd]

As for what most of the people who earn might do, if there are studies showing that for each incremental increase in the marginal rates, x percent of high earners quit their jobs and thus, leads to lower tax revenues, I'd like to see it.

I don't claim to be typical, so who knows how other high income earners will respond. But for us, $250K is a lot of money and we live on less than 1/4 of that amount. So we have choices. Our jobs are stressful, and if our options are to keep busting our butts for less money or enjoy life a little more, then the choice is super easy. Of course if you make $250K a year and spend all of it (and more), you may not have much of a choice at all.

As for studies, there is no better place than Western Europe to see what happens in the real world when you tax the heck out of the "rich" people. Lack of entrepreneurship, lack of innovation, lack of risk-taking, lack of hunger for upward social mobility, lack of ambition, lack of jobs, lack of private capital... I lived there many years and I don't need studies to point out to me the damage high taxes have done to some European economies. America's strength is its people's hunger to succeed and incredible belief that the sky's the limit if you work hard enough. Bring the sky low enough, and America might lose its competitive advantage.

 

[ERD50]

As for what most of the people who earn might do, if there are studies showing that for each incremental increase in the marginal rates, x percent of high earners quit their jobs and thus, leads to lower tax revenues, I'd like to see it.

If you are looking for "real world" studies, the trouble with that is, this is not a laboratory where we can do controlled A-B experiments. IF anyone presents a study, it will be criticized for not taking, x,y,z into account. It will go no where.

So let's turn it around. Everything we know says that yes, if you decrease the reward, you will decrease the demand for that reward. It's common sense.

I suggest you go to your boss and ask for a pay cut, after all, it really does not motivate you. It will save the company money, they can be more successful and that is a good thing. And send the taxes you would have paid at the higher income as a donation to Uncle Sam, because that doesn't matter either.

Let me guess, it's different when we apply it to you? It's just those "high income" guys that don't care if you take their money away? How did they get to such a high income with that attitude?


-ERD50

 

[newporttony]

I pay plenty in taxes.

And I live in Northern CA so I know about CA tax rates. I've looked at how much lower property, sales and income taxes are in NV and AZ.

Not to mention lower housing.

But the employment opportunities just aren't there. TX has lower taxes and their economy was booming last year, at least when oil was way over $100 a barrel. But it's TX.

Hey, Mexico has lower tax rates too. And Monaco has no income taxes. People who are earning that much should have some socked away and they can live where they like.

As for what most of the people who earn might do, if there are studies showing that for each incremental increase in the marginal rates, x percent of high earners quit their jobs and thus, leads to lower tax revenues, I'd like to see it.

Are you willing to work for 30 cents on the dollar? How about 10 cents?