How to Blunt Rising Taxes - Barrons

[dex]

How to Blunt Rising Taxes - Barrons.com

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Desperate times have always called for desperate measures. But for taxpayers who make the right moves now, there is no reason to despair.

 

[dex]

Notice the point about VAT. Also notice that Europe has a VAT since the early 80s and they also have a government debt crisis.
I have no doubt that there will be a VAT at some point in the USA and it will not go to pay down the debt; although it will be sold that way.

 

[Bikerdude]

Notice the point about VAT. Also notice that Europe has a VAT since the early 80s and they also have a government debt crisis.
I have no doubt that there will be a VAT at some point in the USA and it will not go to pay down the debt; although it will be sold that way.

So, what does Europe do now? They already have a VAT tax so maybe now they need a BAT tax (as in baseball bat) to beat the money out of the rich.

 

[LOL!]

But won't Very Long Term cap gains taxes be 15% and not 20%? That is, if you realize a cap gain on assets held 5 years or longer, the rate will be 15%?

 

[ziggy29]

I've always thought that given the increases in the other tax brackets, the 10% jump from the 15% to 25% tax brackets seemed a little steep, especially given the solidly middle-class status of that income level.

 

[aaronc879]

I don't have a problem with any of the taxes proposed. There are a lot of things in this country that people take for granted but those things need to be paid for somehow. The "bush tax cuts" never should have happened so letting them expire seems obvious to me. The so called "war on terror" and "bailout" of the last and current administration have put us in a position that requires an increase in taxes and possibly the implementation of new taxes like the VAT. I would prefer(being the frugal person I am) if there was no "war on terror" or "bailout" but there was and is so higher taxes are a must.

 

[jebmke]

WEALTHY TAXPAYERS SHOULD be on the lookout for changes in the estate tax next year.

and what, kill themselves to avoid the tax increase?

 

[FIREd]

So, what does Europe do now? They already have a VAT tax so maybe now they need a BAT tax (as in baseball bat) to beat the money out of the rich.

Thanks to the free circulation of people within the EU, the rich are simply relocating. There is no common taxation policy in Europe, so some countries like Belgium offer very compelling tax breaks for wealthy European citizens. Wealthy EU citizens for example can move to Brussels and take advantage of the fact that there is no capital gain tax or wealth tax in Belgium. Many also leave the EU altogether.

 

[ziggy29]

Thanks to the free circulation of people within the EU, the rich are simply relocating. There is no common taxation policy in Europe, so some countries like Belgium offer very compelling tax breaks for wealthy European citizens. Wealthy EU citizens for example can move to Brussels and take advantage of the fact that there is no capital gain tax or wealth tax in Belgium. Many also leave the EU altogether.

To some degree, that happens in the U.S. with people moving from high-tax states to low-tax states.

 

[kyounge1956]

WEALTHY TAXPAYERS SHOULD be on the lookout for changes in the estate tax next year.

and what, kill themselves to avoid the tax increase?

No, but perhaps there are other actions they could take. For example, if they were planning on leaving something to a charity in their will maybe they should donate it next year instead, creating extra itemized deductions after the Bush tax cuts end. Wouldn't that reduce their income tax next year, and their estate taxes in the future?

 

[ejman]

Dex, very interesting data you present. Particularly the statement "All told, 85% of the tax burden under the bill will be shouldered by the top 1% of taxpayers, who will see an average $28,500 increase in their annual federal tax bill, according to the Tax Policy Center." I've tried to figure out what percentage of income of the top 1% of taxpayers that $28,500 represents but I've been unable to find that. Do you happen to have that percentage available? Thanks

 

[packrat44]

So, what does Europe do now? They already have a VAT tax so maybe now they need a BAT tax (as in baseball bat) to beat the money out of the rich.

The baseball bat should be used on those in power who are wasteful in the spending of taxpayer's money.

 

[dex]

Dex, very interesting data you present. Particularly the statement "All told, 85% of the tax burden under the bill will be shouldered by the top 1% of taxpayers, who will see an average $28,500 increase in their annual federal tax bill, according to the Tax Policy Center." I've tried to figure out what percentage of income of the top 1% of taxpayers that $28,500 represents but I've been unable to find that. Do you happen to have that percentage available? Thanks

Household income in the United States - Wikipedia, the free encyclopedia

 

[ejman]

Dex, thanks for the information. So as I calculate it, that would represent approximately a 10% increase in their tax bill is that about your read?

 

[ejman]

Sorry, I should have included the source for that 10% calculation ( as of 2007) The Tax Foundation - Summary of Latest Federal Individual Income Tax Data. Tax paid by top 1% 450 billion/1.4 million tax returns = #321K per return. $28 K increase = 8.8% rounded to 10% because it looks rounder...

 

[dex]

Dex, thanks for the information. So as I calculate it, that would represent approximately a 10% increase in their tax bill is that about your read?

Is sounds about right. Does going from about 285K to 313.5K in taxes sound right? I'm really not sure.

 

[HFWR]

A "blunt" sounds like a good solution...

 

[ejman]

Is sounds about right. Does going from about 285K to 313.5K in taxes sound right? I'm really not sure.

Yes, that's about where I get roughly. I was just trying to get a an idea of the actual impact on those folks at the top 1% of income on a basis I could understand.

 

[Hiredgun]

Another reason for RE. The government is just going to keep taking more and more. Why bust your hump, run a successful business, hire employees and pay all their benefits when the govt will eventually take more than 50% of your profits?

These taxes will kill the economy, just as the healthcare bill will cause a lot of doctors to jump ship and those considering a career in medicine to go elsewhere.

My biggest fear is the govt will find more and more ways to go after our accumulated wealth. It's coming my friends, duck and cover!

 

[FIREd]

Assuming my taxable income remains the same in 2011 as I project it to be in 2010 (top 1 or 2% I believe), I estimate that my federal income tax liability will increase by about 7% next year.

 

[ejman]

Another reason for RE. The government is just going to keep taking more and more. Why bust your hump, run a successful business, hire employees and pay all their benefits when the govt will eventually take more than 50% of your profits?

These taxes will kill the economy, just as the healthcare bill will cause a lot of doctors to jump ship and those considering a career in medicine to go elsewhere.

My biggest fear is the govt will find more and more ways to go after our accumulated wealth. It's coming my friends, duck and cover!

Yes, this is why I was curious as to what the actual impact of the proposed tax changes would be. As I read the data in the tax site I quoted above, the average tax for the top 1% of earners was 22.4% in 2007. The proposed tax increase would raise that to 24.6%. I'm not sure how you get to 50% but I would like to know how that number comes about. Thanks

 

[M Paquette]

As I read the data in the tax site I quoted above, the average tax for the top 1% of earners was 22.4% in 2007. The proposed tax increase would raise that to 24.6%. I'm not sure how you get to 50% but I would like to know how that number comes about. Thanks

The usual way is to add up all of the top marginal rates. As one's income tends toward infinity, these marginal rates would become the effective tax rate for that extremely high income taxpayer. For those of us not fortunate enough to earn income many times that of the top bracket bases, we pay at a lower effective tax rate. Some folks like to add in all taxes, including property tax, sales tax, vehicle registration fees, and whatnot, although those tend not to be proportional to income. (Taking these as a proportion of the mean $45,000 annual income, and adding that percentage to the top bracket marginal rates is flawed, of course, but that doesn't stop various pundits from doing it.)

I managed to reach a 0% effective federal tax rate, including FICA (SS + Medicare) and related costs, and a 1.8% state tax rate, through the simple expedient of having no earned income last year.

 

[ejman]

The usual way is to add up all of the top marginal rates. As one's income tends toward infinity, these marginal rates would become the effective tax rate for that extremely high income taxpayer. For those of us not fortunate enough to earn income many times that of the top bracket bases, we pay at a lower effective tax rate. Some folks like to add in all taxes, including property tax, sales tax, vehicle registration fees, and whatnot, although those tend not to be proportional to income. (Taking these as a proportion of the mean $45,000 annual income, and adding that percentage to the top bracket marginal rates is flawed, of course, but that doesn't stop various pundits from doing it.)

I managed to reach a 0% effective federal tax rate, including FICA (SS + Medicare) and related costs, and a 1.8% state tax rate, through the simple expedient of having no earned income last year.

I see. The only observation I have regarding the effect of astronomical marginal tax rates is that most folks theoretically subject to them somehow manage not to pay them so that becomes an exercise in diatribe.

As to actual tax rates, last year I also achieved near tax nirvana, no federal, state, local, or sales taxes ( I live in Oregon) but regrettably I had to pay $980 property taxes on my little 7 acre ranch. Is this a great country or what?

 

[Hiredgun]

I'm thinking I'll eventually have to move alot of my taxable portfolio to munis.

I'd go triple tax free munis but I don't want to place a bet on my state. So it's Vanguard Intermediate Munis and I'll have to pay some state tax, but I'll avoid the Health Care Tax in 2013.

 

[ESRwannabe]

Some of you might want to consider moving to a small town in a cheap area of the country. I spent around $30k last year on living expenses (including all taxes) and I was "living high on the hog". The difficulty of living in such places is that high paying jobs are scarce, but if you have already retired it works to your advantage. Perhaps an even better idea would be to expat.

If you can get your living expenses down to around that of the working class, there really isn't anything the government can do to you, tax wise. If I owned a house I could easily get expenses down to $20k or so.