Mis-direction in reporting on taxation

[nun]

Rejigger Your Portfolio

"I don't think there's a better time to rebalance a portfolio than this year,'' says Mitchell Drossman, national director of wealth-planning strategies at Bank of America's U.S. Trust. The top long-term capital gains tax rate is set to rise from 15% to 20% on Jan. 1, 2011, when the Bush tax cuts expire. Next year also marks the comeback of a provision that shaves deductions claimed by upper-income taxpayers, in effect adding another 1.2% to the rate. Beginning in 2013 there's an added 3.8% Medicare surtax on investment income earned by couples with adjusted gross income of $250,000 and up. So consider taking gains in 2010, particularly if you'll need funds in the next few years. As you replace stocks sold at a profit with similar holdings, consider tilting more to growth than dividend stocks, Drossman says. Unless Congress acts, dividends in 2011 will be taxed as ordinary income, at a top 39.6% plus 1.2% rate. (Obama purports to favor keeping the dividend rate tied to the capital gains rate. But Congress is hungry for revenue.)

When I read things like this I think "what has this to do with me; a middle class guy who hopes to retire on $50k a year or less". Far too often taxation is explained in terms of how it affects the taxation of the rich to scare the majority of us.

 

[meierlde]

Yes like you notice on CNBC the assumption that everyone runs 250k plus since thats all they talk about others clearly are unimportant and don't exist. (Of course that's just the way Wall Street thinks, about themselves only, and doesn't give a damn about anyone else)

 

[dex]

Couldn't the capital gains change affect the non rich?

 

[ERD50]

Yes like you notice on CNBC the assumption that everyone runs 250k plus since thats all they talk about others clearly are unimportant and don't exist. (Of course that's just the way Wall Street thinks, about themselves only, and doesn't give a damn about anyone else)

Some of those +250K earners are small business people (aka - job creators), who are now reaping the rewards of many years of hard work and risk. If their take home pay goes down, I suspect they are going to be looking for ways to cut expenses in their businesses, to bring the risk/reward ratio back closer to where it was.

Hmmm, think they might decide that there isn't enough to go around to give the little guys raises? After all, the big guy had to take an effective pay cut. Maybe Wall Street doesn't 'care' about the little guy, but I won't assume that the people writing the tax code do either.

-ERD50

 

[FIREd]

Perhaps they don't talk about tax changes for people making less than $250K, because there is nothing to talk about (their taxes won't change under the current proposal).

 

[nun]

Perhaps they don't talk about tax changes for people making less than $250K, because there is nothing to talk about (their taxes won't change under the current proposal).

My point exactly. Mis-direction

 

[ziggy29]

My point exactly. Mis-direction

That's not how I interpreted your original point. I read your original post as an insinuation that the media are intentionally misleading lower income people into thinking their taxes will rise, too -- not merely not commenting because there's nothing to talk about there.

 

[FIREd]

I read your original post as an insinuation that the media are intentionally misleading lower income people into thinking their taxes will rise, too -- not merely not commenting because there's nothing to talk about there.

That's how I understood the OP too. My bad.

 

[samclem]

Perhaps they don't talk about tax changes for people making less than $250K, because there is nothing to talk about (their taxes won't change under the current proposal).

Dang, that's great news. I'd heard rumors that the government was going to require everyone to buy health insurance, and that the government was going to enforce this dictum with a penalty fee that the executive branch is now openly calling a tax. Those affected would include those earning much less than $250K per year.

Or, are we talking about some other "current proposal?"

 

[FIREd]

Dang, that's great news. I'd heard rumors that the government was going to require everyone to buy health insurance, and that the government was going to enforce this dictum with a penalty fee that the executive branch is now openly calling a tax. Those affected would include those earning much less than $250K per year.

There is plenty of b!tching about that in the financial media where, by and large, Obamacare is presented as a terrible idea for the country as a whole. Everyone will be impacted by Obamacare, one way or the other, so I don't think this is what the OP is talking about. I think he is talking about the upcoming income tax increase for people making $250K+ and how the media makes it sound like everyone's income taxes are going up. But you knew that already.

 

[samclem]

I lol'ed. How many months has it been and you still haven't read the bill.

Don't you mean the "law?" Hey, it's really long, and I have to sound out the big words. I think there are still a lot of folks who don't know what's in it--there's a senator from Nevada who wrote a letter to HHS a couple of weeks ago about his big concerns with some of the details of its implementation. He was a big proponent of the initiative, I'm sure he read the whole thing. I guess 2000+ pages weren't enough for the central planners to cover all the details.

 

[Texas Proud]

There is plenty of b!tching about that in the financial media where, by and large, Obamacare is presented as a terrible idea for the country as a whole. Everyone will be impacted by Obamacare, one way or the other, so I don't think this is what the OP is talking about. I think he is talking about the upcoming income tax increase for people making $250K+ and how the media makes it sound like everyone's income taxes are going up. But you knew that already.

Well, I thought it was about the Bush tax cuts that expire... which means everybody will be paying higher taxes.... not just the ones over $250K...

What I heard was that the dems want to extend them for the people who make less than $250K, but the repubs will fillibuster that so it is either all or none...

 

[FIREd]

What I heard was that the dems want to extend them for the people who make less than $250K, but the repubs will fillibuster that so it is either all or none...

If the repubs can't fillibuster it, then it's not all or none. Time will tell... Lots can happen between now and the end of this (election) year.

 

[Texas Proud]

If the repubs can't fillibuster it, then it's not all or none. Time will tell... Lots can happen between now and the end of this (election) year.

True... all they need to do is get Snowe or the other more liberal repub on board and it will go through... we will see...

 

[clifp]

The is so much ambiguity regarding the term benefiting those who make more than 250K. That I really have a hard time figuring out what this means to us not rich folks.

For example dividends are currently taxed at the same rate as capital gains. This clearly benefits those making over $250K with large dividend income, but it also helps me... Does preferentially taxes for dividends stay or go?

 

[SunsetSail]

The is so much ambiguity regarding the term benefiting those who make more than 250K. That I really have a hard time figuring out what this means to us not rich folks.

For example dividends are currently taxed at the same rate as capital gains. This clearly benefits those making over $250K with large dividend income, but it also helps me... Does preferentially taxes for dividends stay or go?

Dividends will be taxed as ordinary income, so the rate depends on your marginal tax rate. If your marginal tax rate is above 15%, you will be paying more tax on your dividend income. The $250K baseline is an arbitary number based on the current adminstration's election capaign. There are no laws in place now (and as far as I know no bills submitted) that prevent taxes from going up for those who make under $250K.

I don't have the brackets in front of me, but from memory generally if you make over $35K filing single or $70K filing married you will pay a higher rate.

 

[clifp]

Thanks but I knew this.
Generally I have heard that intention is keep dividends and capital gains the same.
However, what actually is going to happen is at this point is anybody guess. My point is that saying we are going to extend the Bush cuts for those making under 250K is pretty meaningless, because there are so much complexity in the tax code that what matter is the details.

 

[SunsetSail]

Okay, I didn't read your post correctly. I agree it is meaningless to even guess until there is at least a bill making its way through Congress. It looks like there is bipartisan support for something, but who knows what that something will be.

 

[Koolau]

I don't claim to know how this will all play out (devil in the details, etc.) but it's clear to me that the 250K definition of "rich" is a smoke screen. There are so many little details (like AMT, dividends, cap-gains, Social Security limits, obamacare "fines", etc. etc. etc.) that will or could affect us "poor" people making less than 250K. Does anyone here think we can even come close to balancing multi-trillion dollar deficits on the backs of those making 250K or more? I'm afraid not. The only plausible way to cover some of the current spending is to raise taxes on most people, not the relatively few at the top. I do not mean for this to be political. I'm just suggesting that politicians of any "flavor" will attempt to say one thing and do another in order to get (or loose fewer) votes. My guess is that the word "tax" will soon begin to be called by other names (e.g., contributions, fair-share, health-care-participation, etc. etc.) so that "taxes" aren't raised on the middle class. Of course, I could be wrong. I was once. Thought I'd made a mistake and I hadn't.

 

[BTravlin]

Before the housing bust I would have been worried about all the various programs this administration plans to finance by taxing those with incomes above 250K, but now, with my new & improved lower income, that's the least of my worries.