Comparing the taxes of $100K and $500K W2 income

[human]

This is a perfect moment for my all time favorite quote.

EVERYONE NEEDS TO CHILL THE FUCK OUT.

none of you are accomplishing anything. Let it drop. Not one of you will convince any other one of you a single thing and each of you are going to get your blood pressures up for literally no good reason.

Chill out, move on with your lives. We all have different values and opinions, get over it.

I bet most of us are posting during commercials or something, so thanks for your concern but I'm relaxing in bed watching ant-man. Yeah I know an awful movie, just meant to put me to sleep.

[EnjoyIt]

Wahhh? Try to cut out drugs and alcohol would just necessitate an increase of taxes.

Please explain.

TheRealOne1000,

I am very curious. Did you create an account just to through in one liners and derail any conversation? Please stop posting if you have nothing to add to the conversation. Reading all your posts I have no idea what you are trying to say.

[tobitonic]

Or should we be like Cypress where large depositors have their money stolen by their government?

How about like every other rich country in the world with universal healthcare and guaranteed paid maternal leaves?

[human]

Wahhh? Try to cut out drugs and alcohol would just necessitate an increase of taxes.

Please explain.

TheRealOne1000,

I am very curious. Did you create an account just to through in one liners and derail any conversation? Please stop posting if you have nothing to add to the conversation. Reading all your posts I have no idea what you are trying to say.

Prohibition did not succeed in the 20-30s. It just caused a crazy crime wave and the rise of the FBI. The war on drugs is not helping to lower taxes, you can't just wave a magic wand and eliminate the desire for drugs an addiction. It would take morecsocial programs to treat addiction, not less.

[human]

The rich don't make their income off W-2.  You want equality?  You need to raise the capital gains tax.

The top 1% of the 1% make up HALF of all capital gains.  This is why the rich get richer, they are taxed at favorable rates on the vast majority of their wealth.

How does that make people equal exactly?  I understand that what the most leftist of folks really want is a wealth tax, not an income tax.  Never mind that they were taxed once on the first dollars as income.  Or perhaps the wish is for the banks to be seized and everything redistributed.  Again, I reference Atlas Shrugged, if that sort of thing begins then the rich really will start to disappear and will simply stop working and inventing anything or taking personal risks in running businesses.  Apple and Facebook would cease to exist (or maybe it will be run by govt pogues and be crap).  Let's not get into the whole notion that even if everything was redistributed 100% equally it would all be exactly like it is today within 10 years.  Choices again.  Spenders would spend, savers would save.  We all know folks who blow every extra cent that happens to fall into their hands.     

Or should we be like Cypress where large depositors have their money stolen by their government?  I know, I know, a lot of those Cypress depositors got their money by corruption, but I know that many Bernie-lovers do presume that anyone who has saved in North America must also be crooks.  The politics of jealousy are pretty disgusting.     

I let the Atlas Shrugged reference go once, but please don't bring Ayn Rand into this. If you read Das Kapital and the Communist Manisto would you suddenly change your mind on this subject? It's all about perspective, opinion etc.

[EnjoyIt]

I'm not talking about cutting drugs and alcoholism. I am talking about not paying for someone's food stamps and then making it ok to by alcohol with it.

[MrDelane]

I'm not talking about cutting drugs and alcoholism. I am talking about not paying for someone's food stamps and then making it ok to by alcohol with it.

Alcohol cannot be purchased with food stamps.

[human]

I'm not even from the US and I know you can't buy alcohol with food stamps, not sure how you think they buy drugs with them either.

[human]

Oh that's right we should monitor all their purchases, no toys for the kids, no movie ticketS either. Better track all their movements!

[EnjoyIt]

The rich don't make their income off W-2.  You want equality?  You need to raise the capital gains tax.

The top 1% of the 1% make up HALF of all capital gains.  This is why the rich get richer, they are taxed at favorable rates on the vast majority of their wealth.

How does that make people equal exactly?  I understand that what the most leftist of folks really want is a wealth tax, not an income tax.  Never mind that they were taxed once on the first dollars as income.  Or perhaps the wish is for the banks to be seized and everything redistributed.  Again, I reference Atlas Shrugged, if that sort of thing begins then the rich really will start to disappear and will simply stop working and inventing anything or taking personal risks in running businesses.  Apple and Facebook would cease to exist (or maybe it will be run by govt pogues and be crap).  Let's not get into the whole notion that even if everything was redistributed 100% equally it would all be exactly like it is today within 10 years.  Choices again.  Spenders would spend, savers would save.  We all know folks who blow every extra cent that happens to fall into their hands.     

Or should we be like Cypress where large depositors have their money stolen by their government?  I know, I know, a lot of those Cypress depositors got their money by corruption, but I know that many Bernie-lovers do presume that anyone who has saved in North America must also be crooks.  The politics of jealousy are pretty disgusting.     

I let the Atlas Shrugged reference go once, but please don't bring Ayn Rand into this. If you read Das Kapital and the Communist Manisto would you suddenly change your mind on this subject? It's all about perspective, opinion etc.

We can not tax the highest earners and think somehow this country will be better. At some point we need to decide how much more should the guy above me have to pay, and is it fair for me to ask for more? At what point do they pay enough or should all their "extra money" be redistributed?

The problem is there is always more people below you who get to decide what is fair for you. Not themselves but you.

[EnjoyIt]

You buy the food with food stamps, and buy the alcohol with cash, that could have been spent on food.

Yeah, like I said, alcohol cannot be purchased with food stamps.
Thanks for confirming.
We are all on the same page now.

Food stamps are for food.
If you want alcohol, you buy it with cash.

You sell your food stamps below cost for cash and purchase whatever you want.
There is a whole black market for food stamps.

[onlykelsey]

The rich don't make their income off W-2.  You want equality?  You need to raise the capital gains tax.

The top 1% of the 1% make up HALF of all capital gains.  This is why the rich get richer, they are taxed at favorable rates on the vast majority of their wealth.

How does that make people equal exactly?  I understand that what the most leftist of folks really want is a wealth tax, not an income tax.  Never mind that they were taxed once on the first dollars as income.  Or perhaps the wish is for the banks to be seized and everything redistributed.  Again, I reference Atlas Shrugged, if that sort of thing begins then the rich really will start to disappear and will simply stop working and inventing anything or taking personal risks in running businesses.  Apple and Facebook would cease to exist (or maybe it will be run by govt pogues and be crap).  Let's not get into the whole notion that even if everything was redistributed 100% equally it would all be exactly like it is today within 10 years.  Choices again.  Spenders would spend, savers would save.  We all know folks who blow every extra cent that happens to fall into their hands.     

Or should we be like Cypress where large depositors have their money stolen by their government?  I know, I know, a lot of those Cypress depositors got their money by corruption, but I know that many Bernie-lovers do presume that anyone who has saved in North America must also be crooks.  The politics of jealousy are pretty disgusting.     

I let the Atlas Shrugged reference go once, but please don't bring Ayn Rand into this. If you read Das Kapital and the Communist Manisto would you suddenly change your mind on this subject? It's all about perspective, opinion etc.

We can not tax the highest earners and think somehow this country will be better. At some point we need to decide how much more should the guy above me have to pay, and is it fair for me to ask for more? At what point do they pay enough or should all their "extra money" be redistributed?

The problem is there is always more people below you who get to decide what is fair for you. Not themselves but you.

Did you see maizeman's post above? 52 percent of income paid by upper quintile pays 67 percent of taxes. That seems reasonable to me. I'm directly in the middle of your 100 and 500 fwiw

[Magclaw]

My agi was 107,000 and I paid way more taxes then you are indicating, mine was 5600, a lot more than 2000.
You are saying someone with 100k income is paying 2k of taxes. That's a 2% tax rate.
Please explain.

[human]

[
I let the Atlas Shrugged reference go once, but please don't bring Ayn Rand into this. If you read Das Kapital and the Communist Manisto would you suddenly change your mind on this subject? It's all about perspective, opinion etc.

Nope, I read a wide variety of opinions and history/philosophy and manage to avoid whiplash in changing my mind with whatever I happen to have last read.  Not sure why you would presume otherwise, I guess something you disagree with must require you to believe I am stupid.  I guess you don't see the irony that you presume my perspective, opinion, etc. are foolish because we don't agree.  So generous of you to 'let it go' as King of all Comments.  So we are done here. 

Except as the King of Comments it would be nice if you could get RealOne to shut the fuck up.     
[/quote]

I think you missed my point but not sure. I meant we are both pretty well entrenched in our opinions on taxes, me reading a cheesy novel by Ayn Rand will not change my mind on the subject, just like you reading a communist leaflet won't change yours.

[maizefolk]

My agi was 107,000 and I paid way more taxes then you are indicating, mine was 5600, a lot more than 2000.
You are saying someone with 100k income is paying 2k of taxes. That's a 2% tax rate.
Please explain.

Interesting catch! I get $5,088 in federal taxes from plugging the same numbers from the first post in.

I suspect it has something to do with the line about $3,000 in childcare expenses. But I think you only get approx 1/3 of spending as a tax credit, and wouldn't you have to have both spouses working to qualify? (OP specifies one parent works and one stays home). This is not an area of tax law I am very familiar with, not having children or paying for childcare.

[MDM]

My agi was 107,000 and I paid way more taxes then you are indicating, mine was 5600, a lot more than 2000.
You are saying someone with 100k income is paying 2k of taxes. That's a 2% tax rate.
Please explain.

Interesting catch! I get $5,088 in federal taxes from plugging the same numbers from the first post in.

I suspect it has something to do with the line about $3,000 in childcare expenses. But I think you only get approx 1/3 of spending as a tax credit, and wouldn't you have to have both spouses working to qualify? (OP specifies one parent works and one stays home). This is not an area of tax law I am very familiar with, not having children or paying for childcare.

Correct, a healthy SAHP not looking for a job would disqualify the couple from a childcare credit.  See https://www.irs.gov/publications/p503/ar02.html.  Tax will go down a little in 2016, but only to ~$5,053 not $2,591.  Unless we are missing something.....

[Yaeger]

I think you missed my point but not sure. I meant we are both pretty well entrenched in our opinions on taxes, me reading a cheesy novel by Ayn Rand will not change my mind on the subject, just like you reading a communist leaflet won't change yours.

I'm a pretty die-hard libertarian and find that challenging my assumptions by critically reading garbage literature like Das Kapital and the Communist Manifesto enables me to better argue my points and understand better the position of the other person.

It's essential towards having semi-coherent arguments. I don't like Ayn Rand, but I'd recommend The Federalist Papers, The Road to Serfdom, or Capitalism and Freedom. They're all dated books, but I think they're pretty good.

[Yaeger]

My agi was 107,000 and I paid way more taxes then you are indicating, mine was 5600, a lot more than 2000.
You are saying someone with 100k income is paying 2k of taxes. That's a 2% tax rate.
Please explain.

Agreed. My taxable income was $79k.
$15k federal income tax withheld
$4.5k SS tax
$1k Medicare

Total: $20.5k federal tax, $18.4k after refund
I think I'm doing something wrong!

[MrDelane]

I agree---  except I am reminded that is what Mick Jagger kept yelling to the audience at Altamont, "people, just chill out" and then the guy got knifed.

Ha.
That's the best comment we've had so far.
:)



(and that's a brilliant documentary too)

[MDM]

My taxable income was $79k.
$4.5k SS tax
$1k Medicare

Total...federal tax, $18.4k [so $12.9K income tax]

I think I'm doing something wrong!

$4.5K SS tax implies $72,851 FICA wages.

Assuming single filing status, that means ~$18K income from a 1099-MISC (or other self-employment) to reach $79K taxable (assuming by taxable you mean Form 1040 line 43).

Seems you are doing ok!

[Yaeger]

My taxable income was $79k.
$4.5k SS tax
$1k Medicare

Total...federal tax, $18.4k [so $12.9K income tax]

I think I'm doing something wrong!

$4.5K SS tax implies $72,851 FICA wages.

Assuming single filing status, that means ~$18K income from a 1099-MISC (or other self-employment) to reach $79K taxable (assuming by taxable you mean Form 1040 line 43).

Seems you are doing ok!

I'm in the military, my pay falls under different rules for FICA and federal income depending on type. My income subject to FICA is ~72k.

[arebelspy]

[MOD NOTE: Cleaned up a bunch of trash from a known troll who had started a new account after previous bannings.  No need to respond any more.  Carry on.] 

[2buttons]

The "having every advantage " thing really bothers me.

There are people with every advantage that blow it. I know a bunch of them.

There are also people who come from nothing and really make it, I know a bunch of those folks too. In fact, I think getting kicked early in life can be an advantage.

Immigrant 1st gen millionaires are a great example of this, since by definition they have every disadvantage including language.

[ender]

The top 20 percent, with incomes above $134,300, contribute nearly 84 percent of all federal income taxes. Meanwhile, the vast majority of earners, those in the bottom 80 percent, pay about 15 percent, with the bottom 60 percent contributing 2 percent to federal income taxes.

Seems hard to justify that 20% of the people pay 84% of the taxes.  You can list all the arguments that you like but they pay percentage taxes on everything they consume I don't see how people think it is fair for them to carry such a large portion of the tax burden.  Just my opinion.....

What percent of the income do they earn?  Surely you meant to include that, because having one without the other is nonsensical.

I guess we've moved on to the name calling. But since I actually find the numbers much more interesting than that bit:

Apparently in 2011, the top 20% earned 52% of income and payed 69% of federal taxes (combines income and payroll taxes which is likely why this number is lower than the one stated above.)

source: https://www.cbo.gov/publication/49440

This is interesting, thanks for sharing this.

[desertadapted]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.  If you're trying to get after "the 1%," I don't see why you'd attack that issue primarily from a labor/income tax, rather than a capital tax.   So for instance, gradually returning long-term cap to 20% from 15% -- you could also have modest incremental increases in the short term rate.  I'm skeptical that it would have a material impact on investment in new companies/rental properties (but I'm not an economist).  Just generally, it seems like there must be benefits to having labor and investment taxed more similarly, albeit not the same.

[starguru]

Lets see the results
Income:                        $500,000               $100,000
401K contribution:         $18,000                 $18,000
SS Tax:                         $7,316                   $6,200
Medicare Tax:                $9,500                   $1,450
Federal Income Tax        $131,348               $2,591

Total Taxes Paid             $148,164               $10,241

Hmm.  My AGI was about 500k and my taxes were a lot higher.  I paid 145 in income tax + AMT only.  Granted my actual situation is not the same as your hypothetical (two earners, 1 kid, etc).  My accountant said my total tax rate was 40% for all taxes except sales taxes. 

On the topic of "fairness" in another thread I wrote the following

You realize that any appeal to "fairness" is a completely subjective measure, right?  Things were "unfair" before the taxes in the ACA. ACA raises taxes, so things are "fair" then right?  No, wait, wut?  Ok, then in 2013 (I think) congress passed that bill that raised taxes gain.  So things became fair then right?  No, wait, still no?  So now we need more taxes so things are "fair".  If Sanders got his tax plan passed, will things finally be "fair"?  Im guessing until the government runs out of money again, then things will be unfair.  The notion of "fairness" is an appeal to emotion, not an appeal to logic as to why taxes should be higher for some and not for others.

So, two *objective* points are:

1.  Higher earners pay proportionally higher taxes to their income.
2.  Higher earners get less in government benefits per taxes payed. 

You might argue that this is the way it should be, and I wouldn't even disagree with you, but I ask you, is it "fair"? 

And if it is "fair" to ask higher earners to pay taxes out of proportion to their income, is also "fair" to ask people to not be a drag on society and to make smart choices that don't perpetuate poverty (i.e. lack savings, having children they can't afford, making poor health choices that end up costing everyone more, etc...)?

Someone in that thread replied that another objective fact is that people with more wealth also get more benefit from society in that our laws do a pretty good (not perfect) job of protecting wealth, so that's a benefit "the rich" get and you could interpret their higher taxes as paying for that. 

[Schaefer Light]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.

And it would be even more productive to cut government spending.

[tooqk4u22]

The thing is, the median income in the US is far below $100K. Someone making $100K as the sole earner in the family is doing remarkably well. Someone making $500K should STFU about taxes because they already make in a few years more than most people in this country will earn in their lifetime.

Agree they are doing well, but it may not be remarkably well - the US is so economically diverse geographically that this argument doesn't hold water.  Living in NJ or NY or CA with cost of living and ridiculously crazy progressive tax structures - no $100k would not be living remarkably well.

Most of the "fairness" topic does not even cover people earning a wage of $100K or more. Its about the people who earn most of their money through interest, dividends, etc... and shield most of it through various nefarious schemes that are semi-legal. Or its aimed at CEOs like Jamie Dimon who make $23M a year in total compensation, but pay their lowest level employees $9/hr. People do not think that is fair. It has nothing to do with the tax rates on earned income.

Or anybody and everybody on this board is working/saving to FIRE off of interest, dividends, etc....so if we live off of $40k of this stuff I guess then we should pay 40% in taxes.

[wenchsenior]

I do agree though. For a message board that is based on making the best of your own situation, doing as much as possible for your self. I too am surprised how so many (not everyone) want to take more from those who make a bit more than they do.

.

Why do anti tax people always assume I only want to raise taxes on them LOL? I don't just want to raise taxes on those who earn more than me. I also support taking a few thousand more FROM MYSELF by raising my OWN tax rates a few percentage points, in exchange for broader societal prosperity and more robust safety nets for those below my income level.  Anti tax sorts can argue about whether that prosperity is real/is achievable/is moral or whatever. That's fine. But don't accuse me of trying to make only others pay for it.

As it happens, I also support several other steps that would negatively affect our own financial situation. For example, I support Obama's repeated proposals to gradually step-boost the percentage of pay that federal employees contribute to their pension. Doing so won't make DH's pension bigger, and it would cost us another several thousand per year. I won't love paying that, but I'm willing to do it to keep the federal pension system strong, and the option of a safe annuity available for all current and future participants.

Shocking, and so anti MMM. I know.

[starguru]

Most of the "fairness" topic does not even cover people earning a wage of $100K or more. Its about the people who earn most of their money through interest, dividends, etc... and shield most of it through various nefarious schemes that are semi-legal. Or its aimed at CEOs like Jamie Dimon who make $23M a year in total compensation, but pay their lowest level employees $9/hr. People do not think that is fair. It has nothing to do with the tax rates on earned income.

Or anybody and everybody on this board is working/saving to FIRE off of interest, dividends, etc....so if we live off of $40k of this stuff I guess then we should pay 40% in taxes.

That's why the argument is to raise taxes on "the rich" but not define what "the rich" is.  If the argument was "most in this country are 'rich' by global standards, so we should raise taxes on most everybody" it wouldn't be a very popular position.   

[tooqk4u22]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.

And it would be even more productive to cut government spending.

Or at least insure that what is being spent is being spent in a judicious, efficient manner that maximizes its return and utility.  Keep the same pot and apply a mustachian lense to the spending I bet we could have strong defense, safety nets, and health care without spending increasing one bit and maybe even have a surplus.   

But government doesn't care about any of that because they are not spending their money they are spending our money - always more fun when it others people's money.

[PhysicianOnFIRE]

W2 income can't really be hidden. Yes, the doctors, lawyers and business owners and others who work for a wage are paying their fair share.

The Top 5 ways to lower your tax bill:

1. Tax-deferred retirement contributions
2. Self-employment deductions
3. Donate to charity
4. Spouse and kids (child credit / exemptions phased out at higher incomes)
5. WORK LESS!

[BBub]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.  If you're trying to get after "the 1%," I don't see why you'd attack that issue primarily from a labor/income tax, rather than a capital tax.  So for instance, gradually returning long-term cap to 20% from 15% -- you could also have modest incremental increases in the short term rate.  I'm skeptical that it would have a material impact on investment in new companies/rental properties (but I'm not an economist).  Just generally, it seems like there must be benefits to having labor and investment taxed more similarly, albeit not the same.

A family making $500k pays 23.8% on LT Cap Gains.  Not 15%.

[forummm]

I wanted to compare the taxes two families high vs lower income:
Assumptions:
1) Incomes will be $500K vs $100K
2)  Both have a stay at home spouse with 2 kids.
3)  Both choose to rent (makes deductions easier) and therefor both take personal exemption and deduction of their taxes
4)  Both maximize their work 401K of $18K
5)  Both pay $3K in child care expenses

Lets see the results
Income:                        $500,000               $100,000
401K contribution:         $18,000                 $18,000
SS Tax:                         $7,316                   $6,200
Medicare Tax:                $9,500                   $1,450
Federal Income Tax        $131,348               $2,591

Total Taxes Paid             $148,164               $10,241


Basically the higher income earner makes 5x the money but pays almost 14x the taxes. 
Also, the high income earner is paying 39.6% taxes on any earned interest and 23.8% taxes on long term capital gains and qualified dividends.

My question goes to all those people who think that the high income W2 employees are not paying their fair share, how is the above not paying their fair share?


Lets even let this employee save $53K instead of $18K.  The taxes are still $130K every year.  Lets give this employee a mortgage and mortgage interest.  Well, thanks to the Pease phase out and personal exemption deduction, that doesn't really cut taxes by much.  Lets give this family 2 more kids.  Oops, kiddo deductions are phased out as well.  How about school loan interest?  That's phased out also. 

Some may say that these high income earners hide their money from taxes.  That is not true.  Earned income can't be hidden.  You are referring to investment income which is taxed at the capital gains rates. 

Don't get me wrong, the $500K employee is doing very well and if they play their cards right will have a very nice financial future.  But don't think for one minute that they are not paying their fair share in taxes.

I didn't bother to read all the other responses. But you're ignoring a few things here. One is that the deductions for the $500k earner will be significant. They will almost certainly itemize. The state tax deduction alone will be $30k if they are in a 6% tax state.

And you're also misunderstanding something significant. The big disparity in the tax code that people seeking higher taxes on the wealthy point to is not for earned income--it's for unearned income. Warren Buffett never has to pay any taxes on his stock holdings if he doesn't want to. Never. BRK doesn't pay any dividends. If he sold some of his shares he would pay 0% for some amount of shares. And then 15%. And then 20% at the top LTCG rate. Even if he realized $50 billion in gains in 2016, that 20% LTCG rate would still hold. Whereas 5-figure salary office worker ForuMMM has a 25% marginal tax rate on my income from work, and then 7.65% FICA on top of that.

But Buffett doesn't actually have to even pay that 20% ever if he doesn't want to. He can just hold his shares for the rest of his life and borrow against them to fund his spending. He can die with $50 billion in stock and $1 billion in personal or margin loans, and the estate will payoff the loan while he donates the rest to charity or to his beneficiaries. And his beneficiaries enjoy a stepped up basis, so they could sell without paying CG tax at all.

[bacchi]

So, two *objective* points are:

1.  Higher earners pay proportionally higher taxes to their income.
2.  Higher earners get less in government benefits per taxes payed. 

1. That is the nature of a progressive tax system, true.
2. Nope, not objective.

[the_gastropod]

I do agree though. For a message board that is based on making the best of your own situation, doing as much as possible for your self. I too am surprised how so many (not everyone) want to take more from those who make a bit more than they do.

.

Why do anti tax people always assume I only want to raise taxes on them LOL? I don't just want to raise taxes on those who earn more than me. I also support taking a few thousand more FROM MYSELF by raising my OWN tax rates a few percentage points, in exchange for broader societal prosperity and more robust safety nets for those below my income level.  Anti tax sorts can argue about whether that prosperity is real/is achievable/is moral or whatever. That's fine. But don't accuse me of trying to make only others pay for it.

As it happens, I also support several other steps that would negatively affect our own financial situation. For example, I support Obama's repeated proposals to gradually step-boost the percentage of pay that federal employees contribute to their pension. Doing so won't make DH's pension bigger, and it would cost us another several thousand per year. I won't love paying that, but I'm willing to do it to keep the federal pension system strong, and the option of a safe annuity available for all current and future participants.

Shocking, and so anti MMM. I know.

Hear hear! I find it shocking that some people completely distort MMM's message into one selfishness. That's not what it's about.

[AZDude]

The top 20 percent, with incomes above $134,300, contribute nearly 84 percent of all federal income taxes. Meanwhile, the vast majority of earners, those in the bottom 80 percent, pay about 15 percent, with the bottom 60 percent contributing 2 percent to federal income taxes.

Seems hard to justify that 20% of the people pay 84% of the taxes.  You can list all the arguments that you like but they pay percentage taxes on everything they consume I don't see how people think it is fair for them to carry such a large portion of the tax burden.  Just my opinion.....

I could be wrong, but I think that those bottom 80% would gladly pay more in taxes in exchange for earning significantly more money.

[AZDude]

Someone making $500K should STFU about taxes because they already make in a few years more than most people in this country will earn in their lifetime.

At what income level does the First Amendment no longer apply?

https://en.wikipedia.org/wiki/Straw_man

[tooqk4u22]

My agi was 107,000 and I paid way more taxes then you are indicating, mine was 5600, a lot more than 2000.
You are saying someone with 100k income is paying 2k of taxes. That's a 2% tax rate.
Please explain.

Interesting catch! I get $5,088 in federal taxes from plugging the same numbers from the first post in.

I suspect it has something to do with the line about $3,000 in childcare expenses. But I think you only get approx 1/3 of spending as a tax credit, and wouldn't you have to have both spouses working to qualify? (OP specifies one parent works and one stays home). This is not an area of tax law I am very familiar with, not having children or paying for childcare.

Just ran taxcaster and $500k scenario is right but $100k scenario should be $5k.  Numbers should be corrected but it is not so material that it changes his point of view or others discussion of it.

[tooqk4u22]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.  If you're trying to get after "the 1%," I don't see why you'd attack that issue primarily from a labor/income tax, rather than a capital tax.   So for instance, gradually returning long-term cap to 20% from 15% -- you could also have modest incremental increases in the short term rate.  I'm skeptical that it would have a material impact on investment in new companies/rental properties (but I'm not an economist).  Just generally, it seems like there must be benefits to having labor and investment taxed more similarly, albeit not the same.

The benefits to taxing income - labor or corporate - are consistency.  If you raise the capital gains taxes then those impacted by would have the option not to sell the shares and thereby avoiding the tax (at least for now and maybe forever if below the estate tax levels).

If not for that issue, I think eliminating all corporate taxes and just taxing all income (capital gains, dividends, interest, wages, etc) at ordinary rates (whatever those are) would be much better proposition. 

[AZDude]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.  If you're trying to get after "the 1%," I don't see why you'd attack that issue primarily from a labor/income tax, rather than a capital tax.   So for instance, gradually returning long-term cap to 20% from 15% -- you could also have modest incremental increases in the short term rate.  I'm skeptical that it would have a material impact on investment in new companies/rental properties (but I'm not an economist).  Just generally, it seems like there must be benefits to having labor and investment taxed more similarly, albeit not the same.

The benefits to taxing income - labor or corporate - are consistency.  If you raise the capital gains taxes then those impacted by would have the option not to sell the shares and thereby avoiding the tax (at least for now and maybe forever if below the estate tax levels).

If not for that issue, I think eliminating all corporate taxes and just taxing all income (capital gains, dividends, interest, wages, etc) at ordinary rates (whatever those are) would be much better proposition.

Eventually, they would be taxed, and in the meantime the dividends would get taxed. I would still favor zero corporate income taxes and higher dividend taxes. It should eliminate the idea of corps relocating offshore for lower taxes. It will never happen because people are stupid and congress is full of people who make the majority of their income from dividends, capital gains, and interest.

[Digital Dogma]

We have seen tax cuts during good times, tax cuts during bad times, and a growing mountain full of debt. Its time that we stop going through our boom cycles with the false belief that lowering taxes on the wealthiest individuals will somehow stimulate a longer boom cycle instead of making our bust that much harder on the mounting national debt and deficit.

We can't tax our way to prosperity, but we CAN tax our way to a lower deficit and eventually a lower debt level, those two need to be properly balanced to address changing economic cycles. All too often we hear calls to reduce spending with the selfish goal of reducing personal tax burdens, but it doesn't take into account that we SHOULD be tightening our belt on spending PLUS stashing away a large percentage of our revenue to pay down our debts.

I don't advocate eliminating our national debt all together, but reducing it by a factor of 10 would be a great start.

[onlykelsey]

I don't advocate eliminating our national debt all together, but reducing it by a factor of 10 would be a great start.

I don't disagree, necessarily, but I"m not even bullish on our ability to freeze it where it's at (and stop the anticipated increases by 2025).  I also worry that the projects don't take into account the full negative effects of climate change, although they will start, too.  A smaller tax base and more expensive resources will make it a lot harder in 20 years to fix these problems.

[tooqk4u22]

The top 20 percent, with incomes above $134,300, contribute nearly 84 percent of all federal income taxes. Meanwhile, the vast majority of earners, those in the bottom 80 percent, pay about 15 percent, with the bottom 60 percent contributing 2 percent to federal income taxes.

Seems hard to justify that 20% of the people pay 84% of the taxes.  You can list all the arguments that you like but they pay percentage taxes on everything they consume I don't see how people think it is fair for them to carry such a large portion of the tax burden.  Just my opinion.....

I could be wrong, but I think that those bottom 80% would gladly pay more in taxes in exchange for earning significantly more money.

Your probably not wrong, but they may not be willing to exchange the time/energy/education/effort/kiss-assing/working 80 hour weeks/networking/years and years of working to become proficient to be able to command a higher salary that might be necessary to get the ability to pay more taxes.  Most high wage people started at lower wages and climbed up over many years. 

[Northwestie]

The top 20 percent, with incomes above $134,300, contribute nearly 84 percent of all federal income taxes. Meanwhile, the vast majority of earners, those in the bottom 80 percent, pay about 15 percent, with the bottom 60 percent contributing 2 percent to federal income taxes.

Seems hard to justify that 20% of the people pay 84% of the taxes.  You can list all the arguments that you like but they pay percentage taxes on everything they consume I don't see how people think it is fair for them to carry such a large portion of the tax burden.  Just my opinion.....

I could be wrong, but I think that those bottom 80% would gladly pay more in taxes in exchange for earning significantly more money.

Your probably not wrong, but they may not be willing to exchange the time/energy/education/effort/kiss-assing/working 80 hour weeks/networking/years and years of working to become proficient to be able to command a higher salary that might be necessary to get the ability to pay more taxes.  Most high wage people started at lower wages and climbed up over many years.

...........or, conversely, where most of the wealth is located, in the upper 0.5% -- they were born into it.  Just like George Bush - born on third base and thinks he hit a triple.

[aprilchem]

This seems like a big fight, and I'm not looking to antagonize. I'm also not a tax expert.  But I will say that it makes me frustrated when my husband and I do our taxes each year that we pay so much in taxes and we can't take most of the credits that others can take.  I feel like we are being penalized for making good choices, like staying in college forever to get the degrees we have, choosing more difficult majors in college because the job market's better, and working to get ahead in our jobs thus making more money.  Alternatively, many in my family made poorer choices and end up paying zero tax each year (or close to it).  Yes, we are more financially secure than them, but it's not been just dumb luck that we are.  We've really made sacrifices, and every year when I write that tax check I feel like we're being penalized for it.

[tooqk4u22]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.  If you're trying to get after "the 1%," I don't see why you'd attack that issue primarily from a labor/income tax, rather than a capital tax.   So for instance, gradually returning long-term cap to 20% from 15% -- you could also have modest incremental increases in the short term rate.  I'm skeptical that it would have a material impact on investment in new companies/rental properties (but I'm not an economist).  Just generally, it seems like there must be benefits to having labor and investment taxed more similarly, albeit not the same.

The benefits to taxing income - labor or corporate - are consistency.  If you raise the capital gains taxes then those impacted by would have the option not to sell the shares and thereby avoiding the tax (at least for now and maybe forever if below the estate tax levels).

If not for that issue, I think eliminating all corporate taxes and just taxing all income (capital gains, dividends, interest, wages, etc) at ordinary rates (whatever those are) would be much better proposition.

Eventually, they would be taxed, and in the meantime the dividends would get taxed. I would still favor zero corporate income taxes and higher dividend taxes. It should eliminate the idea of corps relocating offshore for lower taxes. It will never happen because people are stupid and congress is full of people who make the majority of their income from dividends, capital gains, and interest.

Yup.  And I agree that it would stop tax arbitrage of relocation.   The problem is that corps could eliminate dividends and retain them...thereby delaying the taxability via the deferred capital gains. 

However, if they changed the rules such that corps act like REITS, which by law have to distribute out 90% of their taxable income (not saying it should be that number, just the premise)  then that would be a way to solve for it.

[tooqk4u22]

The top 20 percent, with incomes above $134,300, contribute nearly 84 percent of all federal income taxes. Meanwhile, the vast majority of earners, those in the bottom 80 percent, pay about 15 percent, with the bottom 60 percent contributing 2 percent to federal income taxes.

Seems hard to justify that 20% of the people pay 84% of the taxes.  You can list all the arguments that you like but they pay percentage taxes on everything they consume I don't see how people think it is fair for them to carry such a large portion of the tax burden.  Just my opinion.....

I could be wrong, but I think that those bottom 80% would gladly pay more in taxes in exchange for earning significantly more money.

Your probably not wrong, but they may not be willing to exchange the time/energy/education/effort/kiss-assing/working 80 hour weeks/networking/years and years of working to become proficient to be able to command a higher salary that might be necessary to get the ability to pay more taxes.  Most high wage people started at lower wages and climbed up over many years.

...........or, conversely, where most of the wealth is located, in the upper 0.5% -- they were born into it.  Just like George Bush - born on third base and thinks he hit a triple.

agreed, but even that wealth was taxed at some point. 

[AZDude]

Your probably not wrong, but they may not be willing to exchange the time/energy/education/effort/kiss-assing/working 80 hour weeks/networking/years and years of working to become proficient to be able to command a higher salary that might be necessary to get the ability to pay more taxes.  Most high wage people started at lower wages and climbed up over many years.

Yes, I'm sure you are right. 80% of the population is just lazy and will not work hard in order to make $100K a year. After all, there are millions and millions of $100K+ paying jobs that are unfilled right now due to lack of interested candidates, right?

[Tabaxus]

Although already mentioned in the thread: it seems like rather than continuing to raise income tax on high income earners, it would be more productive to increase capital gains rates.  If you're trying to get after "the 1%," I don't see why you'd attack that issue primarily from a labor/income tax, rather than a capital tax.   So for instance, gradually returning long-term cap to 20% from 15% -- you could also have modest incremental increases in the short term rate.  I'm skeptical that it would have a material impact on investment in new companies/rental properties (but I'm not an economist).  Just generally, it seems like there must be benefits to having labor and investment taxed more similarly, albeit not the same.

The benefits to taxing income - labor or corporate - are consistency.  If you raise the capital gains taxes then those impacted by would have the option not to sell the shares and thereby avoiding the tax (at least for now and maybe forever if below the estate tax levels).

If not for that issue, I think eliminating all corporate taxes and just taxing all income (capital gains, dividends, interest, wages, etc) at ordinary rates (whatever those are) would be much better proposition.

Eventually, they would be taxed, and in the meantime the dividends would get taxed. I would still favor zero corporate income taxes and higher dividend taxes. It should eliminate the idea of corps relocating offshore for lower taxes. It will never happen because people are stupid and congress is full of people who make the majority of their income from dividends, capital gains, and interest.

Yup.  And I agree that it would stop tax arbitrage of relocation.   The problem is that corps could eliminate dividends and retain them...thereby delaying the taxability via the deferred capital gains. 

However, if they changed the rules such that corps act like REITS, which by law have to distribute out 90% of their taxable income (not saying it should be that number, just the premise)  then that would be a way to solve for it.

It used to be the case that corporations had to pay an excise tax on undistributed earnings if they went over a certain amount.  It was a nightmare, because it makes it very difficult to accumulate cash for acquisitions, R&D, etc.  Terrible idea.  REITs are special because they are generally passive, and they are not taxed at the corporate level (which justifies the distribution requirement).