Author Topic: Big Income, Big Consequences  (Read 17819 times)

talltexan

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Re: Big Income, Big Consequences
« Reply #150 on: February 23, 2021, 07:47:50 PM »
I've long been aware of a house two lots over from my in-laws where the husband has been polishing and maintaining a beautiful, blue corvette. The corvette was parked outside today, with a "for sale by owner" sign. The house is also "for sale by owner". Wonder if there's a divorce going on there, as well.

Wolfpack Mustachian

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Re: Big Income, Big Consequences
« Reply #151 on: February 24, 2021, 05:21:53 AM »

That double taxation argument doesn't really hold up to me as much since the corporation and I are two separate entities. What does hold up to me on a gut level is that I paid taxes on my income when I made it, then invested it and am now paying taxes again on money that I had already earned.

No, you pay taxes on your gains - not the "money you already earned".

Unless you have a stupendously bad tax preparer, I suppose.

You do realize that you quoted the first half of what I said (admittedly could have been worded better) without the explanation in the second half, right? Yes, I realize I'm only paying tax on the increase in my money. However, as I explained, my increase in money at least in part only makes up for the decrease in the value of my money due to inflation. As I asked, would the government credit me anything from my overall income taxes for the lost value in my money due to inflation that they, in a large part, contribute to? Of course they would not. So why do they charge me when I make that money that I already earned earn have a little bit more value than it would have if it had just kept up with inflation? At the very least, why don't they only charge me only related to the amount I gain greater than the inflation itself?

The answer is, they do it because they can. So yes, I very firmly believe the government is double taxing me on my money because of this principle, but I've just resigned myself to not get upset over it.

talltexan

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Re: Big Income, Big Consequences
« Reply #152 on: February 24, 2021, 10:51:37 AM »
So...are you saying that you would tolerate a far higher tax burden in exchange for shifting to the gold standard so as to minimize future inflation?

Telecaster

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Re: Big Income, Big Consequences
« Reply #153 on: February 24, 2021, 01:54:13 PM »
The answer is, they do it because they can. So yes, I very firmly believe the government is double taxing me on my money because of this principle, but I've just resigned myself to not get upset over it.

Never attribute anything to malice which can be explained by simple incompetence.  Until fairly recently, it would have been burdensome for individuals to calculate their basis if they had to include inflation calculation.  Even now I think it would be. 

I would say though, it is more accurate to say you are being taxed at effectively higher rates than are published, but you are still only taxed on time. 

Telecaster

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Re: Big Income, Big Consequences
« Reply #154 on: February 24, 2021, 01:56:45 PM »
So...are you saying that you would tolerate a far higher tax burden in exchange for shifting to the gold standard so as to minimize future inflation?

The other thing you could do would be to adjust your cost basis for inflation.  So, that $200 worth of stock you purchased 20 years ago would have its basis adjusted upwards to $400 today (or whatever it is).  It would add to the complexity of tax preparation, however. 

Bloop Bloop Reloaded

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Re: Big Income, Big Consequences
« Reply #155 on: February 24, 2021, 05:41:51 PM »
So...are you saying that you would tolerate a far higher tax burden in exchange for shifting to the gold standard so as to minimize future inflation?

Could just cut services. Why does the solution to everything have to be more tax?

Taran Wanderer

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Re: Big Income, Big Consequences
« Reply #156 on: February 24, 2021, 06:11:25 PM »
So...are you saying that you would tolerate a far higher tax burden in exchange for shifting to the gold standard so as to minimize future inflation?

Could just cut services. Why does the solution to everything have to be more tax?
Because people have trouble giving up services once they have them.

Bloop Bloop Reloaded

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Re: Big Income, Big Consequences
« Reply #157 on: February 24, 2021, 06:25:57 PM »
There are lots of ways to skin a cat. People also have trouble accepting tax hikes.

Telecaster

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Re: Big Income, Big Consequences
« Reply #158 on: February 24, 2021, 07:05:28 PM »
There are lots of ways to skin a cat. People also have trouble accepting tax hikes.

There are reasons government services exist.  Namely, people want them.  Try this for a political sell:  We're going to cut food stamps so rich people can save money on capital gains taxes. 


Wolfpack Mustachian

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Re: Big Income, Big Consequences
« Reply #159 on: February 24, 2021, 07:28:09 PM »
So...are you saying that you would tolerate a far higher tax burden in exchange for shifting to the gold standard so as to minimize future inflation?

Lol, no. I am saying that we're playing a game set up by the government. They decided to have inflation. They also do things that influence how much inflation there will be. Furthermore, even if they didn't do any of that, they certainly benefit from it.

They've created the game, the conditions where money becomes worth less and then they tax what is at least in part just keeping up value for the conditions that they themselves have both helped set up and also benefit from. They do all of this after they've already taxed me for the money I earned in the first place.
« Last Edit: February 25, 2021, 04:35:34 AM by Wolfpack Mustachian »

Wolfpack Mustachian

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Re: Big Income, Big Consequences
« Reply #160 on: February 24, 2021, 07:34:22 PM »
The answer is, they do it because they can. So yes, I very firmly believe the government is double taxing me on my money because of this principle, but I've just resigned myself to not get upset over it.

Never attribute anything to malice which can be explained by simple incompetence.  Until fairly recently, it would have been burdensome for individuals to calculate their basis if they had to include inflation calculation.  Even now I think it would be. 

I would say though, it is more accurate to say you are being taxed at effectively higher rates than are published, but you are still only taxed on time.

Sure, incompetence could be used as an excuse for the situation. However, as you admit, we now have the ability to calculate cost basis with inflation in a way that's not too difficult. I haven't exactly heard of droves of senators and representatives in support of changing the way capital gains are treated despite the ability to. For your last point, I would disagree with that characteristic of the situation, but as I mentioned before, it's no longer a hill I'm going to die on. However, I will likely always have a gut aversion to the concept and believe it is double taxation of the value of the money that I earned for the reasons I mentioned.

Bloop Bloop Reloaded

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Re: Big Income, Big Consequences
« Reply #161 on: February 24, 2021, 08:23:08 PM »
There are lots of ways to skin a cat. People also have trouble accepting tax hikes.

There are reasons government services exist.  Namely, people want them.  Try this for a political sell:  We're going to cut food stamps so rich people can save money on capital gains taxes.

There's many ways you can sell tax cuts.

How about we remove some unnecessary middle class welfare. That's a much better political sell. Seems to work well for the Republicans.

Travis

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Re: Big Income, Big Consequences
« Reply #162 on: March 01, 2021, 04:37:17 PM »
Yeah, the RE market is insane right now.  Supply is down 40-50% YoY in most places. 

In our neighborhood, sales prices have spiked by 20-25% in the last year.  Our next door neighbors had two showings the first day in October, got offers from both, and closed a month later.  The neighbor on the other side of them priced themselves a bit high, and listed just before Thanksgiving, but still only took two months before they went under contract, for close to list price.  Several other friends had contracts within a week, within a couple days, and in eight hours, respectively.  A local realtor posted a video this morning, saying that they had 61 requests for showings within minutes of listing a house, and had an offer for $40k over list price before the house even opened.  And our area isn't, IMO, all that amazing.  It's nice, but it's 25 minutes from the nearest freeway and 90 minutes from DowntownBigCity, and the school district, while above average, also has about the highest taxes in the state and is still making cuts in order to balance the budget.

DW would love to take advantage and sell our house and move closer to her family, but home prices there were 50% higher than here to begin with, and the current shortage means that they're now about twice the price!

This describes DW's hometown exactly. One of our friends is a realtor the next town over and prices have doubled in five years. It appears to be people commuting an hour away to the city who are buying, and supply is not keeping up with the demand. Her company put a house up last Thursday, had 15 showings Friday afternoon, 7 offers, and had it under contract that evening.

"Over 40 showings in 4 days, 10 offers, in escrow with appraisal and contingency waiver at $27,000 over listing price!"

This was on her FB today, along with a mention that she just sold a house for $400k, $40k over listing price.

Telecaster

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Re: Big Income, Big Consequences
« Reply #163 on: March 01, 2021, 05:11:24 PM »
There are lots of ways to skin a cat. People also have trouble accepting tax hikes.

There are reasons government services exist.  Namely, people want them.  Try this for a political sell:  We're going to cut food stamps so rich people can save money on capital gains taxes.

There's many ways you can sell tax cuts.

How about we remove some unnecessary middle class welfare. That's a much better political sell. Seems to work well for the Republicans.

For example?

talltexan

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Re: Big Income, Big Consequences
« Reply #164 on: March 02, 2021, 06:02:13 AM »
The cap on the mortgage interest tax deduction that was in TCJA.

zolotiyeruki

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Re: Big Income, Big Consequences
« Reply #165 on: March 02, 2021, 07:10:51 AM »
The cap on the mortgage interest tax deduction that was in TCJA.
Are you referring to the SALT deduction cap?  My impression is that that provision was an effort to reduce what was effectively a subsidy to high-tax states.

UpNAtom

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Re: Big Income, Big Consequences
« Reply #166 on: March 02, 2021, 09:57:15 AM »
I've long been aware of a house two lots over from my in-laws where the husband has been polishing and maintaining a beautiful, blue corvette. The corvette was parked outside today, with a "for sale by owner" sign. The house is also "for sale by owner". Wonder if there's a divorce going on there, as well.
If it was only the house or only the car or one then the other, my answer would be different: sounds like they need every penny from both sales for whatever they are trying to pay for ;)

talltexan

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Re: Big Income, Big Consequences
« Reply #167 on: March 02, 2021, 10:42:29 AM »
The cap on the mortgage interest tax deduction that was in TCJA.
Are you referring to the SALT deduction cap?  My impression is that that provision was an effort to reduce what was effectively a subsidy to high-tax states.

I had in mind reducing the principal balance from $1,000,000 to $750,000 on deductible loans.

zolotiyeruki

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Re: Big Income, Big Consequences
« Reply #168 on: March 02, 2021, 11:14:30 AM »
The cap on the mortgage interest tax deduction that was in TCJA.
Are you referring to the SALT deduction cap?  My impression is that that provision was an effort to reduce what was effectively a subsidy to high-tax states.

I had in mind reducing the principal balance from $1,000,000 to $750,000 on deductible loans.
$750k-$1M is middle class?  Wow, where have I been?

robartsd

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Re: Big Income, Big Consequences
« Reply #169 on: March 02, 2021, 11:30:20 AM »
I had in mind reducing the principal balance from $1,000,000 to $750,000 on deductible loans.
$750k-$1M is middle class?  Wow, where have I been?
Yes, you can find middle class homes valued at $750k+ in the SF Bay Area, costal Southern California communities, and Hawaii.

Dicey

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Re: Big Income, Big Consequences
« Reply #170 on: March 02, 2021, 12:40:30 PM »
Yeah, the RE market is insane right now.  Supply is down 40-50% YoY in most places. 

In our neighborhood, sales prices have spiked by 20-25% in the last year.  Our next door neighbors had two showings the first day in October, got offers from both, and closed a month later.  The neighbor on the other side of them priced themselves a bit high, and listed just before Thanksgiving, but still only took two months before they went under contract, for close to list price.  Several other friends had contracts within a week, within a couple days, and in eight hours, respectively.  A local realtor posted a video this morning, saying that they had 61 requests for showings within minutes of listing a house, and had an offer for $40k over list price before the house even opened.  And our area isn't, IMO, all that amazing.  It's nice, but it's 25 minutes from the nearest freeway and 90 minutes from DowntownBigCity, and the school district, while above average, also has about the highest taxes in the state and is still making cuts in order to balance the budget.

DW would love to take advantage and sell our house and move closer to her family, but home prices there were 50% higher than here to begin with, and the current shortage means that they're now about twice the price!

This describes DW's hometown exactly. One of our friends is a realtor the next town over and prices have doubled in five years. It appears to be people commuting an hour away to the city who are buying, and supply is not keeping up with the demand. Her company put a house up last Thursday, had 15 showings Friday afternoon, 7 offers, and had it under contract that evening.

"Over 40 showings in 4 days, 10 offers, in escrow with appraisal and contingency waiver at $27,000 over listing price!"

This was on her FB today, along with a mention that she just sold a house for $400k, $40k over listing price
.
What's funny hilarious about this is that Realtors brag like this as if those results have something to do with them or their sales skills or marketing genius. No, it's the market, you silly asses.

Travis

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Re: Big Income, Big Consequences
« Reply #171 on: March 02, 2021, 04:19:11 PM »
Yeah, the RE market is insane right now.  Supply is down 40-50% YoY in most places. 

In our neighborhood, sales prices have spiked by 20-25% in the last year.  Our next door neighbors had two showings the first day in October, got offers from both, and closed a month later.  The neighbor on the other side of them priced themselves a bit high, and listed just before Thanksgiving, but still only took two months before they went under contract, for close to list price.  Several other friends had contracts within a week, within a couple days, and in eight hours, respectively.  A local realtor posted a video this morning, saying that they had 61 requests for showings within minutes of listing a house, and had an offer for $40k over list price before the house even opened.  And our area isn't, IMO, all that amazing.  It's nice, but it's 25 minutes from the nearest freeway and 90 minutes from DowntownBigCity, and the school district, while above average, also has about the highest taxes in the state and is still making cuts in order to balance the budget.

DW would love to take advantage and sell our house and move closer to her family, but home prices there were 50% higher than here to begin with, and the current shortage means that they're now about twice the price!

This describes DW's hometown exactly. One of our friends is a realtor the next town over and prices have doubled in five years. It appears to be people commuting an hour away to the city who are buying, and supply is not keeping up with the demand. Her company put a house up last Thursday, had 15 showings Friday afternoon, 7 offers, and had it under contract that evening.

"Over 40 showings in 4 days, 10 offers, in escrow with appraisal and contingency waiver at $27,000 over listing price!"

This was on her FB today, along with a mention that she just sold a house for $400k, $40k over listing price
.
What's funny hilarious about this is that Realtors brag like this as if those results have something to do with them or their sales skills or marketing genius. No, it's the market, you silly asses.

She's a friend of the family and gets excited about her niche in the market. I can't parse how much of this is her company's advertising skills and how much is just market demand, but it seems like she isn't having to put too much effort into selling these homes if she only needs 1-4 days to show them and the bidding war is 10-20% over listing price.  My non-expert gut gets nervous because this isn't a town that people should be fighting each other to live in, but according to her anything available in the larger area is getting bought up.

Nederstash

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Re: Big Income, Big Consequences
« Reply #172 on: March 03, 2021, 02:49:21 PM »
Yeah, the RE market is insane right now.  Supply is down 40-50% YoY in most places. 

In our neighborhood, sales prices have spiked by 20-25% in the last year.  Our next door neighbors had two showings the first day in October, got offers from both, and closed a month later.  The neighbor on the other side of them priced themselves a bit high, and listed just before Thanksgiving, but still only took two months before they went under contract, for close to list price.  Several other friends had contracts within a week, within a couple days, and in eight hours, respectively.  A local realtor posted a video this morning, saying that they had 61 requests for showings within minutes of listing a house, and had an offer for $40k over list price before the house even opened.  And our area isn't, IMO, all that amazing.  It's nice, but it's 25 minutes from the nearest freeway and 90 minutes from DowntownBigCity, and the school district, while above average, also has about the highest taxes in the state and is still making cuts in order to balance the budget.

DW would love to take advantage and sell our house and move closer to her family, but home prices there were 50% higher than here to begin with, and the current shortage means that they're now about twice the price!

This describes DW's hometown exactly. One of our friends is a realtor the next town over and prices have doubled in five years. It appears to be people commuting an hour away to the city who are buying, and supply is not keeping up with the demand. Her company put a house up last Thursday, had 15 showings Friday afternoon, 7 offers, and had it under contract that evening.

"Over 40 showings in 4 days, 10 offers, in escrow with appraisal and contingency waiver at $27,000 over listing price!"

This was on her FB today, along with a mention that she just sold a house for $400k, $40k over listing price.

Bought my duplex for 215k in 2015. I could get 380-400k today. I'm looking to sell... but I can't find anything to buy instead. Market is nuts here!

GreenEggs

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Re: Big Income, Big Consequences
« Reply #173 on: March 03, 2021, 03:16:25 PM »
It's amazing that there are so many buyers at such inflated prices. 

talltexan

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Re: Big Income, Big Consequences
« Reply #174 on: March 03, 2021, 03:17:12 PM »
@GreenEggs this is such a great, profound statement

Just Joe

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Re: Big Income, Big Consequences
« Reply #175 on: March 04, 2021, 09:54:50 AM »
I'm not a math genius I ask for your patience please.

If people are in a rush to take advantage of low interest rates - couldn't they wait for the prices to moderate and even if interest rates rise slightly - still find the same deals in a year or two?

Is this real estate frenzy unnecessary? Its a bubble?

In my part of the middle of the country very little has changed in the categories of employment or income levels. I can't see the driver of all this real estate activity.

Maybe WFH types and long distance commuters looking to settle here? The trip to the closest metro areas is a long haul for a daily routine.

zolotiyeruki

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Re: Big Income, Big Consequences
« Reply #176 on: March 04, 2021, 12:22:46 PM »
I'm not a math genius I ask for your patience please.

If people are in a rush to take advantage of low interest rates - couldn't they wait for the prices to moderate and even if interest rates rise slightly - still find the same deals in a year or two?
Interest rates dropped from about 4% to 3% from September 2019 to September 2020.  I just ran some rough numbers, and the payment on a $300k 30-year mortgage at 4% is the same as a $340k 30-year mortgage at 3%.  That, by itself, means that buyers can "afford" a house that's 13% more expensive than the year before.  It also means a lot more people can put in offers on a house that's, say, priced 5% higher than last year.

Just Joe

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Re: Big Income, Big Consequences
« Reply #177 on: March 04, 2021, 07:03:35 PM »
Thanks I was deep in a project here at work and had no more brain cells to spare during a short break. ;)