Author Topic: Targeting the Wealthy: MMM Meets Politics  (Read 57435 times)

capital

  • Bristles
  • ***
  • Posts: 451
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #100 on: January 18, 2015, 06:41:18 PM »
I don't like it, but it only targets the actually rich, not the "comfortably poor" (i.e. Mustachians).

Your definition of mustachians is narrower than mine. I didn't realize there was a limiter/crabpot theory associated with MMM, particularly since Pete himself now probably has a liquid net worth well over $1 million.

DIFFERENT TOPIC: With a 39.6% top rate, wait until you see more people in NY, BOS, LA, SF, CHI, etc. say "Enough is enough"....and John Galt themselves to Longmont, CO. Because in these expensive municipalities there are a disproportionate share of two income households who make an ADJUSTED GROSS INCOME above 500K/year. They are not hedge fund managers, partners in law firms, etc. They are middle managers who work at financial services firms, tech companies, biotech companies, marketing firms, etc.
Y'know, our big coastal metros are expensive because a lot of people with a lot of money want to live in them and their zoning laws don't permit enough housing to be built to meet the demand, not due to some inherent curse upon the land. If fewer rich people wanted to live in them, land values would go down and thus rents would go down, and thus cost of living would plummet, as expensive housing is the main component of the high cost-of-living. Then San Francisco and New York would be cheap, since you don't need a car and utilities are cheap on a modest apartment.

'Tain't so complicated. And, as a New Yorker, that sounds pretty nice, to be honest. It'd probably be good for Longmont, too.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3304
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #101 on: January 18, 2015, 06:42:46 PM »
Yeah, see, the John Galt thing would mean you'd move to Longmont (or Idaho), though. Right? So why are you in the Bay Area? More money? More opportunities?

Funny how that doesn't correlate at all with the CA/SF tax rates. The smartest, most creative entrepreneurs on the planet are... where taxes are highest, basically. Where they have been for a LONG TIME. The movers and shakers of IT, biotech, finance, etc have all failed to Galt out to lower tax areas, let along Galting off to the Cayman islands or something. So the tax rates obviously aren't even close to high enough to disincentivize work, right? I mean, what other evidence would you possibly want?

-W


 And the 'nuclear explosion of cash' doesn't amount to nearly as much in our major coastal metros as it does in Longmont.

Waaah?

Difference in cost of living.

One source: http://money.cnn.com/calculator/pf/cost-of-living/

One example: 50% more expensive to live in San Francisco than in Denver.

Another example: More than 100% more expensive to live in Manhattan than in Denver.
« Last Edit: January 18, 2015, 06:47:57 PM by waltworks »

capital

  • Bristles
  • ***
  • Posts: 451
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #102 on: January 18, 2015, 06:43:49 PM »
I'll just leave this here...


Those high tax rates sure were terrible for economic performance!

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #103 on: January 18, 2015, 06:56:19 PM »
Yeah, see, the John Galt thing would mean you'd move to Longmont (or Idaho), though. Right? So why are you in the Bay Area? More money? More opportunities?

Funny how that doesn't correlate at all with the CA/SF tax rates. The smartest, most creative entrepreneurs on the planet are... where taxes are highest, basically. Where they have been for a LONG TIME. The movers and shakers of IT, biotech, finance, etc have all failed to Galt out to lower tax areas, let along Galting off to the Cayman islands or something. So the tax rates obviously aren't even close to high enough to disincentivize work, right? I mean, what other evidence would you possibly want?

-W


 And the 'nuclear explosion of cash' doesn't amount to nearly as much in our major coastal metros as it does in Longmont.

Waaah?

Difference in cost of living.

One source: http://money.cnn.com/calculator/pf/cost-of-living/

One example: 50% more expensive to live in San Francisco than in Denver.

Another example: More than 100% more expensive to live in Manhattan than in Denver.

The cold weather enflames my hemorrhoids. You keep on rocking out with your rich friends at the ski lodge. Peace out.

capital

  • Bristles
  • ***
  • Posts: 451
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #104 on: January 18, 2015, 07:02:38 PM »

 And the 'nuclear explosion of cash' doesn't amount to nearly as much in our major coastal metros as it does in Longmont.

Waaah?

Difference in cost of living.

One source: http://money.cnn.com/calculator/pf/cost-of-living/

One example: 50% more expensive to live in San Francisco than in Denver.

Another example: More than 100% more expensive to live in Manhattan than in Denver.
It's too bad you're required to live in Manhattan to work there.

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #105 on: January 18, 2015, 07:05:52 PM »

 And the 'nuclear explosion of cash' doesn't amount to nearly as much in our major coastal metros as it does in Longmont.

Waaah?

Difference in cost of living.

One source: http://money.cnn.com/calculator/pf/cost-of-living/

One example: 50% more expensive to live in San Francisco than in Denver.

Another example: More than 100% more expensive to live in Manhattan than in Denver.
It's too bad you're required to live in Manhattan to work there.

One example: 42.5% more expensive to live in Queens than in Denver.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3304
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #106 on: January 18, 2015, 07:06:06 PM »
We've got nice low taxes here in UT! Come visit!

-W

The cold weather enflames my hemorrhoids. You keep on rocking out with your rich friends at the ski lodge. Peace out.

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #107 on: January 18, 2015, 07:10:40 PM »
We've got nice low taxes here in UT! Come visit!

-W

The cold weather enflames my hemorrhoids. You keep on rocking out with your rich friends at the ski lodge. Peace out.

I haven't been in several years. The last time I spent two days in Salt Lake I didn't drop the F bomb for more than six months afterward. And the landing in Salt Lake itself was so frightening that the locals laughed in my face and told me that's a standard test to see if folks like me "believe" or not.

capital

  • Bristles
  • ***
  • Posts: 451
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #108 on: January 18, 2015, 07:19:39 PM »

 And the 'nuclear explosion of cash' doesn't amount to nearly as much in our major coastal metros as it does in Longmont.

Waaah?

Difference in cost of living.

One source: http://money.cnn.com/calculator/pf/cost-of-living/

One example: 50% more expensive to live in San Francisco than in Denver.

Another example: More than 100% more expensive to live in Manhattan than in Denver.
It's too bad you're required to live in Manhattan to work there.

One example: 42.5% more expensive to live in Queens than in Denver.
Yep. Mostly due to cost of housing. And why is housing so expensive? Because there are so many high earners bidding it up. So I am failing to see how it's a problem for the vast majority of New Yorkers who make far less less than $500,000 a year as a couple if some of those high earners left.

But if you make $500,000 a year, you could buy a nice 3-bedroom in Riverdale for less than a year's wages. Beyond a 3-bedroom in Riverdale one is getting pretty firmly into the territory of 'want' versus 'need', unless one starts saying 'other rich people in New York live in beautifully restored brownstones and send their children to Riverdale Country School, so I also need to.'

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #109 on: January 18, 2015, 07:28:35 PM »
<<So I am failing to see how it's a problem for the vast majority of New Yorkers who make far less less than $500,000 a year as a couple if some of those high earners left.>>

You are absolutely right! Hey, have a great night.

Rpesek6904

  • Guest
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #110 on: January 18, 2015, 08:47:24 PM »
By the time the government gets done with high wage earners those people are paying >50% of their income to taxes and fees.

I would like to see your math on this.

Seriously? Between a mid to high 30s federal income tax, medicare tax, ss tax, state tax, property tax, personal property tax, gas tax, sales tax, etc you can't see how its possible?

Star- plus double SS payments for the self employed.

If you're paying anywhere near 50% at any income level, then you need to fire your accountant immediately, because they are a fucking idiot.

If you have the money, there's really no end to the creative, yet legal ways that you can avoid paying taxes. As a decent earning self-employed person with an S Corp, I know. It's just silly, and I don't even take advantage of it all either.

And as a reminder, even if you're in the top income tax bracket, that doesn't mean that you pay 39.6% or whatever it is now on everything you earn. You only pay that on the part that exceeds the top bracket, which, off the top of my head, is whatever exceeds around $400k-ish now. But, that's just salary. Chances are, a good chunk of your income comes from dividends, which are pretty sweet as they completely bypass FICA taxes altogether, even at the higher rate.

If you're self employed (or at least have an S-Corp) you can also stuff a substantial amount of cash into retirement accounts through a profit sharing 401k, cramming over $50k tax free into that. Note that's a lot more than your lower earning working stiffs can put away. Poor bastards.

Then there are business deductions out the ass. You can also do fun things with trusts. And if you have a "farm" (that nice 200 year old colonial you summer in that has a few acres of [cough] "farm land" attached to it, then sweet Jeezus it can get good, not to mention that you can qualify for farm subsidies then. Then there's all the itemized deductions and charitable giving deductions and other bullshit you can cram in as well.

And this is just the small potatoes, 1%-er but not even .001%-er stuff off the top of my head that I know about. A good accountant and tax lawyer can probably work some really sick magic.

No one ever responds to these types of responses! I say stuff like this all the time and get blank stares. You just got the online version of this. Anyway, couldn't have said it better myself. I'll PM you about the trust/farm options, which I've never heard of before.

MoneyCat

  • Handlebar Stache
  • *****
  • Posts: 1754
  • Location: New Jersey
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #111 on: January 18, 2015, 09:10:18 PM »
Nobody should get in a tizzy about Obama's speech.  He knows damn well that none of his plans will come to pass because the GOP is in control of both houses of Congress.  Nothing is going to get done for the next year or so until there are more elections.  All Obama is doing is setting things up to paint the GOP as a party that doesn't care about helping people who are struggling to try to win votes for the next election cycle.  It's all political theater.

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #112 on: January 18, 2015, 10:08:34 PM »
Nobody should get in a tizzy about Obama's speech.  He knows damn well that none of his plans will come to pass because the GOP is in control of both houses of Congress.  Nothing is going to get done for the next year or so until there are more elections.  All Obama is doing is setting things up to paint the GOP as a party that doesn't care about helping people who are struggling to try to win votes for the next election cycle.  It's all political theater.

Well stated. But I wonder how much Obama is helping the Democratic party for 2016 or how much they need his help. It seems like the Republican party will again f up its little presidential election process on its own, i.e., self implode.

I mean...Romney? Really?

Another Bush? Really?

Dip shit Ted Cruz? Really?

Fuck face governor out of New Jersey? Really?

Hillary has got my vote unless things dramatically change on the other side.

zolotiyeruki

  • Magnum Stache
  • ******
  • Posts: 3264
  • Location: State: Denial
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #113 on: January 19, 2015, 06:07:14 AM »
Nobody should get in a tizzy about Obama's speech.  He knows damn well that none of his plans will come to pass because the GOP is in control of both houses of Congress.  Nothing is going to get done for the next year or so until there are more elections.  All Obama is doing is setting things up to paint the GOP as a party that doesn't care about helping people who are struggling to try to win votes for the next election cycle.  It's all political theater.
True that--it's pretty much just political posturing.

I'm curious whether anyone has done a proper, calculated assessment of the effects of this proposal.  Given how few people there are to whom this policy would apply, and all the tax-avoidance vehicles they have access to, how much revenue would it actually raise?

Abe

  • Handlebar Stache
  • *****
  • Posts: 1264
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #114 on: January 19, 2015, 06:19:20 AM »
Math for taxes/fees for people earning >$500k from example (parents, married filing jointly, from actual prior return, but rounded for simplicity):

Gross wages - $530k
Adj Gross Income - $476k
Federal Tax - $127k
State Tax - $25k
SS + Medicare - $22k
Real Estate - $4k
Sales Tax (Approx, 7%) - $15k

Total tax rate: 36%

This is using only common itemized deductions (mortgage, charity, state tax) & aggressive contributions to 401k. As others have pointed out, if more income came from investments, total tax rate would be lower.

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #115 on: January 19, 2015, 06:24:11 AM »
None of this will happen, and if it did, it would slightly move around who's getting screwed by the government without improving the government's financial situation at all, which is the real problem.

If any politician were serious about tax reform they would burn the tax code, eliminate all the credits, and start over with clear, simple tax brackets on total income from any source. Tons of effort on this forum and throughout the country go towards tax optimization, and none of that is productive effort.

Since tax policy arguments are much ado about nothing, I don't vote based on that, I vote on who's going to stop the government from killing and imprisoning so many Americans and foreigners without accomplishing its stated ends (reducing drug use/defeating terrorists). So far Rand Paul is winning that race.

golden1

  • Handlebar Stache
  • *****
  • Posts: 1544
  • Location: MA
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #116 on: January 19, 2015, 07:30:57 AM »
Quote
Quote from: ksaleh on January 18, 2015, 03:49:21 PM
Let's see:

Automaton regurgitated talking points from the left and right? Check
Smug mockery and insulting of the opposing talking points? Check
Reasonable thoughts and math presented and subsequently ignored in favor of red v blue bickering? Check
Someone pointing out that the composition of Congress means this would never pass, also ignored to continue poetical sparring? Check

Looks like all we need is someone to compare someone else  to Hitler and then we will have the thread lock checklist complete.

You know who else liked lists?  The Nazis.

Snorted tea out my mouth...thanks.

Obama is no dummy.  He knows this (and other things he is doing lately) initiative is going to stall in the current congress.  This is more about getting the issue of extreme income inequality in peoples minds. 

P.S.  I am still waiting for responses to the graphs posted above on historical tax rates vs. GDP.  Seems pretty open and shit to me. 

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #117 on: January 19, 2015, 07:36:11 AM »
Quote
Quote from: ksaleh on January 18, 2015, 03:49:21 PM
Let's see:

Automaton regurgitated talking points from the left and right? Check
Smug mockery and insulting of the opposing talking points? Check
Reasonable thoughts and math presented and subsequently ignored in favor of red v blue bickering? Check
Someone pointing out that the composition of Congress means this would never pass, also ignored to continue poetical sparring? Check

Looks like all we need is someone to compare someone else  to Hitler and then we will have the thread lock checklist complete.

You know who else liked lists?  The Nazis.

Snorted tea out my mouth...thanks.

Obama is no dummy.  He knows this (and other things he is doing lately) initiative is going to stall in the current congress.  This is more about getting the issue of extreme income inequality in peoples minds. 

P.S.  I am still waiting for responses to the graphs posted above on historical tax rates vs. GDP.  Seems pretty open and shit to me.
ROFL
If you actually mean open and shut, I agree with you.  ;)

Fishingmn

  • Bristles
  • ***
  • Posts: 334
  • Location: Twin Cities
  • You never have to recover from a good start
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #118 on: January 19, 2015, 07:43:50 AM »
Investments that qualify for capital gains have already been taxed via the income tax on earned income.

This logic is totally flawed.

The property taxes I pay & the sales taxes I pay are also paid with income I've paid income taxes on.

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1395
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #119 on: January 19, 2015, 07:58:06 AM »
Investments that qualify for capital gains have already been taxed via the income tax on earned income.

This logic is totally flawed.

The property taxes I pay & the sales taxes I pay are also paid with income I've paid income taxes on.

Which is just one reason why the income tax is so onerous & flawed.
The Fair Tax or a flat tax is a much better approach, not to mention dramatically slimming down the IRS.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #120 on: January 19, 2015, 08:16:02 AM »
Investments that qualify for capital gains have already been taxed via the income tax on earned income.

This logic is totally flawed.

The property taxes I pay & the sales taxes I pay are also paid with income I've paid income taxes on.

Which is just one reason why the income tax is so onerous & flawed.
The Fair Tax or a flat tax is a much better approach, not to mention dramatically slimming down the IRS.
Except those go to different governments (state vs fed) and flat tax disproportionately affects lower income earners, as does property taxes and sales taxes. 

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1395
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #121 on: January 19, 2015, 08:25:58 AM »
Property & sales taxes are levied on consumption, as would the Fair Tax. This inherently encourages saving & investments, which should be rewarded.

tomsang

  • Handlebar Stache
  • *****
  • Posts: 1085
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #122 on: January 19, 2015, 08:36:27 AM »
Investments that qualify for capital gains have already been taxed via the income tax on earned income.

This logic is totally flawed.

The property taxes I pay & the sales taxes I pay are also paid with income I've paid income taxes on.

Which is just one reason why the income tax is so onerous & flawed.
The Fair Tax or a flat tax is a much better approach, not to mention dramatically slimming down the IRS.

As an accountant I would love a flat tax, but the country could not afford one. You need to start with the premise that the new system needs to be revenue neutral or increase to pay for our government spending.

Currently as you and others stated the wealthy pay a larger percentage than the rest of the population. So if we are going to go with a flat tax, by definition their taxes will decrease. Therefore, those making less than $500k will have to pick up the tab. 

Then we need to make rules for a flat tax. If my business makes $500k in revenue and I buy a building for $500k do I have zero income? Revenue minus expenses?  Do I get to depreciate?  If so rules just keep getting added. A flat tax would be a huge windfall for our clients and the tax professionals defining how to eliminate all taxes. We started out in 1913 with a very simple tax form. Then accountant and legal professionals found ways to eliminate taxes.  The government then created rules to ensure that everyone was paying their fair share. If you have a w-2 job, a house, and some investments then your tax return is simple to do and probably takes an hour or two once a year.  The complexity of the code is built for those with complex situations. You take away the rules and you have the 1%'s paying zero taxes and the government either shutting down or the rest picking up the tab. The poor can't pick up the tab.

James

  • Handlebar Stache
  • *****
  • Posts: 1680
  • Age: 46
  • Location: Rice Lake, WI
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #123 on: January 19, 2015, 08:44:59 AM »
The problem with Obama throwing this out in a speech is that it continues the politics as usual. What we need is him and a few grownups in congress to sit down in a quite back room and figure out a compromise between left and right on what would actually be helpful. No press, no politics, just compromise on both sides and ignore what can't be figured out.

But neither side can do that, and both sides know if the other side did try that they likely only are doing it to cover their ass, not actually get something done. There is no trust, which is what is needed for a compromise. Poison will continue, dysfunction will continue, and until it gets a lot worse we will thrive as a country despite the dysfunction because we are still a lot better off than most countries when it comes to government.

We complain and catch a lot of flack from other countries about our government, yet it is amazing how functional and fair it is compared to so many others.

(And I say this as a political junky who would love to change a shit ton about our government)
« Last Edit: January 19, 2015, 08:46:31 AM by James »

ShoulderThingThatGoesUp

  • Magnum Stache
  • ******
  • Posts: 3057
  • Location: Emmaus, PA
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #124 on: January 19, 2015, 08:46:38 AM »
That taxing 529 withdrawals is being put out there as a serious proposal, even by a non-serious President, makes it seem like a much less attractive investment vehicle. Any thoughts on that, to bring it back to money?

GizmoTX

  • Handlebar Stache
  • *****
  • Posts: 1395
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #125 on: January 19, 2015, 08:49:42 AM »
The tax rules favor all sorts of social engineering -- "fair" was never part of it. The alternative minimum tax started out as yet another method to nail the wealthy, yet now ensnares a significant number of middle class, with no repeal in sight. One advantage of a new tax code is to reset to simplicity.

One fallacy is that businesses pay taxes. Ultimately they pass them along or cease to exist. Taxing just consumers would allow everyone to see just what the real burden is & choose accordingly.

Government spending is simply insane.

genselecus

  • 5 O'Clock Shadow
  • *
  • Posts: 46
  • Age: 31
  • Location: Oakland, CA
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #126 on: January 19, 2015, 09:18:33 AM »
Wow, what an entertaining, interesting, and, at times, depressing read! A few thoughts:

1. One of the big frustrations that we (people) tend to practice is that we tend to fall back on black or white situations. I'm not going to add in the quotes but people here have talked about 500k being far more than enough and people have said that if we increase taxes all of the rich will leave/quit. Well those just aren't true. In reality people are not all the same and what may be too much tax for one person isn't the maximum for the next, and may not be close to the maximum for a third person. Every tenth of a percent increase in tax increases the number of people that quit, but it certainly won't be everyone. A possible alternative would be to increase the tax rate at a percent or two a year until we decide that the benefit is outweighed by the cost.
2. There is a lot of talk of politicking. I would agree that nothing will happen. My suggestion to this issue is to remove the incentives for politics. Increase campaign donation transparency and add term limits to the Senate and Congress so that people are less incentivized to sway politicians. At least don't let them invest in a lifer.
3. I hate waste and inefficiency. I wonder the amount of waste (time, money, energy) that exists due to our current tax system. I mean how many billions are spent each year to draft complicated laws, that need to be enacted by bloated bureaucracy, and acted on and protected by entire professions. If our tax system was simpler, we may be capable, as a society, of spending money on truly important things. Talk about a government hand out.
4. Wealthy people should realize that there is a growing tide of frustration and anger over inequality in the US. Sometimes the best strategy is to placate the masses before they take matters into their own hands. There have been numerous instances of this in the past, and there's no reason to believe the future will be different. And I say that as a future wealthy person (as I and most people here are targeting a number for net worth that is probably higher than a large percentage of Americans).

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #127 on: January 19, 2015, 09:20:49 AM »
That taxing 529 withdrawals is being put out there as a serious proposal, even by a non-serious President, makes it seem like a much less attractive investment vehicle. Any thoughts on that, to bring it back to money?
I have never found them to be great investments anyway, unless your state gives you something.  I might put money in if I had maxed out everything else plus had a small taxable account.  But since I have a way to go before that, I'll worry about that later.

BuildingFrugalHabits

  • Stubble
  • **
  • Posts: 224
  • Location: Great Plains
  • Living the dream
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #128 on: January 19, 2015, 09:32:37 AM »
Couple of thoughts

  • I'll echo other posters who have stated that this is basically a moot point since it's unlikely to come to fruition.
  • High taxes on incomes of more the 500k seems like a very high quality problem to have.  There's no getting around it, 500k is a crap-ton of money even if you are living in an expensive area.  Comparing the take-home pay of a family pulling in say 165k (one third) and paying an effective federal tax rate of 20% to one making making 500k with a 29% marginal rate: take home pay is $131,550 vs $355,250 which is 2.7x higher vs. 3x on gross for the high earners.  Of course, this is a simple analysis ignoring 401k, itemized deductions, social security (which takes a higher % of the lower salary) etc my point is that our current progressive income tax structure doesn't seem like a strong disincentive to work
  • After looking around at other countries which would be nice to nice in, it seems like the United State has one of the highest qualities of life for our cost of living.  Other countries seem to have higher COL and higher taxes so maybe it's a matter of perspective.
  • With regards to the discussion about uber rich folks saying fuck-it and retiring, I doubt this would happen on a mass scale. But if it did isn't that the same thing as everyone becoming frugal?  Seems like this would create more opportunities for others who are skilled in the field to move up into higher level positions. I feel like it could be a good thing for the economy if people got what they needed and then stepped aside to let another qualified person have a shot. If I'm wrong I'm sure someone will point out the flaw in my logic.
  • Regarding the debate on people getting college financial aid, optimizing their taxes etc.  The beautiful thing about the law is that you don't need to read between the lines and guess at the intentions of the legislators, you just need to follow the law.  If you qualify, you qualify.  For example, I don't necessarily care why the mortgage interest deduction is in place, just that it is.  Don't hate the player, hate the game and work to change it for the better.
« Last Edit: January 19, 2015, 09:37:01 AM by BuildingFrugalHabits »

rocksinmyhead

  • Handlebar Stache
  • *****
  • Posts: 1491
  • Location: Oklahoma
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #129 on: January 19, 2015, 09:37:06 AM »
With regards to the discussion about uber rich folks saying fuck-it and retiring, I doubt this would happen on a mass scale. But if it did isn't that the same thing as everyone becoming frugal?  Seems like this would create more opportunities for others who are skilled in the field to move up into higher level positions. I feel like it could be a good thing for the economy if people got what they needed and then stepped aside to let another qualified person have a shot. If I'm wrong I'm sure someone will point out the flaw in my logic.

I agree with this. I think too many highly compensated people think they are "special snowflakes" who truly are just that much smarter and harder-working than, say, a social worker or elementary school teacher who makes $35k a year. No doubt this is true in some cases, and I'm sure there's some kind of correlation between (intelligence+work ethic) and compensation, but I'm skeptical that it's as robust as people like to think.

(and for the record I'm not some embittered low-wage earner, although I also don't make $500k)

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #130 on: January 19, 2015, 09:41:02 AM »

Nobody should get in a tizzy about Obama's speech.  He knows damn well that none of his plans will come to pass because the GOP is in control of both houses of Congress.  Nothing is going to get done for the next year or so until there are more elections.  All Obama is doing is setting things up to paint the GOP as a party that doesn't care about helping people who are struggling to try to win votes for the next election cycle.  It's all political theater.
True that--it's pretty much just political posturing.

I'm curious whether anyone has done a proper, calculated assessment of the effects of this proposal.  Given how few people there are to whom this policy would apply, and all the tax-avoidance vehicles they have access to, how much revenue would it actually raise?

Most are 1099ers with no access to tax avoidance vehicles - any more than you have. Stop believing the spew from politicians and Maureen Dowd.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #131 on: January 19, 2015, 09:46:10 AM »

Nobody should get in a tizzy about Obama's speech.  He knows damn well that none of his plans will come to pass because the GOP is in control of both houses of Congress.  Nothing is going to get done for the next year or so until there are more elections.  All Obama is doing is setting things up to paint the GOP as a party that doesn't care about helping people who are struggling to try to win votes for the next election cycle.  It's all political theater.
True that--it's pretty much just political posturing.

I'm curious whether anyone has done a proper, calculated assessment of the effects of this proposal.  Given how few people there are to whom this policy would apply, and all the tax-avoidance vehicles they have access to, how much revenue would it actually raise?

Most are 1099ers with no access to tax avoidance vehicles - any more than you have. Stop believing the spew from politicians and Maureen Dowd.
Please explain this.  You don't think those who make over $500,000 are investing in taxable accounts (getting lower tax rates than earned income) or that they are unable to open an individual 401k?  Or that people who get 1099 don't claim deductions for work against their income? 
Or even if we are just talking about two high wage earns one making $300,000 in w-2 income and the other making $200,000, that they don't have 401ks or again put money in taxable accounts etc.

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #132 on: January 19, 2015, 09:47:00 AM »

Couple of thoughts

  • I'll echo other posters who have stated that this is basically a moot point since it's unlikely to come to fruition.
  • High taxes on incomes of more the 500k seems like a very high quality problem to have.  There's no getting around it, 500k is a crap-ton of money even if you are living in an expensive area.  Comparing the take-home pay of a family pulling in say 165k (one third) and paying an effective federal tax rate of 20% to one making making 500k with a 29% marginal rate: take home pay is $131,550 vs $355,250 which is 2.7x higher vs. 3x on gross for the high earners.  Of course, this is a simple analysis ignoring 401k, itemized deductions, social security (which takes a higher % of the lower salary) etc my point is that our current progressive income tax structure doesn't seem like a strong disincentive to work
  • After looking around at other countries which would be nice to nice in, it seems like the United State has one of the highest qualities of life for our cost of living.  Other countries seem to have higher COL and higher taxes so maybe it's a matter of perspective.
  • With regards to the discussion about uber rich folks saying fuck-it and retiring, I doubt this would happen on a mass scale. But if it did isn't that the same thing as everyone becoming frugal?  Seems like this would create more opportunities for others who are skilled in the field to move up into higher level positions. I feel like it could be a good thing for the economy if people got what they needed and then stepped aside to let another qualified person have a shot. If I'm wrong I'm sure someone will point out the flaw in my logic.
  • Regarding the debate on people getting college financial aid, optimizing their taxes etc.  The beautiful thing about the law is that you don't need to read between the lines and guess at the intentions of the legislators, you just need to follow the law.  If you qualify, you qualify.  For example, I don't necessarily care why the mortgage interest deduction is in place, just that it is.  Don't hate the player, hate the game and work to change it for the better.

To your #3 here is the rub. Here I think we pay a lot and don't get as much in return as those European countries. The infrastructure in The Netherlands, for example, is shockingly good. The average quality of life there appears to be higher and inequality lower. But there is this one thing about the U.S. that I can't out a price on - freedom. And I will never take that for granted.

Breaker

  • Stubble
  • **
  • Posts: 200
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #133 on: January 19, 2015, 10:39:13 AM »
I agree that I doubt this will pass Congress.

My two immediate thoughts (and I haven't read the article, just heard it on the news).  The wealthy are typically the job creators--why go after them even more?

Secondly, is the tripling of the child tax credit--do I personally like it, yes?  However, I wonder how many will see that as a way to have more children that they should not have.

Yes, the wealthy create jobs IN OTHER COUNTRIES.  Where they can pay a less than living wage and pollute the environment without any consequences.

As a person without children and one who  believes the that over population will eventually kill the planet.  I don't like any tax credits for children.  OTOH, I don't believe that people have children based on the tax cost/benefit.   

Tetsuya Hondo

  • Pencil Stache
  • ****
  • Posts: 503
  • Location: 1960's Tokyo on the Bad Side of Town
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #134 on: January 19, 2015, 10:39:36 AM »
Most are 1099ers with no access to tax avoidance vehicles - any more than you have. Stop believing the spew from politicians and Maureen Dowd.

Ahem...all of my income is 1099 income.

Google "S-Corp and 401k with profit-sharing."

I can sock over $50k a year into a 401k.

I can take a substantial portion of my pay as dividends rather than salary, thus avoiding FICA taxes and at the lower dividend rate.

Being a 1099 is fucking awesome if you do it right.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #135 on: January 19, 2015, 10:47:09 AM »
I agree that I doubt this will pass Congress.

My two immediate thoughts (and I haven't read the article, just heard it on the news).  The wealthy are typically the job creators--why go after them even more?

Secondly, is the tripling of the child tax credit--do I personally like it, yes?  However, I wonder how many will see that as a way to have more children that they should not have.

Yes, the wealthy create jobs IN OTHER COUNTRIES.  Where they can pay a less than living wage and pollute the environment without any consequences.

As a person without children and one who  believes the that over population will eventually kill the planet.  I don't like any tax credits for children.  OTOH, I don't believe that people have children based on the tax cost/benefit.   
Lol, we did work the budget with the tax credits to see if we could afford our first child.  But then again, most pole are not "normal".  I probably would have waited a bit if finances had not worked as well. 

Tetsuya Hondo

  • Pencil Stache
  • ****
  • Posts: 503
  • Location: 1960's Tokyo on the Bad Side of Town
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #136 on: January 19, 2015, 10:58:24 AM »
The problem with Obama throwing this out in a speech is that it continues the politics as usual. What we need is him and a few grownups in congress to sit down in a quite back room and figure out a compromise between left and right on what would actually be helpful. No press, no politics, just compromise on both sides and ignore what can't be figured out.

But neither side can do that, and both sides know if the other side did try that they likely only are doing it to cover their ass, not actually get something done. There is no trust, which is what is needed for a compromise. Poison will continue, dysfunction will continue, and until it gets a lot worse we will thrive as a country despite the dysfunction because we are still a lot better off than most countries when it comes to government.

Reasonable solutions continue to elude us because politicians and the political class (i.e., the parasitic legions of pundits, lobbyists, talking heads, and related ilk) have learned that they can say or do anything with impunity as long as it fires up their base. We the people get the government that we deserve. This thread is Exhibit A in how we the citizens allow ourselves to be swept up in the political theater (on both sides) and the propaganda.

People always blame government for this or that. Government isn't the problem, it's the idiots (I'm one of them) that elected our officials that's the problem. Until a majority of Americans learn to think critically, apply scientific reason, differentiate between information and noise, and a adopt a little humility, we're doomed to dysfunction.


Wait... what was the original question again?
« Last Edit: January 19, 2015, 11:00:08 AM by Tetsuya Hondo »

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #137 on: January 19, 2015, 11:04:01 AM »
The problem with Obama throwing this out in a speech is that it continues the politics as usual. What we need is him and a few grownups in congress to sit down in a quite back room and figure out a compromise between left and right on what would actually be helpful. No press, no politics, just compromise on both sides and ignore what can't be figured out.

But neither side can do that, and both sides know if the other side did try that they likely only are doing it to cover their ass, not actually get something done. There is no trust, which is what is needed for a compromise. Poison will continue, dysfunction will continue, and until it gets a lot worse we will thrive as a country despite the dysfunction because we are still a lot better off than most countries when it comes to government.

Reasonable solutions continue to elude us because politicians and the political class (i.e., the parasitic legions of pundits, lobbyists, talking heads, and related ilk) have learned that they can say or do anything with impunity as long as it fires up their base. We the people get the government that we deserve. This thread is Exhibit A in how we the citizens allow ourselves to be swept up in the political theater (on both sides) and the propaganda.

People always blame government for this or that. Government isn't the problem, it's the idiots (I'm one of them) that elected our officials that's the problem. Until a majority of Americans learn to think critically, apply scientific reason, differentiate between information and noise, and a adopt a little humility, we're doomed to dysfunction.


Wait... what was the original question again?
It is also those who refuse to learn enough to vote that are problem.  We, as a group, could change much, including balancing our budget if people would care enough to learn and vote.

Future Lazy

  • Bristles
  • ***
  • Posts: 350
  • Age: 27
  • Location: Northglenn, Colorado
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #138 on: January 19, 2015, 11:16:16 AM »
So, I've been skimming this thread to see what people have to say... And as an American youth, I'm with these graphs here:

These graphs contain information I already knew about, and wholeheartedly believe in. Trickle down economics of Reagan's era are a bit of a sham, imo. 

I'll just leave this here...


Those high tax rates sure were terrible for economic performance!



I have a wholehearted admiration for people like Warren Buffet and Bill Gates who put forward massive amounts of money to charity as a "self tax" on the belief that taxes on their income isn't high enough. Will I ever make 500k/yr? Unlikely, but if I did, I would be putting a huge portion of it toward charity myself. It's a long time dream of mine to found my own scholarship fund.


I agree that I doubt this will pass Congress.

My two immediate thoughts (and I haven't read the article, just heard it on the news).  The wealthy are typically the job creators--why go after them even more?

Secondly, is the tripling of the child tax credit--do I personally like it, yes?  However, I wonder how many will see that as a way to have more children that they should not have.

Yes, the wealthy create jobs IN OTHER COUNTRIES.  Where they can pay a less than living wage and pollute the environment without any consequences.

As a person without children and one who  believes the that over population will eventually kill the planet.  I don't like any tax credits for children.  OTOH, I don't believe that people have children based on the tax cost/benefit.   
Lol, we did work the budget with the tax credits to see if we could afford our first child.  But then again, most pole are not "normal".  I probably would have waited a bit if finances had not worked as well. 

Agreeing with Breaker here. I'm probably going to have 2 kids, and if I have the extra income/resources, up to 4 kids. I've pretty much already decided that, as a chick, and that number only has a chance of going down, not up. Extra tax money doesn't exactly make my uterus tingle.

The only person I ever saw having babies for the tax benefits was Octomom, and look how many she had to make just to support herself. :) Not a very lucrative business model.

Wait... what was the original question again?

starguru

  • Pencil Stache
  • ****
  • Posts: 736
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #139 on: January 19, 2015, 11:20:55 AM »
Starguru - What does PFF stand for? BTW, I love your "save $10 per day" mantra.

PFF was just the noise I produced when reading a silly response to one of my arguments.  Don't mean nothing.

The full idea is to "order one's life (i.e. make decisions) to facilitate saving at leas that amount, and the wealth follows over time".  Just plug $3650 annual contribution into a compound interest calculator and watch.

I thought its a very mustachian idea; there is actually an article on this blog about "A millionaire is made $10 at a time".  Surprisingly it got a lot of pushback, as evidently many think its too much to expect people to make responsible decisions that facilitate being able save the equivalent of ~1.5 hours of minimum wage earnings a day. 



starguru

  • Pencil Stache
  • ****
  • Posts: 736
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #140 on: January 19, 2015, 12:12:42 PM »


Pff please.  In no world is the EITC anything other than social welfare.  Wikipedia calls it "the third largest social welfare program".  It is need based.  If one plays games to qualify they are abusing it, especially if claiming to be FI.  You can quibble all you want over my wording "working poor" but it doesn't dilute my argument nor is it a straw man.

Meh, since the office of social security website itself has an article that refers to social security as "social welfare" http://www.ssa.gov/history/aja964.html, the fact that EITC could be considered "social welfare" does not put it in a super special class separate from all of the other social benefits most Americans take advantage of when they qualify.   

What "games" are you referring to people on here playing to qualify?  If it's income-based, and one's income is low enough in FI, they qualify.   This is no more "playing a a game" than someone who is FI and SS age claiming SS.

It's amazing the lengths people go to to rationalize their views.  If you want to sit there with a serous face and say you find nothing objectionable with the notion of FIREd individual getting paychecks from a system designed to help lift low income people out of poverty, more power to you.  If you want to sit there and claim the nature of the purpose of EITC and SS are the same, again, more power to you.  If you want to claim that it is somehow more fair for working people, some by need and some by choice, to fund FIREd peoples' leisure thru taxes, go for it.  You are entitled to that opinion. 

I will sit here and find it objectionable. 

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #141 on: January 19, 2015, 12:28:33 PM »
Most are 1099ers with no access to tax avoidance vehicles - any more than you have. Stop believing the spew from politicians and Maureen Dowd.

Ahem...all of my income is 1099 income.

Google "S-Corp and 401k with profit-sharing."

I can sock over $50k a year into a 401k.

I can take a substantial portion of my pay as dividends rather than salary, thus avoiding FICA taxes and at the lower dividend rate.

Being a 1099 is fucking awesome if you do it right.

<<I can take a substantial portion of my pay as dividends rather than salary, thus avoiding FICA taxes and at the lower dividend rate. >>

Please explain this one in more detail...seriously.

--How do you do that?
--What is your job function that enables you to do that?
--What type of company do you work at that enables you to do that? (I thought you referred to Google -- not asking you to divulge if not).

I worked at seven different publicly held companies and one privately held company during my 30 year working career. No company offered this option. If they did, particularly at my last three employers, most every employee would have taken advantage of this option. Trust me that I am not asking this question cynically, but opportunistically and open minded with a hope of learning something new. Thank you in advance.

**NEVER MIND if what you're referring to is simply an ESPP program. But please confirm if that is the case.

Gin1984

  • Magnum Stache
  • ******
  • Posts: 4753
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #142 on: January 19, 2015, 12:43:49 PM »
Most are 1099ers with no access to tax avoidance vehicles - any more than you have. Stop believing the spew from politicians and Maureen Dowd.

Ahem...all of my income is 1099 income.

Google "S-Corp and 401k with profit-sharing."

I can sock over $50k a year into a 401k.

I can take a substantial portion of my pay as dividends rather than salary, thus avoiding FICA taxes and at the lower dividend rate.

Being a 1099 is fucking awesome if you do it right.

<<I can take a substantial portion of my pay as dividends rather than salary, thus avoiding FICA taxes and at the lower dividend rate. >>

Please explain this one in more detail...seriously.

--How do you do that?
--What is your job function that enables you to do that?
--What type of company do you work at that enables you to do that? (I thought you referred to Google -- not asking you to divulge if not).

I worked at seven different publicly held companies and one privately held company during my 30 year working career. No company offered this option. If they did, particularly at my last three employers, most every employee would have taken advantage of this option. Trust me that I am not asking this question cynically, but opportunistically and open minded with a hope of learning something new. Thank you in advance.

**NEVER MIND if what you're referring to is simply an ESPP program. But please confirm if that is the case.
I'm betting they did, but not for the rank and file.  It is common among C-level employees to get this. 
Since you are not interested in googling here is a couple links:
http://www.bizfilings.com/learn/s-corporation-employment-taxes.aspx
http://www.cpa2biz.com/Content/media/PRODUCER_CONTENT/Newsletters/Articles_2014/CorpTax/paying-compensation-or-dividends.jsp
« Last Edit: January 19, 2015, 12:45:37 PM by Gin1984 »

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #143 on: January 19, 2015, 03:37:22 PM »


Nobody should get in a tizzy about Obama's speech.  He knows damn well that none of his plans will come to pass because the GOP is in control of both houses of Congress.  Nothing is going to get done for the next year or so until there are more elections.  All Obama is doing is setting things up to paint the GOP as a party that doesn't care about helping people who are struggling to try to win votes for the next election cycle.  It's all political theater.
True that--it's pretty much just political posturing.

I'm curious whether anyone has done a proper, calculated assessment of the effects of this proposal.  Given how few people there are to whom this policy would apply, and all the tax-avoidance vehicles they have access to, how much revenue would it actually raise?

Most are 1099ers with no access to tax avoidance vehicles - any more than you have. Stop believing the spew from politicians and Maureen Dowd.
Please explain this.  You don't think those who make over $500,000 are investing in taxable accounts (getting lower tax rates than earned income) or that they are unable to open an individual 401k?  Or that people who get 1099 don't claim deductions for work against their income? 
Or even if we are just talking about two high wage earns one making $300,000 in w-2 income and the other making $200,000, that they don't have 401ks or again put money in taxable accounts etc.

The term used was 'tax avoidance.' 401Ks are a tax deferral vehicle.

waltworks

  • Magnum Stache
  • ******
  • Posts: 3304
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #144 on: January 19, 2015, 03:43:13 PM »
No, 401ks can easily be used to avoid taxes entirely via SEPP/Roth conversion pipeline, etc. Not practical for huge amounts of money, of course.

-W

ScroogeMcDutch

  • 5 O'Clock Shadow
  • *
  • Posts: 86
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #145 on: January 19, 2015, 05:13:56 PM »
To be honest, the plans don't sound that bad. Across the globe a tax revision could be used, but noone really found a good alternative to taxing income, consumption, dividends and corporate yet. If a country did, then I guess many would follow suit.

The effects of changing taxes and the so-called flee of people who would fall in them is overrated I would venture to guess.

To your #3 here is the rub. Here I think we pay a lot and don't get as much in return as those European countries. The infrastructure in The Netherlands, for example, is shockingly good. The average quality of life there appears to be higher and inequality lower. But there is this one thing about the U.S. that I can't out a price on - freedom. And I will never take that for granted.

A Dutchman speaking here. We have problems with inequality as well, and a massive amount of money goes to the lower income parts of our country, as the COL is high in most parts due to high housing prices and relavitely low wages (median wage is 34k). Marginal income tax rates go up to 52% starting after you earn more than 58k and pretty much 42% for all below that. Of course there are many deductions possible and a large part of healthcare is also paid through taxes rather than private. All in all I am happy with my country, think things could be done much better and more efficient, but I think any mustachian in any country will see it that way. I do not understand your remark about freedom however, do you consider people in Europe to be less free than people in the US?

Didn't mean to sidetrack, but it's not always a grass-is-greener thing :)


Tetsuya Hondo

  • Pencil Stache
  • ****
  • Posts: 503
  • Location: 1960's Tokyo on the Bad Side of Town
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #146 on: January 19, 2015, 05:35:46 PM »
Please explain this one in more detail...seriously.

--How do you do that?
--What is your job function that enables you to do that?
--What type of company do you work at that enables you to do that? (I thought you referred to Google -- not asking you to divulge if not).

I worked at seven different publicly held companies and one privately held company during my 30 year working career. No company offered this option. If they did, particularly at my last three employers, most every employee would have taken advantage of this option. Trust me that I am not asking this question cynically, but opportunistically and open minded with a hope of learning something new. Thank you in advance.

Certainly.

I'm a consultant that works as a sub to consulting firms.

To create this sort of arrangement, you first need to create an LLC for legal purposes and an S-Corporation for tax purposes. Then, you need to have the company direct your paychecks to your company rather than you as an individual.

Once the money is in your corporate account. You (er, your S-Corp headed by you) can determine how much can flow to you as salary and how much flows as dividends. You need to be reasonable in setting your salary. $0 will get you audited, but in between is one big gray area.

Strongly recommend using a good accountant to keep you from doing anything that runs afoul of the IRS.
« Last Edit: January 19, 2015, 05:41:17 PM by Tetsuya Hondo »

Tetsuya Hondo

  • Pencil Stache
  • ****
  • Posts: 503
  • Location: 1960's Tokyo on the Bad Side of Town
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #147 on: January 19, 2015, 05:39:12 PM »
I do not understand your remark about freedom however, do you consider people in Europe to be less free than people in the US?

As an American, I certainly don't. But then, my definition of freedom is being able to enjoy a beer on the sidewalk without getting harassed by the police.

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #148 on: January 19, 2015, 05:53:01 PM »
No, 401ks can easily be used to avoid taxes entirely via SEPP/Roth conversion pipeline, etc. Not practical for huge amounts of money, of course.

-W

Can you please be more specific, on a step by step basis, on how this would work?

I always thought of:
a) Convert lump sum in traditional 401K to Roth IRA upon leaving one's employer, paying taxes in the process, or....
b) Contributing to Roth 401K with after tax dollars....

What, specifically, am I missing?

RapmasterD

  • Pencil Stache
  • ****
  • Posts: 589
  • Location: SF Peninsula
Re: Targeting the Wealthy: MMM Meets Politics
« Reply #149 on: January 19, 2015, 05:56:50 PM »
Please explain this one in more detail...seriously.

--How do you do that?
--What is your job function that enables you to do that?
--What type of company do you work at that enables you to do that? (I thought you referred to Google -- not asking you to divulge if not).

I worked at seven different publicly held companies and one privately held company during my 30 year working career. No company offered this option. If they did, particularly at my last three employers, most every employee would have taken advantage of this option. Trust me that I am not asking this question cynically, but opportunistically and open minded with a hope of learning something new. Thank you in advance.

Certainly.

I'm a consultant that works as a sub to consulting firms.

To create this sort of arrangement, you first need to create an LLC for legal purposes and an S-Corporation for tax purposes. Then, you need to have the company direct your paychecks to your company rather than you as an individual.

Once the money is in your corporate account. You (er, your S-Corp headed by you) can determine how much can flow to you as salary and how much flows as dividends. You need to be reasonable in setting your salary. $0 will get you audited, but in between is one big gray area.

Strongly recommend using a good accountant to keep you from doing anything that runs afoul of the IRS.

Thank you. So by your own admission, you are not a rank and file 1099 employee, and therefore have much more flexibility in how you are compensated than they are. Thanks again.

P.S. Gin1984 -- Thank you so much for your response and the links as well. Very informative.