Author Topic: Targeting the Wealthy: MMM Meets Politics  (Read 57426 times)

caliq

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #150 on: January 19, 2015, 05:57:54 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?

He said it right there, Roth conversion pipeline.  There's a ton of stuff on these forums and other resources about how it works specifically. 

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #151 on: January 19, 2015, 06:00:57 PM »
Great. Thanks for all the help.

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #152 on: January 19, 2015, 06:22:55 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #153 on: January 19, 2015, 06:34:26 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #154 on: January 19, 2015, 06:51:42 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.
So now that we got that straighten out, what employees, outside of C-level employees, do you think make more than $250,000 annually? 

mozar

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #155 on: January 19, 2015, 07:01:09 PM »
Oh! I always like to hear from the Dutch. If you come back Scrooge, I have read that the unemployment benefits in the Netherlands are terrific and this creates this amazing dynamic workforce where everyone is finding great jobs because no one is stuck anywhere etc, and employers have a lot of freedom to hire and fire? Thoughts?

The OP seems to be obsessed with the EITC. I haven't see any threads about mustachians trying to take advantage of it. I certainly don't plan to. I have volunteered to do taxes for low income folks. It's hard because the people who need it the most tend not to file their taxes because they make so little.

On government waste and inefficient spending people always want to cut the IRS, but the IRS has been cut. About 130 million this year? You will be unable to call them because they are so understaffed. So congrats, I hope you are happy. What else do you want to cut, Sesame Street? That's just a drop in the bucket. Republicans never want to cut the military, a 1 trillion dollar program. Fun Fact: No one actually knows where the money is going. The military has failed every audit in history. it is un-auditable. The government estimates that over the past 10 years about 500 million dollars have been spent by the military that can't be accounted for, at all. That's inefficient, not Sesame Street.

Children = future economy

The way I see it, rich people have to spend their money one way or another. They can either contribute to the society that helped make them rich, or they can spend their money on security as the economy goes down the tubes (like rich people in South Africa).

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #156 on: January 19, 2015, 07:11:16 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.
So now that we got that straighten out, what employees, outside of C-level employees, do you think make more than $250,000 annually?

At the last tech company I worked at, I'd conservatively estimate that a minimum of 10% and more likely a minimum of 15% of the employees have an individual AGI that exceeds $250,000 per year.

I am even more confident this is the case at my S.O.'s company.
 
At my second-most-recent employer -- also a tech company, I'd put the percentage at a minimum of approximately 8-10%.

None of these example companies are well known for astronomically increasing stock prices in the last few years, i.e., not Facebook, or Google, or Apple.....My estimation is based upon salary plus bonus plus very modest RSU gains (e.g., 25K per year).
« Last Edit: January 19, 2015, 07:28:34 PM by RapmasterD »

EarlyStart

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #157 on: January 19, 2015, 07:17:16 PM »
The US government is like a poster who comes to MMM and says:

ComplainyPantsPoster:
"I make $250,000/year and spend $275,000. I'm trying to figure out how to bring in more revenue, so I'm thinking about working 70 hours/week rather than the current 50. What do you suggest?"


MMMResponder:
"Well it looks like you could cut your war expenditures in half- at least. You probably don't  need to give so much money to your friends (foreign aid) given your financial difficulties. The first thing to do would be to stop using your credit card so much (many trillions in unfunded liabilities in addition to the $18t). This makes it very hard to ever dig yourself out of the hole.


ComplainyPantsPoster:
Well, I really like going to war. Drones are fun. That's the point of life, to have fun. I don't think I can do with much less than what I have. The friends that I give money every year provide really important social connections for me. It helps me be part of the 'in' crowd. I'll try to use the credit card less, but the interest rate is so low!!! It's like free money. Why shouldn't I use free money?"



If a human being had finances like this, they'd get well-deserved face punches on MMM. But this is the government, so we cut them slack?



RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #158 on: January 19, 2015, 07:20:33 PM »
Oh! I always like to hear from the Dutch. If you come back Scrooge, I have read that the unemployment benefits in the Netherlands are terrific and this creates this amazing dynamic workforce where everyone is finding great jobs because no one is stuck anywhere etc, and employers have a lot of freedom to hire and fire? Thoughts?

The OP seems to be obsessed with the EITC. I haven't see any threads about mustachians trying to take advantage of it. I certainly don't plan to. I have volunteered to do taxes for low income folks. It's hard because the people who need it the most tend not to file their taxes because they make so little.

On government waste and inefficient spending people always want to cut the IRS, but the IRS has been cut. About 130 million this year? You will be unable to call them because they are so understaffed. So congrats, I hope you are happy. What else do you want to cut, Sesame Street? That's just a drop in the bucket. Republicans never want to cut the military, a 1 trillion dollar program. Fun Fact: No one actually knows where the money is going. The military has failed every audit in history. it is un-auditable. The government estimates that over the past 10 years about 500 million dollars have been spent by the military that can't be accounted for, at all. That's inefficient, not Sesame Street.

Children = future economy

The way I see it, rich people have to spend their money one way or another. They can either contribute to the society that helped make them rich, or they can spend their money on security as the economy goes down the tubes (like rich people in South Africa).

<<They can either contribute to the society that helped make them rich, or they can spend their money on security as the economy goes down the tubes>>

False dilemma. Clearly there are far more than two options, which would start with a broader definition of contributing to society, such as donating portions of one's time for philanthropic endeavors, donating portions of one's money to charities, starting a charity or a foundation, etc. This would just be a beginning of the plethora of additional options.

LINK: http://en.wikipedia.org/wiki/False_dilemma

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #159 on: January 19, 2015, 07:24:20 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.
So now that we got that straighten out, what employees, outside of C-level employees, do you think make more than $250,000 annually?

At the last tech company I worked at, I'd conservatively estimate that a minimum of 10% and more likely a minimum of 15% of the employees have an individual AGI that exceeds $250,000 per year.

I am even more confident this is the case at my S.O.'s company.
 
At my second-most-recent employer -- also a tech company, I'd put the percentage at approximately 8-10%.
And you are in the Bay Area, a pretty expensive place, income wise.  So the question sits, should be tax less than 10% a small amount more on their capital gains so that we advance the average middle classes group?  Well looking at our past and how having a decent size middle classes help our economy, I think it would be pretty obvious to say yes.  Why should those in the top 10% get a tax break (on capital gains) when others earning much less paying a higher rate, just because it us warned income?  That is what this boils down to.   What would benefit the country as a whole not just a small group?  Trickle down economics sure has not.

sol

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #160 on: January 19, 2015, 07:32:47 PM »
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?

The Roth conversion pipeline is a method in which you retire and then annually convert part of your pre-tax 401k to your Roth IRA, let it sit for five years, and then withdraw it for living expenses without ever paying taxes or penalties.  The challenge is to annually convert the highest amount which does not incur any tax liability.  For a family with a few kids, this amount can easily reach $60k/year under the current tax code, and for some people has been as high as $100k/year under special circumstances like having kids in college.

It has been explained in more detail on this forum many many times, but that's the abbreviated version.  You contribute your money to the 401k before taxes are paid, you convert it tax free, you wait five years, and then you withdraw it tax free and penalty free, regardless of your age.  Thus, the "tax-deferred" account becomes a "tax-free" account, assuming you have five years of patience.

The reason the previous poster said it doesn't work for very large amounts of money is that above about $60k/year the odds of you paying something in taxes start to go up.  You of course start at the 10% bracket on the first $18k of income, so if you wanted to draw $78k/year from your 401k and only had the typical $60k of tax shelter from deductions and exemptions and child tax credits, you'd pay 10% of $18k is $1800 on a total income of $78k, or a 2.3% tax rate. 

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #161 on: January 19, 2015, 07:53:34 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.
So now that we got that straighten out, what employees, outside of C-level employees, do you think make more than $250,000 annually?

At the last tech company I worked at, I'd conservatively estimate that a minimum of 10% and more likely a minimum of 15% of the employees have an individual AGI that exceeds $250,000 per year.

I am even more confident this is the case at my S.O.'s company.
 
At my second-most-recent employer -- also a tech company, I'd put the percentage at approximately 8-10%.
And you are in the Bay Area, a pretty expensive place, income wise.  So the question sits, should be tax less than 10% a small amount more on their capital gains so that we advance the average middle classes group?  Well looking at our past and how having a decent size middle classes help our economy, I think it would be pretty obvious to say yes.  Why should those in the top 10% get a tax break (on capital gains) when others earning much less paying a higher rate, just because it us warned income?  That is what this boils down to.   What would benefit the country as a whole not just a small group?  Trickle down economics sure has not.

Absolutely agree. No problem.

Well, there is one problem. You see, four years ago, that dividend tax was 15%. And then it went up to 23.8% (20% plus 3.8% for Obamacare for households with AGI > 250K). And the thinking was that THAT would be it.

So....if THIS will be it...and the new tally is 31.8% (28% plus 3.8% for Obamacare for households with AGI > 250K) for a dividend tax, then I am fine with that as well. In fact, take dividend taxes back to 40%. Fine.

But the question is: when does it stop? When is the beast fed enough? My supposition is: never. http://www.usdebtclock.org/

Obviously, the majority of the 99% will support increasing taxes on the 1%. Who wouldn't? It's human nature. They'll cite what the tax structure was like in the 1950s. But....you just can't tax the 1% enough to make the pain go away. It's not the full answer, or half the answer. Command 90% of their wages. It still wouldn't be enough.

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #162 on: January 19, 2015, 07:55:31 PM »
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?

The Roth conversion pipeline is a method in which you retire and then annually convert part of your pre-tax 401k to your Roth IRA, let it sit for five years, and then withdraw it for living expenses without ever paying taxes or penalties.  The challenge is to annually convert the highest amount which does not incur any tax liability.  For a family with a few kids, this amount can easily reach $60k/year under the current tax code, and for some people has been as high as $100k/year under special circumstances like having kids in college.

It has been explained in more detail on this forum many many times, but that's the abbreviated version.  You contribute your money to the 401k before taxes are paid, you convert it tax free, you wait five years, and then you withdraw it tax free and penalty free, regardless of your age.  Thus, the "tax-deferred" account becomes a "tax-free" account, assuming you have five years of patience.

The reason the previous poster said it doesn't work for very large amounts of money is that above about $60k/year the odds of you paying something in taxes start to go up.  You of course start at the 10% bracket on the first $18k of income, so if you wanted to draw $78k/year from your 401k and only had the typical $60k of tax shelter from deductions and exemptions and child tax credits, you'd pay 10% of $18k is $1800 on a total income of $78k, or a 2.3% tax rate.

Sol - As always, your response is ridiculously well written and with a patient tone to boot. Thank you! I have since researched this topic on this forum as well as Bogleheads, Mad Fientist, and others. Again, thank you.

sol

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #163 on: January 19, 2015, 08:03:42 PM »
Again, thank you.

Despite the fact that members of this forum will sometimes shout loudly at each other over politics or religion, we're basically only here to help each other out with financial stuff.  I'm glad to chip in where I can.

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #164 on: January 19, 2015, 08:05:58 PM »
Again, thank you.

Despite the fact that members of this forum will sometimes shout loudly at each other over politics or religion, we're basically only here to help each other out with financial stuff.  I'm glad to chip in where I can.

Yeah it's been a good learning experience....oh it has. I'm referring to the shouting and all.

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #165 on: January 19, 2015, 08:29:13 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.
So now that we got that straighten out, what employees, outside of C-level employees, do you think make more than $250,000 annually?

At the last tech company I worked at, I'd conservatively estimate that a minimum of 10% and more likely a minimum of 15% of the employees have an individual AGI that exceeds $250,000 per year.

I am even more confident this is the case at my S.O.'s company.
 
At my second-most-recent employer -- also a tech company, I'd put the percentage at approximately 8-10%.
And you are in the Bay Area, a pretty expensive place, income wise.  So the question sits, should be tax less than 10% a small amount more on their capital gains so that we advance the average middle classes group?  Well looking at our past and how having a decent size middle classes help our economy, I think it would be pretty obvious to say yes.  Why should those in the top 10% get a tax break (on capital gains) when others earning much less paying a higher rate, just because it us warned income?  That is what this boils down to.   What would benefit the country as a whole not just a small group?  Trickle down economics sure has not.

Absolutely agree. No problem.

Well, there is one problem. You see, four years ago, that dividend tax was 15%. And then it went up to 23.8% (20% plus 3.8% for Obamacare for households with AGI > 250K). And the thinking was that THAT would be it.

So....if THIS will be it...and the new tally is 31.8% (28% plus 3.8% for Obamacare for households with AGI > 250K) for a dividend tax, then I am fine with that as well. In fact, take dividend taxes back to 40%. Fine.

But the question is: when does it stop? When is the beast fed enough? My supposition is: never. http://www.usdebtclock.org/

Obviously, the majority of the 99% will support increasing taxes on the 1%. Who wouldn't? It's human nature. They'll cite what the tax structure was like in the 1950s. But....you just can't tax the 1% enough to make the pain go away. It's not the full answer, or half the answer. Command 90% of their wages. It still wouldn't be enough.
When we have a balanced budget.  I have no problem with increase capital gains to five percent below the earned income tax brackets, even though yes, I will end up paying high taxes in the long run.  Because having a stable middle classes benefits our country/society much more than having a super rich group. 
I do think we need to cut the budget, but also we do need to increase income and frankly the lower and middle classes have nothing left to give.  We don't want to crash them.  Taxing a bit more for the rich, basically making them pay the same percentage as the lower classes is not a bad thing and it won't crash them, well as long as past practice indicates future results.  Maybe we won't have 10% averages but I could be happy with 6-7% if it meant a stable middle class. 
I'd also like the working poor to not need so much aid from the government.  If the majority of your employees are getting aid (in the large business aka over 50), you make up the difference.  I'm tired of businesses getting tax breaks and citizens paying for them.  It is different when there is a net benefit, for example Geico got some decent tax breaks to move a call center to Buffalo, NY but they have hired and continued to hire $30-$40,000/annual jobs plus benefits without a college degree in an area when you can live in a one bedroom apartment for $500.  That is a win, win.  The situation we have now, does not benefit anyone except the super rich.

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #166 on: January 19, 2015, 08:55:16 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.
There is no such thing as a 1099 employee.  Either you are employee or you get a 1099 and you can set up exactly how it was explained here.

I stand corrected. OOPS! I have meant to be referring to employees all along, or W-2 employees, and most definitely not 1099-ers.
So now that we got that straighten out, what employees, outside of C-level employees, do you think make more than $250,000 annually?

At the last tech company I worked at, I'd conservatively estimate that a minimum of 10% and more likely a minimum of 15% of the employees have an individual AGI that exceeds $250,000 per year.

I am even more confident this is the case at my S.O.'s company.
 
At my second-most-recent employer -- also a tech company, I'd put the percentage at approximately 8-10%.
And you are in the Bay Area, a pretty expensive place, income wise.  So the question sits, should be tax less than 10% a small amount more on their capital gains so that we advance the average middle classes group?  Well looking at our past and how having a decent size middle classes help our economy, I think it would be pretty obvious to say yes.  Why should those in the top 10% get a tax break (on capital gains) when others earning much less paying a higher rate, just because it us warned income?  That is what this boils down to.   What would benefit the country as a whole not just a small group?  Trickle down economics sure has not.

Absolutely agree. No problem.

Well, there is one problem. You see, four years ago, that dividend tax was 15%. And then it went up to 23.8% (20% plus 3.8% for Obamacare for households with AGI > 250K). And the thinking was that THAT would be it.

So....if THIS will be it...and the new tally is 31.8% (28% plus 3.8% for Obamacare for households with AGI > 250K) for a dividend tax, then I am fine with that as well. In fact, take dividend taxes back to 40%. Fine.

But the question is: when does it stop? When is the beast fed enough? My supposition is: never. http://www.usdebtclock.org/

Obviously, the majority of the 99% will support increasing taxes on the 1%. Who wouldn't? It's human nature. They'll cite what the tax structure was like in the 1950s. But....you just can't tax the 1% enough to make the pain go away. It's not the full answer, or half the answer. Command 90% of their wages. It still wouldn't be enough.
When we have a balanced budget.  I have no problem with increase capital gains to five percent below the earned income tax brackets, even though yes, I will end up paying high taxes in the long run.  Because having a stable middle classes benefits our country/society much more than having a super rich group. 
I do think we need to cut the budget, but also we do need to increase income and frankly the lower and middle classes have nothing left to give.  We don't want to crash them.  Taxing a bit more for the rich, basically making them pay the same percentage as the lower classes is not a bad thing and it won't crash them, well as long as past practice indicates future results.  Maybe we won't have 10% averages but I could be happy with 6-7% if it meant a stable middle class. 
I'd also like the working poor to not need so much aid from the government.  If the majority of your employees are getting aid (in the large business aka over 50), you make up the difference.  I'm tired of businesses getting tax breaks and citizens paying for them.  It is different when there is a net benefit, for example Geico got some decent tax breaks to move a call center to Buffalo, NY but they have hired and continued to hire $30-$40,000/annual jobs plus benefits without a college degree in an area when you can live in a one bedroom apartment for $500.  That is a win, win.  The situation we have now, does not benefit anyone except the super rich.

Agreed. One more thing.

I love butter.

Guns? Not so much.

What about cutting defense spending...by a lot. Not likely to happen in our lifetimes, but hey....pretty obvious way to redirect revenues toward more noble ideals than slaughtering human beings, like subsidized state community colleges, etc.

Norioch

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #167 on: January 19, 2015, 09:43:36 PM »
But the question is: when does it stop? When is the beast fed enough?

When we have a balanced budget, or even better a modest surplus so we can slowly start reducing the national debt. Like we had at the end of Clinton's administration.

I've heard the claim (I don't remember the source or the exact numbers, so don't quote me on this) that even if we taxed 100% of the top 1% earners (at their current earnings, ignoring the effects of the Laffer Curve) it still wouldn't be enough to balance the budget. I don't know if that's true or not, but for the record I support raising taxes at almost all income levels, not just the top 1%. Back when the country was about to go off the "fiscal cliff" I was rooting for us to go off the cliff, and I was disappointed when a last-minute bill extending some of the tax cuts was passed.

GizmoTX

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #168 on: January 19, 2015, 09:52:26 PM »
"If the IRS grabbed 100 percent of income over $1 million, the take would be just $616 billion. Thatís only a third of this yearís deficit. Our national debt would continue to explode.
Itís the spending, stupid."

http://www.forbes.com/sites/danbigman/2012/04/03/john-stossel-tax-the-rich-the-rich-dont-have-enough-really/

ScroogeMcDutch

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #169 on: January 20, 2015, 01:16:12 AM »
Oh! I always like to hear from the Dutch. If you come back Scrooge, I have read that the unemployment benefits in the Netherlands are terrific and this creates this amazing dynamic workforce where everyone is finding great jobs because no one is stuck anywhere etc, and employers have a lot of freedom to hire and fire? Thoughts?

Unemployment benefits are pretty good I suppose. For an employee who is fired beyond his own fault, you usually receive 3 or X months worth of unemployment benefits, where X is the amount of years worked in succession prior to becoming unemployed. The benefit is approximately 70% of your last earned wage, up until Ä 2800 euros per month. There is also a base grant of between Ä 668 and Ä 1336 per month for people without a job, but you are very restricted in what you are allowed to do if you receive that (no holidays, all the way up to unannounced house visits to check if you still are allowed that grant in extreme cases). For people who work as contractors, there are no unemployment benefits. You're expected to save for periods of unemployment through the fee you charge as a contractor.

From an employer point of view, there is a strange division in three classes of people who can work for you however in terms of freedom to hire/fire:

A) Employees on a temporary contract
It is basically impossible to fire people on a temp contract, as a judge would assign a compensation worth the rest of the wages of the temp contract as reimbursement. You can let the contract expire and don't have to pay anything additional however, if the employee is not performing well. Most people start with a temp contract, and while legally not allowed to have more than 3 temp contracts in a row, there is a loophole that if you are not employed for 3 + months inbetween your 3rd temp contract and your next, that the counter resets, even if it is with the same employer. Employers use this trick to avoid having to hire someone on a permanent contract, because ...

B) Employees on a permanent contract
These are very hard to fire. Except if someone is really being an jerk, harassing etcetera, for a seriously underperforming employee you will have to make a case against them. Usually this takes two years of gathering evidence, showing you did a lot to try to improve that employee, and then bringing it to court. The other way to fire people is if you can show that for economical reason, you will have to do so in order for your business to survive. If you take that route, usually you will have to show that with the group of people you fire, that the composition of age groups in your company after the firing is comparable to the composition of age groups before firing. If you take a re-organization route, you have a bit more freedom if you change functions more than 20%. The re-organization route is most popular in getting rid of employees once you have to.

C) Contractors
A big move the past few years has been moving to contractors for work (now about 15% of workforce). These are a double edged sword. For middle to high income contractors, it's a great move. Your pay tends to go up bigtime and you have much more freedom to work where and how you want and these contractors have massively reduced the burden on companies to hire expensive people on a permanent contract. For low income contractors, the move was often initiated by the employer, by firing (or expiring temp contracts) the workers, and then suggesting they may hire them back as contractors (for about the same net income for the contractor). Difference is, they miss out on a lot of the social benefits of working (such as unemployment, pension etc). There is a burden on the company hiring the contractor to ensure it's not a "fake contractor" and can be taxed as employee, but I have never heard of this being put in practice where it should, but rather to chase down the middle to high income contractors.

Bit of a long story, and I think we're doing quite ok. The US employment type is probably more like the contractors situation here, with 2 weeks notice and all. I would like less protection for the people on a permanent contract, and a bit higher wages in general as a result (the huge protection is an additional reason for employers to not increase wages too much once on a permanent contract). Overall I think we're doing allright though.

davisgang90

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #170 on: January 20, 2015, 04:03:25 AM »
If only there was another way for the government to pay for all the deficits and the debt.  If only the government could cut spending instead of raising revenue.

Nah, it'll never work.  Let's just enjoy our class envy fantasy.  So delicious.

Schaefer Light

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #171 on: January 20, 2015, 05:47:42 AM »
The art of government consists in taking as much money as
possible from one class of citizens to give to the other.
ó Voltaire

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #172 on: January 20, 2015, 01:39:20 PM »
MMMResponder:
"Well it looks like you could cut your war expenditures in half- at least. You probably don't  need to give so much money to your friends (foreign aid) given your financial difficulties. The first thing to do would be to stop using your credit card so much (many trillions in unfunded liabilities in addition to the $18t). This makes it very hard to ever dig yourself out of the hole.

This was kind of a funny post, but I just wanted to point out that foreign aid is less than $50 billion per year, is about 0.12% of the annual budget.  To use your person making $250k as an example, it would be like that person giving $300 per year to an international charity.  I think that no one would ever suggest that a person making $250k cannot afford to give $300 per year to charity.
If they were going in debt to do so, we would.  I think the whole budget should be looked over with a fine tooth comb.  We don't want another recession but there are always that .01% that can be cut and those cuts do add up. 
« Last Edit: January 20, 2015, 02:05:58 PM by Gin1984 »

Eric

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #173 on: January 20, 2015, 02:01:09 PM »
MMMResponder:
"Well it looks like you could cut your war expenditures in half- at least. You probably don't  need to give so much money to your friends (foreign aid) given your financial difficulties. The first thing to do would be to stop using your credit card so much (many trillions in unfunded liabilities in addition to the $18t). This makes it very hard to ever dig yourself out of the hole.

This was kind of a funny post, but I just wanted to point out that foreign aid is less than $50 billion per year, is about 0.12% of the annual budget.  To use your person making $250k as an example, it would be like that person giving $300 per year to an international charity.  I think that no one would ever suggest that a person making $250k cannot afford to give $300 per year to charity.
If they were going in debt to do so, we would.  I think the whole budget should be looked over with a fine tooth comb.  We don't want another recetion but there are always that .01% that can be cut and those cuts do add up.

Are you sure we wouldn't recommend the poster just print more money from the printing press in her basement?  Either that or we'd conclude that individual finances and governmental finances are in no way comparable.  One or the other. :)

marty998

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #174 on: January 20, 2015, 02:05:01 PM »
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.

Not really, if anything people who don't know any better and don't vote are doing a good thing by sitting out the election. Look up how politics work in countries with compulsory voting (e.g. Brazil, Australia, etc.) sometime. Unless you have an extremely well educated population that cares to learn about the issues at hand you are better off with lower voter turn out by well informed voters than high voter turn out by uninterested voters.

The whole point of democracy is one person one vote. Whether you are ignorant or not it doesn't matter.

If it were just the educated elite that vote, where do you think the priorities of political parties would lie? What do you think it does for people's engagement in the political process if you say to them "you're too dumb to vote". Do you think that will help them?

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #175 on: January 20, 2015, 02:05:21 PM »
MMMResponder:
"Well it looks like you could cut your war expenditures in half- at least. You probably don't  need to give so much money to your friends (foreign aid) given your financial difficulties. The first thing to do would be to stop using your credit card so much (many trillions in unfunded liabilities in addition to the $18t). This makes it very hard to ever dig yourself out of the hole.

This was kind of a funny post, but I just wanted to point out that foreign aid is less than $50 billion per year, is about 0.12% of the annual budget.  To use your person making $250k as an example, it would be like that person giving $300 per year to an international charity.  I think that no one would ever suggest that a person making $250k cannot afford to give $300 per year to charity.
If they were going in debt to do so, we would.  I think the whole budget should be looked over with a fine tooth comb.  We don't want another recession but there are always that .01% that can be cut and those cuts do add up.

Are you sure we wouldn't recommend the poster just print more money from the printing press in her basement?  Either that or we'd conclude that individual finances and governmental finances are in no way comparable. One or the other. :)
Very true! 

EarlyStart

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #176 on: January 20, 2015, 04:44:09 PM »
MMMResponder:
"Well it looks like you could cut your war expenditures in half- at least. You probably don't  need to give so much money to your friends (foreign aid) given your financial difficulties. The first thing to do would be to stop using your credit card so much (many trillions in unfunded liabilities in addition to the $18t). This makes it very hard to ever dig yourself out of the hole.

This was kind of a funny post, but I just wanted to point out that foreign aid is less than $50 billion per year, is about 0.12% of the annual budget.  To use your person making $250k as an example, it would be like that person giving $300 per year to an international charity.  I think that no one would ever suggest that a person making $250k cannot afford to give $300 per year to charity.
If they were going in debt to do so, we would.  I think the whole budget should be looked over with a fine tooth comb.  We don't want another recetion but there are always that .01% that can be cut and those cuts do add up.

Are you sure we wouldn't recommend the poster just print more money from the printing press in her basement?  Either that or we'd conclude that individual finances and governmental finances are in no way comparable.  One or the other. :)


I think the analogy holds. Of course the financing aspects are totally different, but the outright refusal to forego expenditures that are quickly deemed necessities is a common thread. I worked at a private firm once upon a time that contracted the federal government. Every morning I scanned FedBizOpps.com and Fedmine for any opportunities. You would be amazed at some of the things the government is paying people to do for them.


I kid you not, one time I saw a bid that requested researchers for a study on a specific type of monkey shit. Yes, monkey shit and a specific type of monkey at that. I also noticed a certain Agency which focused on international development, which shall remain nameless, giving grants to very questionable "foreign non-profits". It's truly mind blowing.

caliq

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #177 on: January 20, 2015, 04:50:03 PM »
MMMResponder:
"Well it looks like you could cut your war expenditures in half- at least. You probably don't  need to give so much money to your friends (foreign aid) given your financial difficulties. The first thing to do would be to stop using your credit card so much (many trillions in unfunded liabilities in addition to the $18t). This makes it very hard to ever dig yourself out of the hole.

This was kind of a funny post, but I just wanted to point out that foreign aid is less than $50 billion per year, is about 0.12% of the annual budget.  To use your person making $250k as an example, it would be like that person giving $300 per year to an international charity.  I think that no one would ever suggest that a person making $250k cannot afford to give $300 per year to charity.
If they were going in debt to do so, we would.  I think the whole budget should be looked over with a fine tooth comb.  We don't want another recetion but there are always that .01% that can be cut and those cuts do add up.

Are you sure we wouldn't recommend the poster just print more money from the printing press in her basement?  Either that or we'd conclude that individual finances and governmental finances are in no way comparable.  One or the other. :)


I think the analogy holds. Of course the financing aspects are totally different, but the outright refusal to forego expenditures that are quickly deemed necessities is a common thread. I worked at a private firm once upon a time that contracted the federal government. Every morning I scanned FedBizOpps.com and Fedmine for any opportunities. You would be amazed at some of the things the government is paying people to do for them.


I kid you not, one time I saw a bid that requested researchers for a study on a specific type of monkey shit. Yes, monkey shit and a specific type of monkey at that. I also noticed a certain Agency which focused on international development, which shall remain nameless, giving grants to very questionable "foreign non-profits". It's truly mind blowing.

Please don't start questioning scientific research proposals unless you're educated in how science works.  Model organisms are a thing, and they are relevant to human medical concerns, not to mention relevant to other focuses of research such as the environment.  Even monkey poo is important to science. 

You have fruit flies, mice, and monkeys to thank for a huge amount of scientific/medical advances that you have most likely personally benefited from. 

mozar

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #178 on: January 20, 2015, 06:39:48 PM »
Thanks scroogemcduck. It seems that the article I read about the Netherlands was entirely wrong.

I know what a false dilemma is. What I did was actually an oversimplification. My point is that wealth transfers to the middle class and poor benefits the rich. This point has been better articulated by other posters.

Schaefer Light

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #179 on: January 21, 2015, 06:15:19 AM »
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.

Not really, if anything people who don't know any better and don't vote are doing a good thing by sitting out the election. Look up how politics work in countries with compulsory voting (e.g. Brazil, Australia, etc.) sometime. Unless you have an extremely well educated population that cares to learn about the issues at hand you are better off with lower voter turn out by well informed voters than high voter turn out by uninterested voters.

The whole point of democracy is one person one vote. Whether you are ignorant or not it doesn't matter.

If it were just the educated elite that vote, where do you think the priorities of political parties would lie? What do you think it does for people's engagement in the political process if you say to them "you're too dumb to vote". Do you think that will help them?
The US isn't a democracy and was never intended to be.  We're a constitutional republic.

Bob W

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #180 on: January 21, 2015, 06:31:52 AM »
Taxes are ethically and morally wrong.   The big one is the inflation tax.   You can't escape it.

Future Lazy

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #181 on: January 21, 2015, 07:02:36 AM »
Taxes are ethically and morally wrong.   The big one is the inflation tax.   You can't escape it.

If not through tax, how should the government raise funds to make improvements on public spaces? Should nothing be owned by, and therefore paid for by the public?

rocksinmyhead

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #182 on: January 21, 2015, 07:36:51 AM »
Please don't start questioning scientific research proposals unless you're educated in how science works.  Model organisms are a thing, and they are relevant to human medical concerns, not to mention relevant to other focuses of research such as the environment.  Even monkey poo is important to science. 

You have fruit flies, mice, and monkeys to thank for a huge amount of scientific/medical advances that you have most likely personally benefited from.

oh my god thank you. this is A HUGE pet peeve of mine.

FastStache

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #183 on: January 21, 2015, 10:00:19 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

Eric

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #184 on: January 21, 2015, 10:22:39 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

You're kidding, right?  The Federal Gov't spent $3.454 Trillion in 2013.  That's $3,454,000,000,000.00.  Let's just round up for easy math and because that figure is a year old.  So $3,500,000,000,000.00.  There are approximately 300 Million people, including children in the US.  That means that every person's share is $11,667.  So a family of four would owe $46,666.  The median income for a family is $51,900, leaving just over $5000 for that family to live on for the year and a tax rate of 90%.  The family of four making well over the median, let's say $700K, still owes $46,666.  They have an effective tax rate of 6.7%.  But at least everyone is paying "their fair share".  I'm sure this would cause no problems at all because everyone would see how fair it is.

waltworks

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #185 on: January 21, 2015, 10:27:21 AM »
Kids are expensive, though! Better double it for the little ones...

-W

I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

You're kidding, right?  The Federal Gov't spent $3.454 Trillion in 2013.  That's $3,454,000,000,000.00.  Let's just round up for easy math and because that figure is a year old.  So $3,500,000,000,000.00.  There are approximately 300 Million people, including children in the US.  That means that every person's share is $11,667.  So a family of four would owe $46,666.  The median income for a family is $51,900, leaving just over $5000 for that family to live on for the year and a tax rate of 90%.  The family of four making well over the median, let's say $700K, still owes $46,666.  They have an effective tax rate of 6.7%.  But at least everyone is paying "their fair share".  I'm sure this would cause no problems at all because everyone would see how fair it is.

zolotiyeruki

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #186 on: January 21, 2015, 10:48:46 AM »
A tax penalty for having kids is an interesting idea. Currently, many people have children before they can afford them, but if creating children forced them to pay a significant additional amount of tax, they might rethink creating them. However, in practice it wouldn't be fair at all because the people who really need to be deterred from having children tend to have no income at all or a negligible amount, so there's nothing to tax. Low but nonzero income people would just feel resentful that they have to pay for kids while the zero income people use more resources but pay nothing.
From a perfectly fiduciary (i.e. amoral and apolitical) perspective, the government would want to incentivize childbearing for high-earners and discourage it for low-income folks.  Sure, kids cost a lot of money to educate, but they also are the (potential) future taxpayers.  And kids of higher-income households tend to grow up to become higher earners and therefore pay more taxes.

There are lots of political and moral objections to this, but from the perspective of maximizing revenue...

starguru

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #187 on: January 21, 2015, 10:49:51 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

While I agree with your first sentiment I object to ever using the term "fair" in a discussion about taxes.  Its subjective.  It holds no objective power and hence appealing to the notion of fair is never a logical reason to do anything.  "Fair" in most peoples' minds means "someone else".

Look at it this way.  Most mustachians at or near FIRE have more than the average American.  I propose to tax all savings over 250k at .5% per annum.  Over 750k at .75% per annum.  I argue that's fair; people with that much money have more than the average American.  They can afford it.  How many on this forum agree with that?

FastStache

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #188 on: January 21, 2015, 10:52:11 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

You're kidding, right?  The Federal Gov't spent $3.454 Trillion in 2013.  That's $3,454,000,000,000.00.  Let's just round up for easy math and because that figure is a year old.  So $3,500,000,000,000.00.  There are approximately 300 Million people, including children in the US.  That means that every person's share is $11,667.  So a family of four would owe $46,666.  The median income for a family is $51,900, leaving just over $5000 for that family to live on for the year and a tax rate of 90%.  The family of four making well over the median, let's say $700K, still owes $46,666.  They have an effective tax rate of 6.7%.  But at least everyone is paying "their fair share".  I'm sure this would cause no problems at all because everyone would see how fair it is.

I'm sure this would trim the fat right off the budget though.

Eric

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #189 on: January 21, 2015, 10:56:14 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

You're kidding, right?  The Federal Gov't spent $3.454 Trillion in 2013.  That's $3,454,000,000,000.00.  Let's just round up for easy math and because that figure is a year old.  So $3,500,000,000,000.00.  There are approximately 300 Million people, including children in the US.  That means that every person's share is $11,667.  So a family of four would owe $46,666.  The median income for a family is $51,900, leaving just over $5000 for that family to live on for the year and a tax rate of 90%.  The family of four making well over the median, let's say $700K, still owes $46,666.  They have an effective tax rate of 6.7%.  But at least everyone is paying "their fair share".  I'm sure this would cause no problems at all because everyone would see how fair it is.

I'm sure this would trim the fat right off the budget though.

It's true.  You'd have a lot less to spend money on with so many people dying of starvation.  Think of the savings!

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #190 on: January 21, 2015, 10:57:35 AM »
FastStache, I agree with you that that would be conceptually fair, but as you probably realise, the flat fee would be significantly larger than most people's total annual income. Currently, high income people pay a grossly disproportionate ratio of all tax collected in the USA, so if that were going to be averaged evenly among each person, it would be too high for most people to pay. So even though that would be the most fair, it's also not a practical system.

Not flat fee, but flatter percentage income tax...not necessarily completely flat, but flatter -- with fewer brackets and everybody paying some narrower range percentage of income tax, and ALL deductions eliminated. Estate, mortgage interest, educational expense, yadda yadda -- GONE.

For a myriad of reasons, this will never happen.

OMG! There's a dude with a flaming torch banging on my front door -- crap!! I shouldn't have even SUGGESTED this.

RapmasterD

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #191 on: January 21, 2015, 11:01:04 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

While I agree with your first sentiment I object to ever using the term "fair" in a discussion about taxes.  Its subjective.  It holds no objective power and hence appealing to the notion of fair is never a logical reason to do anything.  "Fair" in most peoples' minds means "someone else".

Look at it this way.  Most mustachians at or near FIRE have more than the average American.  I propose to tax all savings over 250k at .5% per annum.  Over 750k at .75% per annum.  I argue that's fair; people with that much money have more than the average American.  They can afford it.  How many on this forum agree with that?

"Fair" is the ultimate subjective and abstract noun. What is a concrete noun? If you can theoretically put it in a wheelbarrow, it is concrete.

Bucket
Water
Airplane (I said theoretically...)

But "fair?" Always open to interpretation.

starguru

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #192 on: January 21, 2015, 11:01:44 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

While I agree with your first sentiment I object to ever using the term "fair" in a discussion about taxes.  Its subjective.  It holds no objective power and hence appealing to the notion of fair is never a logical reason to do anything.  "Fair" in most peoples' minds means "someone else".

Look at it this way.  Most mustachians at or near FIRE have more than the average American.  I propose to tax all savings over 250k at .5% per annum.  Over 750k at .75% per annum.  I argue that's fair; people with that much money have more than the average American.  They can afford it.  How many on this forum agree with that?

"Fair" is the ultimate subjective and abstract noun. What is a concrete noun? If you can theoretically put it in a wheelbarrow, it is concrete.

Bucket
Water
Airplane (I said theoretically...)

But "fair?" Always open to interpretation.

That's my point. 

FastStache

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #193 on: January 21, 2015, 11:19:34 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

You're kidding, right?  The Federal Gov't spent $3.454 Trillion in 2013.  That's $3,454,000,000,000.00.  Let's just round up for easy math and because that figure is a year old.  So $3,500,000,000,000.00.  There are approximately 300 Million people, including children in the US.  That means that every person's share is $11,667.  So a family of four would owe $46,666.  The median income for a family is $51,900, leaving just over $5000 for that family to live on for the year and a tax rate of 90%.  The family of four making well over the median, let's say $700K, still owes $46,666.  They have an effective tax rate of 6.7%.  But at least everyone is paying "their fair share".  I'm sure this would cause no problems at all because everyone would see how fair it is.

I'm sure this would trim the fat right off the budget though.

It's true.  You'd have a lot less to spend money on with so many people dying of starvation.  Think of the savings!

I grew up with in a low income area, and went to schools in an even lower income area. The majority of people have a spending issue, they don't utilize the resources around them well among other issues.

A few are genuinely disadvantaged for one reason or another, bad genetics, medical issues, accidents, traumatic experiences, etc. But just from what I saw the majority of people don't take school seriously, get caught up with the wrong crowd and then wonder why they can't get high paying jobs.

Why should someone that makes 750K have to pay more taxes than the person working a low paying job? Because they can afford it?
« Last Edit: January 21, 2015, 12:27:59 PM by FastStache »

TrulyStashin

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #194 on: January 21, 2015, 11:35:30 AM »
I don't understand the idea of people making more money paying more in taxes. I mean from the government's perspective it should cost about the same in services, etc. per person whether you make 30K or 300K a year. To me, it seems sane to have a flat fee to have live in the United States and have everyone pay their fair share.

You're kidding, right?  The Federal Gov't spent $3.454 Trillion in 2013.  That's $3,454,000,000,000.00.  Let's just round up for easy math and because that figure is a year old.  So $3,500,000,000,000.00.  There are approximately 300 Million people, including children in the US.  That means that every person's share is $11,667.  So a family of four would owe $46,666.  The median income for a family is $51,900, leaving just over $5000 for that family to live on for the year and a tax rate of 90%.  The family of four making well over the median, let's say $700K, still owes $46,666.  They have an effective tax rate of 6.7%.  But at least everyone is paying "their fair share".  I'm sure this would cause no problems at all because everyone would see how fair it is.

I'm sure this would trim the fat right off the budget though.

It's true.  You'd have a lot less to spend money on with so many people dying of starvation.  Think of the savings!

I grew up with in a low income area, and went to schools in an even lower income area. The majority of people have a spending issue, they don't utilize the resources around them well among other issues.

A few are genuinely disadvantaged for one reason or another, bad genetics, medical issues, accidents, traumatic experiences, etc. But just from what I saw the majority of people don't take school seriously, get caught up with the wrong crowd and then wonder why they can't get high paying jobs.

Why should someone that makes 750K have to pay more taxes than the person that person working a low paying job? Because they can afford it?

Yes.  Exactly this.  There is nothing wrong with that in any society that even pretends to value equity and opportunity for all.

On Dec. 27th, my brother (a high-net-worth and very spendy dude) got an email news alert from his accountant letting him know of an obscure tax credit that was about to sunset.  If he acted before the end of the year, he could purchase a boat and so long as he rented it out for charter a few times, he could write off the entire cost of the boat on his taxes.  He immediately started looking at boats priced at $60 - $70k, because he wanted to try and take advantage of the tax credit before Dec. 31st.

My point in telling that story is that our current system already redistributes wealth and it has always done so.  The question we face is, in which direction do we want to redistribute it?  Do we redistribute it upward to a guy like my brother so he can buy a yacht basically for free (or a corporation)?  Or do we redistribute it downward to people who would otherwise not have access to a higher education? (for example)

I vote for downward because a rising tide should lift all boats.


Iron Mike Sharpe

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #195 on: January 21, 2015, 11:47:31 AM »
I just wished we would eliminate the income tax altogether and move to the consumption-based Fair Tax.

There is just so much money wasted in this country trying to comply with the ridiculous tax code.  And now they want to make it even more complex.

Heck, I'd even be in favor of keeping an income tax if we just got rid of all deductions, credits, exemptions, etc.  Just establish real tax brackets and you pay that % while you are in each bracket.  It's lunacy that I get punished for having a tiny mortgage.  And don't get me started on people with kids.  The fact that, in theory, I use less govt than a clone of myself who has two kids would use but yet I have to pay way more in taxes...beyond belief.

TheOfficeLady

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #196 on: January 21, 2015, 01:37:19 PM »
"And for America's youth, what do you make of a President who wants to punish those who save? You are already going to get saddled with the Nation's crushing debt. And now the President you effectively elected is going to penalize your frugal habits."

I don't think he's penalizing any frugality on my part. I make an almost-middle-class income even though I work FT and have a college degree. I'm working towards a 2nd degree. My generation will face bigger hurdles than taxes. The workforce and the skills required to succeed in it have changed so rapidly that it has been a much bigger issue for this economy and my generation than paying an extra $20.00/month for a tax.

I've honestly just gotten used to the idea that people who address "the youth" may never understand these views.

Things that WILL be greater obstacles than taxes in the next 50 years of my life for "youth":

1. Rapid technological advancements that then get included in job requirements. This can then make it more difficult to be qualified for a job that allows you to make more, advance in your career, etc. I've accepted that I will always need to be updating my skills if I want to stay afloat.
2. The inflating price of food. I've started using Leanne Brown's recipes and they're great. But I'm tired when I get home and that's a daily issue. Slow cookers are quickly becoming a friend.
3. The rapidly increasing price of childcare.
4. My ability to get a job where I make enough to support a family. (See #3).
5. Being able to afford a house and all of the expenses that come with it.
6. The time/cost of taking care of parents as they get older. I've read that many women shoulder this burden more than men (statistically).

Sorry but ranting about taxes just doesn't hit home for me as much as a conversation with people my age about the cost of groceries, etc. Daily living costs are really a big challenge that I focus on. Thus the reason I spend time finding resources on this website.

TrulyStashin

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #197 on: January 21, 2015, 01:38:51 PM »
^^^  Thanks for the Carnegie piece.   I'll add this quote from it.   Pete could have written this:

This, then, is held to be the duty of the man of Wealth: First, to set an example of modest, unostentatious living, shunning display or extravagance; to provide moderately for the legitimate wants of those dependent upon him; and after doing so to consider all surplus revenues which come to him simply as trust funds, which he is called upon to administer, and strictly bound as a matter of duty to administer in the manner which, in his judgment, is best calculated to produce the most beneficial results for the community--the man of wealth thus becoming the mere agent and trustee for his poorer brethren, bringing to their service his superior wisdom, experience and ability to administer, doing for them better than they would or could do for themselves.

How sad that this ethic seems to have been replaced with "I've got mine.  If you don't have yours, tough nuts.  You must be a failure."

Gin1984

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #198 on: January 21, 2015, 01:47:57 PM »
"And for America's youth, what do you make of a President who wants to punish those who save? You are already going to get saddled with the Nation's crushing debt. And now the President you effectively elected is going to penalize your frugal habits."

I don't think he's penalizing any frugality on my part. I make an almost-middle-class income even though I work FT and have a college degree. I'm working towards a 2nd degree. My generation will face bigger hurdles than taxes. The workforce and the skills required to succeed in it have changed so rapidly that it has been a much bigger issue for this economy and my generation than paying an extra $20.00/month for a tax.

I've honestly just gotten used to the idea that people who address "the youth" may never understand these views.

Things that WILL be greater obstacles than taxes in the next 50 years of my life for "youth":

1. Rapid technological advancements that then get included in job requirements. This can then make it more difficult to be qualified for a job that allows you to make more, advance in your career, etc. I've accepted that I will always need to be updating my skills if I want to stay afloat.
2. The inflating price of food. I've started using Leanne Brown's recipes and they're great. But I'm tired when I get home and that's a daily issue. Slow cookers are quickly becoming a friend.
3. The rapidly increasing price of childcare.
4. My ability to get a job where I make enough to support a family. (See #3).
5. Being able to afford a house and all of the expenses that come with it.
6. The time/cost of taking care of parents as they get older. I've read that many women shoulder this burden more than men (statistically).

Sorry but ranting about taxes just doesn't hit home for me as much as a conversation with people my age about the cost of groceries, etc. Daily living costs are really a big challenge that I focus on. Thus the reason I spend time finding resources on this website.
And the tax benefits (credits/flex spending account) are not indexed to inflation which amounts to an addition tax compared to prior generations.  And guess what, we can't afford to index it, because of Bush tax credits. 

merula

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Re: Targeting the Wealthy: MMM Meets Politics
« Reply #199 on: January 21, 2015, 02:36:15 PM »
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.

So, at this point maybe not that much chance of a response, but I'm a little confused on the math.

SS & Medicare: SS is capped at $7,254 for 2014. Assuming Medicare on $500k (since you said some is investments, and presumably some is health insurance premiums, etc.), that'd be 0.0145*500,000+0.009*(500,000-200,000) = $9,950. So, yeah, $17,204 isn't a ton lower than $22,000, but it's enough to drop your estimated total taxes to 35.5%.

$15,000 in sales tax at 7% means over $200,000 in spending subject to sales tax. WHAT IS THIS? How can anyone possibly spend that much when they already have a house? Vice taxes on cigarettes/alcohol? Are you somehow including fuel taxes that are included in your gas price?