The Money Mustache Community
General Discussion => Welcome and General Discussion => Topic started by: gluskap on January 22, 2015, 10:31:51 AM
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc. We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year. We also put the max $5k into the Dependant Care FSA and some into the health care FSA, we don't have access to a HSA. Is there anything else we can deduct to lower our MAGI?
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area. It would be awesome if I could work part time but that's not an option at my current job. Maybe a career change to a less stressful lower paying job might be an option at some point. Or should I just suck it up and save as much as we can and then just FIRE earlier? Anyone else in the same situation and just want to commiserate?
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I would love to commiserate but our combined income hasn't even hit six figures yet.
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Are you doing the back door Roth?
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Could you put all that money into killing off the mortgage, and then quit and stay home?
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Hate to break it to you, but that's not middle class. That's top 10 %.
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yes subject title is kind of insulting to people who are actually in the middle class.
The only suggestion is try to transition as quickly as possible to live off of investments, which are taxed at a lower rate than income.
http://money.usnews.com/money/personal-finance/articles/2014/04/24/what-it-means-to-be-middle-class-today
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It's always amazing to me how every single person in this country thinks that they are Middle Class. Even those that earn $233K and are in the top 2-3% of incomes, yet still Middle Class.
But to answer your question, no, I don't think there's much else you can do to lower your current tax bill. I like the plan of sucking it up and saving as much as you can to reach FIRE as soon as possible. Working part time shouldn't be a tax strategy, as you're lowering your income way more than your tax bill. It's fine for many other reasons obviously, but taxes should be near the bottom of that list.
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Does one of your employers have a deferred compensation program?
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Others have already mentioned the distinctly upper class salary, so I'll leave that alone.
I'll just trot out my broken record recommendation for deferring/avoiding taxes, which is to get one of you into a self employed situation if possible, and to set up a Individual 401(k). Then, max out the contributions for both participant and spouse, as well as "employer" contributions (which is still you, contributing from your income), deferring up to $106K per year (or $118K if you're over 50). Note that this max contribution requires the salary earned on 1099 to be fairly high, between 140-185K depending on S-Corp versus Sole Proprietor. Bam, your income is now a combined $127K for tax purposes.
I realize this is easier said than done, but you never know until you try- Since many businesses budget up to 30% for benefits, you or your spouse may be able to talk an employer into paying you slightly more as a 1099 employee, and both parties may benefit. You'll have to cover any benefits that you value yourself as a business expense, but for me that's pretty much just medical and dental, and it's a net increase in income versus being a W-2 employee.
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It's always amazing to me how every single person in this country thinks that they are Middle Class. Even those that earn $233K and are in the top 2-3% of incomes, yet still Middle Class.
But to answer your question, no, I don't think there's much else you can do to lower your current tax bill. I like the plan of sucking it up and saving as much as you can to reach FIRE as soon as possible. Working part time shouldn't be a tax strategy, as you're lowering your income way more than your tax bill. It's fine for many other reasons obviously, but taxes should be near the bottom of that list.
+1000
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I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area.
This should give you great pause. If you truly would be straining to cover your mortgage on one salary, you are in a precarious financial position and should seriously re-think your housing choice.
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc. We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year. We also put the max $5k into the Dependant Care FSA and some into the health care FSA, we don't have access to a HSA. Is there anything else we can deduct to lower our MAGI?
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area. It would be awesome if I could work part time but that's not an option at my current job. Maybe a career change to a less stressful lower paying job might be an option at some point. Or should I just suck it up and save as much as we can and then just FIRE earlier? Anyone else in the same situation and just want to commiserate?
Ill commiserate with you being in a similar situation. Wait to you get above 250k, the dick in the ass gets even longer.
Unfortunately, I have no advice. Get ready to have to get your employer to withhold extra payments and start making quarterly payments so you dont come up short.
Pay up, you totally undeserving cheater, else it ain't fair to anyone else. You can afford it.
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc. We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year. We also put the max $5k into the Dependant Care FSA and some into the health care FSA, we don't have access to a HSA. Is there anything else we can deduct to lower our MAGI?
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area. It would be awesome if I could work part time but that's not an option at my current job. Maybe a career change to a less stressful lower paying job might be an option at some point. Or should I just suck it up and save as much as we can and then just FIRE earlier? Anyone else in the same situation and just want to commiserate?
Ill commiserate with you being in a similar situation. Wait to you get above 250k, the dick in the ass gets even longer.
Unfortunately, I have no advice. Get ready to have to get your employer to withhold extra payments and start making quarterly payments so you dont come up short.
Pay up, you totally undeserving cheater, else it ain't fair to anyone else. You can afford it.
Cancel the thread, everyone. We've skipped to page 6 of some other thread in a stunningly effective savings of time and energy.
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This should give you great pause. If you truly would be straining to cover your mortgage on one salary, you are in a precarious financial position and should seriously re-think your housing choice.
+1
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc.
Only one of those things you mentioned, the traditional IRA deduction, is an actual tax deduction. You mentioned two tax credits, and Roth contributions, which are neither tax deductions nor credits.
We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year.
This doesn't affect MAGI which qualifies you for certain tax credits and deductions. Your itemized deductions reduce your taxable income, not your (M)AGI. I am surprised how many people on this forum do not understand this distinction.
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area.
This should give you great pause. If you truly would be straining to cover your mortgage on one salary, you are in a precarious financial position and should seriously re-think your housing choice.
This is the true problem that you should be trying to address, not your tax bill.
For some humor, I've added this list of ways to reduce your tax liability, as found over on the Boglehead forums
1. Contribute max to 401(k) and self-employed retirement plans.
2. Contribute to Roth IRAs (only reduces future taxes, not today's taxes)
3. Invest tax efficiently (only reduces future taxes)
4. Give your money away to charity
5. Buy biggest house in world and pay huge property taxes
6. Have huge mortgage on that house and pay huge amount of interest
7. Get married and have lots of kids
8. Be sure to lose money in the stock market since $3000 of losses are deductible each year against ordinary income.
9. Move to a state with high income taxes because state income taxes are deductible.
10. Have severe health issues that you pay for out of your own pocket as you can deduct health care expenses above 7.5% of AGI
11. Grow old, you get more exemptions for being old
12. Go blind, you get more exemptions for being blind
13. Buy property and rent it out at a loss. The more losses the better.
14. Quit your jobs. With no earned income, it's not surprising that your taxes drop.
15. Avoid investments that create taxable income. You want losers to reduce your taxes.
16. Etc.
Or just pay the tax and enjoy life.
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17. Hire accountants and investment advisors and pay them lots of money. Anything you pay them that is more than 2% of your AGI is deductible.
Oh and you can stab yourself in the eye to accomplish #12 and #10 in one go.
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OP - No, not much else you can do. I agree with others that you are in the top 2-3% of households so you aren't in the middle class. I'd call this either extremely upper middle class or more realistically lower upper class. Just because your spending is in the middle class (I'm assuming) doesn't mean your income is. The term I saw a while back is HENRYs - High Earners Not Rich Yet. Typically HENRYs end up paying the highest tax bill in terms of % of income.
I see three solutions to your tax "problem"
1) Keep expenses low and build the 'stashe as capital gains are typically taxed lower than earned income (at least in the US).
2) Pull back housing costs so if you want to drop one income for other reasons (child care, hobbies, etc.) you can
3) STFU and just be thankful you are earnering in the top 0.01%+ of the history of humankind. http://www.globalrichlist.com/
My wife and I are practicing all three ATM.
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Chiming in here in a similar income situation but living in a mortgaged condo while maintaining a mortgaged rental property in another state.
HENRYs, I like that. That's us. VERY early in the accumulation stages though so net worth does not feel commensurate with wages. Yet.
We can't quite maintain our current budget on her income alone (she is the higher earner) but if we cut the budget to bare bones, we could. Even with current big-ass budget, we're saving more than the average American household makes.
1) Does it suck to pay so much in taxes? Yes.
2) Does it suck making tons of money and savings tons of money? No.
Does #1 outweigh #2? Fuck no.
Work on budgeting and mindful spending and enjoy the good life.
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One strategy I read long ago - so not sure it's still viable...
Pay next years property tax at the end if this year - that puts this years and next years on this years taxes. For next years taxes, take the standard deduction.
Repeat, alternating years.
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One strategy I read long ago - so not sure it's still viable...
Pay next years property tax at the end if this year - that puts this years and next years on this years taxes. For next years taxes, take the standard deduction.
Repeat, alternating years.
This can reduce their tax liability if they should normally take the standard deduction.
But as I mentioned before, they are interested in reducing their AGI to qualify for certain tax credits and deductions. Property taxes, along with donations to charity or anything else that is an itemized deduction, reduces taxable income, not (M)AGI. It does not help them one bit in qualifying for certain tax credits and deductions.
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gluskap,
Not much you can do (legally/easily) to reduce current taxes. Some things you might want to consider though:
Backdoor Roth (http://www.bogleheads.org/wiki/Backdoor_Roth_IRA)
"Mega back door Roth" (http://www.madfientist.com/after-tax-contributions/) (your ability to do this depends on your employer)
Also, you mentioned switching to a 15 year mortgage, but already being stretched on housing payments. If that is the case, you may want to reconsider this.Of course you want to pay as little in interest as possible, but you also have to look at the cashflow side. Also, the higher your tax bracket, the larger the effective subsidy of the mortgage tax deduction, i.e., a higher earner with a 4% mortgage rate has a lower effective rate than a low earner with the same nominal 4% mortgage.
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Ill commiserate with you being in a similar situation. Wait to you get above 250k, the dick in the ass gets even longer.
Unfortunately, I have no advice. Get ready to have to get your employer to withhold extra payments and start making quarterly payments so you dont come up short.
Pay up, you totally undeserving cheater, else it ain't fair to anyone else. You can afford it.
Somewhere, someone is playing the world's saddest song on the tinyest violin just for you.
You poor thing.... Ahhrgh, I cannot fathom the misery that you must endure daily... 8-/
RE the OP, the best startegy is to FIRE ASAP and thus minimize the amount of tax that you must pay. Of course, if you are feeling strained on an income of that magnitude, you will likely be unable to accomplish this quickly.
Reduce expenses to accelerate the process.
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gluskap,
Not much you can do (legally/easily) to reduce current taxes. Some things you might want to consider though:
Backdoor Roth (http://www.bogleheads.org/wiki/Backdoor_Roth_IRA)
"Mega back door Roth" (http://www.madfientist.com/after-tax-contributions/) (your ability to do this depends on your employer)
Also, you mentioned switching to a 15 year mortgage, but already being stretched on housing payments. If that is the case, you may want to reconsider this.Of course you want to pay as little in interest as possible, but you also have to look at the cashflow side. Also, the higher your tax bracket, the larger the effective subsidy of the mortgage tax deduction, i.e., a higher earner with a 4% mortgage rate has a lower effective rate than a low earner with the same nominal 4% mortgage.
How does one contribute after tax dollars to a 401k? Can anyone do it or does the employer have to allow it?
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How does one contribute after tax dollars to a 401k? Can anyone do it or does the employer have to allow it?
Your ability to do so depends on your employer / plan provider.
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How does one contribute after tax dollars to a 401k? Can anyone do it or does the employer have to allow it?
Your ability to do so depends on your employer / plan provider.
Heh which one is it the employer or plan provider? :)
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233k might sound relatively high to some people, but keep in mind that that's between two people. $116,500 is not a high income for an individual person.
I have seen you comment on this thread and a few others how you don't consider these kinds of salaries high. I am curious, and this isn't me picking a fight: What do you consider high income? The median *household* income for the US in 2013 was $51,939. $116K as an individual income is therefore over double the probable average household income for the US in general.
I see also that you're in the Bay Area. So am I, and I work in tech, but I still consider ~116K to be a high income, even for here. I really think this amount is a high income in all but the most affluent of areas.
Edit to add: Looks like in 2011 dollars, a household in the 95th percentile of incomes made 186K. It's not too much of a stretch to say that 223K is pretty solidly in the top 1-2 percent, which seems pretty high to me.
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233k might sound relatively high to some people, but keep in mind that that's between two people. $116,500 is not a high income for an individual person.
I don't really understand why Americans tend to consider income at the household level, rather than the individual level. A household of two people can easily earn twice as much money as just an individual person. It makes no sense to compare different-sized households without adjusting for the number of people.
As for the OP, I think most people here probably can't imagine how much taxes you have to pay at that level of income, which is honestly not even that high of an income. It's one thing to apply some tax tables but it's quite another thing to actually pay 35-40% of your total income to the government between federal tax, California tax, and FICA. Until you actually have to pay that kind of money to the government, you don't know what it's like.
I'm not sure what the OP is really asking for, other than perhaps empathy. I can offer that since I agree the taxes are high. I'm not sure what else there is to add though.
Yeah $116k is 97th percentile for single filers so gtfo "it's not a high income."
I get that you don't feel upper class. I don't either and make more. But the fact that I can retire and live off my investment income says otherwise. You aren't sailing your yacht around the world, but you gotta get your head out of your high col bubble.
Anyways I agree you should get a 30 year mortgage to improve cash flow while reaping great subsidies.
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Re: Until you actually have to pay that kind of money to the government, you don't know what it's like.
My wife and I do, and don't really notice it since we look at our take-home pay only when making the budget. It is still a firehouse of cash that we are trying to stuff into investments as fast as we can. The other money magically disappears into the void, and since we weren't rich growing up, don't even notice it is missing. Growing up in a less developed country as a child makes me appreciate the ridiculous ease of life in this country, and having a funded government (albeit inefficient and often ridiculous one) is well worth not having a boat I can set on fire and replace every year.
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233k might sound relatively high to some people, but keep in mind that that's between two people. $116,500 is not a high income for an individual person.
I have seen you comment on this thread and a few others how you don't consider these kinds of salaries high. I am curious, and this isn't me picking a fight: What do you consider high income? The median *household* income for the US in 2013 was $51,939. $116K as an individual income is therefore over double the probable average household income for the US in general.
I see also that you're in the Bay Area. So am I, and I work in tech, but I still consider ~116K to be a high income, even for here. I really think this amount is a high income in all but the most affluent of areas.
Edit to add: Looks like in 2011 dollars, a household in the 95th percentile of incomes made 186K. It's not too much of a stretch to say that 223K is pretty solidly in the top 1-2 percent, which seems pretty high to me.
My personal definition of "high" is probably that the income from one year of work is enough to retire. For most people, that would be an income of well over $1,000,000 per year.
It's hard for me to consider an income level to be "upper class" if you have to work for 8 years to be able to retire, which would be my rough estimate for ~$115k.
I realise this definition is not tied to any statistical data, but I don't see what is upper class about having to work for a living. $223k won't be paycheck to paycheck, but you also can't retire without putting in around 5 or more years of work, which means until then, you're in the same boat as almost everybody else -- dependent on other people to get by.
There are definitions of middle class based on statistics, but I also think it's defensible to define middle class as "not being financially independent, but not living paycheck to paycheck".
So once you retire and are spending say 50k/year without lifting a finger will you still call yourself middle class?
Being able to quit working in 5-8 years and still lead a typical American life should make you mindblowingly grateful for your income level
If you disagree, I suggest the Bay Area may not be for you and westchester may be more your speed.
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I won't consider myself middle class when I'm retired. I don't think it makes much sense to define classes based on income (other than passive income).
.....do you know the definition of the term you are talking about?
class - "the system of ordering a society in which people are divided into sets based on perceived social or economic status"
America doesn't have social classes, at least not in the formal sense of days past, so when we speak about class we speak almost entirely about economics -- namely income, for the majority of people in this country. You can choose to make up your own definitions for words, but just because you decide that ketchup is now a synonym for automobile does not make it so.
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I won't consider myself middle class when I'm retired. I don't think it makes much sense to define classes based on income (other than passive income).
.....do you know the definition of the term you are talking about?
class - "the system of ordering a society in which people are divided into sets based on perceived social or economic status"
America doesn't have social classes, at least not in the formal sense of days past, so when we speak about class we speak almost entirely about economics -- namely income, for the majority of people in this country. You can choose to make up your own definitions for words, but just because you decide that ketchup is now a synonym for automobile does not make it so.
It's not as if there is an "official" definition of middle class.
You seem to be conflating "economic status" with "income".
Income is fleeting.
Wealth and economic status is more a function of net worth and/or passive income.
Isn't that one of the major principles of this website? Why do we do discard that in defining classes?
Because most people in America, the people you're trying to categorize, don't really have much net worth. Median US household net worth was 56k in 2013. The vast majority of Americans' economic status is directly tied to their day to day income. They're one job loss away from ruin. Yeah, it's their own fault, but that's the reality of the situation in this country.
This is the reality that you're insulated from when you live in a world where 233k isn't enough.
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233k might sound relatively high to some people, but keep in mind that that's between two people. $116,500 is not a high income for an individual person.
I have seen you comment on this thread and a few others how you don't consider these kinds of salaries high. I am curious, and this isn't me picking a fight: What do you consider high income? The median *household* income for the US in 2013 was $51,939. $116K as an individual income is therefore over double the probable average household income for the US in general.
I see also that you're in the Bay Area. So am I, and I work in tech, but I still consider ~116K to be a high income, even for here. I really think this amount is a high income in all but the most affluent of areas.
Edit to add: Looks like in 2011 dollars, a household in the 95th percentile of incomes made 186K. It's not too much of a stretch to say that 223K is pretty solidly in the top 1-2 percent, which seems pretty high to me.
My personal definition of "high" is probably that the income from one year of work is enough to retire. For most people, that would be an income of well over $1,000,000 per year.
It's hard for me to consider an income level to be "upper class" if you have to work for 8 years to be able to retire, which would be my rough estimate for ~$115k.
I realise this definition is not tied to any statistical data, but I don't see what is upper class about having to work for a living. $223k won't be paycheck to paycheck, but you also can't retire without putting in around 5 or more years of work, which means until then, you're in the same boat as almost everybody else -- dependent on other people to get by.
There are definitions of middle class based on statistics, but I also think it's defensible to define middle class as "not being financially independent, but not living paycheck to paycheck".
You have got to be kidding. I net around $170k after tax, dual person single income household. I won't be able to retire in 6-8 years of this because I won't be preserving the income level for 8 years, but the idea that I am not upper class, sitting where I am today, goes beyond silly. It's actually a bizarre worldview.
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I'm sorry that your job is so horrible that a mere 5 to 8 years is so painful for you that you can't see how much your high income is benefiting you.
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Here's another way of looking at this.
With an income of $100k in the bay area, you can add around $50k to your investments per year. (That's actually very aggressive, and considerably more frugal than most people on these forums.) Using a 4% safe withdraw rule, that means you generated $2k of passive income for the rest of your life, with one year of work.
With an income of $200k, you might be able to add around $100k to your investments. (The reason this is twice as much despite more taxes is that I'm assuming your living costs remain constant and did not scale up.) Again using a 4% rate, you generated $4k of passive income for the rest of your life, with one year of work.
Of course, in practice, there is compounding involved here, so how much passive income you add depends also on how much you already have and so forth. But in general, I try to think of your employment income as a tool to generate passive income for life. And $2-4k of passive income is not a whole lot.
By contrast, with an income of $1,000,000, you can increase your lifetime passive income by around $25k. Now that's a much more impressive sum that many people here could comfortably retire on.
If you look at employment income as a way to "buy stuff", I agree, these amounts in the low hundreds of thousands seem very impressive. You can buy so many toys with them.
But my objective in life is not to buy stuff. And I thought that was the case for most people here.
Your concept that you're only upper class if you can retire on the passive income generated by a single year of savings is just bizarre. You could retire in 8. Most people can retire in what, 20, 30 years? You're upper class. Embrace it.
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With an income of $200k, you might be able to add around $100k to your investments. (The reason this is twice as much despite more taxes is that I'm assuming your living costs remain constant and did not scale up.) Again using a 4% rate, you generated $4k of passive income for the rest of your life, with one year of work.
Sigh, only $4k of passive income for the rest of your life? After working for an entire year? Might as well give up now with such piddling amounts of money.
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Are you doing the back door Roth?
I plan to do this next year. Last year 2014 I was on maternity leave for 5 months with no earned income so I was able to do regular roth contribution for 2014. However I also have traditional IRA so would need to pay some tax when I convert into roth. So to avoid that I was planning on rolling over traditional IRA first into 401k so then I would have no pretax money in Traditional IRA and then do back door roth.
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Could you put all that money into killing off the mortgage, and then quit and stay home?
The plan now is to payoff mortgage as quickly as possible which is why we refinanced to a 15 year. Since housing is like 50% of our expenses once it's paid off I think I could stop working. It'd be nice to have enough money at that point to both retire together but we will see. It's at a low interest rate cuz of the refinance 2.875% so some people think it's better to invest the money versus paying off house too early so still debating that. The ideal would be to pay off the house when we are ready to FIRE so we would have lower expenses and not need to pull out much money and be at a low tax bracket when we retire.
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Hate to break it to you, but that's not middle class. That's top 10 %.
Just going by the numbers I agree we are very happy with our income. I guess because of the HCOL area our lifestyle feels very middle class because even though we make more we have to spend so much for housing.
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Does one of your employers have a deferred compensation program?
Unfortunately no
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I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area.
This should give you great pause. If you truly would be straining to cover your mortgage on one salary, you are in a precarious financial position and should seriously re-think your housing choice.
Yes we bought our house before I came to MMM. It's expensive because it's in an area with a really good school district. If we stayed with the 30 year mortgage I think we could live off of one income...we would still need to make cuts but doable. But we just recently refinanced to a 15 year with the intent of paying off the house and retiring around that timeframe. So with the higher payments I feel like we need to both work to be comfortable and still have some savings. I think once the kid or kids are finished with school we would probably downsize and move to a much cheaper house.
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1. Contribute max to 401(k) and self-employed retirement plans.
2. Contribute to Roth IRAs (only reduces future taxes, not today's taxes)
3. Invest tax efficiently (only reduces future taxes)
4. Give your money away to charity
5. Buy biggest house in world and pay huge property taxes
6. Have huge mortgage on that house and pay huge amount of interest
7. Get married and have lots of kids
8. Be sure to lose money in the stock market since $3000 of losses are deductible each year against ordinary income.
9. Move to a state with high income taxes because state income taxes are deductible.
10. Have severe health issues that you pay for out of your own pocket as you can deduct health care expenses above 7.5% of AGI
11. Grow old, you get more exemptions for being old
12. Go blind, you get more exemptions for being blind
13. Buy property and rent it out at a loss. The more losses the better.
14. Quit your jobs. With no earned income, it's not surprising that your taxes drop.
15. Avoid investments that create taxable income. You want losers to reduce your taxes.
16. Etc.
Or just pay the tax and enjoy life.
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17. Hire accountants and investment advisors and pay them lots of money. Anything you pay them that is more than 2% of your AGI is deductible.
Oh and you can stab yourself in the eye to accomplish #12 and #10 in one go.
Hilarious! Thanks I needed that perspective. I think I'm just having one of those days at work where I feel like I'm working so hard and I just feel like there's no point in working any harder cuz if I make more ill just end up paying more of it in taxes and not seeing much of a difference in lifestyle.
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Thanks everyone for the replies. I guess I was maybe hoping for anything I might've overlooked to reduce my tax bill and help me save more to FIRE earlier. But I think I just need to suck it up, pay the taxes, and just try and spend less.
Am sort of regretting the refinance a bit now. The idea was that with the house paid off earlier we could retire with lower expenses but it does make me nervous if something were to happen to one of our jobs. We do have a year of expenses in our EF though.
I apologize if the title was misleading. I guess our income might not be considered middle class to some but it describes our lifestyle I think.
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There are some harsh replies on this thread. Being in the Bay Area, I can see where OP is coming from. In certain neighborhoods, yes, that combined income could 'feel' middle class. I've tried to focus less on comparing myself with what other people have/buy/consume and more on how I can spend more time with my family and friends through earning, saving, and investing.
Time is limited. I just wish I found the MMM way earlier.
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My two cents: $116,000 for an individual is a crazy high amount of money. That's more than I paid for my home. I say that as an individual who makes well over $116,000 per year. We're not middle class. And when I first crossed the $116,000 income level, my marginal tax rate actually went down because I'm no longer paying social security tax on each additional dollar I make. I hardly feel trapped.
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To be fair, my own situation isn't perfectly comparable since I live in a place with a lower cost of living. I know I couldn't buy a decent home in the bay area for $116,000. I sympathize with your higher housing costs.
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233k might sound relatively high to some people, but keep in mind that that's between two people. $116,500 is not a high income for an individual person.
I don't really understand why Americans tend to consider income at the household level, rather than the individual level. A household of two people can easily earn twice as much money as just an individual person. It makes no sense to compare different-sized households without adjusting for the number of people.
As for the OP, I think most people here probably can't imagine how much taxes you have to pay at that level of income, which is honestly not even that high of an income. It's one thing to apply some tax tables but it's quite another thing to actually pay 35-40% of your total income to the government between federal tax, California tax, and FICA. Until you actually have to pay that kind of money to the government, you don't know what it's like.
I'm not sure what the OP is really asking for, other than perhaps empathy. I can offer that since I agree the taxes are high. I'm not sure what else there is to add though.
this post boggles my mind. I make a good amount of money and I'm single with no kids and no mortgage. I'm pretty sure I know what it's like to pay "that kind of money" to the government, but the idea that there is anything "ohhh, poor me" about that scenario is seriously insane to me.
also, income at the household level makes some amount of sense because sharing housing and other costs is an advantage. I don't think either individual or household is an ideal, totally apples-to-apples way to look at it.
America doesn't have social classes, at least not in the formal sense of days past, so when we speak about class we speak almost entirely about economics -- namely income, for the majority of people in this country. You can choose to make up your own definitions for words, but just because you decide that ketchup is now a synonym for automobile does not make it so.
I don't know, I think we kind of have social classes. class is a weird thing. if you look at where I live, you might guess lower-class. I feel middle-class, I dress middle-class, my whole family is middle-class, and if you meet me and talk to me you would probably think I'm middle-class. but when it comes to financial issues, in no way am I delusional enough to think that my problems are the problems of the middle class. I think with discussion about class you just have to define what you're talking about. people took exception to the OP's description of herself as middle class because she was clearly talking about financial/tax issues, and in that sense I think most of us can agree she's not middle class, even though her lifestyle may be.
Hilarious! Thanks I needed that perspective. I think I'm just having one of those days at work where I feel like I'm working so hard and I just feel like there's no point in working any harder cuz if I make more ill just end up paying more of it in taxes and not seeing much of a difference in lifestyle.
well I think the idea of MMM is that you definitely shouldn't see a difference in lifestyle regardless of any increase in income ;)
*disclaimer: clearly Oklahoma has a vastly lower COL than the Bay Area, but still. put yourself in context, man!
**also not meaning to continue to pile on the OP here, I understand what you mean about feeling as though you have a middle-class lifestyle, and I wish you luck in deciding how to allocate your funds! this was meant to be more in response to Cathy and the conversation on class.
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At that salary range, I would just shovel everything leftover into the mortgage. If you can't pay that off very quickly, you've hosed yourself with more house than you can buy.
Denver is a fairly high housing cost, but since our rent is low and we stand to inherit a condo, we can live a very nice life off of 25k take home. our plans are to streamline it further to 20k. Combined we make 62k, and take home about half.
While I'll heartily agree that the OP is NOT middle class, being envious of their income helps no one. Point out the same strategies we're all trying to use and leave the OP to let the light dawn on themselves :P.
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It's always amazing to me how every single person in this country thinks that they are Middle Class.
I think Bill Gates and Warren Buffett have both admitted to not being middle class. But they might be the only ones.
$116,500 is not a high income for an individual person.
Yes it is. It is not an unthinkably outrageous income, but it is indeed a high income.
The median HOUSEHOLD income is $51k. So for ONE person to be making double that, it is indeed high.
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this post boggles my mind. I kind of hate throwing out numbers like this on the internet, but I grossed $180k in 2014 and I'm single with no kids and no mortgage. I'm pretty sure I know what it's like to pay "that kind of money" to the government, but the idea that there is anything "ohhh, poor me" about that scenario is seriously insane to me.
Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
So lets see, 180k, so your marginal rate is 28%, but i bet your effective rate is more like 20-23% especially if you are self employed, since you could effectively put 45k away in tax deferred retirement plans. Plus the last 2 tax increases from Obama haven't affected you. At all. So your rates haven't gone up.
Imagine someone saying you should pay 10% more. Would you be happy writing an $18k check? Do you feel your money would actually help anyone?
I bet your perspective would change. Even if it didn't, since raising taxes isnt going to fix any problems, there will be calls to raise them even more, so the next tax increase will change your perspective, or the one after that.
Since there are so many people without savings out there, what if the plan was to tax savings, you know, to make things more fair? Like 1% for anyone with more than 100k in the bank, back to the first dollar? Would people care then? Of course they would, because it would actually affect them.
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I think middle class is more of a perspective than an income level. Work hard, provide for your family, hopefully retire some day, etc. This is a vast majority of the population. On either end, you have people who are ok with others providing for them (lifetime welfare recipients/trust fund people).
DW and I both work hard and have higher earning blue collar jobs. We land in the top 20% income bracket pretty solidly. We still manage to land in the 25% bracket due to tax deferred investments, deductions and balancing estimated income vs. working more. We paid ~$40k in federal taxes last year for our hard work.
On the flip side, my SIL has struggled to hold down jobs at gas stations and nursing facilities because she's lazy and a bitch. Has two kids by two different fathers. One of whom, she HAD to marry and have my in-laws pay for a nice wedding then she separated from a year later. She is now back at home living with my in-laws. Both kids are living with father #2 due to being in a better school system (not in the 'hood). Oh, and BTW, somehow he got permanent disability in his mid 40s for a bad back (must've been too stupid for re-training?). She recently got a large payment + reconstructive dental from Worker's Compensation from a patient hitting her in the mouth. Her lack of preventative dental care plus smoking left her teeth weak and her front teeth shattered. She then tried to scam a PTSD claim about the "trauma". She got a tax refund of more than she paid in federal taxes last year due to child tax credits and such.
It's like a reward for being stupid.
So, do I feel bad for trying to reduce my tax burden? Not a fucking chance.
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So, do I feel bad for trying to reduce my tax burden? Not a fucking chance.
I don't think anyone here has suggested you should.
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There's nothing wrong with trying to minimize your tax burden. Anyone who pays more than a cent than they owe in taxes is being a little silly. There's not necessarily anything wrong with advocating for tax reform, either, though the "I AM PAYING MORE THAN MY FAIR SHARE" crybaby stuff tends to highlight a blind spot to the bare-bones lives people who are "lucky enough" not to pay federal taxes (and sometimes state taxes, though this is less common) tend to lead.
But get a little freaking perspective. At the income level people are talking about in this thread as somehow not being middle class, you're making at least $40 an hour after taxes, even if you're in a high tax jurisdiction like Cal or NY. Even adjusting that for the higher housing costs in Cal or NY, you're north of $20-30 as-adjusted for higher COL, per hour, after state/federal income taxes, FICA, medicare. Don't cry about the reduction--you made the choice to live there. If you can't market your skills for the same income elsewhere, then that's really what you're worth; if you can market your skills for the same income elsewhere, then do it. Or accept your decision to effectively make less money to live where you want.
If you think that doesn't put you solidly in the upper class in this country, compared to the vast majority of people, you're out of your freaking mind. $20-30 hour COL-adjusted post-tax is more than the vast, vast majority of people make, it gives you opportunities to save that very, very few people have, and it dramatically shortens the retirement runway (from the 25-30 years/entire adult life most people have to the oh-my-goodness-world's-smallest-violin 8 years referenced in here).
Also, the idea that you're middle class because you work hard and want to provide for your family? Are you kidding? As someone said earlier in the thread, you can rename something if you'd like, I guess, but that doesn't make it so.
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When did middle class solely start being determined on income, especially the median income? If we both lose our jobs and fall to the bottom quintile, are we considered poor? If our industries go through a labor growth period where wages stagnate or fall, can we be considered middle class again?
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this post boggles my mind. I kind of hate throwing out numbers like this on the internet, but I grossed $180k in 2014 and I'm single with no kids and no mortgage. I'm pretty sure I know what it's like to pay "that kind of money" to the government, but the idea that there is anything "ohhh, poor me" about that scenario is seriously insane to me.
Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
So lets see, 180k, so your marginal rate is 28%, but i bet your effective rate is more like 20-23% especially if you are self employed, since you could effectively put 45k away in tax deferred retirement plans. Plus the last 2 tax increases from Obama haven't affected you. At all. So your rates haven't gone up.
Imagine someone saying you should pay 10% more. Would you be happy writing an $18k check? Do you feel your money would actually help anyone?
I bet your perspective would change. Even if it didn't, since raising taxes isnt going to fix any problems, there will be calls to raise them even more, so the next tax increase will change your perspective, or the one after that.
Since there are so many people without savings out there, what if the plan was to tax savings, you know, to make things more fair? Like 1% for anyone with more than 100k in the bank, back to the first dollar? Would people care then? Of course they would, because it would actually affect them.
Some perspective may help you too. If you were born into any other country where you had the ability to make as much as you do here, you'd be paying a much higher tax rate. If you were born into almost any other (modern) time period in this country, you'd be paying a much higher tax rate. I understand if you think you're paying too much. However, it's still a fact that taxes are at or close to an all time low for your income level, so you should understand if others feel like you're still getting a pretty good deal.
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Uh, you're rich. Pay taxes and quit complaining. Holy crap.
Sure, feel free to do what the tax code lets you do, but damn. Taxes are incredibly low in the US compared to the other places you'd be likely to live and work for that level of income.
First world problems.
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this post boggles my mind. I kind of hate throwing out numbers like this on the internet, but I grossed $180k in 2014 and I'm single with no kids and no mortgage. I'm pretty sure I know what it's like to pay "that kind of money" to the government, but the idea that there is anything "ohhh, poor me" about that scenario is seriously insane to me.
Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
So lets see, 180k, so your marginal rate is 28%, but i bet your effective rate is more like 20-23% especially if you are self employed, since you could effectively put 45k away in tax deferred retirement plans. Plus the last 2 tax increases from Obama haven't affected you. At all. So your rates haven't gone up.
Imagine someone saying you should pay 10% more. Would you be happy writing an $18k check? Do you feel your money would actually help anyone?
I bet your perspective would change. Even if it didn't, since raising taxes isnt going to fix any problems, there will be calls to raise them even more, so the next tax increase will change your perspective, or the one after that.
Since there are so many people without savings out there, what if the plan was to tax savings, you know, to make things more fair? Like 1% for anyone with more than 100k in the bank, back to the first dollar? Would people care then? Of course they would, because it would actually affect them.
Some perspective may help you too. If you were born into any other country where you had the ability to make as much as you do here, you'd be paying a much higher tax rate. If you were born into almost any other (modern) time period in this country, you'd be paying a much higher tax rate. I understand if you think you're paying too much. However, it's still a fact that taxes are at or close to an all time low for your income level, so you should understand if others feel like you're still getting a pretty good deal.
I completely disagree. What taxes rates are in other places doesn't mean it's right. What they were historically doesn't make that right either.
1) Government spending is always more inefficient than private spending.
2) Many of our social welfare systems have massive fraud. See this http://www.washingtonexaminer.com/report-massive-fraud-still-rampant-in-earned-income-tax-credit-program/article/2548376.
3) You appeal to history; historically the median wage earners have had higher effective taxes too. See this http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=226. So I suppose you will agree taxes should go up on medium income earners?
4) You appeal to history; historically the lower wage earners have had higher effective taxes too. See this http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=226. So I suppose you will agree taxes should go up on lower income earners?
5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
6) This is a blog one of the main points of which is that as a society we consume too much. If you want to address income inequality, convince people to save. Give everyone a lesson on compound interest. Require savings, like Australia does. Saving $10/day (as i keep saying) over a traditional work career results in serious wealth if historical growth rates continue.
7) Even if you think people shouldn't be expected to have minimal savings, there are better ways than taxes to address inequality. The problem with inequality is this graph. http://theglitteringeye.com/u-s-income-distributiona-chart-to-contemplate/. The bulge needs to be more in the middle. How about requiring companies to have a more even income distribution, especially if they are successful. Companies that generate billions in profit should be required to distribute it more evenly. This has the same effect as taking money away from the top, but it doesn't have the psychological effect of taxation.
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Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
When the budget is balanced, that's enough. It's not impossible to balance the budget. It happened during the Clinton administration, in large part because taxes were higher. Yes, it will solve a problem, the problem being the budget deficit.
Imagine someone saying you should pay 10% more. Would you be happy writing an $18k check? Do you feel your money would actually help anyone?
Yes, I would be happy to pay an additional $18k. I'm not going to do it alone, but if it meant everybody else also paid an additional $18k, I'd be glad to do it. Yes, I do feel the money would actually help people, including myself.
Raising taxes on the highest earners will not solve our budget problems.
Not alone, but it's a step in the right direction. That's why I support raising taxes for almost everyone, not just the top 1%. FYI, I also support spending cuts.
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Some perspective may help you too. If you were born into any other country where you had the ability to make as much as you do here, you'd be paying a much higher tax rate. If you were born into almost any other (modern) time period in this country, you'd be paying a much higher tax rate. I understand if you think you're paying too much. However, it's still a fact that taxes are at or close to an all time low for your income level, so you should understand if others feel like you're still getting a pretty good deal.
I completely disagree. What taxes rates are in other places doesn't mean it's right. What they were historically doesn't make that right either.
snip
5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
starguru, you're arguing against a strawman here. At no point did I even suggest anything should be changed. I merely pointed out that you currently have a pretty sweet taxation rate compared to the rest of the (first) world and the rest of history. So you could choose to complain about it or you could choose to embrace it. I'm sure you know which I'd suggest. :)
But regarding #5 -- I reject the general premise, as I don't believe we have a budget problem at all. I realize the politicians want you to believe that (both sides), but if you judge them by their actions instead of their words, they don't believe it either.
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Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
When the budget is balanced, that's enough. It's not impossible to balance the budget. It happened during the Clinton administration, in large part because taxes were higher. Yes, it will solve a problem, the problem being the budget deficit.
Yup, and spending was less. And taxes on everyone were higher. so if you want to say everyone should pay more taxes, i'd agree with that. Id stop blaming high earners though.
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Some perspective may help you too. If you were born into any other country where you had the ability to make as much as you do here, you'd be paying a much higher tax rate. If you were born into almost any other (modern) time period in this country, you'd be paying a much higher tax rate. I understand if you think you're paying too much. However, it's still a fact that taxes are at or close to an all time low for your income level, so you should understand if others feel like you're still getting a pretty good deal.
I completely disagree. What taxes rates are in other places doesn't mean it's right. What they were historically doesn't make that right either.
snip
5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
starguru, you're arguing against a strawman here. At no point did I even suggest anything should be changed. I merely pointed out that you currently have a pretty sweet taxation rate compared to the rest of the (first) world and the rest of history. So you could choose to complain about it or you could choose to embrace it. I'm sure you know which I'd suggest. :)
But regarding #5 -- I reject the general premise, as I don't believe we have a budget problem at all. I realize the politicians want you to believe that (both sides), but if you judge them by their actions instead of their words, they don't believe it either.
Dude, you reject a lot of general premises.
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1) Government spending is always more inefficient than private spending.
From a utilitarian perspective, I disagree. The marginal utility of each dollar spent on the poor is so much higher than the marginal utility of each dollar spent on the rich, so government welfare programs for the poor contribute a great amount of utility, even with fraud and government bureaucracy. There's plenty of inefficiency in the government, but to declare the absolute that government spending is always more inefficient than private spending is ridiculous.
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Some perspective may help you too. If you were born into any other country where you had the ability to make as much as you do here, you'd be paying a much higher tax rate. If you were born into almost any other (modern) time period in this country, you'd be paying a much higher tax rate. I understand if you think you're paying too much. However, it's still a fact that taxes are at or close to an all time low for your income level, so you should understand if others feel like you're still getting a pretty good deal.
I completely disagree. What taxes rates are in other places doesn't mean it's right. What they were historically doesn't make that right either.
snip
5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
starguru, you're arguing against a strawman here. At no point did I even suggest anything should be changed. I merely pointed out that you currently have a pretty sweet taxation rate compared to the rest of the (first) world and the rest of history. So you could choose to complain about it or you could choose to embrace it. I'm sure you know which I'd suggest. :)
But regarding #5 -- I reject the general premise, as I don't believe we have a budget problem at all. I realize the politicians want you to believe that (both sides), but if you judge them by their actions instead of their words, they don't believe it either.
Really, so you dont buy into the "fair share" and "they can afford it" rhetoric?
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Dude, you reject a lot of general premises.
It's a rejection kind of day. I don't feel like working too much. Let's get into it!
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Being in the Bay Area, I can see where OP is coming from. In certain neighborhoods, yes, that combined income could 'feel' middle class.
Your post was thoughtful so I'm not directing my response at you. But it was a convenient post for me to address the dangerous, slippery slope fallacy of "high cost of living areas" that people fall so easily into.
Anyone living in a HCOL area knows exactly what they are involved in. No one should be crying anyone a river over their HCOL area expenses and housing, which incidentally come with large salaries for professionals. It's a choice that was made and could easily be avoided. But here's the deal: Even in HCOL areas, you do not have to incur high housing expenses. This forum has featured many people who have found ways to drastically cut their housing expenses. It's complete hogwash when someone offers up the usual excuses like, "We have to live in this gated community because it's the only safe neighborhood with the best schools and neighborhood pools." There is a lot of middle ground between "large SFH in a desirable neighborhood" and "van down by the river."
People buying houses in these areas (if that is even a wise choice is debatable) often have gigantic amounts of equity compared to people living in LCOL areas. OP is likely sitting on hundreds of thousands of dollars in equity.
Source: I live in one of the highest COL areas in the country (Northern Virginia), that also has the highest average HH income in the country, in a house that would be considered very average anywhere else in the country, but that you could sell and buy 5-10 identical models in a lower COL area. You won't hear me complaining about how expensive it is to live here, and I recognize we could have easily found lower-cost options if that was a priority for us (it isn't).
westchester may be more your speed.
lol, good times.
1) Government spending is always more inefficient than private spending.
That is an unsubstantiated and false claim, but no doubt we can find all kinds of examples of government waste (as well as in private industry).
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1) Government spending is always more inefficient than private spending.
From a utilitarian perspective, I disagree. The marginal utility of each dollar spent on the poor is so much higher than the marginal utility of each dollar spent on the rich, so government welfare programs for the poor contribute a great amount of utility, even with fraud and government bureaucracy. There's plenty of inefficiency in the government, but to declare the absolute that government spending is always more inefficient than private spending is ridiculous.
Even if I agree, which I don't, but even if I did, you are quibbling. The government does nothing efficiently. Oh, ok let's say its efficient 10% of the time. That still inefficient 90% of the time. To me, that means government spending is always inefficient, but if you have, to rework my statement to "Government spending is mostly inefficient".
Also, I disagree with your point about the utility of the government spending on the poor. I am not disagreeing that the marginal utility of each dollar in the hands of the poor is greater. I just dont think taxation is the way to get those dollars into the hands of the poor.
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We talk a lot about the Internet Retirement Police, but the MMM forums have their own middle class / upper class police.
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Dude, you reject a lot of general premises.
It's a rejection kind of day. I don't feel like working too much. Let's get into it!
Yeah this is definitely affecting my production. :)
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Dude, you reject a lot of general premises.
It's a rejection kind of day. I don't feel like working too much. Let's get into it!
Yeah this is definitely affecting my production. :)
We must both be government workers to be able to be so inefficient. ;)
(I'm not, btw)
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Even if I agree, which I don't, but even if I did, you are quibbling. The government does nothing efficiently. Oh, ok let's say its efficient 10% of the time. That still inefficient 90% of the time. To me, that means government spending is always inefficient, but if you have, to rework my statement to "Government spending is mostly inefficient".
Compared to whom?
Perhaps the Fortune 500 companies that I worked for were the exception, but there were shit tons of "waste" and "inefficiency" all over the place.
Can you imagine if Google were a government agency? Oh, the headlines:
- Employees allowed to do non-productive work one day out of the week!
- Gourmet food served in the cafeterias!
- Executives flying first class!
The horror!
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We talk a lot about the Internet Retirement Police, but the MMM forums have their own middle class / upper class police.
I think the discussion has been derailed a bit into one of class, but really the question is "what is a high income?" MMM himself refers to $250K as "a neverending nuclear explosion of cash."
http://www.mrmoneymustache.com/2014/03/19/make-it-big/
I am fortunate enough to be an earner in a household that makes about this, and I recognize how epic the amount of money we make together is. We make enough to max out everyone's retirement account, buy a couple properties every year, save extra beyond that in taxable accounts, and travel over a month this year. If I have a disagreement, it's just in calling what I, or the OP, make, "not a high income." It is definitively a very, very high income. Class may be subjective, but I submit that high versus low income can be evaluated against the average objectively.
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this post boggles my mind. I kind of hate throwing out numbers like this on the internet, but I grossed $180k in 2014 and I'm single with no kids and no mortgage. I'm pretty sure I know what it's like to pay "that kind of money" to the government, but the idea that there is anything "ohhh, poor me" about that scenario is seriously insane to me.
Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
So lets see, 180k, so your marginal rate is 28%, but i bet your effective rate is more like 20-23% especially if you are self employed, since you could effectively put 45k away in tax deferred retirement plans. Plus the last 2 tax increases from Obama haven't affected you. At all. So your rates haven't gone up.
Imagine someone saying you should pay 10% more. Would you be happy writing an $18k check? Do you feel your money would actually help anyone?
I bet your perspective would change. Even if it didn't, since raising taxes isnt going to fix any problems, there will be calls to raise them even more, so the next tax increase will change your perspective, or the one after that.
Since there are so many people without savings out there, what if the plan was to tax savings, you know, to make things more fair? Like 1% for anyone with more than 100k in the bank, back to the first dollar? Would people care then? Of course they would, because it would actually affect them.
Some perspective may help you too. If you were born into any other country where you had the ability to make as much as you do here, you'd be paying a much higher tax rate. If you were born into almost any other (modern) time period in this country, you'd be paying a much higher tax rate. I understand if you think you're paying too much. However, it's still a fact that taxes are at or close to an all time low for your income level, so you should understand if others feel like you're still getting a pretty good deal.
All of this hand-wringing about taxes being theft (or similar views, not in this threat, but about jack-booted government for or whatever) seems so anti-mustachian to me. It's the law. You can't change it. Vote for the politicans that support your favorite tax schemes, and then stop bitching. Honestly, every tax-obsessed person I know spends so much time and effort trying to minimize taxes that they'd be way ahead if they plowed that white-hot anger into something more productive. I worked with this one guy who somehow got it in his head that switching his dollars several times a day between a regular 401(k) and a Roth 401(k) would somehow yield some kind of tax advantage. He must have spent HOURS dicking around with his investments all day to yield some penny-level tax win over the government. Some people just like to have a villain in their lives, I guess, and the government makes a good target. Especially if the guy you don't like is in charge. So, it becomes more important to get a psychological win over your villain of choice. And that's where you get people threatening to quit or not work just to make sure the government doesn't get their hands on their dollars. Sure, it would hurt them more, because they'd actually lose far more in that scenario. But it still is a fairly common mindset.
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To OP, yeah, I guess you sort of asked for it with the thread title. But, having been there, I understand your "problem". Mega back door is great if your employer offers after-tax contributions. Mine did, and it was via Fidelity. I am guessing it is an employer's choice rather than the provider.
My general (i.e. not very valuable) advice is to simply save aggressively so you can go to one income and/or move to a cheaper area. You will be able to take advantage of these breaks at some point. BUT, my advice is to earn it while you can (i.e. stay with 2 incomes unless they are lopsided, e.g. 200 and 33), then enjoy the benefits later.
Like someone said, at 250 or higher, say 300-400 or so, you really lose many benefits and get screwed (dick in ass gets longer......great one) as you have to pay the AMT.
Instead of viewing it from an "avoid taxes" point, determine what you want to do (go to one income, perhaps) and make choices based on that.
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All of this hand-wringing about taxes being theft (or similar views, not in this threat, but about jack-booted government for or whatever) seems so anti-mustachian to me. It's the law. You can't change it. Vote for the politicans that support your favorite tax schemes, and then stop bitching. Honestly, every tax-obsessed person I know spends so much time and effort trying to minimize taxes that they'd be way ahead if they plowed that white-hot anger into something more productive. I worked with this one guy who somehow got it in his head that switching his dollars several times a day between a regular 401(k) and a Roth 401(k) would somehow yield some kind of tax advantage. He must have spent HOURS dicking around with his investments all day to yield some penny-level tax win over the government. Some people just like to have a villain in their lives, I guess, and the government makes a good target. Especially if the guy you don't like is in charge. So, it becomes more important to get a psychological win over your villain of choice. And that's where you get people threatening to quit or not work just to make sure the government doesn't get their hands on their dollars. Sure, it would hurt them more, because they'd actually lose far more in that scenario. But it still is a fairly common mindset.
(http://i1.kym-cdn.com/photos/images/newsfeed/000/614/639/9df.gif)
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okay, ranting and raving aside.....Our household income is a little over $300K so I FEEL YA. I don't even have mortage interest to deduct. boo hoo...poor widdle me.
ANYWAY, since I just switched companies and now work for a smaller contracting company, I have worked out a deal where they put all of my November and December salary into the company 401K as an employer contribution. viola...lower income.
It's an idea.
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I plan to do this next year. Last year 2014 I was on maternity leave for 5 months with no earned income so I was able to do regular roth contribution for 2014. However I also have traditional IRA so would need to pay some tax when I convert into roth. So to avoid that I was planning on rolling over traditional IRA first into 401k so then I would have no pretax money in Traditional IRA and then do back door roth.
I think you can have multiple IRAs too, and IIRC as of 2014, you don't have to rollover your post-tax 401k contributions into an IRA and then convert to a roth IRA, you can roll them straight over.
If you have an ESPP you can also enroll in that since the company contribution is either free income, or a free write-off at your top marginal rate if you harvest your losses later, but that really only helps if you expect your marginal rate to be higher in the future, and it isn't much in the way of tax savings.
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
.
[/quote]
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
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I'd be interested in knowing what city OP is in...
For the Bay Area the median income varies wildly city to city...if you're in Orinda (http://www.city-data.com/city/Orinda-California.html) where the median is:
Orinda: $153,945
Piedmont: $200,000 +
CA: $58,328
The above cities are considered top notch East Bay cities. Move to a neighboring city, into a lower cost home, and feel like the king of the neighborhood! lol
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okay, ranting and raving aside.....Our household income is a little over $300K so I FEEL YA. I don't even have mortage interest to deduct. boo hoo...poor widdle me.
ANYWAY, since I just switched companies and now work for a smaller contracting company, I have worked out a deal where they put all of my November and December salary into the company 401K as an employer contribution. viola...lower income.
It's an idea.
This SEEMS like it would run afoul of IRS. Just because otherwise why don't more companies offer this? Maybe I'll look into it... would be real nice.
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
.
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
General google searching will yield much, but here are a few links I found.
http://www.usnews.com/opinion/articles/2012/12/19/the-shocking-truth-on-entitlements
http://www.wsj.com/articles/SB10000872396390444914904577619671931313542
http://en.wikipedia.org/wiki/United_States_federal_budget#Mandatory_spending_and_social_safety_nets
Edit, a few more
http://en.wikipedia.org/wiki/United_States_federal_budget#CBO_budget_projections
http://www.cnbc.com/id/101264757#.
Anecdotally, I have a cousin how works on the hill for a senator. He says the only way we can sustain spending at current levels would be to "broaden the tax base", ie raise taxes on everyone. According to him, everyone on the hills knows it too, but the rest is politics.
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Wow I'm still a little new to these forums so didn't think this post would get so much discussion. Just to clarify it was only last year that we both got promotions/new jobs that bumped us each into the six figure salary. So when getting all our stuff together to start doing our taxes I guess I was a little taken aback by how our income phases us out for a lot of credits. So I guess my previous middle class mentality hasn't quite caught up to our higher salaries. It would probably be more fair to say that we are upper middle class/lower upper class now.
I can see now how this post sounded a bit complainy pants. But I think I did get some really great suggestions from it though. I will definitely look into seeing if I can pay for next year's property taxes this year and then just take the standard deduction the next year. Also, I guess there might be a possibility for me to do consulting in my field and be self employed but that might mean a paycut and more work so not sure if I want to go that route. But definitely something to consider.
I realize that it was our choice to live here and we probably could've gotten a cheaper house but again that was done before coming to MMM. I have an opportunity in another 2 years for another promotion but it comes with a lot of stress. Already feeling the stress now and really don't want to make any more money. Just want to save as much as I can and FIRE earlier. Oh and I'm happy to pay taxes because I do appreciate how lucky we have it living here. My parents were immigrants and came to this country penniless so we were on welfare for a few months until they were able to get jobs. I've also seen a lot of people cheating the system and a lot of wasteful government spending as well so I just don't want to pay anymore than I legally have to.
I think my bigger problem is not having to pay more taxes but more how I feel like I have these golden handcuffs with this job and it's hard to walk away from such a high income even with all the stress. Should I just suck it up and stay and FIRE earlier? Or should I get a lower paying less stressful job and work longer? What would you do?
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You're not middle class...
I have to pay a bunch of taxes too. I don't cry about it. The more I pay, the higher above average I am. The more I pay, the more goes into health, education, infrastructure... all things we need for people to do well enough to buy the stuff my company makes which gets me paid.
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
.
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
General google searching will yield much, but here are a few links I found.
http://www.usnews.com/opinion/articles/2012/12/19/the-shocking-truth-on-entitlements
http://www.wsj.com/articles/SB10000872396390444914904577619671931313542
http://en.wikipedia.org/wiki/United_States_federal_budget#Mandatory_spending_and_social_safety_nets
Edit, a few more
http://en.wikipedia.org/wiki/United_States_federal_budget#CBO_budget_projections
http://www.cnbc.com/id/101264757#.
Anecdotally, I have a cousin how works on the hill for a senator. He says the only way we can sustain spending at current levels would be to "broaden the tax base", ie raise taxes on everyone. According to him, everyone on the hills knows it too, but the rest is politics.
A quick look at the links suggest a selection to support your argument, anyone have a numbers for the cost of middle class/corporate welfare
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
I don't have numbers on entitlements, but I can speak to the first part (that taxing high earners won't solve the budget deficit all on its own). President Obama has campaigned over and over again on a tax policy where only income over $250k should be taxed more. Let's take a look at how much difference that might make.
According to the Census Bureau (http://www.census.gov/hhes/www/cpstables/032011/hhinc/new06_000.htm), there were almost 2.5 million households with income over $250k in 2010. These households had a mean income of $398k, which exceeds $250k by $148k. This is the amount that might be affected by increased taxes on "high earners" as defined by President Obama. $148k * 2.5 million people = $370 billion. I don't really envision a scenario where an increase of more than 25% had any chance at passing, so let's say $92.5 billion is the absolute upper bound of the revenue that could be raised by increasing taxes on income over $250k. By contrast, the budget deficit in 2014 was $483 billion (http://www.usgovernmentspending.com/federal_deficit_chart.html), and expected to rise slightly in 2015.
If you want to raise taxes on higher income out of some sense of fairness, that's one thing. It's simply wrong to imply that people making over $250k could fix the budget deficit all on their own. They could make a noticeable dent in it, but some tax increases and/or spending cuts that affect the middle class would be required to get us the rest of the way there.
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
.
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
General google searching will yield much, but here are a few links I found.
http://www.usnews.com/opinion/articles/2012/12/19/the-shocking-truth-on-entitlements
http://www.wsj.com/articles/SB10000872396390444914904577619671931313542
http://en.wikipedia.org/wiki/United_States_federal_budget#Mandatory_spending_and_social_safety_nets
Edit, a few more
http://en.wikipedia.org/wiki/United_States_federal_budget#CBO_budget_projections
http://www.cnbc.com/id/101264757#.
Anecdotally, I have a cousin how works on the hill for a senator. He says the only way we can sustain spending at current levels would be to "broaden the tax base", ie raise taxes on everyone. According to him, everyone on the hills knows it too, but the rest is politics.
A quick look at the links suggest a selection to support your argument, anyone have a numbers for the cost of middle class/corporate welfare
I wasnt aware that usnews, the wall street journal, wikipedia, or the congressional budget office (from inside the wikipedia article) were considered bias. Do your own research and show me some counter examples that show raising income or capital gains taxes on 1% of the population is enough to get the job done.
Edit
doesn't talk about solving the problem but shows the projected growth of entitlement programs
http://www.taxpolicycenter.org/taxtopics/budget/longterm.cfm
I believe the TPC is considered liberal. The links under the Facts section are informative.
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With all the talk about what is and what is not a high income in this country, I went on an exploration and found this tool:
http://politicalcalculations.blogspot.com/2013/09/what-is-your-us-income-percentile.html#.VMKocNLF_pp (http://politicalcalculations.blogspot.com/2013/09/what-is-your-us-income-percentile.html#.VMKocNLF_pp)
It is up to date as of 2013 data from the US Census Bureau.
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... we are just refinancing to a 15 year ...
I'll admit I read through this thread mostly for the giggles (and groans) given the OP's stated income. That said, the obvious solution, or at least an obvious improvement, not to your Q about taxex situation but to your concerns about your work situation would be NOT to refinance and to pay down the mortgage ahead of schedule, anyway -- assuming no penalty for doing so, which most don't. Sure, you don't get the benefit of the lower interest rate for the shorter term, but ALL mortgages are at record lows at the moment, so take the 30-year rate, pay the 15-year payment amount, and be done well ahead of 30 years (and at much lower total interest by paying it off sooner) without losing the flexibility of the lower (required) payment if something in your life takes a turn for the worse.
Sounds from your later posts like you've already refi'ed, though, so that may not be an option.
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I'd be interested in knowing what city OP is in...
For the Bay Area the median income varies wildly city to city...if you're in Orinda (http://www.city-data.com/city/Orinda-California.html) where the median is:
Orinda: $153,945
Piedmont: $200,000 +
CA: $58,328
The above cities are considered top notch East Bay cities. Move to a neighboring city, into a lower cost home, and feel like the king of the neighborhood! lol
We live in Temple City (in Los Angeles county). Median income is $60,452 but median home or condo value is $511,248 compared to only $349,400 for the rest of California. We are somewhat limited to location as I work in the valley and hubby works in the south bay so trying to find a house in the middle was hard. As it is we both have to commute about an hour each way to work. We were also looking for a house with a good school district.
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
I don't have numbers on entitlements, but I can speak to the first part (that taxing high earners won't solve the budget deficit all on its own). President Obama has campaigned over and over again on a tax policy where only income over $250k should be taxed more. Let's take a look at how much difference that might make.
According to the Census Bureau (http://www.census.gov/hhes/www/cpstables/032011/hhinc/new06_000.htm), there were almost 2.5 million households with income over $250k in 2010. These households had a mean income of $398k, which exceeds $250k by $148k. This is the amount that might be affected by increased taxes on "high earners" as defined by President Obama. $148k * 2.5 million people = $370 billion. I don't really envision a scenario where an increase of more than 25% had any chance at passing, so let's say $92.5 billion is the absolute upper bound of the revenue that could be raised by increasing taxes on income over $250k. By contrast, the budget deficit in 2014 was $483 billion (http://www.usgovernmentspending.com/federal_deficit_chart.html), and expected to rise slightly in 2015.
If you want to raise taxes on higher income out of some sense of fairness, that's one thing. It's simply wrong to imply that people making over $250k could fix the budget deficit all on their own. They could make a noticeable dent in it, but some tax increases and/or spending cuts that affect the middle class would be required to get us the rest of the way there.
1. That's survey data, and it's not clear if that survey includes investment income (taxed under a separate code)
2. The mean is 398k, so, by definition, half of households are above it, right? I don't think your number represents an absolute upper bound as you claim unless you know more about the top half of your distribution. You just know the size of the group, but you don't know their incomes. Because you already know your bottom parameter is 250k, you are assuming that the top half is distributed in an even curve about 398k so that the upper bound is 398k + 148k, which doesn't seem like a reliable assumption.
in any case, I see this argument peddled by the right quite a bit, and it's basically like-taxing rich people WON'T EVEN HELP, so don't bother. However, tax policy proposals are not based on revenue estimates from the census, but IRS data.
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5) Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. Raising taxes on the highest earners will not solve our budget problems. If you taxed the top 1% at 100% above a million dollars, there would still be massive deficits. The problem is run away entitlements.
.
Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
General google searching will yield much, but here are a few links I found.
http://www.usnews.com/opinion/articles/2012/12/19/the-shocking-truth-on-entitlements
http://www.wsj.com/articles/SB10000872396390444914904577619671931313542
http://en.wikipedia.org/wiki/United_States_federal_budget#Mandatory_spending_and_social_safety_nets
Edit, a few more
http://en.wikipedia.org/wiki/United_States_federal_budget#CBO_budget_projections
http://www.cnbc.com/id/101264757#.
Anecdotally, I have a cousin how works on the hill for a senator. He says the only way we can sustain spending at current levels would be to "broaden the tax base", ie raise taxes on everyone. According to him, everyone on the hills knows it too, but the rest is politics.
A quick look at the links suggest a selection to support your argument, anyone have a numbers for the cost of middle class/corporate welfare
I wasnt aware that usnews, the wall street journal, wikipedia, or the congressional budget office (from inside the wikipedia article) were considered bias. Do your own research and show me some counter examples that show raising income or capital gains taxes on 1% of the population is enough to get the job done.
Edit
doesn't talk about solving the problem but shows the projected growth of entitlement programs
http://www.taxpolicycenter.org/taxtopics/budget/longterm.cfm
I believe the TPC is considered liberal. The links under the Facts section are informative.
My argument is not about raising taxes, I was just jumping on the usual entitlements BS which tends to suggest that a bunch of lazy layabouts on food stamps is what causing this country to broke. No one ever questions all the kick backs to the middle and upper classes.
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It's always amazing to me how every single person in this country thinks that they are Middle Class.
I think Bill Gates and Warren Buffett have both admitted to not being middle class. But they might be the only ones.
$116,500 is not a high income for an individual person.
Yes it is. It is not an unthinkably outrageous income, but it is indeed a high income.
The median HOUSEHOLD income is $51k. So for ONE person to be making double that, it is indeed high.
"I have never yet known a man admit that he was either rich or asleep: perhaps the poor man and the wakeful man have some great moral advantage."
-Patrick O'Brian, Master and Commander
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I don't have numbers on entitlements, but I can speak to the first part (that taxing high earners won't solve the budget deficit all on its own). President Obama has campaigned over and over again on a tax policy where only income over $250k should be taxed more. Let's take a look at how much difference that might make.
According to the Census Bureau (http://www.census.gov/hhes/www/cpstables/032011/hhinc/new06_000.htm), there were almost 2.5 million households with income over $250k in 2010. These households had a mean income of $398k, which exceeds $250k by $148k. This is the amount that might be affected by increased taxes on "high earners" as defined by President Obama. $148k * 2.5 million people = $370 billion. I don't really envision a scenario where an increase of more than 25% had any chance at passing, so let's say $92.5 billion is the absolute upper bound of the revenue that could be raised by increasing taxes on income over $250k. By contrast, the budget deficit in 2014 was $483 billion (http://www.usgovernmentspending.com/federal_deficit_chart.html), and expected to rise slightly in 2015.
If you want to raise taxes on higher income out of some sense of fairness, that's one thing. It's simply wrong to imply that people making over $250k could fix the budget deficit all on their own. They could make a noticeable dent in it, but some tax increases and/or spending cuts that affect the middle class would be required to get us the rest of the way there.
1. That's survey data, and it's not clear if that survey includes investment income (taxed under a separate code)
Sure, surveys can be wrong. I generally trust the Census Bureau to be in the right ballpark though.
This data comes from the Current Population Survey (http://www.census.gov/cps/). As part of the question about household income, they say "This includes money from jobs, net income from business, farm or rent, pensions, dividends, interest, social security payments and any other money income received." Seems like that covers investment income.
2. The mean is 398k, so, by definition, half of households are above it, right? I don't think your number represents an absolute upper bound as you claim unless you know more about the top half of your distribution. You just know the size of the group, but you don't know their incomes. Because you already know your bottom parameter is 250k, you are assuming that the top half is distributed in an even curve about 398k so that the upper bound is 398k + 148k, which doesn't seem like a reliable assumption.
I think you may be confusing the concepts of mean and median. If $398k was the median, that would mean half the group is above it. The skewed income distribution would then make the mean significantly higher than that. However the $398k number is the mean, which is defined as the total income of everyone in the group divided by the number of households in the group.
Given that the Census Bureau provided mean numbers, the total income is easy to calculate, as is the total income over $250k (since they helpfully separated out people earning over $250k into their own group in the data). If you assume the survey data is reasonably correct (as I do), the math holds up.
in any case, I see this argument peddled by the right quite a bit, and it's basically like-taxing rich people WON'T EVEN HELP, so don't bother. However, tax policy proposals are not based on revenue estimates from the census, but IRS data.
I'm not saying it won't help. By all means, raise tax rates on high earners as part of the overall solution. Just realize that you can't take care of more than 20% of the budget deficit from taxing high earners alone. Even that much of an increase is unlikely to pass Congress even with a Democratic majority in both houses. Forget about it with Republicans in charge. The other 80-90% has to come from somewhere else.
I would love to see IRS data on this. I haven't found that they have nearly as rich of a publicly searchable data set as the Census Bureau does. However if you can point me to a table that shows how much income over $250k that the IRS thinks there is, I'd be happy to revise my argument to fit that set of data instead.
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I worked a week of my life, and I was not able to retire.
I am middle class.
If I made enough in that one week to retire for the next 80 years of my life, I would not be middle class.
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2. The mean is 398k, so, by definition, half of households are above it, right? I don't think your number represents an absolute upper bound as you claim unless you know more about the top half of your distribution. You just know the size of the group, but you don't know their incomes. Because you already know your bottom parameter is 250k, you are assuming that the top half is distributed in an even curve about 398k so that the upper bound is 398k + 148k, which doesn't seem like a reliable assumption.
I think you may be confusing the concepts of mean and median. If $398k was the median, that would mean half the group is above it. The skewed income distribution would then make the mean significantly higher than that. However the $398k number is the mean, which is defined as the total income of everyone in the group divided by the number of households in the group.
I stand corrected! I was thinking median. That number still seems off to me...and on the low end. I don't disagree that tax burdens can be spread among separate income groups, but I really hate this current strain of thinking that demonizes people on the bottom end of the income spectrum as being takers who need to put some skin in the game and have their taxes go up so that higher earners can get yet another tax break. It's so distasteful that people seem to revel in the idea that these people are lazy moochers.
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I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area.
I've never understood this mentality. I would never, ever, ever purposely cut my salary to avoid taxes. Yes, Uncle Sam takes a bigger bite as you go higher, up but you still get to keep the majority of it. It's cutting off your noise to spite your face...or whatever the appropriate idiom is. Why give up all of your extra income just because you'll lose a slightly higher percentage on that bit that exceeds the next tax bracket up?
On a side note, you're new to the boards and stuck your neck out there to get face punched, repeatedly. Welcome! It's actually a good group here. But this is still the Internet-World so innocent enough threads become an excuse to grind everyone's particular brand of axe. But congrats on the salary and being stuck with such a problem! It's nothing to be ashamed of! If anything, it's a great problem to have.
To be honest, I've had the same issue when I was a corporate suit and prior to self-employment (now, I have more tax levers to pull) and I too, always considered myself middle class. Perhaps I shouldn't. But, my blue collar roots and mentality die hard. I get that.
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I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area.
I've never understood this mentality. I would never, ever, ever purposely cut my salary to avoid taxes. Yes, Uncle Sam takes a bigger bite as you go higher, up but you still get to keep the majority of it. It's cutting off your noise to spite your face...or whatever the appropriate idiom is. Why give up all of your extra income just because you'll lose a slightly higher percentage on that bit that exceeds the next tax bracket up?
On a side note, you're new to the boards and stuck your neck out there to get face punched, repeatedly. Welcome! It's actually a good group here. But this is still the Internet-World so innocent enough threads become an excuse to grind everyone's particular brand of axe. But congrats on the salary and being stuck with such a problem! It's nothing to be ashamed of! If anything, it's a great problem to have.
To be honest, I've had the same issue when I was a corporate suit and prior to self-employment (now, I have more tax levers to pull) and I too, always considered myself middle class. Perhaps I shouldn't. But, my blue collar roots and mentality die hard. I get that.
I mean, if you value your marginal hour at $10, and you make $15/hr, you should cut your hours back (or scale them up) until you have a 33% marginal tax rate. It makes sense logically. It's not punitive*
With time vs. money, working an additional marginal hour is a double whammy: you have less time in the day so it's worth more to you, whereas the marginal dollars you'd earn working the extra hour are worth less and taxed more. In a perfect world, you'd work a number of hours where those two forces are at equilibrium. If tax rates go up, however, the equilibrium point would be lower, so you'd cut back hours.
*well, for some pouty Republicans maybe it's intended to be punitive
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I mean, if you value your marginal hour at $10, and you make $15/hr, you should cut your hours back (or scale them up) until you have a 33% marginal tax rate. It makes sense logically. It's not punitive*
With time vs. money, working an additional marginal hour is a double whammy: you have less time in the day so it's worth more to you, whereas the marginal dollars you'd earn working the extra hour are worth less and taxed more. In a perfect world, you'd work a number of hours where those two forces are at equilibrium. If tax rates go up, however, the equilibrium point would be lower, so you'd cut back hours.
Theoretically, I can almost see the logic in this if you are an hourly worker (although, I'm either not bright enough and/or had too much cheap tempranillo tonight to fully comprehend this), but I just don't see this working out in a practical sense.
Yet, even then, some of my projects are paid on an hourly basis, and I have never ever worked less because I'm worried about hitting some higher rate tax bracket and losing a slightly higher percentage of my income. I do however weigh the value of my free time versus getting paid extra. But, the percentage difference in taxes is not enough to be a serious consideration to me. It doesn't enter into my equation at all. Now, if the extra were taxed at 90% then yeah, it would make a difference. But going from 28 to 35% or whatever, just isn't than onerous, especially when you're only talking about the chunk of cash that's at the next threshold.
And if you're a salaried worker, with all things being equal, would you ever really take a lower paid job because you're taxed slightly higher? At the end of the day, you're still making a fair amount more money.
Am I missing something here?
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I mean, if you value your marginal hour at $10, and you make $15/hr, you should cut your hours back (or scale them up) until you have a 33% marginal tax rate. It makes sense logically. It's not punitive*
With time vs. money, working an additional marginal hour is a double whammy: you have less time in the day so it's worth more to you, whereas the marginal dollars you'd earn working the extra hour are worth less and taxed more. In a perfect world, you'd work a number of hours where those two forces are at equilibrium. If tax rates go up, however, the equilibrium point would be lower, so you'd cut back hours.
Theoretically, I can almost see the logic in this if you are an hourly worker (although, I'm either not bright enough and/or had too much cheap tempranillo tonight to fully comprehend this), but I just don't see this working out in a practical sense.
Yet, even then, some of my projects are paid on an hourly basis, and I have never ever worked less because I'm worried about hitting some higher rate tax bracket and losing a slightly higher percentage of my income. I do however weigh the value of my free time versus getting paid extra. But, the percentage difference in taxes is not enough to be a serious consideration to me. It doesn't enter into my equation at all. Now, if the extra were taxed at 90% then yeah, it would make a difference. But going from 28 to 35% or whatever, just isn't than onerous, especially when you're only talking about the chunk of cash that's at the next threshold.
And if you're a salaried worker, with all things being equal, would you ever really take a lower paid job because you're taxed slightly higher? At the end of the day, you're still making a fair amount more money.
Am I missing something here?
Let me ask you: why don't you go out and get a part-time job to supplement your income right now? You'd make more money, after all.
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Let me ask you: why don't you go out and get a part-time job to supplement your income right now? You'd make more money, after all.
I won't because I only have so many hours in the day and even if I did, I'm lazy. But, that has nothing to do with taxes.
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Let me ask you: why don't you go out and get a part-time job to supplement your income right now? You'd make more money, after all.
I won't because I only have so many hours in the day and even if I did, I'm lazy. But, that has nothing to do with taxes.
Is there no Amount of money that would entice you to work, say, an extra 4-hour shift on Saturdays?
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I'm a bit sad that people from Seattle have posted and not suggested the clear solution to OPs problem as opposed to discussing what is/isn't middle class.
Answer to OPs problems: Get similar jobs in Seattle for roughly the same salary (or very slightly less) and enjoy the following:
1) No State Income Tax
2) SIGNIFICANTLY cheaper housing. I bought a brand new amazing home near the lake and 15 minutes (transit, quicker if driving) from downtown for 400k.
3) Better hiking, views, trees, etc
4) A better (typically) work life balance since there is a pretty significant cultural difference between Seattle and the Bay area
Obviously this involves actually finding a job and moving, but it WOULD reduce your taxes and probably make you happier! :)
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Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
Heres' my 2c on it from the POV of taxes.
Total US government spending in 2013 was $3.45 trillion and revenue was $2.77 trillion, leaving us with a $680 billion dollar deficit.
http://en.wikipedia.org/wiki/2013_United_States_federal_budget
Making up that shortfall through taxation alone is possible, but difficult. For instance in the revenue from corporate taxes in 2013 was $273 billion at a 35% rate. If we were to have the corporate tax rates of the late sixties of ~53%, that would increase revenue by ~$140 billion, which would have reduced the 2013 deficit to ~$540 billion.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=203
http://en.wikipedia.org/wiki/Taxation_history_of_the_United_States#Corporate_tax
The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
http://taxfoundation.org/article/summary-latest-federal-income-tax-data
http://en.wikipedia.org/wiki/Income_tax_in_the_United_States#Marginal_tax_rates_for_2013
In addition, there are more than a few people myself included, who think we spend too much in defense. Cutting that down to a more conservative ~$300 billion/year would increase a surplus to ~$760 billion/year, and we would still outspend the rest of the world in defense, but by a smaller amount.
https://blogs.lclark.edu/hart-landsberg/category/military-spending/
This surplus would pay off the national debt in ~25 years give or take, just via increases in taxes on the top 10%, corporations, and cutting defense spending in half. I would even got a bit farther a suggest that everyone pay the same amount in taxes we were paying post-WWII and that we should also audit and reduce spending on other government programs where it's excessive and doesn't have much bang for the buck. All told, I imagine this would allow us to eliminate the national debt in ~10-15 years.
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To be fair, my own situation isn't perfectly comparable since I live in a place with a lower cost of living. I know I couldn't buy a decent home in the bay area for $116,000. I sympathize with your higher housing costs.
More to the point, you can't buy any house in SF for $116k. Not even an outhouse. 100k gets you a parking space: http://blog.sfgate.com/ontheblock/2014/06/09/how-much-is-a-parking-spot-worth-in-s-f/
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Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
http://taxfoundation.org/article/summary-latest-federal-income-tax-data
After WWII, the US was one of the few industrialized countries that hadn't had a war occur on its own shores. There weren't many other places where one could live, run a business and be comfortable.
Today, lots of countries provide good public safety, efficient systems like railroads and highways, education through secondary school and the predictability necessary to run a business. There is more competition in the market for countries. As a result, "prices" have fallen.
Small/moderate tax increases on higher earners would probably work, but large increases like those that you describe would probably cause top earning people to leave. You could chase them around the world with a stick, but I doubt that such an approach would be productive overall.
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maybe someone mentioned this already but root of good covered this subject
six figure income no tax
http://rootofgood.com/make-six-figure-income-pay-no-tax/
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After WWII, the US was one of the few industrialized countries that hadn't had a war occur on its own shores. There weren't many other places where one could live, run a business and be comfortable.
Today, lots of countries provide good public safety, efficient systems like railroads and highways, education through secondary school and the predictability necessary to run a business. There is more competition in the market for countries. As a result, "prices" have fallen.
Small/moderate tax increases on higher earners would probably work, but large increases like those that you describe would probably cause top earning people to leave. You could chase them around the world with a stick, but I doubt that such an approach would be productive overall.
As long as it's done gradually, and more to the point, across the board, where everyone pays more in the way of taxes to settle the national debt and we reduce defense spending/stringently audit existing spending, then I doubt there would be many people leaving.
We've seen that tax cuts for wealthy individuals don't stimulate economic growth or job creation, and I doubt the flip side of that, higher taxes for wealthy individual, would reduce economic growth or job creation, or lead to a mass exodus that would affect our economy.
http://www.businessinsider.com/study-tax-cuts-dont-lead-to-growth-2012-9
There are situations where tax cuts can help economically, but the wealthy would need to reinvest the money they now have from reduced taxes into local economics and job creation, and that hasn't happened in general.
On the flip side, tax cuts for low to middle income people are generally very beneficial because those people spend most of their income by virtue of not being wealthy.
http://www.marketplace.org/topics/economy/commentary/taxing-rich-good-economy
I think the article title is click-bait, but the basic premise, that too much income inequality is bad for an economy, I think holds true just about anyplace. On the other hand, no one is suggesting some sort of communist/socialist playing field where everyone gets the same stuff regardless of ability either, just to make that clear.
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Do you have real numbers on this - ie entitlements, everyone seems to band it about as the root of all evil. Anyone have a break down how much we spend on
Welfare - food stamps, free medicaid, unemployment etc,
Middle class welfare - mortgage tax deduction, subsidized employer provided healtcare, 529 tax breaks etc.
Corporate welfare - subsidies for large corps, income tax breaks for hedge fund managers etc.
The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
http://taxfoundation.org/article/summary-latest-federal-income-tax-data
After WWII, the US was one of the few industrialized countries that hadn't had a war occur on its own shores. There weren't many other places where one could live, run a business and be comfortable.
Today, lots of countries provide good public safety, efficient systems like railroads and highways, education through secondary school and the predictability necessary to run a business. There is more competition in the market for countries. As a result, "prices" have fallen.
Small/moderate tax increases on higher earners would probably work, but large increases like those that you describe would probably cause top earning people to leave. You could chase them around the world with a stick, but I doubt that such an approach would be productive overall.
Yes, because everyone would uproot their immediate family, leave their family and friends behind, and still have to dodge the IRS, all while attempting to receive permanent work status or naturalization in another country, while also avoiding exit taxes. Because the English-speaking developed world has such low taxes. And every job is portable, of course.
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Taxation is definitely something I will factor into where I live and/or retire to. I assume that is the case for most people.
The suggestion that people will go about their business ignoring taxes is kind of absurd.
The sole reason I am living where I am is the expectation that currently I can add the most to my investments per year here. If that stops being the case, I will move in a heartbeat.
In retirement, I wouldn't be so concerned about income taxes, but the introduction of a large sales tax (such as the so-called "FairTax") would definitely make me leave the US immediately.
Also, the US expatriation tax only applies to the portion of unrealised capital gains above $600,000, adjusted for inflation each year ($680,000 for 2014). If your stash is $1-1.5 million, it's possible your unrealised capital gains are below that threshold, but even if not, the expatriation tax would be very small. It is not a serious problem. Of course, the exact mechanics change every few years so it could also become more oppressive too.
As for the ease of moving elsewhere, I think you will find it is not so bad for a Mustachian. Most countries have a program that allows you to immigrate on a permanent basis by making an investment in the country on the order of $200,000 - $1 million, which is entirely on the table for a Mustachian. Also, some people living in the US are not American and/or already have other citizenships. For instance, I am Canadian. I have no family in the US and I do not make decisions about where to live based on family or friends.
I should be clear that with prevailing laws, I think the US is the best place to accumulate savings, and also the best place to retire. I'm just saying that it's conceivable that could change if the laws change, and if so, I would act based on those changes.
I certainly think some people with comparatively less to leave behind would make the same choice if laws changed dramatically, but I think the number of people with few enough roots to actually do this is probably pretty low, particularly for U.S. citizens.
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
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Taxes suck, but save for a few years and you can retire early, paying little tax (or even negative tax).
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Poppycock. My buddy lives in Richmond and paid $325k for his house just a few years ago...And Richmond is fine.
Also, not everyone works in the City.
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Poppycock. My buddy lives in Richmond and paid $325k for his house just a few years ago...And Richmond is fine.
Also, not everyone works in the City.
Have you seen median house prices in Richmond these days? Really? A lot of them are up 50-100% over "a few years ago" I was just on realtor.com today and looking at Richmond, it's one of the few "affordable" areas right now and housing is still absurd.
100-150k in San Francisco IS middle class, it's basically the starting place right now, and if you have a family, forget about living in the city it's too expensive. The only people who make less than that and survive are those who are 1) on rent control for 5+ years, or 2) have owned a place in the city for 5+ years
I "only" pay $1250 for a junior 1-bedroom in Berkeley. That same place (never mind that it has a little yard which you can't find in San Francisco) would be $2500+ in San Francisco.
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Poppycock. My buddy lives in Richmond and paid $325k for his house just a few years ago...And Richmond is fine.
Also, not everyone works in the City.
Have you seen median house prices in Richmond these days? Really? A lot of them are up 50-100% over "a few years ago" I was just on realtor.com today and looking at Richmond, it's one of the few "affordable" areas right now and housing is still absurd.
100-150k in San Francisco IS middle class, it's basically the starting place right now, and if you have a family, forget about living in the city it's too expensive. The only people who make less than that and survive are those who are 1) on rent control for 5+ years, or 2) have owned a place in the city for 5+ years
I "only" pay $1250 for a junior 1-bedroom in Berkeley. That same place (never mind that it has a little yard which you can't find in San Francisco) would be $2500+ in San Francisco.
Still poppycock. Living in San Francisco or Berkeley is a luxury. It's not a McMansion, it's a luxury of locality.
If you think everyone of all incomes needs the "american dream" of a standalone house in SF to live a full life, you've got another think coming.
I do think SF should build up and increase density until home prices are affordable for (at least) median wage earners. Instead, SF creates artificial scarcity with its "low income" housing, where you basically sign up for a lottery to afford a home, and votes to scale back "luxury" developments (when all developments in SF are by definition luxury until there is a glut of supply).
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Have you seen median house prices in Richmond these days? Really? A lot of them are up 50-100% over "a few years ago" I was just on realtor.com today and looking at Richmond, it's one of the few "affordable" areas right now and housing is still absurd.
100-150k in San Francisco IS middle class, it's basically the starting place right now, and if you have a family, forget about living in the city it's too expensive. The only people who make less than that and survive are those who are 1) on rent control for 5+ years, or 2) have owned a place in the city for 5+ years
I "only" pay $1250 for a junior 1-bedroom in Berkeley. That same place (never mind that it has a little yard which you can't find in San Francisco) would be $2500+ in San Francisco.
100-150k in SF Bay area is not middle class. In fact, on that 150k is TWICE the median household income in SF. This is the problem of living somewhere like this, the high concentration of extremely wealthy (as well as big spenders) people makes it seem like $150k annually is middle class.
DW likes to joke and say we're "Silicon Valley poor." But just because the Maserati's are more conspicuous than the folks pushing shopping carts full of their lives doesn't make $150k middle class. It's still a stupid amount of income and potential for wealth. Believing otherwise is a one-way ticket to our beloved hedonic adaptation.
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I live in the bay area. Housing here is such a can of worms. If you want to live in a normal area and get a house through normal means, you pretty much need to have that double engineering salary of two married engineers to get it - in the 200-300k range to get a "starter home" of 700k-1m.
Other alternatives are:
- Live farther away and commute and/or telecommute
- Live in shitty areas
- Buy a foreclosure
- Buy something through some government program
- Buy a condo when you can... they might sell for $450k brand new, $750k two years later, for real... oh, and also HOA fees
- Rent
As you might image, most people choose to rent.
It is a free market (well, sort of.) Nobody is entitled to live near where they work or go to school. This is why a last option that many people consider, and ultimately choose, often after working here for 5-10 years, is:
- Go elsewhere.
People will work for ten years, then move to a cheaper tech-friendly city, buy a big house with garage and an acre or two of land in cash, and live very comfortably earning a bit less, and easily afford sending kids to school.
If that's the way it's going to be, so be it. I personally would prefer that the SF-SJ corridor builds upwards, to relieve the pressure. I would also enjoy seeing china go bust a bit, so that foreign investments stop being used to buy houses; of course that's selfish of me, but I don't really care.
The double-engineering salary is definitely not middle class, but it also doesn't mean it lets you buy a house in SF. Weird, huh?
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yes subject title is kind of insulting to people who are actually in the middle class.
The only suggestion is try to transition as quickly as possible to live off of investments, which are taxed at a lower rate than income.
http://money.usnews.com/money/personal-finance/articles/2014/04/24/what-it-means-to-be-middle-class-today
Personally, I think that you cannot judge "middle class" solely by income, you have to consider COL, particularly housing.
Then again, there's "middle class", "Upper middle", "lower middle".
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Hey! I'm in Santa Barbara, and I can certainly relate.
That house you described would also be $700k here.
Markets come and go - when we bought our house, you could get a bay area house (Mountain View) for about $100k less than we paid, and it was bigger too, more land. (Specifically speaking of a friend's house.)
Of course now that house would be about $1.3M. So, markets they change.
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Some of it is "wealth" too. I never see "income" as the difference between middle class and rich.
Because income can go away, and it can go away fast.
I'm a worker bee.
My husband is a worker bee.
We are in our 40's. I saw what the last huge down turn did to engineers in their 50's.
"Upper class?" Well, if you are high income AND mustachian and save up money, yes.
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Yeah, I consider our household "middle class" too even though the IRS considers us "rich folk" based on income. We were certainly middle class, even over extended middle class when we first bought our current home 24 years ago. We raised our kids here, got some raises, promotions and bonuses along the way. Also suffered a couple of RIF's which made us wonder if we were even middle class.
Moved from the Bay Area to get here and so had some equity to get into a slightly nicer zip code here in Chicagoland, although the house we sold in Fremont went for $225M and now Zillows out at $1.5 Million... so was I upper class millionare then, and stupidly sold my future to early?
So now we have hit a string of years at our highest income. When did I become upper class? Still mowing the same yard in the same school district, wondering is sales numbers will get us a seat at the corporate trough next year?
So if the IRS deems us and treats us as upper class this year, when will we become middle class again? Class envy is the new...Black.
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When did I become upper class? Still mowing the same yard in the same school district, wondering is sales numbers will get us a seat at the corporate trough next year?
So if the IRS deems us and treats us as upper class this year, when will we become middle class again? Class envy is the new...Black.
Agreed, except I might be slinging pipe in a ditch again some time soon. Anyone else here ever been in a ditch with 2' of mud at the bottom banging pipe together while someone yells at you to hurry up? Ditch days tend to remind me I'm not upper class, no matter what my combined income may say. Pulling cable in a manhole full of dog shit? Counting Coney Island white fish and wondering how many needles are in the hole? Yep, not upper class.
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This thread is a solid reminder of why I would never move to the Bay Area. Right now I live in northern San Diego which is still considered HCOL vs. the rest of the US. However, here we can live comfortably with a family of 3 on my single income of ~90k/yr.
Even if I could make substantially more in the Bay Area, it would be offset by the insane COL relative to where I'm at now. I can't even imagine paying anywhere near 1M for a home, much less 500k - even in California.
Good luck with your decision! Personally I'd stash enough money until I could move out of state or to a much lower COL area and retire comfortably. In your situation, you'll have enough money in 3 years to even be FI in the vast majority of the U.S. - or even overseas. Would SF might be nice, nothing is better than FI and eliminating the daily grind.
-Brandon
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This thread is a solid reminder of why I would never move to the Bay Area. Right now I live in northern San Diego which is still considered HCOL vs. the rest of the US. However, here we can live comfortably with a family of 3 on my single income of ~90k/yr.
Even if I could make substantially more in the Bay Area, it would be offset by the insane COL relative to where I'm at now. I can't even imagine paying anywhere near 1M for a home, much less 500k - even in California.
Good luck with your decision! Personally I'd stash enough money until I could move out of state or to a much lower COL area and retire comfortably. In your situation, you'll have enough money in 3 years to even be FI in the vast majority of the U.S. - or even overseas. Would SF might be nice, nothing is better than FI and eliminating the daily grind.
-Brandon
That's the thing... You can live comfortably in the Bay Area with 90k too. Median household income in San Jose is $80k and those people are not starving. You may not be able to retire early and live in Palo Alto though
Everytime I think of moving out of state I look at house prices 1-2 hours away
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I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area.
I've never understood this mentality. I would never, ever, ever purposely cut my salary to avoid taxes. Yes, Uncle Sam takes a bigger bite as you go higher, up but you still get to keep the majority of it. It's cutting off your noise to spite your face...or whatever the appropriate idiom is. Why give up all of your extra income just because you'll lose a slightly higher percentage on that bit that exceeds the next tax bracket up?
On a side note, you're new to the boards and stuck your neck out there to get face punched, repeatedly. Welcome! It's actually a good group here. But this is still the Internet-World so innocent enough threads become an excuse to grind everyone's particular brand of axe. But congrats on the salary and being stuck with such a problem! It's nothing to be ashamed of! If anything, it's a great problem to have.
To be honest, I've had the same issue when I was a corporate suit and prior to self-employment (now, I have more tax levers to pull) and I too, always considered myself middle class. Perhaps I shouldn't. But, my blue collar roots and mentality die hard. I get that.
If I actually loved my job then yes quitting to avoid taxes would be cutting off my nose to spite my face. But one of the main reasons I want to FIRE earlier is to have more time to spend with the kid(s). At some point all the hard work and stress to getting to that high income seems less worth it when you are paying so much in taxes. I'd rather make less and have more time, less stress.
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OP, I think a case study might be helpful - it sounds like you guys might have the NW (if you include the house) to move somewhere else and be FI right now. If not, you could probably pull it off fast if you wanted to on your income plus a little frugality.
To put it another way: do you want to spend time with your kids, or live in your expensive house in the bay area? Because right now, assuming you are sitting on a big wad of equity and spending a ton on a huge mortgage, you are literally choosing your house over your kids.
-W
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maybe someone mentioned this already but root of good covered this subject
six figure income no tax
http://rootofgood.com/make-six-figure-income-pay-no-tax/
I think they were able to optimize their taxes very efficiently and that's what I'd love to be doing too. Unfortunately I only have access to 401k and we are already maxing that out. But I guess we could have more kids! We are actually thinking of maybe having one more kid but are still undecided.
Just found out hubby might be able to have access to a HSA after all so that would help.
Moving to a LCOL area might be an option when we are FIRE but our jobs are not that portable.
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maybe someone mentioned this already but root of good covered this subject
six figure income no tax
http://rootofgood.com/make-six-figure-income-pay-no-tax/
I think they were able to optimize their taxes very efficiently and that's what I'd love to be doing too. Unfortunately I only have access to 401k and we are already maxing that out. But I guess we could have more kids! We are actually thinking of maybe having one more kid but are still undecided.
Just found out hubby might be able to have access to a HSA after all so that would help.
Moving to a LCOL area might be an option when we are FIRE but our jobs are not that portable.
Root of Good has some quality advice, but his post on this topic was very obvious: "use all tax-deferred space available, with the expectation that taxes will be much lower when withdrawals from that space begin." He happened to have a ton of tax-deferred space that matched up very well with his incredibly frugal spending. Nothing particularly insightful there.
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Our family income is much lower than yours and shaky most of the time...but I can understand how money flows away like water in a HCOL area, inspite of many sacrifices.
Not sure how to reduce your taxable income....but here are some thoughts on reducing taxes on gains...ignore if you have already considered it.
+ Try AMT free munis...for example, if your HCOL area is California, then look at VCAIX.
+ Dependent care => you have kid(s). So, a 529 might be useful as well.
+ I am not sure about this...but if you have lots of left over cash, then investing in a rental may be another option for tax reduction.
+ At some point, you may have to watch out for AMT from all the deductions.
Hope it helps.
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Wow I'm still a little new to these forums so didn't think this post would get so much discussion. Just to clarify it was only last year that we both got promotions/new jobs that bumped us each into the six figure salary. So when getting all our stuff together to start doing our taxes I guess I was a little taken aback by how our income phases us out for a lot of credits. So I guess my previous middle class mentality hasn't quite caught up to our higher salaries. It would probably be more fair to say that we are upper middle class/lower upper class now.
oh yeah, I totally relate to this. I went from a $20k grad student salary to my current job, and the first year of taxes was a HUGE shock. thanks to this board I figured out that I should be maxing out my 401k instead of throwing everything above the employer match at my student loans, but it took a minute! glad you got some good advice out of this thread.
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The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
Just to make sure I understand, raise the highest marginal rate to 90% on the top 10% of earners, which I think is ~120-130k a year (having trouble finding a graph that shows it clearly)? So every dollar over 120-130k is taxed at 90%?
If taxes were that high, there would be strong incentive to stop working right before hitting that top rate. The value of one's time vs dollars being made would completely skewed to the former. At current rates, while painful, the incentive to stop working doesn't really enter (at least my calculations) but at 90%, I think most would agree the value of the time becomes much more important.
So in other words, a 90% tax bracket would not bring in any income since most people in that bracket would choose not to work. You would end up making the deficit worse.
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So in other words, a 90% tax bracket would not bring in any income since most people in that bracket would choose not to work. You would end up making the deficit worse.
Agreed. You would likely see a lot more paper divorces as well from high earning couples.
I got blindsided at tax time the year we got married. All of a sudden we made too much to deduct her student loan interest. Luckily, (stupidly?) I had knocked them out earlier in the year (2012). Wish I had known about investing. Paying the interest would've seemed cheap compared to market returns.
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So in other words, a 90% tax bracket would not bring in any income since most people in that bracket would choose not to work. You would end up making the deficit worse.
Yes. Republicans like to trot out the Laffer Curve anytime someone proposes even a modest tax increase. Current rates are low enough that most people wouldn't cut back on their work if their taxes went up, but at rates approaching 90% you would see a lot of people making this choice. I know I would have a hard time asking my employer to spend money on a raise if we both knew that the government would get almost all of that money.
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The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
Just to make sure I understand, raise the highest marginal rate to 90% on the top 10% of earners, which I think is ~120-130k a year (having trouble finding a graph that shows it clearly)? So every dollar over 120-130k is taxed at 90%?
If taxes were that high, there would be strong incentive to stop working right before hitting that top rate. The value of one's time vs dollars being made would completely skewed to the former. At current rates, while painful, the incentive to stop working doesn't really enter (at least my calculations) but at 90%, I think most would agree the value of the time becomes much more important.
So in other words, a 90% tax bracket would not bring in any income since most people in that bracket would choose not to work. You would end up making the deficit worse.
I'm not assuming a 90% marginal tax rate at ~$120k-$130k/year. It'd be at ~$200k/year in my example. What you're positing would be accurate if people made an hourly wage and grossed ~$200k+/year, but most people/couples that earn ~$200k+/year aren't hourly. The only thing a high marginal rate would do is reduce their net income.
Most, if not all, would still choose to take a higher salary, even if they're only keeping 1/10 dollars above $200k/year instead of 6(or less depending on state income taxes)/10 dollars with current taxes. The amount they'll work will remain the same, but their net income after taxes will decrease.
In terms of making the deficit worse, lets say no CEO/lawyer/etc... would even think of working for more than $200k/year, even there's no reason not to, after this new tax rate is enacted. The current marginal rates above ~$200k account for ~$.3 trillion/year in receipts, so in this situation none of that would be taxed.
Having said that, federal tax receipts wouldn't drop by that amount because companies would have a ton of money left over from not paying anyone more than $200k/year, and they would be able to increase existing salaries and/or hire more people. All of those people would pay income tax, so there federal government would still get a lot in tax, but it wouldn't get quite as much because the marginal rate for those people making less than $200k isn't as high as the rate for those making above $200k.
Having said that, just because federal tax receipts decline in this situation, doesn't mean the deficit would increase. With more money going towards lower income people, more of that money will be spent (The lower your income, the more you spend) which will likely do two things. The first off is that it will stimulate the economy, which might provide some benefits. But more importantly, there will be more local spending and local tax revenue would increase.
Since local (state, county, and city) governments would have more money from tax revenues to spend on services/infrastructure, they wouldn't need as much money from the federal government. This would be a situation where the deficit wouldn't get worse even as tax receipts dropped because federal spending would also drop.
Having said that, if the local governments did a crappy job with spending, then the federal government would still need to provide funds, and the deficit would increase, but in that case it would be because of poor spending of taxes at the local level, not because the increase in taxes resulted in the wealthiest Americans working less.
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc. We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year. We also put the max $5k into the Dependant Care FSA and some into the health care FSA, we don't have access to a HSA. Is there anything else we can deduct to lower our MAGI?
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area. It would be awesome if I could work part time but that's not an option at my current job. Maybe a career change to a less stressful lower paying job might be an option at some point. Or should I just suck it up and save as much as we can and then just FIRE earlier? Anyone else in the same situation and just want to commiserate?
Ok, so let's look at this a bit more analytically.
You are maxing two 401ks and $5k in your FS. So your taxable income is about $192k/year. Looks like this should be about $40k in federal income tax ignoring all deductions/exemptions/etc. Estimate another $10k for FICA and $20k for CA taxes leaves you with about $132k worth of take home pay, per year. This is probably low because I basically ignored any standard exemptions or deductions. It's possible you owe more in FICA depending on your incomes.
$132k yearly takehome pay translates to $11,000 per month. Guesstimating your mortgage at $5k a month, you have about $6000 per month additional in takehome pay for life expenses (food, utilities, clothing, etc).
Even if you manage to somehow spend $3000 on those you still have another $3000 to invest in whatever you want. Each year you should very easily be able to save close to $40k in taxable accounts or backdoor Roth IRAs and this isn't even remotely as much as is possible if you reduce that $3k/month spending.
Saving $75k+ a year in investments plus whatever company match you have is a fast track to being able to FIRE, especially if you are not heavily tied to your current location.
To answer your question, you probably can take some advantage of the following:
- Charitable giving
- 529 or other educational saving plans
If you are very serious about reducing your taxes, you might even explore whether you can start your own company and thus be able to put more than $18k into a 401k (total employer/employee contribution is about $50k/year). It might take some work but your employer might not care as long as the total cost to them is the same. As the company owner you have a lot more options. Definitely consult folks familiar with this if you go this route. You could also conceivably end up with a HDHP for HSA benefits too (though presumably this is worse than your current insurance?)
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I haven't read all the responses here, so maybe it's already been covered... but reducing your income to reduce your tax burden is generally not a sound plan if you're trying to reach FI.
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In retirement, I wouldn't be so concerned about income taxes, but the introduction of a large sales tax (such as the so-called "FairTax") would definitely make me leave the US immediately.
Ahhh but wouldn't it be nice to have all that extra money to save while you worked =D
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The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus.
Just to make sure I understand, raise the highest marginal rate to 90% on the top 10% of earners, which I think is ~120-130k a year (having trouble finding a graph that shows it clearly)? So every dollar over 120-130k is taxed at 90%?
If taxes were that high, there would be strong incentive to stop working right before hitting that top rate. The value of one's time vs dollars being made would completely skewed to the former. At current rates, while painful, the incentive to stop working doesn't really enter (at least my calculations) but at 90%, I think most would agree the value of the time becomes much more important.
So in other words, a 90% tax bracket would not bring in any income since most people in that bracket would choose not to work. You would end up making the deficit worse.
I'm not assuming a 90% marginal tax rate at ~$120k-$130k/year. It'd be at ~$200k/year in my example. What you're positing would be accurate if people made an hourly wage and grossed ~$200k+/year, but most people/couples that earn ~$200k+/year aren't hourly. The only thing a high marginal rate would do is reduce their net income.
Most, if not all, would still choose to take a higher salary, even if they're only keeping 1/10 dollars above $200k/year instead of 6(or less depending on state income taxes)/10 dollars with current taxes. The amount they'll work will remain the same, but their net income after taxes will decrease.
In terms of making the deficit worse, lets say no CEO/lawyer/etc... would even think of working for more than $200k/year, even there's no reason not to, after this new tax rate is enacted. The current marginal rates above ~$200k account for ~$.3 trillion/year in receipts, so in this situation none of that would be taxed.
Having said that, federal tax receipts wouldn't drop by that amount because companies would have a ton of money left over from not paying anyone more than $200k/year, and they would be able to increase existing salaries and/or hire more people. All of those people would pay income tax, so there federal government would still get a lot in tax, but it wouldn't get quite as much because the marginal rate for those people making less than $200k isn't as high as the rate for those making above $200k.
Having said that, just because federal tax receipts decline in this situation, doesn't mean the deficit would increase. With more money going towards lower income people, more of that money will be spent (The lower your income, the more you spend) which will likely do two things. The first off is that it will stimulate the economy, which might provide some benefits. But more importantly, there will be more local spending and local tax revenue would increase.
Since local (state, county, and city) governments would have more money from tax revenues to spend on services/infrastructure, they wouldn't need as much money from the federal government. This would be a situation where the deficit wouldn't get worse even as tax receipts dropped because federal spending would also drop.
Having said that, if the local governments did a crappy job with spending, then the federal government would still need to provide funds, and the deficit would increase, but in that case it would be because of poor spending of taxes at the local level, not because the increase in taxes resulted in the wealthiest Americans working less.
Wait wait wait, you wrote
"The top 10% of earners in the country pay ~$580 billion in income taxes with a top marginal rate of 39% or so, compared to a top marginal rate of ~92% on income above $200k after WWII. With the average household AGI for the top 5% at ~400k+, if we increased the top marginal rate to post-WWII levels (increase the rate and lower the income required to hit that rate), it would result in revenues on that top marginal rate of ~$1.30 trillion versus the current marginal rates of 33-40% and revenues of ~.3 trillion, which would wipe out the deficit and leave us with a ~$460 billion surplus."
You are talking about raising the rate and lowering the threshold at which that rate applies? What and what?
Which table in the links you provides shows that raising the rates on whatever income (please define) will result in taxes of $1.3 trillion?
You also write
"What you're positing would be accurate if people made an hourly wage and grossed ~$200k+/year, but most people/couples that earn ~$200k+/year aren't hourly. The only thing a high marginal rate would do is reduce their net income....Most, if not all, would still choose to take a higher salary, even if they're only keeping 1/10 dollars above $200k/year instead of 6(or less depending on state income taxes)/10 dollars with current taxes. The amount they'll work will remain the same, but their net income after taxes will decrease."
That is utter nonsense. People would either: 1) have their income changed from salary to some sort of non-wage incentive, or 2) switch to hourly. In fact, I actually had the thought that in this situation I would go back to being a contractor and work 6-8 months a year. What would happen is that none would get payed higher than 200k in wages. They'd either work less, or get some other form of compensation. It makes no sense to work 1000 hours for 200k and work 2000 hours for 220k. Those last 1000 hours net 20k, very few would do that.
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Yup, exactamundo. I'm not just talking about raising the top marginal rate and lowering the bracket arbitrarily. I'm using the top marginal rate and bracket from the US post-WWII.
http://upload.wikimedia.org/wikipedia/commons/9/97/Historical_Mariginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg
At that time we had more (real) debt than we do now, and managed to pay it down very quickly because of reduced spending and higher taxes.
http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Federal_Debt_Held_by_the_Public_1790-2013.png/425px-Federal_Debt_Held_by_the_Public_1790-2013.png
The links and definitions should be in post 105 (above). Let me know politely if anything from there is unclear.
Also, please keep ad hominems to a minimum. You may think people working with a marginal 90% tax rate is "utter nonsense", but it happened after WWII and I haven't seen any examples of people working less in the aggregate because of that high marginal tax rate.
If you're lucky enough to make $100+/hour and work 40 hours/week as a contractor, then you would probably cut back on hours, but most high earners aren't in that boat. They're salary, and they're going to work a full work week regardless of what their top marginal tax rate is. Some people may also be able to work for some of the year, but again, most don't have that luxury because business runs 24/7/365. They can try to negotiate a reduced work schedule, but there's a good chance someone making $160k/year full time will be willing to take their position for $250k/year full time, even if that last $40k is taxed at 90%.
In any event, I think this is getting a little off track in terms of the overall message. Like I said before, I don't think that the only the top marginal rate should increase, I think that everyone should pay more in taxes to pay down US government debt, just like we did after WWII. I also think we should audit and minimize federal spending, especially defense spending, just like we did after WWII. Both of those will allow us to aggressively reduce debt and will also likely benefit the economy.
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Yup, exactamundo. I'm not just talking about raising the top marginal rate and lowering the bracket arbitrarily. I'm using the top marginal rate and bracket from the US post-WWII.
http://upload.wikimedia.org/wikipedia/commons/9/97/Historical_Mariginal_Tax_Rate_for_Highest_and_Lowest_Income_Earners.jpg
At that time we had more (real) debt than we do now, and managed to pay it down very quickly because of reduced spending and higher taxes.
http://upload.wikimedia.org/wikipedia/commons/thumb/3/36/Federal_Debt_Held_by_the_Public_1790-2013.png/425px-Federal_Debt_Held_by_the_Public_1790-2013.png
The links and definitions should be in post 105 (above). Let me know politely if anything from there is unclear.
Which chart shows raising taxes on who will raise $1.3trillion? Please define the rates, the incomes, and which data support this.
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DarinC: When top marginal tax rates were 90%, after 1945, the total tax collected by the federal government was just under 19.8% of GDP.1 What are they today? About 18.3% of GDP.2
1 http://www.usgovernmentrevenue.com/year_revenue_1945USpn_16ps1n#usgs302
2 http://www.usgovernmentrevenue.com/year_revenue_2015USpn_16ps1n#usgs302
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Yup, exactamundo. I'm not just talking about raising the top marginal rate and lowering the bracket arbitrarily. I'm using the top marginal rate and bracket from the US post-WWII.
A couple things here:
1) I'm going to give you the benefit of the doubt and assume you didn't ignore a previous poster or the simple facts regarding the post-WWII economy. The US was the ONLY remaining large, developed economy after WWII. This put the US in the position for unprecedented exports, high wages, political stability, and to become the world's reserve currency & free-trade advocate. Tax rates from this era have ZERO relation to the complex global economy of today and if you can't recognize that I simply don't know what to say. If you don't think you'll see massive brain drain or job loss then you need to sit down with a macroeconomics textbook.
2) Ah, the "good old days." I love it when people harken back to eras such as this - times when 20% of the population couldn't vote and faced discriminatory hiring practices which, guess what, kept those high-paying manufacturing jobs reserved for white men in unions.
3) Other aspects of confiscatory rates like the ones you support are increases in tax avoidance and tax evasion, not to mention expatriation. The black market economy would quite simply explode.
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this post boggles my mind. I kind of hate throwing out numbers like this on the internet, but I grossed $180k in 2014 and I'm single with no kids and no mortgage. I'm pretty sure I know what it's like to pay "that kind of money" to the government, but the idea that there is anything "ohhh, poor me" about that scenario is seriously insane to me.
Its not a "poor me" thing, but more a "when is enough is enough" thing and a "is this really going to solve any problems" thing.
So lets see, 180k, so your marginal rate is 28%, but i bet your effective rate is more like 20-23% especially if you are self employed, since you could effectively put 45k away in tax deferred retirement plans. Plus the last 2 tax increases from Obama haven't affected you. At all. So your rates haven't gone up.
Imagine someone saying you should pay 10% more. Would you be happy writing an $18k check? Do you feel your money would actually help anyone?
I bet your perspective would change. Even if it didn't, since raising taxes isnt going to fix any problems, there will be calls to raise them even more, so the next tax increase will change your perspective, or the one after that.
Since there are so many people without savings out there, what if the plan was to tax savings, you know, to make things more fair? Like 1% for anyone with more than 100k in the bank, back to the first dollar? Would people care then? Of course they would, because it would actually affect them.
Can you elaborate on how increased government revenues (read: schools, roads) won't fix anything?
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Can you elaborate on how increased government revenues (read: schools, roads) won't fix anything?
I read increased government revenues as (drones, bombs)
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Yup, exactamundo. I'm not just talking about raising the top marginal rate and lowering the bracket arbitrarily. I'm using the top marginal rate and bracket from the US post-WWII.
Except you're ignoring inflation, which does make it pretty arbitrary.
$200,000 in 1945 dollars is $2.6 million in 2014 dollars (using the CPI, which has its own issues, but it's good enough to make this point).
Here's the correct way to calculate this:
$200,000 in 2014 dollars is $15,206.81 in 1945 dollars. Under the Revenue Act of 1945 (http://www.scribd.com/doc/62004329/Revenue-Act-of-1945-PL-79-214), somebody with an AGI of $15,206.81 and 1 exemption would pay a "normal tax" of $419 plus a "surtax" of $3,943 for a total income tax of $4,363, representing a tax rate of 28.7% on $200,000 of 2014 income. That is a bit higher than today's rates, but not dramatically so, and it's important to emphasise that that was the rate at the point of highest taxes in US history. At almost any other point in US history, it would have been less.
So really, current rates are not especially low -- they are a bit lower than the peak of US taxation, but higher than most of US history, when you account for inflation.
I think the technical term for a tax like that is "progressive", but I don't disagree with the rest.
I'm not ignoring inflation either, just setting the same absolute bracket, which would result in the US debt being paid down faster.
If the "1%" from my earlier link on federal income tax by source had to pay the rates from your link, on average their real marginal tax rate would go to 80+% from 40%, and tax receipts would increase by ~$250 billion per year. This is dramatically higher than today's rates. As income drops, the gap wouldn't be that large, but it would still be significant.
Like I've said at least three times before (Fourth time's the charm?), I'm not suggesting that only people making above $200k/year should pay more in taxes. I think everyone should, since it would substantially increase receipts, per the link you provided.
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Which chart shows raising taxes on who will raise $1.3trillion? Please define the rates, the incomes, and which data support this.
The links and definitions should be in post 105 (above). Let me know politely if anything from there is unclear.
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DarinC: When top marginal tax rates were 90%, after 1945, the total tax collected by the federal government was just under 19.8% of GDP.1 What are they today? About 18.3% of GDP.2
1 http://www.usgovernmentrevenue.com/year_revenue_1945USpn_16ps1n#usgs302
2 http://www.usgovernmentrevenue.com/year_revenue_2015USpn_16ps1n#usgs302
I don't dispute any of that. In 1944 it was higher at ~20.5%.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205
A difference of 2.2% of GDP is not insignificant. In fact it's likely ~70% of the 2014 deficit.
http://www.forbes.com/sites/stancollender/2014/09/16/the-federal-budget-deficit-has-disappeared-really/
Like I said before, I think tax rates in general are too low given the national debt. Spending is also too high, especially in defense, just to make that clear for the third time I think...
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Can you elaborate on how increased government revenues (read: schools, roads) won't fix anything?
I read increased government revenues as (drones, bombs)
Cuts to defense spending should minimize that.
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Yup, exactamundo. I'm not just talking about raising the top marginal rate and lowering the bracket arbitrarily. I'm using the top marginal rate and bracket from the US post-WWII.
A couple things here:
1) I'm going to give you the benefit of the doubt and assume you didn't ignore a previous poster or the simple facts regarding the post-WWII economy. The US was the ONLY remaining large, developed economy after WWII. This put the US in the position for unprecedented exports, high wages, political stability, and to become the world's reserve currency & free-trade advocate. Tax rates from this era have ZERO relation to the complex global economy of today and if you can't recognize that I simply don't know what to say. If you don't think you'll see massive brain drain or job loss then you need to sit down with a macroeconomics textbook.
2) Ah, the "good old days." I love it when people harken back to eras such as this - times when 20% of the population couldn't vote and faced discriminatory hiring practices which, guess what, kept those high-paying manufacturing jobs reserved for white men in unions.
3) Other aspects of confiscatory rates like the ones you support are increases in tax avoidance and tax evasion, not to mention expatriation. The black market economy would quite simply explode.
Look, I love ad hominems and straw men as much as the next guy, but I appreciate well reasoned and well supported posts more.
FYI, if someone can turn an argument around by changing a few words, it's not...
Like...
1) I'm going to give you the benefit of the doubt and assume you didn't ignore a previous poster or the simple facts regarding the post-WWII economy income inequality. The US was the ONLY remaining large, developed economy after WWII and a progressive tax system along with higher rates helped the economy significantly. This put the US in the position for unprecedented exports, high wages, political stability, and to become the world's reserve currency & free-trade advocate. Tax rates from this era have ZERO relation a significant connection to the complex global economy of today and if you can't recognize that I simply don't know what to say. If you don't think you'll see massive brain drain or job loss then you need to sit down with a macroeconomics textbook.
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Can you elaborate on how increased government revenues (read: schools, roads) won't fix anything?
I read increased government revenues as (drones, bombs)
Cuts to defense spending should minimize that.
Hey! That's my paycheck you're talking about!
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc. We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year. We also put the max $5k into the Dependant Care FSA and some into the health care FSA, we don't have access to a HSA. Is there anything else we can deduct to lower our MAGI?
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area. It would be awesome if I could work part time but that's not an option at my current job. Maybe a career change to a less stressful lower paying job might be an option at some point. Or should I just suck it up and save as much as we can and then just FIRE earlier? Anyone else in the same situation and just want to commiserate?
Tons of replies already...
The reality is everything you describe is accurate and its a function of a progressive tax code. Its far more progressive than the stated rates because of all the phase outs, deductions, ect. You have one of two choices - decide if you can cut expenses and live on one income, or continue to work and give up almost 50% of your earnings to Uncle Sam + State of California.
Its not a trap, because you still have "more" money for each dollar you earn, its just the % you keep drops dramatically. Its basic math, at some point between a worker keeping 100% of their earnings and 0% of their earnings, they will choose to stop working. You might have hit that point
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Which chart shows raising taxes on who will raise $1.3trillion? Please define the rates, the incomes, and which data support this.
The links and definitions should be in post 105 (above). Let me know politely if anything from there is unclear.
This is not helpful. You are throwing around so many general numbers and not laying out anything specific in 105. I think you wrote raising the rate on 200k back to 92%, but I cant find any chart that indicates that would raise the required amount. But you also talk about raising taxes on everyone, so Im not sure you intend for that 1 tax to take care of the entire sum.
I have looked at the charts you provided; for example this link
http://taxfoundation.org/article/summary-latest-federal-income-tax-data
Im not seeing anything that clearly lays out how much income remains above the top marginal rate limit, therefore cannot even begin to figure out how you are getting to 1.3 trillion, and who would pay what.
I strongly disagree with your confidence that people would just take it and keep working against higher taxes that reduces their equivalent $/hr to below minimum wage, once above the marginal rate, but we can just disagree on that. This is never going to happen.
Regarding your general point though, that everyone should pay more regardless of what it costs them to address the debt/deficit, hey at least its more balanced than what a lot of others think. No element of class warfare in this argument, just "we could address the debt with more taxes." Certainly there is 1.3trillion to be had if you are willing to raise taxes, especially on everyone.
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I won't consider myself middle class when I'm retired. I don't think it makes much sense to define classes based on income (other than passive income).
.....do you know the definition of the term you are talking about?
class - "the system of ordering a society in which people are divided into sets based on perceived social or economic status"
America doesn't have social classes, at least not in the formal sense of days past, so when we speak about class we speak almost entirely about economics -- namely income, for the majority of people in this country. You can choose to make up your own definitions for words, but just because you decide that ketchup is now a synonym for automobile does not make it so.
It's not as if there is an "official" definition of middle class.
You seem to be conflating "economic status" with "income".
Income is fleeting.
Wealth and economic status is more a function of net worth and/or passive income.
Isn't that one of the major principles of this website? Why do we do discard that in defining classes?
I'd argue that "economic status" in the US is how much you spend regardless of income.
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DarinC: When top marginal tax rates were 90%, after 1945, the total tax collected by the federal government was just under 19.8% of GDP.1 What are they today? About 18.3% of GDP.2
1 http://www.usgovernmentrevenue.com/year_revenue_1945USpn_16ps1n#usgs302
2 http://www.usgovernmentrevenue.com/year_revenue_2015USpn_16ps1n#usgs302
I don't dispute any of that. In 1944 it was higher at ~20.5%.
http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=205
A difference of 2.2% of GDP is not insignificant. In fact it's likely ~70% of the 2014 deficit.
http://www.forbes.com/sites/stancollender/2014/09/16/the-federal-budget-deficit-has-disappeared-really/
Like I said before, I think tax rates in general are too low given the national debt. Spending is also too high, especially in defense, just to make that clear for the third time I think...
Don't feel like looking up, but from what I recall, almost no people actually paid that top tax rate of 90%. It's annoying when people try to make current rates sound low by referring to that.
Each person will likely feel rates are too high if they think the govt is spending lots of $$ on things they do not agree with and is beyond the Fed's responsibility (me) but would be willing to pay a little more if they agree with policies.
Generally, though, it seems additional spending is never matched by increased taxes or spending cuts in other areas. So, debt continues to rise and, if the Fed chooses to 'pay' for it by devaluing the $, it hurts almost everyone.
I'd choose to lower debt by decreased spending. If the govt were a Mustachian, that's what it would decide to do. ; )
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Look, I love ad hominems and straw men as much as the next guy, but I appreciate well reasoned and well supported posts more.
You addressed neither 1, nor 2, nor 3. You're completely disregarding the circumstances surrounding this previous era that happened to have a set of tax rates that suit your preferred ideology. Not only does it have zero to do with today's world, it is 100% out of the question from a policy standpoint, so why is it even in discussion?
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Very interesting editorial about the middle class and taxes:
http://www.slate.com/articles/news_and_politics/politics/2015/01/the_upper_middle_class_is_ruining_all_that_is_great_about_america.html
The author's claim is that the upper middle class is hurting America by demanding higher taxes from the super rich but vehemently opposing any higher taxes for themselves, or any sacrifice for themselves of any sort. The author self-identifies as conservative, and I don't, but I agree with a lot of what's in the article. Our budget problems are never going to be solved if voters are not willing to make personal sacrifices for the good of the country.
The author defines the upper middle class as "families that earn well into the six-figure range yet don’t feel rich". I don't really qualify, since I make six figures and do feel rich, and as I've already stated in this thread, I don't feel middle class. But, as a member of whatever class I'm in, I have a plea for any politicians reading this: please raise our taxes. Please collect more in taxes from people like me who are drowning in disposable income. You won't lose my vote if you promise to raise my taxes. You might earn it.
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I advocate raising the tax rate on rich people, because I want their money so I think I should take it from them. That would be the easiest way to get it.
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I advocate raising the tax rate on rich people, because I want their money so I think I should take it from them. That would be the easiest way to get it.
Seconded. All in favor? Meow
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I favor raising taxes on poor people because they can't afford lawyers. That's probably easier than taxing rich people because of aforementioned lawyers.
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I favor raising taxes on poor people because they can't afford lawyers. That's probably easier than taxing rich people because of aforementioned lawyers.
But if they are taxed too much, they can't pay on account of being poor and become tax cheat criminals. Plus they out breed the rich leading to more and more poor people. Lets sterilize the poor so that we can finally win the war on poverty when they die out.
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I am a little confused - what is the argument about? Also, why all the BS about handpicked years to prove our taxes now are low, really low *drum roll*. why 1945 and not say 1935 (63% top rate), why 1935 and not 1925 (25% highest income tax rate), why 1925 and not 1915 (<15% highest tax rate while WWI is going on which US will enter in few years) ? Why such selective memory?
personally, I would trust government spending as percentage of GDP much more than made up comparisons with made up years. and trend is (without any exceptions known to them) that higher government spending => misery , always.
signed, ex Soviet Union immigrant , lived there, breathed the 'free' medicine/education/zero unemployment fantasies that "rich" (anyone not you) should pay for. never works, not a single example.
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As someone who makes less than 60k, I find this thread incredibly amusing.
If any of you 200k earners want to trade, let me know. :)
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I am a little confused - what is the argument about?
What ever its about, it long ago stopped being about the OPs question or helping him/her with their situation. I think now it's about this:
(http://imgs.xkcd.com/comics/duty_calls.png) (http://xkcd.com/386/)
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thanks :), liked the illustration. checking out for the next 5 pages at least (if thread makes that far).
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I favor raising taxes on poor people because they can't afford lawyers. That's probably easier than taxing rich people because of aforementioned lawyers.
But if they are taxed too much, they can't pay on account of being poor and become tax cheat criminals. Plus they out breed the rich leading to more and more poor people. Lets sterilize the poor so that we can finally win the war on poverty when they die out.
Besides, poor people don't have any money to tax. Maybe we could find a way for them to pay taxes in folk art made from old beer cans.
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Hate to break it to you, but that's not middle class. That's top 10 %.
Defining the middle class in the US is becoming problematic. If you do it solely on income it doesn't count for retirement and other critical savings needed in the "ownership" society. Defining middle class solely on an "income" basis worked a lot better when we all had pensions but that's simply not the case anymore.
Case in point would you rather be a retired 55 year old cop with a $70K annual pension or a 55 year old accountant making $125K a year with $400K in a 401K? I think most would say that the cop is doing better financially although the government would say the cop is middle class and the accountant is upper class looking at solely their annual incomes.
Middle class income and total wealth should also be defined regionally so as to take into account cost of living differences.
I think a fair definition of middle class is whether you still need to earn wages from labor. I think once a person has started being able to live off of investment income (passive income), then they start to transition out of thye middle class and into the upper class.
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Hate to break it to you, but that's not middle class. That's top 10 %.
Defining the middle class in the US is becoming problematic. If you do it solely on income it doesn't count for retirement and other critical savings needed in the "ownership" society. Defining middle class solely on an "income" basis worked a lot better when we all had pensions but that's simply not the case anymore.
Case in point would you rather be a retired 55 year old cop with a $70K annual pension or a 55 year old accountant making $125K a year with $400K in a 401K? I think most would say that the cop is doing better financially although the government would say the cop is middle class and the accountant is upper class looking at solely their annual incomes.
Middle class income and total wealth should also be defined regionally so as to take into account cost of living differences.
I think a fair definition of middle class is whether you still need to earn wages from labor. I think once a person has started being able to live off of investment income (passive income), then they start to transition out of thye middle class and into the upper class.
Such a good point, and well said too. Income is just one part of the financial picture. Someone wrote earlier about HENRYS ( high earners not yet rich), which applies to this idea. When u consider the entire picture it seems to me at least the notion of singling out just the high earners seems arbitrarily selective. So what's the answer? A wealth tax? How many people here who support taxing "the rich" support taxing wealth? What if it's their wealth?
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The idea that "we all had pensions" is pretty much a myth. http://m.kiplinger.com/article/retirement/T047-C000-S002-the-new-realities-of-retirement.html
Don't blame the boomers' underfunded retirement predicament solely on disappearing pensions. The golden age of the gold watch is largely a myth. A recent Investment Company Institute report noted that although 90% of private-sector workers who had access to a retirement plan in 1975 were covered by a traditional pension, only 20% of them ever received any income from those plans. Back then, more-stringent vesting rules prevented many workers with fewer than ten years on the job from qualifying for any pension benefits, and the biggest checks were reserved for those who stuck with one employer for 20 years or more. In reality, few did.
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The idea that "we all had pensions" is pretty much a myth. http://m.kiplinger.com/article/retirement/T047-C000-S002-the-new-realities-of-retirement.html
Don't blame the boomers' underfunded retirement predicament solely on disappearing pensions. The golden age of the gold watch is largely a myth. A recent Investment Company Institute report noted that although 90% of private-sector workers who had access to a retirement plan in 1975 were covered by a traditional pension, only 20% of them ever received any income from those plans. Back then, more-stringent vesting rules prevented many workers with fewer than ten years on the job from qualifying for any pension benefits, and the biggest checks were reserved for those who stuck with one employer for 20 years or more. In reality, few did.
I agree that boomers are a part of the "ownership" society - they just realized it way, way too late. In their defense, the boomers parents were the "pension" generation and the boomers continued their parents spending without regard for their own retirement security. If you - or Kiplinger's - looked at 1955 and 1965 the percentage of workers receiving traditional pensions would be a lot higher than 20% for the "greatest generation" or whatever you want to call pre-boomers.
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Hate to break it to you, but that's not middle class. That's top 10 %.
Defining the middle class in the US is becoming problematic. If you do it solely on income it doesn't count for retirement and other critical savings needed in the "ownership" society. Defining middle class solely on an "income" basis worked a lot better when we all had pensions but that's simply not the case anymore.
Case in point would you rather be a retired 55 year old cop with a $70K annual pension or a 55 year old accountant making $125K a year with $400K in a 401K? I think most would say that the cop is doing better financially although the government would say the cop is middle class and the accountant is upper class looking at solely their annual incomes.
Middle class income and total wealth should also be defined regionally so as to take into account cost of living differences.
I think a fair definition of middle class is whether you still need to earn wages from labor. I think once a person has started being able to live off of investment income (passive income), then they start to transition out of thye middle class and into the upper class.
Such a good point, and well said too. Income is just one part of the financial picture. Someone wrote earlier about HENRYS ( high earners not yet rich), which applies to this idea. When u consider the entire picture it seems to me at least the notion of singling out just the high earners seems arbitrarily selective. So what's the answer? A wealth tax? How many people here who support taxing "the rich" support taxing wealth? What if it's their wealth?
Thanks for pointing out the HENRY group. I bet they exist in droves in large cities.
http://archive.fortune.com/2008/10/24/magazines/fortune/tully_henrys.fortune/index.htm
http://www.marketplace.org/topics/economy/keeping-henrys
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Hate to break it to you, but that's not middle class. That's top 10 %.
Defining the middle class in the US is becoming problematic. If you do it solely on income it doesn't count for retirement and other critical savings needed in the "ownership" society. Defining middle class solely on an "income" basis worked a lot better when we all had pensions but that's simply not the case anymore.
Case in point would you rather be a retired 55 year old cop with a $70K annual pension or a 55 year old accountant making $125K a year with $400K in a 401K? I think most would say that the cop is doing better financially although the government would say the cop is middle class and the accountant is upper class looking at solely their annual incomes.
Middle class income and total wealth should also be defined regionally so as to take into account cost of living differences.
I think a fair definition of middle class is whether you still need to earn wages from labor. I think once a person has started being able to live off of investment income (passive income), then they start to transition out of thye middle class and into the upper class.
This kind of ignores that the pension for the cop was effectively forced savings. Of course the cop is in a better place, because the accountant (apparently) failed to save much during his or her working career. If you equalize the pension contributions, you can get a better sense of what the cop's real wages were over time. Unfortunately, the tax code doesn't treat this stuff in an economically appropriate matter--pension contributions should have the same cap on tax deferral as do 401(k)s (or vice versa).
I do believe that it can be appropriate to think of middle/upper class as accounting for COL differences, and there are certainly some places where low six figures could conceivably be upper-middle class (and mid/high 5 figures could be mid/lower middle class).
But this idea that, in order to "start to transition" out of the middle class, you need to be in a position where you never need to work again? That is ridiculous, on both sides: it implies that someone is upper class if they have very modest passive income but low enough spending to live on that passive income (e.g., $15k/year ERE types), and it implies that someone making $500k a year might not be upper class if they're a spendthrift and blow all of their cash. Income is an imperfect substitute, but it gets rid of a lot of the noise.
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But this idea that, in order to "start to transition" out of the middle class, you need to be in a position where you never need to work again? That is ridiculous, on both sides: it implies that someone is upper class if they have very modest passive income but low enough spending to live on that passive income (e.g., $15k/year ERE types), and it implies that someone making $500k a year might not be upper class if they're a spendthrift and blow all of their cash. Income is an imperfect substitute, but it gets rid of a lot of the noise.
Are you sure? The living off 15k type has ~400k in the bank. They are rich compared to almost everyone on earth, and even most of the US populate, who is too busy buying useless crap to save any significant funds at all.
One can make 500k a year and still be poor. Buy a few homes, a boat, a few fancy cars they can easily have negative NW. They are not rich (and yes, the person in this example is an idiot), but they are a high earner.
The whole point is the "tax the rich" mantra is flawed because all it really means in Obama-speak is high earners. Its demagoguery. It's speaking nonsense that appeals to people who hear "it's someone else's responsibility".
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Info on private pension plans 1950-74 http://socialsecurity.gov/policy/docs/ssb/v39n6/v39n6p3.pdf
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Hate to break it to you, but that's not middle class. That's top 10 %.
Defining the middle class in the US is becoming problematic. If you do it solely on income it doesn't count for retirement and other critical savings needed in the "ownership" society. Defining middle class solely on an "income" basis worked a lot better when we all had pensions but that's simply not the case anymore.
Case in point would you rather be a retired 55 year old cop with a $70K annual pension or a 55 year old accountant making $125K a year with $400K in a 401K? I think most would say that the cop is doing better financially although the government would say the cop is middle class and the accountant is upper class looking at solely their annual incomes.
Middle class income and total wealth should also be defined regionally so as to take into account cost of living differences.
I think a fair definition of middle class is whether you still need to earn wages from labor. I think once a person has started being able to live off of investment income (passive income), then they start to transition out of the middle class and into the upper class.
1. This kind of ignores that the pension for the cop was effectively forced savings.
2. Of course the cop is in a better place, because the accountant (apparently) failed to save much during his or her working career.
1. Forced savings would be a great way (like the Australian system) to make the ownership society retirement system work a whole lot better.
2. The cop is in a better place because his or her employer (the taxpayers, in reality) will end up paying 80-90% of his or her pension costs until they and, most likely, their spouse passes away. With regard to 401K savers, why do you say that saving $400K at 55 is a failure? What if the accountant only started earning $125K a year 3 years ago and his employer does not have a retirement savings match? If we expect humans to be perfect with regard to spending, earning, saving, investing and withdrawing, then the "ownership" society system will never, ever work for the vast majority of humans who have not accumulated enough wealth to get off the wage tread mill or who get sick, are uneducated, grow up poor or middle class, come from "pension" families so they either were nor taught to save or spend like they don't need to save, have bad role models for parents, have no parents, get laid off, don't follow good advice and start too late in life, etc. or simply make mistakes...
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But this idea that, in order to "start to transition" out of the middle class, you need to be in a position where you never need to work again? That is ridiculous, on both sides: it implies that someone is upper class if they have very modest passive income but low enough spending to live on that passive income (e.g., $15k/year ERE types), and it implies that someone making $500k a year might not be upper class if they're a spendthrift and blow all of their cash. Income is an imperfect substitute, but it gets rid of a lot of the noise.
Are you sure? The living off 15k type has ~400k in the bank. They are rich compared to almost everyone on earth, and even most of the US populate, who is too busy buying useless crap to save any significant funds at all.
One can make 500k a year and still be poor. Buy a few homes, a boat, a few fancy cars they can easily have negative NW. They are not rich (and yes, the person in this example is an idiot), but they are a high earner.
The whole point is the "tax the rich" mantra is flawed because all it really means in Obama-speak is high earners. Its demagoguery. It's speaking nonsense that appeals to people who hear "it's someone else's responsibility".
I will acknowledge that tax policy debates would be on firmer ground if the debate was "tax high earners!" rather than "tax the rich!" The recognition-event framework of taxation is designed around taxing income, not wealth. And yes, the person who can afford to "buy a few homes, a boat, a few fancy cars" should be taxed at a significantly higher rate that the person who can afford to pay modest rent and food on their table. The fact that a few people in the former group are idiots with their money isn't an indictment of progressive taxation.
Of course, I think we should tax wealth much more broadly at death (much broader and higher inheritance tax, get rid of the step up in basis, etc.), so it is what it is. Despite being a relatively high earner, I still believe very firmly in that pesky social contract that holds that we shouldn't be letting people starve in the streets or be deprived of solid public education or infrastructure.
Comparing the "retired with a $70k pension cop" and the accountant only works if you are equalizing salary over time. Takes a lot of years on the job to have that vested pension, and the value of that pension should be "backed in" to the wages the cop received over his or her career to make a fair comparison to the accountant. Obviously, if you turn the pension around and the cop had a much higher effective wage over his career than the accountant, it shouldn't be remotely surprising that the cop is in a better place. Of course, there could be a huge thread on its own devoted to the public choice problems inherent in public pensions, but that's going pretty far out in left field.
ETA: We do have some forced savings. It's called social security, though I have no expectation that I will ever see a penny of those savings (and that is a problem inherent with a forced savings system). I wouldn't have any problem whatsoever with expanding forced savings, and I think it's good public policy, but most people really don't like it.
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But this idea that, in order to "start to transition" out of the middle class, you need to be in a position where you never need to work again? That is ridiculous, on both sides: it implies that someone is upper class if they have very modest passive income but low enough spending to live on that passive income (e.g., $15k/year ERE types), and it implies that someone making $500k a year might not be upper class if they're a spendthrift and blow all of their cash. Income is an imperfect substitute, but it gets rid of a lot of the noise.
Class should be defined in both terms of income and wealth in order to not unfairly target or classify those that perceive themselves as middle class as wealthy. I think making money from money - with no need to labor - is a pretty good sign that a person is wealthy. Another way of looking at how to best define whether a person is middle class or wealthy is how secure they are in retirement savings? If we have a target number per person of $1, 2 or 3 million for retirement savings (taking into account age and subtracting expenses for kids, health care, etc.) , we might get a sense of how wealthy folks really are. Wealth accumulation - not wages from labor - is a much bigger factor in retirement security.
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But this idea that, in order to "start to transition" out of the middle class, you need to be in a position where you never need to work again? That is ridiculous, on both sides: it implies that someone is upper class if they have very modest passive income but low enough spending to live on that passive income (e.g., $15k/year ERE types), and it implies that someone making $500k a year might not be upper class if they're a spendthrift and blow all of their cash. Income is an imperfect substitute, but it gets rid of a lot of the noise.
Class should be defined in both terms of income and wealth in order to not unfairly target or classify those that perceive themselves as middle class as wealthy. I think making money from money - with no need to labor - is a pretty good sign that a person is wealthy. Another way of looking at how to best define whether a person is middle class or wealthy is how secure they are in retirement savings? If we have a target number per person of $1, 2 or 3 million for retirement savings (taking into account age and subtracting expenses for kids, health care, etc.) , we might get a sense of how wealthy folks really are. Wealth accumulation - not wages from labor - is a much bigger factor in retirement security.
I do think it should be defined in terms of a combination of income and wealth, but doing wealth correctly is much more difficult. If you turn it into being based entirely on security in retirement savings, are you basing that on an objective standard for retirement? The perfect test probably is some balance between expected future earnings and current assets, but effectively testing that runs into a number of variables that is basically impossible to sort out. You can't base tax policy on this.
If you want to tax based on wealth, are you going to tax the high-earning person who has not saved as much money at a higher rate to give them a chance to "catch up"? I wouldn't think so. If you're going to tax the frugal lifelong saver more highly on the wealth they have accumulated (before they die anyway--I think all bets are off at death), that's going to strongly incentivize people to over-consume/under-save.
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But this idea that, in order to "start to transition" out of the middle class, you need to be in a position where you never need to work again? That is ridiculous, on both sides: it implies that someone is upper class if they have very modest passive income but low enough spending to live on that passive income (e.g., $15k/year ERE types), and it implies that someone making $500k a year might not be upper class if they're a spendthrift and blow all of their cash. Income is an imperfect substitute, but it gets rid of a lot of the noise.
Are you sure? The living off 15k type has ~400k in the bank. They are rich compared to almost everyone on earth, and even most of the US populate, who is too busy buying useless crap to save any significant funds at all.
One can make 500k a year and still be poor. Buy a few homes, a boat, a few fancy cars they can easily have negative NW. They are not rich (and yes, the person in this example is an idiot), but they are a high earner.
The whole point is the "tax the rich" mantra is flawed because all it really means in Obama-speak is high earners. Its demagoguery. It's speaking nonsense that appeals to people who hear "it's someone else's responsibility".
I will acknowledge that tax policy debates would be on firmer ground if the debate was "tax high earners!" rather than "tax the rich!" The recognition-event framework of taxation is designed around taxing income, not wealth. And yes, the person who can afford to "buy a few homes, a boat, a few fancy cars" should be taxed at a significantly higher rate that the person who can afford to pay modest rent and food on their table. The fact that a few people in the former group are idiots with their money isn't an indictment of progressive taxation.
Of course, I think we should tax wealth much more broadly at death (much broader and higher inheritance tax, get rid of the step up in basis, etc.), so it is what it is. Despite being a relatively high earner, I still believe very firmly in that pesky social contract that holds that we shouldn't be letting people starve in the streets or be deprived of solid public education or infrastructure.
Comparing the "retired with a $70k pension cop" and the accountant only works if you are equalizing salary over time. Takes a lot of years on the job to have that vested pension, and the value of that pension should be "backed in" to the wages the cop received over his or her career to make a fair comparison to the accountant. Obviously, if you turn the pension around and the cop had a much higher effective wage over his career than the accountant, it shouldn't be remotely surprising that the cop is in a better place. Of course, there could be a huge thread on its own devoted to the public choice problems inherent in public pensions, but that's going pretty far out in left field.
ETA: We do have some forced savings. It's called social security, though I have no expectation that I will ever see a penny of those savings (and that is a problem inherent with a forced savings system). I wouldn't have any problem whatsoever with expanding forced savings, and I think it's good public policy, but most people really don't like it.
[First bolded] - I don't think many would argue that starving people is good. Social safety nets for actual legitimate need are important.
But it is a more legitimate question to ask what is expected vis-a-vis personal responsibility. I remember reading on these boards about some 48 Hours special on poverty where the family in the piece couldn't put food on the table but refused to give up cable (or something like that). I remember seeing, during the height of the recent financial crisis, people driving to food banks in the Cadillacs (CBS Sunday Morning show, I believe). Where is the line between legitimate need and refusing to tell someone who appears needy maybe they need less stuff. I mean, is it reasonable to take tax dollars away from one to help another get food, when the other made shoddy financial decisions (as an example)? If you say yes, then you are effectively saying some peoples taxes should go to other people's Cadillacs.
Or more generally, if there is a social responsibility to help the truly needy, is there a social responsibility to do one's best not to be needy?
[Second bolded]. SS is not forced savings. Workers pay in, beneficiaries pay out. You might argue that any surplus is saved, but even if it happened in the past, the demographic picture is it wont happen in the future.
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I completely agree that there is an issue between necessary safety nets and when, if ever, they should be pulled away because people made terrible decisions. I don't think any decisions are ever terrible enough to justify allowing people to starve in the streets, and that is doubly true for situations where people have made really horrible decisions re the number of kids to have (it is not the kids' fault). That said, I do agree that people who receive aid should be forced to cut things that aren't necessities.
I'll acknowledge that thinking of social security as forced savings can be sloppy. That's essentially what it is intended as. I acknowledged the problems with it (like I said, I expect I will never see a penny of mine). Are you envisioning a system of individual forced saving? The problem there is that the government can always change the rules--as they will have to with social security--so it's exposed to the same issues that social security benefits will be facing down. That's why I made the comparison.
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I completely agree that there is an issue between necessary safety nets and when, if ever, they should be pulled away because people made terrible decisions. I don't think any decisions are ever terrible enough to justify allowing people to starve in the streets, and that is doubly true for situations where people have made really horrible decisions re the number of kids to have (it is not the kids' fault). That said, I do agree that people who receive aid should be forced to cut things that aren't necessities.
I'll acknowledge that thinking of social security as forced savings can be sloppy. That's essentially what it is intended as. I acknowledged the problems with it (like I said, I expect I will never see a penny of mine). Are you envisioning a system of individual forced saving? The problem there is that the government can always change the rules--as they will have to with social security--so it's exposed to the same issues that social security benefits will be facing down. That's why I made the comparison.
Starving children are always bad.
I would personally favor forced personal savings. To my mind there is a significant difference between money being taxed from earnings, going into a government system, and then redistributed to people, compared to government mandating forced savings, and the money not changing hands. The latter is simpler, takes a massive bureaucracy out of the picture, and IMHO this lead to more personal responsibility.
I agree the government can always change the rules, but as you point out they can change the rules with the current system, so its a non-issue in that its gonna happen if its gonna happen.
I agree the gubment can always change the rules, but of course it can
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I'll acknowledge that thinking of social security as forced savings can be sloppy. That's essentially what it is intended as. I acknowledged the problems with it (like I said, I expect I will never see a penny of mine). Are you envisioning a system of individual forced saving? The problem there is that the government can always change the rules--as they will have to with social security--so it's exposed to the same issues that social security benefits will be facing down. That's why I made the comparison.
Why are people so quick to say they are okay with the government taking social security benefits? Losing SS is likely to cost you a hell of a lot more than a change in a tax rate but people fight the tax rate so much harder than a SS cut or a fix to solidify the system.
The Paul Ryans of the world are already chopping benefits along generational lines. Why, because the boomers howl if you touch their benefits and Gen X and Gen Y say "I don't expect to see any of it..."
This nonsense has got to stop.
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Definitely not middle class, but there are tax shelters available to you. Real estate investing, municipal bonds, oil wells, and others. Even forgoing stock sales so that you don't realize capital gains. These strategies can reduce your adjusted gross income down to the point where you can take advantage of otherwise lost tax breaks (Roth contributions, personal exemptions, child tax credit, etc.).
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I completely agree that there is an issue between necessary safety nets and when, if ever, they should be pulled away because people made terrible decisions. I don't think any decisions are ever terrible enough to justify allowing people to starve in the streets, and that is doubly true for situations where people have made really horrible decisions re the number of kids to have (it is not the kids' fault). That said, I do agree that people who receive aid should be forced to cut things that aren't necessities.
I'll acknowledge that thinking of social security as forced savings can be sloppy. That's essentially what it is intended as. I acknowledged the problems with it (like I said, I expect I will never see a penny of mine). Are you envisioning a system of individual forced saving? The problem there is that the government can always change the rules--as they will have to with social security--so it's exposed to the same issues that social security benefits will be facing down. That's why I made the comparison.
Starving children are always bad.
I would personally favor forced personal savings. To my mind there is a significant difference between money being taxed from earnings, going into a government system, and then redistributed to people, compared to government mandating forced savings, and the money not changing hands. The latter is simpler, takes a massive bureaucracy out of the picture, and IMHO this lead to more personal responsibility.
I agree the government can always change the rules, but as you point out they can change the rules with the current system, so its a non-issue in that its gonna happen if its gonna happen.
I agree the gubment can always change the rules, but of course it can
SS is forced savings in the sense that it takes money from your paycheck, pools it with other individuals (similar to a mutual fund or another "pooled" investment vehicle) and then pays you a benefit when you qualify. The Supreme Court has ruled that you are "entitled" to receive this benefit so, unlike a mutual fund, it is backed by the United States government. Unlike a mutual, you may receive more in benefits than you paid in (even with compounded interest) but you might receive less as well (if you die young, for instance). It's also a safety net insurance policy that most, including MMM, see as a cornerstone for retirement security in the United States.
http://en.wikipedia.org/wiki/Entitlement
In the United States, an entitlement program is a type of "government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right...whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. The beneficiaries of entitlement programs are normally individual citizens or residents, although sometimes organizations such as business corporations, local governments, or even political parties may have similar special 'entitlements' under certain programs."[3] Examples of entitlement programs at the federal level in the United States include Social Security, Medicare and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs.[4][5]
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I completely agree that there is an issue between necessary safety nets and when, if ever, they should be pulled away because people made terrible decisions. I don't think any decisions are ever terrible enough to justify allowing people to starve in the streets, and that is doubly true for situations where people have made really horrible decisions re the number of kids to have (it is not the kids' fault). That said, I do agree that people who receive aid should be forced to cut things that aren't necessities.
I'll acknowledge that thinking of social security as forced savings can be sloppy. That's essentially what it is intended as. I acknowledged the problems with it (like I said, I expect I will never see a penny of mine). Are you envisioning a system of individual forced saving? The problem there is that the government can always change the rules--as they will have to with social security--so it's exposed to the same issues that social security benefits will be facing down. That's why I made the comparison.
Starving children are always bad.
I would personally favor forced personal savings. To my mind there is a significant difference between money being taxed from earnings, going into a government system, and then redistributed to people, compared to government mandating forced savings, and the money not changing hands. The latter is simpler, takes a massive bureaucracy out of the picture, and IMHO this lead to more personal responsibility.
I agree the government can always change the rules, but as you point out they can change the rules with the current system, so its a non-issue in that its gonna happen if its gonna happen.
I agree the gubment can always change the rules, but of course it can
SS is forced savings in the sense that it takes money from your paycheck, pools it with other individuals (similar to a mutual fund or another "pooled" investment vehicle) and then pays you a benefit when you qualify. The Supreme Court has ruled that you are "entitled" to receive this benefit so, unlike a mutual fund, it is backed by the United States government. Unlike a mutual, you may receive more in benefits than you paid in (even with compounded interest) but you might receive less as well (if you die young, for instance). It's also a safety net insurance policy that most, including MMM, see as a cornerstone for retirement security in the United States.
http://en.wikipedia.org/wiki/Entitlement
In the United States, an entitlement program is a type of "government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right...whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. The beneficiaries of entitlement programs are normally individual citizens or residents, although sometimes organizations such as business corporations, local governments, or even political parties may have similar special 'entitlements' under certain programs."[3] Examples of entitlement programs at the federal level in the United States include Social Security, Medicare and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs.[4][5]
Yeah, one of the aspects of MMM that I never agreed with is the notion that one can be FI and have a plan that requires relying on programs like SS. To me, the word independence implies independence, not dependence on government programs. Hence I do not include any benefits when I consider my FI progression, even if I will receive benefits.
Ok, gametime.
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The Supreme Court has ruled that you are "entitled" to receive this benefit so, unlike a mutual fund, it is backed by the United States government.
I want to stay out of all these tangential arguments, but I want to know what you are referring to. I'm pretty sure the Supreme Court has ruled the opposite (http://en.wikipedia.org/wiki/Flemming_v._Nestor):
"The Court ruled that no such contract exists, and that there is no contractual right to receive Social Security payments. Payments due under Social Security are not “property” rights and are not protected by the Takings Clause of the Fifth Amendment. The interest of a beneficiary of Social Security is protected only by the Due Process Clause.
Under Due Process Clause analysis, government action is valid unless it is patently arbitrary and utterly lacking in rational justification. This provision of §202(n) is not irrational; it could have been justified by the desire to increase the purchasing power of those living in America, because those living abroad would not spend their payments here."
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I completely agree that there is an issue between necessary safety nets and when, if ever, they should be pulled away because people made terrible decisions. I don't think any decisions are ever terrible enough to justify allowing people to starve in the streets, and that is doubly true for situations where people have made really horrible decisions re the number of kids to have (it is not the kids' fault). That said, I do agree that people who receive aid should be forced to cut things that aren't necessities.
I'll acknowledge that thinking of social security as forced savings can be sloppy. That's essentially what it is intended as. I acknowledged the problems with it (like I said, I expect I will never see a penny of mine). Are you envisioning a system of individual forced saving? The problem there is that the government can always change the rules--as they will have to with social security--so it's exposed to the same issues that social security benefits will be facing down. That's why I made the comparison.
Starving children are always bad.
I would personally favor forced personal savings. To my mind there is a significant difference between money being taxed from earnings, going into a government system, and then redistributed to people, compared to government mandating forced savings, and the money not changing hands. The latter is simpler, takes a massive bureaucracy out of the picture, and IMHO this lead to more personal responsibility.
I agree the government can always change the rules, but as you point out they can change the rules with the current system, so its a non-issue in that its gonna happen if its gonna happen.
I agree the gubment can always change the rules, but of course it can
SS is forced savings in the sense that it takes money from your paycheck, pools it with other individuals (similar to a mutual fund or another "pooled" investment vehicle) and then pays you a benefit when you qualify. The Supreme Court has ruled that you are "entitled" to receive this benefit so, unlike a mutual fund, it is backed by the United States government. Unlike a mutual, you may receive more in benefits than you paid in (even with compounded interest) but you might receive less as well (if you die young, for instance). It's also a safety net insurance policy that most, including MMM, see as a cornerstone for retirement security in the United States.
http://en.wikipedia.org/wiki/Entitlement
In the United States, an entitlement program is a type of "government program that provides individuals with personal financial benefits (or sometimes special government-provided goods or services) to which an indefinite (but usually rather large) number of potential beneficiaries have a legal right...whenever they meet eligibility conditions that are specified by the standing law that authorizes the program. The beneficiaries of entitlement programs are normally individual citizens or residents, although sometimes organizations such as business corporations, local governments, or even political parties may have similar special 'entitlements' under certain programs."[3] Examples of entitlement programs at the federal level in the United States include Social Security, Medicare and Medicaid, most Veterans' Administration programs, federal employee and military retirement plans, unemployment compensation, food stamps, and agricultural price support programs.[4][5]
Yeah, one of the aspects of MMM that I never agreed with is the notion that one can be FI and have a plan that requires relying on programs like SS. To me, the word independence implies independence, not dependence on government programs. Hence I do not include any benefits when I consider my FI progression, even if I will receive benefits.
Ok, gametime.
Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
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Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
We are talking about financial independence, which has nothing or little to do with MadMax style apocalypse.
Go Patriots!
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The Supreme Court has ruled that you are "entitled" to receive this benefit so, unlike a mutual fund, it is backed by the United States government.
I want to stay out of all these tangential arguments, but I want to know what you are referring to. I'm pretty sure the Supreme Court has ruled the opposite (http://en.wikipedia.org/wiki/Flemming_v._Nestor):
"The Court ruled that no such contract exists, and that there is no contractual right to receive Social Security payments. Payments due under Social Security are not “property” rights and are not protected by the Takings Clause of the Fifth Amendment. The interest of a beneficiary of Social Security is protected only by the Due Process Clause.
Under Due Process Clause analysis, government action is valid unless it is patently arbitrary and utterly lacking in rational justification. This provision of §202(n) is not irrational; it could have been justified by the desire to increase the purchasing power of those living in America, because those living abroad would not spend their payments here."
Interesting - and thanks for posting. This case involved denial of SS benefits to a communist in 1960. We'll likely get another case if SSDI runs dry and benefits are denied to a military veteran of the middle east conflict. The latter fact pattern may result in a different outcome. Of course, legislators and the chief executive would have to cut or deny to pay these benefits to the combat veteran first before it could ever be litigated.
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I just thought of a great solution for people concerned about the taxes for making $250,000/year. Just donate some of your money to me, like say, $100,000 of it and then you won't have to worry about paying capital gains taxes on it. It's a solution that works for everybody.
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Moneycat, I think the limit on untaxed gifts is $14,000, so you'd be paying the taxes on that $100 grand...
And the comment about ""That said, I do agree that people who receive aid should be forced to cut things that aren't necessities. "...when you apply for food stamps, you have to demonstrate that you have less than $2250 in savings or personal property. How vehicles count depends upon your state: http://www.fns.usda.gov/snap/eligibility
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Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
We are talking about financial independence, which has nothing or little to do with MadMax style apocalypse.
Go Patriots!
Yes, but you are still arbitrarily cherry picking the issues you have problems with being dependent on the government for assistance.
Congratulations on the Patriots win.
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Moneycat, I think the limit on untaxed gifts is $14,000, so you'd be paying the taxes on that $100 grand...
And the comment about ""That said, I do agree that people who receive aid should be forced to cut things that aren't necessities. "...when you apply for food stamps, you have to demonstrate that you have less than $2250 in savings or personal property. How vehicles count depends upon your state: http://www.fns.usda.gov/snap/eligibility
I know the requirements. I've been on food stamps before, and have family that still is. I think the asset test cutoff is too low, and it's a problem that they don't make people cancel the cable, cancel the smartphone, sufficiently monitor the kind of food being bought (though I will admit that food deserts in urban areas are a real problem on this front, because SNAP does impose some limitations), etc.
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Moneycat, I think the limit on untaxed gifts is $14,000, so you'd be paying the taxes on that $100 grand...
And the comment about ""That said, I do agree that people who receive aid should be forced to cut things that aren't necessities. "...when you apply for food stamps, you have to demonstrate that you have less than $2250 in savings or personal property. How vehicles count depends upon your state: http://www.fns.usda.gov/snap/eligibility
I know the requirements. I've been on food stamps before, and have family that still is. I think the asset test cutoff is too low, and it's a problem that they don't make people cancel the cable, cancel the smartphone, sufficiently monitor the kind of food being bought (though I will admit that food deserts in urban areas are a real problem on this front, because SNAP does impose some limitations), etc.
This.
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Fruitvale station & a Brompton, you got a house for 2x income:
http://www.trulia.com/property/3146992788-2047-36th-Ave-Oakland-CA-94601
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Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
We are talking about financial independence, which has nothing or little to do with MadMax style apocalypse.
Go Patriots!
Yes, but you are still arbitrarily cherry picking the issues you have problems with being dependent on the government for assistance.
Congratulations on the Patriots win.
Thanx, that was a rocky one.
And what? We are talking about FI. Financial Independence. Money. Saying the notion that one who relies on a government assistance program can't really be FI, since they have a dependency on something, has NOTHING to do with peoples' general reliance on government for day to day stability and protection against apocalyptic fantasies.. Your argument is so tainted I had to go look up what type of logical error you are making. False Analogy (http://en.wikipedia.org/wiki/Argument_from_analogy#False_analogy).
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Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
We are talking about financial independence, which has nothing or little to do with MadMax style apocalypse.
Go Patriots!
Yes, but you are still arbitrarily cherry picking the issues you have problems with being dependent on the government for assistance.
Congratulations on the Patriots win.
Thanx, that was a rocky one.
And what? We are talking about FI. Financial Independence. Money. Saying the notion that one who relies on a government assistance program can't really be FI, since they have a dependency on something, has NOTHING to do with peoples' general reliance on government for day to day stability and protection against apocalyptic fantasies.. Your argument is so tainted I had to go look up what type of logical error you are making. False Analogy (http://en.wikipedia.org/wiki/Argument_from_analogy#False_analogy).
Are you telling me that you don't use roads?
Marshawn Lynch should have plowed it in from 1 yard line but since the Seahawks were there on a very luck catch, I hope that Pete C. doesn't get grilled too badly today and forever...
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Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
We are talking about financial independence, which has nothing or little to do with MadMax style apocalypse.
Go Patriots!
Yes, but you are still arbitrarily cherry picking the issues you have problems with being dependent on the government for assistance.
Congratulations on the Patriots win.
Thanx, that was a rocky one.
And what? We are talking about FI. Financial Independence. Money. Saying the notion that one who relies on a government assistance program can't really be FI, since they have a dependency on something, has NOTHING to do with peoples' general reliance on government for day to day stability and protection against apocalyptic fantasies.. Your argument is so tainted I had to go look up what type of logical error you are making. False Analogy (http://en.wikipedia.org/wiki/Argument_from_analogy#False_analogy).
Are you telling me that you don't use roads?
Marshawn Lynch should have plowed it in from 1 yard line but since the Seahawks were there ona very luck catch, I hope that Pete C. doesn't get grilled to badly today and forever...
I think that play call will be questioned till the end of time. I would like to see stats on interceptions on short slant routes vs fumbles on short runs -- i.e. was it really that dumb of a play call? Whats the worst that can happen -- yeah an interception, but if they ran it, beast mode could have fumbled, or the hand-off botched, or whatever.
I'm telling you roads have nothing to do with Financial Independence as a concept and the elements that define that concept. We are not talking about the value of government or even taxes anymore. We are talking about a concept. What does it mean to be financially independent. I say one is not FI if one relies on money from an outside source. Countering with "yeah but you need roads" has nothing to do with the definition of when one is financially independent.
If I were saying "government is useless and we don't need it", the counterpoint "but wait don't you need some or all of the things government provides, l like roads" makes sense.
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
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Well, unless you are pedaling a bike to generate your power while accessing the internet from the Thunderdome (http://en.wikipedia.org/wiki/Mad_Max_Beyond_Thunderdome) where you have successfully battled hundreds of post apocalyptic warriors for complete and individual domination, your retirement (and other) security is already completely dependent on the government.
Halftime Retort! Back to the game.
Go Seahawks!
We are talking about financial independence, which has nothing or little to do with MadMax style apocalypse.
Go Patriots!
Yes, but you are still arbitrarily cherry picking the issues you have problems with being dependent on the government for assistance.
Congratulations on the Patriots win.
Thanx, that was a rocky one.
And what? We are talking about FI. Financial Independence. Money. Saying the notion that one who relies on a government assistance program can't really be FI, since they have a dependency on something, has NOTHING to do with peoples' general reliance on government for day to day stability and protection against apocalyptic fantasies.. Your argument is so tainted I had to go look up what type of logical error you are making. False Analogy (http://en.wikipedia.org/wiki/Argument_from_analogy#False_analogy).
Are you telling me that you don't use roads?
Marshawn Lynch should have plowed it in from 1 yard line but since the Seahawks were there ona very luck catch, I hope that Pete C. doesn't get grilled to badly today and forever...
I think that play call will be questioned till the end of time. I would like to see stats on interceptions on short slant routes vs fumbles on short runs -- i.e. was it really that dumb of a play call? Whats the worst that can happen -- yeah an interception, but if they ran it, beast mode could have fumbled, or the hand-off botched, or whatever.
I'm telling you roads have nothing to do with Financial Independence as a concept and the elements that define that concept. We are not talking about the value of government or even taxes anymore. We are talking about a concept. What does it mean to be financially independent. I say one is not FI if one relies on money from an outside source. Countering with "yeah but you need roads" has nothing to do with the definition of when one is financially independent.
If I were saying "government is useless and we don't need it", the counterpoint "but wait don't you need some or all of the things government provides, l like roads" makes sense.
I just don't see a difference between the government providing and maintaining roads and providing and maintaining social security. It's basically, the same thing. Both are very useful in giving me the means to FIRE and I don't plan to do without either one in retirement.
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
Social security is not a handout.
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Are you telling me that you don't use roads?
Marshawn Lynch should have plowed it in from 1 yard line but since the Seahawks were there ona very luck catch, I hope that Pete C. doesn't get grilled to badly today and forever...
I think that play call will be questioned till the end of time. I would like to see stats on interceptions on short slant routes vs fumbles on short runs -- i.e. was it really that dumb of a play call? Whats the worst that can happen -- yeah an interception, but if they ran it, beast mode could have fumbled, or the hand-off botched, or whatever.
I'm telling you roads have nothing to do with Financial Independence as a concept and the elements that define that concept. We are not talking about the value of government or even taxes anymore. We are talking about a concept. What does it mean to be financially independent. I say one is not FI if one relies on money from an outside source. Countering with "yeah but you need roads" has nothing to do with the definition of when one is financially independent.
If I were saying "government is useless and we don't need it", the counterpoint "but wait don't you need some or all of the things government provides, l like roads" makes sense.
I just don't see a difference between the government providing and maintaining roads and providing and maintaining social security. It's basically, the same thing. Both are very useful in giving me the means to FIRE and I don't plan to do without either one in retirement.
Haha ok. Yes because people need roads reliance on SS doesn't constitute a dependence in the definition of FI. Congratulations, you found a way to be financially independent while maintaining a massive financial dependency.
-
Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
Social security is not a handout.
Ah, quibbling...That's true, replace "handout" with "entitlement" and go again.
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Are you telling me that you don't use roads?
Marshawn Lynch should have plowed it in from 1 yard line but since the Seahawks were there ona very luck catch, I hope that Pete C. doesn't get grilled to badly today and forever...
I think that play call will be questioned till the end of time. I would like to see stats on interceptions on short slant routes vs fumbles on short runs -- i.e. was it really that dumb of a play call? Whats the worst that can happen -- yeah an interception, but if they ran it, beast mode could have fumbled, or the hand-off botched, or whatever.
I'm telling you roads have nothing to do with Financial Independence as a concept and the elements that define that concept. We are not talking about the value of government or even taxes anymore. We are talking about a concept. What does it mean to be financially independent. I say one is not FI if one relies on money from an outside source. Countering with "yeah but you need roads" has nothing to do with the definition of when one is financially independent.
If I were saying "government is useless and we don't need it", the counterpoint "but wait don't you need some or all of the things government provides, l like roads" makes sense.
I just don't see a difference between the government providing and maintaining roads and providing and maintaining social security. It's basically, the same thing. Both are very useful in giving me the means to FIRE and I don't plan to do without either one in retirement.
Haha ok. Yes because people need roads reliance on SS doesn't constitute a dependence in the definition of FI. Congratulations, you found a way to be financially independent while maintaining a massive financial dependency.
Thank you, the difference between you and I is that you're living in denial of your dependence on government for financial security
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
Social security is not a handout.
Ah, quibbling...That's true, replace "handout" with "entitlement" and go again.
Are you arguing that roads are handouts?
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Are you telling me that you don't use roads?
Marshawn Lynch should have plowed it in from 1 yard line but since the Seahawks were there ona very luck catch, I hope that Pete C. doesn't get grilled to badly today and forever...
I think that play call will be questioned till the end of time. I would like to see stats on interceptions on short slant routes vs fumbles on short runs -- i.e. was it really that dumb of a play call? Whats the worst that can happen -- yeah an interception, but if they ran it, beast mode could have fumbled, or the hand-off botched, or whatever.
I'm telling you roads have nothing to do with Financial Independence as a concept and the elements that define that concept. We are not talking about the value of government or even taxes anymore. We are talking about a concept. What does it mean to be financially independent. I say one is not FI if one relies on money from an outside source. Countering with "yeah but you need roads" has nothing to do with the definition of when one is financially independent.
If I were saying "government is useless and we don't need it", the counterpoint "but wait don't you need some or all of the things government provides, l like roads" makes sense.
I just don't see a difference between the government providing and maintaining roads and providing and maintaining social security. It's basically, the same thing. Both are very useful in giving me the means to FIRE and I don't plan to do without either one in retirement.
Haha ok. Yes because people need roads reliance on SS doesn't constitute a dependence in the definition of FI. Congratulations, you found a way to be financially independent while maintaining a massive financial dependency.
Thank you, the difference between you and I is that you're living in denial of your dependence on government for financial security
Not all. I recognize I am dependent on government for all sorts of things. The difference between us is when I consider the semantics of FI, I want to be as "I" as possible, and certainly to the point where the disappearance or alteration of a government entitlement program will affect me as little as possible, and hopefully not at all.
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Are you arguing that roads are handouts?
Huh?
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
The false equivalence is being drawn between basic government functions (i.e., roads) and social security. I think it's completely defensible to base FI on a figure that does not include social security, particularly for younger people. I plan to get $0 from it. I do not base my FI planning on the possibility that basic infrastructure is not being provided for. I also don't base FI on the possibility that tax rates will go up to 90% on accumulated wealth or something of that nature. There are only so many "what ifs" a person can plan for.
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
The false equivalence is being drawn between basic government functions (i.e., roads) and social security. I think it's completely defensible to base FI on a figure that does not include social security, particularly for younger people. I plan to get $0 from it. I do not base my FI planning on the possibility that basic infrastructure is not being provided for. I also don't base FI on the possibility that tax rates will go up to 90% on accumulated wealth or something of that nature. There are only so many "what ifs" a person can plan for.
I agree with this 100%. How is what you wrote in any way against the assertion that the semantics of term FI, specifically the "I" part of it, it is at direct odds with receiving SS-like payouts from the government. Your
"Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous."
post seemed to be a direct counterargument of the statement I made previous to it. Perhaps I misinterpreted.
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Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous.
Finally, an actual strawman.
I never said "independence from a functioning government". I said "reliance on government handouts" goes against my definition of FI. I think it is very likely (or at least certainly possible) SS and other government programs will at least be means tested, or have some of their benefits cut (or both), in the future. If such changes made it so one needed to work again, how can one be considered FI?
The false equivalence is being drawn between basic government functions (i.e., roads) and social security. I think it's completely defensible to base FI on a figure that does not include social security, particularly for younger people. I plan to get $0 from it. I do not base my FI planning on the possibility that basic infrastructure is not being provided for. I also don't base FI on the possibility that tax rates will go up to 90% on accumulated wealth or something of that nature. There are only so many "what ifs" a person can plan for.
I agree with this 100%. How is what you wrote in any way against the assertion that the semantics of term FI, specifically the "I" part of it, it is at direct odds with receiving SS-like payouts from the government. Your
"Requiring independence from a functioning government as an element of financial independence would un-FIRE the vast majority of FIRE'd people. Be realistic. Trying to plan around the end of days is ridiculous."
post seemed to be a direct counterargument of the statement I made previous to it. Perhaps I misinterpreted.
Think there was just a crossed wire. "Functioning government" to me means the roads, basic infrastructure, etc., not "social security doesn't get dramatically changed/reduced".
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Fruitvale station & a Brompton, you got a house for 2x income:
http://www.trulia.com/property/3146992788-2047-36th-Ave-Oakland-CA-94601
Free bullets!
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I get SO tired of this narrative that people in expensive houses must live in McMansions in gated communities. I work for a nonprofit in San Francisco proper, helping first time homebuyers get ready to purchase. So basically, worst job ever cause all I do is break hearts. I don't think anyone who doesn't live here can truly understand how awful our housing market is. A small, run down house in a neighborhood with bad schools and poor infrastructure will go for $700,000. Like a previous poster mentioned, you can get a parking spot for 100k, maybe, there are no houses even close to that price range whatsoever. (Unless you qualify for Below Market Rate, which we don't, and is beyond competitive). You could save $ by moving an hour away but then enjoy your monster commute stealing 2 hours a day and $500/month in gas and tolls or whatever. (not mustachian, people!) Salaries are higher here, but the housing market is completely unnattainable to all but the highest earners. I have a colleague who has been making offers on 600k homes in the east bay (again, that's pretty cheap here) for a year, and hasn't gotten an offer accepted yet. So even if you want to over-pay for something, good luck to you.
I would gladly live in a fixer-upper house in a fairly ugly, dull neighborhood if it meant I could own something. We can't. At all. We make 150k/yr. This isn't a complaint, life is pretty rainbows and butterflies in our long-term rent-controlled apartment, but not everyone here is so lucky.
Fruitvale station & a Brompton, you got a house for 2x income:
http://www.trulia.com/property/3146992788-2047-36th-Ave-Oakland-CA-94601
Free bullets!
A house that cheap leaves a lot of room in the budget to take a car if you need to get home late. It's also lot harder to build a rail line than it is to lower a crime rate.
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Jesus, $370k for a 1,000 sq ft house in an awful part of Oakland. Deliver me from ever living in California.
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I favor raising taxes on poor people because they can't afford lawyers. That's probably easier than taxing rich people because of aforementioned lawyers.
But if they are taxed too much, they can't pay on account of being poor and become tax cheat criminals. Plus they out breed the rich leading to more and more poor people. Lets sterilize the poor so that we can finally win the war on poverty when they die out.
You are missing it -- a tiny tax on millions of people would generate a lot of money. So tax the poor, just not too much, only say, $100 per year each? ("Poor" stated tongue in cheek to mean lowest 40% of the tax base?)
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Hey! That's my paycheck you're talking about!
Maybe! I'm not a fan of some of the porkier projects out there.
http://en.wikipedia.org/wiki/Lockheed_Martin_F-35_Lightning_II#Pentagon.E2.88.92Lockheed_Martin_relation_issues
http://www.politico.com/story/2014/02/f-35-fighter-plane-costs-103579.html
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Don't feel like looking up, but from what I recall, almost no people actually paid that top tax rate of 90%. It's annoying when people try to make current rates sound low by referring to that.
Each person will likely feel rates are too high if they think the govt is spending lots of $$ on things they do not agree with and is beyond the Fed's responsibility (me) but would be willing to pay a little more if they agree with policies.
Generally, though, it seems additional spending is never matched by increased taxes or spending cuts in other areas. So, debt continues to rise and, if the Fed chooses to 'pay' for it by devaluing the $, it hurts almost everyone.
I'd choose to lower debt by decreased spending. If the govt were a Mustachian, that's what it would decide to do. ; )
I'm not sure if that's true, but I'm not inclined to look it up either. In any event, those real marginal tax rates today would increase revenues enough to wipe out 70% of the deficit. I'm sure we can find plenty of pork to push us into a surplus and start paying down the national debt.
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Look, I love ad hominems and straw men as much as the next guy, but I appreciate well reasoned and well supported posts more.
You addressed neither 1, nor 2, nor 3. You're completely disregarding the circumstances surrounding this previous era that happened to have a set of tax rates that suit your preferred ideology. Not only does it have zero to do with today's world, it is 100% out of the question from a policy standpoint, so why is it even in discussion?
There wasn't much to constructively address. You made claims based on your preferred ideology without any quantitative support, and I replied from a position that's roughly opposite of yours using the same approach. GIGO and all that.
If you want to have a substantial discussion, with facts, figures, sources, criticism of those sources, etc... I'm down for that, but I'm not going to spend time debating opinions.
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This is not helpful. You are throwing around so many general numbers and not laying out anything specific in 105. I think you wrote raising the rate on 200k back to 92%, but I cant find any chart that indicates that would raise the required amount. But you also talk about raising taxes on everyone, so Im not sure you intend for that 1 tax to take care of the entire sum.
I have looked at the charts you provided; for example this link
http://taxfoundation.org/article/summary-latest-federal-income-tax-data
Im not seeing anything that clearly lays out how much income remains above the top marginal rate limit, therefore cannot even begin to figure out how you are getting to 1.3 trillion, and who would pay what.
I strongly disagree with your confidence that people would just take it and keep working against higher taxes that reduces their equivalent $/hr to below minimum wage, once above the marginal rate, but we can just disagree on that. This is never going to happen.
Regarding your general point though, that everyone should pay more regardless of what it costs them to address the debt/deficit, hey at least its more balanced than what a lot of others think. No element of class warfare in this argument, just "we could address the debt with more taxes." Certainly there is 1.3trillion to be had if you are willing to raise taxes, especially on everyone.
My numbers are accurate, not general, although not precise since I don't feel like drilling down into significant digits.
They're derived from my specifics for the marginal tax rate and the table from the tax policy and tax foundation websites. The chart where I calculated roughly how much revenue we would get by raising the marginal rate to 90% on any earnings above $200k is from the tax foundation site. I am also for raising taxes on everyone, but I didn't calculate the increases in receipts given a different set of brackets, although I think it would be interesting to do if I had the free time.
In terms of the tax foundation link, you can calculate the AGI per return of earners in the top N%, and get an accurate amount for how much income would fall above the $200k limit. Then you apply the higher marginal rate of 90% to that income above $200k and you get an accurate estimate of the increase in income taxes for the top N% if the top marginal rate were increased to 90% and the top bracket lowered to $200k.
People making $200k/year would never make minimum wage, at least not federal minimum wage. At worst, assuming they were hourly, their marginal income per hour would drop into the ~$10+/hour range, depending on their yearly salary. And in that case, I agreed, they wouldn't work more, and that's that. On the flip side, the work they do would still need to be done, so instead of paying one person $300k/year, a company might end up paying one personal $200k/year for part time work and another $100k/year for part time work. At the same time, this situation probably isn't common because most high earners are salary, and won't turn down higher pay even if they end up in a higher tax bracket. For them, it's better to get $160k earnings from a $300k salary than $150k in earnings from $200k in salary.
I'd like to think I'm fairly fiscally conservative and am definitely for less private pork (higher taxes) and less public pork (reducing spending and stringent auditing). It's not class warfare to state that many wealthy people do a great job at generating more wealth and a piss poor job at providing healthy economic growth and jobs.
If the wealthy can't or won't provide positive economic activity, I think the government should tax them at a higher rate and use that income to pay down debt and invest in effective (and thoroughly audited) public programs that benefit everyone.
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You are missing it -- a tiny tax on millions of people would generate a lot of money. So tax the poor, just not too much, only say, $100 per year each? ("Poor" stated tongue in cheek to mean lowest 40% of the tax base?)
It's a lot of money in the sense that a billions of dollars is a lot, but it wouldn't make an appreciable dent in the deficit, at least not compared to higher marginal rates on the wealthy. Can't get blood from a turnip...
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Taxes suck! As a (currently) single, renting, man, I take home about 51% of my gross pay.
Granted I am in a higher tax bracket but I'm paying European levels of taxes for pretty much zero services here in the US.
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Look, I love ad hominems and straw men as much as the next guy, but I appreciate well reasoned and well supported posts more.
You addressed neither 1, nor 2, nor 3. You're completely disregarding the circumstances surrounding this previous era that happened to have a set of tax rates that suit your preferred ideology. Not only does it have zero to do with today's world, it is 100% out of the question from a policy standpoint, so why is it even in discussion?
There wasn't much to constructively address. You made claims based on your preferred ideology without any quantitative support, and I replied from a position that's roughly opposite of yours using the same approach. GIGO and all that.
If you want to have a substantial discussion, with facts, figures, sources, criticism of those sources, etc... I'm down for that, but I'm not going to spend time debating opinions.
BS. 90% is confiscatory. Keep acting like you're not being intransigent by throwing out anachronisms that are unworkable today due to capital flight, tax avoidance and evasion strategies, and pure common sense. No one is going to vote for or implement your fringe ideas. At best you're tilting at windmills, at worst you're hiding behind condescending language to support your philosophy.
tl;dr if you propose radical shit, it is YOUR job to tell us why we should agree. ESPECIALLY when it is an old policy that existed in a completely different era. At least Picketty is honest enough to admit that his global wealth tax is a pipe dream.
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Taxes suck! As a (currently) single, renting, man, I take home about 51% of my gross pay.
Granted I am in a higher tax bracket but I'm paying European levels of taxes for pretty much zero services here in the US.
Unless you don't use roads, public utilities, and could live in a banana republic style area w/o the need for police, military, or courts... Well, law really, you use more than zero services. If you've really made it ala this guy...
http://abcnews.go.com/Business/utah-caveman-quits-money/story?id=16273605
Congrats! Your stache is huge, and you shouldn't have to pay for services because you really don't use any.
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Why is it always roads that people bring up when people talk about not getting anything for their tax dollars?
Please, won't somebody think of the....roads.
http://www.tommullen.net/featured/chapter-three-who-will-build-the-roads-from-anti-libertarian-nonsense-the-ridiculous-arguments-for-government-control-of-everything/
Also, big lol's must be given for all the complaining about the SF housing market.
"Oh, I'm so helpless in NorCal making six figures and I'll never be able to afford a house. Oh there are cheap houses in Oakland? That must be a shitty school district and minorities probably live there, and be prepared to get murdered."
So many rivers are being cried for you.
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Why is it always roads that people bring up when people talk about not getting anything for their tax dollars?
Uh... because roads are a very visible government service that everyone uses.
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Me and the hubby's combined income is now at $233k. Even though we are maxing out both of our 401k, so subtract $36k, we are phased out of most of the good tax deductions...ie Child Tax Credit, Roth IRA contributions, traditional IRA deductions, education credits, etc. We have the mortgage interest deduction but we are just refinancing to a 15 year so that deduction will probably become less than the standard deduction next year. We also put the max $5k into the Dependant Care FSA and some into the health care FSA, we don't have access to a HSA. Is there anything else we can deduct to lower our MAGI?
I have considered just being a SAHM to lower our income but then we would be straining to make our mortgage since we live in a HCOL area. It would be awesome if I could work part time but that's not an option at my current job. Maybe a career change to a less stressful lower paying job might be an option at some point. Or should I just suck it up and save as much as we can and then just FIRE earlier? Anyone else in the same situation and just want to commiserate?
I know how you feel. I blogged about it recently here: [MOD EDIT: See signature for blog link.]
For those who are piling on, I also blogged here: [MOD EDIT: See signature for blog link.]
There are pluses and minuses both ways.
My wife doesn't work because after the additional costs and childcare and getting taxed on her teacher's salary at my doctor's tax rate, she'd only be making $2 an hour. Better to just volunteer her time when she feels like it (my kids's classes are the only kids in the district who get PE taught by a PE teacher) and pursue her other interests.
Moderators- if posting those links is too spammy, feel free to delete. [MOD EDIT: Okay.]