View Full Version : Beer and taxes
harveyc
01-28-2010, 05:27 PM
I wish this was just a dub joke!
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.
He said, "Since you are all such good customers, I'm going to reduce the cost of your daily beer by $20. Drinks for the ten now cost just $80."
The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men -- the paying customers? How could they divide the $20 windfall so that everyone would get his "fair share"?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer.
So the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay!
And so:
The fifth man, like the first four, now paid nothing (100% savings).
The sixth now paid $2 instead of $3 (33%savings).
The seventh now pay $5 instead of $7 (28%savings).
The eighth now paid $9 instead of $12 (25% savings).
The ninth now paid $14 instead of $18 (22% savings).
The tenth now paid $49 instead of $59 (16% savings).
Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings.
"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man, "but he got $10!"
"Yeah, that's right,' exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I!"
"That's true!!"shouted the seventh man. "Why should he get $10 back when I got only $2 ? The wealthy get all the breaks!"
"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"
The nine men surrounded the tenth and beat him up.
The next night the tenth man didn't show up for drinks, so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
Abnshrek
01-28-2010, 05:39 PM
That's right... it pays not to be dumb, stupid, ignorant, or drunk enough to beat-up your rich friends :^)
Scuba_Dave
01-28-2010, 06:32 PM
Where do you get the 59% Tax rate ?
http://www.tax.com/taxcom/taxblog.nsf/0971609221721415852572ac0067c130/2f63ecba7f8bca54852576850045adf5/Body/0.2D7E?OpenElement&FieldElemFormat=gif
http://www.moneybluebook.com/images/2009-federal-income-tax-brackets-rate-schedule-comparison.jpg
..................General rate Top rate
...(percent of GDP)... (percent of income)
Sweden........ 53.2%... 45.0
Denmark...... 48.3...... 40.0
Norway ........ 47.1...... 23.0
Netherlands .. 47.0..... 72.0
Germany ...... 39.2...... 56.0
Finland ........ 37.7....... 51.0
Canada ........ 37.3...... 29.0
Japan .......... 30.9...... 60.0
United States 29.8..... 34.0
sunfish
01-28-2010, 06:35 PM
State tax
harveyc
01-28-2010, 06:52 PM
It's not the tax rate, it's the percentage of the taxes paid, or tax "bill."
Jack Daw
01-28-2010, 08:02 PM
Interesting story. Well at least I had a good laugh - I've never thought of it like a bar visit before. :ha:
Abnshrek
01-28-2010, 10:55 PM
It's not the tax rate, it's the percentage of the taxes paid, or tax "bill."
Well with the benefit of Beer :^) 10 Bucks says the rich guy wasn't drinking from the Tap.. and deserved the 59%/49%.. lol
Richard
01-28-2010, 11:42 PM
I agree that the tax system is disfunctional. One of the reasons that the higher brackets have a higher tax is because they have more to write off. So whether I was working as a salaried employee or now with my own business, our joint family income has always been about in the middle of the brackets shown by Scuba Dave but my effective federal tax (taxes paid / total income) has been around 19%.
I would be in favor of a flat federal tax, but those in higher income brackets with write-offs have always fought against it.
harveyc
01-29-2010, 01:34 AM
I am puzzled when people refer to the wealthy getting "breaks". They don't get any breaks that others don't get except for the lowest earners get a standard deduction which is often higher than what their itemized deductions would be. The wealthy get slammed with the alternative minimum tax. Something that would be unheard of to hit the four beer drinkers with. A flat tax would be a huge benefit to the wealthy so there is not resistance there. Resistance is mostly from Congress as politicians would lose control in shifting various benefits around to their favorite groups (supporters), etc.
harveyc
01-29-2010, 01:36 AM
By the way, I'm about in the category of the 9th guy and I don't want to beat up the 10th guy!!! :ha:
Jack Daw
01-29-2010, 04:05 AM
I agree that the tax system is disfunctional. One of the reasons that the higher brackets have a higher tax is because they have more to write off. So whether I was working as a salaried employee or now with my own business, our joint family income has always been about in the middle of the brackets shown by Scuba Dave but my effective federal tax (taxes paid / total income) has been around 19%.
I would be in favor of a flat federal tax, but those in higher income brackets with write-offs have always fought against it.
19% is a standard tax here too, for salaries, goods...
The best things about taxes are, that you have to pay tax from your earnings (at least 19%), than pay the tax for buying something (19% or more, in case of oils and petrol this tax here can rise up to 70%!!!) and when the seller sells you something, he has to pay the 19% income tax. After calculating, you generally get that you give your state (or at least here people give our state) more than 55% of all money that flows in the market. And those corrupt *******s steal that money! And so a slightly different and less pro-country approach is common among the middle and higher-class here (or generally in the former USSR Union and its satellites). Fortunatelly our laws here are so defect, that they offer you a variety of ways how not to effectively give the money to your state's tax department without committing anything bad or breaking any low.
By the way, I'm about in the category of the 9th guy and I don't want to beat up the 10th guy!!! :ha:
Why would you beat me? :) Not that I would be any rich, but I usually pay in the bar more than I drink. ;) :D Dunno how or why, someone usually doesn't have the cash with him or something. lol
Abnshrek
01-29-2010, 04:20 AM
A flat tax would be a huge benefit to the wealthy so there is not resistance there. Resistance is mostly from Congress as politicians would lose control in shifting various benefits around to their favorite groups (supporters), etc.
That's right the Rep's want to keep the power in & filling their pockets :^)
The big tax break that went to the rich under Bush was the 50% cut in taxes on dividends--with the 28% maximum tax rate that means 14% tax rate for those that own millions of shares of Exxon--they really need it. Oh yeah, I got a $50 decrease in the taxes on my $300 in dividends--whoopie. My Total income tax bill went from $6000 in 1983 to $10000 in 1984 (my income went up $800) when Regan passed the Tax Reform bill that cut the maximum tax rate from 91% to 35% --actually just 33% for the very rich, the 35% only applied to the upper middle class.
harveyc
01-29-2010, 10:28 AM
There you go, sbl, beating up that 10th guy.
Something has to be missing in your 1983-84 tax comparison. Tax rates didn't go up for anybody then.
lorax
01-29-2010, 11:43 AM
I'm obviously doing quite well then! I pay a flat $8 a month in taxes here due to the government's excellent Small Business Tax scheme (called the "Smile" tax); if I ever make more than $60,000 I'll start paying 7%, and if I go over $1 million I'll pay 25%.
The VAT (goods and services) tax is 12% AND I get a portion of it back each year depending on my receipts. Petrol and oil products are subsidised, which means that I pay only about 2 cents per gallon tax, and a gallon of petrol costs me $1.50. Liquors produced in other countries, however, are crushingly expensive, and about 65% of what I pay there is tax of one sort or another.
North American and European taxes are messed up!
Richard
01-29-2010, 12:00 PM
I am puzzled when people refer to the wealthy getting "breaks". They don't get any breaks that others don't get except for the lowest earners get a standard deduction which is often higher than what their itemized deductions would be.
Not true.
The wealthy get slammed with the alternative minimum tax. Something that would be unheard of to hit the four beer drinkers with. A flat tax would be a huge benefit to the wealthy so there is not resistance there.
Not true.
Resistance is mostly from Congress as politicians would lose control in shifting various benefits around to their favorite groups (supporters), etc.
True, their supporters being the ones with the ability to pay.
Jack Daw
01-29-2010, 01:06 PM
I'm obviously doing quite well then! I pay a flat $8 a month in taxes here due to the government's excellent Small Business Tax scheme (called the "Smile" tax); if I ever make more than $60,000 I'll start paying 7%, and if I go over $1 million I'll pay 25%.
The VAT (goods and services) tax is 12% AND I get a portion of it back each year depending on my receipts. Petrol and oil products are subsidised, which means that I pay only about 2 cents per gallon tax, and a gallon of petrol costs me $1.50. Liquors produced in other countries, however, are crushingly expensive, and about 65% of what I pay there is tax of one sort or another.
North American and European taxes are messed up!
I hope that once I open my company's department in Ecuador, I will have to pay there more than 25% taxes, Beth. ;) You can do that in Ecuador, because relative cash flow is really small when compared to European or American (USA). There are people in Europe who earn twice as much as the entire East Africa, so each state sees there's lots to be taken on taxes. Besides, the most powerful companies from Europe, USA... are (no) tax payers with official seat on Bahamy, Caymans... :lurk:
lorax
01-29-2010, 01:33 PM
Ah, Jack, if I were a company, that would be a different boulle de gomme. Corporate tax here starts at 35% and works its way up to 50% for very large corps.
Jack Daw
01-29-2010, 02:19 PM
Ah, Jack, if I were a company, that would be a different boulle de gomme. Corporate tax here starts at 35% and works its way up to 50% for very large corps.
Well then my company will be better off in Europe, won't it? :ha:
Patty in Wisc
01-29-2010, 03:07 PM
The people I know around here would tell the first 4 to go home & buy their own frickin beer:ha::ha::ha:
harveyc
01-29-2010, 03:19 PM
Richard, the things I stated above are true, but you can create your own imaginary world with whatever "facts" you want to dream up. Google alternative minimum tax and learn something.
Here's an article stating the middle class is the group being adversely impacted by a flat tax.
washingtonpost.com: Flat Wrong: New Tax Schemes Can't Top Old Progressive Truths (http://www.washingtonpost.com/wp-srv/politics/special/tax/stories/top032496.htm)
There you go, sbl, beating up that 10th guy.
Something has to be missing in your 1983-84 tax comparison. Tax rates didn't go up for anybody then.
I was wrong about the yr--it was the 1986 tax reform act--http://law.jrank.org/pages/10684/Tax-Reform-Act-1986.html
The bill was tax neutral--it did not increase or decrease the total income tax collected, but the rate went down for the rich and up for the dual income working families --note that the highest rate was reserved for upper middle class--33 % while the rate for the very rich was only 28%. It also eliminated a lot of deductions, no sales tax deduction (FL does not have income tax), no interest except on the house, no deduction for gasoline tax, it raised the amount required before you got a deduction for medical cost--I'm sure there were others I can't remember. The standard deduction did increase, but not nearly as much as my deductions would have been.
Richard
01-29-2010, 04:51 PM
Harvey,
I understand AMT and also trust you when you say your tax rate is high.
One of my customers has 500+ acres of row crops here in the North County. After reading your post I asked him if he'd support a 14% flat rate tax. He said probably, because the savings he would have from not paying the tax accountant would offset the 1% to 2% more he would pay in taxes.
harveyc
01-29-2010, 08:53 PM
sbl, while the richest people did get a lower marginal rate on a portion of their income, they also paid the higher rates for that portion of their income as well.
I do have mixed feelings about paying much higher taxes just because I work harder and make more money and at the same time lose a portion of my deductions. I'd rather be able to use those dollars to give to the needy I chose to give to instead of let government decide how to spend my money. Being in California with its high income tax rates makes it all the worse. I've seriously considered moving some of my retail sales to Nevada, but think it's crazy to have to go through hassles like that to keep what I think is a fair share of my earnings.
Before switching to farming full-time, I worked in agricultural lending for almost 30 years and reviewed thousands of tax returns of business earning $50,000 to $10,000,000 or more. I saw folks paying taxes of next to nothing and others paying $1,000,000 per quarter. The people that paid next to nothing either were losing money (real negative cash flow) or expanding businesses and getting the benefit of deferring income, though it eventually catches up to them if they quit expanding. Of course, the rest of society and the economy in general benefited from their business expansion. I can only think of one case out of thousands where a customer made an expenditure solely for the tax benefits. The "funny" thing about it is they were getting into serious financial trouble at the same time. While I'm still expanding and doing new things, I'm doing so mostly to provide my son with more opportunities should he decide to come back to the farm after finishing his schooling. If it wasn't for him, I'd be scaling back instead as the extra work is not worth it for the amount I get to keep. A flat tax would make it more attractive to me, especially if California did the same.
Richard
01-29-2010, 09:02 PM
A flat tax would make it more attractive to me, especially if California did the same.
Harvey, we have a lot of agreement there. California's taxes are "the worst of both worlds".
harveyc
01-29-2010, 09:14 PM
The people I know around here would tell the first 4 to go home & buy their own frickin beer:ha::ha::ha:
Recycled beer might be another option! :ha:
harveyc
01-29-2010, 09:18 PM
Harvey, we have a lot of agreement there. California's taxes are "the worst of both worlds".
I read some news the other day about woes in Oregon and am especially glad I don't have a business in Portland. I thought it couldn't get worse than how things look here.
Abnshrek
01-29-2010, 10:01 PM
Recycled beer might be another option! :ha:
Well the New Orlean's Mayor (Nagan) is going to the supebowl on the tax payer's.. They should serve his sorry a** some recycled beer :^)
It has never seemed right to me to pay less taxes on the money I get from dividends or capital gains than the money that I worked hard to earn. The fact that the people that own millions of shares of Exxon pay taxes at half the rate that I do just galls me.
Abnshrek
01-30-2010, 04:56 PM
It has never seemed right to me to pay less taxes on the money I get from dividends or capital gains than the money that I worked hard to earn. The fact that the people that own millions of shares of Exxon pay taxes at half the rate that I do just galls me.
Well when you think about it it doesn't gall me. Most people that have shares are investing money they already paid taxes on, or it's part of someone's 401K, IRA or mutual fund. So the people owning a butt-load of shares is limited and they make me sick :^)
harveyc
01-30-2010, 08:37 PM
It has never seemed right to me to pay less taxes on the money I get from dividends or capital gains than the money that I worked hard to earn. The fact that the people that own millions of shares of Exxon pay taxes at half the rate that I do just galls me.
If I own a farm and make a profit, I pay taxes on my earnings. Say I combine my farm with that of nine others and we decide to incorporate to save on some overhead expenses, get more efficient equipment, etc., each owning 10%. Now the corporation I own 10% of pays income taxes on the earnings and then I pay taxes on the dividends when my share of the income is distributed to me. a reduced tax rate on dividends is only slightly off-setting the injustice of double taxation. A bigger company like Apple Computer obviously has many owners (shareholders), but the principle is the same. Those earnings are being taxed twice.
Capital gains rates are designed to encourage investment in capital assets that may have a long period of time to earn a return. Such investments are beneficial to society as they lead to more jobs and stimulate the economy.
Are you equally bothered that individuals/couples can sell a home with a large capital gain entirely tax-free (up to $250k or $500k)?
Well when you think about it it doesn't gall me. Most people that have shares are investing money they already paid taxes on, or it's part of someone's 401K, IRA or mutual fund. So the people owning a butt-load of shares is limited and they make me sick :^)
People owning IRAs and 401Ks do not get that advantage--you put money in without paying taxes as earnings--the dividends and gains accumulated--then when you take it out you pay taxes as if it were earned income. People owning a butt-load of shares is limited to the very rich--the top 5 or 10% --they got a 50% tax cut under the Bush tax cut--I got a few hundred dollars--how much did you get?
If I own a farm and make a profit, I pay taxes on my earnings. Say I combine my farm with that of nine others and we decide to incorporate to save on some overhead expenses, get more efficient equipment, etc., each owning 10%. Now the corporation I own 10% of pays income taxes on the earnings and then I pay taxes on the dividends when my share of the income is distributed to me. a reduced tax rate on dividends is only slightly off-setting the injustice of double taxation. A bigger company like Apple Computer obviously has many owners (shareholders), but the principle is the same. Those earnings are being taxed twice.
Capital gains rates are designed to encourage investment in capital assets that may have a long period of time to earn a return. Such investments are beneficial to society as they lead to more jobs and stimulate the economy.
Are you equally bothered that individuals/couples can sell a home with a large capital gain entirely tax-free (up to $250k or $500k)?
You choose to incorporate to save money--mostly from tax advantages for corporations--then you get lower tax rate on earnings because you call them dividends--that is double dipping.
The break for individuals selling a home tax free is really pretty limited--we could always avoid taxes on those gains if it went into a new home--so it really only applies to those moving into a smaller or lower price home, I would not care if it disappeared--it has never applied to me, but again I don't see why I should pay less tax on money I got for doing nothing than money I worked for.
Abnshrek
01-31-2010, 09:17 AM
People owning IRAs and 401Ks do not get that advantage--you put money in without paying taxes as earnings--the dividends and gains accumulated--then when you take it out you pay taxes as if it were earned income.
how much did you get?
I don't see why I should pay less tax on money I got for doing nothing than money I worked for.
401K's and IRA's either its pretax $$ or you get a tax credit ahead of time so thus it can start making money if put where the best value for your $$ is.
Ok I liked Bush alot, but he was responsibile for the derivitives bs w/ housing coming about after enron crashed. They definately loosened the grip. Me I can say I liked him(Bush) personally, Economy wise he sucked.
The point is why your paying less money on Investments is.. You Risked it (not everyone who invests makes a profit doing it), you should reep your rewards (especially after you earned and paid taxes on what you did invest.). Your helping to create jobs. The Govt can't do that to good.. Point #2 Harvey & his 9 buddies are all working hard to make a buck on their coop(Inc.). Why should they put themselves on the payroll when they can make more by paying themselves dividends :^) @ half the tax rate. :^)
401K's and IRA's either its pretax $$ or you get a tax credit ahead of time so thus it can start making money if put where the best value for your $$ is.
Ok I liked Bush alot, but he was responsibile for the derivitives bs w/ housing coming about after enron crashed. They definately loosened the grip. Me I can say I liked him(Bush) personally, Economy wise he sucked.
The point is why your paying less money on Investments is.. You Risked it (not everyone who invests makes a profit doing it), you should reep your rewards (especially after you earned and paid taxes on what you did invest.). Your helping to create jobs. The Govt can't do that to good.. Point #2 Harvey & his 9 buddies are all working hard to make a buck on their coop(Inc.). Why should they put themselves on the payroll when they can make more by paying themselves dividends :^) @ half the tax rate. :^)
I'm not against IRA or 401Ks, I think it is a good way to encourage savings and investment--I am just pointing out that the working person that puts his money in an IRA is not getting the same tax benefit as the really rich that are paying 14% on income from dividends.
Your second point shows how Harvey was trying to mislead us--he is not getting double taxation--if his corp. paid him a salary equal to what his farm earned--he would pay the same tax rate as us working people--the company would decuct the cost of salaries--not pay taxes on that as profit. The real benefit for incorporation is in the tax deductions for investments and depreciation--I am not against that.
Risking your money does not deserve any special benefit over working for it. I still do not think it is fair that the rich pay taxes at half the rate that I do.
harveyc
01-31-2010, 11:45 AM
Your second point shows how Harvey was trying to mislead us--he is not getting double taxation--if his corp. paid him a salary equal to what his farm earned--he would pay the same tax rate as us working people--the company would decuct the cost of salaries--not pay taxes on that as profit. The real benefit for incorporation is in the tax deductions for investments and depreciation--I am not against that.
Risking your money does not deserve any special benefit over working for it. I still do not think it is fair that the rich pay taxes at half the rate that I do.
You're the one doing the milseading. People do not incorporate to save on taxes as corporations don't receive special tax breaks such as you claim. There you go beating up on the 10th beer drinker again. Take a look at Small Business Taxes & Management (http://www.smbiz.com/sbrl001.html) for a comparison of tax rates and get that nonsense out of your head. Corporations have some shareholders that are working day to day for the corporation and receiving salaries but most large corporations obviously have inactive shareholders. If I have a sole proprietorship I can chose to work day-to-day in the business or hire someone to manage it for me. I'll make more money if I run it myself (unless hired management is more capable) since I'll save on salaries. Either way, I only pay taxes on earnings once. The earnings for a corporation I'm a owner of have already been taxed and the only reason to tax dividends is for socialistic wealth distribution. The primary reasons businesses incorporate is to make it easier to acquire additional capital for expansion (via selling shares) and to limit personal legal liability (especially doctors, etc.).
It is true that the reason many incorporate is to limit liability and even an individual farmer could probably depreciate the cost of his equipment just like any business, but business do get deductions that individuals do not --such as entertainment and travel.
When I hire a plumber I pay him with money that has already been taxed should he get to keep it without paying taxes--no. When a corporation pays the people who invested in it that money should be taxed as well. If I invest in a company, and loose money Uncle Sam jumps in and gives me back 28% --I think it is fair to pay him 28% on the money I make either as capital gains or as dividends.
What you implied is that if you incorporate (as a group of farms) and make the same money you would as an individual farmer, the corporation would get taxed and then you would get taxed on dividends--getting taxed twice, but you are really taking dividends because they are taxed at the lower rate. I have a nephew that has a lawn care business--he takes minimum wage as an employee and then splits the company profits with his partner as dividends because of the lower tax rate--he would not do that if he was paying more in taxes.
Abnshrek
01-31-2010, 04:18 PM
I think it is fair to pay him 28% on the money I make either as capital gains or as dividends.
Some folks just don't have your outlook. What can the govt do with it that we can't? I can give it to any Org. ( Like ducks Unlimited, a church even(non-profit)) that I think does the world good to lessen my tax burden to a point.
<- thinkin' its time for beer.. I'm all taxed out.. lol :^)
harveyc
01-31-2010, 05:56 PM
It is true that the reason many incorporate is to limit liability and even an individual farmer could probably depreciate the cost of his equipment just like any business, but business do get deductions that individuals do not --such as entertainment and travel.
When I hire a plumber I pay him with money that has already been taxed should he get to keep it without paying taxes--no. When a corporation pays the people who invested in it that money should be taxed as well. If I invest in a company, and loose money Uncle Sam jumps in and gives me back 28% --I think it is fair to pay him 28% on the money I make either as capital gains or as dividends.
What you implied is that if you incorporate (as a group of farms) and make the same money you would as an individual farmer, the corporation would get taxed and then you would get taxed on dividends--getting taxed twice, but you are really taking dividends because they are taxed at the lower rate. I have a nephew that has a lawn care business--he takes minimum wage as an employee and then splits the company profits with his partner as dividends because of the lower tax rate--he would not do that if he was paying more in taxes.
The entertainment and travel expenses are allowed as they are done to generate business income. Travel is allowed at 100% and entertainment is only deducted at 50% because it is realized that sometimes it may be done as simply a perk but other times it is a form of advertising, etc. It is a cost of business and should be deducted. Individuals can do the same if they have a business and carry out these activities for business purposes. As consumers, when we are traveling and entertaining it is not done to generate income and is not a legitimate business expense. There really shouldn't be any controversy here, IMO. I sometimes hire a contractor for business purposes to help me earn income and deduct it and sometimes hire the same guy for personal needs and don't deduct it.
I don't understand your point about capital gains losses. They are both deducted at the same rate. Short term gains and losses are deducted as ordinary income while long term gains and losses are at the lower rate.
Double taxation is still taking place on the income used to pay dividends, though at a lower rate when it gets taxed the second time. Dividends are not deducted as an expense by the corporation. You say your nephew has a business that pays dividends but then mention he has "partners". Is it a corporation or a partnership? Partnerships do not pay taxes and do not pay dividends. Income taxes are paid by the partners whether those earnings are distributed to the partners or not.
If I entertain the boss or take him on a fishing trip--I may be doing it to increase my income as well, but I can't deduct it. I know many people in business that make a reason to travel where they want to go hunting or fishing or take their buddies out for entertainment. Sure, sometimes it is a legitamite expense, but it is definitely a benefit.
If I make $100,000 at my job and loose a couple thousand on a stock investment, Uncle Sam pays 28% of my loss (by reducing my tax on my income). Why shouldn't I have to pay 28% when I make a couple thousand in capital gains the next time I gamble on some stock even if I did own it for a yr or 2. I am more proud of the money I earn by working--why should I pay less tax on money I get just for being lucky--especially when Uncle Sam is willing to back me (or anyone) for part of the loss when I lose money gambling on stock.
harveyc
01-31-2010, 07:05 PM
You, might be able to deduct those expenses, though I've never seen it done. It requires to meet criteria which probably is pretty rare, since it's not "necessary": Deducting entertainment expenses. | Legal > Tax Law from AllBusiness.com (http://www.allbusiness.com/accounting-reporting/corporate-taxes-tax/248860-1.html)
Where are you coming up with this 28% figure that Uncle Sam is supposedly paying you for capital losses? As I said before, both short term gains and losses are taxes as ordinary income (whatever marginal rate you're at) but short term losses are taxed at the same reduced rate as gains with one downside caveat: You can only deduct losses equal to the amount of your gains plus $3,000 in the current year (the balance may be written off in future years up to the amount of gains plus $3,000). I know that very well as I helped a relative out with an investment and ended up with a large loss that will take me several more years to write off.
28% is what I pay in taxes on my income. I do not have to have gains to deduct losses, but they do offset if I have gains. If I was in a lower tax bracket (say 15%), Uncle Sam would not back my losses at 28%--just 15%--I guess it pays to be rich.
Abnshrek
01-31-2010, 10:18 PM
28% is what I pay in taxes on my income. I do not have to have gains to deduct losses, but they do offset if I have gains. If I was in a lower tax bracket (say 15%), Uncle Sam would not back my losses at 28%--just 15%--I guess it pays to be rich.
Well it may pay to be rich. But it really pays to invest in yourself, to work smart & hard. The right plan & execution you could be the "master of your world" :^) I don't envy the rich. A Large portion of them have alot more problems than I ever will think about having. :^) Me I don't worry about what I don't have, just enjoy what I do have :^) till uncle sugar sends me a bill due on 15 april.. lol
Well it may pay to be rich. But it really pays to invest in yourself, to work smart & hard. The right plan & execution you could be the "master of your world" :^) I don't envy the rich. A Large portion of them have alot more problems than I ever will think about having. :^) Me I don't worry about what I don't have, just enjoy what I do have :^) till uncle sugar sends me a bill due on 15 april.. lol
I agree with that!
I consider myself fortunate to have done as well as I have. It does not bother me that people who make less than I do pay lower taxes or even no taxes for those making minimum wage. This is a great country and I don't mind doing my share to support it--even if I do not always agree with our government.
It does bother me that those really rich @!@#!# that own millions of shares of Exxon pay half the tax rate that I do--for doing nothing.
harveyc
02-01-2010, 12:02 AM
sbl, you keep claiming that uncle sam backs your losses at 28%, but that simply is not the case. I've pointed that out twice already. In your effort to vilify those who have saved, invested, and done well, you're mixing fiction with facts. The wealthy pay the bulk of the income taxes in the U.S. already and and it seems you won't be happy until they pay 100% of their income back in taxes for some reason. That's the point of this parable of sorts: beat up on the rich guy enough and he'll leave the party and leave you with the bill.
Abnshrek
02-01-2010, 12:11 AM
I agree with that! I consider myself fortunate to have done as well as I have. It does not bother me that people who make less than I do pay lower taxes or even no taxes for those making minimum wage. This is a great country and I don't mind doing my share to support it--even if I do not always agree with our government.
It does bother me that those really rich @!@#!# that own millions of shares of Exxon pay half the tax rate that I do--for doing nothing.
I hear you on the tons of shares no matter the company. Like some wise person said, "knowledge is power", and if exec's know they are going to do better than expected they take / execute their options. It's a bonus plan :^) for their efforts.
I had a neighbor burned by Enron.. He's kinda a miserable fellow and blames everyone else. I say if he was managing his retirement he'd have @ least half in bonds as old as he was, and should've been managing what he had with an acount ready to unload or spread risk. Just cause you buy stock options when you work someplace doesn't mean they won't get you in the end if your not tending to your money tree :^)
That's right Harvey.. Its like they say about enemies keep them closer so you can see what's coming.. The rich will be just that, unless they are stupid, but not likely. A friend is friend; it doesn't matter if he's rich or not it's more about the bonding time.
sbl, you keep claiming that uncle sam backs your losses at 28%, but that simply is not the case. I've pointed that out twice already. In your effort to vilify those who have saved, invested, and done well, you're mixing fiction with facts. The wealthy pay the bulk of the income taxes in the U.S. already and and it seems you won't be happy until they pay 100% of their income back in taxes for some reason. That's the point of this parable of sorts: beat up on the rich guy enough and he'll leave the party and leave you with the bill.
It is true. I have only a loss on a stock sale to report this yr--it will be between 2 and 3K in loss. When I take that loss from my income, I will get back 28% of the loss because I will not have to pay income taxes on the income equivalent to that loss. That is backing my loss at 28%.
I am not vilifying those who save and invest--I do it myself. I just think that money earned from hard work should not be taxed at twice the rate as those that are lucky enough to be rich. When I first started paying income tax it was very progressive with those who could afford it paid higher percentage as their income increased--the highest rate was supposedly 91% according to what I learned in school. Now the rate is pretty close to flat, but the very rich that don't even have to work for their income pay only 14%--that is not fair.
Yeah, 14% of a million is more than I pay with my 28%--that doesn't make it fair--they can afford to pay more.
harveyc
02-01-2010, 10:12 AM
It is true. I have only a loss on a stock sale to report this yr--it will be between 2 and 3K in loss. When I take that loss from my income, I will get back 28% of the loss because I will not have to pay income taxes on the income equivalent to that loss. That is backing my loss at 28%.
I am not vilifying those who save and invest--I do it myself. I just think that money earned from hard work should not be taxed at twice the rate as those that are lucky enough to be rich. When I first started paying income tax it was very progressive with those who could afford it paid higher percentage as their income increased--the highest rate was supposedly 91% according to what I learned in school. Now the rate is pretty close to flat, but the very rich that don't even have to work for their income pay only 14%--that is not fair.
Yeah, 14% of a million is more than I pay with my 28%--that doesn't make it fair--they can afford to pay more.
Then your stock loss was a short term loss (investment held for less than one year) and, as I said before, a short term capital gain would have also been taxed at 28%. If the investment was held for more than one year, you or the rich investor would deduct the loss and save on taxes at the rate of 15% up to a loss of $3,000 in excess of any gains you may have had.
Why should someone pay more because they can afford it? So you think you should pay more for a beer than someone who makes a lot less money than you?
Abnshrek
02-01-2010, 11:35 AM
Then your stock loss was a short term loss (investment held for less than one year) and, as I said before, a short term capital gain would have also been taxed at 28%. If the investment was held for more than one year, you or the rich investor would deduct the loss and save on taxes at the rate of 15% up to a loss of $3,000 in excess of any gains you may have had.
Why should someone pay more because they can afford it? So you think you should pay more for a beer than someone who makes a lot less money than you?
An investment is like beer, no one likes to loose a beer (your favorite kind). A short-term sell shouldn't even be taken unless its to your tax advantage. The market isn't for the faint of heart. Most folks need to stick to mutuals that meet their needs (a good no-load). That way when the next Great-American rip-off( Derivitives (Enron, Housing Market, Banks), Lucent, World-Com) occurs your not swimming in losses.
The rich guy didn't mind paying for his friend's beer cause I guarantee he was writing it off. If life is good why not help out his bud's... He might need his lawn mowed next week.. lol
Then your stock loss was a short term loss (investment held for less than one year) and, as I said before, a short term capital gain would have also been taxed at 28%. If the investment was held for more than one year, you or the rich investor would deduct the loss and save on taxes at the rate of 15% up to a loss of $3,000 in excess of any gains you may have had.
Why should someone pay more because they can afford it? So you think you should pay more for a beer than someone who makes a lot less money than you?
The investment was held for more than one yr, but I do not have any long term gains for it to offset. I will soon see, but I believe that will be a deduction against my income--taxed at 28%.
Yes, I do believe that when it comes to taxes, those that can afford it should pay more--I said that earlier, I do not mind the fact that minimum wage earners do not pay income tax--I feel glad that I was more fortunate.
Even then they pay sales tax at the same rate as the rich.
I certainly do not believe that the rich should pay taxes at a lower rate than I do (a middle class taxpayer). Especially those that are manipulating the price of oil and energy (Enron, Exxon, and the hedge fund managers that almost brought down the financial system--let's not forget the bankers with their billions in bonuses after we bailed them out).
harveyc
02-01-2010, 01:36 PM
Obviously the rich aren't getting rich by having capital losses so it's not the norm by having capital losses in excess of their gains. Usually it's a one year anomaly.
I didn't ask if you thought the rich should pay more taxes; I asked why you thought they should pay more. Just because someone can afford something isn't a just reason, IMO. I'd hate to start paying $30 for a beer (though one reason I've saved well is because I don't drink much of the stuff anyways).
Why should the rich pay less?
Edit: To answer your question and mine with the same answer--because they own more congressmen!
Abnshrek
02-01-2010, 03:05 PM
Why should the rich pay less?
Edit: To answer your question and mine with the same answer--because they own more congressmen!
It always pays to have a Lobbiest in your pocket too.. :^)
harveyc
02-01-2010, 10:29 PM
Why should the rich pay less?
Edit: To answer your question and mine with the same answer--because they own more congressmen!
I have never said that they should pay less. I could argue that they should pay the same amount as everyone else, since they receive essentially the same level of government services as others (a beer is a beer). But even though they pay much more, people want them to pay even more yet and won't be happy until they get brought down to the same level as people who have spent unwisely, maybe not worked as hard, etc.
The rich don't own more congressman; that's nonsense. Just look at how unions had such control over how health care benefits were to be taxed in recent negotiations.
Richard
02-01-2010, 10:37 PM
There's certainly a lot to complain about in the U.S. structure of federal taxes. It also seems that the people with the most acrimony and complaints have the least (if any) concrete proposals for an effective and equitable alternative.
Abnshrek
02-02-2010, 12:15 AM
There's certainly a lot to complain about in the U.S. structure of federal taxes. It also seems that the people with the most acrimony and complaints have the least (if any) concrete proposals for an effective and equitable alternative.
I say we outlaw any professional lobbiest. So maybe the people might have the power they are suppose to have? :^)
Or are we all so busy to give a crap till election day?
<-thinkin' it's beer:30 :^)
I have never said that they should pay less. I could argue that they should pay the same amount as everyone else, since they receive essentially the same level of government services as others (a beer is a beer). But even though they pay much more, people want them to pay even more yet and won't be happy until they get brought down to the same level as people who have spent unwisely, maybe not worked as hard, etc.
The rich don't own more congressman; that's nonsense. Just look at how unions had such control over how health care benefits were to be taxed in recent negotiations.
But the rich do pay less--14 % on millions in dividends as a result of the Bush tax cut-- compared to the 28 % for middle class workers with earned income. So you believe that those single parents making minimum wage should pay almost $5000 out of the measly $16,000 they make in a yr? The truth is that taxes are not the same as buying a beer. There are taxes like sales tax that are the same for everyone, but income tax was originally designed to be a progressive tax on income--starting at 0% for the first few dollars we make and increasing to a maximum of 91% for those lucky enough to be making millions. It was the same for everybody making the same--even the rich paid the same rate for the first $10,000 or first $50,000. But the people with influence started getting politicians to create loopholes for things that benefited them.
Now the income tax system is getting regressive--taxing the middle class at a higher and higher rate. That is why, over the last decade, "real wages" (what you can buy for a dollar) have gone down for the middle class. That is why I can't afford to eat out as often, why we can no longer afford a maid once a week.
Why shoud the rich pay more? Because they benefit more from the opportunities in this country. Because they have more to loose. Because they have more to protect. Because they get more. Because they can afford it.
harveyc
02-02-2010, 10:30 AM
You're dealing with percentages vs. the amount of taxes paid, though 15% capital gains tax is only a portion of the taxes they paid and you're neglecting the Alternative Minimum Tax that is paid. Again, you want to vilify the wealthy and are dealing with your perception rather than fact. Even people that aren't considered "rich" by most standards are required to pay the AMT.
Alternative Minimum Tax (AMT) Assistant for Individuals (http://www.irs.gov/businesses/small/article/0,,id=150703,00.html)
Alternative Minimum Tax - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Alternative_Minimum_Tax)
And itemized deductions get phased out for high tax payers as well, losing a "loophole".
Maybe this will help you come to grips with who is really paying the tax bill: Who Pays the Most Income Tax? (http://usgovinfo.about.com/od/incometaxandtheirs/a/whopaysmost.htm)
Ability to pay is not a reason to pay higher taxes. If someone benefits more from our economic system (as the wealthy generally do), I do think they should pay more income taxes than those benefiting less, but not to the point that we discourage their productivity (i.e., beat up the 10th beer drinker).
I don't know much about AMT--it doesn't affect me, but I am just guessing--it doesn't raise the tax on someone who gets a million in dividends whose total income comes from dividends. If it is designed to make sure that everybody pays as much as I do (28% on my last dollar), even if they got it all from dividends, I am all for it.
Productivity is goods produced per hour of work--generally increased by inovation. GDP is a function of both investment and consumer purchasing power. It does no good to invest in increasing you product if nobody can buy it. I have never read the quote myself, but my dad told me that when Henry Ford started building the Model T, his rich friends ask him why he was paying his workers so much (about $1/hr I think). His reply was "If I don't pay them, who is going to buy these cars?". Our economy is in the tank because the middle class has lost it's purchasing power due to increasing cost of gas and energy and a higher percentage of the total taxes.
I am fortunate enough to have been born with at least average intelligence and to parents that made sure I got a good education. Some are not that fortunate, not very smart and still work hard just to make ends meet. They support this country just by the work they do and the taxes they cannot avoid like sales tax and gas tax. I do not believe they need to pay the same rate as the rich--apparently you do.
Again, income tax was designed to be progressive--to collect a higher percentage from those that make more--but it is getting so regressive that it is killing the middle class.
Abnshrek
02-02-2010, 10:28 PM
I am fortunate enough to have been born with at least average intelligence and to parents that made sure I got a good education. Some are not that fortunate, not very smart and still work hard just to make ends meet. They support this country just by the work they do and the taxes they cannot avoid like sales tax and gas tax. I do not believe they need to pay the same rate as the rich--apparently you do.
Again, income tax was designed to be progressive--to collect a higher percentage from those that make more--but it is getting so regressive that it is killing the middle class.
I don't its like that , but somewhere down the road the US found the rich would just invest someplace else where they can make there $$ worthwhile like thru a foreign bank.
They may pay a lower % but its still more than the middle class pay is harvey's point I believe. ?
If half the poor tried harder we might have a better economy.. That right its the poor folks fault.. :^) They buy more chinese crap than anybody, cause they can't afford the good stuff. Thus our economy is doomed if they keep that crap up. We can do without alot of their (chinese) junk they are attempting to sell here now a days. And that's where the middleclass has transferred to in production/manufacturing unless your one of the fortunate to work in production/manufacturing that hasn't been shutdown to a new factory overseas.
<- thinkin' its time for a beer :^)
Migael, You are right about the rich investing oversees--that is what they did with all the extra money they got from the Bush tax cut--it sped up the transfer of our jobs oversees to China--and they got a tax breaks for even doing that.
BTW, I looked up the AMT--it does no apply to dividends and capital gains. So those nice big bonuses the bankers are getting in stock options will only get taxed at 15% (if they ar smart enough to hold them for a yr). Not like the bonuses I got and most of the middle class get --taxed at 28%.
Isn't that sweet! We bail them out, give them a sweet deal on their bonuses, and they move our jobs oversees. I do think the rich guy owes me a beer!
harveyc
02-03-2010, 11:33 AM
sbl, you need to read about AMT a bit closer. Again, you're just reading what you think you already "know". AMT and Long-Term Capital Gain (http://www.fairmark.com/amt/ltcg.htm) Not all capital gains get hit, but they do come into play and affect the taxes paid. It's also mentioned in one of the Wikipedia link I gave above.
And then you throw stuff out there that the rich invested their tax savings overseas. You have some documentation for that? Higher tax rates here encourage overseas investing. Is that what you really want?
If it wasn't for the rich, many of the great ideas (inventions) that have come about would just be sitting on paper. It takes large investors with capital to help bring these things to market, putting people to work.
Surely you understand the way that law making works. Bush did not write the tax law but signed it. Many Democrats supported it in the legislature. They recognize a benefit to society of encouraging long term capital investments.
Another principle behind discounted long term capital gains being taxed at lower rates is due to inflation. If someone investes $1,000,000 in 2000 and gets a return of $1,200,000 10 years later, is it really fair to tax that $200,000 gain at the full rate when, in reality, he has suffered a "loss" due to the decline in the purchasing power of their money?
From BankRate.com:
"The tax act that reduced the dividend rate treats dividends as net capital gains when computing the favorable tax rate for AMT purposes. Therefore dividends, like long-term capital gains, won't be taxed at higher than 15 percent for the alternative minimum tax."
The rich got their big tax cut in 2001 or 2002-- have you seen a big increase in manufacturing jobs here since then? How about in China? What more evidence do you need? That clearly has helped our economy!
I could accept an adjustment to capital gains based on inflation--that would be a few % per yr. Not 50%. So I guess you are happy with the bonuses of the bankers we bailed out being taxed at half the rate of the middle class--I'm sure there are others.
Abnshrek
02-03-2010, 02:40 PM
From BankRate.com:
"The tax act that reduced the dividend rate treats dividends as net capital gains when computing the favorable tax rate for AMT purposes. Therefore dividends, like long-term capital gains, won't be taxed at higher than 15 percent for the alternative minimum tax."
The rich got their big tax cut in 2001 or 2002-- have you seen a big increase in manufacturing jobs here since then? How about in China? What more evidence do you need? That clearly has helped our economy!
I could accept an adjustment to capital gains based on inflation--that would be a few % per yr. Not 50%. So I guess you are happy with the bonuses of the bankers we bailed out being taxed at half the rate of the middle class--I'm sure there are others.
The problem is there isn't any incentives really to do anything on our soil vs making the quik buck by ordering out..? for cheaper labor
The problem is there isn't any incentives really to do anything on our soil vs making the quik buck by ordering out..? for cheaper labor
You are right! Cheap labor is the reason most of our jobs were shipped oversees. The tax cuts and breaks just helped finance it.
harveyc
02-03-2010, 09:07 PM
The bankrate.com article is obviously overly simplified and misses the mark with AMT.
The indexing would be helpful, but the 50% figure you quote is not "per year". That would be great, some of my capital gains would give me tax credits instead of reduced tax levels.
The risk of that results when one ties their capital up for longer periods of time is considered justification by most lawmakers as worthy of a discounted tax rate, especially since the investments helps stimulate economic growth and jobs. Some jobs here simply would not exist if there wasn't the 15% break, period. I don't think that's really what you want to see.
The tax cuts had nothing to do with sending jobs overseas. Regulatory burden and competition are the factors that have increased jobs being sent overseas. Most of us all shop for the best bargains we can get instead of shopping for "Made in the USA" products. That's the price we pay. You like to blame the wealthy for it but you have no support for such a claim. It didn't take any extra money to move jobs overseas, it saved company's money.
No, the capital gains tax break is not 50% per yr, but those billions stock options bonuses that the bankers just got will get a 50% reduction if they just hold them for a yr--what kind of investment is that?
According to a recent news segnment, when the Bush Tax cut expires it will increase federal tax collection over 360 Billion/yr. So, over the 10 yr life of the bill, it put somwhere in the range of $3.5 Trillion in the pockets of the rich. How much of that was spent creating jobs here in the US? I will bet you that more of it was spent moving jobs to China. BE HONEST--of course it cost money to move jobs oversees--the cost of moving equipment or new equipment, the cost of new buildings, the cost of training workers--but then all of that is deductable as is the travel to visit (or go play golf there). And the rich owners that moved those jobs over there still have to pay income tax on their profits or dividends (if they want to spend that money here of course).
Abnshrek
02-03-2010, 10:06 PM
I think its time for the state to lower the Taxes on my Beer :^)
Who will drink to that? :^)
I think its time for the state to lower the Taxes on my Beer :^)
Who will drink to that? :^)
I will!
In fact I know a great way to do that! Make your own--no tax at all (except sales tax). There are some pretty good kits out there too.
harveyc
02-04-2010, 01:50 AM
No, the capital gains tax break is not 50% per yr, but those billions stock options bonuses that the bankers just got will get a 50% reduction if they just hold them for a yr--what kind of investment is that?
According to a recent news segnment, when the Bush Tax cut expires it will increase federal tax collection over 360 Billion/yr. So, over the 10 yr life of the bill, it put somwhere in the range of $3.5 Trillion in the pockets of the rich. How much of that was spent creating jobs here in the US? I will bet you that more of it was spent moving jobs to China. BE HONEST--of course it cost money to move jobs oversees--the cost of moving equipment or new equipment, the cost of new buildings, the cost of training workers--but then all of that is deductable as is the travel to visit (or go play golf there). And the rich owners that moved those jobs over there still have to pay income tax on their profits or dividends (if they want to spend that money here of course).
The primary financial benefit is getting the right to purchase a stock at a pre-determined price which is usually at a very good discount when/if exercised (some options are not exercised when the company's stock price drops below the option price). The discount between the option price and the market price is reported as wages and has been treated as such for maybe close to 10 years (my wife get some small stock options so I remember it changed a while back, but it wasn't a big deal for us). So the capital gains break has nothing to do with stock options. He someone chooses to hold on to the shares they will need to come up with the money to pay their taxes on the discount elsewhere. If they hold onto those shares for over a year and the stock goes up in price above the market price when they exercised their option, they will report that as a long term capital gain and pay the discounted capital gains rate (though the capital gains may push them into being hit with AMT).
I am being honest. Capital gains are not funding the transfer of jobs overseas. Most moves involving outsourcing and hiring a company in China to manufacture a part for someone, not the U.S. company actually building a plant there. But even when a U.S. company needs to raise capital to fund construction of a plant overseas, it's done from the sale of additional shares of a company. One shareholder selling at a gain simply transfers ownership of those shares from one party to another with no impact on the capital level of the company.
You're wanting to single out companies based on what you perceive to be bad things they've done. That opens up a dilemma which is impossible to solve. Different people will have different opinions of what is bad. Some of those bankers receiving huge bonuses had nothing to do with any losses suffered by their parent company and actually earned huge profits for their company. But you want to tax them more because of the company they're working for? What about a public employee's pension fund that owns shares in Exxon, should they be taxed higher because they profit from shares in a supposedly evil company? What about Apple Computer, which sold $15 billion of products last quarter but has closed down plants here in the U.S.? Maybe we should tax people more if they buy too many products made outside of the USA. We should also consider extra taxes for people who don't eat five servings a day of fruits and vegetables (one serving of bananas should be required, IMO).
If the billions bankers and corporate executives of companies are now getting taxed as salary on the part of options below market value that is great--it didn't used to be that way. They are still getting taxed at half the rate as I am for no real investment at all in the company on the gains. Middle class stockholders of these companies are getting shafted as the value of the stock is diluted.
Of course companies are moving equipment to other countries, I know people whose last yr on the job was just to move and set-up equipment. They did it for cheap labor and they didn't fund it by selling stock. It was a privately owned company and they funded it out of their rich pockets.
Again, the earnings of my pension plan and IRA are taxed as salary--not as capital gains--even if capital gains were part of the increase.
I am not saying we should tax bad behavior differently--though if it were possible it would be a good idea--but we should quit rewarding it.
I am just saying if 28% is the highest tax rate and it applies to the middle class--the same rate should apply to all income above that level. I do not think the rich should pay a lower tax rate than I do.
Abnshrek
02-06-2010, 01:57 AM
Again, the earnings of my pension plan and IRA are taxed as salary--not as capital gains--even if capital gains were part of the increase.
Well maybe(?) when you retire, but not if they are in a tax-free bond fund... but what's the fun in that.. Tax-free being semi-stabile earnings.
The only problem I have with what your 28%, that's now; not when you retire and are on SS if its still around.? So your tax bracket may not be @ 28% (unless your a really good packrat) like you state, which should ease your burden and your mind... :^)
<- thinkin' it's time for a beer :^)
harveyc
02-06-2010, 02:25 AM
sbl, you continue to want to single out the rich as getting the capital gains tax advantage. I'm middle class and get the break and so do you and so do the lower class. Whoever makes long term investments gets the same break. Also, you keep saying that the rich pay a lower rate than you but that is only if they have long term capital gains and you have none. Most everyone that has long term capital gains also has other forms of income and the rich are in higher brackets than the middle class. Again, the top 10% of taxpayers are paying over half of the income taxes in this country but you still don't think that's enough.
I didn't say anything about taxation of your pension benefit. I asked if pension companies shouldn't also pay income taxes on capital gains.
Your example of one company that moved their equipment overseas makes no connection with that being funded by long term capital gains. I know of many companies that have moved operations to overseas but most do not move plant and equipment; it's easier and cheaper to set up new facilities overseas. Certainly there are cases where there is some specialized high-value equipment that is worth moving. Such moves are usually funded from existing capital of a company and has nothing to do with long term capital gains.
Richard
02-06-2010, 02:29 AM
The higher the income, the easier it is to lower your Adjusted Gross Income. Other than bad planning, I don't see why an upper-middle class (or higher) gross income would ever encounter AMT.
Yes, I get a capital gains tax break--sometimes a few thousand $$$, and I get a tax break on dividends--usually less than a few hundred $$, but like I said, I don't see why I should pay less for income I got for doing nothing than money I worked hard for.
Yes the top 10% pay half of the income tax--but they make 90% of the income. They pay less for no reason other than they own more congressmen--Republican and Democtrats. For the most part, the tax breaks they get do not go into creating new job--most new jobs are created by small business--by middle class tax payers who scrape together everything they can and borrow whatever they can to start a new business. Now they are out of money and can't get loans and even if they could they can't sell things because nobody but the rich can afford to buy.
If Congress really wanted to increase manufacturing jobs in this country, they could pass more laws like the Jones Act that requires ships delivering good between US ports to be built in the US--protecting our shipbuilding industry and preventing it from being exported. We need to do the something similar for steel, textiles, and other key manufacturing industries.
Your rich guy is going to be drinking by himself and the bar will probably have to close because the middle class can't afford a beer!
Abnshrek
02-06-2010, 11:04 AM
If Congress really wanted to increase manufacturing jobs in this country, they could pass more laws like the Jones Act that requires ships delivering good between US ports to be built in the US--protecting our shipbuilding industry and preventing it from being exported. We need to do the something similar for steel, textiles, and other key manufacturing industries.
That's called protectionism I due believe. You think our economy sucks now. Govt Contracts are protectionism enough, anything else is just feeding a fat cat's pocket. I look for amercian products and pay the premium price for them so other folks dont loose their jobs. If 300 million people did that I guess disney, hasbro games, the lot wouldn't be selling a whole lotta nothing. I have the view of what has china ever done for me. You know the answer to that.
momoese
02-06-2010, 11:50 AM
I look for amercian products and pay the premium price for them so other folks dont loose their jobs. I have the view of what has china ever done for me.
Life Without Goods Made in China a Challenge : NPR (http://www.npr.org/templates/story/story.php?storyId=12056295)
harveyc
02-06-2010, 12:54 PM
Richard, it's not easy to avoid the AMT unless you're so intent on it that you intentionally lose money and that's not good planning.
sbl, most new jobs are created by new products being made and that requires capital investment. Most of our lawmakers use what little wisdom they have to help encourage capital investments by providing accelerated depreciation, reduced capital gains taxes, etc. Both small businesses and large businesses benefit from this.
I've made a point to my son about the problem about so much of what we buy coming from China. He will scan items now to see where they come from. Some guy on the citrus form has a signature line that says something like "Ty Ty is a place to get robbed, WalMart is a place to buy a bunch of plastic crap from China." ;)
Small businesses are the biggest employers in this country, but most small businesses are not creating a new products, they are selling products and services and they need customers. I was listening to NPR this morning and they interviewed a small business owner (custom trucks and vans). He said even the $5000 tax credit for new employees would not help him--he doesn't have customers.
The middle class --the 70 to 80% in the middle that pay the other 50% of the tax --has been squeezed by the cost of necessities--higher energy cost, higher medical cost, higher education cost, and higher food cost. They don't have money to spend on discretionary spending. It doesn't matter how much you invest in a business--if you do not have customers, it will fail.
I am not against depreciation and investment credits for businesses that create jobs in this country, but after that vehicle or equipment that was depreciated to $0 is sold for $10,000, what is wrong with the govt getting 28% of that depreciation back instead of 14 or 15%?
harveyc
02-06-2010, 06:04 PM
Selling a depreciated asset requires recapture of depreciation tax at the taxpayers full marginal rate (28% or whatever). I think it's Form 4797.
Selling products wears out manufacturing equipment which requires new capital outlays to replace it. In addition, people don't usually just keep selling the same product, they re-tool and build newer/better versions.
The biggest problem with the economy isn't because the middle class has been squeezed by higher costs but because a large number of people were irresponsible and spent more money than they earned for ten years or more of borrowing against inflated home prices. Adjusting to spending what a person is actually earning is painful to those directly affected as well as the entire economy.
There are surely some that overspent and mortgaged their homes to do it, but the vast majority are still in their homes, still working, but finding it hard to make ends meet and still go out to eat (small business), take vacations (small business), buy services (small business), pay for home improvements (small business). All of those small businesses are supported by discretionary spending from the middle class, that can't export their manufacturing, they need customers--money from investments and tax cuts for the rich didn't help them and won't.
harveyc
02-06-2010, 08:07 PM
I didn't say most people were out of their homes but that can't keep getting equity loans to buy things since home equity no longer exists, in many cases. The fact that people sucked paper equity out of their homes is well documented and the cessation of such spending decreases economic growth, increases unemployment, etc.
Providing incentives for capital investments does stimulate such activity and benefits the economy, including those in those in the middle and lower classes of the economy.
Providing incentives for capital investments does stimulate such activity and benefits the economy, including those in those in the middle and lower classes of the economy.
Like the last 9 yrs? When the rich were getting 350 billion per yr in tax breaks? While the middle class paid the same tax rate and found those benefits of the stimulated economy getting harder and harder to find.
I haven't borrowed on my house or my 401K or IRA, but we still have less and less to spend on discretionary items due to increasing cost, yet we are still asked to pay twice the income tax rate of the rich and you think that is fair?
Richard
02-06-2010, 10:13 PM
Have fun with this article:
Editorial - The Truth About the Deficit - NYTimes.com (http://www.nytimes.com/2010/02/07/opinion/07sun1.html?pagewanted=all)
Good article--I found this line particularly true:
"that running big deficits when the economy is expanding only sets the country up for bigger deficits when the economy contracts"
harveyc
02-07-2010, 02:24 AM
Like the last 9 yrs? When the rich were getting 350 billion per yr in tax breaks? While the middle class paid the same tax rate and found those benefits of the stimulated economy getting harder and harder to find.
I haven't borrowed on my house or my 401K or IRA, but we still have less and less to spend on discretionary items due to increasing cost, yet we are still asked to pay twice the income tax rate of the rich and you think that is fair?
You don't pay twice the tax rate as the rich. You get the same benefits of long term capital gains treatment as the rich do. As noted previously, essentially nobody derives all of their income from long term capital gains and it rarely makes up a majority of a taxpayer's income, even for the rich. The rich are paying higher rates on their other income than you are.
I didn't everyone borrowed against their home (nor retirement accounts) but many people did and now that this source of spending has dried up the economy has tanked. That affects everyone, including those that were responsible with their borrowing. Tax cuts did not lead to the recession, decreased spending did.
You don't pay twice the tax rate as the rich. You get the same benefits of long term capital gains treatment as the rich do. As noted previously, essentially nobody derives all of their income from long term capital gains and it rarely makes up a majority of a taxpayer's income, even for the rich. The rich are paying higher rates on their other income than you are.
The top 10% make more money than the other 90% put together. By your own admission, they only pay 50% of the taxes. None of those rich have salary in the billions (some make millions). Of course, capital gains and dividends make up most of their income, it makes up a few % of mine.
They do not pay higher rates than I do on their income--at best they pay the same rate on their salary.
I didn't everyone borrowed against their home (nor retirement accounts) but many people did and now that this source of spending has dried up the economy has tanked. That affects everyone, including those that were responsible with their borrowing. Tax cuts did not lead to the recession, decreased spending did.
So, where did all that money go as the middle class struggled ( both the ones that borrowed and spent responsibly and the ones that had to borrow against their homes and raid their savings just to make ends meet)? It went to the rich that were making billions on mortgage derivitives--mortgages that they made to people they did not tell about increasing interest rates--mortgages where brokers lied about incomes so that people would qualify.
To the oil companies that made billions in profits. To the insurance companies that have more than quadruples their rates. To the bankers that are charging interest rates of more than 30% on credit cards and raising fees on everything.
And you think they should get more tax cuts?
harveyc
02-07-2010, 11:51 AM
sbl, do you have any documentation for your claims or do you make it all up? I know my insurance has barely budged in 10 years.
I have said nothing that I think the rich should get more tax cuts. I don't think there should be any tax cuts for anybody and I don't think people that don't pay income taxes should get "refunds".
harveyc
02-07-2010, 12:00 PM
From what I could find, the top quadrant makes about 50% of the income in the U.S., not the top 10th percentile.
Abnshrek
02-07-2010, 12:09 PM
From what I could find, the top quadrant makes about 50% of the income in the U.S., not the top 10th percentile.
I believe th top quad is 3%.. And that those folks that get refunds that don't pay taxes, just chap my 4th point (buttocks) of contact. :^) talk about redistribution..of income... WTH is this world coming to.
From what I could find, the top quadrant makes about 50% of the income in the U.S., not the top 10th percentile.
If you look at the table below, the top 10% make more than all the rest combined. Back in 92, the bottom 90% made almost as much as the top 10%.
From Wikipedia:
Before-Tax Family Income in the U.S. from 1989-2004[27]
(thousands of 2004 dollars)
before tax family income (mean)
Percentiles of net worth 1989 1992 1995 1998 2001 2004
90-100 205.1 158.5 172.8 206.3 272.7 256.2
75-89.9 74.6 67.0 65.0 78.3 83.7 87.9
50-74.9 52.9 48.1 50.1 54.3 62.7 60.6
25-49.9 36.9 36.4 38.6 39.3 42.1 42.2
Less than 25 21.5 22.9 22.9 23.6 25.6 25.1
Maybe your insurance did not go up, but mine has quadrupled in the past decade--if I had kept the same policy I had in 2000--it would be up 10 fold.
Here is another link on incomes:
Income inequality in the United States - Wikipedia, the free encyclopedia (http://en.wikipedia.org/wiki/Income_inequality_in_the_United_States)
harveyc
02-07-2010, 07:47 PM
I can't read your post #90 very well and it speaks of percentiles of net worth but mixes income in the heading, so I don't know what it's reporting. I already read the link in post #90 but it doesn't show me that the top 10 percent of income earnings make 50% of the income as you claimed earlier.
It is well documented that insurance companies paid out billions for claims due to hurricane damage. Did you ever think that your increased premiums are due to that instead of insurance companies ripping you off? Insurance is to protect against risk and if the risk is higher, the premiums need to be higher.
The table is pre tax income. The percentiles are based on net worth (the richest) The top 10% has an average income in 2004 of $256,200. The total income of the other brackets adds up to less than $220,00.
I have been through 5 hurricanes since I lived here. I have not had one dollar in claims through all 5 hurricanes, but my insurance has shot up to cover the rich people who live on the beach and whose million dollar homes have had to be rebuilt several times.
My medical insurance has more than doubled in the last 5 yrs and I have since had to take a lower option plan.
It is good to know you are not arguing for more tax cuts for the rich, I would have never guessed that.
In case you did not read the link here is one of the key factors (quote):
"Between 1979 and 2005, the mean after-tax income for the top 1% increased by 176%, compared to an increase of 69% for the top quintile overall, 20% for the fourth quintile, 21% for the middle quintile, 17% for the second quintile and 6% for the bottom quintile.[21] For the same time span the aggregate share of after-tax income held by the top percentile increased from 7.5% to 14%"
harveyc
02-07-2010, 11:31 PM
There should be some clearer census information such as was presented in 1997 in this article: Income Inequality: How Census Data Misrepresent Income Distribution (http://www.heritage.org/Research/Labor/CDA99-07.cfm), but I haven't found it.
I certainly don't know much about the distribution of communities in Florida but the two people I know who have had severe damage to their homes were not wealthy people. One was in Homestead (was in the middle of a move to California and he was out here while his wife and kids were unfortunate to go through Andrew alone) and then another in Port Charlotte.
I honestly don't pay much attention to our health insurance premiums but know they have gown up a lot, but also know that our medical costs have gone up a lot. Our insurance paid out nearly $30,000 for us last year, mostly for testing for our son that ended up all being unnecessary (long story, I posted about it elsewhere already). Funny thing about that is that our son's hematologist decided that no further follow-up was needed after I requested that his blood work be performed using two different methods (to prove that the traditional method was unreliable). The insurance company denied payment for the second test performed on the same sample. That's not because of any evil profit incentive; just plain ol' bureaucracy at work. The hospital refunded our co-payments and we told them we had no plans to make a legal claim because that's a big part of the problem with medical costs today.
The story behind this example of beer drinkers shows that everybody gets a tax cut, with the 5th guy who previously paid for his beer now getting his for free. While the 10th guy got the biggest cut in the price of his beer, he had a smaller percentage decrease than the others and was still paying much more. The story is similar to when we have had across-the-board tax cuts. Newspapers will report that the wealthiest are getting the largest dollar cut but not reporting that they are still paying more nor saying that their cut is a smaller percentage than others. With the current deficits being racked up and our huge deficits, I don't think anybody should get tax cuts. I also don't think government spending is going to turn our economy around and that various forms of incentives can be helpful, but a restoration of consumer confidence is of utmost importance. Blaming banks and others for the problems of today is misguided as people who were irresponsible in their spending need to recognize their mistakes instead of blame others. I such a bubble is not repeated again in my lifetime, but I'm not hopeful that this will be the case. I am seeing many homes selling for 75% less than what they sold for less than four years ago (I may buy a second home closer to where my son will later go to school). Crazy. Banks sure aren't getting rich from selling their collateral for much less than they are owed.
I don't like the government redistributing wealth and would rather do that myself. We're sponsoring three children/families in Nicaragua and feel better about that as they are like family to me. Let the government get involved and things would cost ten times as much.
momoese
02-07-2010, 11:37 PM
I don't like the government redistributing wealth and would rather do that myself. We're sponsoring three children/families in Nicaragua and feel better about that as they are like family to me.
You are being naive to think others will follow your path. Also keep in mind that money (imo) would be better spent on the poor in this country. Not saying it's a bad thing to help them, that's great, but there are many people just as unfortunate here.
harveyc
02-07-2010, 11:53 PM
There are many generous people that donate to needy causes. I also donate to many charities here in the USA (more money here), but I don't feel the close connection that I do with the kids in Nicaragua. And I don't think borders should make a difference.
momoese
02-08-2010, 12:01 AM
And I don't think borders should make a difference.
I agree but it seems you guys are talking about what can help us here in the good ole USA.
Richard
02-08-2010, 12:04 AM
I don't know why anyone would use Rush Limbaugh as a source of information when he does things like refer to meeting of advocates for the mentally handicapped as "a retard summit."
harveyc
02-08-2010, 12:22 AM
Richard, I'm not using Rush as source. I'm using U.S. Census data. I Googled and just picked a site with the census data. Give me a direct link to the census information and I'll use it. I think Rush probably has some good points from time to time but don't rely on him for information as it's mostly about entertainment, IMO. But I also think the same about most of our political leaders.
Mitchel, this thread is mostly about taxation but has expanded into other areas but nothing specifically has been stated about making the USA a better place. Still, I think generosity worldwide helps all of humanity and benefits everyone, including the donors.
There should be some clearer census information such as was presented in 1997 in this article: Income Inequality: How Census Data Misrepresent Income Distribution (http://www.heritage.org/Research/Labor/CDA99-07.cfm), but I haven't found it.
The Heritage foundation is a republican mouthpiece that misrepresents data all the time. Like the fact (true) that the Bush Tax Cut would cut taxes for 95% of American taxpayers. They did not tell us that the 58,000 rich people who were paying over a million dollars a yr in taxes (in 2000) would get a 50% tax cut while millions of Americans would get a few dollars.
I certainly don't know much about the distribution of communities in Florida but the two people I know who have had severe damage to their homes were not wealthy people. One was in Homestead (was in the middle of a move to California and he was out here while his wife and kids were unfortunate to go through Andrew alone) and then another in Port Charlotte.
I can tell you. Most of the middle class lives in houses worth 100-200K that are not on the waterfront. Most of the rich live in houses on the waterfront worth millions. When a hurricane hits, many of the inland houses loose a roof or have a tree fall on it causing a few thousand to tens of thousand dollars in damage. Most of the houses on the beach get wiped out ahd have to be totally rebuilt. Fortunately, the only damage I have had is trees falling but not on the house--insurance does not pay for tree removal unless it fall on your house.
I don't like the government redistributing wealth and would rather do that myself. We're sponsoring three children/families in Nicaragua and feel better about that as they are like family to me. Let the government get involved and things would cost ten times as much.
Redistribution is an important function of governments, otherwise all the money ends up in the hands of a few like most third world countries where the masses can barely afford to survive.
"As I've often said... this [increasing income inequality] is not the type of thing which a democratic society—a capitalist democratic society—can really accept without addressing. - Alan Greenspan, June 2005"
It was Bush that gave all working Americans a $600 tax refund at a cost of about 60 billion (even if they did not pay income tax) because someone told him that the economy was not really "fundamentally strong" and that the $350 billion tax cut/yr he gave the rich was not really stimulating the economy.
harveyc
02-08-2010, 10:45 AM
As I said in my reply to Richard, the Heritage Foundation information I'm looking at is just the census data. Every site, even Wikipedia, includes a bias, but usually you can find some useful information there.
Greenspan is an interesting person to quote on this matter. His unsound monetary policies with free cash, (along with Congress pushing lenders to make more credit "available' to the poor and just plain crazy lending by lenders) is largely responsible for the recession we're in.
Sure Bush signed a bill from Congress that gave refunds to those that didn't pay taxes; it was the only way Democrats would approve it.
Bush gave the refund to the poor because he knew they would spend it and stimulate the economy--unlike the money he gave to the rich who invested it in hedge funds that speculated on oil and derivatives.
The mortgage meltdown was caused by unscrupulous mortgage brokers that had no stake in the security of the mortgage. They lied about incomes to qualify people, lied to people or didn't tell then about the fact that the teaser rates used to qualify them would increase from 4 to 5 % in a couple years and then from 5 to 6% in a couple more. These brokers didn't care because they were just bundling the mortgages and selling them for use in derivatives. I know-- My neighbor is a real estate agent that deals only in foreclosed homes.
The real strength of this country has always been the middle class--a middle class that is shrinking and struggling while the rich keep getting richer. And you think they should pay half the tax rate that I do!
harveyc
02-08-2010, 12:36 PM
sbl, you gave me a chuckle. I would guess that much less than 1% of the population invests in derivatives, etc. but you sure focus your attention on these. Most of the rich that received such a payment did not do anything different in their lives.
The bogus lending practices by some mortgage bankers certainly contributed to the problem, but consumers were idiots also. I may be buying a house at foreclosure next week and have been reviewing hundreds of foreclosures. The house I am interested was worth about $107,000 10 years ago but sold for $305,000 in 2005 and peaked in value at about $346,000 in 2006. I should be able to get it for quite a bit less than $100,000 today. This house should never have sold for anything close to $300,000. It's not just the rich that are greedy, everyone was chasing real estate hoping to get rich.
I am not talking about the $600 "Tax Refund" that did go to the rich as well as those that did not make enough to pay income tax. Mine paid for about a month of gas for my truck.
I am talking about the 360 BILLION a yr Bush Tax Cut the is still going to the rich. You are right that the number of people investing in derivatives is small, hedge funds are limited to the very rich--billionaires for the most part, but they had a tremendous amount of money in the market--some estimates put it at 2 to 3 TRILLION dollars in 2007. And it was derivatives that brought down the likes of Leman Brothers and almost brought down AIG (because of the derivatives they insured) which the taxpayer now owns. And for all of this good that these nice rich people do they pay income tax at half the rate of the middle class on their "capital gains" and dividends.
Abnshrek
02-21-2010, 04:53 AM
I am talking about the 360 BILLION a yr Bush Tax Cut the is still going to the rich. And for all of this good that these nice rich people do they pay income tax at half the rate of the middle class on their "capital gains" and dividends.
Well just think those supposedly Conservative Folk are talking about cutting more taxes after they push out the Dem Majority in the next round of elections. Remember its about greed not the people.. Even the Dem's are all about the greed just another segment of business & society which we live. The only person that's looking out for you is you, and maybe your tax man.. & maybe your attorney if you goto his church :^) lol
Richard
02-21-2010, 09:40 PM
Tea Party = White Fright.
LilRaverBoi
02-23-2010, 12:34 PM
*Thread closed at request of the original poster*
Patty in Wisc
02-23-2010, 01:28 PM
I was just ready to post what I wrote below & the thread got locked! I hate to do all this writing for no reason so I C&P'd it to post here. It is nothing offensive :)
I like this thread. I'm learning something, & I like to see others opinions. So nice to see that intelligent ppl can disagree & discuss an issue without name-calling & fighting!:)
Insurance:
Mike's health ins. just went up about $150 a month (to over $500.00)- & that's just for him! Never been in a hospital. Ins Co. says it's because he takes bld. pressure meds - that isn't covered!, so he got diff ins. I just heard on Nat'l news that H. ins. went up so much that ppl can't afford it. AND, the ins. Co's are making big profits, so why the big increase they asked? No answers yet.
Home Owners: I saw a show (60 minutes?) about houses along a coast that keep getting destroyed by hurricanes/storms, & the govrnment helps pay for damage. These are rich ppl that pay a lot for insurance, but so do ppl nearby that don't live on the shores or have damage done, but pay as much for ins (as SBL stated) to help cover those homes. Plus, govmnt helps them w/ $ for damage.
Taxes:
Harvey, you said "and I don't think people that don't pay income taxes should get "refunds"."
Please tell me how to get this money! LOL I get "earned income credit" but you only get it if you have EARNED income & it depends how much you make...the less you earn, the less you get & you have to make less than a certain amount per year -- like poverty level. I get that & SOME refunds of the taxes I paid all year - property tax & income tax.
If I can't show EARNED income, I get nothing.
Banks:
I'm a good example of banks cheating. I know my banker -he's now the big cheese there. I brought Mike to him for lower interest mortgage & Mike moved all his $ there into money market. 2 yrs ago, I applied for equiline. Banker Bob did interview & asked how much I make a yr. He knew I was not working except for helping Mike out on few jobs. I couldn't answer, so Bob said "$30,000?" & I said yeah, sounds good. So, I got $100,000 line of credit. So, for just over 2 yrs, been living off that while I remodeled my basment. I did pretty good that I only borrowed just over $20,000 in over 2 yrs - lived on it & bought materials. Of course, Mike helped out alot -labor & materials. I only have to pay interest monthly. But, they never shoulda gave me that line of credit as I didn't really have a job! My house is paid for so that helps a lot & now I get $700.00 a month for renting bsment apt.
As long as I'm spilling my guts out here LOL, I will say that I bought this house for $12,900 - when my son was 5. My Dad helped w/ down payment & I waitressed & worked in factories. The neighborhood is really cleaned up now & it's now Conservation District - not quite historic, but there are guidelines. With the remodeling I've done over the years, new sunroom addition, basement apt. etc, I've been told this house is worth well over $200,000 maybe 250.
Sorry if I derailed your thread Harvey.
Now, if only I could get the over $45,000 from my son's Dad for back child support!!!!!!
Jack Daw
02-23-2010, 02:24 PM
All I know about it, Patty:
*Thread closed at request of the original poster*
;) Maybe all that had to be said, was said.
LilRaverBoi
02-23-2010, 02:42 PM
Yeah, I was asked by Harvey to close the thread. Pretty sure he felt the discussion had already peaked and had sufficiently covered the topic. From what I was told there weren't any hard feelings toward anyone, just wanted it to be closed. Don't mean to stifle your words, Patty, by any means. I'll merge this with the other thread.
Thanks for your understanding guys!
vBulletin® v3.6.8, Copyright ©2000-2020, Jelsoft Enterprises Ltd.