Gibson raided

[W. Mark Hellinger]

Re: Gibson raided

I am not a fan of punishing the wealthy for being wealthy, nor do I think all the loopholes in our personal income tax system

So what are these big-assed LOOPHOLES for the "wealthy"? I'm surprised it hasn't come up yet.

I'll suggest one is possibly the cap on Social Security TAX payments.

First, I'll suggest that most "wealthy" taxpayers are self employed... one way or another.

I'm of the understanding that Social Security TAX is basically a flat percentage on the self employed of possibly 12.4% of taxable earnings. That means that if you make $50K inna year as a self employed individual, you will pay $6,200 in social security TAX. If you make $100K, you will pay $12,400 in social security TAX. However, there is a cap. If you make $106,800 inna year, you will pay $13,432 in social security TAX. If you make a billion-zillion bucks per year, you'll still only pay a max of $13,432 in SS TAX. $13,432 is the max social security TAX payment... because: Social security is paid out at a maximum rate of $674/mo. So, lets say you paid in at the maximum rate of $13,432 MOL for 20 years, invested at 10% per annum compounded... and you lived to be 70... your SS warchest at retirement age would be approx. $1M... annual payments would need to be somewhere in the neighborhood of a couple hundred grand to exhaust your SS warchest before you die... and $674/mo just ain't gonna come close.

Anyhoo... once you hit your SS TAX max payment, your effective Federal tax rate drops by approx. 12.4%... dropping the "wealthy" from a 47.4% tax bracket to somewhere around a 35% tax bracket on the last dollar they earned (approx. a 25% tax break for the "wealthy").

Loophole? Sure. Is it fair? I seriously doubt I'll ever live long enough to recieve even 10% back of what I've paid into SS TAX over the past 3 1/2 decades... much less recieve 10% of what I've paid in considering any sort of interest on the account.

 

[Charlie Zureki]

Re: Gibson raided

As in possibly a flat combined federal, state, county, and city sales tax on retail sales?

If so, I see three problems with that:

1) If I understand at-all correctly the data I've seen concerning govt. budgets vs. retail sales in the US, such a tax would need to exceed 100% (by quite a bit) to have any hope of balancing the collective govt. budgets.

2) What to do with all the out of work accountants, tax preparers, and tax auditors?

3) What to do about all the pissed off Americans who buy a pizza for $10, plus another $15 or $20 or $?? in govt. sales tax.

BTW: I'll suggest that if you want to really piss off the American voter, abolish all taxes except a one flat tax based on either income or spending, and abolish all tax witholding... and make everyone write a check for the full taxes they're obligated to pay as their fair share once a year.

Hello Mark,

I think he's referring to a flat rate Income Tax. There have been many highly regarded, Nobel Prize winning, Economists that have been suggesting for over twenty years, that such a plan would work. It would collect enough Taxes to actually pay the Budget and help pay down our Nation's Debt. There would be no deductions or exemptions allowed for the Tax payer and his dependants. The Income Taxes would be collected as they as supposed to now...through Payroll withholding.

I'm not so concerned with Tax preparers, Accountants, and Tax Auditors...there would still be jobs for them, but involved with Business and it's Taxes.

(and since when have they ever been concerned with any other occupation's welfare? ;o) )

I know that an only "sales tax on purchases" plan is really not going to work, and would not be acceptable to anyone. It would never raise enough revenue to offset any of our current budget or debt. I'd hate to see people penalized for purchasing...(like they did for a short time)... remember the luxury Taxes? And, as you've said, the Taxes would raise the prices of purchasing items to the point of pricing items out of the Consumer's reach.

FWIW...Pizza is one of the last, inexpensive luxuries that many Americans can afford....don't mess with Pizza.

Cheers,
Hammer

 

[Charlie Zureki]

Re: Gibson raided

That's a great quote but we passed that decision point several decades ago. If a little socialism is like pregnancy we are long past due, with some degree of socialism on place for decades.

I find it instructive watching tens of thousands in Italy protesting because their entitlements are being cut, frankly because they can't borrow like they used to. That could be us in one very possible future if we don't clean up our act.

We need to decide how much socialism we want... I don't personally want any, but that decision was made before I was born.

JR

Hello,

I find the word "Entitlements" to be a dirty word that's brandished about at every opportunity by Political groups to separate one class of Americans from another. These same people that use this word should prove that they are not hypocritical and give up their Medicare and Social Security when they are able to collect.

The Governor of Michigan has recently signed a bill that terminates Unemployment and Welfare for many Michigan residents (about 58,000 a month) that have collected for some specific amount of time. This Act will take place on October 1, 2011. I can already imagine Prisons and Jails occupancy rates rise. (even after some sigificant decreases in the last ten years) I will be packin' when I'm out and about.

The trouble (riots) will not happen in Detroit as it did 43 years ago; (there's only about 400k residents now) it'll happen in the suburbs, where there's actually stores, businesses and personal property that can be had.

Hammer

 

[W. Mark Hellinger]

Re: Gibson raided

The Governor of Michigan has recently signed a bill that terminates Unemployment and Welfare for many Michigan residents (about 58,000 a month) that have collected for some specific amount of time. This Act will take place on October 1, 2011.

Personally I'm pissed as hell about the unemployment welfare system.

I NEED another employee... droves walks through the door asking "cannIhalfajob'? with their right hand scratching their croch.

"I'd be happy to take your application"...

"Application???" Good grief... I've gotta work... pushing a pencil... to get another check??? (and I get that cow looking at a new gate look)

"Can I just put you down as somebody I contacted (and I don't need to fill out your application)?"

........"whatever".......

OR:

"Oh... maybe I'd like to hire you."

"I'm currently unemployed collecting benefits... to come to work for you... and make it worth my while I need to make $XX.XX per hour over my unemployment benefits."

"No can do as that's substancially above this state's going rate for the job title. (besides that you basically have no job skills or experience to qualify you for anything above minimum wage... or more precisely "an unpaid apprenticeship"... where I pay for your education to possibly become an employable assett here"

"So... what's your under-the-table payrate?"

"We don't do that!!!"

"Why, everybody else does! (what's wrong with you?)."

"If you'd like to fill out an application, I'll keep it on file for 90 days."

"FU(k-off asshole (dust cloud)."

 

[John Roberts]

Re: Gibson raided

Hello,

I find the word "Entitlements" to be a dirty word that's brandished about at every opportunity by Political groups to separate one class of Americans from another. These same people that use this word should prove that they are not hypocritical and give up their Medicare and Social Security when they are able to collect.

Aren't we a little sensitive... picking on my "dirty words".

I am 62 and haven't collected one penny of medicare, or Social Security... I don't even have health insurance, but unless the supreme court overturns that other elephant in the room, I will be legally forced to.

So relax.

The Governor of Michigan has recently signed a bill that terminates Unemployment and Welfare for many Michigan residents (about 58,000 a month) that have collected for some specific amount of time. This Act will take place on October 1, 2011. I can already imagine Prisons and Jails occupancy rates rise. (even after some sigificant decreases in the last ten years) I will be packin' when I'm out and about.

I am surprised, but there are any number of credible economists that draw a straight line between longer unemployment benefits and less enthusiasm in job seeking. Reward not working and you get more not working.

Lets see what happens... shall we?

The trouble (riots) will not happen in Detroit as it did 43 years ago; (there's only about 400k residents now) it'll happen in the suburbs, where there's actually stores, businesses and personal property that can be had.

Hammer

I have friends in the area, counting you too I hope. Fear of rioting is not a valid reason to give in to any mob... We are seeing that play out in the EU zone, who are farther down the road than we.

Do I need to add what economists will say about rewarding rioting or fear of rioting (hint... more rioting).

We all need to man up...

JR

 

[Jack Arnott]

Re: Gibson raided

Hello All,
One thing is going conspicuously missing from this conversation.

Capital gains.

As in most of the rich don't make their money on income, per se, but on capital gains.
So the charts are useless in this instance.

Yes they pay higher taxes on "income" than we do. But most of their money coming in is capital gains, and is taxed at, if not all time low, a long time low of either 12 or 12.5%.

Things would be a lot different here if I were paying that rate.


Also, there is one entitlement that I would like to address. That of congress/senate members getting paid for life.
Even if they are a single termer. And getting full medical benefits for life also.
(I am even for the POTUS getting this treatment, and SCOTUS too.)
But to be able to vote for yourself to get this treatment rankles me. I really feel that they should have to live by the same system they set up.
EG, social security. Government is known for its benefits package, but this is ridiculous.

Regards, Jack

PS: JR, don't you get health insurance through the veterans administration?

PPS: Also, as I understand it, there is no SS payments on either capital gains, or business income. As in, I can pay myself a set income, which is taxed, and FDICed at the going rate. But when my company makes profit, and I distribute that at the end of the year, I don't think I pay social security on that, even if I have not hit the limit. Someone please set me straight on this.

 

[Ryan Lantzy]

Re: Gibson raided

So what are these big-assed LOOPHOLES for the "wealthy"? I'm surprised it hasn't come up yet.

I think a lot of the loop holes are related to certain industries that get special tax credits or exemptions for the work they do. I'm at a loss to name any but I think it more relates to corporations in certain industries (especially renewable energy).

Additionally, wealthy people often gift money to family members or use other means to essentially hide money they've made in interest or otherwise. Often it's just a matter of being able to afford a lawyer that knows how the system works.

How effective is this? I personally know people that do it, often every tax year, to skirt taxes. Is it legal? Yes. Is it ethical? *shrug*

The point is this is the inherent problem with income tax systems. Tax laws are enacted, special interest gets a loophole, revenue goes down, rate goes up a little, wash, rinse, repeat.

Eventually you get to the point where certain people/organizations pay no tax at all and others can't start a business because its too costly to comply with the laws and current tax code.

I'm in favor of a sales based tax because it can be applied much more fairly (IMO). The other reason it has advantages is that in theory prices should go down. If the manufacturer, distributor, wholesaler, and retailer all do not have to pay income tax on their profits, they don't have to charge as much for their product. Another clear advantage is that the only people that file tax returns are the collectors (retail sales points). This drops the number of returns from a hundred million or so down to several hundred thousand or a million or so. This could vastly reduce the size and power of the IRS.

 

[Ryan Lantzy]

Re: Gibson raided

Personally I'm pissed as hell about the unemployment welfare system.

"Oh... maybe I'd like to hire you."

"I'm currently unemployed collecting benefits... to come to work for you... and make it worth my while I need to make $XX.XX per hour over my unemployment benefits."

"No can do as that's substancially above this state's going rate for the job title. (besides that you basically have no job skills or experience to qualify you for anything above minimum wage... or more precisely "an unpaid apprenticeship"... where I pay for your education to possibly become an employable assett here"

"So... what's your under-the-table payrate?"

"We don't do that!!!"

"Why, everybody else does! (what's wrong with you?)."

"If you'd like to fill out an application, I'll keep it on file for 90 days."

"FU(k-off asshole (dust cloud)."

Mark,

When I hear people refer in the news to the "mythical" small businesses that are trying to make a go at it, I think of you and Liz. Keep up the good work.

Unfortunately: http://www.cnn.com/2011/OPINION/09/07/rushkoff.jobs.obsolete/index.html

 

[Charlie Zureki]

Re: Gibson raided

Hey JR.

There is some truth that those that can collect Unemployment Benefits/ Welfare have no particular incentive to actually find work. Those are not the people that I worry about, I'm concerned with those that spent many years in College or learning a trade/craft that cannot find work. Or, those over the age of fifty that have been dismissed because of age-ism, down sizing, etc...

Also...there has to be jobs available, Wallmart can only have so many door greet-ers. Many Companies will not even consider those with "too much experience"

Our Country has become like many around the World, there just isn't any jobs. There are no funds available to start new Businesses, unless the prospective Business builders have experience in Business start-ups and existing funds to get the ball rolling.

We have been seeing the gap come into play. The "gap" is the period between the traditional mind-set of find a job, work hard, be a good employee, and retire from this Company, and then.... the mind-set of do not count on any Company for a steady position, get an Education, build your own business, no loyalty to anyone but their own interests, etc..

Our Generation of Boomers have seen the biggest changes in Employment mind-set. There is no reward for most to be a loyal employee, the younger workers have this idea down.

Just random thoughts....

I'm not in fear of mobs or riots in my hood... it takes some effort to get there. I believe in "being prepared"...because I may "need it".

Hammer

 

[Charlie Zureki]

Re: Gibson raided

Hello All,
One thing is going conspicuously missing from this conversation.

Capital gains.

As in most of the rich don't make their money on income, per se, but on capital gains.
So the charts are useless in this instance.

Yes they pay higher taxes on "income" than we do. But most of their money coming in is capital gains, and is taxed at, if not all time low, a long time low of either 12 or 12.5%.

Things would be a lot different here if I were paying that rate.


Also, there is one entitlement that I would like to address. That of congress/senate members getting paid for life.
Even if they are a single termer. And getting full medical benefits for life also.
(I am even for the POTUS getting this treatment, and SCOTUS too.)
But to be able to vote for yourself to get this treatment rankles me. I really feel that they should have to live by the same system .

+1

I did mention investment income in an earlier post... but did not use the term Capital gains.

And yes, we need to limit/stop the "entitlement" handouts to those that generally have assets in the 10s of Millions of dollars. After all, to qualify for Welfare, the applicant cannot own a vehicle or have more than a specific dollar amount in assets.

And..stop the multiple Government Pension checks for those that held more than one position
Hammer

 

[John Roberts]

Re: Gibson raided

Hello All,
One thing is going conspicuously missing from this conversation.

Capital gains.

Perhaps you missed my discussion of active vs passive income. Passive income is things like dividends, interest, and capital gains.

As in most of the rich don't make their money on income, per se, but on capital gains.
So the charts are useless in this instance.

I have a news break for you... It isn't just wealthy people who own stocks, or put money in savings accts, while interest these days is pretty puny thanks to Bernanke's games with interest rates. Ramping up rates on passive income will hit widows and orphans, retirees, 401ks, more than just the wealthy few.

And where do you think the capital came from in the first place? First generation wealth came from earning it so that seed capital was taxed already once. I have been investing in the stock market for decades and paid taxes on all the money I used to invest, when I first earned it the old fashioned way.

Yes they pay higher taxes on "income" than we do. But most of their money coming in is capital gains, and is taxed at, if not all time low, a long time low of either 12 or 12.5%.

I'd say the all time low was 7% when they first started, but that was the normal tax rate for ordinary income in 1921.

I'm not an economist, but I played basketball last night so I'll pretend to be one. If we raised taxes on capital gains, this would directly reduce the market value of dividend paying stocks, then indirectly this lower return on capital investment would be a disincentive and reduce the amount of "capital" made available to business to expand and grow (create jobs).

[edit- I would consider a significant "very" short term capital gain tax on securities held for fractions of a second by flash traders. There is no good reason for people flipping stocks that quickly, other than the siphon wealth out of the market and away from long term investors. I don't mind rewarding clever, but this is borderline stealing, and they game short term price inefficiencies with very fast computers, often located at the exchanges. I could live with $.05 stock price resolution if that reduced this death by a million cuts. /edit]

Things would be a lot different here if I were paying that rate.

So you are in the 49% minority who pay income taxes? (note this is another disputed statistic and used for shock value as it is only talking about income taxes, not all taxes, but still a remarkable number.

Also, there is one entitlement that I would like to address. That of congress/senate members getting paid for life.
Even if they are a single termer. And getting full medical benefits for life also.
(I am even for the POTUS getting this treatment, and SCOTUS too.)
But to be able to vote for yourself to get this treatment rankles me. I really feel that they should have to live by the same system they set up.
EG, social security. Government is known for its benefits package, but this is ridiculous.

+1... they need to put themselves on the same health plan they are forcing on us. They are pigs at the taxpayer's trough.

Regards, Jack

PS: JR, don't you get health insurance through the veterans administration?

I was drafted back in 1970 and served the shorted term I could get away with (18 months, 2 weeks). I believe I am eligible for some kind of veterans consideration but I'd have to arm wrestle some bureaucratic clerks for it. The veterans office in the town/city near me (25 miles) was closed years ago (I haven't checked again lately to see if they reopened) so I would have to drive 60 miles to pursue this, and probably for any clinic care. It might be worth the trip if I was destitute and sick. I'll cross that bridge when I come to it, but right now I prefer to remain healthy and not destitue.

PPS: Also, as I understand it, there is no SS payments on either capital gains, or business income. As in, I can pay myself a set income, which is taxed, and FDICed at the going rate. But when my company makes profit, and I distribute that at the end of the year, I don't think I pay social security on that, even if I have not hit the limit. Someone please set me straight on this.

Huh... schedule C profit is fully taxable.

In S corp organization the profit can be taken out as regular pay and distributions. The simple income must pay employment tax, while distributions don't have to pay. However the IRS will spank you if they don't think you have paid yourself a reasonable salary, and will reclassify the distribution as regular income.

In C corps you want to pay yourself as much as possible to reduce profit and corporate taxes (dividends are not deductible from corporate taxes). Another observation about passive income, the corporation already paid tax on the that dividend before distribution it to stock holders, who are then taxed on it again... If business was double dipping like that the government would raise holy hell...

Selling appreciated stock that you own, personally, would not be subject to Social Security tax, as it is not considered wages. However, if you're referring to employee stock options that have appreciated, that appreciation is considered additional salary and would be included in your wages, subject to Social Security, Medicare and federal and state income tax withholding.

So yes, for pass through tax structured businesses, some fraction of income can be treated as a distribution but you are subject to what the IRS considers reasonable. AFAIK there is not strict code definition of what is reasonable, so good luck...

JR

 

[John Roberts]

Re: Gibson raided

I'm in favor of a sales based tax because it can be applied much more fairly (IMO). The other reason it has advantages is that in theory prices should go down. If the manufacturer, distributor, wholesaler, and retailer all do not have to pay income tax on their profits, they don't have to charge as much for their product. Another clear advantage is that the only people that file tax returns are the collectors (retail sales points). This drops the number of returns from a hundred million or so down to several hundred thousand or a million or so. This could vastly reduce the size and power of the IRS.

Be careful what you wish for... My speculation is that the $600 1099 requirement they tried to slip into the healthcare bill was setting the stage for VAT tax. While you are correct a simple consumption tax "only" could reduce tax reporting and perhaps simplify, I worry about "we'll just add a small consumption tax" on top of the current taxes.

In my lifetime I only recall one tax ever going away... It was a temporary 3% tax on long distance phone calls to fund the Mexican-American war in 1898, and only retired in 2006.

FWIW, in Greece where the VAT tax is the dominant federal tax, there is a vibrant underground economy to avoid this tax.. the result is they raise the VAT rate, and drive more of the economy under ground.

There are many simple answers, but they often contain got'chas. We have the luxury of looking elsewhere for things that don't work as predicted.
-------
I have semi-seriously considered a federal sales tax to reduce the clutter and confusion of all the different state and local sales taxes. This would reduce the current advantage of out of state mail order and direct sales over bricks and mortar merchants. But I don't trust the feds to collect a sales tax without misplacing more than a little of it.

Giving the federal government more money is like watering weeds and expecting a pretty yard.

JR

 

[W. Mark Hellinger]

Re: Gibson raided

Mark,

When I hear people refer in the news to the "mythical" small businesses that are trying to make a go at it, I think of you and Liz. Keep up the good work.

Unfortunately: http://www.cnn.com/2011/OPINION/09/07/rushkoff.jobs.obsolete/index.html

Thanks for thought and link. I get pretty worked up about this stuff.

And yes, I do agree that "jobs" are falling casuality to mechanization... but, but, but (geeze... where to start and where to stop on this subject?).

I'll start here: Better tools should result in higher quality... not lowered expectations all the way around. Work should be be in-part it's own reward. Why not go the extra mile and do the job as right as reasonably possible?

My employees generally verbalize some when they start-out working for me that they think I oftentimes go to "a lot of work"... "there's quicker & easier ways to do things". I'll reply: "Could be, and if you know of a quicker or easier way to deliver as good or better results, we'll do it your way." Sometimes the answer is: "Well... no, it's not gonna turn-out quite as good, but who cares?" I'll reply: "I care... my standard is my standard, so we're going to do things up to my standard, and although the boss might not always be right, the boss is always the boss." Sometimes they do have a better method (quicker and/or easier) to generate as good or better results... oftentimes using new & improved technology... so we do it the improved way.

Another one of my sayings involving standards: "How many times will we get to do this?" Response by employees, bandmates, co-workers doing shows, etc...: "Do what?" My reply: "Life... you-know... the chance to do what we've been given a chance to do... heck, why not do a great job? What else would we be doing today if we weren't doing *this*? Might as well do this over-the-top if we can, right?"

Humans have all the right stuff to produce phenominal results... why not push the envelope? Why not strive to do a great job, even though a mediocre job might be adequate for the here and now? Sure, there might be machines that do a pretty good job at some stuff... but here's lots of opportunity out there to produce results that a machine cannot do. Whats with the goal to get out of work?... and do what? Lay on the couch and be passively entertained and stuff yourself with junk food? Maybe I'm missing something: What's wrong with doing something that others might call work? We only have one shot at this... might as well make it count.

Oh yea, and that "money stuff". As far as I'm concerned, that stuff is simply the ways and means to grease the skids of accomplishment. Money is just another tool in the tool chest.

 

[Charlie Zureki]

Re: Gibson raided

Another one of my sayings involving standards: "How many times will we get to do this?" Response by employees, bandmates, co-workers doing shows, etc...: "Do what?" My reply: "Life... you-know... the chance to do what we've been given a chance to do... heck, why not do a great job?

Humans have all the right stuff to produce phenominal results... why not push the envelope? Why not strive to do a great job, even though a mediocre job might be adequate for the here and now?

Whats with the goal to get out of work?... and do what? Lay on the couch and be passively entertained and stuff yourself with junk food? Maybe I'm missing something: What's wrong with doing something that others might call work? We only have one shot at this...

+1

As you've pointed out, some people work harder at GETTING OUT of work, than just doing the work in the first place.

Throughout history, people have prized the ability to not have to work. Generally, not having to work was a sign that one had wealth.

Although today, ignorant people are missing that part of the equation...the most important part, the part about having wealth in reserve. Somehow they continue to strive to not work, while NOT having wealth in reserve.

Working solves a lot of problems besides the obvious concerns of paying for food, shelter, and clothes, there's the social, and mental aspects too. The proceeds from work can also keep people busy, separated from each other from spending a 24hr day together....(most people ;o) Social Scientists can discuss in great detail the benefits from working. Too big of a topic for this post.

Cheers,
Hammer

 

[Randy Gartner]

Re: Gibson raided

Hello All,
One thing is going conspicuously missing from this conversation.

Capital gains.

As in most of the rich don't make their money on income, per se, but on capital gains.
So the charts are useless in this instance.

Yes they pay higher taxes on "income" than we do. But most of their money coming in is capital gains, and is taxed at, if not all time low, a long time low of either 12 or 12.5%.

Things would be a lot different here if I were paying that rate.


Also, there is one entitlement that I would like to address. That of congress/senate members getting paid for life.
Even if they are a single termer. And getting full medical benefits for life also.
(I am even for the POTUS getting this treatment, and SCOTUS too.)
But to be able to vote for yourself to get this treatment rankles me. I really feel that they should have to live by the same system they set up.
EG, social security. Government is known for its benefits package, but this is ridiculous.

Regards, Jack

PS: JR, don't you get health insurance through the veterans administration?

PPS: Also, as I understand it, there is no SS payments on either capital gains, or business income. As in, I can pay myself a set income, which is taxed, and FDICed at the going rate. But when my company makes profit, and I distribute that at the end of the year, I don't think I pay social security on that, even if I have not hit the limit. Someone please set me straight on this.

I believe capital gains is 15%.My aunt,who is 88 and not rich,just sold her house which her and my uncle bought at the Delaware shore in 65 for $12,500. Sold it for $400,000. Nice,but the feds are going to take $60,000 from her. She isn't rich.Never made more than $25,000 a year durring her 50 years of working.And while she was working,she paid income tax,sales tax,gas tax,property tax etc,etc. Now when her savings are starting to run out,she selles the place so she has money to live on,but the feds get $60,000 for what? What did theydo to deserve that money.As I pointed out, they already took taxes from her all her life.That's fine.Now they want more?
So it's not only the rich who get hit by capitol gains,it middle Americans too. As too the argument about do the rich pay their fair share,I believe that the tax rates they pay are fine,maybe even a bit too high.Obama's Simpson Bowles Commssion recommends lower tax rates and closing loop holes. I agree,but the president has ignored his own commssion. Jeff Imelt,head of General Electric, is also head of Obama's jobs councilLast year,GE made a profit of $7.2 billion but paid no taxes because of "loop holes".That's not right.But it's also not right that 47% of all working Americans pay no income tax.They not only pay no income tax,they get money in return.One of my customers owns a restaraunt.He had a gril working for him last year that ended up paying no income tax,but got over $2,000 back from the child tax credit.Where does that money come from? From those of us that pay in,and from people like my aunt. I think everyone from GE to the lowest paid worker should pay something.We all benefit from this country and we all need to give something back,even if it's a very small amount in the case of the lower income workers to the highest money earners like GE.

 

[Tim McCulloch]

Re: Gibson raided

There are "loopholes" that a financial adviser or estate planning attorney coulda/shoulda suggested to your Aunt. Folks who pay "full price" at the taxman's cage needed advice and counsel at least 3 to 5 years earlier (and then followed that advice). I'm sorry to hear she's taking such a big hit. Is this income tax on the profit from the sale of a primary residence, or is it capital gains on a second residence, vacation property, etc?

 

[John Roberts]

Re: Gibson raided

I believe capital gains is 15%.

I'm not a tax expert, but there are at least two rates on capital gains, depending on how long the security is held... For short term capital gains, (less than one year) we pay ordinary income tax rates, for long term holdings more than one year there are lower rates depending on what bracket you are in.

Starting in 2013 medicare tax is increasing to 3.8% (was 2.9%) and will be charged on investment income too, formerly it was just applied to regular income but was increased in the recent healthcare legislation (on $200k+ earners).

My aunt,who is 88 and not rich,just sold her house which her and my uncle bought at the Delaware shore in 65 for $12,500. Sold it for $400,000. Nice,but the feds are going to take $60,000 from her.

There's a $250k exemption (per taxpayer) for primary residences, If it wasn't her primary residence it might be worth living there long enough to establish it as one.

She isn't rich.Never made more than $25,000 a year durring her 50 years of working.And while she was working,she paid income tax,sales tax,gas tax,property tax etc,etc. Now when her savings are starting to run out,she selles the place so she has money to live on,but the feds get $60,000 for what? What did theydo to deserve that money.As I pointed out, they already took taxes from her all her life.That's fine.Now they want more?


So it's not only the rich who get hit by capitol gains,it middle Americans too. As too the argument about do the rich pay their fair share,I believe that the tax rates they pay are fine,maybe even a bit too high.Obama's Simpson Bowles Commssion recommends lower tax rates and closing loop holes. I agree,but the president has ignored his own commssion.

I've heard rumors of work on a plan to eliminate the corporate taxes on off shore profits, and reduce some loopholes to get nominal rates lower while being revenue neutral, but nobody is optimistic that congress would consider such in this climate. I suspect the president would love to free up the $1T on corporate balance sheets (held offshore), to create domestic investment and jobs before next year's little election.

Jeff Imelt,head of General Electric, is also head of Obama's jobs councilLast year,GE made a profit of $7.2 billion but paid no taxes because of "loop holes".

I mentioned GE already and while the example is factual its not some mysterious loophole, but some $32B of losses they took in their finance division. It seems fair enough for business to apply real loses from one dividion against profits in another and to carry it over into future years... For individuals there's an Alternate minimum Tax to keep deductions from completely wiping out high income tax liabilities. Perhaps something like that for corporations could make sense, while it's hard to get blood from a stone, or a corporation that isn't making a profit. I suspect GE will be paying more taxes as these losses roll off.

It's the loopholes we don't know about that bother me. They are just about to pass a new improved patent law, and one drug company finagled a special loophole to retroactively forgive a mistake they made (they missed a patent filing date by one day on some big dollar drug application).

That's not right.But it's also not right that 47% of all working Americans pay no income tax.They not only pay no income tax,they get money in return.One of my customers owns a restaraunt.He had a gril working for him last year that ended up paying no income tax,but got over $2,000 back from the child tax credit.Where does that money come from? From those of us that pay in,and from people like my aunt. I think everyone from GE to the lowest paid worker should pay something.We all benefit from this country and we all need to give something back,even if it's a very small amount in the case of the lower income workers to the highest money earners like GE.

There is a lot of social engineering in the tax code, including a $250k exemption for selling homes. Attacking the poor people for not paying enough taxes is pretty much the other side of the same coin as criticizing the wealthy for not paying enough. This class warfare is distracting us from the man behind the curtain, borrowing and spending our money.

I wish the government would just spend (and have spent) less... So we wouldn't be in a position where we pretty much have to increase taxes, and cut spending too. All these very expensive short term band aids on the economy don't fix the fundamental issues. Here we are a couple years after the last big short term patch job, and we're surprised that that the root issues haven't changed? I'm shocked! Another short term stimulus, will be yet another short term postponement of reality, but all this borrowing for the "health" of the economy, reminds of ancient medicine that used to bleed patients with leeches. I guess we didn't bleed the patient enough with the last stimulus program.. Doctor, bring us more leeches...

JR

 

[W. Mark Hellinger]

Re: Gibson raided

.My aunt,who is 88 and not rich,just sold her house which her and my uncle bought at the Delaware shore in 65 for $12,500. Sold it for $400,000. Nice,but the feds are going to take $60,000 from her. She isn't rich.Never made more than $25,000 a year durring her 50 years of working.

What's good for the goose should be good for the gander, as in:

If I buy a new shop for my business, I believe I have to amortize that purchase off over decades... I can't deduct the whole purchase price in one year, even if I didn't borrow to make the purchase & paid cash.

Your aunt owned that house for approx. 46 years; therefore, the asset appreciated approx. $8,500 per year.... adjusted for inflation it probably appreciated some around grand a year back in the '60's and $15K - $20K/yr. more recently.

I suggest, what would be good for the gander is for those capital gains tax payments to be amortized for the next 46 years at the same relative rate of what the house appreciated in value since its purchase... so she'd owe approx. $150 this year... and her last capital gains tax payment on that sale, 46 years from now, would be approx. $3K.

Sounds fair to me. Her SS war chest should have way more than enough in it to act as collateral if she worked for 50 years, assuming of-course all her SS taxes are vested and drawing compounded interest at a reasonable fair market rate all these years.:roll:

 

[Randy Gartner]

Re: Gibson raided

My aunt's house was a second home at the shore which was bought in 1965 ( for $12,500),so it wasn't her primary residence which means she has to pay capitol gains on the full amount. As I pointed out,she's 88 years old and not rich.I was trying to make the point that it's not just the wealthy that pay capitol gains.John,I'm not attacking the poor. I was trying to make 2 points. First,we all benefit from this country and we all need to help support it,even if it's just a little.The second point was that some who work and pay no taxes,are getting money from those of us who are paying taxes.So our government isn't Robin Hood taking from the rich and giving to the poor.They are also taking from many of us who are just squeeking by in this economy.I don't mind helping out the less fortunate,but I like to choose who I give my money to instead of having the government decide.

 

[John Roberts]

Re: Gibson raided

it could take something like 2 years to establish primary residency, and at 88YO that is likely out of the question. Probably an unintended pun but you typed "capitol" gains.. at least those folks in our nation's "capitol" are "gaining" from her circumstance.

I am not accusing you of attacking the poor (we are on the same page), just that the whole, how much wealthy or poor pay is a "red herring" fallacy pushed by both sides to paralyze the middle and distract attention from the real issue. The government can only get enough revenue by taxing the productive segments of society, no matter how much wealth they claim is available from tapping the super rich, or taxing the poor for that matter, even though nobody is crass enough to suggest raising taxes on the poor. I'll be crass for a moment.. How about making long term unemployment benefits a loan, not a gift, that must be paid back in part or in full at some time in the future. Perhaps this would provide the safety net for the truly needy, but remove the incentive to not aggressively seek work. If unemployment got paid back we would also have more such funds available long term, not that I trust government to keep their hands out of that lock box, between recessions.

The real issue as I see it, is spending more than we can prudently afford to spend. This means we, or our children, or their children will be saddled with the negative unintended consequences.

Anybody who has ever run a business can see from a distance how wasteful and unproductive government activity is. I will avoid the cliche, "all government must be slashed" (even if I'm thinking that), but we need to thoughtfully separate the wheat (useful government functions), from the chaff (everything else), and both reduce the chaff while improving the effectiveness of the useful parts. I recall when government jobs were low paying but safe choices for people willing to trade job security for low pay, probably a fair exchange because most government work was not heavy lifting. But now government jobs are often higher paid than the private sector, and growing like topsy, while the persistent lack of economic growth may derail even this gravy train.

While there are IMO some areas of regulation that needed work after the financial meltdown, there are far more existing regulatory functions that needed to be fixed as they were asleep at the wheel, missing all kinds of fraud and bad behaviors ( Bernie Madhof and liar loan mortgages anybody?). I don't feel like the regulatory oversight of the stock market (SEC et al) is doing me much good, and the labor dept going after home builders over their labor practices, does not seem helpful to an industry already limping. Lets see how suing the banks that write mortgages, and attacking home builder's labor practices does to stabilize the housing market? It seems like the regulators are in a different world from the rest of us.

We need more adult behavior in our government. More of a long term perspective, instead of short term, "what can I be seen doing" in time for the next election cycle. If anybody thinks jobs suddenly became a problem one year before the election, need only look at the unemployment rate for the last several years, and what the legislators have been doing instead until very recently.

To fix jobs and hiring, the first (long term) step is to stop or at least reduce the uncertainty about future costs and regulatory overhead. Short term hiring incentives will only change the timing of marginal hiring (the business would have hired anyhow in the next 6 months to a year). No business is going to create a permanent position because of a temporary incentive. It's like that new car incentive, that mainly pulled in a bunch of future sales into the current period and depressed sales later. It didn't make people buy a car that didn't need a car, and after they bought one they didn't need another.

In fact I will go further and give government a partial pass because they can't create private sector jobs, so why pretend they can? However they sure can muddy the water and slow down job growth with all their arm waving. I think Bernanke kind of gets it (the negative consequences of uncertainty). His recent announcement of a fixed two year interest rate target, is pretty much unbelievable. I sure expect him to change it if the economy changes before 2 years are up (and it better), but he is trying to telegraph some stability from the government, while all around him are creating more uncertainty about the future.

I suspect my personal opinions will sound partisan to some, so I will stop tilting at windmills for now.

JR