Across the board tax rate...fair for all?

[gotomu212]

Own real estate, have your money in tax deferred investments, open a charitable trust.

Lucas sold star wars to Disney for 4 billion as I recall, and put the income in a charitable trust. Taxes= zero

Some of this is greatly exaggerated. Real estate tax breaks do not apply to all properties. Tax deferred investments have income caps. Charitable trusts are an option but that means you are donating the money and those trusts come with strict IRS rules.

There’s some benefit to setting up corporations, but then you’re subject to corporate taxes. Yes there are ways to shelter your money but truly wealthy people are paying the lion share of personal taxes going into the treasury.

 

[DopeyDame]

I really don't know how she will be taxed twice. She was very upset and vented about the amount of taxes she had to pay, trying to put money away for retirement and not being able to deduct it/ being taxed twice on it, the time she spends working and away from family and being penalized for it. I just let her talk and offered her a job change to panhandling.

That's the kind of advice I would totally offer to my friends.

 

[tvguy]

Got any proof of that? I'd love to know how I could do that.

Easy.............if you are rich.......to have no taxable income. Put all your money in tax exempt investments.
Probably not the wisest move for rate of return. You pull money out of those accounts to pay your bills.

I plan to retire at age 63 and not touch my Social Security, IRA's, and 401k money until full retirement age of 66 1/2. I will live off my savings. I think I had $3,500 in interest and dividend income last year, so if that continues for those 3 years, with me not working I will have zero dollars earned income, and $3,500 taxable income a year.

 

[longboard55]

Some of this is greatly exaggerated. Real estate tax breaks do not apply to all properties. Tax deferred investments have income caps. Charitable trusts are an option but that means you are donating the money and those trusts come with strict IRS rules.

There’s some benefit to setting up corporations, but then you’re subject to corporate taxes. Yes there are ways to shelter your money but truly wealthy people are paying the lion share of personal taxes going into the treasury.

Not really true, they always talk about income taxes. What about FICA, that is a huge chunk of federal income they rich pay very little of. Even if you pay zero income tax they are still taking out for medicare and SS. I am self employed so its 15%, I will guarantee you Lebron James does not pay 15% on his actual total income

 

[Hikergirl]

Easy.............if you are rich.......to have no taxable income. Put all your money in tax exempt investments.
Probably not the wisest move for rate of return. You pull money out of those accounts to pay your bills.

I plan to retire at age 63 and not touch my Social Security, IRA's, and 401k money until full retirement age of 66 1/2. I will live off my savings. I think I had $3,500 in interest and dividend income last year, so if that continues for those 3 years, with me not working I will have zero dollars earned income, and $3,500 taxable income a year.

If you are retired you are not earning an income, capital gains aside.
Admittedly I do not know the tax laws regarding all tax exempt investments but I'm willing to bet that if you are earning an income then the gov't isn't going to allow you to put 100% of that income in to those investments.
So, the idea that someone like Lebron James, who is not retired and actively working and earning, has $0 taxable income just doesn't make sense.

 

[rickybobby]

Everyone should read "The Fair Tax Book" by Neal Boortz. It was written years ago, and it is a consumption tax that could work. Everyone would get a prebate check for basic necessities each month. And the beauty would be that if, say you get paid $30 an hour for 40 hours, your take home pay would be $1200. No taxes taken out.
Herman Cain had plans of moving gradually to this tax system when he was running for president a couple elections ago. He was going to start with his 9-9-9 tax plan initially, then change over to the Fair Tax.

 

[soccerdad72]

Lucas sold star wars to Disney for 4 billion as I recall, and put the income in a charitable trust. Taxes= zero

Lucas took Disney stock in payment for his sale of Star Wars, so at the time of sale, he wouldn't have paid taxes. It doesn't, however, mean that the sale at some point in time won't be taxable.

 

[rickybobby]

Not really true, they always talk about income taxes. What about FICA, that is a huge chunk of federal income they rich pay very little of. Even if you pay zero income tax they are still taking out for medicare and SS. I am self employed so its 15%, I will guarantee you Lebron James does not pay 15% on his actual total income

The idea of FICA is that it is a program wherein you get back after retirement what you put in. That was the original intention. Therefore, it is phased out on high income workers after they have paid in as much as they could possibly get back when they qualify for their own SSI.

 

[morgan98]

If that is the case you should be maximizing 401k and ira deductions. All I am saying is the super rich are not paying 35% unless they refuse to take advantage of the options available. On the other hand if your living paycheck to paycheck like many do, you have no options

Lets take steve jobs for example, we did not take an income for his job, he always traded companies and never sold them, and he made sure apple never paid a dividend. He dies a billionaire but paid very little in taxes

First of all, no matter the income level, the 401k deduction is the same for everyone and IRA contributions are not deductible once you hit a certain threshold.

Steve Jobs is an extreme examples. A family with two W-2 employees with good careers is not equivalent to the options for tax avoidance Steve Jobs has.

 

[morgan98]

Not really true, they always talk about income taxes. What about FICA, that is a huge chunk of federal income they rich pay very little of. Even if you pay zero income tax they are still taking out for medicare and SS. I am self employed so its 15%, I will guarantee you Lebron James does not pay 15% on his actual total income

But the benefit social security pays out is capped as well. FICA covers totally different things than income tax.

 

[longboard55]

Lucas took Disney stock in payment for his sale of Star Wars, so at the time of sale, he wouldn't have paid taxes. It doesn't, however, mean that the sale at some point in time won't be taxable.

If he dies and gives the stock to his family, all those capital gains disappear. They would have to pay inheritance tax, because they failed to repeal that, but as far as capital gains taxes. pooof they are gone. The game is trade up assets and never report a profit

 

[Colleen27]

I really don't know how she will be taxed twice. She was very upset and vented about the amount of taxes she had to pay, trying to put money away for retirement and not being able to deduct it/ being taxed twice on it, the time she spends working and away from family and being penalized for it. I just let her talk and offered her a job change to panhandling.

It sounds like she misunderstood how it works, which is easy enough to do with as complicated as our tax code is. There is no double taxation on post-tax retirement savings; you pay your current rate on the initial contribution, because it comes out of post-tax dollars, and then pay the capital gains rate only on the gains when you sell those investments.

Tax-advantaged accounts allow you to escape taxes at the time of contribution, but withdrawals are taxed as ordinary income which can actually mean a higher rate than the capital gains rate levied on the increase in value on post-tax investments.

Nope. Sacramento, the Capital of California. Population of Sacramento County is 1.5 million
We have Kaiser Hosptials
We have Sutter Hosptials
We have Mercy Hospitals (owned by Dignity health)
We and the UC Davis Medical Center.

My Doctor belongs to a group that is exclusively linked to Sutter.
My insurance, CIGNA has a contract with Sutter and Mercy.
So you have to go to the Hospital group that is affiliated with your Doctor, and you choose your Doctor based on which insurance he or she accepts. I guess the Doctor is the link
My insurance will pay for other hospitals, but that would be out of network so they pay less.

It is crazy how much things can vary from state to state. The bolded is the same here, but most doctors in my area have privileges at multiple hospital systems, and off the top of my head I count a half-dozen systems with facilities in my area. There are probably more if I included more of the metro area. My primary care doc is affiliated with two of the three closest hospitals, as well as with another system that doesn't have facilities close enough to be useful to me (but which is close to the other office of her group practice).

Not really true, they always talk about income taxes. What about FICA, that is a huge chunk of federal income they rich pay very little of. Even if you pay zero income tax they are still taking out for medicare and SS. I am self employed so its 15%,

In all fairness, most flat tax or consumption tax proposals are structured to replace both income and payroll taxes, so it isn't as though that higher tax rate for lower-income workers would be in addition to FICA.

 

[tvguy]

If you are retired you are not earning an income, capital gains aside.
Admittedly I do not know the tax laws regarding all tax exempt investments but I'm willing to bet that if you are earning an income then the gov't isn't going to allow you to put 100% of that income in to those investments.
So, the idea that someone like Lebron James, who is not retired and actively working and earning, has $0 taxable income just doesn't make sense.

Who said Lebron James had no taxable income? Google says he paid $17 million in Federal Income Tax.

 

[soccerdad72]

If he dies and gives the stock to his family, all those capital gains disappear. They would have to pay inheritance tax, because they failed to repeal that, but as far as capital gains taxes. pooof they are gone. The game is trade up assets and never report a profit

The estate would pay taxes on the stock and his heirs will receive it at the value at the time of his death.

If the stock increases in value after inheritance, the heirs would owe taxes on the capital gains when they sell the shares.

 

[DisneyOma]

I am not sure if this would be considered a political thread, if so please delete. I am wondering what people think of one tax rate for everyone.

MY DS21 is getting into economics. he has an internet friend over in England and they get into debates all the time. The other day he asked me if I agreed with one tax rate for all. I said ABSOLUTELY!!! He didn't agree.

I am thinking, of course he is not going to agree while he is starting out in the working world making $9/hour. As my income grows, I watch more and more get taken out. It is frustrating. Why do I have to pay 35-40% tax while other pay 25%?

He used this as an example. for easy math, tax rate for all is 10%. Joe make $20,000/ year and pays $2000 in taxes. Bill makes $2,000,000/year. He pays $200,000 in taxes. To that I said, "exactly". Bill is still paying way more taxes than Joe, but it is more fair because they are both paying the same rate. To this my son pointed out that Joe paying $2000 of his $20,000 only leaves him with $18,000 to live on. While Bill would still have $1,800,000. That's not fair.

I tried to get him to understand that Joe is still only going to have $18,000 to live on after his 10% tax is paid, whether Bill pays 10% or 40%. After going round and round with him, I realized I am just not educated enough on this topic to debate him, other than to say I am tired of seeing my take home pay shrink as I make more money.

The rule And a question - do you mean just income tax, or a tax on all money made? For it is not all called 'income'.

you need to understand the difference in taxable income and total income. Lower paid workers pay taxes on their entire revenue, i.e. their paycheck. Rich people pay taxes on their taxable income after a mountain of exclusions, deductions, and tax avoidance schemes that is a fraction of what their total income is.

Do rich people pay 35% on their income, no way, they pay 35% on their taxable income, which in many cases is zero.

Exactly, and they squirrel a lot away under other names/shelters/tricks the rich have created to become richer. Can't get into the politics of it though.

I have no doubt that the super rich use tax shelters, I do doubt that their taxable income is $0 though.

For some, it's pretty damn close to $0. Family member is an accountant for a few firms in the local area. He does some interesting things with money I'd call 'income'. Own your own business, call a lot of stuff 'expenses' and you make $0.

 

[tvguy]

It is crazy how much things can vary from state to state. The bolded is the same here, but most doctors in my area have privileges at multiple hospital systems, and off the top of my head I count a half-dozen systems with facilities in my area. There are probably more if I included more of the metro area. My primary care doc is affiliated with two of the three closest hospitals, as well as with another system that doesn't have facilities close enough to be useful to me (but which is close to the other office of her group practice).

My Primary Care Doctor is affiliated with 5 Medical Groups, but all 5 of those groups are affiliated with just one hospital.
Kaiser is a whole different ball game. If you have Kaiser health care, you only use a Doctor who is EMPLOYED by Kaiser. They are your insurance, your hospital and your Doctor.

 

[Hikergirl]

Who said Lebron James had no taxable income? Google says he paid $17 million in Federal Income Tax.

Tell that to the poster here who claims that in many cases rich people have zero dollars in taxable income.
That is how this whole (side) conversation got started and I assumed you were contributing too. I brought up Lebron because that poster did.

 

[tvguy]

Tell that to the poster here who claims that in many cases rich people have zero dollars in taxable income.
That is how this whole (side) conversation got started and I assumed you were contributing too. I brought up Lebron because that poster did.

Sorry, I missed that and just scrolled through quickly now and don't see it.
My point is, even common folks like me can have zero or little taxable income.
Preservation of capital and minimizing taxes are the goals of my modest investments.

 

[ColoradoDisneyFreaks]

That's confusing tax dollars with tax rates, though. In terms of effective tax rate, it is just the opposite.

For example, using a 25% consumption tax for the sake of easy numbers:

Family A is working poor. They earn 30K/year and pay $10K of that in rent. Virtually every dime of the rest goes to food, clothing, medicine, car repairs, etc. so it would all be taxed. Effective tax rate: 16.6%.

Family B is middle class, earning 100K/year. They pay $30K/year in mortgage and utilities, contribute 10K to their retirement accounts, and put an additional 10K into a HSA, 529 or other savings vehicles. Even if they spend every dime of what's left on taxable goods, they have an effective tax rate of 12.5% - considerably lower than the working poor family.

Family C is well-off, with an income of 1mil/year. They spend 150K/year on mortgage and utilities on their primary and vacation homes. They also spend 100K on foreign travels and overseas shopping, which isn't subject to U.S taxes. In the U.S., they spend fairly freely and make 250K in consumer purchases each year. The remainder of their income goes into investments and savings. Their effective tax rate is just 6.25%.

Any consumption-based model ends with the same result - those with the lowest incomes pay the highest rates, because they have no choice but to spend most of their income, while those with the greatest ability to invest and save pay less.

Only if you're included food and medicine as taxable goods. Remove that from your calculations and it changes drastically. At that point, the poorest family is paying taxes on their clothes and car repairs, while the middle class and well off families are spending a much larger percentage of their disposable income, and those items are what is taxed. Every fair tax program I've seen has always excluded food and medicine from the taxable goods categories.

 

[longboard55]

Not to pick on LeBron james, but it says he made 71 million with salary and endorsements, so 17 million in taxes is 24%, not 35%. That is what I am saying. Everyone complains that 35% in taxes is too much. They are not paying 35%