Aside from the major hiccup the economy faced during the COVID-19 pandemic, the economy has been on a steady upward trajectory ever since years ago when we were talking about extending the Bush-era tax cuts. In case you don’t remember, we did end up keeping those cuts in place permanently for any individual making less than $400,000 per year, and for couples earning less than $450,000. Nowadays, those fortunate few who make more than that amount are paying a marginal rate of 35%.
But like I said, it’s been years since we passed the extension into law and I still don’t personally know anyone bringing home $400,000 per year. So who is actually paying that top tax rate these days? I decided to find out what kind of jobs command such high salaries:
1. The President
Perhaps the most famous $400,000 per year job is the leader of the free world. The office of the president not only pays a $400,000 annual salary, but also provides the president with a $50,000 annual expense account, a $100,000 nontaxable travel account, and a $19,000 entertainment account.
There are some obvious downsides to this particular career, however. Besides being very difficult to get, the job is highly stressful, and advancement post-office can be considered somewhat iffy. And, of course, you can’t expect regular raises: the last salary increase for the commander-in-chief (from $200,000 to the current rate) was in 2001. Prior to that, the previous raise (from $100,000) occurred in 1969.
On the other hand, most presidents end up receiving so many requests for speaking engagements after they hold office that he or she will be set for life. They also get a pension equal to the salary of the head of an executive department (Executive Level I) would be paid. In 2020, that is $219,200.
2. Surgeons and specialists
Even a local general practitioner can expect to pull in over $100,000 per year, but the real money in medicine is reserved for those who specialize. Anesthesiologists, heart surgeons, and brain surgeons can all expect to make up to $400,000 per year at the height of their careers. Plastic surgeons can make up to twice that amount.
Most people are completely okay with that though. After all, these people do a very, very important job.
3. CEOs and Founders
The median salary of a Chief Executive Officer (CEO) of a public company is over $700,000. These individuals are in charge of both short- and long-term profitability for their companies. CEOs generally have to know the industry inside and out (although there are certainly plenty of counter-examples), and need to have worked their way up over many years.
There are also plenty of CEOs from private companies who make quite a bit of money. The job can be stressful, but when you are the top dog, you reap the reward whenever your company does well.
4. Wall Street Bankers and Lawyers
If you work in either finance or finance law, the place to go for fat paychecks is Wall Street. According to an October 2012 report, “the average salary of financial industry employees in New York City rose to $362,950 in 2011.” While that still falls short of the mark required for the higher tax bracket, it’s important to remember that this figure represents the average (meaning some people are making more) and that there have almost certainly been raises in the past few years.
5. Mortgage Loan Officers
This may be surprising to you because not many people think of this group of individuals as ones who can earn the big bucks. However, there are some loan officers, riding the wave of historic low rates, who are raking in the dough right now. After all, their salary is directly tied to commissions they earn as a percentage of the total loan amount they get approved for their clients. They work hard, often seven days a week in many cases due to unprecedented loan volume these days, but they are definitely getting rewarded for their hard work.
6. Speakers in Public Events
Before the pandemic, the good speakers were booking speaking engagements left and right. Not only do they speak at conferences, but they also have opportunities to speak to employees in their offices as well. Some people even write books that tie into their brand. They travel all over the country (and some all over the world), so clients are plentiful.
The pandemic has slowed business to a trickle, but these people will bounce back because everything will eventually go back to normal.
7. YouTubers
Can you see why your son or daughter would want to be a YouTuber yet? The popular video creators not only make $400,000 a year, but they can have earnings in the millions every year. The vast majority of people who try to make it big fail to amass a following, but many dream of the life of recording themselves play video games and earning the big bucks all the time. What they don’t realize is that those who earn millions not only have talent, but they also work extremely hard. If not, then they have a team of people who are behind all the videos that get produced. An entertaining video takes hours and hours of editing, but most people just see someone talk, have fun, and collect cash.
The Top Percent of the Top Percent
These high-income earners are really rare. Consider the fact that most articles listing the highest paying jobs in America don’t even include any professions with median salaries of $400,000. Those individuals making $400,000 per year are in the top one percent of the top one percent — and often, they’re also public figures.
Thankfully, even though individuals in this bracket are few and far in between, the government estimates that raising the tax rate on this small group raise about $600 billion in new revenues a decade.
Not bad for a group that small.
What other professions that earn annual incomes of $400,000?
{ read the comments below or add one }
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Also, getting a refund or even an EIC doesn’t mean you didn’t pay ANY taxes. We got a refund a few years ago for like $5,000, but we still paid over $100K in taxes. We just happened to pay our property taxes in January and December to get over the standard deduction since we were ‘losing’ our mortgage interest deduction due to paying off our house early. This year we are being phased out of many of our charitable deductions so if give $10,000 to my favorite charity, I can only deduct $7,000 from my taxes. Stop the loophole arguement. ANYONE can deduct charity if you are over the standard deduction and itemize. Yes, itemizing favors those that have a certain level of mortgage, which is usually a $250K house or above, but we also pay higher property taxes due to the value of the house. So stop the rhetoric about loopholes and deductions. We have to pay SOMETHING in order to even get those deductions. I can’t deduct mortgage interest if I don’t have a mortgage. I can’t deduct property taxes if I a rent my house or apartment. How many athletes make millions and rent due to being traded away at any minute? They still pay State and Federal Taxes, PLUS they have to pay taxes in EVERY state they play in. How about having an income tax return with 20 different states. Guess what, you hire an accountant. You PAY someone. you have just now created a job for someone. Anyone want to argue that point?
So true what many of you are saying. If you took the top tax bracket all the way up to 50%, it would raise about $80 billion in revenue. The deficit is $1.3 trillion. That cuts the deficit by 6%. In other words – it is POLITICS only. Raising taxes on the top brackets – even including capital gains taxes and dividend taxes will be window dressing to help people get elected – not real solutions to close the deficit. There is ZERO way to fix the deficit without reducing spending – and honestly even that is over politicized. You can’t cut a $1.3 trillion hole by simply shaving 10% off of the education budget or defense or whatever…. it MUST include welfare, social security, and military/government/veterans benefit reform. This is painful to discuss, but the math just doesn’t work any other way. This must be a long-term solution though, and no president or congressman/woman wants to be the one to do it.
So we continue to spend, play with tax rates for window dressing, encourage class warfare and keep driving the car right off the cliff. The sad thing is most people think it is as simple as “rich people need to pay their fair share!” or “the government needs to quit spending wastefully”. It HAS to involve SS and other entitlement reform.
I am tired of this notion that the rich “control assets”. What exactly does Bill Gates “control” that affects my life? What does Mr. Ford control that keeps me from going to work? Also, on the property tax issue, not everyone making $20M feels the need to buy a $100M dollar house. We could have bought a $500K house, but we CHOSE not to due to having to pay higher property taxes. See, I can CONTROL how much in taxes I pay by making proper choices.
How about those like Sam Walton that drove around in a 30 year old truck and paid $5 for a haircut? The reality is the rich do create jobs. Pool cleaners, house keepers, nannies. Maybe a driver, maybe a ship captain. Without the rich many industries wouldn’t exist. What happens if most of the rich decide to hire a private chef and never eat out again. Hundreds of restaurants close and those waiters will have to find alternate jobs. Maybe in the service industry, maybe not. Not many poor people travel to Hawaii or Vegas. Those were hit hard in the recession. People lost jobs due to low tourism. So don’t tell me the rich don’t create jobs. It might not be a direct job, but since someone said we are a consumer society, if you depend on consumers, you want consumers that can afford your product.
Good for them! I think that people’s salary is their own accomplishment. I live nicely with what I make and work only in what I really like to do. I pay taxes and I generally see my taxes at work here in NYC. We see well that there is a gap in earning around the country but I don’t really think that most people want, can or should dream of being that financially successful in their lifetime. People seem to live the course of their lives taking opportunities and making the usual mistakes. Cool thing here is that we can actually fix our mistakes and flaws if we want.
I like your comments. Everyone makes choices in their lives that have a direct impact on how much they make, how much time they have to invest in work, how much $$$ they might invest in work, etc… If people accept responsbility not only for those decisions, but for the causal effects, then all would be well with the world. The problem occurs when someone becomes jealous and envious of another who works harder, invests more time and $$ in work and career and then (shockingly!) makes more money!!! Unless that thinking becomes a thing of the past, we will remain mired in the class warfare state that we find today.
This whole class warfare is so misguided. What always surprises me is how quick people are to attack anyone making good money. Nobody making over $400k should have to justify themselves in a blog – whether you are a doctor, lawyer, CEO, financial planner, actor or athlete. If you managed to make a great living like that for you and your family – as long as you didn’t cheat or step on someone else to get there – I say GOOD FOR YOU. In fact, if we don’t have all of these success stories…..the American Dream as I know it is dead.
I think the big problem is that the media and the President are attacking the wrong people. Really, when they say “the rich”, they don’t mean people making $400k a year, but those making $10-20 million. Like many of you have said, there is a misconception among the 99% that making $400k means a lavish lifestyle. If you live in a major city and have a family, it is a comfortable one – but hardly one with private jets and caviar. Plus it almost always took some tremendous sacrifice or great skill to get there. (For instance – look at athletes….. You don’t think it took hard work to make it to the pros???? Long hours running and working out, etc,? The streets are littered with talented athletes that don’t make millions)
Anyway, until you have walked in the shoes of the 1%, how can you judge so easily?
We agree, people who are at the top of their game, top of their career, top of their profession earn over $400,000 per year. A lot of them earn $1 million plus. It’s important to note that we’re talking about current, reportable income. Many business CEOs get paid in stock options which, when they mature in 5 years are estimated to yield $XX dollars. Not all CEOs make the cut. I shed no tears for underpaid CEOs, but I am deeply skeptical of the reported incomes they supposedly make. All those reports do is create envy between the classes.
Beyond a certain level, perhaps only a million dollars or so, the money doesn’t really matter. It’s all about the power, the perks, the prestige and the reputation. Being able to command the company Citation to go to the West Coast, rather than wait in line at the airport, gives one a decidedly good feeling inside. Ask Nancy Pelosi. Rupert Murdoch changes the course of nations with his power. The money is just a number that reflects his power.
A Navy carrier pilot doesn’t get paid all that much, but a supersonic airplane with your name painted on it is as good as it gets. And when you walk into a room, everyone else becomes second best. Those are perks that go way beyond money.
I believe that this is what motivates people at the very highest levels. Taxes are just something that their accountants worry about. The accountants tell them how to avoid this levy or that, but the real issue is how to maneuver the total tally into something that confers more power and prestige than that of your peers. Taxes matter at that level only because they restrict one’s ability to make strategic moves. It’s the strategic moves that are important, not the money.
Those making the tax disincentive argument have also made the argument for lowering the minimum wage. I have heard if the minimum wage were lower, job creators would suddenly create more jobs. People would be happy for any work even at lower wages. Then the same people claim that the wealthiest 1% would quite working if their taxes increased. Maybe their own logic would prevail and they would work harder to keep their millions.
I’d be happy if these people paid the SAME rate of tax that I did. Someone making $100K a year pays, after deductions, about 20% in income tax and 12% in FICA tax–32% Federal taxes.
Someone making $400,000 pays about 25% in income tax, but only 3% in FICA tax or 28% Federal taxes, 4% less than the $100K earner.
Someone making $1,000,000 pays about 28% in income tax, but only 1% in FICA tax, or 29%, again less than the person making $100K.
Do you want everyone to buy the same house, buy the same priced car? People making $1,000,000 most likely have higher property taxes than someone making $100,000. the class warfare has to stop. The free market determines salaries and some of you just have to get over it. A public school teacher will never make more than the principal and the principal will never make more than a CEO of a fortune 500 company. How does any of it affect your life? You can scream unfair all you want, but life is unfair. I just had a friend shot dead by a family member and now his wife and two kids have no dad after successfully building a business and selling it. Obama wasn’t there from the beginning to help him, the gov’t didn’t help him choose the products the consumers were willing to buy. He sold the business for big bucks and now someone in his family was jealous, they took it out on him and killed him. now all the rest of you can F-Off with your class warfare and discuss the IRS and tax rates and calmly discuss why the poor get more gov’t services than the rich and why the rich pay more, but none of us have the right to ask why some lawyers make $400,000 and you don’t.
The amount you make in retirement is based on how much you contribute to FICA. There is a cap on the tax, but there’s no free lunch because, obviously, you don’t get credit for the tax you didn’t pay. So, to keep the system fair if we removed the cap we would have to pay these people more in retirement. People might be getting 10,000 checks every month, which would be fair but the large amount of money going through the system would provide more risk and note really address the purpose of Social Security. Obviously, removing the cap but not giving people credit would be a “rich”-only tax that would offer them NOTHING in return, discourage achievement, and encourage fraud.
Scott:
Your calculations are not correct.(taxable income below is earned income)
Someone with taxable income of $100k pays $15,710 in FIT or 15%
Someone with taxable income of $400k pays $109,140 in FIT or 27.3%
Someone with taxable income of $ 1 million pays $319,500. or 32%
(Note: If you make $1 million vs. $100,000 you don’t pay 10 times as much but 20 times as much in FIT!!!!).
Your comments re FICA is also incorrect. Only self employed individuals pay at the 12% rate). And everyone pays the same rate up to the FICA wage limit of approx $110k annually). In any event the $400k and $1 million earners don’t get ANY larger benefit ultimately from FICA. They do however continue to pay the Medicare add-0n (1.45%) even above the FICA wage limit.
I noticed that there was not one mention of dumb football, baseball, basketball players. Overpaid, underperforming clowns who can’t speak a coherent sentence. At least these CEO’s, Doctors, etc produce a product or service.
Athletes have been mentioned. They are paid what the market will bear even if you think they are overpaid. Three sports have salary caps limiting how dumb some owners can be. Golfers have to work every week to get paid. Why do assume all are dumb? What team are you on?
Good to hear you’re finally seeing daylight Gabe. Few resent doctors today as the stories of their increasing sacrifices have spread. Viewed as the most intelligent among us, they are still highly regarded socially. Because of decreasing lifetime income, especially when compared to other professionals, I believe fewer are now getting into medicine for the money, and perhaps that’s good. I’d prefer the doc who’s motivated by the sincere desire to help others over one motivated by the money. Congratulations on your well deserved success.
Dear all,
Have read the posts its is a amazing story of futility. We must REDUCE SPENDING! We can be taxed at 100% and it would still not pay for what is being spent. Reduce all government spending by .5% per month across the board until we have a balanced budget. There would be an amazing renaissance of innovative thought when all government, department by department had to have a conversation called “How are we going to be .5% more efficient this month with the taxpayer dollars we’ve been entrusted to oversee?” They would have to look for the answer and in doing so save us all. A six percent per year reduction of the budget combined with a flat tax system and all tax loopholes abolished and removed would solve this once and for all. The problem is that those people at the very very top do not want this to be solved. That is why things that make common sense never go far. Demand “Kaizen” in your government! We can have a .5% reduction per month until budgets are balanced.
If the budget is balanced then these clowns will not be needed. I agree, a flat tax on everyone with no deductions or loopholes and spending cuts would fix this problem but then the likes of Pelosi, Reid and Obama would be out of a job because they wouldn’t be able to give a few crumbs to their followers.
I read this article and was pleasantly surprised at the comments. I am an anesthesiologist and just completed my first full year as an attending physician. I made almost (but not quite) $400k. Usually these types of articles harp on how wealthy physicians are and all of the comments are about how overpaid we are. But the articles never take certain things into consideration.
I am 34 years old and finally, at my age, started making money. This is not unusual. Physicians give up nearly a decade of earning potential and compounding interest, to study and work 80 to 100 hour weeks in residency. Your social life and physical and mental health go to hell. When you do finish training a large portion of your salary goes to paying back mountains of school loans, paying for malpractice and disability insurance, and catching up on retirement savings. I honestly live the exact same lifestyle I did when I was a residenct making $45k a year.
I do not mean to complain. I didn’t become a doctor to get rich. I love what I do and I love taking care of people, however, if physician reimbursements continue to diminish while hours continue to pile up, I will find it very difficult to suggest young people follow in my footsteps.
I’d be interested in your (intelligent) thoughts. Thanks.
Thanks for your views Gabe!
I was always mystified as to why the so called “Health Reforms” never included ANY mention of ……. Exactly HOW many new quality doctors would be educated?… WHERE would they come from?….. WHY would they want to endure the huge time and debt commitment required???
Oh, I forgot that law was basically nothing but a gift to insurance and big HMO’s… Much like Bushes “Sr. Drug Benefit” was basically a gift to big pharma.. (That law made it illegal for the Feds to negotiate the price of drugs with the makers!)
I wonder how you would all feel in this scenario. Suppose you worked in sales, getting a 10% commission. You sold a million dollars worth of products and services, receiving $100,000 in wages. Your boss didn’t like this so much, so he decided to start paying only 5% once you exceed $500,000 in sales, so that with the same effort next year you would earn only $750,000. Wouldn’t you be tempted to slack off by November, since that late push was only getting you 5% instead of 10%? Wouldn’t that lack of effort hurt the company?
This is progressive tax as if it were used for wages.
Historically, “slacking off” didn’t occur when taxes were raised. Just the opposite occurred. Americans also felt more unified as more were defined as “middle class” American.
The feeling of unification that you perceive was present in these bygone days, if it existed at all, was due to the fact that the payors didn’t feel that they were funding all the entitlements and free lunches that are available today. And they were not funding a system that discouraged person resonsibility for one’s own life and family.
Its hard to feel unified when people that pay no FITax get a “refund” due to the earned income credit which is not available to families making over $50k in earned income. Talk about a disincentive to work harder.
I know your story Rick, and know you didn’t work any less because you believed that all those less fortunate than you were slackers, “feeding at the public trough” that you feel forced to fund. Actually, welfare was cut in half in the mid ’90’s, and government “entitlements” refers to those programs like SS and Medicare to which we contribute during our working years, which then ENTITLES us to benefits when we retire. “Entitlement mentality” is a term coined in a 1970’s book which has nothing to do with SS or Medicare. Don’t confuse the two.
We are definitely less civil toward one another today and indeed, great divisions have grown in political discourse in this country. You listen to talk radio, watch Fox, and receive the hateful emails too, and should know that reason and fact are no longer valued; only “my tribe”. We are less unified because ideologues use division to gain power, and have been beating their drums especially loudly since the end of the cold war and the elimination of our common enemy, “Godless Communism”. Without an enemy, the tribe has no purpose and turns on itself. Unfortunately, we are seeing the results of that in Congress.
Calling the tax increase a “disincentive” is only a Grover Nordquist talking point repeated by the drumbeat of talking heads. It’s meaningless except to further divide.
As someone who skirts with the 1% annually with my earned compensation, I am not asking that the 47% bow down in awe and appreciation for the $150,000+ in taxes I easily paid last year. But the frustration lies when I feel accused of not paying my fair share and not contributing to the better good of all. And my feeling of frustration only grows more when I watch MSNBC and CNBC and read and hear the Pelosi, Reid and Obama speak. But the worse thing I hear or read, is when regular voters believe the misinformation and make statements (like in this blog) that “the first $450,000 of income is TAX FREE” or that all “rich” people have many loopholes and pay no or little taxes”, or when they believe (incorrectly) that the Cap Gain Rate is the rate that everyone who makes over $250,000 pays, irregardless if their income is purely salary, wages, bonues, etc…
And frankly, what about the 47%? What is their “fair share?” No Federal Income Tax? At all? (And don’t tell me about “payroll taxes” …that is a contribution to a fund which they should recover, that by the way, I match as the employer of 60 regular employees areound here…). By the next election over half of this country will pay no FIT, but of course they get a vote, just like mine when I pay $100,000 just in FIT!!! I would love to find a group of investors that would let me have 51% control of a business where they invest all the capital every year and I get to decide how its spent! I need to start look for those people because we must be a nation of guilible morons to accept the current way we finance our goverment “for the people.”
I’m not sure who the 47% are or how they pay no federal income tax. Even my 15 year old son paid income tax one year bussing tables part time at a nearby restaurant. Are they the high school and college kids would don’t make so much? Of course the unemployed would ad 8% to that as would many of the underemployed. I wonder what percentage of 30 and 40 somethings pay no taxes. Regardless, I’ll bet that if we looked at their stories, our resentments would vanish. Just like Workers Comp, there are safeguards that prevent all but a few undeserving lower income people from avoiding taxes (most probably through unreported income).
I’d also bet that much more revenue is lost when small business owners fudge their reported expenses to IRS, and even more through corporate subsidies and loopholes. You see my friend, when we start dividing into tribes like the “47%” v. the “taxpayers”, the “corporations” v. the “consumers”, “labor” v. “employers” etc. their is a lot of resentment to go around. The bottom line is that Americans want to believe that they are generous and take care of one another – that they are their “brother’s keeper”. Of course, no one wants to be scammed.
Not everyone gives a damn about the less fortunate however, especially if they grew up isolated from them in upper middle class communities, and have no first hand knowledge of their concerns or sufferings (Many of my frat bros at USC fit that bill). It’s not that they are evil. It’s only that they are unaware and incapable of empathizing. They are easy targets for the right wing propaganda against the “Nannie state”, and in turn perpetuate such propaganda through emails and YouTube videos such as the ones you’ve mentioned. They falsely believe that the problems are pervasive and, like Romney, the 47% are being purchased by the Democrats with handouts and tax dodges. That’s just silly.
Yes, you are right that there are ignorant people out there who are too lazy to research the facts and simply pull stuff out of their asses. And then there are those who deliberately deceive, using tribal divisions to convince you of the rightness of their cause. I received a link to a YouTube video that showed a young black women telling others how to get government subsidies and welfare for having illegitimate children. When I researched it however, I discovered that the young woman, a well known singer in the black community, was actually trying to shame those other young black women who may think of actually having illegitimate kids. Someone cut the original video to make it look like she was advocating scamming the taxpayer. Because no one likes being fooled, I’ll bet that few people who got that viral email ever checked the truth of it since it fit their world view. It was meant to piss everyone off and create a stereotype of government waste using the stereotypical single black mother. Evil people use our prejudices to sell their lies.
The fact is that someone in your position has had a 40% increase in salary and net worth over the last 40 years while the average guy (median wage earner) has only seen a 4% increase. The fact is that we must pay off the tremendous debt incurred by past tax cuts and spending increases. The fact is that an across the board elimination of the Bush tax cuts would harm the recovery. The fact is that the pain caused by a 4.5% tax increase would be many times greater for the guy making $50,000 than for someone making $500,000. And although I’d like ever American to share the pain of getting our national debt under control, this example shows that pain and equal percent of income are not the same thing.
Someone once told me that “fair” in a democracy is what 50% of the people think is too much, and the other 50% believe is too little. Of course, I know that fair is what I believe to be fair, and all others should just ask me. Right Rick?
With manufacturing diminished, service jobs paying lot less, the rich folks (most) have either inherited money or scamming the system (financial services – speculation).
Unless you can make, formulate and distribute a product or a great service many times how do you make so much money (honestly)?
Government is in with the jobs because private sector is not interested to create high paying jobs while the cost is lower somewhere else in the world.
How would you create wealth unless MONEY is pumped into the system and new products or services are there to use the NEW money? Old finite money simply circulate and/or get used in new (cell phone/Netflix) for old (land lines/Block Buster).
Unless jobs are created to replace the lost ones (manufacturing or service), the money will not circulate and rich will have to get richer. Govt. will try to get in and stimulate but they cannot promote the free market philosophy.
It is complicate at macro and micro levels.
Tax is problem when all are not employed and the less fortunate ones have to be supported. A rich man would not mind to pay the sick but favorite butler for a visit to the doctor to ensure a great party for friends (tax or no tax)!!
JB: There is another group…already with the capital…who can take an idea from someone and invest to make money (though both will benefit).
While I certainly don’t make this kind of money, there are a few people who do what I do and make even more than $400,000 a year! I’m a freelance copywriter with a decent salary, considering I’m only two years deep in this business.
But I’ve heard of, spoken with, and researched a small group of A-level, top copywriters – you know, the ones who work directly with Creative Directors or Marketing big guns in Fortune 500 companies – who make right at or over that amount.
Just like any other highly-paid profession, it requires a LOT of experience to get there, but it is possible in copywriting to become one of the top 1%.
and they are the 1% at the top of the profession. Does any copywriter make $1,000,000 a year? Why not, what are the market forces that keep a copywriter from making $1,000,000? What exactly does a copywriter do? (and I am being serious), how does a copywriter either bring in revenue (sales) or keep expenses down? Are they just a cost, but that cost has tangible skills?
I’ve read every comment and had a royal exposure to some very interesting and informed (mostly) contributors. This has been the best afternoon’s entertainment one could wish for although the solutions were obvious but unobtainable. Our apathy will be our downfall. Our country is being lost to the takers and we, as a nation, are helpless. Since the USA is the last bastion we will take our medicine and go down like obedient dependents.
Higher tax brackets is different than paying higher taxes. In the past, during the times our economy boomed the most, tax brackets were as high as 70-90% on the wealthy. However, they didn’t actually have to pay that high of a tax rate because they would invest, create jobs and grow their business to lower their effective tax rate. This made the economy boom, and they grew even wealthier. Win-win. Now, with much lower tax rates, there is no incentive to invest or create jobs. As a matter of fact, there is more incentive to outsource jobs than create them here in the U.S.
Surgeons and specialist in the medical field might gross $400,000 but you subtract their malpractice insurance and office operating expense and it’s not so juicy considering most are on call 7 days a week and work 12 hour days.
Also, there isn’t a finite amount of money out there. If it is so easy for a person to create an idea and turn that idea into a multi-billion company, everyone would be doing it. That is why they are part of the 1%. Only 1% of people are smart enough to invent something, bring it to market and get 500 million people to buy it.
Once Mitt starts tapping his IRA, he will pay $3,000,000 a year in taxes.
The income inequality in this country is at an all time high. The welfare and entitlements for the last 40 years have been moving up, not down. Funny now, while the rich are living high, paying tax rates like Mitt Romney or none at all.. The tax codes were written by lawyers who were lobbied to fix it so they paid low taxes. The minimum wage we pay Americans is modern day thievery. I made more money on the hour in 1978, and gas was 61 cents a gallon. 10 bucks an hour back then was pretty good money, now they are claimed as lazy moochers, who expect a handout to feed their family. There are many easy ways to fix the problem. Continuing paying into Social Security on all income. A tax on all stock trades, and CEO’S who bankrupt companies should not walk away set for life leaving workers empty handed. The wealthy do not pay their fair share any where in this world, and it is the main reason the whole world is in the tank. Monaco, tax haven for the extreme wealthy. They have learned how to not pay, and trying to get them to pay will be next to impossible. While they sit in some 200 million dollar yacht drinking 5 thousand dollar bottles of wine like we drink bottled water, and buying elections and politicians.
Actually it is the bottom 50% in earners that are paying no income tax at all. Not Mitt Romney. And even if he avoids or reduces the taxation by making large charitable donations or buying tax free bonds (which help our states fund important projects like hospitals and roads), when he dies the government will take half of his wealth. “Fair or unfair” it is crazy to say someone like him isn’t “paying their fair share”.
If you raise taxes sharply on the people making $250k-$500k, those are the people that will fire their yard service, maids, nannies and all sorts of other extras that they did without just fine before they made more money. They will stop doing projects like building onto their homes, go out to eat a little less and travel less. At least in the metropolitan area I live in, these people and their spending is helping fuel the middle class.
Top Mathematician(s)
I finally made $400K last year. I’ve been a laywer for 14 years (working about 70/hrs per week), Ivy league college and law school degree. My wife stays at home, and we have 4 young kids in public school (well, 3 so far, the other is too young). I save 20-25K/year for retirement, she drives a minivan and I drive a Ford SUV with no leather/entertainment system. We take one beach vacation a year, we don’t have a maid and we try to live comfortably, but not luxuriously (for instance, I drive half hour to take the kids to a movie theather that costs $8 for the move/drink/popcorn – rather than 5 minutes to a theather that costs $10 just for the ticket). We don’t skip on medical (for the children), I do have a nice life insurance policy in case something happens, and we don’t skimp on lessons, sports and the like for the kids. Because of the taxes, beyond the 20-25K/year for retirement, we don’t save much even though, as I mention above, we are not leading what I consider the “high society life”. Kudos to people that make do with less. The reason for this post is not to brag, nor to complain. But to simply state what is my reality for someone that just made $400K. And this reality is shared with many people I know that make between $250K – $500K. I am thankful for the job I have, and I don’t mind paying taxes because that means I’m doing well. I don’t worry about money particularly (except when I think of college for 4 kids) and lead a very good life. But do I think we should have to pay higher and higher taxes as we make more $? No, it would be nice if I continued to make more that I would be able to keep a large chunk to really save for the future (I want to pay for the kids college tuition, professional degree, and a nice wedding for my daughters). My point is, $400k is not as much as it seems when you are actually making that much. When I was single and just out of college, $400K seemed like an ungodly amount of money, but now that I make that, with the current situation, is not that much. Of course, we could have made different choice, my wife could have continued working (she also has two Ivy degrees), we could have lived in a small apartment, etc…, etc…, but the choices we made I don’t think are extravagant (i.e. my home is worth less than $300K, and I don’t have a second home or anything else). So don’t hate on the people that make $400k just because they make that, everyone’s situation is different (but mine, I don’t think, is much different than many others that make that much).
Hello John. I have a 30 year career in law, practice in the midwest and like you have worked hard thru school and my career to make a good living for my wife and 3 kids. I am not embarassed that I have achieved something for my family and myself and you should not either. In fact you are to be applauded that your wife stays home with your kids and they will be better off for it.
The problem with so many of the people on this blog is that they hold fast to many beliefs that only fosters their own jealous and envious attitudes:
You don’t deserve what you make.
You really don’t work harder than other people. In fact you work far less.
You really didn’t work hard to get where you are today. You were lucky.
You inherited sufficient wealth to make you rich now.
It is your responsibility to support other people who made choices that did not lend themselves to suceess in business and employment.
And of course, you pay taxes at rates far below what “normal” families pay.
So no apologies for what you have accomplished. I hope your wife and you will teach your kids your values and work ethic. Trust me they are watching and will learn from your good examples.
Thank you Rick, let’s hope so. 🙂
Very few people are handed a job making 400K. You worked long hours and got to the top, but Yes, you may not work AS hard now. My wife is a Partner in an accounting firm and she doesn’t work 70 hours a week anymore, but she has a lot more hassle of having 75 people under her.
The best formula is Expense rise to meet Income. Millionaires blow money all the time. Making 100K and living paycheck to paycheck. If you make 400K and can’t save at a minimum 20%, then to me, you are spending too much. Maybe it was the house, maybe it is private school. The reality is when you make over a certain dollar, the every day expenses become a smaller amount of your disposable income. $100 for food isn’t a big deal when you make $400K, but then again, those making $400K pay a higher mortgage payment, higher taxes and more in interest. It’s just the nature of humans. We all survived in college on nothing. Some went crazy with a first job and bought furniture and a brand new car before saving anything, then they might have lost the job and now can’t make payments. We save a ton and live off the rest. We can do pretty much whatever we want to. But we still don’t stay in $400 a night hotel rooms or fly first class, but we could.
But remember, JB, many people that make $400K/year probably have not made that the last ten years in a row. We started with $0 in our accounts, got married after law school and my first job paid 6 figures. But after paying for school debt, affording cars, finally upgrading to a decent home (and at $300K is not a mansion – although very nice in the midwest), we definitely have not saved the 20% you mention above. Hopefully we will soon, but it will be for college tuition and the other things I mention above. And yes, we could have kept the expenses low like we lived in college, but I’m not feeding my kids ramen every day. And sure, if we had no kids I’m sure we’d be flush with money, but that’s not the point. The point is that without making extravagant choices, we lead a very good life but not an ostentatious life. And I paid about $130K in taxes on the $400K, I think that is contributing to society plenty. And I will pay more if I make more, but for those that ask that I pay over 50% of $ in excess of $400K, I don’t think that’s fair.
I totally agree with you. Very few people except athletes, make huge money right away with little debt or expenses incurred. Doctors wait until their mid 30’s to start making decent money while having to pay down medical school debt. Same with many lawyers except lawyers can start to work 8 years sooner than doctors.
My wife pays more in taxes than I make. It really is amazing how much in taxes we pay. We pay more in taxes than the average person makes.
There are people making $50,000 with a greater net worth than many millionaire athletes.
John
I congratulate you on your very good year. It is certainly well deserved after a law degree from an Ivy league and 14 years of law practice. I am a business owner and I can completely relate to your situation. What most people do not realize is that after funding your retirement accounts (tax deferred) and paying taxes you end up keeping about $200 – $235K a year, which does not go as far as one would think when you have three kids in my case or even four in yours and need to save for their education while ensuring they leave a good lifestyle growing up.
I wish the general public would attempt to emulate those you have succeeded in life rather than bash it.
Hi – I don’t see any mention of IT professionals. You can make $400k a year programming or working on network hardware. It is a very specialized skill set – much like medical or law but without the 7 years of school.
Never mind it takes millions to become President. Pretty much any job where you make over 400K, you are inherently part of the 1% of those that are smart or have an ability the other 99% don’t have. Actors and Athletes are part of the 1%.
Message from a small business owner impacted by the Tax increases:
I laid off one employee on Jan 1 to make up for the excess amount of taxes I will have to pay. When he asked my why he was being let go I was 100% honest with him. Want to raise my taxes again? I will lay off more people to account for the difference at the bottom line.
You may think you are getting even with the “evil” rich guy but in the end you are only hurting the middle class.
Oh please, how did we live prior to the Bush tax cuts when the economy thrived and we all paid more taxes. The middle class does not earn almost half a million dollars. You ain’t hurting the middle class. It that income inequality thing. You could still earn almost a million or more and by the time you write off everything you can and the bottom line is more than 450 thousand bucks. The first 450 thousand is still tax free….if your tax rate to pay on is 550 thousand , your higher rate is only on 100 thousand dollars.
Everyone should read this post from Cella. This is exactly the reason why our country is likely doomed. When so many people believe statements like:
“The First $450,000 is still tax free”
“…The rich are living high, paying tax rates like Mitt Romney or none at all”
Then class warfare will dominate our society and make it impossible to make any real progress. But congratulate democrats and liberals for this new civil war. After years of cultivating this thinking by the passing of false information through the friendly media, they actually have people like Cella believe that a system where the top 20% earners pay 80% of the taxes (while having less than half the income), means that the “RICH” are not paying their fair share.
If Jefferson, Adams and Franklin appeared in Franklin’s time machine today, they would take one look around and return to the 18th Century as fast as possible.
Cella (and some of you other non believers out there):
In 2012 an American Family with $450,000 in taxable federal income tax, filing Married/Jointly: would pay Federal Income Tax of $126,639.50. In my midwestern state, you would also pay another $45,000 in State and Local Income taxes, plus property taxes, Sales Taxes, FICA contribution and the medicare tax. Also note that this family would not be allowed to take credits/deductions for Earned Income Credit, Tuition/College expenses, Child Care credit and this famly actually would lose some of their deductions AND would owe Alternative Minimum tax too on top of the $181,000 I identified above.
You need to understand that the well publicized capital gain rate of 15% only applies TO CAPITAL GAINS and not earned income like salaries, wages, bonuses etc… That’s what the people who cry “The Rich Aren’t Paying Their Fair Share!” don’t want you to know. (If you don’t believe this Google “2012 IRS tax Table Married filing Joint” and do the caculation yourself.” After you have learned the truth, start asking the “Fair Share” folks why they don’t tell the whole truth.).
Real important point no one mentions is for small business owners in particular but most everyone who reports high income of 400k plus NDF especially 1 mil or more, these do not represent average annual income but typically are an anomaly. The high income is not annual salary but a once in a lifetime experience. Where as President Obama has an annual salary of $400k most small business owners have it once in a lifetime, often when they divest after many many years of retaining profit as net worth. When I live on $30k for 30 years and sell my business and assets for $500,000 is it really right I be taxed at the same rate and viewed as high income, rich 1%? Out of the small percent of people with high income very, very few are high income from a salary. The vast majority are typically earning a modest income and are experiencing an once in lifetime payment from selling an asset. For all the anti-small business types, inheritance would be your closest brush with our reality. How would you feel if mommy dies, leaves you $750,000 and you become nouveau rich before April 15th? What should your tax rate be? That year you give 1/2 to government because you are RICH.
Don’t worry Steve. When you divest yourself of business assets, the profits are not taxed as ordinary income, but as capital gains which is almost half the top marginal tax rate. An inheritance of $750,000 isn’t taxed at all by the federal government.
You do bring up a good point however. We once had income averaging in which you could average income over a period of years to even out steep fluctuations in business income. That way, the taxpayer could minimize his exposure to those top rates. That was take away when the tax code was “simplified” in the 80’s.
..and I bet Steve in those 30 years of only making $30k, that you were the last person to be paid at your business. You probably mortgaged your house and your personal assets to make your business go, but always made sure you made payroll for your employees.
As a small business owner too, my partners and I are always the last paid, or the one’s who miss paychecks so that our employees are paid as well as our vendors. Few liberals recognize that little fact.
HEY DAVID CONKLIN, NOW I UNDERSTAND YOU AND WHERE YOU ARE COMING FROM:
“My Social Security went up 3% and my food stamps went down 10%.”
I get you now. Completely. You don’t have to worry about any more dialogue with me sir. Good luck.
I wonder why they don’t list actors, musicians, directors, college presidents, among others.
Chrissy C.
Nobody hates actors or musicians as much as CEOs. Never mind if Tom Cruise makes $20M a movie and gets back end residuals. At least actors have to produce movie by movie or they can’t sustain huge paychecks. There is much hate toward college presidents making large salaries as a public official.
According to Obama, single people that make $200,000 yearly, and married couples making $250,000 a year are the new millionaires and billionaires.
Can you show me where he said that John?
Come on guys! Isn’t it about time we got off this! Sure there are lots of parts of the tax code that is repulsive – to both sides. There are plenty of “rich” that must see their tax burden go up, and there are plenty of “poor” unfairly living off the largess of the Federal government. Anecdotal evidence can be documented, ad nauseum, for both positions.
The Tax Code clearly must be reformed. declare a Mulligan and start over with a clean slate. Arguing over what is the definition of “rich”, defending, or attacking the “Rich” is getting very long in the tooth in this discussion. How many times can we say the same ludicrous or insightful things?
The issue facing this country is simple. If the debt situation is not resolved, there will be no rich or poor as we know it today. There will just be uber rich and destitute once we are reduced to a 3rd world economy. Don’t think it could happen do you? It surely could.
The issue is not blood sucking rich versus hard working poor. A focus on that is like shuffling the deck chairs on the Titanic. To quote Clinton “It is the economy, stupid!” It is about the federal government deciding what is best to make this a more business friendly country so that investment flows into the economy and businesses have a stable environment in which to put long range plans into action. Such investment in this country (not in Dubai, Singapore, or SE Asia) leads to sustainable growth, jobs, and an increase in living standards for all. And I do not consider stimulus programs designed to keep state workers employed to be investment, nor do I consider the government investing in start-ups like Solyndra viable long term answers either. The government cannot pick the winners and losers, but it can mold the playing field to assist areas of national importance. By the way,I am not about to get into detailed steps the government should take as I am not qualified to do so.
There is a lot of talk in economic circles about the confidence of the consumer and its impact on the economy. In fact the University of Michigan has a closely followed survey of consumer confidence that is watched as closely as any other economic survey. What you don’t hear discussed in this country is talk of business confidence. Without it, there is minimal investment and a minimalist future. Somehow such discussion would seem to be politically incorrect these days.
If you believe that you can solve the debt crisis by taxing the rich, then you need new calculators. This needs to be about encouraging business investment, not discouraging and demotivating such investment. This government seems to be about business bashing, not business encouragement. That might be a populist approach that gets you re-elected, but it is a recipe for disaster for the economy. And that does not reduce down to just a discussion of tax rates, by the way.
The continued focus in this discussion on the rich and the unfairness (or fairness) of it all is getting very long in the tooth.
> there are plenty of “poor” unfairly living off the largess of the Federal government.
Okay …. My SS went up 3% and my food stamps went down 10%. Most of the poor are white, most are children.
>If you believe that you can solve the debt crisis by taxing the rich, then you need new calculators. This needs to be about encouraging business investment, not discouraging and demotivating such investment.
We were doing just fine till we started lowering the tax rates AND we STILL have not seen the jobs they claimed would be created. INSTEAD, we lost 2.5 million jobs overseas. That kool-aid has been laced with toxicity; repeating it doesn’t take us forward.
>The continued focus in this discussion on the rich and the unfairness (or fairness) of it all is getting very long in the tooth.
Unfortunately you can beat them over the head with facts all day and they’ll still deny that the upper .1% are making out like bandits from the gov’t trough.
David:
I have been described as “Reaganesque” in a prior post, so living up to that label:
“There you go again!”
This is the 4th time you have picked out sentences out of context from my posts to reply to, and missed the point altogether. Every point you made in your latest post was about the fairness issue (I get it, I hear you, I know what you think on that issue – enough already!), not the economic issue – completely missing (or ignoring) my point about investment.
I will respond just once more.
Your attack on all this is about fairness, unfairness and you seem to believe that all we have to do is change the tax code to tax the rich and all will be solved. That changing the tax code cost us 2.5 million jobs (dubious conclusion at best – it was a lot more than that, for example the rise of China and India as low cost producers, or the rise of technology), and the top .1% are making out like bandits (absolutely true). However, you could take all the wealth of the top 0.1% and it would only be a dent in the liabilities facing the federal government. If, for example, you confiscated all the net worth of the Fortune 400, you would get about $1.7T. This would cover about 1 year of the deficit, assuming that such an act would have zero effect on the economy and thus tax revenue in general – which clearly would not be the case. And I am talking everything they own, not their annual income. It is ludicrous to believe that the top .1% can bail out what is happening in Washington.
The economic issue (rather than the fairness issue) is about encouraging investment in this country in order to create jobs here – rather than “there”. It is not about “fair share”, regardless of how desirable that is. If you do not go after the real issue, you will go down with all flags flying, as good as you might think that makes you feel.
> This is the 4th time you have picked out sentences out of context from my posts to reply to, and missed the point altogether.
Back when I was in college in one quarter I was taking a class in logic and another class in programming (I forget which language)–the latter required us to do a special project that we would be interested in. I tired to write a program in which we’d feed in a paragraph from some writing and the program would then analyze it to see if it was logical or not. Even tho’ my project failed (we were still using Hollerith cards) the prof was impressed by the attempt and I still got an A.
The point with that is that in everything we write we are either trying to make a logical argument, or we are just spewing propaganda. So, when I dissect your argument into phrases, it is NOT an attempt to unfairly rip things out of context. You can/should take it as an attempt to show that some of the claims you make are either weak or, at best, poorly worded (that’s ME!). If one of your phrases isn’t logical it causes your conclusion (the point you are trying to make) to be illogical and false.
>That changing the tax code cost us 2.5 million jobs (dubious conclusion at best – it was a lot more than that, for example the rise of China and India as low cost producers, or the rise of technology),
Part of the change to the tax code was to allow tax credits for jobs overseas–i.e., where the low cst producers are. So, what you see as a “dubious conclusion” is probably a tautology?
> you could take all the wealth of the top 0.1% and it would only be a dent in the liabilities facing the federal government. If, for example, you confiscated all the net worth of the Fortune 400, you would get about $1.7T.
Why would I want to do that? Remember that the transfer of wealth from the low and middle classes to rich also means that gov’t outlays to support those who lost their jobs increased–so it was a double-whammy. Puttoing the tax rates back to where they were would only solve part of the problem. Getting the jobs back would help solve the other for the present (or as soon as we get those jobs back) and the future. We’re stuck with the debt that was incurred because our politicians and economic leaders were not fiscally prudent.
more later, my cat wants to go outside for a walk.
The people that write these articles should get more precise. For starters the new increased marginal tax bracket is on those who make $400,000 TAXABLE income which is not the same as Gross Income. I wish journalists would be better technicians if they are going to write about technical or specialized topics. So deceiving.
The really rich do not work as hard as a lower paid plumber, teacher or nurse. They sit at home(s) and draw in unearned income which is only taxed at 15%.
The top 1% are really the wealthiest 1% rather than the top 1% of wage earners. Some interesting facts follow:
#1) The Top 1% Owns 40% of the Nation’s Wealth yet pays 37% of income tax:
Nobel Laureate Joseph Stiglitz points out the richest 1% of Americans now own 40% of the nation’s wealth. This disparity is much worse than it was in the past, as just 25 years ago the top 1% owned 33% of national wealth and 15% in 1776.:.
How much does the bottom 80% own? Only 7%.
#2) The Top 1% Take Home 24% of National Income
While the richest 1% of Americans take home almost a quarter of national income today, in 1976 they took home just 9% — meaning their share of the national income pool has nearly tripled in roughly three decades.
#3) The Top 1% Own Half of the Country’s Stocks, Bonds and Mutual Funds: The Institute for Policy Studies illustrates this massive disparity in financial investment ownership, noting that the bottom 50% of Americans own only 0.5% of these investments.
#4) The Top 1% of Americans Have Only 5% of the Nation’s Personal Debt:
Using 2007 figures, sociologist William Domhoff points out that the top 1% have 5% of the nation’s personal debt while the bottom 90% have 73% of total debt.
#5) The Top 1% Are Taking In More off the Nation’s Income Than at Any Other Time Since the 1920s: Not only are the wealthiest 1% of Americans taking home a tremendous portion of the national income, but their share of this income is greater than at any other time since the Great Depression
I hope this might explain why we may expect more of the top 1% when solving the debt crisis.
“I hope this might explain why we may expect more of the top 1% when solving the debt crisis”
Lots of data in your post. How about producing some data that shows that there is any chance of “solving the debt crisis” by getting more from the top 1%.
By the way, I have no problem with the idea that there are really out sized incomes for many people who contribute little value – athletes, actors, CEOs who do not deliver, and wall street 20 somethings inventing and trading financial instruments immediately come to mind. The idea of claw backs for many of these people is a good one. But there is no way that such action can do anything but put a dent in $trillion annual deficits, soon by the 2020s to escalate upwards from there.
While there are good reasons to adjust this playing field, wrapping it in the guise of “solving the debt crisis” isn’t one of them. While we can debate whether significantly increasing taxes on the 1% demotivates them from earning marginal income or not one can certainly take the position that it certainly does not motivate them to do so.
So if you want to argue that it “isn’t fair”, fine. But you must explain how it can have a significantly impact on eliminating the 40% of the Federal budget that must be borrowed currently.
.
“man-of-ridiculous” what is your point? i hope its not to show why the top 1% should pay more taxes to help with the national debt lol
this is the most disturbing part of your post(“#4 The Top 1% of Americans Have Only 5% of the Nation’s Personal Debt:Using 2007 figures, sociologist William Domhoff points out that the top 1% have 5% of the nation’s personal debt while the bottom 90% have 73% of total debt.”)since you seem to think its the 1%’s responsibility to to solve the national debt and by taxing them more it will help lower it, how about all the people who open up a credit card, with a $10,000 limit(just an average figure), then run to the mall and buy clothes, shoes, jewelry, cd’s, etc… and have no intentions of paying it back, be responsible at all? or the banks who loan these morons the money?
the bottom 90% have 73% of the nations total debt, while the top 1% have 5%, wow
way to keep it reasonable
I fired our lawn service 4 years ago when they did a crappy job. I am now tired of cutting my own grass so I can afford to hire it out. The difference between rich and poor is the rich know what their time is worth and do hire help. Plenty of people make good livings cleaning houses and owning a lawn service and operating car washes. Some things I am not qualified to do like my own plumbing and some things I have no desire to do, like re-roof my house. The poor just need different priorities and to realize that there are many jobs in offices that pay decent, but they would rather just live off the gov’t. There are still rich people in socialist nations and the rest of the population don’t care about doing a good job at work because they know they will never not get a raise or get a large promotion. They have jobs, but not careers. More power to them, but I would rather people get ahead by being smarter and more efficient than who they know.
There are lots of jobs available these days, just too many people who think that those jobs are beneath them and who see the Gov’t not as parachute (temporary, emerency fix) but as a way of life.
>The poor just need different priorities and to realize that there are many jobs in offices that pay decent, but they would rather just live off the gov’t.
ROFL! For every two job openings right now, 9 people show up. Are the other 7 slackers who want to live off the gov’t? Hell no! Why lie like that? Do you think that we ‘re too stupid to know any better? Those figures don’t even count the people who don’t even bother applying because they already know that they aren’t going to get hired. Nowadays, if you are over 50, you can forget about getting hired for virtually any job.
When I was out looking for work, my dad tried to help (bless his soul). On one occasion he pointed to a particular ad and suggested that I go apply there. I looked at the ad and told him, that’s fro the military (I was already too old by then). He had no idea because he’s never had to look for work–he started at 3M before he even finished college and worked there for his whole life.
Take out the want ads in you local Sunday paper. Count how many pages of ads there are, multiply that by the number of columns per page, and then count how many ads in a specific column (pick a representative one) and multiply that by the previous number–people do point to the number of jobs that are pout there and claim that anyone who wanted a job could get one “if they really wanted one vs. sucking of the gov’t tit.” Now go back and see how many jobs you are really capable of doing. Do you meet the qualifications? Do you see now how few jobs there really are?
If you pay attention to reality vs Faux Noise propaganda channel you’ll see “horror” stories of people who used to make 6 figures, now reduced to $10/hr positions. “What’s wrong with that?” For stares, you can’t make ends meet! You have to apply for food stamps and rental assistance, help paying the heating bill in the winter, etc.. By eliminating good jobs in this country we’ve increased the demand for “welfare” and those who don’t want to pay taxes, but keep getting the lion’s share of the available income, complain about gov’t spending going out of control.
David, here’s an idea! Instead of bitterly spending 45 minutes(sounds like you did a lot of biased research so 45 minutes is a low estimate) blogging about how hard life is/finding jobs/the bad economy, on your free wi-fi you are using at a coffee shop, you might want to spend that same amount of time positively searching for a job, finding one, working, and helping our country. If hundreds of thousands of illegal immigrants can do it, I have faith that you can to! 95% of being successful is showing up to work(no matter what job it is), and whining on message boards about people who make 400k+ isn’t going to get you anywhere. Since you are savvy enough to use the internet to complain about the sunday paper and horror stories on the news, why not just use the internet to find a job? There are thousands of companies that are hiring(we hire an avg of 10 people a week) but they are looking for positive people who want to work hard and add value to the company, not complain about the 1%.
You can either get offended by my response or wake up, I hope it’s the latter.
>David, here’s an idea! Instead of bitterly spending 45 minutes(sounds like you did a lot of biased research so 45 minutes is a low estimate
Actually, I spent less than 5 minutes remembering what I was taught in business school. While there I also learned that if I was going to be a good manager I had to learn how to make very good decisions based on very limited information, because I would never have all the info I needed to make a good decision. So, I trained myself and it works quite well.
>on your free wi-fi you are using at a coffee shop
I do have free wi-fi, from home.
> you might want to spend that same amount of time positively searching for a job
I’m retired after 40+ years in business–altho’, I am looking to get into pyrolysis.
>whining on message boards about people who make 400k+ isn’t going to get you anywhere.
I’m Irish-German, we don’t whine about anything.
>why not just use the internet to find a job?
Because as I said, I’m retired.
>There are thousands of companies that are hiring(we hire an avg of 10 people a week)
Nationwide, probbbably. but, as I noted before, look at thae ads and see which one’s you are qualified for–pitifully few of them and comboine that with age discrimnation and you are not going to get a job. Can you tell the diff between a regular job and an ad from the military?
>we hire an avg of 10 people a week
That means you have such lousy managers that you can’t keep them. I had the lowest turnover among 1,000 other managers.
>not complain about the 1%.
What’s not to complain about? They didn’t create jobs in the country as we’ve been told thaey would do with the Reagen-Bush tax cuts. Instead they shipped the jobs overseas. Meanwhile their income almost tripled. According to the CBO: “The wealthiest 1% of Americans saw their incomes skyrocket by 275% during that stretch [the past 30 years], while after-tax income for the one-fifth of households with the lowest income grew by just 18% from 1979 to 2007. … The bulk of this widening gap was because income before taxes and government transfers grew for wealthier earners.” And most of that growth went to the upper .1%. Did you get that last phrase from the CBO? There’s the “welfare” fat that should be cut. And GET THE JOBS BACK! NOW!!
>You can either get offended by my response
I am. I don’t take lectures from ignorant pups.
> wake up
Its 1 am, shut up and go to sleep.
Sean, you have to understand that our friend David, like most of the other Dems/Liberals never want to acutally respond to challenges such as:
Taxing the “rich” will have an insignificant impact on the deficit.
How can the system not be fair when 20% of taxpayers pay more than 70% of FIT, while having a fraction of that as income?
The only real loopholes are benefits that the so called RICH cannot take advantage of: Earned income credit, College expense deductions/credits, Child Care Credit, free money from the gov’t for college, preferred terms from the gov’t for student loans, etc…
I never receive any kind of reasoned, intelligent response from these people. Its always: RICH dont’ work hard. RICH got lucky. RICH inherited their money. RICH pay a lower FIT rate than the middle class, etc…. RICH don’t make charitable contributions? RICH don’t care about people with real needs. (an interesting read for all you bleeding hearts Dems/Liberals http://www.nytimes.com/2008/12/21/opinion/21kristof.html?_r=0
Bottom line for these people is that their issue with the RICH is all about jealously and envy. They cite to an example or two of really wealthy people that pay only capital gains rates, and conclude that EVERYONE WHO MAKES $200k in this country pays those same low rates. Or they mention a company that cheated on their taxes, so that now means that EVERY COMPANY cheats on their taxes.
Guess what folks. For purposes of FIT and cheap college money, etc… the RICH start with a couple where the wife is a nurse and the husband in a CNA operator and they make compbined income of $180,000. They are not Warren Buffet or the Walton family. They have kids, and bills and a mortgage. They have childcare expenses and won’t to send those kids to college. But they are paying FIT taxes at rate far in excess of a proportionate rate for the same family making half their income. Tell them they are not paying their fair share? By the way, a couple that makes $50,000/year in earned income and interest/dividends.:What is their fair share of FIT? Apparently $0.
Years ago Italy raised the income tax rates on individuals. The Rich were unhappy and they just stopped paying. Result: tax legislation was withdrawn. Go ahead and keep taxes the RICH more and more and you will eventaully see the results: layoffs, no raises or bonuses, benefits cuts, etc… Not because the RICH are being vindictive, but just because it is business.
So everyone take Sean’s advice and get back to work, and take responsibility for yourselves. As President Regan said, “The nine most terrifying words in the English language are, ‘I’m from the government and I’m here to help.”
>Sean, you have to understand that our friend David, like most of the other Dems/Liberals never want to acutally respond to challenges such as:
Sean, what you need to udnerstand is our friend Rick has been caught lying several times. Goto isidewith.com and take their quiz, like I did, I scored 80% with the GOP. Rick is more interested in his agenda than in telling you the truth.
>Taxing the “rich” will have an insignificant impact on the deficit.
No responsible financial planner is going to tell you that the way to solve your debt problem is to cut your income–and that is exactly what we’ve been doing since ’63 when the rates were lowered under President Lyndon Johnson (the conservatives don’t realize that they’ve drunk deeply from the libral kool-aoid on that issue). Secondly, if we’d collect the estimated $2 trillion in taxes that are owed, but aren’t being collected, we wouoldn’t have a deficit–we’d have a surplus (which could be applied ot the debt load).
>How can the system not be fair when 20% of taxpayers pay more than 70% of FIT, while having a fraction of that as income?
Again, Rick shows that he cannot be trusted to tell you the truth. Goto the National Taxpayers Union website. The very 1st chart shows that the upper 1% only paid 36.73% of the FIT; the top 10% (not 20%–earning a bit over $112k) paid a bit less than 70.5% of the taxes. What they don’t tell you is what percentage of the income each percentage of taxpayers make. Now if we use wealth as an indicator then the upper 10% own almost 90% of the net worth in the country–so how much in taxes should they be paying?
>The only real loopholes are benefits that the so called RICH cannot take advantage of: Earned income credit,
False; they can very easily do so–cut your income down to about $35k and you will qualify.
> College expense deductions/credits
Really? Where’s the proof? Are you saying that some income levels can deduct college tuition (new news to me when I was going to school) and others can’t?
>free money from the gov’t for college,
Do you have any idea how poor you have to be to qualify for that? At minimum wage I was making too much. BTW, no hits when I searched for it. What was your source? Rush?
>preferred terms from the gov’t for student loans
Agian how poor do you have to be to qualify? Exactly how good are these “preferred terms”? Could find anything on a web search for it.
> Its always: RICH dont’ work hard. RICH got lucky. RICH inherited their money. RICH pay a lower FIT rate than the middle class, etc…. RICH don’t make charitable contributions? RICH don’t care about people with real needs.
1) Rick shows agian that he is lying through his teeth–I’ve NEVER said or even thought of anything like that.
2) Is Rick denying that luck sometimes plays a role? There was _a_ article in a business magazine decades ago in which a young man admitted that he just happened to be in the right place at the right time when a company was being formed. It happens, only a fool with an agenda would deny it. Apparently Rick has never heard of the phrase “its not what you know, but who you know.”
3) Most of the uber rich DID inherit their money; its the nouveau riche who “earned” (think Jenna McCarthy) it.
>Bottom line for these people is that their issue with the RICH is all about jealously and envy.
Why would I be jealous of someone who is going to die in hell?!? Greed is a sin, period. The wages of sin is death.
> They cite to an example or two of really wealthy people that pay only capital gains rates, and conclude that EVERYONE WHO MAKES $200k in this country pays those same low rates.
That would be illogical so I wouldn’t have done that. The flip side for the idots is to assume that all the poor people can take advantage of “Earned income credit, College expense deductions/credits, Child Care Credit, free money from the gov’t for college, preferred terms from the gov’t for student loans, etc.”.
> the RICH start with a couple where the wife is a nurse and the husband in a CNA operator and they make compbined income of $180,000.
I would define rich as starting at $250k–but this is Rick’s fairy tale.
>Years ago Italy raised the income tax rates on individuals. The Rich were unhappy and they just stopped paying. Result: tax legislation was withdrawn
And the fairy tale continues–it was proposed and dropped; it was NEVER enacted, the rich did NOT stop paying (how patriotic and law-abiding, eh?). See http://www.bbc.co.uk/news/business-14711935
>Go ahead and keep taxes the RICH more and more and you will eventaully see the results: layoffs, no raises or bonuses, benefits cuts, etc
Hmm, we had high tax rates till ’63 and you didn’t see any of that. now that tax rates have been lowered so that they’d create jobs and what do we see? See Rick’s fairy tale, plus 2.5 million jobs shipped overseas.
>take Sean’s advice and get back to work, and take responsibility for yourselves.
Did that, done that and got screwed. Anything else, oh, brilliant wonder?
>There are thousands of companies that are hiring(we hire an avg of 10 people a week
Sounds like a company without a business plan. And as they say in the insurance industry, a failure to plan is a plan to fail.
Sadly any time David doesn’t agree with something it is because the author is lying. An easy way to not respond to the facts or the reality of the status quo.
David, why don’t you google “Income tax phase outs” and you will quickly see that a persons ability to take the earned income credit, credits and deductions for child care, college expenses, etc… is phased out and ultimately eliminated as the persons income goes up. I myself cannot take any of those deductions, lose some of my Schedule A deductions and personal exemptions because of the level of my income. But no one who makes $45,000 a year (earned income credit limit ROUNDING) or even higher amounts of income (chilld care, college, etc…) loses those benefits.
Further the top 10% earners in this country pay in over 70% of the FIT. That’s from the IRS. Sure I didn’t say wealth holders, but that wealth has already been taxed before sometimes more than once (for example corporate dividends are taxed twice). And it will be taxed again upon death.
My favorite inane thing that you wrote is about “being lucky.” I like how you (and other similar bloggers) like to make points by saying:
“I read in an article 3 decades ago” or “in a study that I did…” Curious, when the young man in your article “got lucky at the start up of a company” did he explain that new start up owners often have to pledge their houses, their retirement plan balances, work tw0 or three jobs, etc… to gain capital to fund their businesses. One of my great clients did all those things and also took 20% interest advances of credit cards to make payroll too. Did you know that the vast majority of start ups fail, meaning that those owners lose their houses, savings, etc… in the process. You types think that starting a buisness that contains the name “Inc” or “Company” means instant success and advancement to the status of the “RICH.”
You know I do agree that there is a little luck in getting a good job. Being in the right place at the right time helps. But if you happen to apply for a job where there is an opening, what seals the deal, is a resume showing educational success, practical experience, success in prior jobs and good references attesting to a strong work ethic. I.E. studying hard, working hard and investing in your own success is really not luck. My dad called that “Making your own luck.” Too bad so few people understand that today. Entitlement is rampant and we are doomed until that attitude changes. Under this president we have no chance of seeing any change in the thinking of people who expect the government to provide for them and others to fund those gov’t programs.
There are plenty of lawyers and accounting partners/directors making 400K, but guess what, nobody handed them the job. They had to work long hours and be smart to move up in the company.
According to the Payscale website the average salary for lawyers is $45,113 – $166,028.
Oh my goodness Mr. Conklin. You are so angry at “The Man” that you think that all the problems of your world are due to incompetency of management. And of course every average worker is much smarter and more astute about business then the “The Man.” My only question is what union card do you hold?
Management is not infallible. But so is the average employee. Any credibility that you had, which was not much, has now been washed away by the idea the the economic problems facing this country can be resolved by an employee suggestion box. You must be married to that woman delegate at the DNC this past year, who stated to MSNBC that it shoudl be illegal for US companies to earn a profit.
Finally, as a person who represents lots of companies, I find it remarkable to read here about the $3 million annual salaries of American CEO’s. To read these posts would be to believe that the head of any company that has in its name “Inc.” or “Co.” means that the man or woman running the company makes, on average $3,800,000! Are you kidding me? There are fewer CEO’s making over a million dollars than the are Bigfoot sightings in an average week. This class warfare/envy mentality, of which you are the apparent champion of the day, has to stop. It has now become so wide spread that Obama was able to make it the center piece of his platform: “I will make sure that the Rich pay their fair share!” Do you know what FIT that produced for this country? Less than $60 billion annually, or the amount that the deficit is increasing every month! In consequential against our problem. But funny, if the Bush tax cuts on the middle class had not been renewed, the FIT production from that segment of the popoulation would have been approx $175 Billion! Looks like we renewed the wrong tax cuts for the wrong class!
> You are so angry at “The Man”
Hmmm, no anger at this end. Why’d you get your panties in a bunch?
> that you think that all the problems of your world are due to incompetency of management
Not even close. When you lie about such simple stuff why should anyone listen to you on anything else?
>every average worker is much smarter and more astute about business
Never said such a thing. I do have a niece who came up with an idea that saved a major corp $1 million tho’–management did not see it.
>My only question is what union card do you hold?
I don’t know of any managers that belong to a union.
> Any credibility that you had, which was not much, has now been washed away by the idea the the economic problems facing this country can be resolved by an employee suggestion box.
Hmmm, did I says that was all that was needed–no. You proven yet again that you are a liar. Secondly, if productivity jumped 250% in two years where would the country be?
>You must be married to that woman delegate at the DNC this past year, who stated to MSNBC that it shoudl be illegal for US companies to earn a profit.
She’d be one of the idiots–like those who worked over 40 hours in a week. Companies have to make a profit so that they can at least keep pace with inflation.
>To read these posts would be to believe that the head of any company that has in its name “Inc.” or “Co.” means that the man or woman running the company makes, on average $3,800,000!
That would exceed the bounds of the evidence that has been given. Which says a lot about your thinking and analytical skills.
” According to the AFL/CIO CEO Pay Database, in 2010, median pay for CEOs from Standard & Poor’s (S&P) 500 companies was $10.6 million, while CEOs from companies listed in the Dow-Jones Industrial Average earned $19.8 million.
With the median income for full-time American workers at approximately $36,000 (Bureau of Labor Statistics), S&P companies’ CEOs earn approximately 300 times the average worker’s pay, and Dow-Jones companies’ CEOs are paid about 550 times what the average worker earns.
By comparison, Japanese and German CEOs earn 11 or 12 times what the average worker earns, while French CEOs earn about 15 times that of the average worker.”
Read more: The Average Income of a CEO of a Fortune 500 Company | eHow.com http://www.ehow.com/info_8034082_average-ceo-fortune-500-company.html#ixzz2IvWhIvQ
> This class warfare/envy mentality, of which you are the apparent champion of the day, has to stop.
No class warfare or envy mentality here–do you know what the Bible says about judging others? It is time for you to stop lying about others and throwing out the cheap shots to compensate for your lack of substance.
I am glad that you are relying on the AFL/CIO data base as your authority for CEO compensation. They are so unbiased and reliable. I also enjoy all the liberal writers on this blog who talk about “doing their own study” or an article I read 10 years ago”….. I suspect that your study was done while looking in the mirror.
We can never have a decent conversation when so many of you think that anyone who runs and owns a company or who has been successful either cheated to get there, inderited it, does not deserve it and makes millions each year when their employees get peanuts. Do those circumstances occur? Sure. How often? Its a small number folks, there are only so many FOrtune 500 company’s (500 actually) and S&P 100 (100 actually). The liberal pundits and class warfare pundits want everyone to think that it is the status quo.
Last year I grossed $250,000. My assistant grossed $55,000. I will bet anyone my life savings against theirs that: 1. My FIT tax rate against taxable income (not AGI as many of you state) is well over 20% and my assistant’s under 10%. 2. Adding FIT, State and local taxes I paid in excess of 36% percent in taxes. 3. Overall counting all taxes I paid, plus FICA I contributed I paid over $80,000 in taxes. 4. My secretary’s Federal Income Tax and State Tax rates were all SUBSTANTIALLY lower than mine. 5. My assistant was able to take advantage of the Earned Income Credit, Child Care Credit, Deductions/Credits for college expenses, and her college son recieved a grant to help with tuition. 6. I had all the same items as my assistant in No. 5 and could not take any credit or deduction on my return.
Any takers on my bet?
To my fellow human being Rick, with whom I am also in the great boat of life – I have been following these posts for a few days and from the way you describe yourself you seem like an incredibly hard worker and God knows, when you have actually worked a hard day in your life you can look around and realize that most people have no idea what hard work is. Most people do not come from a family who teaches them hard work. Most people rely on ¨other¨people to teach their kids how to work hard. What I´m saying is, not everyone has the same circumstances as you. I graduated with a BS from a major university years ago and since then I have been working more that forty hours a week just to make ends meet and help out my mom and dad, who 1.) have super poor money management skills and are up to their eyes in debt, and 2.) my mom who in 2008 went from a full time teacher in the public school system to part time after 38 years of teaching and got her pay cut $1500.00 a month thanks to the government trying to save money.
When it comes to this stuff we can throw numbers around all day and its important to be factual but we can also look at our life experience. Experientially it sure doesn´t seem like hard work alone can provide a life for everybody like the one you have. In my life experience something seems seriously wrong with the state of things in the USA. There seems to be a big disparity between the people on the top and the people on the bottom. You have the haves and the have-nots and that divide is only growing more and more everyday. And the have´s are usually growing at the expense of the have-nots and the government, who mostly seems like it is made up of haves do very little to stop the tightening of screws in the daily lives of the rest of us. Their quality of life is going up, while for the rest of us its going down, regardless of how hard we work.
Last year for example, I got a 285.00 ticket with an option for traffic school so my auto insurance wouldn´t go up, for ¨failure to yield to a pedestrian in a cross walk¨because I rode my BICYCLE across the street instead of walking it, after all the pedestrians had already begun to step on the curb on the other side and there was never any chance of harm or injury to them or anyone else. That´s just one small daily experience of many that I have had with our government. Thats a quality of life issue right there that I can only image happens because my government is using the police force like revenue agents to try and take as much blood money out of us as they can to alleviate how much they are hemorrhaging everyday.
This is honestly what I see everyday in my daily life – The rich get richer and the poor get poorer. It´s no different with government. Our representatives don´t represent us. All these systems are made and lobbied for by the rich and favor the ones who made them. Looking at history, it seems like fifty years ago hard work got you a lot further. Now government is bought and sold by those that have money. Healthcare is a business. Education is a business. Access to healthy food is a business. Access to public space or environmental green space is a business. All these things that have to do with quality of life, are commodified and bought and sold by the few that can afford to do that.
The ones that have the ability to actually pull people up and provide an environment of empowerment for the American people are choosing to hold on to what they have more than spread it out for the benefit of all which in turn really benefits them too. Its amazing what people can do if they work together.
Now its like when your a little kid and the teacher tells you, you can´t eat that unless you brought enough for everybody because she sees the other kids longing for what you have and is trying to instill in you the value to share. But instead of the school taking your tuition and providing enough for everybody (or at least the opportunity for everybody to get it) , you sit there with your treat in front of thirty other hungry kids, probably some of whom their dad´s work for your dad and you know they don´t make nearly anything because your dad´s company is profit driven and he pays the least amount possible to push profits high – you sit there and eat this thing , meanwhile some of those kids get in trouble and have to pay fines which go to some fund of which they will never see any benefit. At the same time an institutional program has been put in place so that you pay less tuition, because your money comes from a different place, even though you had more to begin with and were able to generate this new money with that money.
Now some of those other kids might have amazing dad´s who instill in them strong work ethics, in the face of a pedagogical oppression like the governing bodies in my example but most simply will not. And maybe through shear will of force and all the right circumstances coming together a few of those kids will become like the dad in the example, but most will not. Most people will rely on their government and get whatever the government gives them until the day they die.
This is why when you go to another country where social services are provided, free health care, free education, markets with healthy affordable food in every neighborhood, access to cultural programming, etc. the quality of life seems so much higher. It´s because it is! The citizens of these nations don´t mind contributing to those systems as a few other commenters have posted. It´s because they get a lot out of paying taxes and also culturally for the majority their life doesn´t revolve around money as the ultimate goal. I´m writing this from another country right now and I can tell you first-hand its true. I have a much higher quality of life here although I´m getting payed a lot less. What a concept right!?
Thanks for reading… Best, JD
>5. My assistant was able to take advantage of the Earned Income Credit, Child Care Credit, Deductions/Credits for college expenses, and her college son recieved a grant to help with tuition. 6. I had all the same items as my assistant in No. 5 and could not take any credit or deduction on my return.
Since by you own admission you made substantially more income that your assistant you could not take advantage of the EIC–btw, neither could/should your assistant:
Earned Income and adjusted gross income (AGI) must each be less than:
$45,060 ($50,270 married filing jointly) with three or more qualifying children
$41,952 ($47,162 married filing jointly) with two qualifying children
$36,920 ($42,130 married filing jointly) with one qualifying child
$13,980 ($19,190 married filing jointly) with no qualifying children
So, either she cheated on her tax return (and how would you know what it says anyway?) or you lied. Given your track record it isn’t hard to guess which way that works out.
>I am glad that you are relying on the AFL/CIO data base as your authority for CEO compensation. They are so unbiased and reliable.
Here’s their sources:
[1] AFL-CIO analysis of 313 companies who disclosed CEO pay data as of April 1, 2012, as provided by Salary.com.
[2] AFL-CIO Executive Paywatch calculations.
[3] “CEOs: Why They’re So Unloved,” Businessweek, April 22, 2002.
[4] U.S. Bureau of Labor Statistics’ Current Employment Statistics Survey—Table B-2: Average hours and earnings of production and non-supervisory employees on private nonfarm payrolls.
[5] U.S. Census Bureau, Selected Measures of Household Income Dispersion, Table IE-1.
[6] “Trends in the Distribution of Household Income,” Congressional Budget Office, October 2011.
[7] “Striking it Richer: The Evolution of Top Incomes in the United States, (Updated with 2009 and 2010 Estimates),” Emmanuel Saez, University of California, Berkeley, Department of Economics, March 2, 2012.
Are the last 5 sources biased and unreliable? Are their calculations wrong? If not why lie by innuendo?
>We can never have a decent conversation when so many of you think that anyone who runs and owns a company or who has been successful either cheated to get there, inderited it, does not deserve it and makes millions each year when their employees get peanuts.
I don’t even start with that kind of thinking.
We need to plug the CEO and financial industry being paid taxed at Capital Gains rates for the last 30 years. Since I make $150,000 a year of which the first $110,000 is taxed at 15% which I have no problem paying, if I am one of the 75% I am born with that will be alive at 65 I have. No proble paying. The guys who are taxed at 15% are way under taxed. The scam of being paid 90% as compensation taxed at 15% is what has gotten this country in trouble. We need to tax ALL CEO compensation at ordinary Income Tax rates. Until we do that, the middle class, whoever they are, will continue to disappear and the USA will be just like every other third world country with a huge poor. It gets me when I hear someone struggling, homeless or on food stamps say they are a Middle Class family. Som done needs to point out that they are Not Middle Class, but poor .
The Tax laws are making a few Rich, very Rich while the rest of us slide into poverty . Until we change the Tax Law s,get people in office to do it, the laws will never change. If you keep voting Republican expect the Tax Laws to be Unchanged and the Rich will just get Rich er and the rest of us will carry the tax load and get poorer. To those who think the Rich pay too much, the way it works is you have to have. Enough income to pay taxes above poverty and since most of the money is being taken and kept at low tax rates of 15% or less, people the 99% will cont Niue to slide into poverty. Hopefully, we will throw out the Rich mans buddies in Congress in 2014.
This isn’t “Class Warfare” against the wealthy, as the Republican propaganda machine intones. And I don’t hear that you hate the rich either. You hate the present system which allows some greedy rich bastards to buy politicians with unlimited contributions, and hire lobbyists and PR firms to stump their ideas and even convince voters to choose what’s damaging to them. Money does that.
However, many wealthy people know that and are on your side in this. Warren Buffet and many like him agree with you Mike. Good post.
>”greedy rich bastards to buy politicians with unlimited contributions, and hire lobbyists and PR firms to stump their ideas and even convince voters to choose what’s damaging to them”
I assume that you include Teachers Unions, AFL/CIO, Environmentalists, and AARP in your group of “greedy bastards”? After all they have legions of lobbyists and PR firms stumping for them also.
Let’s really try to understand what the fiscally conservative Warren Buffett is really saying. Warren Buffett said over 30 years ago that he would only leave $500K of his wealth to each of his children. He does not believe in corrupting his children on their path to establishing themselves in life. He has since upped that somewhat but still will give away over 99% of his wealth. I believe that his posture on taxes is partially driven by the strategy to motivate really rich people to give their wealth away instead of corrupting the next generation just because they chose the right parents! He is not about class warfare and robbing the rich just because they are rich.
I am a fiscal conservative who believes that government is part of the problem and minimally part of the solution. I believe that the impact of this government is detrimental to this economy. However, I agree with Buffett’s premise concerning the unfairness of passing wealth on to a privileged generation. I think that he was the one who had an analogy along the lines of – “would you select future Olympic basketball teams only from the children of past Olympic team members?”
No Jack, I’m limiting the scope by addressing the detrimental impact of those who have accumulated far more than they can ever spend in a lifetime and want it all to go to their children, grandchildren, ad infinitum. That behavior corrupts not only families, but governments, and establishes aristocracy by suppressing meritocracy. That is truly “class warfare”. But people are blinded by self interest. I greatly admire Warren Buffet (and Carnegie before him) for understanding a much bigger picture and speaking out on inheritance and the fairness in income tax policies.
If you search for the options the government has to balance the budget, you’ll find that the OMB grades each spending cut and revenue (tax) gain on the dollar impact each has on an economy which is still quite fragile. The most detrimental cuts and tax hikes are those to the very poor because all the benefits and cash they receive is plowed back into the economy. The least detrimental impact on the economy (and employment) are tax hikes on those making more than $250K. It’s all simply math by the non-partisan OMB, and not some silly slogan like “class warfare” made up to influence the vast majority to vote against their best interests.
I’ve read your other posts and know that for you, the issues are:
1. Big government (bad), versus small government (good)
2. Government is the problem rather than the solution (very Reaganesque)
3. That government will “suck the life out of the entrepreneurial spirit” by over spending, over taxing, and over regulating
My questions then are these:
1. How can you tell that government is too big since “too big” and “too small” are relative terms? Compared to what…?
2. Since all large organizations have waste and inefficiencies, why do you think government is any different than GM or Boeing?
3. Why do you think current spending, taxation or regulation will quash incentive when we spent, taxed, and even regulated more in the ’30’s, ’40’s, ’50’s, ’60’s and ’70’s?
I look forward to your response
These are very easy questions to address:
Q1. How about by Fed cost as percentage of GDP, since GDP represents the nation’s income. Like every family, the Fed should live within a budget. How about 18% going to the Federal state? Seems fair given history.
1931 – 3% of GDP
1941 – 8%
1951 – 15%
1961 – 18%
1971 – 19%
1981 – 21%
1991 – 22%
2001 – 18%
2008 – 20%
2011 – 25%
Every percentage point reduction against our current GDP is worth about $160 Billion per year. If we got back to 2001’s 18%, we would eliminate the entire deficit! Now I am not proposing that, but you get the point I hope. Even if we got only to 21%, we would knock off over $600B per year. We must achieve a level that we can afford, regardless of noble objectives. Again, I am a fiscal conservative, and do not believe in free lunches or unproductive debt.
Q2. Of course waste and inefficiency exists everywhere – including my family. But in the free market competition regulates these corporation by competition. It is not perfect, but it does work. Competition at all levels internally and externally. Competition from the free world. Product price , product quality, and resource competition. We also have assumed the role of the world’s policeman thus giving our competition a free ride as we protect sea lanes and communications. The system sets the prices through competition, the corporations build the products to maximize shareholder profit. If the profits are unacceptable, at a minimum, heads roll; at a maximum companies disappear. If they are cheating, they are exposed ultimately and disposed of. Even this last financial disaster is an example. It was exposed and dealt with. The fact that they are dealt with should be encouraging, rather than ask government bureaucrats to be smarter than the free market in preventing them and probably throwing out the baby with the bathwater in the process. And let’s not even go to the major role the government played in this recent meltdown.
Of course we have our Enrons and Bernie Madoffs, but they ultimately are dealt with in the market. How many of these things that occur in Government are ever dealt with?
As to government, first of all, nothing disappears in Washington D.C. where I grew up. Down on Constitution avenue we had temporary buildings erected for WWI that were still there in the 1950s as I recall. Enacted failed laws are not repealed, they are papered over by newly enacted failure prone new laws. Many are not even read by Congress. Need I go any further than referencing the tax code in this regard? Or how about unnecessary military bases or military contracts that are protected by local Congressmen?
Second and most of all, the Federal government is a monopoly; and thus has no competition. That is the way it has to be, but certainly does not lead to competent management.
Q3. Because the government took much less of the public pie in those decades, leaving much capital available for investment.
Historically, the United States has had about 23% of the world’s GDP. After everybody else was destroyed in WWII, we had 50% and manipulated the post war world to meet our’s (and the world’s) economic needs. We were economically fat, dumb, and happy in the 50s and into 60s until Vietnam, Watergate, and stagflation. Ultimately we won the Cold war and a democratic free market model was the victor. However, we were not prepared for victory. We have built up during our “golden years” an unsustainable Federal overhead that is negatively effecting our competitive capability today. We were not prepared for 2 1/2 Billion very competitive Chinese and Indians coming online in the free market. We are back to somewhere around our historic 23% of the world’s GDP (with 5% of the population by the way), but the trajectory of America’s overhead is unsustainable at that level.
USA had 23% in 1940 (of the world’s GDP)
USA had 50% in 1945
USA had 40% in 1950
USA had 22% in 2008
If only we still had 40%, but we don’t and we won’t, so we must adjust the overhead. The Federal overhead as a percentage of our GDP is repeated below:
1931 – 3% of GDP
1941 – 8%
1951 – 15%
1961 – 18%
1971 – 19%
1981 – 21%
1991 – 22%
2001 – 18%
2011 – 25%
> Of course we have our Enrons and Bernie Madoffs, but they ultimately are dealt with in the market.
Really?!?
To Jack:
So you want to reduce government total spending to some past historic level. Romney made such a statement emphasizing that total government spending had increased from 27% in 1963 to 37% by 2010. His statement was close to true as far as it went. But there are other considerations not included by his statistician.
In 1963, there was no Medicare and Medicare and Social Security are “government transfer payments” which are paid for with earmarked taxes – FICA and unemployment insurance taxes. When we get transfers from the government under Social Security, Medicare and unemployment insurance, we’re getting back the money that we or our employers contributed when we were working.”
While these are undoubtedly government expenditures, one could argue that they are actually pass-throughs of payments from the American public to itself. And it’s worth noting that Social Security and Medicare — the drivers of government growth — are among the most popular of all government programs.
So how would taking this into account change the equation? If you subtract the share for federal transfer payments from figures above, it turns out that government spending as a percentage of GDP actually declined between 1963 and 2010, from 22.5 percent to 19.3 percent.
Your stats also included such transfer payments. (where did you get 3% for 1931 and 8% for 1941? My sources say they were much much higher – just curious.)
The bottom line is that arbitrary numerical targets for federal spending and revenues, such as 18% or 21% or any other firm figure, are misguided. Although history provides useful information and guidance, it should not be a straitjacket. What will be appropriate in 2020, 2030, or 2050 is not necessarily the same as in 1970 or 1980. Budgetary policies, like other policies, must respond to changing circumstances. “As our cause is new,” wrote Abraham Lincoln, “so we must think anew, and act anew.”
Determining the appropriate levels of federal spending and revenues requires making a thoughtful assessment of national needs and weighing the benefits of federal spending programs and tax expenditures against each other and against the costs of the taxes to pay for them. Limiting spending and revenues to their historical average or another inflexible target would prevent these trade-offs from being made. In my view, the aging of the population, the continued importance of Social Security and Medicare, the growth in federal responsibilities in recent years in areas such as homeland security, and rising health care costs justify higher levels of federal spending and revenues over the next 40 years than over the past four decades.
Generally speaking, there are tasks more efficiently done by governments, and those better done by the private sector. For example, fire suppression is better done by government, while fire insurance is most efficient in the private sector. The post office and even Medicare actually offer better service at lower cost too (although I sure some propagandists, especially in the insurance industry will disagree).
Being a monopoly is not necessarily “bad” if good oversight and transparency is provided. Our free press compares costs and uncovers waste constantly which provides the incentive for government managers to eliminate waste and actually be inventive to provide more with less expenditure. And from my experience, I’m amazed at the competency of government managers who must compete for promotion in objective testing situations or objective evaluation processes rather that who can best kiss up to the boss or is related to him. Most people don’t label our society as “socialist” because we take advantage of the cost savings that government provides. It’s simply common sense.
As far as raising the tax limit to 39.6% causing a disincentive to work, I find that rather absurd. America had a most productive time from the late forties through the seventies with historically high GDP growth, and the tax rate limits ranged from 70% to 94% as we payed down our debt. Yet GDP was very low, and middle class wages stagnated, as did job creation from 2001 through 2008 when Bush cut taxes. The effect of moderate tax cuts or hikes are highly exaggerated by Friedman and his neo-con supply-siders. I’m amazed they still push that crap when there has been no historical correlation between their actions and the expected results.
We do agree that this tremendous debt is a drag on the economy and something must be done to get it under control. However, if we don’t understand exactly how we got there, we are bound to repeat the mistakes. I encourage you to click here > http://showmethefacts.com/us-federal-debt-as-a-percentage-of-gdp-2012/ for a chart on how the debt accumulated over the various presidential terms from WW2 to today. Afterward, you may want to read up on, “starve the beast”, the ideology behind it all.
I enjoyed our exchange and want to compliment you on you writing style and the logic you display.
Thank you for your complements. I don’t have time to respond in detail to your message, but will later. Here is a URL to the historical GDP chart I used.
http://www.ritholtz.com/blog/2011/07/government-spending-as-a-percentage-of-gdp-2/
For some reason I do not have a REPLY button where I expect it, but here goes.
I too have appreciated the fact based approach we have shared in this exchange.
Any budget process starts with a piece of the overall pool. The overall pool is the GDP of this country. I don’t know what percentage the Fed should take, but even the CBO shows Fed health care outlays almost tripling in the next 20 years and the Fed taking 25% of GDP 20 years out. By the way, add in state and local government and the number approaches 50% of GDP! As to your trade offs in the future? All other discretionary costs are cut in half (supposedly). This number does not even include the cost of interest payments that surely will spiral upward as interest rates and debt climbs.
http://www.cfr.org/united-states/us-deficits-national-debt/p27400#p2
Many states (California for example) and Corporations (Airlines for example) have made retirement commitments to employees in good times that are bankrupting them in the current bad times. The Federal Government has done the same thing.
And you want to know how we got here? Demographics, my friend, purely and simply – demographics. And zero advanced planning to deal with its impact. At 10,000 baby boomers retiring per day on the way to 82,000,000 in total, the piper is here to collect. Incompetent, power hungry, low horizon vision politicos kicking the can down the road and catering to their constituencies in order to maintain power have exacerbated this situation.
And you wonder why I don’t like big government?
And by the way, Medicare, Medicaid, and Social Security probably do not pass the actuarial test of good business. If they were products of an insurance company, they would be in big trouble in the long run. While I have not studied the numbers, it is my impression that the long range outgoing commitment far exceeds the incoming transfer payments you mention. I could be wrong, but I doubt it.
Also, Al Gore’s famous lock box never existed. The incoming has been spent on buying Federal debt and the excess of outgoing over an ever decreasing incoming revenue stream must be borrowed. Social security, for example has been buying Federal debt with its excess. Soon they will not have any excess and will be net sellers of T-bills. Also the Fed’s balance sheet is in jeopardy and thus they are winding down their purchases of debt. Finally, if a second rating agency downgrades our debt, many pension funds who are required to buy only top rated bonds will be sellers as well. We will then be almost totally dependent on foreigners to fund our excesses and they will soon demand higher interest to offset their risk. And then – look out below!
You can have all the noble social justice objectives in the world; but, as I said previously – there is no such thing as a free lunch.
>And you wonder why I don’t like big government?
You correctly noted that the problem we are facing is because of demographics and yet cast the blame on the size of gov’t?!?
I blame it on the incompetence of government in not laying the appropriate long range plans for dealing with the demographics. This is just one example of why government needs to be as minimal as possible, because they are in general, incompetent due to the political filters over their eyes. The 535 politicos could have dealt with this over the years without needing to increase the size of government. But they just are not capable. So why should we believe they are capable of handling bigger responsibility? I certainly don’t believe that.
Any Corporate CEO who built up such an unfunded liability on his balance sheet would have not only been fired, but run out of town on a rail by the shareholders! The problem is that the federal government does not have a balance sheet – and therein lies the disaster awaiting us.
It has nothing to do with the size of government unless you want to believe that managing massive programs such as Social security and Medicare in a fiscally responsible manner was beyond their grasp in the first place.
>I blame it on the incompetence of government in not laying the appropriate long range plans for dealing with the demographics.
Likewise with insurance and pensions. It appears that virtually no one thought far enough out. It is illogical to single out a single societal organization for an endemic failure.
>> “Likewise with insurance and pensions”
I believe that Insurance companies do think far enough out, the insurance business is very specific about such things. Also as I said many states and some corporations (such as airlines and auto manufacturers) have bought off their workers/voters with lavish pension programs in good times only to get into trouble in bad times. Corporations clearly identify such unfunded liabilities, governments do not – and that is a dramatic difference in transparency.
As to pensions, I repeat what I said above:
“Many states (California for example) and Corporations (Airlines for example) have made retirement commitments to employees in good times that are bankrupting them in the current bad times. The Federal Government has done the same thing.”
>> “It is illogical to single out a single societal organization for an endemic failure.”
I disagree completely with your comment. It is very logical to pick out governments as it does not identify on a balance sheet what its future liabilities are. Insurance companies as do all corporations, by law, have to do that.
It is not an “endemic failure”, it is a population bubble working its way through the economy. This government doesn’t seem even now to recognize the future liability as it still has not prepared for its impact! And certainly because of the lack of a government balance sheet identifying unfunded liabilities, has never even identified its magnitude. so we have pundits estimating $50 trillion? $75 trillion, $100 trillion?
Whatever this is, it is not an endemic failure, but it is a potential government failure of epic proportions. Head in the sand stuff, for sure!
>I believe that Insurance companies do think far enough out
Way, way, way back in the very early 70’s one of profs pointed out that when companies try to assess risk they do so based on a statistical analysis of the past (and they didn’t go too far back into the past–so, for instance, up in NW MN along the Red River they had two 500 year floods, back to back–so the insurance companies that offered flood coverage got creamed twice over). He showed me a graph of human population growth up to the point in time and a dotted line for the expected growth rate. Then he drew in a line as what he thought it would be–much steepr than the first. He said that no one accounts for that kind of growth rate–a couple of months ago a group of guys were selling the idea that given the every increasing rate of growth in population and their demands for water, food and fuel, our economy is basically a Ponzi scheme that is destined to failure; “But, we can show yuou how to profit from it!”–yeah, right, when it hits the fan you won’t be able to collect anything, except at the point of a gun.
One more thing. About GDP. I looked at this a few months ago and it turns out that all the growth in GDP of the last few years (I forget over what period I studied) has been the debt incurred by the government. In other words, GDP numbers representing the real growth of the economy that really matter are flat.
I haven’t looked at this in a while, so I could be wrong, so this is as I remember it from a while back.
I am not an economist, but that does not seem to be real growth to me, unless you really consider this debt to be investment – which I suspect would be a real stretch.
We need to get the real engine of growth going by, at a minimum, getting the governmental rules fixed and in place so that corporations can start making investment plans. Ideally, these rules would not be abusive; but, in any event Corporate America is smart enough to adapt – once the rules are stabilized.
The size of gov’t isn’t the problem–even small towns are having trouble managing the insurance and pension costs that they are facing. And with ever-increasing life spans and better (and much more expensive) medicine we live longer/linger at great expense.
I just read every entry here and respectfully submit that you guys are all missing the point.
The issue is not about taxes, tax loopholes, tax rates, or class warfare.
The issue is not about the motivational impact of taxing the rich.
The issue is not whether the government should provide basic services and infrastructure investment as well as a safety net help. It should.
The issue IS about big government versus small government
The issue IS whether we believe that government is part of the solution or part of the problem.
The issue IS whether we allow the government to suck the life out of the entrepreneurial spirit that made this company great, by over spending, over taxing, and over regulating thus throwing the baby out with the bathwater.
Of course the government has an important role to play; but its ever expanding role in today’s America is not the one we should want. In this tug of war between the free market and the federal government, an overpowering government is winning, and that is not good news for the future.
What kind of future do we want guys? Right now the future is very bleak in this regard, and until we get away from the symptoms and get down to the issue, it will continue to be bleak.
Given the ineptness of our politicians in D.C. ( and I mean all from both sides), I believe that this ship of state has no option but to ultimately hit the iceberg. The only question is will their be enough lifeboats? The answer is obviously – a resounding NO!
>The issue IS about big government versus small government
Okay, lets work with that; this raises a number of questions (we’ll start with two):
1a) What is the correct size of gov’t?
1b) How was that size determined?
2a) With the current size of gov’t Bernie Madoff was able to run his scam for quite some time. That would seem to indicate that the current size isn’t big enough, agreed?
2b) With the current size of gov’t we are facing $70 billion in losses every year because of food poisoning. The FDA figures that if their budget was increased by $7 billion they could stop that–does that sound like a fair trade?
>The issue IS whether we allow the government to suck the life out of the entrepreneurial spirit that made this company great, by over spending, over taxing, and over regulating thus throwing the baby out with the bathwater.
Baloney. Business could very easily turn this thing around if they did two simple things:
1) Institute an aggressive employee suggestion program. In one company the management decided that they didn’t know everything and so they set on up. In two years productivity jumped over 250%. Most companies will NOT do this, not because of gov’t interference, but simply because they think that only “they” know what needs to be done. I used to work for a company and suggested that they start an employee suggestion program and was told exactly what i just said. it only took them 15 years to come up with one of my ideas–at the rate they are going it will take about 600 years to cover all of my ideas.
2) Bring home the 2.5 million high paying jobs that were shipped overseas.
> I believe that this ship of state has no option but to ultimately hit the iceberg.
Quite correct–because the current “crop of clowns on the bridge” are too arrogant, proud and greedy too change course.
Anecdotal, out of context, incidents do not an argument make.
I could give lots of anecdotal evidence as well that shows how government incompetence is rampant at all levels. But that would be anecdotal, and self evident. GS level government bureaucrats are not better positioned to make free market decisions than the free market. Government’s job is to provide infrastructure, referees, and security (personal as well as defense). Where its role in these areas starts and ends is the basis for the issue of big or small government.
I grew up in Washington D.C., and you went to work for the government only if you did not have the motivation to go on to better and more rewarding opportunities. The candidates thus hired by the government are far from the “cream of the crop” as a result.
Your argument is about as useful as asking why cops and prisons have not stopped crime, or referees have not stopped fouls in sports. The answer is not more cops, more prisons, or more referees.
Very few of the jobs lost in the great recession went overseas. These people were replaced by technology, improving productivity in our Corporations. These jobs will not return. That is why the current recovery is a “jobless” recovery.
Your number one solution is employee suggestion programs? We are clearly talking at two different levels here. By the way, every large company I ever worked for had a suggestion box – Philco, IT&T, IBM, and Hughes Aircraft. Smaller companies I worked for didn’t need one since they couldn’t be successful unless they work together. Even so, most I have dealt with have one.
Government spending trillions on unnecessary wars and defense industry toys, government bailouts, committing to a $100 Trillion (that is $100,000B, by the way) future baby boomer liability, and paying 40% of today’s tab by borrowing from foreigners, and no plan or idea how to pay the future liability, does make the argument. Sucking $250B in interest per year out of the economy at almost 0% rates that as rates rise will drive the $250B number easily to over $1000B makes the argument as well.
At least we agree on one thing – this ship of state has a “group of clowns on the bridge”. But we did vote them into office.
>Anecdotal, out of context, incidents do not an argument make.
They are examples, not the argument.
>you went to work for the government only if you did not have the motivation to go on to better and more rewarding opportunities.
And yet they went to school to get doctorates. Hmmm.
>Your argument is about as useful as asking why cops and prisons have not stopped crime, or referees have not stopped fouls in sports.
Non sequitur.
>every large company I ever worked for had a suggestion box – Philco, IT&T, IBM, and Hughes Aircraft.
3M, Burger King, 7-11 (Southland at the time), SuperAmerica, Kmart, Seagate, for some examples, do not have suggestion boxes; nor do those companies that do have suggestion boxes know how to broaden the input.
>At least we agree on one thing – this ship of state has a “group of clowns on the bridge”. But we did vote them into office.
I didn’t elect any CEO into office.
Okay, so I read people continually saying “it’s only 39.6%” over and over again and I really think you need a reality check. What additional taxes do you pay? Do you pay state income taxes, property taxes, sales tax, toll road fees, etc.? What is the ACTUAL tax rate you are paying?
The USA’s problem is we’ve put Government in the place of God. Government makes a mean task master and while you may have your belly filled and be able to get a cast on your broken arm, your aunt may have her feeding tube turned off because some board somewhere decided her treatment wasn’t cost-effective. There is a price to pay for entitlements and you will realize it sooner or later!
“From those according to their ability. To those according to their need.”
“Give a man a fish, feed him for a day. Teach a man to fish, feed him for a lifetime.”
America has tried the Experiment: “From those according to their ability. To those according to their need.”
There are serious practical issues that brought several noble Experiments to an end. I am thinking about the Communes of Pilgrims in Mass; a Town called New Harmony, ILL; a settlement near Sarasota, Fla; the founding of Holland, Mich and LDS pioneering the United Order in Utah. The fundamental flaw was ‘human’. Too many choose to do less and less work compared to their draw from the community. It created significant friction among the population. Eventually, the redistribution of ‘other people’s fruits of work’ became unsustainable. The longer all the people were hard workers, the longer the Experiment lasted. The moral character of those that began the Experiment was very high. Behavior that is typical of those on Govt Assistance today is no where near the high standards of participants of past Experiments.
Bottom Line- It is OK with me for a group of volunteers to establish another Experiment(Liberals create a foundation for distributing contributions to their favorite programs). They have to be VOLUNTEERS, though. This notion of forcing the Experiment on USA is wrong and flawed.
I find fascinating all the comentary about the state of affairs in 1776 or 1811 or during those colonial times. I will resist the urge to banter on and on about you people wanting to return to times of salvery, women with no vote, plague, etc… One thing worth pointing out is the Jefferson and Adams of their time controlled the vote. How? Well you had to own a certain level of property to vote and in some states (where the legal control of voting was held), your vote was weighed by the amount of land/property you owned. Take a look at how Virgina for example weighed their votes (and who could vote and who could not). Reflects in an interesting way on Jefferson who owned hundreds of thousands of acres there.
So, why not have a USA system now that says your vote at the Federal level is weighed by the amount of Federal Income Tax you pay. Name me any other system, business etc… where non contributors, non investors get the same “say” in decision making as investors. How many of you liberals would invest in a business with me when I told you, at the same time, that I was investing nothing, but would control everything and make all the decisions. That’s where we are heading folks. To a system where more than half the voters don’t pay income tax but they can control those who do. I wonder what Jefferson and Adams would think if they got off of my time machine and took a look at the current state of the USA. I think they would be asking me to send them back to the 18th Century ASAP.
> How many of you liberals would invest in a business with me when I told you, at the same time, that I was investing nothing, but would control everything and make all the decisions.
That’s not how the political system works. We have two houses in Congress: the House of Representatives (the number being based on the population in your state) and the Senate. What you are proposing is a system in which the richest people, screw the rest on their pay (so that they cannot pay much in taxes) and then keep all the power for themselves.
reply to Rick: your rejection of the historical points I raise seems to follow the logic of: It did not work 10 times before, but it will work now because I say so.
Fuzzy Thinking Alert…
By the way, that’s a quote from Karl Marx.
To get a real understanding of this issues of who pays the taxes, here is a good and easy to understand argument, based upon actual tax paying facts and not the class warfare propaganda. http://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes
And yet that site is class warfare propaganda!
One example: as a result of the tax cuts: “There was more investment, more hiring by businesses, and a stronger stock market.” If that was true then where’s all the jobs? We shipped about 2.5 million jobs overseas. And since they didn’t ship the minimum wage jobs overseas, we can safely assume that these were good paying jobs (like the steel and auto industries). So what happens to your economy when you ship out the good paying jobs? Less demand for goods a and services at home so those workers get laid off, more unemployment, greater demand for food stamps (“welfare”), more homelessness, etc. just what we are seeing today.
Cut Taxes will Stimulate the Economy. Nope. Today is a new reality. Our Economy has shrunk. Too many factories and industries have left the country. Companies are profitable with the employees they have. There are so many part-timers that Business expansion would have to exceed the equivalent of 1 million new-hires just to take up the slack. Compare that to 20 million that are looking for a good job. There is no one to hire them.
Bottom Line: Taxes for the wealthy could be cut to ZERO and Capital Gains tax could be Zero and taxes on Interest could be Zero and there would be NO significant increase in net new jobs (outside of Wall Street).
The major component holding the Economy together is Federal Govt payments to Welfare, Unemployed, Food Stamps, and States. The day that US Bonds cannot be sold to pay for Subsistence support, is the day we crash down to the Second Great Depression.
>If a person making $1 million a year is used to having that translate into $Y of disposable income per year and then suddenly a much larger proportion is taken by the government, there is often a very significant drop in motivation.
And yet it didn’t affect their behavior before 1963 when President Johnson and Congress lowered the tax rates.
The IRS reports tht the lower 50% of taxpayers paid only 3% of Federal Income tax which I assume is your $3 billion. If you can, do the math and determine the $$$ amoutn of what the upper 50% paid! Crazy!! Next thing you’ll say is that the lower 50% should pay no tax or worse, should get tax refunds, which is a oximoron in this conext because a refund assumes that you paid something in, in the first place. You know in life you make choices that have ramifications. So if you choose to not go to school, or not do well in school…ie…not invest in yourself, then you have to accept that you may not be as fianancially successful as someone else who did. You may not like it, but that’s the way it is. We are rapidly becoming a country where successful people will be working not so much for themselves but for others who made decisions that have caused their lives to be less than they want. That is not a state of affairs that will last long in any society. If it continues, we are doomed.
Hmm, I was off! According to the Tax Foundation (http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0#table4) in 2009 the bottom half paid $19 billion, 511 million in taxes–which is quite a way off from zero.
> Next thing you’ll say is that the lower 50% should pay no tax …
Well, since we are a consumer-spending based economy, if you wanted to stimulate the economy and put more people to work, then yes, one should zero out the taxes on the little people.
>So if you choose to not go to school, or not do well in school…ie…not invest in yourself, then you have to accept that you may not be as fianancially successful as someone else who did.
I hate to burst you pollyanna bubble, but in RL, people do not get ahead solely on the basis of ability. One company decided that they didn’t know everything (smart move) and so they set up an employee suggestion program. Productivity jumped over 250% in two years. I have a niece who works for a major company with lots of MBA grads and highly paid executives. She came up with an idea that saved them 41 million dollars, not the suits. I wrote up a business plan. On VC looked at it and said “This would be like printing money!” Couldn’t get the funding. I worked for one firm and in the employee lunch room were two newspapers (on different days) which ran an article about what a major competitor was doing. I had come up with those ideas 6 months before. At another company I suggested that they start an employee suggestion program. they poo-poo’ed it. “We have highly paid executives doing nothing but thinking about what the company should be doing.” It only took them 15 years to come up with one of my ideas–at the rate they are going it will take 600 years before they cover everything.
> That is not a state of affairs that will last long in any society. If it continues, we are doomed.
And yet we fought two world wars and were doing fine till 1963.
The “suits” eh? Next thing you’ll be talkin about “the man.” My dad never went to high school, never made more than $22,ooo in a year, but he stressed education, hard work and not taking handouts. I worked two jobs during high school and college. Paid for college and post college myself. Put 3 kids through school with no student loans. Ben married for 30 years. Part owner of my company and have 4 employees working who support me. So, it can be done without the crutch of government. Dont’ know when the entitlement attitude became popular but it wasn’t long after 1963. Funny too, during those two WW, that no one expected handouts from the government to make their way in life.
You went through a school system funded by the government. You walked to school on sidewalks paid for by the government. You ate the food your mom purchased at the store and didn’t get sick because of taxpayers funded government food inspection. You paid less for many products (especially oil) because our military kept foreign shipping routes open and free. You, like all Americans benefited greatly from government funded research into everything from medicines to micro-technologies. Your opportunity to attend college was the result of citizens uniting (aka “government”) to make that happen, something which would probably never have happened to someone of your family background before that time. Your products get to market over roads and bridges, railways, airlines, and barges, all either built by, subsidized by, or regulated through government funding. Even the internet was created, courtesy of the U.S. government. Pres. Lincoln came close to being self made. Few, if anyone including you are today. You didn’t achieve in a vacuum Rick.
“Entitlement” was a term attached to benefits such as Social Security (1935) which are paid into throughout a citizen’s working life and to which entitles him to a small pension when he retires. It has nothing to do with “entitlement mentality” which was coined as a negative term in a 1970’s book having nothing whatsoever to do with government entitlements.
Finally, government isn’t a crutch. It’s simply a way we can collectively provide opportunities for all our children to achieve and thrive better than we. Not just the wealthy, but ALL, and you are the poster boy for that Rick.
You are right. Glad to be the poster boy. I took advantage of all the things you identified and made something of myself, employ others, educated my children with no post college debt (They all work now). In other words I took advanatge of the government provided base infrastructure that was made avaialble to every US citizen, including those that paid no FIT. But where does all that stop? I assure you that all of the social programs made available today and paid for by the gov’t were not in place in the 60’s and 70’s. And our President is only getting started with the free money and benefits.
Here’s a fun excersie for you. Go on an internet search engine and type in “How to apply for” The popular links that will all pop up relate to applying for var gov’t benefits. How pathetic is that. People have lost and are losing the will or desire to make a life for themselves and their dependents. A self responsible, self sustaining life. And the government’s mission is no longer to provide simply a base from which to succeed, but provide free cell phones, tax refunds when you pay no tax, etc… The government is supposed to provide a base for success and responsibility, not a disincentive to education, initiative, responsbiltiy and hard work that allows a family to rise from their present situation.
I took your advice and Googled “how to apply for”. The first site that appeared was Social Security Disability. Because I have a friend who hasn’t been able to work due to a severe anxiety disorder and is bipolar, I could research whether such a disability was covered (it was) and then cut and pasted 19 pages to print for her. It was one of the best web sites I’ve been to.
She hasn’t worked and hasn’t been able to afford therapy or medication for two years. With such support, perhaps she can recover and go back to work. Thanks for the tip Rick.
>The “suits” eh?
That’s what they are called in the real world.
> So, it can be done without the crutch of government.
Really? Who ordered the schools built? Who ordered the roads built? Do you drink city water or from a well like I did when I was kid?
>during those two WW, that no one expected handouts from the government to make their way in life.
Did anyone say anything about expecting a handout? Have you ever heard of the Great Depression and the step taken to mitigate its effects? We, through the gov’t, built 6 large dams that are bigger than the pyramids of Egypt–there was an educational TV show about the Hoover dam and one expert was just amazed that we could do this–simultaneously! Who ordered the freeways built? Private enterprise based on demand? How about the bridges in NYC? Did private companies step and say “Hey, I want to build a bridge here because there’s lots of demand for one!” Nope.
Handouts wouldn’t have to be a “way of life” if we hadn’t shipped the jobs overseas. Right now we have 9 people applying for every two jobs. That leaves 7 alleged “slackers” out in the cold.
I would guess a fair number of $400,000 earned 100,000 and cashed a $300,000 401K once to buy their retirement home, at years end, but I have not ever seen good statistics on this number
>Do you think the $200k family paid Federal Income Taxes (FIT) 2 times what the other family paid (what you might think since “Rich” people don’t pay their fair share), or maybe 4 times the FIT of the $50k family? (That seems fair, right?). Try a rate more than 10 times!!! Is that fair, …?
Depends, if need at least say 50k to get by then the extra 150k is “gravy.”
So fundamentally DJ Conlin, if someone is making more than someone else, they shold have to pay more in taxes simply because either:
They don’t deserve the extra income they earned; and/or
Because they can pay more?
Conklin, not Conlin.
I didn’t say anything about “deserve.” They can and should pay more–they have more to lose if it all hits the fan.
They do pay more purely by way of making more taxable income. But the problem lies in the share they are paying. I am happy to pay twice as much as someone who makes half what I make. Heck, I will gladly pay 4 times what the family who makes half of my income. But when I pay 10 times that amount and then am told, that I am not paying my fair share, and need to pay more, that’s a problem. The only explanation for the fairness of this system is either that “I should pay more because I can” or somehow “I don’t deserve the money that I earn.” Neither of those is an acceptable explanation to me and to many others who have worked hard, invested in themselves, their business, their employees, their community, etc…
Most people don’t begrudge the wealthy, especially those who’ve worked hard for what they have. We do begrudge the greedy however, and those who get paid to falsely represent them as, “job creators” etc. and therefore deserving of special tax treatment (sometimes called welfare for the wealthy).
In 1811, two years after Jefferson left the Presidency, Jefferson wrote a letter to General Thaddeus Kosciuszko, a hero of the American Revolution. Jefferson said that he supported taxes (then tariffs, since there was no income tax yet) falling entirely on the wealthy. As Jefferson explained: “The farmer will see his government supported, his children educated, and the face of this country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings.”
Here is someone else who was an outspoken proponent of progressive taxation: Adam Smith, who literally “wrote the book” on capitalism. In 1776, in The Wealth of Nations, Smith wrote:
“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
(I wonder: When Adam Smith wrote about the “luxuries and vanities” of the rich, was he contemplating Mitt Romney’s elevator for Romney’s car? Or is that simply beyond contemplation?)
Two hundred years ago, when America was founded, progressive taxation was viewed as just common sense. We still have common sense, don’t we?
>Adam Smith, who literally “wrote the book” on capitalism. In 1776, in The Wealth of Nations
Did you know that when Adam Smith wrote his work that the economy he was writing about was literally passing from view? It is only when something is mature and about to pass can the wise write about it.
>The only explanation for the fairness of this system is either that “I should pay more because I can” or somehow “I don’t deserve the money that I earn.” Neither of those is an acceptable explanation to me
John Wesley said that we should earn all we can, give all we can. One of the attitudes that made Henry Ford rich was that he paid his workers enough money so they could buy his cars (i.e., above and beyond what they would have gotten elsewhere).
>while the bottom 47% pay no Federal Income tax?
That’s not true. Overall, they paid about $3 billion in taxes and that’s not even considering that they are paying a “tax” in the form of low wages–roughly 50%.
As usual, this article about who makes how much is far off the mark. Many doctors make much more than $400,000 a year, but not Primary Care Doctors. Specialists, like Dermatologists, Surgeons, Radiologists, Oncologists, Anethesiologists, etc make far more than that and have done so for decades. I recently saw an internal report from an insurance company on this issue. It estimated pediatricians at $150,000 and Dermatologists at $450,000.
Hollywood Screenwriters and Professional Athletes make much more, but they are a small part of the population. On the other hand, many Corporate Executives and Bankers make this much, even in your community, as do many business owners and some Real Estate Sales people.
Dear Man of (No) Reason: Your comments refelcct that every small business owner is a cheater. Not true. I can just as easily say that many middle class folks deal in cash and don’t report non payroll earnings, etc… Further, there are many, like me, whose income is all related to earnings, ie W-2 income. Contrary to what you might think I cannot deduct trips, meals, home office,e tc… The were once deductible, where appropriate to all employees, but no longer. Capital Gains? A Loophole? The Capital Gains rate is available to EVERYONE, not just the so-called rich. But note that those capital gain investments are made with MONEY THAT HAS ALREADY been taxed at least once. So if I take some of my hard earned wages (being taxed at 40% Fed, State and Local income taxes) and buy an investment and make a gain, then my overall effective rate exceeds 20% easily. Finally, rent losses are subject to very low limits, making any benefits from rent losses miniscule. Further your REIT idea has no basis in available law for indivduals either. A grand idea, but not feasible or available at law. MIght as well tell me to declare my rich clients all churches so they don’t have to pay taxes. A fun but loser idea and strategy. So my question to you and anyone else who drinks the Rich Don’t Pay Their Fair Share cool-aid, is how can 80% of taxes be paid by the top 10% while the bottom 47% pay no Federal Income tax?
Of all the small business owners I’ve known, and that is quite a few, I only know of one man who was completely honest. After eight years, he had to fold, even though he had income from another source. Most people fudge when the IRS can’t contest their documentation.
Yes, most capital gains are realized from investments using previously taxed money. But that money is not taxed twice. That’s called the basis and only the difference between the basis and the sales price are taxed. If you invest $10 and sell at $100, $90 is taxed as capital gains (half the top tax rate). The original $10 isn’t taxed at all. In real estate, you can depreciate income property over 20 years (or has that changed). That means that you can write off $10,000 each year for a $200,000 rental. The basis also decreases by $10k each year, so that even if you only break even when you sell after 10 years, you have saved $39,500 in taxes during that time, have a basis of $100,000, and end up paying $20,000 in capital gains tax. If you invest the tax savings over time, you’ll have made much more. probably enough to pay your capital gains tax. Although very simplistic, that’s an example of what high wage earners do to legally convert ordinary income into capital gains. I know. I’ve done it.
A lot of this is the psychology associated with a materialistic society. Consider someone making 30K a year, paying minimal taxes and scraping paycheck to paycheck. If we offerred them the chance to make 400K a year – but at a %50 tax rate they would still jump at the chance. So what’s the deal with people in the higher bracket? It’s that we all get accustom to a certain lifestyle. Anytime that lifestyle is threatened (ie-higher taxes) we freak out.
I prepare a couple of tax returns for fun last night. One for a family of 4 with college expenses, typical deductions etc… and with taxable income of $50,000. The second return was for a the same family, but with taxable income of $200,000. Do you think the $200k family paid Federal Income Taxes (FIT) 2 times what the other family paid (what you might think since “Rich” people don’t pay their fair share), or maybe 4 times the FIT of the $50k family? (That seems fair, right?). Try a rate more than 10 times!!! Is that fair, especially when the $200k family has no right to the earned income credit, tuition credit/deduction, child care credit, college grants, subsidized student loans, IRA’s, other deductions, etc… And exactly how much benefit is the “rich” family receiving from the gov’t either? Imagine that you go out to lunch with your co worker who makes $10,000 less than you, but you are required, because you worked harder and as a result make more than your friend, are required to pay 60% of his lunch bill and he gets dessert too? Doesnt’ seem very fair in those terms, does it?
The comments about people making over $400k having lower income tax rates is simply not correct. Further, someone please tell what what are the “loopholes” that rich people can use that middle class cannot? As a tax professional, I can tell you that they don’t exist anymore. What I can say is that I pay AMT which middle class taxpayers don’t, and unlike middle class families I cannot: Take deductions for child care and tuition expenses both of which I have. My kids cannot get gov’t grants for college or even subsidized loans. I have earned income but can’t take the earned income tax credit. I lose some of my itemized deductions and on and on. If tax rates for the “rich” are lower than the middle class rates, than please explain to me how the upper 10% of earners pay nearly 80% of Federal Income Tax, while the lower 47% pay none? Please do your homework first and learn the truth, before just accepting the propaganda about tax rates spun by Democrats and Liberals that only spurs on their war between the (income) classes in our country.
Well Rick,
As a tax professional, you and your clients who also own small businesses, deduct auto expenses, phones, internet service, part of your house uses as an office, travel (including vacation if you see a prospective client), meals out with the family (if you also see a prospective client), etc., etc. Exaggerating expenses is routine in business as you know. The tax code was made for people like you. Unfortunately, you probably don’t make enough to take advantage of the biggest loophole of all – Capital Gains. But maybe not.
Just like Mitt Romney, you too can convert your wages into Capital Gains. Houses are cheap. Buy a few and rent them out. Yes, you will lose money, but with allowed depreciation, save a great deal on your taxes. With a little sweat equity, you can even realize appreciation and sell at a profit. What you deferred in taxes at 39.5%, you can now recapture previous “losses” paying Capital Gain rate of 20% on the adjusted basis. That’s HALF the taxes and paid years later!
If you build this up over the years, you can then incorporate as an REIT and issue shares to yourself causing those shares to appreciate over time. But don’t sell them or you’ll pay Capital gains on the difference between the basis and selling price, which can be avoided. Instead, will them to your kids. As you know, when you die, the basis of those shares will be readjusted in your heirs’ names at the full value at the time of death, thereby eliminating any Capital Gains and taxes altogether.
No loopholes? Mmmwwaaahahahahahaha!
Hi Rick, I posted this above but I figure it doesn’t hurt to add to what the Man of Reason has said.
The problem is that the super wealthy actually do have ways to work around paying taxes. For example, a CEO at a big company might get paid $15 million for the year, of which $12 million is paid in the from of company stock options. Rather than cash in the stock and pay capital gains tax, they take out a loan against that position. This way they get $12 million that they are free to invest, rather than $10.2 million. By the time they have to repay the loan, the $12 million which has been invested has generated a return greater than what they will eventually have to pay in taxes. In this way, the super wealthy can essentially avoid paying taxes. However, a problem occurs when that stock starts to tank (see Green Mountain Coffee).
Taxes? “not to worry”. One-half of these people have Loop Holes- Deductions. Enough to pay Zero Income Taxes.
go to the IRS dot GOV website, select ‘taxstats’, select ‘indtaxstats’, select ‘articles’
Select: “All Returns- Adjusted Gross Income”; IRS Table 1.2; Year: 2009
Go to the BOTTOM of the spread sheet.
Display ROWs 41 thru 45
Print Screen.
Circle COLUMNs “A” and “B”
Write on the printout:
“17 Million Pay ZERO Income Taxes AND Earn more than $100,000”
You’re an imbecile. In column N it shows that the 17 million filers who earned over $100K paid $647 Billion of the $866 Billion total federal income tax collected in 2009. That is 75% of the total, paid by the highest earning fifth of taxpayers. Here’s a homework assignment: Find table 1.1 and calculate what portion of total income taxes was paid by the bottom 48% of earners. Hint: Row P, lines 11-17. Another hint, the answer is 1.7%. You’re right that half the people in America have credits and “loopholes” that enable them to pay nothing or close to it — but it’s not who you say they are.
QUOTE: “some countries in Europe are charging 70% tax on people who earn this kind of money a year!”
Actually, France reversed course on that.
To increase tax fairness, and raise our incoming taxes, the U.S. should switch to a National Sales Tax, and get rid of the Income Tax. That way, criminals and those with illegal income will be paying taxes just like the rest of us.
If we can’t come up with a National Sales Tax, then a Flat Tax, with NO EXEMPTIONS is the 2nd best choice.
Unfortunately, the wealthiest Americans, and those with criminal incomes, will be dead-set against any tax reform. Our current system is designed so the rich and criminals do not pay their fair share, and they want to keep it that way!
cliff
KGRB
And the poorest among us will pay much more while those who can most afford to pay, the wealthy, will pay much less. A progressive income tax is by far the fairest tax this country has. It needs a makeover to ensure the rich pay a fair share.
Gasoline taxes are in second place.
Prior to WW2, only capitol gains were taxed, the robber barons made enough to run the whole country. FDR decided to tax all to gear up for the war. Afterwards, congress realized it had a cash-cow & continued the practice. You be the judge, with over 900 billion going to keep relations with small bad/good countries, tobacco & distilleries, ConAgra…..get the picture?
Funny. For 6 years all I heard or read about from Democrats and Liberals was that the “Bush Tax Cuts” only favored the wealthy and the Republican’s base of rich people. But since the election, all that the President and Democrats and Liberals could talk about was preserving the Bush Tax Cuts that favored and benefitted the middle class….I recall that if the middle class tax cuts expired that the average family would pay an additional $4,000 in federal income tax. Funny we never heard about the tax benefit that middle class families received from the Bush administration, until it was no longer necessary to make class warfare the cornerstone of the re-election platform and message.
It’s also funny how they make such a huge deal about the extra cost in taxes to the “average family” if these cuts expire then say relatively little about not extending the Social Security Tax cut, which is doing the same thing these bleeding hearts keep whining about.
Due to the Bush tax cuts, federal revenues are down from an historical average of 18% of GDP since WWII to below 15% of GDP. There was no decrease in government spending under Bush, in fact, government spending increased (and discretionary spending has grown very little since). Recall Bush did not see fit to include any of the costs of 2 wars in his budgets, effectively saying money spent on wars doesn’t count. The US Government has been living on credit cards since the Bush tax cuts. My taxes are too low, your taxes are too low and so are the taxes of anyone earning over $100k per year. Basically people bought the “feel-good” policy that lowering taxes would make everything all better. It is time the US people went back to work and funded the government they expect. In an odd way, one of the favorite whipping boys in all of this is Social Security. But, it is one of the few programs that is actually well-funded for over 10 years (it presently has a surplus of $2.5 trillion) and modest tweaks to it would make that fiscally sound position solid for decades.
Forget that higher taxes are de-motivational. While this is true, the person earning that extra money is not paying 100%, therefore, if they earn more, they DO indeed earn more.
The REAL issue with this is that the extra $300,000 that the government gets, goes to raise the wages of congress and pay for debts incurred that NO ONE in this country would every knowingly agreed to. AND, that extra $300,000= SIX $50,000 a year salaries that this person could provide. Yet the government THINKS they can somehow spend his money better. Even if he keeps $200,000 and only re-invests $100,000 in workers salaries or raises, he has still done more good than the bureaucracy could ever do with the same amount of money. And that $200,000 he “keeps” is loaned out by banks, in need of capital, to people who will start new businesses and pay wages and salaries and taxes that may net the good ol’ government more money over the years.
Enough with defending the rich. I’m not here to saint them, but there is an argument to be made for keeping taxes where they make the most sense. If the government hadn’t overspent and grown as it did, we wouldn’t NEED to raise taxes, and the money that was collected would be more effectively spent.
Even before this new tax rate upper income earners ( those making 250-500k a year) were already getting the shaft. Alternative Minimum Tax limited write offs and the income was true income and not capital gains. My wife and I are upper mid management for good companies in California, we own a 2500 soft house and drive entry level luxury cars. We adequately fund our retirement accounts but do not feel rich or have a lot of cash left over every month. Our effective tax rate was almost 40%. Ca state taxes are high and we both max out our SS. Had the 250k level been passed we would have been near 50%. We are punished for being married and reasonably successful. What a lot of people don’t understand is there were TONS of deductions when the mid century rates were so high. The rich still paid less than everyone else, just like today.
It is wage earners, including high wage earners who pay most of the taxes. The Super Rich, like Romney don’t get wages, they get investment income and Capital Gains, which are taxed at very low rates. If we treated all income the same it would make sense that those of us who EARN more pay a higher rate, but letting the non-working rich get away with low rates is just legalized tax evasion and theft. Knowing that they aren’t bearing their fair share means my rate is being pushed higher to subsidize them.
Truth is voting to tax these high income individuals and companies will cost everyone that actually earns their own money. Companies will raise prices and cut expenses… Including salary cost, product cost, etc . They will pass the buck to you and I. I personally do not believe a married couple at an income of 450k deserves this either. Most high earners have paid education costs and spent 100s of hours bettering their education. It’s the lower end of the sale that will lose the incentive to work so hard only to be taxed beyond belief. They will cut their earnings just enough to make out better at tax time.
Here we go. My husband and I are 61…we are physicians, board certified and re-certified with excellent credentials and reputations. We cannot be replaced. We spent our thirties paying medical school loans, taking call, working 80 hour weeks and investing in our practices. Our 40 were spent saving for college and post grad expenses. Though our 3 children excelled academically we refused merit scholarships as we felt all scholarship money should go to the needy. Our 50’s were spent paying enormous costs for our parents uncovered health care. (We could not stand to see them in Medicaid nursing homes as their longevity long ago depleted their savings.) Our 60’s will be spent saving, finally, for retirement. We are in the 400k plus category. We will be paying 4.5% state income tax, .5% city, probably an effective rate of 33% federal, 12.6% MC tax and surtax of ? We have lived well but not extravagantly and paid fully for our educations and that of our children. I do not mind paying taxes, but I balance my budget at home and I expect the same of Washington. I do not feel guilty or ashamed of our income and with “feet on the floor” at 530 every morning we are not earning our income from capital gains or other tax preferences shenanigans. Just tell me when it will end…when will it be enough? When can our government have the same values and work ethic we do? We need jobs and disincentivising me is not a way to get to that end. The entitlements math just do not work….We need to increase the retirement and MC age commensurate with the increased life expectancy or there will be shortfalls. And the baby boomer docs and lawyers with stories like ours are not going to be there ( or be enough) to bail out REALLY bad math
You make an excellent case — people like you who work for their income pay much higher taxes than the actual rich with the same gross income, who pay max 15% on capital gains. The MC tax was originally intended to tax people who lived on tax-exempt investments. It should be fixed.
If you lived in a socialist country, you would pay higher tax rates, but wouldn’t have tuition costs for your children or medical costs for your parents. You didn’t mention your own student loans — I believe they are normally massive for people like you and your husband.
I was able to work well into my 70’s. You may choose to do this, also, hopefully with reduced hours. But a person who does manual labor would not be able to do this. Increasing the SS retirement age is not a cure-all.
Personally, I think all these disenchanted fellows should emigrate to Australia, where they can have the joys of freedom and liberty in the land of no taxes. Or so some would claim. LOL.
http://www.ato.gov.au/content/12333.htm
Funny how the developed country with the lowest actual rates for the wealthy gets all this abuse. And yes, that’s the USA.
Here’s what most bothers me. Say I make 500 grand a year (approximately correct) and say I give, as I do, 1/2 to charitable donations to real places that need money and say I give another 50,000 to people I know are in poverty –these are certainly not organized 501c charities, then if the govt disbands charitable deductions because some of the really rich use them as tax dodges, how will the charities or organizations hold up? That said,
I have no idea how much 500,000 means re: 2013 taxes. But do away with the charitable donations and you are screwing those most in need. Explain if anyone is still here.
Although donations may decrease, it’s uncertain as to how much. I also give much to charity and claim the deduction. However, I do this because it makes me feel good to help my neighbor. I won’t change anything since deductions are not primary to my giving. How about you?
You have to love the mindset of the author “Thankfully, even though individuals in this bracket are few and far between.” So the fewer high income individuals we have in the USA the better? What kind of perverted logic is that?
I am more than happy to pay my tax’s, never said I wasn’t. But reasonable tax’s
There are a lot of provocative posts on this article (and some that made me real sad when I read them) but one thing seems unanimous among nearly all posters – namely a huge distrust in the US Government´s ability to be responsible with tax revenue. It seems logical that if you don´t trust the government, then you would want to keep taxes as low as possible, or probably not pay them at all. If someone really believes that government is out of control with no regard for its people, is there any tax amount that is reasonable?
This is not a conversation about if any of these positions, or a person is worth what they earn, or if they work to little or to hard, or to many hours for it. Its about our Gov. taking what is not theirs to take. Its about us getting to keep the lions share of what we earn. Its about that WE are entitled to it and our Gov. is NOT. I don’t mind paying reasonable tax’s. but we have a Gov. out of control, and a Gov. that has NO regard for its people.
You don’t get it Stella. You see WE are the government. WE elect representatives to determine collective solutions to problems. WE hold them accountable when they screw up and elect others. It’s called a democratic republican form of government and enshrined in our constitution.
Our elected representatives must decide the fairness of the tax code. Hopefully they won’t be influenced by the self interest of corporation and wealthy individual campaign contributors over the rest of us when making those determinations. It’s not perfect, but it’s better than all other forms of government.
The government is “WE” and we deserve what we determine to tax ourselves. The legislature is gridlocked over partisan issues, but our government is far from being, “out of control”. That’s simply code for, “I don’t want to pay taxes, but they make me.”
Our Gov. is not more entitled to our income than we are, that is the bottom line!
Even Jesus told his followers to pay their taxes, even though the government the taxes went to was made up of tyrannical foreign occupiers (the Romans).
Here’s the deal, Stella, you can be exempt from taxes if you agree not to drive on any roads, to buy only uninspected food, to not set foot in a park, to jump up and say “I surrender” if (God forbid) this country is ever invaded, to mail back your Social Security check when you qualify, to be responsible for the income and health care of your elderly relatives, not to call the police or fire department, and not to file a patent should you happen to invent something.
That’s just a small sample.
We have NO right to take the money that is theirs, the same is true of us. It is the Gov. job to be accountable to us for what they do with OUR money, not just keep taxing us, taxing everyone and spending as they please.
really do you think the president of mercy hospital in janesville wisconsin deserves to earn $3 million a year
If Europe tax 70% for those who make $400,000 a year they should. Anyone who make that kind of salary should not complain. Can you imagine those donot make this a year and is struggling to pay their bills.
Really, these whiners who CHOOSE to work 60 or 70 hours a week (mostly shuffling papers and bossing people around) think they’re so much better than the people who HAVE TO work 60 or 70 hours a week (doing backbreaking, boring, or unpleasant jobs) to bring their incomes UP to $20,000 year.
Only a few people are speaking out for those who were not fortunate to make large amounts of money. There are those who think that anyone can make $400K if they tried. I disagrees with this. Because of life circumstances, many people did not have the opportunity to go college, or obtain a high paying job. Do you think if anyone was given the opportunity to make $400K plus per year would turn the opportunity down?
There are those who think that income from interest should not be taxed a maximum rate of %20. Income is income, no matter if you received it from money already earned or you worked a very hard job for it. Why should Mitt Romney be allowed to pay less than 14 percent on $20 million and the average hard working middle class pays more? Actually interest income should be taxed at the same rate as income made by those who have a job. worked for it.
That post is muddled, but mainly, it seethes with peevishness. You are better off than the vast majority of people in this country, and yet you’re whining about how rough you have it. My late mother would have called that “poor mouthing,” and it was not a complimentary word.
Apparently the new cry of the affluent suburbanite is, “Don’t tax me or I’ll stop working.”
Great news! Millions would love to have your job.
Bad news. Millions can’t do my job. Read Atlas Shrugged. The people who you paraphrase “Don’t tax me or I’ll stop working” will bring the economy to it’s knees if they stop working. We add value to the economy, we produce, we innovate, and we create jobs.
If a person adds value to a company making $400,000 should not mind being taxed a certain percentage. And if threatening to stop working as a temper tantrum. I’m sure they can be replaced with someone who would cooperate with the government.
Stick your hand in a bucket of water and then pull it out. Notice and difference? Others will notice the same difference when you quit working.
I was a “Fountainhead” and “Atlas Shrugged” fan in college many years ago. Then I got a real job, got married, had kids, and grew up. Although talent has much to do with success, being in the right place at the right time (aka: luck) is most important. You too must be aware of the many talented people who fail to succeed so wall as many less talented.
Howard Roark is a myth.
The naive Howard Roark might be, but the pragmatic John Galt is not! It is happening as we speak as our non strategic immigration policy drives the best and brightest coming out of our universities back to their native lands, and American winners move themselves and their families overseas.
Who’s John Galt? He’s a myth too. However, I agree about the foreign students and studies verify their exodus resulting from our immigration policy. Do you have any stats or studies on “American winners” leaving because of taxation? Although guys like Templeton are well know, although few and far between because they’re very high profile, I know of no major expatriation movement.
> Although talent has much to do with success, being in the right place at the right time (aka: luck) is most important
A well-known business magazine ran an article about 2 decades ago in which the guy who was the CEO of the company admitted that was the case for him.
A higher income tax on higher earners is not going to solve anything long term and this country is already overtaxed as it is if people would just take the time to realize it. With unemployment as bad as it is you just know more and more people are making ends meet by entering the underground economy, and if you want to see where that will lead, just look at Greece and Italy, both with about 30 to 40% of all economic activity occuring under the table (compared to about 7 to 8% here in America).
It is not just tax on income, although that is a big one. I’m self employed and 2012 was a good year. My wife works and we both are post master degree professionals. As of April, and after I hit the SS maximum, 45.9% of every additional gross dollar I earned went to Medicare, state or federal income tax. Before anyone writes about “marginal” tax rates, I literally mean that every gross dollar earned by my company after April went to employment or income tax – 2.9% for Medicare, 5% for state income tax, and 38% for federal taxes. We have no debt and have a very comfortable, but by no means lavish, lifestyle. We have three kids in college or post graduate school, and are probably somewhere in the top 5 to 10% of the population in terms of net worth. But having to pay that amount in employment related or income tax disencentivized me from earning more in 2012, and going forward, I have no intention of continuing to work hard. There is no reason to as we have enough, and we are sick of supporting wasteful governments (the multiple layers of government and taxing bodies are ridiculous and highly inefficient), and not earning more is our way of voting the only way that matters. They can’t tax what you don’t make, and we are about to engage in our own version of “dropping out” by retiring early in our late 50’s and taking advantage of what good health we have left. We should have enough to remain comfortable, see no need to spoil our kids beyond a debt free college education and a used car, and should things get ugly in America, we are both comfortable with the idea of becoming ex-pats and watching the meltdown and the three ring circus that passes for politics and leadership from afar.
But employment related taxes are only part of the picture, and it is those other taxes that are painful to many people who are not as fortunate. I track spending and all forms of tax imposed on us, even though with things like liquor, gasoline, and a few other purchases there is almost a concerted effort to offuscate what the total taxes really are. Counting things like utility taxes, fire protection fees on our water bill, fees in your phone bill to subsidize other’s with telephone service, tolls, vehicle license fees, sales taxes, real estate taxes, and the myriad of government imposed fees (many for essentially nothing in return – our past governor invented some 300 plus new fees as part of his promise not to raise taxes before going off to jail for trying to sell a Senate seat), out of every gross dollar earned throughout the year for all of 2012, 39.4 cents went to pay one form of tax or another. Real estate taxes on our residence is just shy of $12,000 – up from 4,500 just 18 years ago – and the tax keeps going up with less and less services in return. When property taxes are added to other non-employment or income related taxes, we spent just over $25,000 in non-income/non-employment taxes in 2012.
On an AGI of about 183K in 2010, 42.7% of everything earned was spent on one or another form of tax. On an AGI of about 135K in 2011, over 32% went to pay taxes, and on an AGI of about 685K for 2012, 39.4% plus went to pay taxes. I am not a supporter of the tea party, and I view their politics as outright stupid, but the fact is that America is over taxed, and much of what tax revenue is spent on is wasted, and in the case of things like our massive defense spending, much of that spending is outright frivolous. America is already overtaxed, and it is overspending, and there is an alarming growth in the divide between the haves and have nots, and opportunities to be successful in America are quickly eroding. Our children will not be as successful as we have been, and the generation after that had better hope that this current crop of leaders doesn’t spend the country, and their future, into oblivion, or that corporations export many more of the remaining jobs overseas in search of greater profits, at the expense of an consumer economy on the brink, about to run out of consumers.
Much of what you say is honest and has value, but “too big” and “too little” are simply relative terms. An elephant is “big” compared to a mouse, but “little” compared to blue whale. So, is an elephant big or little?
Likewise, you must make comparisons when you claim to pay too much in taxes. Compared to whom or what do you pay too much? Or is this another, “I don’t like paying taxes” thing that most of humanity feels. How much do you think you should pay compared to what?
I’m actually old enough to remember the 1950s, and I grew up in a factory town, so most of my classmates were the children of factory workers. Their parents all owned a house and a car, and the families went on vacations. Many of my classmates went to college.
Furthermore, the grandchildren of the founder of one of the factories attended public school and invited everyone in their class to their birthday parties. My father was a minister, and he heard form his parishioners that the family who owned the factory didn’t want their kids to think they were better than anyone else.
The 1950s had its disadvantages, but from an economic point of view, American workers never had it so good.
Yes. We need to study the 50s and 60s, and learn from them. I remember my father and my future father-in-law and their friends talking about investing in local businesses and all the things they did to shelter their money from additional taxes – and how proud they were that their taxable rate was a steady 20% of gross every year. After they invested, and sheltered their income. And how proud they were of what this nation, all the way down to the village level, accomplished with the tax revenues. We could do that again.
Study history. We have been great, and we have been greedy. We can be great again – but only if we stop being greedy.
The greatest period of economic growth in our country’s history was during the Eisenhower years, when the top marginal tax bracket was 90% That’s right, NINETY PERCENT. Corporate taxes were a flat 50%. The wealthy seemed to do just fine, and a strong, blue-collar middle class had plenty of disposable income to support manufacture and retail — thereby growing the economy and providing a motivation for the rich to invest in jobs, rather than stash their money in foreign tax shelters.
Remember that number: NINETY PERCENT.
Robertx You miss a critical point, the same point that escapes most Americans on the Fiscal Cliff showdown: It doesn’t matter that the top tax rate is for the truly wealthy. they still have their government welfare, lobbyist created tax loopholes as an escape hatch from whatever tax rate you want to impose.
No one PAID 90% in the Eisenhower era. We all listened to Obama rail on ad nauseum in his Class Warfare “Tax the Rich They Caused the Deficit They are the Devil Incarnate” re election campaign. Warren Buffet must be laughing. He knows that he, Romney, and Obama will keep their loopholes while the Little People, professional couples working 70 hour weeks, will pay 43.6% including the new Obamacare taxes. Barbara Streisand, Tom Hanks, and Bruce Springsteen will still pay lower rates than their publicists, they will still fly around in tax deductible Lears, flashing tax deductible plastic surgery smiles at their tax deductible entourages en route to their tax deductible Caribbean hideaways.
>No one PAID 90% in the Eisenhower era
REALLY?!? Where’s the proof?
The small business people who file as individuals are the REALLY small businesses, not the rich, and even they can take deductions on their Schedule C that are not available to people who are employed by others.
I’m self-employed myself, and most of the self-employed people in my field who make $100,000 or more are incorporated so that they can pay corporate taxes, which are significantly lower and offer even more breaks.
Anyone who makes $400,000 a year through self-employment and isn’t incorporated is an idiot.
Business owners have write offs that lessen their taxable income. Not everything coming into the register is theirs to keep and the gov’t to tax. It’s a dance. Liabilities and business expenses & losses offset the income. A successful business has advisers, lawyers, and accountants on staff to assists the business owner with managing their tax burdens.
I know of one small business owner who uses a portion of her home exclusively for the business. A portion of her mortgage payment, utilities and even the coffee maker and the TV in the reception area are written off as business expenses. The accountant that does her taxes is also a written off expense. It’s all legal.
I always found this odd, but the it appears the gov’t wants small businesses to succeed and this is on way to lessen the tax blow.
Yes, when I transitioned from being an employee to an independent contractor, I was surprised at what I could write off as business expenses, including my home office, everything that I bought new for it, and even the percentage of my utility bills that presumably goes toward lighting and heating that room.
Furthermore, when I inherited a brokerage account, dumped some clients who were more trouble than they were worth, and lived about 25% off the proceeds of the account, I was again surprised to find that my income tax actually went DOWN due to the lower rates charged to capital gains and the proceeds from tax-free municipal bonds, even though my disposable income was larger.
I think that people who have only worked for others have no idea of all the goodies available to the self-employed or the independently wealthy.
Small businessmen typically file as individuals and will get battered by this tax; many people will lose their jobs and many more will never be hired. But boy “we” stuck it to “The Evil Rich” — right?
The only employees who may lose a job when individual income taxes increase, may be domestic help. The bottom line of any business would never be affected. However, I can’t see any of these people letting the maid, nanny, cleaning lady, or gardener go, so I don’t think many jobs will ever be lost and the greatest burden will fall on illegal immigrants who fill such positions.
Stop falsely claiming that unemployment will increase because small business owners will lay off employees. That’s nonsense, just as there was no employment increase when Bush cut taxes. Just suck it up and lower your investments in emerging markets to maintain you living standard. Invest in America instead.
I think everyone is missing the main point, that is that the richer you get the greedier you get. There REALLY is no reason for an individual to make so much money. They are not geniuses. In reality as some previous posters wrote it’s either abusing their employees or rather in my opinion being in the right place at the right time. Since when should a plastic surgeon in Brazil make 2x as much as a transplant surgeon? In these cases the only factor is greed, nothing more. They would work an extra 20 hours to make $20.
In the Soviet era nuclear physicists, doctors and the guys who made major contributions etc, that matched the USA may have had a few extra luxuries but all in all they made a pittance, just like the rest of the people. The important people do it for the love of it, like the doctor I knew who would still come around the hospital for free. The rich are either rich because of a fluke or ripping of the public or workers. Tax them all to reality, maybe if they quit a whole bunch of new doctors will come and maybe reduce their fee schedule. Or WOW, Apple has made such contributions that Jobs was worth every penny. B.S. he was a lair and thief from the start, and all he did was put a few common components and make them a cult. That’s why Apple is worth more than Exxon. It’s so funny and pathetic I don’t know whether to laugh or cry.
I’m not as much of an egalitarian fundamentalist as you are, but you have a point. Beyond a certain level, money is just a way of keeping score. People lose all their perspective.
I would bet that a lot of the people who are rallying to support the poor, put-upon rich people make closer to $40,000 a year than $400,000.
The corporate media have really done a number on the American people, making them worship the super-rich and despise the poor, with whom they actually have more in common.
Why are you living in the US when you think this way? You would be much happier in Europe. They don’ work anywhere near as hard as Americans do.
I would absolutely love to live in Europe. My relatives over there seem very happy. They visit the U.S. and enjoy the scenery and some of the cities, but they have no desire to live here. They’d have to sacrifice their vacation time, their health care, their free university tuition, and their generous old-age pensions. They pay high taxes, but they feel that they get a lot, and they certainly don’t seem to be hurting for money.
However, it is nearly impossible for Americans to move permanently to Europe, especially if they’re my age, unless they have a specific job offer, millions to invest, or a European spouse. I could kick myself across the Atlantic for not having taken the job offer I had when I was in my thirties.
Tax Update: As part of its 2012 budget, the U.K. government announced an income tax rate cut to 45% from 50% for individuals earning more than £150,000 annually, effective April 6, 2013. HM Revenue and Customs (HMRC) studies have shown in the first year of the increase to a 50% income tax rate, tax revenues fell by £7 billion while the number of individuals claiming income of £1,000,000 or more fell by 50%.
Tax revenues fell in the UK because they have high unemployment, caused partly by their Conservative Party government laying off masses of government employees, who in turn spend less on clothing, groceries, entertainment, and other adjustable expenses, which is hard on the business community, since it means less income for them. So some guy who made a million running a popular restaurant will find that oops, all of a sudden he doesn’t have so many customers. The formerly highly paid actor will find that the movie and TV studios aren’t as eager to greenlight as many projects as before.
Tax revenues ALWAYS fall when there’s high unemployment, and Conservatives love it that way, as they will admit when you can get them alone and ask pointed questions.
Clearly, the only answer is for a masked mad man and his band of mercenaries (lets call them the League of Shadows) to hijack a nuclear fusion reactor, then kidnap a nuclear physicist to change that reactor into a nuclear bomb. Then and only then would he be able to give a trigger to a citizen, unleash a mob, implement marshall law and give control of the country back to you…the people.
If your work is such a benefit to society (although I doubt that “benefit to society” would be a consideration for an Ayn Rand fan) , then someone else will step in to do it.
Meanwhile, enjoy your retirement–but think of the 50% of Americans who have worked hard all their lives and never made it past $50,000.
So what? My parents never made more than $10,000 a year, either of them, yet they sent two daughters to university and always owned the homes we lived in, which they fixed up and then sold for a profit. My parents worked hard for what they got, and they never resented the fact that other people worked hard and got more. They were happy to have 5 daughters who were healthy and hard working and never broke the law (except for exceeding the speed limit, which Daddy approved of), and felt that their lives were well spent. We were taught to be thankful and keep our hands off things that did not belong to us.
I don’t resent people who actually work hard to make their money (although the idea that someone who makes $1 million a year works 10,000 times harder than someone who makes $10,000 a year is just ridiculous), but so many of yesterday’s moderately rich people became billionaires not by creating products or services that people might need or enjoy but by making up tricky financial games that rob the rest of us.
Or take the Walton family. Sam Walton (even though he was bankrolled by his father-in-law) was a marketing genius, brought better shopping opportunities to small towns, and prided himself on buying American. His descendants are all multi-billionaires, so what do they do? They pay their employees so little that the employees have to be on food stamps and Medicaid and forced their suppliers to keep lowering prices until the suppliers couldn’t stay in business any longer, whereupon they started outsourcing to slave-like factories in the Third World. What’s admirable about keeping your employees poor and driving American factory owners out of business (and hiring illegal immigrants in many cases) when your net worth is already 500,000 times the median U.S. income? Couldn’t the Walton family let up a bit on their more-more-more-for-us crusade and compensate their employees (who do the actual work of the company) better? (Yes, I know they donate to charity, but does it really balance out the damage they have done?)
No. It doesn’t.
The majority of people making 500k – 1 million didn’t get there by firing people or outsourcing jobs. Many got there through hard work, talent, and intelligence.
Someone making 1 million dollars might not “work 10000x harder than some one making 10000k a year”, but they also don’t make 10000x more either (just pointing out your math). The majority of them do work longer hours and have the intelligence and talent to do things that are valued and difficult.
A highly skilled and trained surgeon making 1 million dollars a year deserves more money than a bricklayer making 50 thousand a year.
Deal with it. Life isn’t fair. Some people are smarter and more talented.
> The majority of them do work longer hours and have the intelligence and talent to do things that are valued and difficult.
Well, if they are working more than 40 hours a week, then they are an idiot. Ask them if they ever heard of circadian rhythms.
Now, if we compare CEO pay we find that American CEO’s make ab’t $3.5 million while their Japanese counterparts make $580,000–reported in Business Week. Now are you trying tell us that the American CEO’s are such hard-working, intellectual wonders that they deserve to be paid 6 times as much as the Japanese CEO?
yeah, life isn’t fair, but that’s not really the question. The question is what should we do about it? Hey, I’m in the top 10%, as long as I stay employed I’m golden. But do I want the guy who didn’t have smart, industrious parents not able to find a decent job? Not really, a permanent underclass is a revolt waiting to happen. The point of government is that it lends structure to society, and the discussion needs to be about the form of that structure. I think abandoning everyone with an IQ under 90 is both intellectually stupid, and morally wrong. I’m ok making a little less if it means we can structure our society so everyone can make a little money, like industrial workers of the 1960s. However, the wealthiest among us have rigged the game so they get richer, and it’s happening in the face of globalization trends that are pulling the rug out from under the middle class. I want to ditch both parties and find someone out there who is talking sense, because all I hear from politicians are inanities that don’t address the issues. Of course, I will say, that Republicans of late have just gone loco. I left the party and went Independent.
Excellent post BarnOwl! Thanks!
Excellent post pdx!
Save your breath, Kate. Trolls and resentful ne’er do wells like Harry and pdxtran aren’t worth it.
I am around the borderline of the 1%. I have been a saver all my life and now have a nice portfolio of investment property, stocks, and bonds, while my peers spent theirs on million dollar homes and new luxury cars every 2 years. Because of the upcoming rate increase, I converted a large chunk of my IRA to Roth last year. In order to do that and stay below a marginal income tax rate increase, I took a few months off in 2012.
My work is a benefit to society, but if you raise rates much more, I will spend all day in my pajamas waiting for the rent, dividend, and interest checks to appear in my mailbox. I can work or not work as I wish, and marginal tax rates are a significant influence on my decision.
If my tax dollars would be spent to reduce our national debt, I would think differently, but when I think of how hard I worked to get where I am, and how much of my money is going to sponsor indolence, it is a powerful disincentive to work.
Who is John Galt?
That’s another silly argument. Please go John Galt. That leaves another opening for someone else to step in and supply similar work and enrich themselves. I don’t think it hurts the nation at all if you choose to do that. Additionally, this whole idea that government is inefficient compared to business is a canard. The two are doing different things. In cases where govt has to compete with business they do fine. The Post Office and Medicare are just as efficient as anyone else, the difference being the extra demands placed on the Post Office that no private business has to manage, and Medicare is frankly just more efficient and suffers less fraud per covered client than private insurance, the figures are readily available. Not that there isn’t waste in the gov’t, and yes there is a fair argument that the Postal Service is losing relevance, but I’ve seen plenty of mismanaged businesses that survive and get by despite all sorts of holes in their business models.
John Galt is the proverbial red herring. He’s a myth. Lounging around in your pajamas while clipping coupons makes you the poster boy for what’s wrong with the tax system. When hard working Americans find out that such indolence rewards the wealthy by taxing them less that those who actually labor, lower rates for capital gains and dividends will be history.
Why do we work when the government takes a large percent?
Because we like our work. And our taxes go to our country to keep it running. You have no gratitude for all the goodness in your life?
I just turned 40. I make about 500K but live in NYC. I’ve got a million saved and pay outrageous rent. I have no incentive to work more and make more money.
I’ll work 10 more years and will move to FL or TX to avoid high taxes. Btw, I am not considered wealthy even if the president and most of the country believes I am. I worked very hard the last 15 years to get to this level and will not be penalized because I have more than others. I pay the highest taxes in the country and I’ll likely never receive Social Security. I also know of several people just like myself who are leaving NY because of the taxes and refuse to work hard anymore to support a crumbling and irresponsible government.
Cloe…..great reply
JW……. which is where you choose to live. If you lived were rents were reasonable you would certainly make a lot less. Only in America will you hear somebody complain for being 40 years old making 500,000 dollars a year having 1,000,000 dollars in the bank and is looking forward to retiring at age 50. Talk about people and their entitlements…….
Harry don’t look now but your Sour Grapes are showing. Yes, JW makes more money than you. A lot of people make more money than you- get over it. I don’t blame JW one bit. 500k is not that much in New York or San Francisco, which is the reason Schumer and Pelosi initially resisted Obama’s portrayal of $250k as “rich.” “Talk about people and their entitlements”? Working for $500 k / year is an “entitlement” in your world? JW has also been hit by the new taxes to fund the voracious monster Obamacare that just went into effect Jan 1. SS And Medicare will just be more forms of welfare by the time he retires. He wont get that after paying in most of his life, so he will be
completely dependent on what he can bank. Texas will welcome you JW, when you are ready to get away from insane housing costs, high taxes and cold weather. Just hope we can find a way to deal with our rapidly dwindling water supply to handle all our new neighbors. It’s going to be a challenge.
Yeah, the latest right-wing talking point is that “$500k isn’t that much in New York or San Francisco.”
Riiiight. Because all the people who staff the daycare centers and clean the offices and wait on tables and ring up groceries in NY or SF are making $500k a year…
Somewhere in this country a man was arrested after he walked into a store and told the owner after he worked hard all day, every day for the rest of his life. He must fork over 35% of all sales, or be dealt with. The charge was extortion. Sound familiar? As a whole and not just one squeaky wheel. We need to say no more.
But Robert, there are more of us who are okay with this. There are many (most) of us who are happy paying out taxes, happy having good roads and bridges, schools, police, (the list goes on and on) including taking care of the less fortunate, infirm, elderly, handicapped. If you feel restricted by taxes, then in my opinion, you either have chosen a career that doesn’t pay well enough to sustain the lifestyle to live, or are just one of “those people” who just sit around and complain and feels as if somehow you’re “entitled” to these basic rights without having to share in the burden of paying for them.
Harry-
If you want to pay higher taxes just pay them. No one is stopping you.
My husband and I paid off our college and law school loans, worked long hours at relatively low pay, and just finished paying for the education of our 3 children. Now, for the first time, we are not strapped and would like to build a retirement fund. We are both 60.
I wouldn’t mind paying more in taxes if the government spent it wisely and frugally, but, sadly, way too much is wasted on pork and poorly considered programs. So I’d like to hang on to my earnings!!
There is a lot of waste in government, mostly unnecessary wars and weapon systems and corporate welfare, including Bush’s Medicare Part D, which actually FORBIDS the government to negotiate lower drug prices.
However, there’s a tendency for people to throw the baby out with the bathwater. A lot of federal spending benefits you in little-known ways, whether you realize it or not.
Don’t talk down to me, pdxtran.
I am aware of the ways in which government spending benefits me. I am also aware of the waste inherent in anything the government does.
The government is the last entity I’d trust to spend money well.
You trust the business community?
Yikes.
pdxtran-
I trust a business MUCH more than the government.
I can see why you’d trust the government–you are an idiot.
Well Harry, I respect your opinion. However presumptuous it may be. If I did not earn enough then It is possible I would not have commented. With that said in my opinion. It is not ok to run a business as I do, to have someone take my hard earned money under the guise of all those things you mentioned. When you and I know damn well a great portion of my taxes and yours goes to other countries and the privately owned federal reserve. Furthermore, I served this country proudly, and I pay taxes so I do my part. This gives me the right to call it like “I” see it contrary to your opinion. All I say Harry is stand for something and you’ll feel better about yourself.
The problem Harry is that the US is now a welfare state, with entitlement spending increasing by 75% over the last 12 years, half the country receiving government checks every month. We are running up massive 16.4 trillion deficits, adding another trillion every year, adding new behemoth Obamacare entitlements, making fools of our mathematically challenged selves in front of the world with drop in the bucket tax hikes, with the revenue being spent 4 times in the same bill and again in the next couple of weeks for hurricane relief, ALL because we simply have not yet arrived at the point where we are forced to acknowledge the inevitable: Taxes are going up, WAY UP on EVERYONE, all the way down to 60k, and even then we will have to do serious entitlement reform. Democrats will whittle down the definition of “rich” over the next 10 years, blaming the GOP with each tax hike, and the American people have dumbed down to the point where they will swallow Democrat’s Orwellian Fairy Tale hook, line, and sinker.
Where do I begin? There are so many AM radio falsehoods in that post that it’s overwhelming, and not in a good way.
Some of the points made here echo mine. My husband and I are are 30/33 and IT consultants. We are on track to pull in over $500k this year but will likely stop working the last couple months of the year because then it’s just a wash with taxes. I’d rather take the time off!
Your taxes are only going up on the amount over $450,000. So you’re saying that you would rather take a couple months off rather than pay an additional 3.5% in taxes on the $50,000….. WOW
For IT consultants, they do appear to be arithmetic-challenged, don’t they, Henry? I wonder if they realize that they’ll still have to pay for housing, food, etc. even when they’re not working.
Harry and PDX, you did read the tax news, right? They’ll lose deductions, and regardless of the incremental effect, it’s still 40%+ on each of those dollars. Apparently you don’t know what that feels like, but thanks for making judgment calls on someone else’s money. Now go back to watching the Today Show so you can get your daily dose of propaganda.
Reb’s stop the wiening O made the temporary let me say it again temporty permenent for 98.5 percent of americans id call this a repub win….no?
This being a “blog”, helps me understand why the “blogger” does not really understand what he tried to state as fact. Not very researched. It is incorrect on many levels.
“Those individuals making $400,000 per year are in the top one percent of the top one percent — and often, they’re also public figures.”
-Not true. A salary of $506,000 is needed to be in the 1% as of 2011. It’s probably higher now. http://blogs.wsj.com/economics/2011/10/19/what-percent-are-you/
$400000 is just scraping into the 2%. Get your figures right. Also you’re leaving out small business owners, entrepreneurs, successful authors, professional athletes, celebrities, real estate agents in pricey areas and inventors.
400K a year is the top 1 percent roughly. It isn’t the top 1 percent of the top 1 percent.
I share this not because it clearly comes out one way or the other, but just because it’s a real world factual example of how the tax hikes work. Whether they’re a good idea depends on how much deficit impact they have and how significant the issues I note below are on a widespread basis.
I earn appx $2.5mm /year. I’m lucky that this is the case. My wife and I are saving to build a large house for about $8mm. We will save until we have enough to build. Once we build, we will employ a significant number of people for 18 months. Some part time (architect), some full time. $8mm pays a lot of salaries over 18 months. Before the tax hikes, we planned to build in 2 years. Now we plan to build in 3 years. So one year wait before $8mm of salaries start getting paid to people. Not an issue for us, but does illustrate an example of a large number of people who are going to have to wait a year for at least this piece of work.
The salaries will total maybe 10% of the 8 million. A much larger portion will go into the peoples pockets who will probably never set foot on your property, unless it’s for caviar and wine.
And the actual workers, will still get paid their normal salaries…..depending on where it is in the country, it could be anywhere from $15,000 a year to $60,000 a year (for the actual workers) Your argument is really dumb in my opinion.
At the same time, forty families buy houses in a tract averaging $200,000 each. That’s $8,000,000 that goes to the architect, carpenters, plumbers, electricians, etc. And, now, exactly why should you be treated more specially than any one of them? Every person who spends $1 in the American economy creates jobs. I’ll wager however, that those forty families spend much more in the American economy and less in “emerging markets” than you do.
look,
this approach of obamas is doomed on all fronts.
first it only generates 60 billion a year in revenue, to put that in perspective
even if liberals are too stubborn to admit its peanuts compared to the deficit, we just gave New jersy 90 billion in Hurricane Sandy relief alone.
And secondly Obama refuses to address the spending problem, he feels blaming it on someone else has got him this far, soooo why not I guess.
If you want blame for our ballooning deficits, blame the Republicans, who kept cutting taxes while raising military spending and corporate welfare and starting unnecessary wars. The “miracle of compound interest” is hitting us during the Obama administration. I will fault Obama for continuing Bush’s stupid wars, but anyone who thinks that we’ve got some lavish welfare state is simply misinformed.
Nobody complained about government spending during the Bush administration, especially not Dick “Deficits don’t matter” Cheney.
We all know Bush signed every spending bill that came across his desk. That’s when millions of fiscal “pocketbook” Republicans left the GOP. The AM radio and Faux News accusations are just an empty windmilling tactic used when a liberal is backed into a corner with no viable argument. Fiscal conservatism does NOT automatically say GOP. There used to be fiscally conservative Democrats called “Blue Dogs,” remember? They all got booted for voting for Obamacare.
“Centrist Uniter” Candidate Obama, 2008:
“The problem is, is that the way Bush has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents – #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic.”
Obama promised to “cut the deficit in half my first term.” Our debt has just hit $16.4 trillion. By the end of his second term, Obama will have more than DOUBLED Bush’s “unpatriotic” and “irresponsible” 9 trillion national debt he criticized as a candidate. Obama just signed a fiscal cliff deal, with NO spending cuts,hardly the “balanced approach” he promised, that ADDS 4 trillion over the next 10 years to our national debt, while allowing Warren Buffet et al to keep their tax loopholes. Obama ignored his own bipartisan deficit commission to achieve this political goal of increasing tax rates, pushing class warfare and marginalizing the good of the country to do so. Obama did get his political victory of forcing the GOP to raise taxes, all for a measly 60 billion in annual revenue. That won’t even pay a quarter of the 260+ billion in INTEREST on the national debt, much less touch the annual 1 trillion deficit he promised to cut in half by now. On the tax and spend liberal scale, Obama makes Bill Clinton look like Orrin Hatch. Obamacare has already doubled in cost to 2.6 trillion, and will double again 2020-2030, since Democrats will be unable to front load 10 years of tax hikes to pay for only 6 years benefits.
Obamacare is a Trojan Horse for single payer. I’ve bee in healthcare for 30 years, have read PPACA. Universal acceptance mandates with no cost controls are projected to run private premiums for a family of 4 up to $40K by 2022. We’ll all be forced in to government ACOs being formed now, and we will all eventually be rationed under Obama’s 15 member IPAB. All this means that, even with entitlement reforms, that there is NO mathematical way for the rich to pay for all this. Taxes will have to increase all the way down to 60K according to budget experts on CSpan last month. In 10 -15 years Democrats will have their Euro stye welfare state, complete with Single Payer Health Care. We’ll have a large LOWER middle class with a plexiglass ceiling over it due to the tax structure, and we’ll all take 2 hour lunches and all of August off, looking much more like Spain or Greece than Denmark due to different demographics. Older population, fastest growing demographic with 50% high school dropout rate. Republicans contributed by gluing themselves to the religious right, runaway spending under Bush, invading Iraq, allowing Big Pharma to write its own government welfare bill on K street. With the GOP weakened, Democrats are now free to escort the US down to Second Class Welfare State status.
WHY? Everyone is complaining that Obamacare is costing soo much. Why, I had a heart attack and when the bill came, I almost had another. I was charged 77.00 for a 4 foot piece of plastic tubing that I can buy at Home Depot for 3.57. WHY? The problem is not with health care, it’s the unregulated medical industries that take advantage of the sick and the insurance companies that set the rates that they will pay. Why does it cost 70.00 for 30 pills of Lipitor or it’s generics, the most prescribed medicine in America, when it costs less than 0.04. per pill It is because the Government is being taken advantage of by the pharmaceutical and insurance companies. That is why it costs so much. In my eyes, Socialism “would” be a better way to live. At least it would keep the corporations from the total raping of America and the American way. Our rights are being stripped so why not!
The government continually overestimates the revenue it will bring in through tax increases and consistently underestimates the cost of proposed programs, such as the Unaffordable Health Care Act. I am willing to bet my entire annual income (after taxes) that the government will not receive an increase of $600 billion due to higher rates on the wealthy, who will use every law at their disposal to delay or avoid paying higher taxes, including dividing their income up among relatives and various corporations, investing in companies that are losing money now, etc. The problem is not how much money the government is bringing in. That seems to increase every year. It’s the amount the government is spending. The feds are now borrowing more than 40 percent of every dollar they spend, and much of the money is being provided by foreign investors, such as the Chinese, who have been allowed by Democrats and Republicans both to take over a huge segment of our manufacturing segment. You’re probably reading this on a screen made in Asia and sitting on a chair made in Asia in a room illuminated by bulbs made in Asia and wearing shoes or clothing made in Asia, assuming you bothered to get dressed this morning before checking to see if your unemployment check came.
Most people fail to realize, that those higher taxes are graduated, and the rate is only 39.6% on the amount made OVER $400,000. Up to that point it is the same as everyone else.
I never saw the sense in taxing someone 70% of their income. It’s just too much.
While i agree that the wealthy should pay a bit more, 70% is waaaaaay over the top
Paul, you need to learn about marginal tax rates.
NOBODY pays $70 of their entire income, no matter what the right-wing media tell you.
First of all, $400,000 in annual income is NOT in the top 0.1% of earners in the US. The top 0.1% earn $1.67 Million dollars a year or more. Which means this article starts WAY off target with one of its premises.
Also, many of those earning $300,000 to $500,000 have just started earning at this level and have given up huge parts of their lives, to make their way through highly competitive and expensive education, training and professional development. They have forged into and through their 30’s, working for essentially a pittance, at high stress high performance positions, and often piling up debt to arrive at this earning level.
Many of them have had almost NO chance to save money during that time. When they start earning “real money”, at times much of their “taxable income” is not income at all, but money being invested to build a business or practice or buy into a business or practice. While firefighters, police and autoworkers and public employees have huge pension benefits building up and have, in essence, millions in net worth, in the form of their pension plans, many in the bottom of the “1%” “high earners” have NOTHING built up for retirement.
Many of these in the bottom part of the “1%”, are still working hard into their late 60’s and 70’s, if their health holds out, well after some “entitled” employees have retired with hefty benefits.
But these “$300,000 to $500,000 high earners are the “rich”, so “soak ’em”, no matter what their actual net worth is, right? Of course, the tax “reforms” proposed by the politically empowered in the US, don’t ever really hurt the top 0.1%, such as the hypocrites in Hollywood. Even $170,000 in additional annual taxes, now slated for someone making $1 million per year, leaves that person with several hundred thousand dollars a year in discretionary income, allowing them to continue build wealth year after year, to live luxuriously, invest and peddle influence. Their influence peddling, for instance, might get them into a group that obtains a government secured loan to support a politically friendly business that goes belly up. Somehow, the influence peddlers still manage to walk away with more millions while the “people” they “care” so much about are left holding the bag – for instance, people who had retirement plan investments in GM, or the non-union workers who were thrown under the bus with the GM bailout, or the average taxpayer.
Oh, and by the way, good luck actually getting $600 Billion dollars revenue over a decade, from this nonsense. If it even arrives, that is only $60 Billion dollars a year. How is that supposed to help solve the problem of a spending deficit that is $1.1 Trillion to $1.5 Trillion per year? And that deficit is on top of a $16 Trillion dollar current national debt, and a $100 Trillion dollar downstream liability tsunami. Pile that onto declining birth rates and population growth, and a growing elderly population. Mix it with a stale economy and class warfare guaranteed by the runaway tax and spend insanity and what do you get? – a socioeconomic Molotov cocktail. No one but a part of the top 0.1% will be able to get out of the way the mess that ensues.
If you believe in “soaking” the rich, soak the top 0.1% for real, with net worth as an adjusting factor. But don’t expect to get anywhere near the revenue that is projected, and don’t expect that revenue you get will solve any real problems until you STOP THE CORRUPTION, STOP THE INSANE SPENDING, STOP INCENTIVES FOR IRRESPONSIBILITY, and FIX THE ENTITLEMENT DISASTER, before these things bury us.
I completely agree with you. They need to target the astonishingly wealthy based on net worth not income. If you work your whole life building a business and lose money for 4 years then have 1 great year, you don’t deserve to get soaked. The tax system needs more analytics involved in determining who gets hammered but honestly the top .01% is a better target. Let people get to a couple million net worth before you beat them down like a dog. Go after the mega mega billion dollar net worth folks. Take 500 million form someone like that and they wouldn’t even know it was missing. Take 500k from a millionaire, well that’s a big impact.
Agreed. I’ll go another decimal point, along with the net worth adjustment.
Of course, the point is not to pick the pockets of the ultra “Rich” to redistribute their earned wealth. The point is just to have the ultra rich pay a somewhat higher fare, to kick in their fair share, for the First Class Ride they enjoy on our “engine of wealth”. That engine, namely, is a system of “Free” Markets and “Free” people, and property rights – protected by rule of law and by “the brave”.
It would be a relative pittance of extra revenue that would be collected from the 0.01% as a matter of “equity”, and the 0.01% must be kept at arm’s length from influence peddling in government. After that the REAL problems of out of control government spending, sovereign debt, entitlement philosophy and of expansive government will still be there. These problems must be solved.
And we don’t need to add to those problems a demagogic mantra that is destructive of our wealth engine, of “Free” markets and “Free” people. That demagogic mantra is the idea that the plumber’s daughter and carpenter’s son, the electronic assembler’s niece, those who took risks and used their brains and effort and sacrifice to move into the “1%”, are somehow now the “ENEMY”. That they should have sandbags tied over their shoulders, fetters tied around their ankles, and have their income “redistributed”.
This demagoguery ignores the fact that achieving individuals and families actually come and go out of the bottom half of the “1%”, in a life cycle. It ignores the fact that these individuals and families that go back and forth between the 1% and the 99% have little political influence but provide tremendous amounts of innovation and economic energy. This attitude goes against justice and “equity”. This attitude chokes an important part of the engine of wealth and progress, and thus seriously harms the prospects of the 99%, and of the 0.01%. Every economic history and statistic demonstrates this fact, but how do you convince the plumber, the carpenter, the electronics assembler and the 0.01%?
It depends on how you define ‘fair share’.
I think it means paying for what you use. Bill Gates does not use more public resources than the guy who makes $40,000. Or $100,000.
But his tax bill is equal to the taxes paid by about 1000 people making $100,000. (The guy making $40,000 will may only a tiny amount of federal taxes so there may not be enough of them to equal the Gates’ bill.)
You like Obama’s definition.
Why should anyone redistribute the wealth of another?
If you try to redistribute the wealth of the local gas station, you get arrested and will spend some time in jail.
I believe that you eat what you catch.
And I will redistribute my wealth as I want to. Personally, I have a number of favorite charities and contribute to them generously. I know who they are. I know what they do. I like their mission and their ethics.
Eventually they will get all my wealth. My decision. Not some political hack.
Totally agree. gtsa is just like the 47%, trying to pick richer people’s pockets. Bad form, and bad policy. Sounds like our current govt leaders.
I agree. Being responsible, working hard, investing in the future are all increasingly looked down upon today. People who got an education, built a good life and achieved success were once admired. Now they are reviled as cheaters who do not pay their “fair” share.
What effect will this have on young adults?
It’s a myth that all rich people worked hard. Sometimes they were just in the right place at the right time. A lot of them inherited their wealth.
Few things are as silly as rich people who are better off than 99% of their fellow Americans whining about how tough their lives are. If you think that life is tough on $500,000 a year, just think of the 50% of Americans who work REALLY hard at backbreaking jobs all their lives and never break through $50,000.
Nobody is disparaging those who get an education and achieve success. In case you haven’t noticed, young college graduates are having trouble finding jobs and people over 50 with good work records and supposedly “marketable” educational backgrounds are being laid off and discriminated against in hiring. Show a little respect for all the people who played by the rules and are getting shafted in today’s sick society, which worships millionaires and billionaires and ****s on the people who do the actual work.
Some of the whiny rich people really need to get out more.
That is simply an Occupier’s whine. I know plenty of people who are well off through hard work, or through having a skill that earns them big money (my nephew aged 23 for one, who writes software to save factories money on their heating, lighting and water — and retains the patents and collects royalties). In case you haven’t noticed, a college degree isn’t a GUARANTEE that you will instantly get a six figure salary and a corner office the day you graduate. One reason in the business I’m in why they aren’t hiring “young college graduates” is that they think they were hired to update their facebook page and twitter feed, and they simply don’t have the time to do the work for which they were actually hired. Our firm prefers to hire people with a work ethic.
Kate, I am 62 years old and have been self-employed for 19 years.
Good for your nephew if he’s getting rich writing software, but we’ll see if his clients decide that someone in India can do the same job for less money. Nobody’s job is safe now.
Despite my age, I think that your stereotype of young people is demeaning. You’re obviously looking at the wrong young people.
Sorry To burst your egalitarian bubble, PDX, not all, but the vast majority of rich people worked very, very hard, and/or were very, very smart, and/or took on very, very big risks to achieve the degree of financial success they have. It simply makes you feel much better if the story you tell yourself is that the rich are greedy, lazy, or “just lucky” people. That justifies supporting your government in confiscating their money, doesn’t it? Obama’s team used that psychology to get re elected. Demonize the rich. Distort the numbers to do it. Portray $250k (your local Walgreens Pharmacist and his CPA wife) as Greedy Corporate Jet Owners Who Stole Their Wealth from the Middle Class. Then you can feel Ok about taking their money.
We could hire thugs to roll the top 400 in this country, leave Buffet, Zuckerberg, Gates, et al naked in homeless shelters, confiscate their entire net WORTHS, and it would pay off less than a tenth of our
national debt.
Now I KNOW you have some connection with AM radio.
I know very few wealthy people who have not worked hard. The estate taxes in the US make it hard to pass along fortunes.
The turnover in the top 1% of earners is over 25% a year.
The turnover in the Forbes 400 is pretty high too.
I have dozens of wealthy friends and clients. Most of them earned their wealth by building businesses. And they are still the first in and the last out.
I work more than 70 hours a week. It is a rare day that I do not work at all. I actually cannot think of the last time that happened. A few years ago I had surgery and was talking to clients up until I went under anesthesia and then talked to my senior staff about business that evening. With laptops and cell phones this has become easier but it also means that the work day is extended.
The downside is that this greatly bothers my wife.
But in our circle it is not uncommon.
I do it because I love the work. I love my clients. I have an outstanding team that works hard because they know I do.
A lot of young people made bad choices and got degrees in fields with no jobs. Or that have historically not paid well. That is their problem. If they financed this education with loans they were really not thinking and the poor sap that loaned them the money was foolish.
The discrimination against older workers is unfair. And also stupid. I’ll take the experienced people any day. There is a lot of value in having been there before. In fact, in some areas, I’d never hire anyone under 35. I think you need at least 10 years of heavy involvement in any field to develop expertise. This applies to stock brokers, doctors and to contractors, carpenters and other skilled trades.
And I truly do not understand how the fact that some guy made millions or billions negatively impacts the young unemployed.
GTD, I will explain it to you.
There are many ways to become and stay in the top fraction of 1%. Some of them are fine: producing a product or service that large numbers of people need or enjoy is certainly ONE way to become rich. Being a popular show biz personality or author is another. Working 70 billable hours a week as a corporate attorney is another–although I don’t see the point of earning a lot of money if you spend all your time working only to die of a heart attack at 50. This kind of wealth acquisition actually does create jobs.
But other ways are morally questionable. One of them, unfortunately becoming more common, is to slash employee payrolls, make the remaining employees work twice as hard, and have your board of directors vote you–already very well compensated– a multi-million dollar bonus, i.e. enough to cover the wages and benefits of those employees you laid off. Another is to buy up a company and strip its assets after you lay off all or most of its employees. (This happened to the main industry in the town where I spent my teenage years.) Another is to dream up complex mathematical formulas for the finance industry that the law hasn’t caught up with yet, causing banks to come near collapse.
I have never said that ALL rich people are bad. That’s a stupid right-wing caricature. Money in itself is morally neutral. But if all you can think about is how to make more, then you’re on dangerous moral ground.
Let me respectfully correct you PDX. Most rich people do not work any harder than most others. Although not wealthy myself, I’ve had many friends and acquaintances who are. Yes, many do work hard, but so does the young mother of three who must work to make the mortgage payment, or the cop who puts in 30 hrs per week overtime so his kid can go to college. Most rich folk never work that hard.
I don’t know where someone got the idea that there’s a 25% annual turnover in the top one percent. That’s simply ridiculous. A few years ago, I saw a reasonable study that said only seven percent of the wealthiest one percent arrived there from below. That means that 93% didn’t have to work hard at all (though I’m sure some did regardless, just like most other Americans). The point here is that we are not so upwardly mobile in this country any more.
People have a general tendency to acquire more than they need and then plan to pass it on to their children. Eventually, if not checked by government, that evolves into aristocracy and negates meritocracy. If you reflect on the political agenda and tax consequences, you’ll discover that’s the direction we are taking. (Romney pays 13% while his secretary pays 25%) The wealthy contribute to political campaigns and hire lobbyists and PR firms to influence legislation that assures their kids will have more than yours, regardless of talent or merit. Only a lobbiest can coin the term “death tax” in an effort to make sure Junior gets as much as possible. Your kid gets to make up the deficit.
AGREE.
The article has many flaws.
The surgeons and specialists make a lot more than $400,000.
Top professionals in consulting, accounting, and law firms make well over $1,000,000 a year.
Thousands of brokers make 7-figure incomes.
And let’s not forget athletes, actors, and performers who make tens of millions.
or top CEO’s that make 100’s of millions!
Many NJ Police Chiefs, Fire Chiefs and Public School Administrators with working spouses will achieve these tax brackets. This does not include their free medical coverage and pension contributions or “unused” sick and personal days!!!
It will not increase by about $600 billion in new tax revenues. The rich and their auditors will come up with new ways to avoid paying taxes.
you are right. the wealthy will find ways to restructure in hopes of avoiding that hit. for godsake they are asking the top 5% to pay almost all the taxes. for how long is that sustainable? not very in my mind. at some point very soon i’ll downsize everything, move to one of my second homes and live off of tax free muni investments or dividends at a comfortable level. I’ve paid 20 life times worth of taxes but its never enough for this country
Sorry to say it, but the United States must stop being brother proficient in all wars around the world. U.S. can not afford it. Look at China and Russia, their economy is doing well and they are not inblande in some expensive protracted wars around the world.
It is not sustainable. And with 50% of workers paying no federal taxes that creates a disincentive to control spending. The actual number not paying is much higher since there the untaxed ‘cash and barter’ society is huge and growing.
The top 5% own or control 99% of all the money. Why shouldn’t they be responsible for 99% of the tax burden?
That was over 10 years anyway. The Democrats were asshats and cited things over a ten year period to convince people they actually made progress on something.
I am a lowish income Canadian and I have 25% deducted from each pay but I get a lot for that from the government.
When Mitt Romney’s tax returns were being analyzed on tv he had so many deductions that it reduced the amount of taxes he actually pays down to a very small amount. I would assume that other wealthy people know how to shelter their income to avoid having it all gobbled up by your Uncle Sam.
Your American taxes seem like a complicated affair.
Mitt’s income was nearly all capital gains which are taxed at 15% – now 20%. That is why his income tax rate was seemingly low. It wasn’t ordinary income.
He already paid tax on that money in prior years as ordinary income. Capital gains tax should be -0-
Well, no. He paid income tax when he earned the original money that he invested.
However, the invested money earned NEW income that hadn’t been taxes. Hence, capital gains.
Please explain to me difference between earning money with labor and earning money with money!
Labor is both socially redeeming and economically necessary to create a strong nation. Money, on the other hand, allows the holder to pick the fruit (money) from someone else’s labor. When fruit is collected, it begats more fruit ad infinitum, especially if not taxed much.
Those with the most fruit employ the National Fruit Council to advertise on TV to convince the laborers that fruit is healthy and therefore, all taxes on fruit should be cut. It worked. That’s why fruit vendors like Mitt Romney pay less in taxes than you.
$1.3 million dollars is a very small amount?
Yes, $1.3 million is a VERY small amount, if you are making a lot of money.
That is why we invented percentages. If I am paying 25% of my income as tax, I am paying MORE than someone who pays 15%. It does not matter what the dollar value is, what matters is what is the % of your income that is paid as tax.
cliff
KGRB
In the US you cannot ‘shelter’ income any more. At best it is a deferral of taxes due.
Certain kinds of income, like dividends and capital gains, are taxed at rates lower than ordinary income (wages).
For individuals there are a few major deductions – home mortgage interest, taxes paid to other jurisdictions and charitable contributions being the three most common. But the new law reinstates the phase out so as you income rises about the threshold ($200,000 I think), you lose some of the value of deductions. At the highest level your deductions get reduced by 80%.
As a business owner I get the majority of my income through dividends but I also pay a lot of taxes for the privilege of owning the business. I pay the matching portion of the employee payroll taxes (FICA – 6.2% for social security; 1.45% for Medicare), as various state taxes in more than 40 states.
Add in personal property taxes, real estate taxes, sales tax, use tax, fuel taxes (on 4000 trucks) – and my tax bill would float a small country.
The problem is that the super wealthy actually do have ways to work around paying taxes. For example, a CEO at a big company might get paid $15 million for the year, of which $12 million is paid in the from of company stock options. Rather than cash in the stock and pay capital gains tax, they take out a loan against that position. This way they get $12 million that they are free to invest, rather than $10.2 million. By the time they have to repay the loan, the $12 million which has been invested has generated a return greater than what they will eventually have to pay in taxes. In this way, the super wealthy can essentially avoid paying taxes. However, a problem occurs when that stock starts to tank (see Green Mountain Coffee).
And remember that the 39.6% is only on income earned OVER 400k. So the president will not be seeing a 4.6% increase overall. It will be about 3k or 0.7% from this change. The 2% payroll tax increase is much more dramatic.
That too depends on deductions allowed as we earn under 400k but have been at just over a 39% tax rate for several years now.
The highest federal tax rate has been 35%. Please tell us all how you somehow are paying a higher rate. I’d find a new accountant if I were you.
She’s probably counting SS and medicare.
Right now, some countries in Europe are charging 70% tax on people who earn this kind of money a year! I wonder what motivation people that earn this number have to continue to work.
I never understood this logic. What incentive do they have? Obviously, the incentive is to earn more. So the government takes 70 percent. Should they stop working and make Nothing? Should they cut their income? Of course not. The fact remains that 30 percent of $1 million is $300,000. So why should they strive to make more? Because 30 percent of $2 million is $600,000 so their extra work is rewarded.
I am far from the high income category but if I was earning the big bucks, I wouldn’t be happy to work hard to give 70% to the government. I think this type of taxes only make people unmotivated to declared their real income or move their companies to countries where the taxes are much lower.
The claim in this article that “the top 1 percent of the 1 percent” earn $400,000 is factually inaccurate – completely so. The top 1 percent of americans taxpayers – 1.4 million of them – earned at least $370,000. they also paid 37% of all the taxes paid. Given the article is actually about “who earns 400,000” one would think a little more research would have been in order – the IRS provides this data readily.
And you really believe the IRS as they are part of this unreliable government
This government rocko?
As if all of Nasa, the National Institute of Health, etc change
with each administration?
You disregard the top .1% who earn over 10,000,000 a year. The top 100 CEO’s made a little over 3 billion dollars in 2011 with the top ten totaling a billion. Does ANYONE need that kind of money. If, for instance, The top earner, Timothy D. Cook CEO of Apple, who earned $377,996,537 in 2011 only took 10% of those earnings, Apple could put 4000 additional people to work with a salary of 35,000 a year with full benefits. Shouldn’t THAT the real incentive to his job, He would still be making over 30,000,000. More money than he could ever spend, Re3member that is per year!!
This is what I have been thinking. To work so hard only to have the government come and tax them for being successful. I think it would demotivate and infuriate and they didn’t make all that money being dumb. They will find a way to avoid some of the blow or if they have to, move their company to a place that doesn’t tax as high.
Except it doesn’t demotivate, perhaps because of the culture.
I have many friends in Europe, who live in “socialism”. Denmark, for example.
Their taxes are very high. Their “death” taxes are even higher. They don’t complain about taxes as much as we do because of what they get in return. Subsidized child care. College educations. Health care. To them, the return on investment is worth it.
In fact, they consider the fact that they care for others – even those who don’t make a lot of money – to be “civilized” not necessarily “socialist”.
People DO NOT make the difference between $20K and $20M by working 1000 times harder. Evryone has a limit and the factor is at most about 10. Everybody works 8 to 10 hour a day. The ones making $20M make it by (1) scamming a whole lot of people or (2) by paying depressed wages in effect robbing the $20K worker off what he truly makes which may be $50K or higher. The higer taxes on the $1M or $20M guy is a penalty the sociatey at large levies on the crooks. The penalty is way too small if you do the nubers.
GC;
Since those “scammers” would include Steve Jobs and Bill Gates. Put your money where your is and boycott all products from their companies. You can start with your computer.
Marcia, the problem is that the US has completely different demographics that will ensure a US welfare state will look more like Dpain or Greece than Denmark. We have a huge Boomer population that will bankrupt us through entitlemenents that should have been adjusted many years ago to longer life spans and fewer workers per retiree. Our fastest growing demographic has 40-50% high school drop out rates, guaranteeing future generations will work half the year to support the government. This is NOT the case in Denmark. Or Sweden. Or Switzerland. Or Germany, where newspapers are now comparing the US to Greece. Both parties have seen this demographic disaster coming for years and have betrayed our best interests in the most egregious ways. The GOP by ramming through Medicare Part D, The government welfare bill Big PhArma wrote for itself on K street, but Democrats outdid the GOP 50:1 with passage of Obamacare, already doubled in cost to 2.6 trillion, will double again 2020-2020.
“Hard-working” and successful people often put in 16 hour days, potentially 6-7 days a week. There is absolutely a sacrifice these people pay for their success, and the money they derive from their sacrifice is theirs, not ours. I worked 5,000 hours one year. That’s 100 hours a week, for 50 weeks. The next year? I worked 4500. That’s 90 hours a week for 50 weeks. What did I make? $160,000 at 22 years old. I paid ~40% income tax. You didn’t deserve anything from that and neither does anyone else. Sacrifice? I sacrificed my life, my sleep, personal relationships, everything. And I absolutely deserved to live in a penthouse apartment, drive a nice car and own expensive clothes. I sacrificed everything else for it.
People who own their own businesses routinely work 14-18 hours a day for years. Their family-life suffers. Occasionally they go bankrupt. They deal with stress you cannot even imagine.
Hard work DOES equal success.
> i worked 5,000 hours one year. that’s 100 hours a week, for 50 weeks.
A very recent study was published that showed that if you work 60 hours per week that you were NOT 50% more productive. More like 25%. I sued to work 60-65 hours per week for several years. I can tell you from experience that at that rate you were brain dead. Your failure rates goes up, you are sleep deprived, you are a walking zombie. BTW, the company didn’t care in the least and there was no reward for my efforts to keep the place afloat.
Do you REALLY think if the CEO took $1,000,000 less or whatever, that the money would flow down to all the employees salaries? Heck no, because we are all paid what we are worth. There is a reason the receptionist doesn’t make $500,000 year. There is a reason we are all paid what we are paid and if you want more, go get more skills. I couldn’t care less what the CEOs of the world make because it doesn’t impact my life whatsoever. Do you really care LeBron James makes $1,000 per basket? The market is there to be able to pay him. CEOs have a skill and the market can bear the salary, even though most of it is in stock options, which cost ZERO to you and me.
$35K a year is pretty much poverty level in the area that Apple is located.
As to why one would want to continue to work even in the face of 70% taxation? For a lot people who make a lot of money, at some point more money becomes relatively meaningless and then it becomes about doing some socially good.
No, that is not the CEO’s ‘incentive.’ The CEO’s job is to increase shareholder wealth. No successful company will survive if they fill positions simply to fill them. You don’t pay for employees you don’t need.
39.6% is still the lowest rates since 1932 except for the Regan/Bush years and people still bought RollsRoyces, drank champagne and ate cavier:
Year, #of Brackets, Lowest rate, Highest rate, Income level of highest rate, adjuste to 2013 dollars, notes
1913 7 1% 7% $500,000 $11.3M First permanent income tax
1917 21 2% 67% $2,000,000 $35M World War I financing
1925 23 1.5% 25% $100,000 $1.28M Post war reductions
1932 55 4% 63% $1,000,000 $16.4M Depression era
1936 31 4% 79% $5,000,000 $80.7M
1941 32 10% 81% $5,000,000 $76.3M World War II
1942 24 19% 88% $200,000 $2.75M Revenue Act of 1942
1944 24 23% 94% $200,000 $2.54M Individual Income Tax Act of 1944
1946 24 20% 91% $200,000 $2.30M
1964 26 16% 77% $400,000 $2.85M Tax reduction during Vietnam war
1965 25 14% 70% $200,000 $1.42M
1981 16 14% 70% $212,000 $532k Reagan era tax cuts
1982 14 12% 50% $106,000 $199k Reagan era tax cuts
1987 5 11% 38.5% $90,000 $178k Reagan era tax cuts
1988 2 15% 28% $29,750 $56k Reagan era tax cuts
1991 3 15% 31% $82,150 $135k
1993 5 15% 39.6% $250,000 $388k Omnibus Budget Reconciliation Act of 1993
2003 6 10% 35% $311,950 $380k Bush tax cuts
2011 6 10% 35% $379,150 $379k
2013 7 10% 39.6% $400,000 $400k
Thank you Air!
Most people don’t begrudge the wealthy, especially those who are self-made. We do begrudge the greedy however, and those who get paid to falsely represent them as, “job creators” etc. and therefore deserving of special tax treatment (sometimes called welfare for the wealthy).
In 1811, two years after Jefferson left the Presidency, Jefferson wrote a letter to General Thaddeus Kosciuszko, a hero of the American Revolution. Jefferson said that he supported taxes (then tariffs, since there was no income tax yet) falling entirely on the wealthy. As Jefferson explained: “The farmer will see his government supported, his children educated, and the face of this country made a paradise by the contributions of the rich alone, without his being called on to spend a cent from his earnings.”
Here is someone else who was an outspoken proponent of progressive taxation: Adam Smith, who literally “wrote the book” on capitalism. In 1776, in The Wealth of Nations, Smith wrote:
“The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”
(I wonder: When Adam Smith wrote about the “luxuries and vanities” of the rich, was he contemplating Mitt Romney’s elevator for Romney’s car? Or is that simply beyond contemplation?)
Two hundred years ago, when America was founded, progressive taxation was viewed as just common sense. We still have common sense, don’t we?
Reply to Marcia-
Many of the Founding Fathers, Pilgrims, Immigrants, Communes and great minds like Adam Smith have a common attitude that is rarely mentioned:
“If you don’t work, you don’t eat”
They noted exceptions, but only a few. For example, disabled grandparents still contributed something (no matter how small) to their support.
Why?
Because it is important to the health of the Human Spirit.
Those that live off of others, such as criminals, are warping their lives.
We have inalienable rights given by the Almighty. We also have a model, given by the Almighty, to follow that will give us the most joy.
Do not allow Social Safety Nets to entrap the vulnerable into a spiral of uselessness and character degradation.
Do not make our legacy: Second Generation Welfare Families.
>Many of the Founding Fathers, Pilgrims, Immigrants, Communes and great minds like Adam Smith have a common attitude that is rarely mentioned: “If you don’t work, you don’t eat”
Most of the Founding Fathers and the likes of Adam Smith were the entitled few. Like Thomas Jefferson with his slaves. I recently did a study on the times around 1492. About 5% of the population was so poor that they couldn’t even buy food to eat–some the Danish nobles were shoeless!
The problem isn’t that most of the poor people don’t want to work. They already know that they will NOT be hired if they applied for ANY job. They haven’t been taught about the self-respect you earn from a good day’s work. There is nothing like leaving a job site at the end of your shift and feel like you are walking on several inches of air–and then get yelled at the next day by the boss to not do such a good job, because it was boring at work!
You didn’t adjust for inflation, and you’re also missing the fact that the rate only applies to LABOR – investment income is taxed at a much lower rate now. And of course, movie stars, trial lawyers, and other groups who lobbied the democrats to create tax shelter corporation types for them, spread out their income over multiple years to avoid taxes – like an IRA that you don’t have to be retired to collect from, and that allows you to transfer money to other people pre-tax to further avoid paying taxes.
And with these vastly different rates, the actual tax receipts were relatively steady the last 60 years. They only exceeded 19% of GDP 4 times in that time frame, and were only above 20% one year at the peak of the dot com bubble. My point is that the wealthy will always find ways to shelter their income when rates are higher.
“Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy, its inherent virtue is the equal sharing of misery.”
Winston Churchill
AIR, it shows right in the adjusted dollars column that those top tax rates were for people making a lot more that the equivalent of $400,000. I don’t know if you’re challenged by arithmetic, or just don’t care about the truth as long as your leftist ideology wins. I mean, in 1944 it was an astounding 94%, but at least you had to make almost 3 million dollars to pay that– and I guarantee that the rich found the deductions to keep that from happening. In 1941, you had to make a healthy $76 million to hit the 81% rate.
If you study a little history, you will discover that marginal tax rates have been much, much higher in the past. As a result, there was much more investment, job creation, and prosperity, and very few of the wealthy ran away with their money. A true Conservative doesn’t put two wars on a credit card, and hope they can blame it on the next guy.
Well said Barbara. The definition of “conservatism” changed with Ronald Reagan. Prior to that time, conservatism was all about balancing the budget, even if it meant raising taxes. Then, California Proposition 13 passed in 1978 with neo-con support. It reduced property taxes without a corresponding cut in spending and the neo-cons were off to the races.
A new ideology was introduced by Reagan now called, “Starve the Beast”, which advocated cutting taxes and borrowing to fund the government. The idea behind it as President Reagan explained on TV, was to deprive congress of their “allowance” as you would your kid, and thereby reduce the size of government. What he didn’t explain was that your kids don’t have credit cards. But these ideologues didn’t really care whether congress would drive the national debt to crisis levels – they were counting on it.
You see, their goal was and still is to shrink the government (“…to where it will fit in a bathtub, and then drown it”). Prior to Reagan, successive presidents mostly decreased debt in real terms and increases were held to single digits during recessions. Reagan increses the debt 56% during his first term, 48% his second, while Bush 1 had a 42% record. Clinton turned that around with an increase of 16% and a decrease of 3% respectively during his terms. Bush 2 cut taxes again and drove the debt up 22% and 42% respectively, and when he left office the economy was in a free-fall. The crisis that Nordquist had hoped for was here, and these irresponsible idiots now believe and publicly express the need to reduce “big” government. They have intentionally created a crisis that has hurt so many in order to get what they want, decreases in Social Security, Medicare, Medicaid, and any other socially responsible program.
Don’t believe it? Search for “Starve the Beast”. Look for articles from mainstream economists. Wikipedia explains it fairly well too.
A high tax rate on those jobs that pay over a certain threshold will likely do nothing to the productivity of the top earner. There is no logic to the idea that more pay means proportionally more effort. If that were true, a CEO would be working 100 or more times as hard as his gardener.
Instead, if the tax rate is very high on high incomes, it encourages a company or owner to re-invest the money that would have gone to a bloated CEO salary back into the company itself as the additional $ will hire many more workers at much lower salaries, which can actually increase the productivity.
You currently only take home 2/3 to 3/4 of the fruits of your hard work; have you cut the hours you work because of this?
A few high income folks told me the issue is that since the marginal utility of more wealth for them is low, feeling like what they are earning by working is mostly going to the government is just not worth the sacrifice they’re making.
Consider a high earner that has amassed a few million in liquid assets with a paid off house in their 50s. Yes, they are still making $300,000 in your example. But since they already have enough, more time and less stress becomes more important to them and if the government keeps raising tax rates (not to mention making the public view them as the bad guy even though they made a lot of sacrifices to earn a high income), it just makes working less appealing.
…Consider a high earner that has amassed a few million in liquid assets with a paid off house in their 50s…since they already have enough, more time and less stress becomes more important to them…”
So where’s the issue? Once they’re rich, they can stop working if less stress is more important (if they were actually working to begin with — very few jobs actually pay an income that’s very high — most of the time incomes over 500k are from investments which don’t always entail hard work.). No one cares if they are no longer working. Sure, tax revenues may go down, but that’s only if they weren’t minimizing their tax burdens already through questionable means.
If they need income after this, they can still invest in bonds and live off of the interest. Bonds are very low risk, and still taxed at a rate less than me…something like 15%. I make around 50000 a year, I get a little over 30k after benefits and taxes — where’s MY incentive to work? Oh yeah, maintaining my current standard of living. Why don’t rich people need to maintain theirs? Either they do, so they can’t quit, or they don’t need to any longer and they can quit, OR they can still maintain their standard of living without having to work.
Also, bonds do not create jobs.
Bonds don’t create jobs…. Are you nuts ! If a city, municipality or state decides to create or fix infrastructure they go and borrow in the bond market. The money funds the project which in turn means jobs to build or fix. If a company wants to expand they to might borrow in the bond market by issuing bonds too. Expansion will lead to more positions and jobs. Clearly you have very little understanding of economics.
Silly rabbit!
Those earnings get funneled (usually) into non-taxable retirement accounts. It costs relatively little money (for them) to funnel investment earnings into those tax-free vehicles.
The rich continue to earn a lot (not all) of their money tax-free, and with excellent planning (which they can afford), they retire with most money taken in retirement also tax-free.
I help them do it, and I get paid handsomely for it. You will receive less and less of this income in the form of taxes too, as I get more wealthy.
People who are “investing” their cash already paid taxes on that money once already. Bonds and debt instruments (for people who are approaching retirement) don’t payout as much as they used to. Why? Because our govt is artificially keeping interest rates low and printing money. Punishing people who are responsible and saving their cash.
What do you think revenue from bonds are used for?
If Detroit issues a bond or if Oracle issues a bond, why do you think they do so? They need capital for a project. How do you complete a project? With people.
Bonds have interest rate risk. When interest rates go up, value have to go down. Bonds pay very little right now. What is my incentive to buy bonds at this point? The best bond is paying 3%. if you have 2% inflation, you are making 15. BFD.
Given your title here is MoneyNing – I am guessing you wrote this article?
The claim in this article that “the top 1 percent of the 1 percent” earn $400,000 is factually inaccurate – completely so. The top 1 percent of americans taxpayers – 1.4 million of them – earned at least $370,000. They also paid 37% of all the taxes paid. Given the article is actually about “who earns 400,000? one would think a little more research would have been in order – the IRS provides this data readily.
In addition, though this blog is full of support for soaking those that earn over $400,000 – this 1% already pays 37% of ALL taxes paid in the US. Let me repeat – the top 1% pays 37% of ALL the taxes paid in the US.
Is that not enough? How much is too much? Should the top 1% pay ALL the taxes paid – 100%? 50%? 75%?. Is there an upper limit?
I own this blog, but I did not write this article.
You are absolutely right, as $400,000 belongs to the top 1% and not the 0.1%. Emily (who did write the piece) spoke to me about this and we corrected the error that you pointed out.
You printed it, so own it. You either did write it or you should have at least checked it for accuracy before printing it. It still contains flaws.
However, that top 1% owns/controls upwards of 80% of the money – so paying only 37% of the taxes means they are not paying their fair share of them.
“In addition, though this blog is full of support for soaking those that earn over $400,000 – this 1% already pays 37% of ALL taxes paid in the US. Let me repeat – the top 1% pays 37% of ALL the taxes paid in the US.”
I’ve seen this kind of stat before. My question on the top 1%: Do they have 37% of ALL income? If so, then 37% of ALL taxes would seem appropriate.
If we go by the effects on income, then the top 1% are not paying as much as they should.
Over the past 10 years the wealth of the nation has concentrated into that top 1% at an alarming rate. The system we have is benefiting top earners. When you say that the top 1% pay 37% of all taxes, you are referring only to Federal income tax (not ALL taxes). Social Security Tax, for example is not collected for any $ over 106000 (as of 2011). So the effective tax rate of a person in the middle class who has all of his or her income taxed for social security and a portion taxed for income tax will be as high or higher than an upper income earner.
As for those who earn too little to pay the income tax… They are having to live on an income that is too low to pay the federal income tax… I pay income tax and I find it difficult to make ends meet, so I can’t at all begrudge someone who makes so little that he or she does not even reach an income that requires a payment of income tax.
Barbara, if 50% controlled 80% of the money, does that make you happy? There are plenty of rich people that are dumb with money. I would trust Bill Gates and Warren Buffet if they held 10% of the worlds money. The poor don’t own houses or stocks. The majority of their income is spent on survival. Is that the fault of a CEO? It won’t change the life of a poor person if a CEO makes $1,000,000 or $10,000,000? That poor person made choices in life that put them there. There are plenty of stories of kids living in poverty making it out and having fine jobs. They just have to WANT to get out.
DOposite,
bonds, loans, or cash never created jobs or anything connected to the real economy. This is the bakers scam that has been alive for hundreds of years. I ask you when these financial inventions came to be; especially the bonds; and when did mankind engage in labor for a living. How did they do it before the age of bonds? I guess you know the answer. As far as understanding economy I would be the last one to throw a stone if I lived in a glass house.
Barbara Hotlzman: Before just accepting what your liberal sources say about taxes and weath, note that the top 1% of wage earners who pay more than 37% of FIT, only “control” 17% of the income. So what is disproportionate, is how much tax they pay vs. how much income they “control.”
I also find interesting and humorous the commentary about the Bill Gates, Walton family, etc… types of the world. You all suggest that everyone who makes more than $400k in a year, was successful because of wealthy parents or inheritance, etc… Likewise I guess I can say that everyone on unemployment or on welfare is sitting at home on their Iphones, watching one of their 3 flat panel TV’s, while their 9 kids are all flunking out of public school. As several pointed out in these streams, the vast majority of $400-1,000,000 earners are persons and couples who earn that income on their jobs or in their professions. They are not receiving company loans in lieu of W-2 income, nor stock options, etc… They are paying a wildly disproportionate percentage of their income, earned and deserved just as hard as everyone else, while our tax system prevents them from taking “loopholes” that middle class and lower can take like the earned income credit, deductions/credits for child care, college expenses, college grants, subsidized student loans, etc… Not the president wants to go back to that same well to fund programs that those same people don’t want, need, and don’t qualify for in any case. My dad once told me that the definition of a Rich person for most people is someone making $1 more than yourself. That has become our mentality now: Don’t tax me, but tax the guy who makes a dollar more than me because not only can he afford it, but he doesn’t deserve what he makes…….
I’ve seen various stats on how much “income” the top 1% earn and have determined that it depends on who defines “income”. If only “wages” from labor are used, then Mitt Romney doesn’t qualify. And that what Rick’s “17%” figure includes. However. if not only wages, but also capital gains and other asset appreciation is included, the figure is more than 40%. Surprisingly, in 1776, the top 1% (our founders) controlled only 15% as do the top 1% in Great Briton today. Much of that almost threefold increase for those so fortunate has been due to the tax cutting, deregulation, and deficit spending policies of since President Reagan.
And, by the way, only 7% of the top 1% arrived there from below. The rest did it the old fashioned way, they inherited it. From that 93% come the champions who donate greatly to political causes. They also use their wealth to buy candidates and hire lobbyists in order to assure that America doesn’t become a Meritocracy. That way, their children and grandchildren will be assured a place at the top too.
>note that the top 1% of wage earners who pay more than 37% of FIT, only “control” 17% of the income.
Other sources found that they made 20% of the AGI (in 2010)–which as you know full well excludes capital gains.
Now if we look at wealth, then the bankrate site reports:
“”The State of Working America’s Wealth,” a study by the Economic Policy Institute, or EPI, produced similar bleak income results, especially for lower-income earners.
The Washington, D.C.-based think tank found that from 2007 to 2009, average annualized household wealth declined by 16 percent for the richest fifth of Americans and 25 percent for the rest of the country.
But even with the across-the-board income drops, EPI researchers found that in 2009 the wealthiest 1 percent of U.S. households had net worth that was 225 times greater than the typical median household’s net worth.
That disparity, according to EPI, is the highest ratio on record.”
Read more: http://www.bankrate.com/finance/taxes/top-1-percent-earn.aspx#ixzz2IqROCAwL
>You all suggest that everyone who makes more than $400k in a year, was successful because of wealthy parents or inheritance, etc.. … That has become our mentality now: Don’t tax me, but tax the guy who makes a dollar more than me because not only can he afford it, but he doesn’t deserve what he makes.
I’ve never said that or even thought it. I prefer John Wesley’s POV: earn all you can, give all you can. The Bible condemns greed in very strong terms–is hell fire enough for you?
Seems to me that if the top 1% owns/controls 80% of the money, then they should be paying 80% of the tax burden!
High Earning Professionals are a way different mindset than Investors. They are successful when they work harder. They are ‘in’ it for the work-environment. Some may decide to work less because of high taxes. That is the minority. An example would be California Actors. Some are taxed at 90% in the last bracket. Several, including Fred Murray worked only 6 months a year.
Multi-millionaire Investors have a totally different mind-set: manipulation of wealth game-world. They dodge taxes like I step over a crack in the sidewalk. They wrote the Tax Loop Holes.
A lot of you commentators don’t seem to understand what a tax bracket is. If your adjusted gross income is $400,500, you pay 39.5% on the $50,000 only. Not so bad.
Also many — if not most — high income people have inherited their wealth.
>If your adjusted gross income is $400,500, you pay 39.5% on the $50,000 only. Not so bad.
Nope. Lets say that you made $395,000 and we’ll say that the tax rate at that level is 35%; and you now get a promotion to $400,500 and tax rate at that level is 39.5%–you pay that rate on the whole, i.e., 4.5% extra on the $395,000 that you had made. Some people try to make it out that this would discourage you from trying harder to make even more money. Apparently, some people don’t try harder just for the psychic thrill of doing a good job.
David Conklin. You are mistaken. A marginal tax rate is exactly what its name suggests–the tax you pay on the margin (i.e. next dollar). Everyone in the U.S. is taxed at the same federal rate, albeit a rate that increases with income. The person making $500k per year pays the same 10% federal tax on their first $8,700 as the person who only makes $8,700 total (excluding tax credits and adjustments). This is the definition of a “progressive” tax system.
Lamont, you are correct; I was thinking of something else. I just checked and found that the progressive nature of the tax rates is built into the system. This makes the claims of the those against higher taxes that it discourages innovation, effort, etc. to be false.
MoneyNing, you have described me to a T. I just sold my successful business of 28 years in December (ahead of the cap gains & income tax hikes) at age 59 because I simply could not stomach working more for the government than for myself (income tax rates > 50%). Vilifying me as “not paying my fair share” didn’t help. I was paying 7-figure tax bills – and that isn’t a “fair share?” I certainly wasn’t skirting taxes – marginal Fed tax rate well in excess of 30%.
The society and the government made it quite clear that I was no longer wanted in my role of creating jobs (I let all my employees go, but helped them find work) and innovating (I invented stuff for cancer diagnostics) and instead of contributing to a society that hates me I will sail off enjoy the fruits of my long, long labors.
I see Marcos replied to your post by saying “No one cares if [I] am no longer working.” Really? I created jobs. My employees certainly cared when I closed up. I will no longer create jobs. My customers really cared a lot. I will no longer help them, and the millions they serve. Oh, and my income was 95% from the fruits of my labors, not “investments,” although I certainly consider the 3 decades of my life I worked like a crazed weasel an “investment.” I made dog food money for a long time before it paid off.
@ artesanatos & John
You guys should read up on the difference between marginal tax rate & effective tax rate.
The marginal tax rate does NOT apply to ALL income.
This seems to be a common misunderstanding I see everywhere these days.
So for instance, France ALSO uses a progressive tax system. This means that if France raises it’s marginal tax rate for income over 1 million euros to 75%, that does NOT mean that Gerard Depardieu would have to pay 75% of his entire income to taxes. He would pay 75% of his income OVER that amount.
Now that is quite steep, of course.
But the U.S. income tax is only being raised to 39.6% for over $400,000. A far cry from 75%.
As for the tax increases now. Yes, for those making over $400,000, they will now see a marginal tax rate of 39.6% instead of the 35% they were paying before.
BUT, the tax extensions ALSO apply to all money earned up to that amount. Meaning individuals making over $400,000 will NOT be paying 39.6% of that first $400,000. Indeed, they won’t be paying anymore on that first $400,000 than they have since the original Bush tax cuts. And that’s across the board, whether the individual makes $500,000 or $5.2 million. None of them will pay any more than they have been on that first $400.000.
Part of the confusion, I think, is caused when articles will say things like
“taxes were raised 39.6 percent from 35 percent for single filers with taxable income over $400,000.” (I actually saw this on a professional web site describing the tax increases.)
That’s bad communication, and gives the wrong impression of the facts.
To say this correctly, it would be:
“taxes were raised, for individuals, to 39.6% from 35% for taxable income over $400,000.”
There’s a significant difference there.
Another confusion I think comes from when they report in the news about certain INDIVIDUALS tax % for this or that year. Like reporting Romney’s tax rate – they were talking about effective tax rate.
That’s why say, when Warren Buffet said his secretary paid a higher percentage of income taxes than he did himself, he did NOT mean she paid MORE taxes than he did, and he didn’t mean her marginal tax for earned income was a higher rate. He meant that a larger percentage of her income went to taxes than his… that’s EFFECTIVE tax rate.
Though of course this information is useful to get a feel for the situation of people of different income strata.
CLEARLY if someone making $15,000 a year had to pay 39% of their income to taxes… They may not be able to afford to pay rent, let alone afford health insurance, or even food.
If Warren Buffet had to pay even an EFFECTIVE tax rate of 39% on all his income – he would still not be struggling to survive.
But the important part is here that he WON’T be paying 39% of all his income.
So anyway, hope this helps clear up the confusion.
If you want to know how much taxes someone is paying, altogether, as a percentage of their income, you would need to figure out the EFFECTIVE tax rate.
The tax laws and the percentages the laws talk about, do NOT tell you that.
They state marginal tax rates under the progressive tax system.
Effective tax rates have to be figured out on a case by case basis because everyone’s exact income & deductions & all are all varied. So unless you have the details of someone’s tax return, you can’t even accurately guess their effective tax rate.
Correction for clarification:
My numbers do not include what they call the “payroll tax”. Which is considered separate from regular income taxes. (For example, on your W2, that “payroll tax” is not counted in “Federal Income Tax Withheld”, and is not part of your tax liability.
The payroll tax is what’s listed on your pay stub as “social security tax” and “medicare tax”.
This has increased for EVERYONE.
However, it’s important to note, that while it was extended to be taxable on many types of investments… Investment (passive) income like interest and such, has been taxed at a very low level, compared to earned income (like from working at a job).
So that’s a separate matter, that also plays into the “effective tax rate”. But it has nothing to do with the marginal tax rate.
Thank you for the clarification, It has been muddled by the media and people who just don’t understand the numbers. I can not say that I fully understand it all but this has cleared up a few questions that i had been thinking about.
Thank you Chloe – this does make sense – taxable income and effective tax rate are important phrases indeed!
Thank you ,Chloe.
@ SHane – Yeah, I have a hard time wrapping my head around all the different parts. I was thinking I was going to figure our effective tax rate, and well… it’s going to have to wait! ha ha
I only started learning about this stuff after I was laid off my job (that I liked too) the same week Lehman Bros. collapsed & the big bailouts took place that very weekend. I was so CLUELESS about how it was related, and it took me a couple of months for it to really sink in what was going on. And I remember at some point I felt, WOW, boy have I been foolish & ignorant about the economy!
I’ve always been a frugal sort, but that’s just my nature & maybe the way my family growing up was. I’ve always been good at basic accounting math too. But boy was I totally ignorant about the world of finance.
Pretty funny since my sister is a research scientist, turned MBA securities trader, now going back to school for physics. She tried to explain securities to me, and I thought ugh, how boring! lol
Well not only have I read well over 100 books related to economics, Wall Street, finance, the financial crisis, the housing bubble, about the history of debt, over the past 4 years… What led me to doing that was that I made it a point to watch (online) every senate hearing & congressional hearing related to the financial crisis. All of them. In TOTAL. All testimony, everything.
And that’s why I had to start reading books… to even begin to understand what the heck they were talking about & have any idea of what had happened.
And now, finally, I’ve started communicating with people about it… because I finally got to the point where I felt I could sort of spread out & talk about it… And it sends SHIVERS down my spine how little people who talk about it really understand it. The reason I find it breathtaking is because I still feel like I don’t know enough… yet here there’s plenty of people who are at square one, and don’t even know it.
I now realize that I’m probably in a very unusual situation. Being a fairly ordinary person. Worse, an artist with an interest in astronomy… But now I can read stuff where people are talking about economics in their economics lingo, and know what’s being talked about most of the time.
And it’s like nobody in-the-know wants to take the time to explain it in plain English, because, yeah, it is somewhat complicated.. taxes, economics, markets, etc.
But it’s not so complicated that the average person can’t get the general gist of things if it’s explained in plain English. I think “lingo” of certain “fields” sometimes puts people off and creates a wall… Just like a language barrier. Well it IS a language barrier. But not an insurmountable one!
Oh, and just for the record, I don’t think any country has a 75% tax bracket of any type, either as a flat tax or a marginal tax bracket. Because at the time that the French President suggested, I think people said it would be the highest ever.
It’s also hard to say what country has the highest taxes, because some nations have flat taxes, and some are marginal … and you could wind up comparing apples & oranges.
Thank you, Chloe.
To repeat what Chloe said: Nobody is paying 75% of their total income, not even in France. Not even in Scandinavia. Anyone who doesn’t understand marginal tax rates or the different tax rates for different kinds of income or the difference between individual and business income taxes needs to take an accounting course or at least read up on the tax system.
But if everyone did that, then they’d be able to tell what bald-faced liars the AM radio guys are.
PDxtran: People who get hardest are 400k-800k, because this is earned income, usually professional couples. Many seem to forget that big tax increases, supposedly to pay for Obamacare, kicked in Jan 1, making the federal tax rate for 400k+ 43.6%.
If you add in other taxes such as state income, sales, property, etc., many professional couples will be working half the year to pay taxes.
Chloe, thank you for explaining this issue – many just make assumptions. Read the facts and stop illogical fears and hysterical assumptions. Warren Buffet’s secretary, does not miss out on trips to france; but food, gas, health care, and every other basic need is affected, not to mention saving for college, retirement. This is why the tax rates are grossly unfair to the middle classes.
John, think of it like this. Say the same government that taxes millionaires at 70% and taxes income of 500,000 at 50%. The one who strives to earn a million brings home 300k and the one who earn 500k brings home 250. Is it really worth the extra effort, the long days, missing family events, etc to make an extra 500k just to pay 90% of it to a government that generally doesn’t spend it well?
Evangelist – I suggest you read up about US income tax rates. There is a good post above to start with. Your numbers are incredibly far off from how our system works.
Since you didn’t provide a rate for lower earnings, let’s say the first 500k has a rate of 25%.
Someone with taxable earnings of $500K would pay $125k.
Someone with taxable earnings of $1M would pay $125k + $250k = $375k.
Someone with taxable earnings of $2M would pay $125k + $250k + $700k = $1075k.
Another person who doesn’t understand marginal rates.
Even assuming that ALL income below $500k was taxed at 50% (and I don’t know of any country that does that), the 70% rate would apply ONLY to income above $500k.
Thus, in your VERY hypothetical example, the person with $500k would pay $250K and the person with $1 million would pay $250k+ $350k or $600k.
The person with $1 million in income would therefore have $400k left, which is $150k above what the person with a $500k income would have left over.
If you want to whine that “it’s not worth working for just an extra $150k,” consider this. $150k is THREE TIMES the median household income in the U.S. That is, half of all households make LESS than $50k and would be thrilled out of their minds to have an extra $150k.
You must not be rich yourself, because if you did, you’d know that most people in the million-dollar bracket don’t necessarily “work hard.” They have other people work hard for them or they live off investments or they inherited a company or they’re on a corporate board and the other corporate board types voted them a bonus.
The number of entrepreneurs who became millionaires by commercializing their inventions or innovations is quite small, and even many of them started out wealthy. Bill Gates’ family was already rich–his mother was on the corporate board of a bank, a position that they don’t give to poor or even middle class people. Fred Smith founded Fedex by using his $4 million inheritance. Despite his talent for marketing, Sam Walton was bankrolled by his father-in-law at several crucial steps in his career. And his children? Well, they’re worth a couple of billion each, and all they did was be born to the right parents.
This is the most ridiculous argument I’ve ever heard. So…you point to a couple of people who own/started companies and that exemplifies everyone who is considered “rich”? You obviously don’t know the first thing about being rich…other than parroting what the media or some other malcontent defined what they believe “rich” is. To then go on and say that “most people” would be happy with earning an extra $150k is almost laughable except it’s what you truly believe. “Most people” should earn it…not rely on others to do it for them.
Brian surely does consider the people who provide all the services that he uses. Waiters and waitresses work very hard and average about $20,000 a year. The people who pick up and deliver mail and packages. Those who install the internet, cable TV and telephones. Those who repair appliances and sell appliances. Not to mention all the sales people that work in stores, shopping center and other retail stores. That is only a few of the people that you overlooked.
Don’t you think that everyone of these people, who work very hard, would like to be making $150K a year. Those people are working hard and are not relying on others to do it for them.
Thanks pdxtran…Hope people are learning, not just stuck to their preconceived notions.
Also, many people who aren’t wealthy don’t understand how much help via government subsidies the wealthy receive. They just don’t get it! One college newspaper published the names and amounts of subsidies local “farmers” and “ranchers” received, in the millions yearly! I don’t believe plain “folks” could understand the huge amounts paid directly from the treasury to these people for nothing. Often, the same property gets subsidies in many different subsidy ownership parcels, and designations-for wetlands, for set-aside, for crop, or dairy. The NYT has a recent excellent investigative article on this.
What is often overlooked in statements like this is that the 70% rate is the MARGINAL tax rate. That means that if you make $1M/year, and the amount over $500k is taxed at 70%, the tax on the first $500k is much lower (for the sake of argument, suppose it’s 25%). In this scenario the actual tax rate for the entire income amount is a little under 50%. This is still high, sure, but the question isn’t what motivation they have to work, but what motivation they have to work hard to get that next $1M.
Also, this is SALARY income, and most wealthy people get a lot of their income from capital gains, which are taxed at a much lower rate (at least in the US).
A side benefit of this is that since charitable contributions are tax-exempt, there is a strong motivation to give more to charity at high income levels. Giving your money away might not seem like a perk, but the key is that you get to decide where it goes rather than the government – you are spending it on something you want, rather than losing it.
Who are you to tell me to keep on working so my earnings can be confiscated to hand out to cronies of My Betters? And yes, I do make closer to $40,000 than $400,000 but the people who provide my job can’t do it if you take all their money to fling out the windows of your limousine to anybody who will grovel for your favours.
John there is a point of diminishing return. Most who earn this much are already working 60-70-80 hour weeks. If the government starts taking half of their earnings or especially 80%, what are you going to do? Move into your office and work all your waking hours? End up divorced with estranged kids? Have a heart attack at age 40? What about the CPA wife of an orthodontist? The ICU nurse wife of a patent attorney? Won’t she say “Take this job and shove it, I’m not putting the kids in daycare so the Feds can take half our income. I’ll quit, we’ll fire the butcher, the baker, and the candlestick maker, live on one salary, and probably be much happier.” This comes to you from a professional woman who did exactly that.
This is the reason you see Europeans taking 2 hour lunches, all of August off.
Nobody is talking about 80% or even 50% of anyone else’s wealth.
And with all the unemployment, that “professional woman” you quote will free up a job for someone else.
You sound like someone who gets their “facts” from AM radio (or makes up “facts” for AM radio jocks.)
If you are working in the United States, you are not paying more that half of your $400K in taxes. The highest take rate is 39.5% and that is only on the money made over $400K.
It really gets old hearing those of Liberal persuasion resort to “You
Listen to AM radio” tactics.
1/3 of the country is independent. Millions fled the GOP as it became more radical on social issues. We in the middle tend to be socially moderate and fiscally conservative. We think both parties are pathetic and we have to hold our noses in the voting booth.
MSNBC is about propaganda just as Fox News is about propaganda.
The truth is liberals should truly be ashamed when they look at the truth about what a drop in the bucket taxing the rich really is compared to our catastrophic deficit, and especially the way Democrats mislead their base. The Big Orwellian Lie of Campaign 2012 told to the 25th in the world in math American electorate is that we can leave enitlemennts untouched, solve the deficit problem by just making the Greedy Bastard Rich “pay their fair share.” After all that Tax the Rich And I mean AD NAUSEUM Tax the Rich ranting during his campaign,Obama just ADDED 4 trillion to our national debt with his fiscal cliff tax hike. He offered NO spending cuts, hardly the “balanced approach” promised. The fiscal cliff deal raises a pathetic 60 billion per year in a country with a 16.4 trillion debt, 260 billion on interest last year, a trillion added to the deficit every year. Heck this year’s revenue was spent AGAIN on hurricane Sandy relief. Obama ignored the advice of his own deficit commission, let the truly wealthy keep their loopholes, all to pull a Tax the Rich political trick to get lower and middle class voters angry at rich white people and out to the polls. The fact that it worked is proof positive that the US is formally in decline.
To make this kind of money, you work very hard. To work hard and have more than half your income confiscated by the government is insulting, at best.
It is definitely a disincentive. I make more than $400,000 a year. When I look at my tax bill I get sick. I would like to call the cops to have the perps arrested for taking my hard-earned money but the cops cannot help. The perps are above the law.
If you are working in the United States, you are not paying more that half of your $400K in taxes. The highest take rate is 39.5% and that is only on the money made over $400K.
States tax 7%. Medicare Tax. SS Tax…
Not how it works. We all pay the same rates, which congress critters forget every time they want to promote tax breaks. There is no person in existence who pays at the top rate, that’s not the law. The law provides for EVERYONE to pay at the same rates up to XXX where it switches to higher income bracket and money earned OVER THAT AMOUNT to the next bracket is taxed at that rate. So in 2011 for example, a single person making over a million a year in taxable income after deductions paid a total of 110,016.50 on the total below 379,150.00 and 35% on income between the 379,150 figure and the amount total. To actually pay the headline percentage is simply not possible, it’s like the joke about claiming someone can grow as old as their 1 year older brother if they wait long enough, because they approach 100% of his age over time. Can’t happen. http://en.wikipedia.org/wiki/Rate_schedule_(federal_income_tax)
And that’s how it really works. And I’ll make this offer to all disenchanted billionaires, give me your money in excess of 400K every year, and I’ll keep it and pay the tax from it. And I promise to never ever complain about it.
Under the REPUBLICAN president Eisenhower, the top U.S. tax bracket was 95%. Today, the highest U.S. bracket is WAY down to only 39%. These Europeans should move to the US where the taxes are low.
cliff
KGRB
Many have. Just look at Paul McCartney & John Lennon. They both moved to the US for tax reasons at one point. Same goes for corporations. For example in the past two years Sara Lee spun-off/sold off much of the company to Dutch and Mexico interests. The corporate tax rate was not allowing them to compete internationally.
Excuse me…do you know what type of effort goes into a ‘job’ that earns someone $400K +? So your logic is to kill oneself in order to offset confiscatory taxes…
The incentive ends because you have the temptation to stop working, retire and enjoy the wealth you have created. Why work when you feel it is being stolen by the government. How much can we as a people morally and forcefully take from any one individual not matter how much they make?
@john – It may behoove you to be a bit more familiar with what motivates behavior. On the one hand you correctly point out that 30% of something is still something so there is an incremental gain. But it’s not clear you consider 2 other things. One of those is something called “anchoring”. If a person making $1 million a year is used to having that translate into $Y of disposable income per year and then suddenly a much larger proportion is taken by the government, there is often a very significant drop in motivation. I have had the fortune of making sizable earnings but it comes with a lot of sacrifice. I don’t get to work 40 or 50 or 60 hours a week and then go home and enjoy my evenings and weekends like many do. My weeks often involve over 100 hours or working time and because I have global operations I am often on the phone or web meetings at all hours of the day and night. Weekend meetings of the executive team are not at all uncommon. If someone told me that I have to work just as hard for much less money, I am going to be inclined to either stop working (and start managing my investment portfolio as a full time job) or to take a position that requires less sacrifice. This won’t apply to all – those who make a nice salary but can’t just stop may be motivated to push harder – but for those executives who already have enough wealth to never work again this is really a disincentive. Now one could say, “so what, if they leave there are others who would gladly work for that kind of money even with high taxes so they will just fill the jobs”. That’s a good thought but in reality there is a reason that there are very few really high paying jobs and only a few get them. As much as people like to think that executive jobs are easy and all we do is sit in big offices and make lots of money, the reality is that the decisions are hard ones and the time required is not something many are prepared to sacrifice. So there’s the concept of “anchoring” which really means that it seems like a huge pay cut for the same amount of work and that is a big downer mentally, and then there’s the opportunity cost of having better things to do with your time if you are now going to be paid much less.
If you don’t understand, then let me clarify. The big problem is not that they have no incentive to work harder. It is that they have a stronger incentive to work on avoiding taxes than on working productively. If you want a conservative view on this subject, read Reagan’s “see-through buildings” speech.
No problem, John. Just charge double for services rendered, or perhaps provide the same billable services but double the volume. Either way, the customer comes away with less than they deserve.
So John,
If a guy makes 1 million bucks a year and only gets to take home 300k (30%) Please tell me why he shouldn’t work LESS, make LESS yet still take home almost or even the same pay? If he was earning 399k and getting taxed at a much lower rate (like 30 – 40 %) Now his take home is between 200-300k and the Government gets a lot less. You must have learned your math from Joe Biden
stone, it’s obvious that “john” feels as if the harder you work and more successful you are then the more you must pay to governments/taxes, he also thinks when he goes to the store it’s fair to be taxed more for more expensive items, with his logic, he obviously thinks he should spend 7% taxes on a tire but 95% taxes on a car, so when he buys a $100 tire it’s fair to pay $107 but because he has the money to buy a $40,000 car(no way he does, just an example to show how dumb his logic is) he should pay $78,000, it’s just laughable,
IF PEOPLE THINK “THE MORE YOU MAKE THE MORE YOU SHOULD GET TAXED” THEN THE SAME ‘LOGIC’ SHOULD APPLY TO THEIR PURCHASES.
imagine going out to dinner and paying 10% tax for a $50 dinner but %80 tax for a $500 dinner, I’m sure a lot of places would stay in business
imagine how much that would affect all the bartenders and waiters tips???
the most ironic part is the people who are whining about taxing the rich more are the ones who will get screwed the most if it continues to rise, they might have to start their own biz and then will complain to lower taxes if they are successful and build it into a billion dollar company haha
I quit owning my own business in part because of the hassle the government made in doing so. The thing with these earners is — they don’t need the money. They can stop earning. If I were earning what they were and someone raised my taxes to over 70%, I’d just quit and go do something else with my time. I’m not your slave, neither are high income earners. It’s not their job to work and give up the MAJORITY of what they make. I don’t understand YOUR logic — by your logic, the governments should tax them 99% so they are incentivized to earn even more, right?? Oh, and for the privilege of paying these taxes, they get resented, hated, and ragged on by the media.
john E, couldn’t agree with you more, why do people feel like the more someone makes the more they should get taxed?
do you think they realize they will just eventually shut their companies down and it will snowball to the point where we won’t have any airline companies, restaraunts, malls, grocery stores, etc…???
keep taxing the rich more and more and watch them shut the business down, eliminate millions of jobs, and move to an island while all the lazy a$$es who keep pushing to tax the rich more and more and more fight each other simply to survive, it’s nuts
TO ALL THE PEOPLE WHO WANT TO TAX THE RICH MORE……JUST WORK AND DO THE RIGHT THINGS WHILE WORRYING ABOUT YOURSELF, IF YOU KEEP VOTING FOR GOVTS WHO TAX THE RICH YOU WONT HAVE A JOB, DOES IT EVER DAWN ON YOU “POOR” PEOPLE THAT YOU ARE MAKING 40-150K A YEAR FROM THE AND THE RICH YOU WANT TO TAX MORE ARE SIGNING YOUR PAYCHECKS?? WHAT ARE YOU GOING TO DO IF THE BIZ YOU WORK FOR HAS TO EITHER SHUT DOWN OR CUT YOUR JOB BC INSTEAD OF PAYING EMPLOYEES THEY HAVE TO PAY MORE TAXES?
I NEVER UNDERSTOOD THAT, JUST MAKE YOUR COUNTRY PROUD AND QUIT WORRYING ABOUT WHAT THE PEOPLE WHO SIGN YOUR CHECKS HAVE TO PAY IN TAXES.
It would stop the motivation to out source all of the jobs to the third world to boost their not 15% taxed billions in stock options
john, people like you are the reason successful people waste time worrying about taxes, i’ve never understood your logic, you are saying people who are successful and make money should get taxed more and pay the debt that the countries they live in put themselves in and also pays for all the lazy people who expect above said countries to send them money for doing nothing because they “deserve it”.
to answer your question “should they stop working and make nothing?” yes they should because then all the money the governments take and wasted or give to lazy a$$es would be non existent and the “reward” for their extra work would crash every country they do business in
you ever think what would happen if big business’s shut down and spent their hard earned 70% taxed money on themselves for the rest of their lives? no more economic stability
be very careful blabbing about how the rich should stop working because if this trend continues, that will happen, and all your ignorant posts that you are able to post from the free wi-fi you get at the starbucks you spend hours of your day at while ordering tap water will turn into hand written notes on napkins that you pass out to people in front of the liquor store while you are begging for change
John,
There’s a fairness factor involved, at least with me, and I reject your definition of “their extra work is rewarded”. I get tired of the lunacy that is our tax system. My brother chooses to not go to college, not be away from his family for 50% of the work year, not put in overtime (ironically because of what he sees as the “extra” taxes he pays in that particular overtime paycheck), but because I choose to do all the above I am supposed to augment his income by paying an ever-increasing % of mine? I use no more services than he does, and because he smokes and drinks (I do neither) I will also likely use less health care resources. Yet you and the other 99% feel I owe you all for some reason??? THAT’S logic I never understood. And to directly address the question, I will work right up to my desired retirement number and am then calling it a day. Only a sucker works more than necessary to give the govt 40% of his income, and I’m not a sucker.
Your logic is something the liberals don’t understand. My wife and I are fed up with entitlement attitude and class warfare that has become so prevalent. With the recent tax increases, we are planning to retire before age 50 and have moved most of our money into tax friendly investments such as muni bonds, real estate and legal off shore investments. Our tax rates went up for 2013 but the government will collect about 50% less in tax dollars form us this year! We will no longer support the nanny state that continues to grow in this country.
That’s right Tahoebum. You are much better and morally superior to those lazy bastards who make less than you, like Don’s brother. You and Don are smarter, more educated, harder working and better looking that all the 99% combined and therefore ENTITLED to keep all that you earn. Hell, the 99% should be paying you! Your class shouldn’t be bullied or dictated to by the likes of those beneath you socially. That’s “CLASS WARFARE” for Heaven’s sake. You should declare war instead!
Oh, that’s right, Reagan did that 30+ years ago when he first reduced the tax rates for the 1% effectively tripling their take home income.
As a one percenter, I can tell you that keeping the fruits of your hard work is very important to us. The French are leaving for tax friendly countries – it’s not much different living 10 miles over the border! My wife and I just moved out of California to save $20,000 per month in state income tax. They are also losing my property, school bond, and sales taxes which totaled about $35,000 last year. Businesses and wealthy individuals are leaving high tax states in droves. I’ve never been crazy about California – in fact their are many states I enjoy more. There are also record numbers leaving the U.S. for other countries to keep more of their money, and I expect that trend to continue.
Let me help you understand this logic. I am paid $250/hr and over $400K per year. The government takes about 35% so I really take home about $165/hr. If the government raised tax rates to 70% I would take home about $75/hr. If this were to occur I would simply stop working and live on my savings until the economy and the socialist government collapsed. I’d rather spend time with my kids than work for $75/hr.
I wasn’t aware that the United States was a socialist country from 1931 to 1982 while the top marginal tax rate was over 70%. I don’t think the country will collapse because you stop working however.
Why is the President even included in this article?! As President, one of the many perks is that you never have to pay taxes again! That is BS. It is also why Obama so easily is trying to preserve welfare and tax the “rich”. He will never have to pay into the “kitty”. Let’s do away with that perk and see how eager he is to tax what he perceives as “rich”. Also, only 3% of the population is considered wealthy yet they pay 90% of all taxes. The incentive for hard work and sacrifice is diminishing as welfare is far more appealing. Example; At 400k, you are taxed at a higher rate, you only have the deduction (at an adjusted lower rate) for mortgage interest available to you as you income has precluded you from taking other deductions years ago when you made 175k.
So, your tax bill is outrageous, you are unable to take deductions for medical expenses, even though your wife had breast cancer last year, no deduction for 2 of your 4 children, absolutely no deduction for college tuition and you make to much to qualify for free tuition money, no childcare, higher AMT amounts, limited donation, etc. In other words, you are killing yourself to pay taxes so the free loaders who absolutely do not want to work, can keep on getting free benefits.
Why do we even work? We used to be the greatest country in the world. Used to be.
you describe my situation almost perfectly. however, as a business owner we are fortunate to have capital gain income as an option and 90% of my income is from there derived. still pay over half a million each year in fed taxes. don’t forget state taxes, property tax, car tax, sales tax. regardless, the goal of all wealthy high earning people is to have their money working for them at some point so they don’t have to keep getting destroyed by the highest tax bracket. at the end of the day and at some point when effort exceeds reward, i’ll stop employing 50-100 people, quit, live under the income radar and leave a swatch of unemployed behind that have to seek jobs elsewhere. not sure how the president or democrats thinks targeting the 1% helps anyone as small business accounts for 60% of job growth and don’t think for a second corp america picks up the slack – they run bare-bone and have for decades. I’ll have to eliminate 203 positions this year to compensate for HALF of my tax increase. the other half comes out of my retirement savings so this “make the rich pay their share” crap inevitably just trickles down into more unemployment
Your math doesn’t add up. You say that you pay $500k in taxes and then you say half your tax increases will cover salary of 203 people.
Do you honestly think if you “stop employing 50-100 people and quit” that someone won’t pick up the business where you left off an run with it? You’re not that great of a leader that someone else can’t do it.
That is assuming someone else has the capital to start up. Shift more of the capital (e.g. income beyond what one needs to live) from individuals to the government and there are less opportunities for someone else to do it.
Umm, hiring people REDUCES your state and federal tax burden. Employee wages and benefits are paid with pre-tax income. Or didn’t your accountant tell you that?
Sorry typo I meant 2-3 people and their salaries do not come from sources exclusive to my income. Yes it’s deductible but that doesn’t make it free $ just a write off. My point is simply that the changes hit small business owners hard and it’s not insignificant. These aren’t billable positions they are overhead costs so it’s not like releasing revenue back to the market means rest of team has to pickup that slack. Same as ford laying off people to eliminate overhead just much smaller scale
Gtsga – Thank you for pointing out some of the other taxes we all pay besides income tax. I’d like to add that we all get to pay 6.2% into the black hole called Social Security. Lucky self employed people like us get to pay the “employer” contribution of 6.2% as well. Then there’s Medicare tax (which is now increased for income over $200,000 for Obama Care) and local city tax. If you’re self employed you get to pay the other half of the Medicare tax as well as commercial activity tax, unemployment tax, workers compensation tax…..And you’re spot on about “writing off” expenses….it infuriates me when people imply this is free money. It is simply overhead costs that I must earn and pay before I can take real income out of the business.
Jackie is incorrect in saying that the President doesn’t have to pay taxes. Here, for example, is President Obama’s 2011 Form 1040 return: http://www.scribd.com/doc/89228611/President-Obama-s-2011-Tax-Return
President’s do not have to file income tax returns. Did you happen to notice his “deductions” and the final amount? He filed them because he is receiving 24k back from the IRS because of his creative deductions while I am paying said 24k because we do not have the extra money to “invest”. I stand be my statement as I too would file to get an undeserved return of 24k.
If you read the rest of the return you will see it is not a 24k tax credit or anything crazy.
Their total tax due was 162k and during they year they paid in 186k through withholding and pre-payments. Essentially they gave the government an interest free loan in the amount of 24k. The 24k is the balance due back to them.
And they continued to loan it to the government by using that money to prepay their 2012 taxes.
Like I said Andrew, I would file a return if I were receiving 24k back even if I did not need to.
And by the way, he did not “loan” the government 24k, his accountant cleverly “found” many deductions for him to take.
Jackie – you can “stand by” your statement all you want. But it is false. Presidents (Democrat or Republican) are not exempt from filing income tax returns or from paying Federal income tax.
Jackie, anyone who overpays on taxes should get them back when they file a return.
I usually get back about $5000. We make way less than the President. Should I let the government keep that money? I don’t have any great tax loopholes either…two incomes, house, two kids, there’s no easy way to calculate what my tax burden is going to be, so we guess. Sometimes we hit it right on, sometimes we don’t.
And there’s no lifetime dispensation for taxes either. Why bother with facts?
Jackie,
not to begin with critisism, but the president DOES pay taxes. And the 3% top earners do not pay 90% of the taxes. Lets use facts not myths. Also, the freeloaders you talk about are probably in your neighborhood just as in mine. I gues you have never confronted any of them with your opinions on them. Becasue deep inside you know that many of them are working poor. The rest are former working poor who gave up on their dreams to achive anythign. The freeloaders are by far an unintended consequence of the exploitation by what we consider the sucessful business owners in this country. No one can legitimately make $1M a year on his own labor. You try it and seehow you do. It always involves hiring somone else to work for you and payingthem far less than what they produce so you can keep more for yourself. Money made on investments and banking is the same on a slightly varied methodology. As long as wehave $1, $2, and $100M guys runnig arround we will always have what you call “freeloaders”. If resources and the benefits of labor were distributed more equatably (see W Europe and Scandinavia for examples) the freeloaders will all but dissapear.
“The freeloaders are by far an unintended consequence of the exploitation by what we consider the successful business owners in this country. No one can legitimately make $1M a year on his own labor. You try it and see how you do. It always involves hiring someone else to work for you and paying them far less than what they produce so you can keep more for yourself. ”
You are a very honest socialist, who is at least honest enough to put your distorted half-truths in detail for consideration.
Having worked up through the career ladder, I understand your resentment, but there truly are some leaders and CEO’s who make good use of their worker’s capabilities, and that use becomes profit to the company and bonuses to the executives.
What you don’t explain is why can’t the workers make the same good use of the workers capabilities. The reason is very simple: In capitalism, capital rules. The workers typically don’t have the capital to make effective use of their skills. Their skills need to be directed into a group project, and it takes a lot of money to do that. So the owners of the money want their cut. Do you think they have too much of a cut? I bet you do.
The solution is for young people to stop spending so much money on BMWs and Lexus cars. The people in my neighborhood 20-25 years younger than me all have much betters cars than I do. But they don’t have the capital to invest. I save my money and I do have investment capital. To each his own, but you are very unfair to say that the BMW drivers deserve a cut of my profits.
We have a nation of people who think they are entitled to way more they really are, and it is not just the welfare and federal disability takers that want to be on the dole, even people who live in $300,000 houses driving BMWs want more from “the greedy mean people.”
Learn to control your own greed for consumer items, and you too might become successful and independently wealthy. “The enemy is us” is completely applicable to those who spend all their money and end up living paycheck to paycheck.
Not every business owner is greedy or unfair to his workers, nor every worker who doesn’t make enough to pay taxes, a “freeloader” or spendthrift. All of that is mutually exclusive.
The enmity between employees and their employers can only be mitigated through communication which fosters trust. Yet, we are deliberately limiting the ability of employees to be heard as more states pass “Right to Work” laws or eliminate the ability of workers to negotiate wages and benefits.
Without the benefit of communication between all associated humans, a business becomes amoral as opposed to moral or immoral. Amoral is considering the bottom line and competition in the marketplace and excluding the consequences to the lives of real people. Cigarette companies, old time slave holders, and even the Catholic Church have be good examples of that. It is very difficult for corporations to consider anything other than the bottom line and therefore, we form governments, not only to protect us from external threats, but also from internal threats from amoral interests which have no responsibility to promote the public interest.
When a man can’t tell his employer why he thinks he has more value than reflected in his wage, or such statements fall on deaf ears, he will feel exploited regardless of your opinion. To say that exploitation doesn’t happen, or that it’s simply a complaint of young spendthrifts to justify not being promoted or achieving your level of success, is a red herring which has no bearing on the subject. You see, Thomas Jefferson was a spendthrift also and managing money is a weakness for many across class lines.
The fact is that currently the U.S. has a problem with the growing gulf between wealthy and middle class. The fact is that tax favorable legislation for the wealthy, reduced regulations on corporations, reductions in union representation for workers, and reduced benefits to our safety nets, have all contributed to a distrust of government to represent the interest of all citizens. The fact is that “greed” did contribute a great deal to the current recession and debt crisis we are now faced with.
Man-of-Reason: excellent points! Thanks for your input!
We are in the 1% league, and do not have any employees. Too costly. Too whiny. Too much grief from the Fed and NY state government and tax agencies that suck the life out of business owners. We work out of our home, contract out all we can to other business owners to avoid all those pesky employer related taxes and expenses, pull the majority of our income through dividends as opposed to salary, and pay out the nose for the best legal and CPA services available. We suck out cash from large corporations franchisors to the direct benefit of franchise holders, and are very good at what we do. Recession? What recession?!? Business has never been so good, and with no employees to parasitize off us.
So, is that greedy of us, or just good business strategy? I say it is the latter, with a touch of good luck along the way. You don’t like it? Tough. Get past our guarded gate and security cameras, alarm system, then past our cache of weapons if you dare try, then maybe we will talk. Maybe. But likely not because we don’t need to explain why we do things the way we do. We just have to pay the very least amount of taxes on our income, property, etc., and let our attorneys keep the various folks looking to take a piece our of hide out of us beyond arm’s length.
It is good to be free of being an employee, and having employees!
The President pays taxes but his real income is far more than the $400,000 salary.
And the big bucks come after he leaves office.
Clinton left office broke and owing $25 million in legal fees for his various nefarious activities. In less than 8 years his net worth was well over $100 million.
A friend of mine, who is mega wealthy, recently had that conversation. He said he sometimes wondered why he worked so hard to pay so much in taxes and why didn’t he just go on welfare. His answer was that he could never live like that. We were talking about total taxes, which are over 50%, not just income taxes. Even the middle class are paying over 50% in total taxes.
Please tell your friend to switch places with me for say 3 months. I have been seeking reasonable employment for the past 3 years(at least 7.25 hr), and am living off of family as my income is 255 dollars a month and I refuse to go on welfare. Eventually that will have to happen, unless I die first. When an executive makes in excess of 100,000,000 a year, and yes there are some, who could instead put people to work and don’t, Where is the equality. I’ll bet my monthly earnings that I have done more work seeking employment than most CEO’s have done in the past year.
If our family made $400K per year, our tax rate would go down. We now pay a TONNE of AMT (Alternative Minimum Tax), and we would pay $0 AMT if we made $400K per year.
Some of my co-workers make $350-$450K per year. I would love to make that much and would have no problem payer the lower tax rates that we would have!
cliff
KGRB
Used to be? The great American honeypot remains a people magnet.
>The great American honeypot remains a people magnet.
People who have never been out of the country, or who don’t watch the news, have no idea how great our country is.
Often the incentive is to pay off debt. They don’t give $400K jobs to college graduates. Those doctors and lawyers on the list spend a lot of money on college and graduate school loans. Then when they get out, they real life loans, like houses and cars (maybe they are nice houses and cars, with higher loans). These are the kind of folks who can afford to be generous to their kids and pay for their college education without the need for loans. And when they can finally pay off their home, and get their kids through school, they’ll work a few more years to save money for retirement (because they surely won’t have a pension and will probably be limited on what they get out of social security). Of course, because it takes a long time to get a career like that on track, these high earners didn’t get married until their 30s, and had kids thereafter. So they’re still working until they are 65, just like you and I. Come to think of it… they are exactly like you and I!! I want a nice home and car. I want to pay my kids school so that they don’t begin life burdened with loans, and I want to retire at 65 without having to worry about living on social security or government dole. Why are we demonizing these people when they represent everything I want to achieve?
Graduated law school and passed the bar at 24, after working hard for 4 years in college (paid for my own room and board by part-time employment) and 3 tough years studying law. After one-year federal clerkship earning $28,ooo, started with small business law firm. Worked 6 days/week for 10 years. Became partner at 35. Married at 26 and had 2 kids. Paid off law school loans, saved for house down payment. Saved for kids college with 529 plans. Saved for retirement with 401k plan. Saved for rainy day. Traveled a bit. Donated a bit. Provide pro bono to the needy.
Now 50. Earn low 6 figures. Wife works part-time. I drive a Chevy Malibu. We have a 2000sq ft track home. Live below our means. Try to treat others fairly and make the world a better place.
Don’t object to paying higher taxes if it benefits the less fortunate, but not the slackers. I guess I’m in the upper middle class now, but having 7-8 years of higher ed, plus 25 years of long hours provides a level of experience that many will pay well for.
Are they talking about $400k gross income or net taxable income? Anyone with a net that high would probably have a gross of around $600k.
Nothing from nothing leaves nothing. We should have here a 95% tax on all income above 5,000,000 and who disagree we should take all they have, period. All wealth in any country is because of the American soldier, the value of the dollar is based on his success.
Good maybe they’ll retire..
Income tax is graduated. You pay the same rate as every other schmuck for income below 400,000. Your income over 400k is taxed at the higher rate. Your incentive to continue to increase your income is so you enjoy/save the additional money you earn and appreciatively contribute the remainder to perpetuating the system that facilitates you earning that income. If the social fabric breaks down you will soon find that nobody can afford your hourly rate or the fabulous tchotchkesyou peddle. You will also quickly learn that taxes in this country are a bargain that keeps your precious ass(ets) safe from the broke, dumb and vicious. This stuff has pragmatically evolved for many significant but quickly forgotten reasons.
Dan, that’s only partly true. For those making up to a certain amount, they don’t pay any Federal income tax. I do, and continue to pay. Also, I fully realize the infrastructure must exist for business to function (and have the combat decorations and experience to prove it), but I dispute completely that our taxes are a bargain and that the investment of the 53% is effectively managed. Additionally, I find the death tax (excuse me, the “Estate Tax”) repulsive in the extreme. I believe the social fabric breaks down in direct proportion to the myth perpetuated by the enablers that ‘we’re all equal and deserve to be treated that way’ without a corresponding caveat that ‘as long as you work equally as hard’. Therein lies the rub, and it’s what makes the hated 1% so bitterly opposed to allowing the existing hands in our pockets to dig ever deeper. I have far less faith in the govt’s expanding role in our lives than you do.
John:
Because jumping from 1 million income to 2 million income level is so easy?
What a silly point to make to try and prove your point.
There are producers and takers in life. The producers are sick of giving ridiculous amounts to the takers due to the inadequacies and inefficiencies of the government.
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