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Old 01-07-2016, 09:45 PM
 
33,016 posts, read 27,371,229 times
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Quote:
Originally Posted by TaxPhd View Post
Don't you qualify for the Michigan Homestead Property Tax Credit?

GRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

You have just hit my Hot Button

The Michigan Homestead Property Tax Credit, affords homeowners a tax break based on the property taxes billed in the year, whether paid in that year or not. (My employer has a recurring two-year business cycle in which he makes a ton or money one year and very little the next year - his expenses and revenues are very heavily concentrated in consecutive years. As a result, he lets his property taxes go unpaid one year and then pays two years' of property tax the next year - while enjoying the Homestead Credit in the year he didn't pay, thanks to my tax tip. So I've saved him thousands of dollars, )

On the other hand (pout), renters can use only RENT PAID DURING THE YEAR to calculate their tax credit, and MUST USE A ONE-SIZE FITS ALL FORMULA REGARDLESS OF THE ACTUAL PROPERTY TAXES on the rental.

The actual property taxes on my rented home are 40% of the rent I pay, but the formula allows me to apply only 20% to the tax credit calculation, therefore I do not qualify at all. (My landlord prefers a stable low-maintenance long-term tenant to short-term profit; her strategy is to hold the property and let her children inherit with a stepped-up tax basis.)

If I were a homeowner paying directly the same amount of property tax, I would get an annual tax credit between $400 and $500.
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Old 01-07-2016, 09:55 PM
 
33,016 posts, read 27,371,229 times
Reputation: 9074
Quote:
Originally Posted by TaxPhd View Post
Ah, so there ARE choices. . .

Except that many choices turn out to be unfeasible because the cost of moving house is greater than the cost savings at the destination, not to mention the risks involved in relocating without a firm job or housing commitment.
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Old 01-07-2016, 09:55 PM
 
10,511 posts, read 5,563,011 times
Reputation: 10587
Quote:
Originally Posted by freemkt View Post
GRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR

You have just hit my Hot Button

The Michigan Homestead Property Tax Credit, affords homeowners a tax break based on the property taxes billed in the year, whether paid in that year or not. (My employer has a recurring two-year business cycle in which he makes a ton or money one year and very little the next year - his expenses and revenues are very heavily concentrated in consecutive years. As a result, he lets his property taxes go unpaid one year and then pays two years' of property tax the next year - while enjoying the Homestead Credit in the year he didn't pay, thanks to my tax tip. So I've saved him thousands of dollars, )

On the other hand (pout), renters can use only RENT PAID DURING THE YEAR to calculate their tax credit, and MUST USE A ONE-SIZE FITS ALL FORMULA REGARDLESS OF THE ACTUAL PROPERTY TAXES on the rental.

The actual property taxes on my rented home are 40% of the rent I pay, but the formula allows me to apply only 20% to the tax credit calculation, therefore I do not qualify at all. (My landlord prefers a stable low-maintenance long-term tenant to short-term profit; her strategy is to hold the property and let her children inherit with a stepped-up tax basis.)

If I were a homeowner paying directly the same amount of property tax, I would get an annual tax credit between $400 and $500.
Thanks for the explanation, I wasn't sure how it worked.
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Old 01-07-2016, 09:57 PM
 
10,511 posts, read 5,563,011 times
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Quote:
Originally Posted by freemkt View Post
Except that many choices turn out to be unfeasible because the cost of moving house is greater than the cost savings at the destination, not to mention the risks involved in relocating without a firm job or housing commitment.
I understand that. I believe that I addressed the issue of prior choices possibly limiting current choices.
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Old 01-07-2016, 10:03 PM
 
33,016 posts, read 27,371,229 times
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Quote:
Originally Posted by TaxPhd View Post
Thanks for the explanation, I wasn't sure how it worked.

Every state is different, I think the tax software people are the only ones who actually know how every state works. Most states with property tax circuit breakers do not extend them to renters at all. I believe there is one state that allows renters to use actual property taxes on the property but I don't remember which one.
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Old 01-08-2016, 07:28 AM
 
658 posts, read 1,140,793 times
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Quote:
Originally Posted by TaxPhd View Post
Oh, you mean those from AGI deductions, both itemized and standard, that are available to all, not just the middle class?

Yeah, I thought that was what you were talking about.

nice backpedal. either people 100% pay their own way, or they don't.

which is it?
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Old 01-08-2016, 11:07 AM
 
10,511 posts, read 5,563,011 times
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Quote:
Originally Posted by LeaderOCola View Post
nice backpedal. either people 100% pay their own way, or they don't.

which is it?
No back-peddle at all. EVERY taxpayer is allowed certain deductions in calculating their taxes. If you're point is, "any taxpayer who deducts anything when calculating their taxes isn't paying their own way," fine. But it doesn't change the fact that the welfare class has luxuries due to them being paid for by taxpayers.
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Old 01-08-2016, 03:13 PM
 
Location: Paranoid State
13,044 posts, read 13,817,290 times
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Quote:
Originally Posted by Lowexpectations View Post
This as is much in the term of economics is opinion and theory.
I agree. In a separate blog post, Dr. Cochrane agrees, recognizing it has no chance, but defends his article from the perspective of stating an ideal policy position.



Quote:
Originally Posted by Lowexpectations View Post
...For instance in theory a higher income tax rate at higher incomes is a disincentive to earn more, a higher capital gains rate is disincentive to invest. But in reality and in real life the impact isn't that clear. Do I decline a raise because it puts me into the next tax bracket?

Typically only if I'm ignorant and don't understand how things actually work. Do I invest less if cap gains are taxed higher? In reality no I don't and from the investor behavior I seen over nearly two decades most aren't impacted by this either.
Good points. At a sufficiently high cap gain rate (100%), no one would invest -- everyone would just consume. But within the range of where we are today, raising or lowering the cap gain rate a few points at the margin will affect a few people

I agree that people don't decline raises because of a bump into the next tax bracket -- but at the margin, some people will reduce hours worked. There are real-world stories of people who, because of various subsidy programs, make a rational choice not to work more hours. There are real-world stories of, say, housewives who choose to be stay-at-home moms once they figure out their after-tax, after-day-care, after-commute expenses. At some point, one chooses to retire (as I did).

Quote:
Originally Posted by Lowexpectations View Post
In the article it mentions

"when the govt taxes savings" this would be abnormal and I'm not aware where savings are taxed,
Today, income is taxed - and then we put after-tax money into savings. I believe that is what Professor Cochrane is referring to. Of course, our government has responded to the demand by creating all manner of tax-advantaged savings accounts (IRAs, 401Ks, Roth-IRAs etc etc) as well as tax-advantaged spending accounts such as Medical Savings Accounts or Health Savings Accounts. There are many others.

I believe Cochrane's point is to simplify & make all savings untaxed on the front end -- you put pre-tax money into savings, and when you pull it out (consume it), it is then taxed.

Quote:
Originally Posted by Lowexpectations View Post
"wealth" does this happen? If so where?
At the federal level, I believe you are correct. At the state level, some states indeed have had wealth taxes. Florida, for example, used to have an "intangibles tax". This was a way to get at the large number of elderly retirees who had all their savings in double-tax-free muni bonds and hence had wealth but effectively zero taxable income.



Quote:
Originally Posted by Lowexpectations View Post
"Inheritence" this from a federal level just doesn't apply to very many people
At the Federal level, we have the 4th highest Estate Tax of the OECD. At the state level, currently, fifteen states and the District of Columbia have an Estate Tax, and six states have an Inheritance tax. Maryland and New Jersey have both Estate and Inheritence taxes.

"It reduces the incentive to save, invest, and build companies rather than enjoy consumption immediately"
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Old 01-08-2016, 03:46 PM
 
26,181 posts, read 21,462,310 times
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Quote:
Originally Posted by SportyandMisty View Post
I agree. In a separate blog post, Dr. Cochrane agrees, recognizing it has no chance, but defends his article from the perspective of stating an ideal policy position.





Good points. At a sufficiently high cap gain rate (100%), no one would invest -- everyone would just consume. But within the range of where we are today, raising or lowering the cap gain rate a few points at the margin will affect a few people

I agree that people don't decline raises because of a bump into the next tax bracket -- but at the margin, some people will reduce hours worked. There are real-world stories of people who, because of various subsidy programs, make a rational choice not to work more hours. There are real-world stories of, say, housewives who choose to be stay-at-home moms once they figure out their after-tax, after-day-care, after-commute expenses. At some point, one chooses to retire (as I did).



Today, income is taxed - and then we put after-tax money into savings. I believe that is what Professor Cochrane is referring to. Of course, our government has responded to the demand by creating all manner of tax-advantaged savings accounts (IRAs, 401Ks, Roth-IRAs etc etc) as well as tax-advantaged spending accounts such as Medical Savings Accounts or Health Savings Accounts. There are many others.

I believe Cochrane's point is to simplify & make all savings untaxed on the front end -- you put pre-tax money into savings, and when you pull it out (consume it), it is then taxed.



At the federal level, I believe you are correct. At the state level, some states indeed have had wealth taxes. Florida, for example, used to have an "intangibles tax". This was a way to get at the large number of elderly retirees who had all their savings in double-tax-free muni bonds and hence had wealth but effectively zero taxable income.





At the Federal level, we have the 4th highest Estate Tax of the OECD. At the state level, currently, fifteen states and the District of Columbia have an Estate Tax, and six states have an Inheritance tax. Maryland and New Jersey have both Estate and Inheritence taxes.

"It reduces the incentive to save, invest, and build companies rather than enjoy consumption immediately"

Saying we have the 4th highest rate in OECD may be factual but is also purposefully or not missing a big part of the entire picture

Quote:
The U.S. has the fourth highest estate or inheritance tax rate in the OECD at 40 percent; the world’s highest rate, 55 percent, is in Japan, followed by South Korea (50 percent) and France (45 percent). Fifteen OECD countries levy no taxes on property passed to lineal heirs.
The U.S. estate tax has a high rate and a large exemption; as a result, it raises very little revenue and applies to very few households.
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Old 01-09-2016, 02:18 AM
 
6,438 posts, read 6,888,631 times
Reputation: 8742
Quote:
Originally Posted by TaxPhd View Post
Itemized deductions ARE available to all. Not having an income level high enough to take advantage of that doesn't change their availability.

I included the standard deduction in my post, for just such a reason.
Itemized deductions may be available to all, but that doesn't make them useful for all. For example, I don't have a mortgage so I am better off taking the standard deduction. (This also means that I cannot take the 65-and-over additional deduction.)
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