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I'm not sure how you jump to this conclusion. It isn't supported by the data.
You pay taxes based off of your taxable income. If the bottom 60% contribute 4% of the total tax revenue, this would mean there are may people without sufficient income to be taxed. This can happen only one of a few ways:
1. Not earning more than the standard deduction / file a tax return
2. Most or all of your income being a legitimate deduction due to actual expenses
3. (The minority of the 60%) People living off of a lump sum that was either tax free or already taxed in a previous year.
What other possibilities can you think of, if you are stating my conclusion is unfounded?
Owning enough capital to have an above median living standard in a high ranking developed country, without needing to work at all, FOREVER... is wealthy.
You have a very interesting definition of wealthy. Mine is a bit different than yours.
I think you're wealthy if you can afford some of the following (the choice to buy them is different; I'm talking the ability.)
And why the hell is this person getting free healthcare, while the guy making $50k/yr at a job is paying $$$ for it?
Three thoughts:
1) How does the person in your hypothetical scenario make you, personally, worse off? It clearly upsets you, but how does that person make you, personally, worse off?
2) Wealthy people have personal physicians on their own payroll.
3) The solution to the problem raised by your hypothetical, assuming the problem is pervasive enough in the real world to warrant a solution, lies in changing the rules for social service benefit eligibility, not in levying a wealth tax on capital.
Quote:
Originally Posted by rruff
Our system heavily favors owners of capital and screws people who work for a living.
There is a reason our system favors capital: we wish to encourage capital formation.
There is a reason we wish to encourage capital formation: it drives technical innovation forward, it drives increases in GDP, it drives increases in high paying jobs, in drives employment up and unemployment down.
That seems to me like a good thing, don't you?
Similarly, our system does not SCREW people who work for a living. Our system REWARDS people who work for a living.
Here are some leading companies (all with over 1000 employees) and their respective MEDIAN cash compensation (base + bonus + value of stock compensation, but not including things such as the value of employer paid health insurance, gym memberships, life insurance, etc).
Remember, the median compensation number is where half the employees earn more than that amount and half the employees earn less than that amount:
(Moderators: I own the copyright on the following images)
Sources of the data published: MyLogIQ (median pay); S&P Global Market Intelligence and company filings (sector classification and number of employees)
not for nothing , but i think you guys would be better off learning how to improve your own financial plans instead of dumping so much time in to what amounts to nonsensical arguments that don't help you in the least .
So, here's a hypothetical: Imagine someone with no job but substantial wealth parks all of her wealth in tax-free municipal bonds. Her IRS Form 1040 AGI would be zero... but that doesn't mean she ends up paying zero federal income tax.
All that tax-free municipal bond interest income, while it does not flow to AGI, does indeed flow to the Alternative Minimum Tax form IRS form 6251. https://www.irs.gov/pub/irs-pdf/f6251.pdf . That tax-free municipal bond income is counted into AMTI - Alternative Minimum Tax Income.
In general, that hypothetical person parking substantial wealth in tax free munis would owe quite a bit in federal income taxes.
You pay taxes based off of your taxable income. If the bottom 60% contribute 4% of the total tax revenue, this would mean there are may people without sufficient income to be taxed. This can happen only one of a few ways:
1. Not earning more than the standard deduction / file a tax return
2. Most or all of your income being a legitimate deduction due to actual expenses
3. (The minority of the 60%) People living off of a lump sum that was either tax free or already taxed in a previous year.
What other possibilities can you think of, if you are stating my conclusion is unfounded?
You said in post 647:
Quote:
Originally Posted by ddm2k
Close to 60% have an AGI of essentially $0?
AGI is IRS form 1040 line 7, from which is subtracted a variety of things such as the standard deduction or itemized deductions, (IRS form 1040 line 8) and qualified business income deduction (line 9).
I still do not know how you could conclude, regarding IRS form 1040 line 7, Close to 60% have an AGI of essentially $0
So, here's a hypothetical: Imagine someone with no job but substantial wealth parks all of her wealth in tax-free municipal bonds. Her IRS Form 1040 AGI would be zero... but that doesn't mean she ends up paying zero federal income tax.
All that tax-free municipal bond interest income, while it does not flow to AGI, does indeed flow to the Alternative Minimum Tax form IRS form 6251. https://www.irs.gov/pub/irs-pdf/f6251.pdf . That tax-free municipal bond income is counted into AMTI - Alternative Minimum Tax Income.
In general, that hypothetical person parking substantial wealth in tax free munis would owe quite a bit in federal income taxes.
Ummmmm noooooo .... only certain private activity bonds are subject to AMT there are plenty of AMT exempt Tax free muni’s and funds around. Nobody who had the potential to trigger AMT would invest in bonds that were not AMT exempt.
AGI is IRS form 1040 line 7, from which is subtracted a variety of things such as the standard deduction or itemized deductions, (IRS form 1040 line 8) and qualified business income deduction (line 9).
I still do not know how you could conclude, regarding IRS form 1040 line 7, Close to 60% have an AGI of essentially $0
It's a pretty bottom-line number:
(7) Adjusted gross income. If you have no adjustments to income, enter the amount from line 6; otherwise,
subtract Schedule 1, line 36, from line 6
This may or may not be an earnings issue. This may or may not be an expense issue. But what it suggests is, up to approximately that 60th percentile of filers, there is usually a very thin margin of discretionary income left over.
I'm not convinced that the 1% contributing to taxes at an all time high is necessarily an injustice. That's just how it would mathematically happen, whether we had a flat tax or a progressive tax.
60% percentile is just over $78k. Yes, you can take the standard deduction, but when you add in deductible expenses like healthcare premiums, retirement contributions, educational expenses, you're not left with a lot (and thus not a lot to tax).
To reach the 1% in 2017, an American household would have to earn $434,454.80. Roughly 1,276,791 households made that or more for full year 2017. This could be two working professionals in the Bay Area, or a single software engineer with a lot of RSUs. But it only starts there.
Owning enough capital to have*... without needing to work at all, FOREVER... is wealthy.
Nope. This level is what is meant when the term 'comfortable' gets used.
The distinction being that it's not enough to ALSO afford taking on much risk (or obnoxious indulgence).
Quote:
Originally Posted by ddm2k
This may or may not be an earnings issue. This may or may not be an expense issue.
But what it suggests is, up to approximately that 60th percentile of filers,
there is usually a very thin margin of discretionary income left over.
I'm not convinced that the 1% contributing to taxes at an all time high is necessarily an injustice.
It's not. The 1% could be be assessed a DOUBLING (to 86%) and it would still not be an injustice.
*: Calculating what/how that other term you used could be mean? Not real useful.
(an above median living standard in a high ranking developed country)
Last edited by MrRational; 03-12-2019 at 03:50 PM..
Ummmmm noooooo .... only certain private activity bonds are subject to AMT there are plenty of AMT exempt Tax free muni’s and funds around. Nobody who had the potential to trigger AMT would invest in bonds that were not AMT exempt.
Fair enough... but it was my hypothetical, so I'll stick to the hypothetical where the person in question was an idiot.
You pay taxes based off of your taxable income. If the bottom 60% contribute 4% of the total tax revenue, this would mean there are may people without sufficient income to be taxed. This can happen only one of a few ways:
1. Not earning more than the standard deduction / file a tax return
2. Most or all of your income being a legitimate deduction due to actual expenses
3. (The minority of the 60%) People living off of a lump sum that was either tax free or already taxed in a previous year.
What other possibilities can you think of, if you are stating my conclusion is unfounded?
Quote:
Originally Posted by RationalExpectations
You said in post 647:
AGI is IRS form 1040 line 7, from which is subtracted a variety of things such as the standard deduction or itemized deductions, (IRS form 1040 line 8) and qualified business income deduction (line 9).
I still do not know how you could conclude, regarding IRS form 1040 line 7, Close to 60% have an AGI of essentially $0
+1
Don't forget the CTC and the EIC also. A couple with 2 kids, married filing jointly, could easily make the US median income and still pay no income tax.
The standard deduction is now 24k, so your median household is left with 37k taxable assuming they don't do a Traditional 401(k). I'll assume they do 10% in one, so 31k taxable.
So (.1 x 19,000) + (.12 x 12,000) means $3,340 in taxes. However they probably had ~5,000 withheld during the year and if they have even 2 kids they're already looking at getting back their 5,000 withheld plus ~600 from the refundable CTC.
Of course if they're around the median household income in NC rather than the national median then they will also get ~2,400 from the EIC, not to mention more like 2,800 in refundable CTC.
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Next time I talk to that investment advisor I'll ask him how it's done.
