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Bonuses are taxed federally at the 39.6% marginal rate, irrespective of income. Bonuses ordinarily confer a positive aspect to one's performance. However, the federal government punishes positive behavior.
Make the income tax rate flat, and make it lower. 18% with no deductions (inclusive mortgage deduction) sounds about right.
18% on every last penny earned by everybody would produce about as much revenue as the rates we have now. You're going to encounter a lot of resistance from people making $20,000 a year and facing a $3,600 Federal income tax bill on top of their $3,060 Social Security and Medicare bill (if they're self-employed and pay both halves).
the top capital gains rates are 20% and the top income rates have a medicare surcharge tax on them of over 3% , bringing the capital gains rate to almost 24% not 15% .
on top of that anyone with capital gains that high will not be on the marginal tax rate system .
they would trigger the amt tax which if income was high enough becomes a pretty much flat tax from dollar one .
plus states do not recognize special capital gain rates so you are taxed on the full amt amount with no break on capital gains .
we got hit with the amt tax last year because of a big capital gain . on top of the 23.2% capital gains rate , we owed an additional 16k amt penalty on top of what the marginal tax rate would have been .
plus all that was taxed by our state .
you have to remember that we use two parallel tax systems all the time and your rate is the higher of the two . but when organizations want to show how little tax high income folks pay they only show it under the marginal system not the amt system . most high earners are not on the marginal tax system , especially if a lot of income is qualified dividends and capital gains items .
Last edited by mathjak107; 12-14-2015 at 04:40 AM..
Skeptical when people pick odd years when showing trends, it is always done to cherry pick a high/low and chase a conclusion.
I don't doubt net worth is down but 2007? Why would you pick that year? Oh yeah, peak of the housing bubble, where so much of American net worth was tied up. How would it look if he picked 2010 and compared to today? Not quite as dramatic I suspect.
People treat numbers like that as if they were real. They are not real, and never have been. A house is worth a place to live and keep your stuff. In that sense, my house is worth the same as it was in 1994 when I bought it. In another sense it is worth more because I have done extensive upgrades and remodeling, and I like it better now than I did in 1994. It has no cash value until I sell it. At that point the cash will have a numeric value and the house will be worthless, because somebody else will own it.
Stocks and bonds are the same. Their value is a fiction. Just ask my brother how much his WaMu and Chrysler bonds were worth.
Most people have no concept of value. They swallow numbers like they are real.
Bonuses are taxed federally at the 39.6% marginal rate, irrespective of income. Bonuses ordinarily confer a positive aspect to one's performance. However, the federal government punishes positive behavior.
Make the income tax rate flat, and make it lower. 18% with no deductions (inclusive mortgage deduction) sounds about right.
What kind of nonsense is this? Income is income is income. A bonus is taxed at your marginal tax rate. For a fraction of 1% who are extremely high income, that would be 39.6%.
I can't believe the ignorance. I mean... we all pay Federal income taxes. You'd think people would sit down at least once and get at least a basic understanding of how it all works. I do my Federal income taxes using an Excel spreadsheet. It forces me to sit own and see what tax law changed ever year and makes me aware of exactly what tax bracket I'm in. Since I'm a cheap bastard, I then transcribe the numbers to FreeFillableForms.com which is the only place higher income people can efile for free.
People treat numbers like that as if they were real. They are not real, and never have been. A house is worth a place to live and keep your stuff. In that sense, my house is worth the same as it was in 1994 when I bought it. In another sense it is worth more because I have done extensive upgrades and remodeling, and I like it better now than I did in 1994. It has no cash value until I sell it. At that point the cash will have a numeric value and the house will be worthless, because somebody else will own it.
Stocks and bonds are the same. Their value is a fiction. Just ask my brother how much his WaMu and Chrysler bonds were worth.
Most people have no concept of value. They swallow numbers like they are real.
i would disagree , everything is worth just whatever it is at any point in time . the fact you invested poorly or made bad decisions is a different issue .
investment are no different then working a job for commissions . each year what you get is variable and is sure as heck as real an amount as anything else is .
in fact my yearly income in retirement is based each year on my portfolio value . that is as real as it gets . my net worth may be variable but it sure is real .
it is like that nonsense about things being only paper losses or gains because you didn't sell.
that is bull.
just because you choose to keep the money in play over night instead of selling and buying a new position each morning amounts to the same thing .
plus states do not recognize special capital gain rates so you are taxed on the full amt amount with no break on capital gains .
we got hit with the amt tax last year because of a big capital gain . on top of the 23.2% capital gains rate , we owed an additional 16k amt penalty on top of what the marginal tax rate would have been .
plus all that was taxed by our state .
A minor quibble but you can't project New York state income tax rules on the rest of the country. Every state has different tax law. Quite a few states don't tax capital gains at all. Others just align with the Federal system and use your AGI on your Federal income tax form as the basis for state tax.
but it is still a tax that erodes my income whether it effects anyone else . in any case that 15% capital gains rate and marginal tax system would not apply for most high earners . as the capital gains get higher the chances of the amt tax being your system get greater .
People treat numbers like that as if they were real. They are not real, and never have been. A house is worth a place to live and keep your stuff. In that sense, my house is worth the same as it was in 1994 when I bought it. In another sense it is worth more because I have done extensive upgrades and remodeling, and I like it better now than I did in 1994. It has no cash value until I sell it. At that point the cash will have a numeric value and the house will be worthless, because somebody else will own it.
Stocks and bonds are the same. Their value is a fiction. Just ask my brother how much his WaMu and Chrysler bonds were worth.
Most people have no concept of value. They swallow numbers like they are real.
As MathJack has pointed out a number of times, owning a home in a high cost area at least allows you the option of selling it when you retire, buying a cheaper home in a low cost area, and living a comfortable retirement topped up with that recaptured home equity. Sure, you need to live somewhere but it doesn't need to be an $800K single family home in the NYC tri-state area, metro-Boston, metro-DC, or the Bay Area.
Since I'm single, my home is my long term care policy. It will fund a half-dozen years in an assisted living place or dementia ward.
I keep two net worth calculations on my financial planning spreadsheet. One includes my home and looks like the one we all have. The other excludes it and projects retirement cash flow. I beg to differ on your "numbers are not real" statement. If you don't take a hard look at the numbers, it's impossible to plan your personal finances. Based on my parents and the way genetics works, I have to plan to live well into my 80's. Those line items on my financial spreadsheet aren't merely abstract fiction. I'm going to spend all of that if I live that long. If I model it wrong and run completely out of money a decade too soon, my life is going to suck.
but it is still a tax that erodes my income whether it effects anyone else . in any case that 15% capital gains rate and marginal tax system would not apply for most high earners . as the capital gains get higher the chances of the amt tax being your system get greater .
Sure. We all have our own tax reality. Other than being in a higher marginal tax bracket, mine looks exactly like Joe Sixpack's. Most years, I could just about do a 1040-EZ if it were allowed.
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