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CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Old 12-10-10, 12:56 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by CRM114 View Post
Right. And if you make $300K, it's not like this tax increase would be that noticeable.

I wish I could find the chart now but I remember it showing people with incomes at or around $250K will save a couple thousand max with the tax cuts. People making over $1 million would really see the savings and the difference was quite dramatic.
Slightly oversimplified, but it would about an extra 3% on everything taxed as income, plus another 10% on dividends moved from cap gains rates to regular income rates. It would depend on your distribution of income plus it could easily be $10K at the 250 K level, plus there is the extra 4% FICA on unearned income if the total is over $250K.
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Old 12-10-10, 01:08 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by Nausicaa View Post


People also seem to ignore that these high dollar earners are still keeping the same tax cuts as everyone else on income earned in the lower brackets, up to the highest bracket (which is around $370k, why all the discussion about $250k? Are they changing the brackets?). So, the whole, "well, $250k isn't [i]that[i] rich" argument is a distraction. People earning that much will still get the same tax cuts as everyone else, and only be forced into a higher rate on income over the threshold. Which is to say, it doesn't really affect these people much at all. It will hit people with significant portions of their income in excess of the highest bracket much harder.
How are you going to feel about this in 10 years when the expected inflation hits and $250K is an fairly average income for a 2-income family, the same as $125K now. Only a 7% inflation rate over 10 years does that.
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Old 12-10-10, 01:16 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by X View Post
How are you going to feel about this in 10 years when the expected inflation hits and $250K is an fairly average income for a 2-income family, the same as $125K now. Only a 7% inflation rate over 10 years does that.
Plus health care will probably cost about 200K a year by then, and you'll be required to pay for it.

I think 10 years is ample time to reassess. But It's interesting that we're not reassessing after as many years as it's been since the original Bush cuts.
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Old 12-10-10, 01:19 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Yeah, I feel the brackets should be adjusted every few years to take inflation and cost of living into account.

EDIT: And for the record (not that anyone cares), I don't necessarily oppose extending the tax cuts for everyone this year. And I consider myself liberal.
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Old 12-10-10, 01:21 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by Nausicaa View Post
Yeah, I feel the brackets should be adjusted every few years to take inflation and cost of living into account.
...and cost of dying.
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Old 12-10-10, 02:10 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by Nausicaa View Post
Yeah, I feel the brackets should be adjusted every few years to take inflation and cost of living into account.
Without it written in, it becomes like the Alternative Minimum Tax that is used as a tool to pass shit we don't need or want so they can do a yearly fix of the AMT.
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Old 12-10-10, 02:24 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by OldDude View Post
Slightly oversimplified, but it would about an extra 3% on everything taxed as income, plus another 10% on dividends moved from cap gains rates to regular income rates. It would depend on your distribution of income plus it could easily be $10K at the 250 K level, plus there is the extra 4% FICA on unearned income if the total is over $250K.
An extra $10K? I'm not sure how you came up with that number. Who's talking about unearned income?
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Old 12-10-10, 03:13 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by OldDude View Post
I think that whiplash comes from how we define "rich."
http://www.snpp.com/episodes/CABF06

Nelson: Hey, look how much money Skinner makes. $25,000 a year!

Bart: [putting the numbers in a calculator] Let's see, he's 40 years old times 25 grand -- whoa, he's a millionaire.
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Old 12-10-10, 03:19 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by Red Dog View Post
If we had a locality factor/component in tax payment (as the feds do with federal employee pay), we could address this issue and determine whether the $250K income earner is rich or relatively ordinary.

But alas, this is merely a pipe dream, and beyond the ability of our government for some reason.

No, no, no! If you had a locality factor, then the liberals in expensive places like Manhattan who favor high taxes on everyone else would see their own taxes reduced. This is also why I am opposed to letting people deduct their state and local taxes on their federal income tax form. Liberals who favor high taxes should not be allowed to use loopholes to avoid paying those taxes.
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Old 12-10-10, 03:24 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by grundle View Post
No, no, no! If you had a locality factor, then the liberals in expensive places like Manhattan who favor high taxes on everyone else would see their own taxes reduced.
I know some Wall St people and none of them would consider themselves "liberal" by any stretch. I'd imagine the majority of people with money in NYC are Republicans.

Originally Posted by grundle View Post
This is also why I am opposed to letting people deduct their state and local taxes on their federal income tax form. Liberals who favor high taxes should not be allowed to use loopholes to avoid paying those taxes.
Are you saying that if a state has high taxes, that the citizenry should be punished via double taxation? Do you believe the citizens like paying high taxes? Perhaps I'm not following your logic here.
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Old 12-10-10, 03:31 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by Red Dog View Post
Well above average does not equal rich. And if you have multiple kids, that $250K in Fairfax Co is even less substantial.
A timely piece in today's WP:
http://www.washingtonpost.com/wp-dyn...004197_pf.html

Analysis examines what it's like to be a 'rich' family in America

By Karen Hube
The Fiscal Times
Friday, December 10, 2010; 2:29 PM

Karen Hube works for The Fiscal Times, an independent news organization that specializes in fiscal and economic matters. It is funded by Peter G. Peterson, who separately supports groups that advocate for long-term debt reduction.

In the heated battle over extending the expiring Bush-era tax cuts, a single number has emerged from the crossfire: $250,000. It's the annual income that President Obama and others have repeatedly used to define what it means to be "rich" in America today. And even though a tentative deal has been reached on the cuts, $250,000 is etched in the minds of policymakers and pundits as the number that separates the middle class from the wealthy.

By most measures, a $250,000 household income is substantial. It is six times the national average household income, and just 2.9 percent of couples earn that much or more. "For the average person in this country a $250,000 household income is an unattainably high annual sum - they'll never see it," says Roberton Williams, an analyst at the Tax Policy Center, a nonpartisan think tank in Washington.

But just how flush is a family of four with a $250,000 income? Are they really "rich"?

To find the answer, BDO USA, a national tax accounting firm, computed the total state, local and federal tax burden of a hypothetical two-career couple with two children, earning $250,000. To factor in varying state and local taxes, as well as drastically different costs of living, BDO placed the couple in eight locales across the country - including the District, Alexandria and Bethesda - with top-notch public school districts using national data on spending.

The analysis assumes that this couple - let's call them Mr. and Mrs. Jones - are both working professionals. They take advantage of all tax benefits available to them, such as pre-tax contributions to 401(k) plans and medical, child care and transportation flexible spending accounts. They have no credit card debt, but Mr. Jones racked up $40,208 in student loan debt in undergraduate and graduate school, and Mrs. Jones borrowed $22,650 to get her undergraduate degree (both amounts are equal to the national averages for their education levels). They also have a car loan on one of two cars, and a mortgage for 80 percent of the value of a typical home in their communities for a family of four, which includes a toddler and one school-age child.

The bottom line: It's not exactly easy street for our $250,000-a-year family, especially living in high-tax areas on either coast. Even with an additional $3,000 in investment income, they end up in the red - after taxes, saving for retirement and their children's education and a middle-of-the-road cost of living - in seven of the eight communities in the analysis. The worst: Huntington, N.Y., and Glendale, Calif., followed by the District, Bethesda, Alexandria, Naperville, Ill. and Pinecrest, Fla. In Plano, Tex., the couple's balance sheet would end up positive, but only by $6,114.

Taxes take a hefty toll. Everything from property taxes and the alternative minimum tax to the taxes tacked on to cellphone bills and the cost of gas, when combined, takes a large bite out of earnings - in some cases even more than the federal income tax toll. And it's not likely to get better anytime soon. States and municipalities have been steadily raising income tax rates to help close gaping holes in their budgets. Property taxes are also increasing even though real estate values have cratered. And sales taxes are hitting record levels, in some areas nearing 10 percent. Gas taxes, alcohol taxes and surcharges on things such as airline flights, ferry rides, soda, vehicle registrations and rental cars have also climbed.

Additional tax increases for couples with salaries of $250,000 or more (and singles earning $200,000 or more) are scheduled to go into effect in 2013 under the health-care bill passed last March.
Meet the Joneses

Being in the red on a $250,000 annual salary might still seem surprising. But taking responsibility for their retirement and their children's future is costly. They are maximizing contributions to two 401(k)s and all flexible spending accounts available to them, and they are squirreling away $8,000 a year into college funds.

Their spending is conservative, based on national averages for professional couples with two children. Not included are those run-of-the-mill pay-outs for charitable deductions, life insurance premiums, disability insurance, legal fees - or monthly sessions at the hair salon or gym membership.

As educated professionals, they buy books, newspapers, magazines; they own computers and pay for Internet access.

But the Joneses don't take lavish vacations. They don't belong to a country club, play golf or drive luxury cars. They don't have a swimming pool or buy designer clothes. They don't own or rent a second home and don't send their children to private school. And they don't shop for groceries at high-end markets (they spend what the Department of Agriculture defines as a "moderate" amount on food for the average family of four).

In short, even if they're in the top 5 percent of earners, they're not "wealthy."

In reality, to make ends meet, this couple would have to cut back on discretionary expenses - take a pass on a new suit, skip an annual vacation and drop some activities for the children. Unfortunately, the family would also probably save less, at the expense of their retirement or the college funds.

"A family earning $250,000 should be saving more, not less," says Rocky Cummings, BDO's national director of state and local taxes. "Saving less isn't going to cut it for their retirement."

Consider the tax profile of the Joneses when based in Huntington, a suburb of New York City. Thanks to all of their smart pre-tax contributions and a fat deduction for mortgage interest and state and local taxes, the couple's federal income tax is only $29,344. But what often goes overlooked is the toll taken by state and local taxes. In this case, it exceeds the federal income tax bill: $29,864.

State income taxes, taken alone, are $10,557. But factor in the gas tax ($1,545), property ($15,222), phone service taxes and surcharges ($350) and sales ($848), and the picture changes. Their total tax bill, including the AMT and payroll taxes: $77,074.

"When most people think about taxes, they think first about federal income taxes, then maybe about sales taxes, but there are a lot of taxes out there," says Mark Robyn, an economist with the Tax Foundation a nonprofit tax research group in Washington. "It's eye-opening to step back and take a look at the whole picture."

The Joneses would fare somewhat better in the Washington area. If they lived in the city, they would pay $29,909 in federal income taxes, $177 in alternative minimum tax and $15,299 in payroll taxes. Add to that the $20,067 in state and local taxes and you get a total of $65,452.

Moving to a state with no income taxes or low taxes in general would do more to help the Joneses' bottom line. In Pinecrest, Fla., a suburb of Miami, they would owe zero state income tax, and pay an annual $10,976 in property taxes, $856 in sales taxes and $350 in phone service taxes, for a total state and local tax burden of $13,476. Because they would have no deduction for state and local taxes on their federal tax return, they would have to pay Uncle Sam more than they did in Huntington: $31,768. Still, the total tax burden would be significantly less: $60,644, versus $77,074 in Huntington and $70,716 in Glendale, a suburb of Los Angeles.

But for many people, moving to a low-tax state in mid-career is difficult, if not impossible. People are generally bound to their high-tax states by their jobs. And often it's tough to find high salaries in low-tax states like Florida.
What $250,000 buys

The $250,000 threshold was first mentioned in a campaign speech by Obama in 2008. "It's an historical accident," Williams says. "I don't think there was any thought given to why $250,000 - it became a mantra."

Whether $250,000 represents affluence "depends a great deal upon where you live," he says.

Consider, for example, the tab for the same assortment of ground beef, tuna, milk, eggs, margarine, potatoes, bananas, bread, orange juice, coffee, sugar and cereal: In Twin Falls, Idaho, $23.41. In New York City, you would shell out $40.29, or 72 percent more, according to the Council for Community and Economic Research. That higher percentage carries across all expenditures, from child-care costs to haircuts.

Of course, housing costs are one of the biggest variables. In Glendale, the Joneses can live reasonably well - but not extravagantly - in a three- or four-bedroom home valued around $750,000. In Twin Falls, they would need to spend about half as much on an equivalent home.

After covering taxes and only essential expenses for housing, groceries, child care, clothing, transportation - and their dog, the Joneses would still be in the red by $585 in Huntington. In Alexandria, the couple would be in positive territory with $15,313; in Bethesda, they would be up by $14,187 and in Washington, by $12,036. In Plano, Tex., the best-case scenario of all the locales in the analysis, they would have $28,707 to spare.

But factor in common additional expenses for a working couple with two children - music lessons, day camp costs and after-school sports, entertainment, cleaning services, gifts and an annual week-long vacation - the Joneses get deeper in the red in Huntington to the tune of - $23,178. In Alexandria, they would be down by $7,280. In Bethesda they would be short by $8,406, and in Washington, by $10,557. In Plano, the best-case scenario, they would have $6,114 to spare.

Some of the expenses incurred by couples like the Joneses might seem lavish - such as $5,000 on a housecleaner, a $1,200 annual dry-cleaning tab and $4,000 on kids' activities. But those are the sort of expenses that households with two working parents might juggle as they try to maintain the home, care for the kids and dress for their professional jobs.

And costs assumed by the Joneses could be significantly higher if their circumstances changed. If they worked for themselves, for example, they would have to foot the bill for all of their medical insurance premium, which averages $14,043. As it is, they pay 30 percent of the premium and their employers pay the rest.

Bottom line: For folks like the Joneses who live in high-tax, high-cost areas, who save for retirement and college, pay for child care to enable two incomes and spend higher prices for housing in top school districts - $250,000 goes quicker than you think.
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Old 12-10-10, 03:54 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Now I feel bad for rich people.
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Old 12-10-10, 03:55 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Obviously the hypothetical couple has to cut down on their truffle and caviar consumption. And stop buying their clothes from Brioni and Versace!
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Old 12-10-10, 03:55 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

the reason for the high property taxes in places like huntington is to pay for babysitting. instead of your kids getting in trouble after school you make them participate in after school activities
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Old 12-10-10, 03:58 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by X View Post
Obviously the hypothetical couple has to cut down on their truffle and caviar consumption. And stop buying their clothes from Brioni and Versace!
The fools shouldn't have gotten a higher education either. Without that student loan debt, they'd really be living the high life.
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Old 12-10-10, 04:00 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

if the property taxes are so high these people can live in a lower tax area. in the 50 miles around NYC the taxes on the same size house can go from a few thousand $$$ to over $20,000. people choose to live in high tax areas
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Old 12-10-10, 04:03 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by al_bundy View Post
if the property taxes are so high these people can live in a lower tax area. in the 50 miles around NYC the taxes on the same size house can go from a few thousand $$$ to over $20,000. people choose to live in high tax areas
That's the next thing we need to take care of. It's 2010 and we still let people choose where to live? If only the Republicans would get out of the way, we could fix that.
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Old 12-10-10, 04:36 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

As a FYI, Bernie Sanders is filibustering the tax bill right now. He's been at it for a few hours.
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Old 12-10-10, 04:41 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by wendersfan View Post
As a FYI, Bernie Sanders is filibustering the tax bill right now. He's been at it for a few hours.
Every time I hear this guy's name it makes me want to kick back on the beach with a bucket of wings and a dead guy.
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Old 12-10-10, 04:42 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by CRM114 View Post
Or they could stop whining and worrying about everyone else and just a couple grand more to help pay down the deficit.
Let's not kid ourselves into thinking that any of the money would go towards paying down the deficit. We have a few wars going on and some exchanges to set up that could always use more money.
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Old 12-10-10, 04:42 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Property taxes are also increasing even though real estate values have cratered.
When will this be reformed? It is as if someone takes a pay cut but continues to get taxed for their prior level of income.
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Old 12-10-10, 05:01 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by wishbone View Post
When will this be reformed? It is as if someone takes a pay cut but continues to get taxed for their prior level of income.
If expenditures remain constant (or even increase), the smaller the tax base the higher the rate has to be.
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Old 12-10-10, 05:35 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by wendersfan View Post
As a FYI, Bernie Sanders is filibustering the tax bill right now. He's been at it for a few hours.
Is it still a filibuster when the Senate has no business scheduled until Monday?
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Old 12-10-10, 05:35 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by X View Post
If expenditures remain constant (or even increase), the smaller the tax base the higher the rate has to be.
That's correct. The tax rate and the estimated value are independent.

If your property taxes have gone up, you need to make sure it's not a poor value estimation that led to it (which can be challenges in many cases). If it's a tax rate increase, not much you can do about it.
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Old 12-10-10, 07:00 PM
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Re: CBS News "Obama Tax Cut Plan would Increase Taxes for the Poor"

Originally Posted by CRM114 View Post
An extra $10K? I'm not sure how you came up with that number. Who's talking about unearned income?
Interest, dividends, and capital gains are "unearned income" (not wages).
If you make $250 K you probaly have some. Dividends would go from being taxed at 15% (cap gains) to income rates, probably 25% at this level.

Except of course under Obama confiscation 25% is now 28%. PS There is an extra 3.8% on unearned income. So taxes on dividends goes from 15% to 31.8%

I took 3% on the whole salary (10% eliminated and replaced by 15%, 25% becomes 28%, etc, plus Obama specials on dividends (15% becomes income rate), cap gains (15% becomes 20%), and extra special confiscation on unearned income if you are slightly over $250K.
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