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GOP Tax Reform Looks Great...Except for Urban Liberals
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2014 Feb 27, 2:39am 5,503 views 39 comments
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The only people who benefited are those already dependent on the government (i.e. mostly qualified as poor-lower middle-class), the majority of the middle-class (the middle-class and upper middle-class) got shafted under Obummer.
That's a talking point that doesn't really have any substance. Where's your proof? What direct actions did Obama take the resulted in those things? Please explain. Obama doesn't always do things right, but I'm trying to find a causal pathway here.
Presidents get blamed for a lot of things they have no control over, and sometimes many things they *constitutionally* have no control over. It's quite strange.
This plan keeps capital gains at the same rate because you can shield 40% of capital gains from taxation. That means if you are below the threshold, your tax rate is 15%, and if you are above the threshold, it's 21%, which is remarkably similar to the current 15%/20% brackets for capital gains.
Which is good as investments are made from already taxed money and only the uber wealthy would pay higher investment taxes. Totally fair to exempt 40% as if somebody's income is mostly from investments they will end up paying much more. I am on board with this.
That's a talking point that doesn't really have any substance. Where's your proof?
My proof are my taxes since Obama took office, and I am (upper) middle-class. I am working on getting closer to the 1% as I don't thin much will change with this administration and the Dems and their asinine tax hikes. After taxes my gross income, which consists of salary plus capital gains, is reduced way too much. I should be able to retain 75% of it, esp. considering that there are literally no perks/services returned for your taxes, it all goes to the war machine and entitlements. I also advocate a fee based system similar to ballot measures where the fees are tied to one purpose only and cannot be abused and funneled into crony capitalist pockets like taxes. Taxes are very inefficient in general.
Paralithodes
2014 Feb 27, 9:42pm
You asked? Should be obvious: Most middle class families own houses. Most have
mortgages. Most benefit from having the ability to reduce their total tax via
mortgage interest deductions. Simple enough.
Not quite so simple or obvious... Homeowners pay for the alleged benefit of the mortgage interest deduction upfront with higher home prices. Not sure if you want to increase the bid on a certain house you want? Your realtor will remind you to not forget about the mortgage interest deduction, to supposedly make increasing your bid price more affordable.
This deduction is something that is marketed as a means to make homeownership more affordable, but what do those who are opposed to its reform claim? That reducing/ removing it will lower home values for current owners. Perhaps if you can explain this significant contradiction, things will be more simple and obvious.
As it stands, the mortgage interest deduction does not make homes more affordable, it simply makes taking on more debt easier.
I'm not the only one to state the obvious and I'm befuddled I am having to
"explain" this given its common knowledge. The tax system is lopsided. The
largest chunk the of the country's wealth is tied up in a very small upper
percentage of the population and as of now are taxed at a lower percentage than
the bulk of the population. Mathematically that makes no sense
You claimed that this proposal would halve the rates of the rich. Yet the proposal has a 10% surcharge on the top 1% or so, which would bring their top rate to 35%. The largest % of individual federal income tax comes from the most wealthy. That is a mathematical fact, verifiable via www.irs.gov.
I am. In fact, since I assume that you are as well then you too would see that
as recently as the 60's and 70's that the aforementioned tax situation I
mentioned previously was actually backwards from where it is now, where the
upper level earning segment of the population paid a much greater tax rate
versus today where they pay less. People seemed to be ok with that too. So with
that established, I can only assume you agree with my previous statements.
I agree with your previous statements regarding "taxes" being a dirty word. I disagree with your claim that it is the GOP that made taxes a dirty word (though I understand why you would make that claim on Patnet, because everything bad in the word is the GOP's fault here). The history of our country just doesn't support any claim that it is the GOP that is at fault for not liking taxes. We can start in the 1770s and talk about JFK as well...
... except taxes haven't been raised on the middle class. In fact, its been
readily and widely shown that taxes for the middle class have been lower than
they've been in over 60 years.
Since it seems like removing deductions is viewed as a way of raising taxes on the middle class, let's use Obamacare as an example... It raises the medical expense deduction from above 7.5% of AGI to above 10% of AGI.
Now since someone with a very high income is not as likely to have medical expenses above 7.5% or 10% of their AGI, as someone with a lower income, who does this deduction impact the most?
Answer: The middle class, especially those with higher medical needs or special needs kids. I expect to get impacted by this for 2013 taxes. Good thing I'm in the relatively upper middle class instead of the more average middle class - relevant deductable expenses would be the same regardless, but it would certainly be more financially painful. (Note: I'm not personally complaining - I think most deductions should go away. But here is an example of something that specifically hits the middle class instead of the rich.).
Paralithodes
2014 Feb 27, 9:47pm
Only in high housing cost/high state tax states. If you live in flyover with
low or no state income tax and have a $100K mortgage, then often you will
benefit by taking the standard deduction.
The mortgage interest deduction is highly regressive. The more money you
make, the more money it shields because it shields money at the marginal rate.
The larger house, the larger deduction you can take.
Even in high cost/high housing states, it provides incentives to people to take on more debt to get the house they want, so they bid up prices.
This is one issue where "liberals" and "conservatives" could very much agree on if they understood more about the details. Even if their main points are different, they overlap enough and are difficult to refute. Bellingham Bill/Bob/Troy does a good job explaining this one.
My proof are my taxes since Obama took office, and I am (upper) middle-class.
What law did Obama pass that raised your taxes?
Is the plan revenue neutral? Details are emerging, but the answer cannot be "yes" while cutting tax rates at the top unless taxes are increased elsewhere.
Elimination of write off from State and local taxes while doubling the standard deduction to $22,000? This effectively removes the mortgage interest deduction as well.
Very few other itemized deductions large enough besides taxes paid and mortgage, therefore mortgage interest would have to exceed at least $15-17k to exceed the standard deduction. (assuming at most 5-7k in other itemized deductions)
At 4%, that means a mortgage balance of $375k. At 80% LTV, home value would be ~$470k. About twice the median home.
Effective capital gains tax rate increase from 23.8% to 24.8% for ultra-rich? Yawn. This will most likely be offset by the reduction in their ordinary income rate from 39.6% to 25%.
i.e. if 90% of your income is taxed 1% higher but 10% of your income is taxed 14.6% lower, .9% increase offset by 1.46% decrease. In order to pay more under this plan, the "mix" of income must be greater than about 93.5% capital gains and 6.5% ordinary income.
Anytime you see a reduction in the EIC, you know who is going to have an increased tax burden. With the EIC the working poor have an effective negative tax rate. You could make the standard deduction $100k, but you are never going to get a negative tax rate through deductions.
Lets look at a median income family of 4. $55k income, $100k mortgage balance, 6% state income tax rate, 1.5% property tax rate.
Under Camp's plan, this family would have standard deduction of $22k, taxable income of $33k and a tax rate of 10%, so taxes due $3300, less 2*$1500 child tax credits, taxes of $300.
Currently, this family has 4*personal exemptions ($3900) = $15,600. They have $4k in mortgage interest, $1.7k in property taxes, and $3600 in state income taxes. They take the standard deduction of $12,200 since it is greater. So $55k - $15.6k - $12.2k = $27,200 in taxable income. They pay $1,785 plus 15% of (27,200-17,850) = 1402+1785. Total 3187 less $2k in child tax credits, taxes of $1187. Plus they get EIC of $4455. This median family would get a refund of $3268.
Current law, they have net tax rate of -5.9%. Camp's plan would have a median income family of 4 PAY .5%. Effectively, the tax rate for a median income family of 4 would increase 6.4%.
Beware wolf in sheep's clothing...
My proof are my taxes since Obama took office, and I am (upper) middle-class.
What law did Obama pass that raised your taxes?
Surtax on Investment Income
Medicare Payroll Tax
Skyrocketing health care premiums (they had to drop the current provider in the middle of the year and scramble for one with less steep hikes)
All in all I estimated easily in an additional burden over 10K even without factoring in health care - so yeah, hope and change ;)
I am working on getting closer to the 1%
Dream on, honey.
I know Obummer is killing mobility for the middle-class and protecting the cronies, but whadda you gotta do? You just gotta try harder ;)
lostand confused
2014 Feb 28, 12:13am
You asked? Should be obvious: Most middle class families own houses. Most have
mortgages. Most benefit from having the ability to reduce their total tax via
mortgage interest deductions. Simple enough
Except in coastal bubble states-middle class don't buy 500k houses.
My proof are my taxes since Obama took office, and I am (upper) middle-class.
What law did Obama pass that raised your taxes?
Surtax on Investment Income
Medicare Payroll Tax
Your quote above: I am (upper) middle class, does not mix with paying the Investment Income Surtax (MAGI over $250k/200k. You need gross income of at least $220k/$270k to have this)
This is not middle class, or upper middle class. It is 4/5 times the median household income. It is top 1.5%-2%.
"Middle" means middle. 25%-75% makes most sense. Maybe you could argue it is 35%-85%. But certainly not top 2%. You are rich, and Obama has made no bones about raising taxes on the rich. He campaigned and won on it twice.
Boo freakin hoo you pay .9% more in income taxes,and 3.8% more on investment income. At $300k income with $50k investment income, you pay $2350 more in taxes. $10k? Even at $450k income, $200k investment you pay only $7600 (3.8% of 200k more, you wouldn't pay medicare because that is only on Wages)
You obviously make under $450k because you didn't camplain about that tax increase.
You obviously make under $450k because you didn't camplain about that tax increase.
That is correct, I am just over the lower end to pay for the other taxes I mentioned.
"Middle" means middle. 25%-75% makes most sense. Maybe you could argue it is 35%-85%. But certainly not top 2%. You are rich, and Obama has made no bones about raising taxes on the rich. He campaigned and won on it twice.
You cannot make a tech salary like that outside of CA, prob outside of the bay area. And that is upper middle class here. Nothing more. I give a fuck about what Obama thinks is rich, if he wanted to tax the "rich" he'd tax the 1% like the proposed levied surtax on the most wealthy by the GOP plan.
You cannot make a tech salary like that outside of CA, prob outside of the
bay area. And that is upper middle class here. Nothing more. I give a fuck about
what Obama thinks is rich, if he wanted to tax the "rich" he'd tax the 1% like
the proposed levied surtax on the most wealthy by the GOP plan.
You don't understand math then. Even in the CA, or the BA, a $250k income is top 5%. That is rich compared to the median.
As an aside - I agree with you. I think the taxes should be more progressive - I think they should be 90% on incomes over $10 Million, I don't think there should be a different rate for capital gains and wages. I don't think they should have increased taxes on guys like you, it would have been better to do it MORE onthe generationally wealthy, the true capitalists. I think this because of large numbers - yeah, you are only 1.4999% away from Warren Buffett - but you are closer in income to the bum who just panhandled $20 bucks than your are to him in both absolute and percentage terms.
Your interests are not any more aligned than his are to the bum's. You would be better off if he paid more, FWIW.
But don't argue that you are middle class when your income is 4-5 times the median. By math, this is not true.
My proof are my taxes since Obama took office, and I am (upper) middle-class.
What law did Obama pass that raised your taxes?
There is an increase on investment tax for those with agi more than $250k. I can imagine that someone living in the Fortress might think that $250k annual income is middle class.
However, they would be wrong.
(this is not class envy or anything like that, just a factual statement. )
finehoe
2014 Feb 28, 1:15am
Warren Buffett - but you are closer in income to the bum who just panhandled $20
bucks than your are to him in both absolute and percentage terms.
This in a nutshell is the problem with the vast majority of Republican voters. Because they make a decent salary and have some money in the bank, they think their interests are alligned with the Bill Gates and Jamie Diamonds of the world, when in reality they are wage-slaves like the rest of us. And are viewed that way by their plutocrat masters, just like the rest of us.
lostand confused
2014 Feb 28, 1:29am
Warren Buffett - but you are closer in income to the bum who just panhandled $20
bucks than your are to him in both absolute and percentage terms.
This in a nutshell is the problem with the vast majority of Republican voters. Because they make a decent salary and have some money in the bank, they think their interests are alligned with the Bill Gates and Jamie Diamonds of the world, when in reality they are wage-slaves like the rest of us. And are viewed that way by their plutocrat masters, just like the rest of us.
And the problems with democrats is they want to grab what meager savings I have and give it to octomom and any numbe rof "worthy" causes.
Warren Buffett - but you are closer in income to the bum who just panhandled $20
bucks than your are to him in both absolute and percentage terms.
This in a nutshell is the problem with the vast majority of Republican voters. Because they make a decent salary and have some money in the bank, they think their interests are alligned with the Bill Gates and Jamie Diamonds of the world, when in reality they are wage-slaves like the rest of us. And are viewed that way by their plutocrat masters, just like the rest of us.
But see it's not, had 2008 played out without market intervention, the wealthy with leveraged assets (even Buffet is leveraged) would have gotten wiped out or seen their wealth reduced dramatically while savings rates would have shot up for those who cannot leverage but save. The point is to allow and encourage investment with reduced taxes or - if same as income tax - dramatically reduce the income tax to like 25% whereas removing special deductions to discourage leveraging and too much speculation that will be payed for by the taxpayer when it fails. People who make 100K-300K need to have the ability to move upwards by investing smart and with calculated risk, not debt-driven leverage. The current tax system is killing mobility and - as lost and confused pointed out - rewards entitled dependents and thew 1% by burdening the middle class. The fact that by numbers middle class means far less income speaks volumes about this failed policy. Nobody considering themselves middle-class should have to depend on any special deductions or government handouts.
And the problems with democrats is they want to grab what meager savings I have and give it to octomom and any numbe rof "worthy" causes.
As opposed gabbing what meager savings you have and blowing it on military and wars?
the wealthy with leveraged assets (even Buffet is leveraged) would have gotten
wiped out or seen their wealth reduced dramatically while savings rates would
have shot up for those who cannot leverage but save.
The would have been MORE of a consolidation of wealth not less. Warren Buffett maybe, maybe not. I seriously doubt he was leveraged and legally liable so much that without a bailout he would have been wiped out, but don't know his specific personal balance sheet in 2008.
Do you really think EVERY rich capitlaist was leveraged?
Prime example: Hostess Brands - no bailout there. Twinkies are still in production - the owner just changed. Now a new capitalist produces the same Twinkies at a lower marginal cost because he was able to eliminate the long term liabilities of the previous owner of Hostess, while acquiring the same income producing asset.
Who got screwed? Well, the union. That union (and the workers therein) contributed years of economic capital to build and maintain the value of Twinkies. Their deferred compensation (read: Pension) was what was destroyed when the new owners acquired only the assets (and not the liabilities) of the brand.
Without the bailouts, this would have happened everywhere. At least one rich guy was not leveraged, and after the deflationary spiral, his billions in unleveraged capital would have been all that remained in relative terms, suddenly enough to buy EVERYTHING. He would be able to outbid you unless you were willing to borrow, from HIM. This is an extreme example of ONE unleveraged rich guy, but in reality - there would have been enough Joe the plumber certainly isn't going to be acquiring income generating assets.
In the best times, Joe the plumber is barely treading water. In a deflationary depression - he is broke because all of his customers lost their jobs and are roke too.
You would have lost your job. Your investments would have plummeted in relative value. Any debt you had would have increased in relative value. Most of your net worth is the present value of your future earning potential. No job = no future earning potential. You couldn't borrow to take advantage of the buying opportunity. Your net worth would have been GONE. Even if it wasn't, you wouldn't be able liquidate your assets to buy more valuable assets.
You would have lost your job.
Doubtful, I had enough offers even throughout the recession, but sure there's never a guarantee, that's why you need to save for a nice cushion instead of buying a house and leveraging yourself to the hilt.
Your investments would have plummeted in relative value.
Doubtful, I invest mainly in results driven biotech (even during the recession small caps were acquired if they had interesting pipelines), some agriculture, precious metals and solid real tech companies, instead of bullshit-hyped leveraged tech, financial or housing trannies. The portfolio didn't look great, but was doing ok in 2008.
You couldn't borrow to take advantage of the buying opportunity. Your net worth would have been GONE. Even if it wasn't, you wouldn't be able liquidate your assets to buy more valuable assets.
You shouldn't have to borrow, that's not sane capital formation, but debt-driven speculation. Unless you or your family is hit by a mostly unforseeable catastrophy (health, natural disaster etc.), you should never have to liquidate anything - and recessions don't count as catastrophies, they are part of the market cycle and necessary corrections, and they would be less often and shorter if not for government and Fed meddling which continues to distort the markets and blow bubbles left and right. Capital formation without leverage is the cornerstone of any successful and healthy economy, not deficit spending and debt-driven leverage. You can clearly see that it is not working and hammering the middle class.
tatupu70
2014 Feb 28, 8:31am
Doubtful, I had enough offers even throughout the recession, but sure there's never a guarantee, that's why you need to save for a nice cushion instead of buying a house and leveraging yourself to the hilt.
Doubtful, I invest mainly in results driven biotech (even during the recession small caps were acquired if they had interesting pipelines), some agriculture, precious metals and solid real tech companies, instead of bullshit-hyped leveraged tech, financial or housing trannies. The portfolio didn't look great, but was doing ok in 2008.
Clearly you don't 'understand what a deep recession/depression is. It's not only bullshit-hyped leverage tech that goes down. There would be no job offers when you get laid off.
Clearly you don't 'understand what a deep recession/depression is. It's not only bullshit-hyped leverage tech that goes down. There would be no job offers when you get laid off.
BS - in fact more productive jobs would have been created in the aftermath as the drain of the parasitic TBTFs would have come to a halt. You have a bad economy because you let crony-capitalist, parasitic lobbying companies exist that do nothing but siphon off money from the Fed spigot.
Which is good as investments are made from already taxed money and only the uber wealthy would pay higher investment taxes.
Lots of tax experts disagree. Reagan's certainly did. Reagan's tax plan, which continued through the Bush I and Clinton administrations, taxed capital gains and labor the same. This would help with a lot of wealth disparity, certainly.
My proof are my taxes since Obama took office [and a bunch of other nonsense]
That's not really an argument -- and I bet it's actually untrue. You haven't explained exactly what happened -- again, we need some facts and then an argument that logically flows from those facts.
Surtax on Investment Income
Medicare Payroll Tax
Skyrocketing health care premiums (they had to drop the current
No, actually, Congress passed those first two. Check your Constitution, bud.
The third one is based on the economy and the level of coverage. People who don't understand how insurance works always say this crap. Insurance is based on having assets and liabilities. The assets are the premiums paid in, which are invested. The liabilities are payments. If the investments aren't doing well, then you have to get more assets by raising the premium.
Hence, when the economy isn't doing well, premiums go up. When liabilities go up, premiums also go up. If your coverage is better, then premiums could go up, sure. You haven't given us enough information to know whether this claim is BS or not. I don't think you have the information, most likely, because you haven't done enough research into this to know whether it's true, and you don't have access to the actuarial formulas.
End Prop 13
Agreed.
People who make 100K-300K need to have the ability to move upwards by investing smart and with calculated risk, not debt-driven leverage. The current tax system is killing mobility and - as lost and confused pointed out - rewards entitled dependents and thew 1% by burdening the middle class.
I agree with this part to a point. What gets obscured in all this is that a $180-200K salary is definitely in the top 5% of households. However, there's a big difference between top 5% and top 1%. And there's also a big difference between the top half of the top 1% and the bottom half of the top 1%. Most people from the top 5% up to the bottom half of the top 1% are wage slaves. Most people in the top half of the top 1% are living off investment income.
Budgets are being balanced on the back of the 0.51-5%, whereas they should be balanced more on the back of the top 0.5%. That's why investments should be taxed the same as labor -- this would equalize those groups better.
No, actually, Congress passed those first two. Check your Constitution, bud.
Of course they did, eventually. There is not much difference between mainstream Republicans and Democrats when it comes to the financial policy, as the two wings closest to each other eventually continue more of the same.
Hence, when the economy isn't doing well, premiums go up. When liabilities go up, premiums also go up. If your coverage is better, then premiums could go up, sure. You haven't given us enough information to know whether this claim is BS or not. I don't think you have the information, most likely, because you haven't done enough research into this to know whether it's true, and you don't have access to the actuarial formulas.
There is not much formula research you have to do when your insurance provider tells you that they had to hike premiums due to provisions in the ACA. Sure you can accuse them of lying and maybe they are exaggerating their premium hikes either for pure greed or to cover their bases if payments will be higher than estimated, but there is no doubt that this has caused premium hikes.
Budgets are being balanced on the back of the 0.51-5%, whereas they should be balanced more on the back of the top 0.5%.
Agreed if that's the two choices.
That's why investments should be taxed the same as labor -- this would equalize those groups better.
I think that would discourage investment for the non 1%ers too much, certainly under the current income tax structure. I'd prefer something similar, taxing up to a certain amount at a reduced rate and the rest as income. Of course if income tax is 25%, then the tax burden would not be higher than today.
Paralithodes
2014 Mar 1, 11:14am
No, actually, Congress passed those first two. Check your Constitution, bud.
So when Congress passes something, when does it become law?
So when Congress passes something, when does it become law?
Well, it could become law if the president signs it. It also could become law if a larger proportionate of Congress agrees to it.
Again, presidents can't drive the agenda here. They can propose things and have Congress accept or reject them, but at the end of the day, they can't dictate legislation. Trying to say a president has extra-presidential powers is usually going to be a losing argument. You would do better to focus on a good counter-argument than the blame game.
There is not much formula research you have to do when your insurance provider tells you that they had to hike premiums due to provisions in the ACA. Sure you can accuse them of lying
Ding ding ding, a lot of them *were* lying. But they often simultaneously increased coverage while increasing premiums too. That will "raise premiums" but you'll get more back on the back end, on average.
Even Mr. Armstrong of AOL was lying. What did a couple babies being born premature in 2012 have to do with the Affordable Care Act? Absolutely nothing. Even his complaints about healthcare costs were somewhat bogus anyway -- they made bumper profits far beyond any alleged healthcare cost increase. He was just trying to make political hay.
but there is no doubt that this has caused premium hikes.
It is extremely hard to find an apples-to-apples comparison of premiums, so yes there is doubt. It's hard to say without knowing more specifics. For example, NY didn't have an individual mandate before, but did require certain coverage, and the individual mandate significantly lowered rates (about 50%, but not sure if that's apples-to-apples, i.e. the same plan or with adjustments to account for the plan being different). This is much more complex than a cheap talking point:
I've been reading the GOP tax reform proposal and it looks great to me; however, almost no news media outlet is reporting it correctly. They keep saying it cuts popular deductions which is not true at all. It does limit some deductions like mortage so that the average Joe gets it, but someone living in a $2 million dollar pied a terre in Mahattan does not.
http://news.yahoo.com/gop-tax-plan-lowers-rates-repeals-popular-breaks-205426022--finance.html
#housing