patrick.net

why there is a declining middle class is because they are taxing the hell out of them

Ayup. Poor people get tons of tax breaks. Rich people have enough money to structure their finances to get tons of tax breaks. Middle class gets the shaft.

And on top of that the economy has lost 2 million jobs since 2000.

If it weren't for government, health care, and education (up 5M in total) there wouldn't be much middle class any more.

Of course, government, health care and education are the next dominos to fall as Republicans continue to gut the financial underpinnings of the present system.

When I made $50000 a year, I didn't pay anywhere near 10k in taxes, and that's when I was single.

I made 257k last year and my total tax liability was under 50, including fiscal, sales taxes, etc. Not even close to fifty percent

The reason the middle class is getting screwed is international labor competition, the inevitable result of globalization. Don't like it? Stop buying cheap crap from Walmart.

Kevin If you are a contractor or an LLC, sure tax write offs are so lavish that you can go to town with it, bypassing the standard deduction (which is a joke) by a million miles.

For most people that's not the case, they work for someone, and are unable to write off much... basically non itemized standard deduction which sucks. 1099 is very different from 1040.

Ways to avoid taxes?
- get paid in cash and simply do not declare it.
- be a contractor/llc and write off every single expense as business expense.... as long as you keep a journal log it's fully legitimate. my friend wrote off his vacation to Dominican Republic as a business expense as there was no way to prove it wasn't for business purposes. If your entire lifestyle is a business expense your tax liability becomes almost 0.

EconPete,

>>The reason why there is a declining middle class is because they are taxing the hell out of them!

Wrong. The reason for the decline of middle class is that he wealthy is getting paid much more and the middle class less.

This whole idea that "if we didn't have to pay taxes, we'd all be wealthy" is a cornerstone of Republican propaganda. It's amazing how many people believe it. But, not paying taxes is much better for the rich than it is for a middle-class person. Just look at the amounts involved.

Kevin says

When I made $50000 a year, I didn’t pay anywhere near 10k in taxes, and that’s when I was single.
I made 257k last year and my total tax liability was under 50, including fiscal, sales taxes, etc. Not even close to fifty percent
The reason the middle class is getting screwed is international labor competition, the inevitable result of globalization. Don’t like it? Stop buying cheap crap from Walmart.

Um how did you only pay 50k in total taxes (federal, state, local???) on a 257k salary...that sounds impossible. You should be paying that in federal taxes alone lol

>Um how did you only pay 50k in total taxes (federal, state, local???) on a 257k salary…that sounds impossible. You should be paying that in federal taxes alone ...

I'd also like to know. Maybe there is some good tax-planning I can learn here.

CaffeineAddict says

Kevin says

When I made $50000 a year, I didn’t pay anywhere near 10k in taxes, and that’s when I was single.
I made 257k last year and my total tax liability was under 50, including fiscal, sales taxes, etc. Not even close to fifty percent
The reason the middle class is getting screwed is international labor competition, the inevitable result of globalization. Don’t like it? Stop buying cheap crap from Walmart.

Um how did you only pay 50k in total taxes (federal, state, local???) on a 257k salary…that sounds impossible. You should be paying that in federal taxes alone lol

The answer is kinda complicated and long winded....but the short of it is "Itemizing" and being "self employed/incorporated".

I have been in that bracket as well for the last few years and my NET tax bill averages 16% or so. 16% of 250K = 40K. And that's when I don't get too aggressive with my writeoffs.

I'm sure it has nothing to do with declining wages for everyone who isn't an executive.

Remember, to us a job is essential - to them, it's just another expense to trim.

It's easy to demonize taxes, but when you pay taxes, in exchange you get America, and I think that's a pretty fantastic deal. Unless you think your business would be more prosperous in a place like Somalia. Hey, no taxes!

SF ace says

2) Below the line deduction. SCH A deduction, in my case about 50K.

SFace what is SCH deduction?

Outsourcing to China and lower actual tax rates for the rich have double-negative effects on the middle class:

Outsourcing to China reduces middle class wages and increases profits for rich corporate owners at the same time. James Goldsmith warned about this in 1993: http://www.amazon.com/Trap-James-Goldsmith/dp/0786701854

Low taxes on the rich takes away a bigger percent from the middle class this year, and compounds the effect next year, when the rich have yet more income from the money they didn't pay in taxes this year.

I think the gap will continue to widen as long as the anger of the formerly middle class can be sucessfully directed away from the rich who are actually taking the money and toward the imaginary "liberal" beast.

No matter what side you're on, a fascinating read--mostly on the rebuttals. Great stuff, gang.

ChrisLA says

Kevin If you are a contractor or an LLC, sure tax write offs are so lavish that you can go to town with it, bypassing the standard deduction (which is a joke) by a million miles.
For most people that’s not the case, they work for someone, and are unable to write off much… basically non itemized standard deduction which sucks. 1099 is very different from 1040.
Ways to avoid taxes?

- get paid in cash and simply do not declare it.

- be a contractor/llc and write off every single expense as business expense…. as long as you keep a journal log it’s fully legitimate. my friend wrote off his vacation to Dominican Republic as a business expense as there was no way to prove it wasn’t for business purposes. If your entire lifestyle is a business expense your tax liability becomes almost 0.

Yeah fucken right. Having self-employment income/deductions is the highest audit risk an individual can have. Taking tax breaks for vacations may as well scream 'please audit me.' Your friend is an idiot and is playing with fire.

The IRS doesn't have to prove it wasn't for business purposes. You have to prove it is for business purposes. Get too creative with that shit and you're risking massive fines or even jailtime.

Ptipking222 says

The IRS doesn’t have to prove it wasn’t for business purposes. You have to prove it is for business purposes. Get too creative with that shit and you’re risking massive fines or even jailtime.

I absolutely agree with you. My CPA will not let me do "creative" write offs like that, nor would I take risks like that either especially since I am a family man. But some people do like playing Russian Roulette with IRS audit.

NOPE, the reason for the decline of the middle class is that tax rate for the wealthy has been on a steady decline since 1950.

See the following chart.

http://www.ritholtz.com/blog/2011/04/us-tax-rates-1916-2010/

We are not declining because rich aren't paying enough. At least I do not believe that to be a valid reason. Rich people don't sit on the money, they tend to invest it. Other nations have started catching on onto this capitalism thing, they are moving up and competing with us.

Government just needs to get out of the way of the private sector with their extreme taxation.

I am curious if some of these wasteful wars such as Vietnam, Iraq (2003-), etc. are strongly supported by those in the top 1% of net worth.

Rich people speculate their money and invest it overseas... neither of which creates jobs in the U.S. They are also more likely to buy non-productive assets, like artwork or classic cars, which also does not create jobs. Rich peopel do NOT create jobs. What caused the Great Depression to end? World War II. What did World War II consist of? MASSIVE government spending. Case closed.

Correct me if I'm wrong, but rich people DO sit on their money (witness the growing wealth disparity's results...corporations with trillions on the sidelines, etc. Recessions make them hold on to what they have---- http://www.bloomberg.com/news/2010-09-13/rich-americans-save-money-from-tax-cuts-instead-of-spending-moody-s-says.html )

It's the poor and middle class who spend all that they have, no?

CL says

corporations with trillions on the sidelines

You might want to look a little more closely at this. Almost all of the cash corporations are sitting on is borrowed. Look at the other side of the balance sheet. Corporations are taking advantage of the almost zero interest rates to put aside cash in case of another financial crash. Many were caught by surprise by the crunch in 2007 and don't want to be in position to have a cash flow problem like that again.

but aren't they also recording record profits? Apple comes to mind, as do a few others. Are you sure you're not talking about the financials? (But I'm sure many companies do want to keep cash reserves on hand, much more than before the depression)

Isn't there plenty of M&A activity occurring?