Prove me wrong about tax cuts for the rich.

[The-Noid]

I don't think that's right.

http://www.irs.gov/pub/irs-pdf/i1040se.pdf

He is 100% correct. If you leave money in your s-corp it is after-tax money. Assuming the business makes money it is sent down to the owners as a percentage of ownership in the form of a K-1 even if not distributed. The term is known as "phantom income."

 

[Throckmorton]

OP, actual economics backs you up. The multiplier is higher for tax cuts to the middle class than tax cuts to the rich. In fact, the multiplier for the rich tax cuts is only 0.40. Basically 60% of the tax cut isn't stimulative.

 

[The-Noid]

It's stimulative to asset prices and I am fairly sure any administration and the central bank at this point only care about how high they can make the stock market fly.

 

[zephyrprime]

In my opinion, it's not that giving tax cuts to the poor is better than giving it to the rich. The poor already have low rates. The problem is that the rich have very low rates as well. Although the marginal rate is high for the rich, the rates for capital gains is low and there are so many loopholes that the rich are capable of exploiting that it's well known that the rich actually have a lower tax rate than the middle class. Warren Buffet pays a lower rate of taxes than myself. In the US we have progressive and regressive taxation. The poor get a tax break due to sympathy for the poor. The rich get a tax break due to their power to corrupt the political system.

 

[her209]

He is 100% correct. If you leave money in your s-corp it is after-tax money. Assuming the business makes money it is sent down to the owners as a percentage of ownership in the form of a K-1 even if not distributed. The term is known as "phantom income."

In other words, the money wasn't reinvested, but rather just held on to. Seems logical for it to be taxed in the year it was made and not the year it is distributed. If the money is later used to buy an asset, the depreciation value is taken against future earnings, i.e., effectively making the investment tax free.

 

[Turin39789]

This is just the usual "sock it to the rich!" tripe. Nobody has presented ANY logical reason why someone who earns more than some arbitrary figure (250 thousand, 1 million, 5 million) is less deserving of a tax cut than someone making less than that figure. Just because someone earns more doesn't mean we need to steal more of their money and give it to people who do nothing to earn it.

Because progressive taxes work and regressive tax does not. Society works better with a healthy lower and middle class.

Income tax, benefits, and deductables, and special tax rates and abatements are all a form of class warfare. It is time to end the madness.

Go flat tax now.

Flat tax is just another regressive tax, it leans too heavy on the people who spend the majority of their income on consumables/survival and too light on those who are able to hoard wealth and live off the interest.

That is not a logical reason to arbitrarily take money away from someone based on some magical amount of income.



Again, you're just saying that the top earners are keeping more. That's not a logical reason to steal the money they've earned. It's just typical class warfare.

It is entirely logical. You can end up with a society where there is an aristocracy of concentrated wealth supported by a lower class that goes without, or you can balance it and have a healthier lower/middle class who are provided with some measure of security and opportunities to grow and contribute with an aristocracy of slightly less concentrated wealth.

There will always be wealthy people, through inheritance or extreme talent pulling themselves up from their bootstraps. They generally take care of themselves and they help the world go round. There will always be people who struggle to make it, who work hard to help make the world go round. But do they make $18/hr or $8.50? Are they taxed at 0% federal income and 20% other taxes while the wealthy are taxed at 15% or less?

With caps on SS tax and no FICA, people who can bring in more than 250k in dividends are getting their money taxed lower than people who get their money through a paycheck. It isn't sustainable. Progressive taxes make sense because they keep the wheel turning.

 

[PokerGuy]

It is entirely logical. You can end up with a society where there is an aristocracy of concentrated wealth supported by a lower class that goes without, or you can balance it and have a healthier lower/middle class who are provided with some measure of security and opportunities to grow and contribute with an aristocracy of slightly less concentrated wealth.

Or, you can end up with option C, the one that happens in the real world. The government takes more money from everyone, wastes it in a various ways, makes sure more people end up on the dole (ie, dependent), the middle class shrinks some more while those at the top still own the government. That's what we have now.

With caps on SS tax and no FICA, people who can bring in more than 250k in dividends are getting their money taxed lower than people who get their money through a paycheck.

Are we conveniently forgetting that there's also a cap on how much money is paid out by SS? Yes, there's a cap on paying into the system, but those folks are also not going to get the payout so it's not a net benefit. Another fallacy of the "lower effective tax rate".

 

[Patranus]

In other words, the money wasn't reinvested, but rather just held on to. Seems logical for it to be taxed in the year it was made and not the year it is distributed. If the money is later used to buy an asset, the depreciation value is taken against future earnings, i.e., effectively making the investment tax free.

Companies hold onto money for future investment.
If you tax that money at a high rate, they will have less money for that investment.

 

[Carmen813]

Companies hold onto money for future investment.
If you tax that money at a high rate, they will have less money for that investment.

There is a limited supply of money, like any resource. If companies hold on to that money instead of investing it, there is less money available for investment.

We can go in circles all day.

 

[pwilson316]

People seem to forget the "rich" dont stuff their money into a matress. It is put into a bank. Which then dishes it out in the form of loans to people to build homes, business, cars, buy products. Or they invest into business. Taxing them is an opportunity cost on that money. Instead of going into a bank or business, it is put into the inefficient monster of big govt.

This is what I was thinking - it's all the same money, who is better at spending the it, the ones who earned it or the government.

What do you think the rich are doing with their money? Even if they are spending it on expensive toys for themselves that still means jobs. To the greater degree, in one way or another, any money the rich make that does not go to the government is being injected into the economy in one way or another.

Maybe in these uncertain times some of the rich are holding onto more money, but that money is still in banks and not in mattresses. Take away the uncertainty and I think the money will flow more freely.

On the other hand, any money the government spends may or may not be spent wisely. Put aside any corruption or abuse, they did nothing to earn it and are not going to care about being frivolous with it. They can always raise taxes to get more.

I say let the ones who earned the money spend it.

 

[Turin39789]

Are we conveniently forgetting that there's also a cap on how much money is paid out by SS? Yes, there's a cap on paying into the system, but those folks are also not going to get the payout so it's not a net benefit. Another fallacy of the "lower effective tax rate".

I'm not conveniently forgetting anything, it is insurance for the aged and infirm. We all benefit by not having the streets clogged with homeless elderly. It wasn't designed to keep the fortunate well off after they stop working, it was designed to keep people alive and not freezing when they are unable to work anymore.

You can't claim benefits unless you are disabled or old either! The horror! It's like it was designed that way.

 

[Zebo]

Good post - I lean right but old right like Eisenhower right who understood REDISTRIBUTION was necessary but you better earn it. Merit like grades, credit history, working, honest business, etc should be qualifier if you get Federal help or not. This sitting at home, running your business into ground, and getting money from govt needs to end.

 

[Zebo]

Something to keep in mind: Any business man has a business which changes your BASIS tremendously.

For example a W2 employee buys a car with after tax earnings. A CEO has a company car which is 100% write off.

You throw a party at your house food and beer is with post tax dollars. A CEO throws a party it's a write off.

I could go in for 100 pages. But exclusions, exemptions, deductions, depreciation and all sorts of other goodies is not afforded to w2'ers in the same way to radically change basis.

 

[Phokus]

Companies hold onto money for future investment.
If you tax that money at a high rate, they will have less money for that investment.

You have that backwards, if you have high taxes and companies can expect high taxes in the future, it would make more sense to invest that money now so that you can claim those depreciation/amortization expenses to offset your taxes from now and into the future. When taxes were high before, that's exactly what they did.

Conservatives really ruined this country.

 

[Fern]

-snip-
About the wealthy.

1. Most wealthy people who own businesses, who make over $250k, are not filing their taxes as sole proprietorships, they're incorporated and they are paying corporate income tax rates, not personal income tax rates. So saying lowering the personal income tax rates creates jobs is ridiculous. It does not effect their businesses.

As pointed out above, this is incorrect.

The VAST majority are in S-corp's. The S-corp itself pays no income tax, rather the income from the S-corp is put on the owners' tax return. This means the corp/business income is taxed at personal rates.

However, what is often overlooked in this discussion is that the US has the second highest rate in the world for corp/business income. Increasing it further, which is what raising individual rates would do, is questionable at the least.

You also need to be d@mned careful about creating a difference between personal and C-corp (regulat corp) rates. This causes all kinds of 'games' and problems. 3-4% might be enough to motivate that, but I mention because that look's like where some people want to go.

And we have things like the loophole for fund managers (like Buffet), who typically make 100's of millions per year, who are only taxed at 15% (LT cap gains rate). That need's to be fixed NOW. But it really has nothing to do with the Bush cuts. Nor do the extreme idle rich living off capital gains, the Bush tax cuts don't really fix that.

What we needed was a 'smarter' overhaul or tweak to our tax laws. Instead, the clowns in Washington DC have dithered around and focused only on the Bush cuts. There is no time left for them to discuss and make the changes needed.

2. Giving the wealthy more money will not increase their personal spending. Most wealthy people already live below their means and already own all the things they want or need. If you gave a millionaire $1,000 , do you think they'll spend it? I think not.

Why do people say this?

What is it based on?

Some years ago I worked in Manhattan (I'm a tax CPA) and handled the accounts for top exec's at Fortune 500 companies. You'd be surprised at how many of these people spent every dime they got. At the end of the month they literally had zero money left. You give them more money, they spend it asap.

We can use some law changes, but this Congress is dumbing it way down and seeing only a choice between extending Bust tax cuts or not. That's just stupid.

If I were a Dem/liberal I'd be mad as h3ll. This (Dem) Congress has had 4 years in control to come up with some tax proposals. Instead, it's just "extend or not"?

Fern

 

[Zebo]

Only about 5% of small incorporated businesses file as a c-corp (CPA society of Minnesota) which pays the corporate income tax.

They file as an s-corp which passes profit and loss through to the shareholders at their rate.

Your entire post is flawed. Try again.

Not too bright IMO.

Two words: no fringe.

And Double taxation is entirely avoided by bonusing out any profit as salary. I can think of no reasons to have an S actually. Maybe easier?

I'm no CPA but my dad is and does all my taxes and told me never go S corp.

 

[Steeplerot]

Trickle down economics are as debunked as utopian Communism, grow up peoples, we tried it, and it fails just like everyone said it would back in the Reagan years. The income gap is worse then ever, working families are getting paid less and jobs are outsourced with the extra monies to the rich to benefit themselves. You are being played for suckers into screwing your own class.
All in the name of some fairytale free market scam.

DO you think for a minute the elites will ever let you into their "circle"?
lol@useful working class idiots selling themselves out.

You either inherit old money in this country so you are entitled to be one of the privileged non-working class or you win the "lottery" of the "American Dream". (the one you have to be asleep to fall for)

 

[Fern]

It's stimulative to asset prices and I am fairly sure any administration and the central bank at this point only care about how high they can make the stock market fly.

That's right.

That's one reason rates on dividend income were lowered- you raise that rate and it creates pressure moving stock values down.

Fern

 

[Fern]

There is a limited supply of money, like any resource. If companies hold on to that money instead of investing it, there is less money available for investment.

We can go in circles all day.

What do you think companies that "hold on to their money" are doing with it?

They're not stuffing it in a mattress or burying it.

They are investing it. Just maybe not in equipment etc for their own use, but it is being invested. I.e., someone else is using it for their eqiup etc.

Fern

 

[Zebo]

I don't even understand having corporate taxes at all. Money should be taxed when it gets to individuals, not forcing a corp to find every loophole and spend to avoid them. It's unhealthy for them and not competitive with different places.

 

[Zebo]

Trickle down economics are as debunked as utopian Communism, grow up peoples, we tried it, and it fails just like everyone said it would back in the Reagan years. The income gap is worse then ever, working families are getting paid less and jobs are outsourced with the extra monies to the rich to benefit themselves. You are being played for suckers into screwing your own class.
All in the name of some fairytale free market scam.

DO you think for a minute the elites will ever let you into their "circle"?
lol@useful working class idiots selling themselves out.

You either inherit old money in this country so you are entitled to be one of the privileged non-working class or you win the "lottery" of the "American Dream". (the one you have to be asleep to fall for)

Getting more true but not entirely true.

My parents cam here in the 60s with $90. trust me I got that $90 right - they told us about it all the time to get us motivated growing up.

My moms first job at del taco they paid her under min wage. In three months she was manager. She even went on to be a professor.

Dad worked a tire shop then got MBA part time then opened a lighting manufacturing company and sold it to Chinese for millions.

Only a two of my siblings are deadbeats. Most are just fine.

One brother owns a small pharmacy in BFE and nets about $450K
One is a computer guy for a university system and makes over 100K
Sister is a psychologist for the st of Ca and does okay
etc

If you have kids my suggestion is accounting with 4.0 > decent business school MBA > Wall Street guaranteed millionaire by 30-35 form nothing.

 

[The-Noid]

snip

If you have kids my suggestion is accounting with 4.0 > decent business school MBA > Wall Street guaranteed millionaire by 30-35 form nothing.

Do econ/accounting or econ/math. Accounting and finance aren't good on wall street anymore it is how you can handle math and make products more complicated and find patterns by torturing the data until it proves what you want.

 

[BudAshes]

I think the funniest thing about taxes is when rebulicans tell us that all our smart and talented people will leave the country if we tax the rich too much. Really, well where the fuck are they gonna go? Canada? Socialist. Europe? Socialist. China? Really? Russia? nope. They ain't going anywhere because America is the best and always will be as long as we have a powerful middle class and a relatively just society.

 

[Genx87]

I think the funniest thing about taxes is when rebulicans tell us that all our smart and talented people will leave the country if we tax the rich too much. Really, well where the fuck are they gonna go? Canada? Socialist. Europe? Socialist. China? Really? Russia? nope. They ain't going anywhere because America is the best and always will be as long as we have a powerful middle class and a relatively just society.

So you think there is some kind of economic berlin wall surrounding this country which allows you to smash these people over the head with whatever you want under the false impression there isnt anywhere better to go? Now that is funny.

 

[Phokus]

Why do people say this?

What is it based on?

Because the rich have a marginal propensity to save, not consume. Just because YOU saw a few rich idiots spend all their money doesn't mean they all do.