US 2012 Tax Brackets - Why and what needs to change

Attic

Diamond Member
Jan 9, 2010
4,282
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Pic taken from http://en.wikipedia.org/wiki/Tax_bracket#2012_Tax_Brackets

So from the 66% jump (15% to 25%) brackets is what stands out to me. Bigtime. That's the largest jump between brackets and it lands squarely on middle class. The brackets above the 25% point pinch down to smaller increases so why are we locked into the current rate structure that doesn't appear to make any sense for the middle class. In the lower incomes we see the 66% rate increase, but in higher incomes we see down to a less than 10% rate increase between brackets? In a time when cost of living is going up up up, the big rate jump middle class is going to starve a lot of folks from available discretionary spending while the higher brackets are giving more discetionary spending money.

Other standout look is why does the brackets end at 388k? What's the hold up to adding another higher bracket for higher earners. Currently the folks above 388K get to enjoy the leverage of the vote from those earning between 388k and infinity. Why not put in a bracket at 500k or a million so that any hold up to those brackets being implemented or increased would not enjoy the backing of folks between 388k and 500k, or 388k and 1M? Looks like the very high earners get to enjoy a tax structure that ends at 388k and get the benefit of being catered to by a vote that may change if the tax inceases were leveied at 500k or 1M+ as opposed to 388k where certainly more people would be against it a rate increase.

I believe taxes need to be lowered across the board or remove double taxation and worse and fees that are crushing folks when they need to spend $$$ they've already been taxed on, but the lowereing would need to be 66% lower for the brackets in question and 10% or less lower for high income brackets otherwise or we would still shifting money to the top. The 20% across the board from Romney while in principle I agree with I think misses the method to deliver a promising result for the nation. Of course if you can deliver the tax break to the top, then how about shifting the tax brackets so it starts of slowly increasing and grows to faster increases at the top instead of rapidly increasing at low wages and flattening out at high wages?
 

DCal430

Diamond Member
Feb 12, 2011
6,020
9
81


Pic taken from http://en.wikipedia.org/wiki/Tax_bracket#2012_Tax_Brackets

So from the 66% jump (15% to 25%) brackets is what stands out to me. Bigtime. That's the largest jump between brackets and it lands squarely on middle class. The brackets above the 25% point pinch down to smaller increases so why are we locked into the current rate structure that doesn't appear to make any sense for the middle class. In the lower incomes we see the 66% rate increase, but in higher incomes we see down to a less than 10% rate increase between brackets? In a time when cost of living is going up up up, the big rate jump middle class is going to starve a lot of folks from available discretionary spending while the higher brackets are giving more discetionary spending money.

Other standout look is why does the brackets end at 388k? What's the hold up to adding another higher bracket for higher earners. Currently the folks above 388K get to enjoy the leverage of the vote from those earning between 388k and infinity. Why not put in a bracket at 500k or a million so that any hold up to those brackets being implemented or increased would not enjoy the backing of folks between 388k and 500k, or 388k and 1M? Looks like the very high earners get to enjoy a tax structure that ends at 388k and get the benefit of being catered to by a vote that may change if the tax inceases were leveied at 500k or 1M+ as opposed to 388k where certainly more people would be against it a rate increase.

I believe taxes need to be lowered across the board or remove double taxation and worse and fees that are crushing folks when they need to spend $$$ they've already been taxed on, but the lowereing would need to be 66% lower for the brackets in question and 10% or less lower for high income brackets otherwise or we would still shifting money to the top. The 20% across the board from Romney while in principle I agree with I think misses the method to deliver a promising result for the nation. Of course if you can deliver the tax break to the top, then how about shifting the tax brackets so it starts of slowly increasing and grows to faster increases at the top instead of rapidly increasing at low wages and flattening out at high wages?
FYI this is the bracket if the bush cut extension passes, if it fails it will be higher for all.
 

nehalem256

Lifer
Apr 13, 2012
15,669
8
0
Eliminate "Head of household" filing status

Introduce a 0% tax bracket and eliminate standard deduction and exemption.
 

DaveSimmons

Elite Member
Aug 12, 2001
40,730
670
126
Maybe a small increase to something like 42-45% above $800K - $1M. That will hit CEOs, but many of the rich like Romney have capital gains and dividends rather than wages.

Increase capital gains taxes from the current Bush rate of 15% to a compromise rate of (pulling number from hat) 20%.

That will still make investment income attractive, but will hit the rich like Romney a lot harder than the middle class.

We need both tax increases and spending cuts to pay off our national credit card debt.
 
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Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,675
136
Eliminate "Head of household" filing status

Introduce a 0% tax bracket and eliminate standard deduction and exemption.
That's your usual beatdown on single custodial parents, mostly women, also their children- standard misogyny from you.
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,675
136
Brackets don't tell the whole story, not by a longshot. If we look at effective tax rates, there's no big jump at all, so there must be other factors compensating for the perceived discrepancy- table 8-

http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0

that's 2009, which is likely little different from today. The one thing they don't break out is the rate for those in the top 5% but below the top 1%, which is likely much less than the 20% rate for the top 5% combined.

Once in the top 5%, that's not exactly "middle class", anyway, considering it's ~5X that of the 50th percentile, the median...

Notice the top .1%, which is where low rates on investment income really come into play. They barely pay more than people in the rest of the top 1%...
 

Attic

Diamond Member
Jan 9, 2010
4,282
2
76
Works great until you get millions for families that are hit hard because of it. Politicians don't have the guts to try it (unless under disguise of something else).
Part of the issue would point to stagnant wages as we desperately need to find a way to get incomes up for tax revenue as well as family needs. I think getting wages up comes from tax relief not more tax burden, but whatever works needs to get implemented. Current tax scheme is certainly broken from what i've seen.

Where the 0% tax bracket is placed would be signficant in where a families tax burden would be pre and post such a change. We'd have to see the 30-45k rate remain largely unchanged or bettered (i think that's achievable) while delivering more tax revenue from higher brackets and or folks reaping to much advantage from deductions. Recieving more money from government that was paid in would have to stop for the lowest earners.
 

Attic

Diamond Member
Jan 9, 2010
4,282
2
76
Brackets don't tell the whole story, not by a longshot. If we look at effective tax rates, there's no big jump at all, so there must be other factors compensating for the perceived discrepancy- table 8-

http://taxfoundation.org/article/summary-latest-federal-individual-income-tax-data-0

that's 2009, which is likely little different from today. The one thing they don't break out is the rate for those in the top 5% but below the top 1%, which is likely much less than the 20% rate for the top 5% combined.

Once in the top 5%, that's not exactly "middle class", anyway, considering it's ~5X that of the 50th percentile, the median...

Notice the top .1%, which is where low rates on investment income really come into play. They barely pay more than people in the rest of the top 1%...
Well the fact that the wealthy and ultra weathly get to "earn" huge amounts through investments while paying low low tax on it is clearly an issue and transfers a lot of the wealth of a succesful economy to the top.

For anyone providing income where >50% is from investments, tax the investments in bracketed form otherwise tax it at 15%. It's perverse that the wealthiest get this grin of huge incomes paying 10-15%
 

Jhhnn

IN MEMORIAM
Nov 11, 1999
62,365
14,675
136
Well the fact that the wealthy and ultra weathly get to "earn" huge amounts through investments while paying low low tax on it is clearly an issue and transfers a lot of the wealth of a succesful economy to the top.

For anyone providing income where >50% is from investments, tax the investments in bracketed form otherwise tax it at 15%. It's perverse that the wealthiest get this grin of huge incomes paying 10-15%
I'd make it simpler than that. Reduce corporate income tax to less than 5%, then tax all income at current rates regardless of source. Give long term investors a break of 1%/yr held on capital gains, with a max credit of 10%. Disallow holding back of profits in offshore subsidiaries.

Corporate entities would make America their home in droves, because that would be very good for corporations, and the govt would get their revenue out of investors, and out of corporate employees in this country.
 

Engineer

Elite Member
Oct 9, 1999
39,234
700
126
I'd make it simpler than that. Reduce corporate income tax to less than 5%, then tax all income at current rates regardless of source. Give long term investors a break of 1%/yr held on capital gains, with a max credit of 10%. Disallow holding back of profits in offshore subsidiaries.

Corporate entities would make America their home in droves, because that would be very good for corporations, and the govt would get their revenue out of investors, and out of corporate employees in this country.
I actually like that plan. I could vote for someone who would actually run on it and "try" to get it passed.
 

JTsyo

Lifer
Nov 18, 2007
11,199
399
126
capital gains - 15% up to $350K then same as your income tax rate for anything over.
 

nehalem256

Lifer
Apr 13, 2012
15,669
8
0
That's your usual beatdown on single custodial parents, mostly women, also their children- standard misogyny from you.
Its called making women pay their fair share. Although apparently treating women as equals counts as misogyny according to liberals.

EDIT: There are already plenty of tax breaks for parents. Why should single parents get special extra tax breaks? It does not seem like something we should be encouraging.

Increase capital gains taxes from the current Bush rate of 15% to a compromise rate of (pulling number from hat) 20%.
If you use reasonable numbers for inflation and average capital appreciation you get a 35% equivalent rate of 17.5-21%. You should introduce more LTCG brackets like for regular income with the top rate at 21%, and the other brackets adjusted accordingly.
 
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Zargon

Lifer
Nov 3, 2009
12,240
2
76
capital gains - 15% up to $350K then same as your income tax rate for anything over.
I might lower it to say 178 for single, 217 for joint to match the top of the 28% tax bracket....just to not have MORE numbers to worry about in taxes :p

but yeah, I always felt capital gains should atleast be tiered once
 

the DRIZZLE

Platinum Member
Sep 6, 2007
2,956
1
81
I actually like that plan. I could vote for someone who would actually run on it and "try" to get it passed.
There is actually fairly broad support on this forum for both the left on the right for this type of tax reform. I'm on board except I'd like to see it accompanied by a flattening of the brackets, and a elimination of most deductions.
 

BoberFett

Lifer
Oct 9, 1999
37,563
9
81
I'd make it simpler than that. Reduce corporate income tax to less than 5%, then tax all income at current rates regardless of source. Give long term investors a break of 1%/yr held on capital gains, with a max credit of 10%. Disallow holding back of profits in offshore subsidiaries.

Corporate entities would make America their home in droves, because that would be very good for corporations, and the govt would get their revenue out of investors, and out of corporate employees in this country.
I'm not entirely opposed to something like that. Doesn't destroy LTCG like many fools seem to want, while lowering corporate taxes which some people still don't understand is a tax on consumers.

I'd certainly be interested to see at least a rough estimate of federal revenues, assuming all else was equal.
 

BurnItDwn

Lifer
Oct 10, 1999
25,857
1,343
126
Do not separate capital gains from Earned Income. Tax them at the same rates.

Create a minimum of 3% of taxable income that applies to everybody who earns more than 10K.

Brackets maybe something like this?
0-25K 10%
25-50K 15%
50-100k 20%
100k-200k 25%
200k-400k 30%
400k-800k 35%
800k-1.6m 40%
1.6m-3.2m 45%
3.2m+ 50%
 

xBiffx

Diamond Member
Aug 22, 2011
8,232
2
0
Do not separate capital gains from Earned Income. Tax them at the same rates.

Create a minimum of 3% of taxable income that applies to everybody who earns more than 10K.

Brackets maybe something like this?
0-25K 10%
25-50K 15%
50-100k 20%
100k-200k 25%
200k-400k 30%
400k-800k 35%
800k-1.6m 40%
1.6m-3.2m 45%
3.2m+ 50%
Complicate much?
 

HomerJS

Lifer
Feb 6, 2002
30,803
18,541
136
How about a cap on all deductions except medical at 200K. Would give back a little fairness to the middle class.
 

bfdd

Lifer
Feb 3, 2007
13,312
1
0
Why are some of you treating people so unequally? Why do you promote divide and inequality? Lol at all the "fairness" bring thrown around. You're just trying to set the OK limit at which the government can forcibly take property and you can't even do that without coming up with imaginary reasons you should be treated differently.
 

xBiffx

Diamond Member
Aug 22, 2011
8,232
2
0
How about a cap on all deductions except medical at 200K. Would give back a little fairness to the middle class.
How about we just eliminate all deductions aside from medical expenses exceeding a % of income. That is the only one that seems not to be choice driven.
 

dank69

Lifer
Oct 6, 2009
32,613
21,836
136
How about we just eliminate all deductions aside from medical expenses exceeding a % of income. That is the only one that seems not to be choice driven.
I would think that owning a home would be good for the economy. You don't see a lot of renters down at Home Depot every weekend picking up supplies for their latest home improvement project.
 

child of wonder

Diamond Member
Aug 31, 2006
8,307
175
106
I would think that owning a home would be good for the economy. You don't see a lot of renters down at Home Depot every weekend picking up supplies for their latest home improvement project.
I'd rather the government didn't prop up certain parts of the economy like that. It makes it nearly impossible to withdraw the funding because everyone becomes accustomed to it and no one wants to deal with the pain of ending it.
 

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