Re: Taxing the rich - what is the cutoff?
 

Back to the subject at hand, I'm going with 750k as an appropriate cutoff. Then adjust every year with inflation rates. There's no formula involved with this value, just good old gut instinct. Sometimes you got to go with the gut.

Re: Taxing the rich - what is the cutoff?
 

[quote=724Skinsfan;453033]Back to the subject at hand, I'm going with 750k as an appropriate cutoff. Then adjust every year with inflation rates. There's no formula involved with this value, just good old gut instinct. Sometimes you got to go with the gut.[/quote]


I'll see your 750K and up it by 250K. I say let's make it a cool million just to be on the safe side.

Re: Taxing the rich - what is the cutoff?
 

[QUOTE=SC Skins Fan;453024]I don't claim to understand the in's and out's of tax policy, but the 'tax revenue increases with decreased rates of taxation' is apparently a questionable assertion.[/QUOTE]

It's debateable for a number of reasons. First and foremost, it is difficult to separate causation from correlation. But, even if cuts in the capital gains rate do not result in substantial increases in tax revenue, I have yet to see anything which indicates that cuts in the cap gains rate results in the loss of substantial amount of tax revenue.

Re: Taxing the rich - what is the cutoff?
 

Well here is a peice about two of the largest tax cuts durn JFK (yes JFK cut taxes for the rich) and Regan tax cuts.[url=http://www.mackinac.org/article.aspx?ID=676]Tax Cuts vs. Government Revenue [Mackinac Center for Public Policy][/url]

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453058]Well here is a peice about two of the largest tax cuts durn JFK (yes JFK cut taxes for the rich) and Regan tax cuts.[URL="http://www.mackinac.org/article.aspx?ID=676"]Tax Cuts vs. Government Revenue [Mackinac Center for Public Policy][/URL][/quote]

I like how he says this:
[quote]It should be stressed, however, that the economy of the 1990s has grown moderately, in spite of tax increases, not because of them.[/quote]

Yet he provides absolutely no support for the statement.

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453059]I like how he says this:

[QUOTE]It should be stressed, however, that the economy of the 1990s has grown moderately, in spite of tax increases, not because of them.[/QUOTE]

Yet he provides absolutely no support for the statement.[/quote]Economic theory has generally ruled that statement to be true through trial and error, but it is a poor writing technique to just assume your reader is fluent in economic theory and move on.

It's not hard to defend a statement like that; a little effort would be nice.

Re: Taxing the rich - what is the cutoff?
 

[quote=saden1;453050]I'll see your 750K and up it by 250K. I say let's make it a cool million just to be on the safe side.[/quote]

I actually considered 1 mil but I think the elation of making it to the 7 figure mark would be offset by being taxed more. I'd hate to make a suggestion that leads to such disappointment. Hmm, what the hay, let's make it 1.25 million but increase the taxable % to offset all of the potential money we will have lost from the 250k to 1.25M crowd.

Re: Taxing the rich - what is the cutoff?
 

[quote=saden1;452909]I couldn't agree more. If we had a flat tax everything would be great. If you make 10K you should get another job or second job and then you might be able to afford that $4.50 gallon of gas and that $4 gallon of milk and won't have to rely on a tax scheme that fleeces the rich.[/quote]
I don't want to turn this into another thread about oil, but this is exactly why we need to drill for oil here. If we were energy independent, gas would be cheap again and the recession would be over.

Re: Taxing the rich - what is the cutoff?
 

oil speculation is driving up prices more than lack of supply right now... everyone diving in for fast cash (700% profit in 7 years, wow). other commodities are seeing the same type of investment hoarding too.

as for riggo - you don't like seeing soldiers hurt, but guess what? try talking to some of them. they knew the deal and wanted to join anyways. using the "someone might get hurt" argument in a war debate would be pretty laughable. have fun with your terribly warped and close minded world view.

Re: Taxing the rich - what is the cutoff?
 

[quote=GTripp0012;453061]Economic theory has generally ruled that statement to be true through trial and error, but it is a poor writing technique to just assume your reader is fluent in economic theory and move on.

It's not hard to defend a statement like that; a little effort would be nice.[/quote]
I'm not sure what you mean by "trial and error". I found a few links discussing it, but it's mostly places like the Heritage Foundation, from whom I expect no less (see [URL="http://taxprof.typepad.com/taxprof_blog/2008/03/tax-cuts-not-th.html"]these comments[/URL]):
[URL]http://www.heritage.org/Research/Taxes/wm1835.cfm[/URL]

Factcheck.org says it was a combination of reducing the deficit, oil, and the internet boom:
[URL]http://www.factcheck.org/askfactcheck/were_clintons_policies_responsible_for_the_1990s.html[/URL]

This was a pretty balanced review of the 1990s economy (although it could be raving lunacy for all I know):
[URL]http://econ161.berkeley.edu/TotW/clinton.html[/URL]

I did find one study that suggested the deeper the tax cuts in the 1990s the deeper budget problems and economic stress during the downturn:
[URL]http://www.cbpp.org/1-12-05sfp-pr.htm[/URL]

The important takeaway according to the study was that tax cuts have to be affordable (which means cutting programs). That would support the opposite conclusion of tax cuts increasing revenue.

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453070]The important takeaway according to the study was that tax cuts have to be affordable (which means cutting programs). That would support the opposite conclusion of tax cuts increasing revenue.[/quote]I think this goes without saying, and my one real problem with the Bush Administration (I'm not and never was real anti-war, and I think good point are made on both sides) was a general disregard for a balanced budget.

Tax cuts are generally a good idea, and the thought process that they would stimulate the economy a generally solid one, but I totally agree with you that they dropped the ball by not making up the difference by cutting spending.

Smaller government, by definition, requires the government to cut its spending. Not only GW, but the entire administration sort of got off on the right foot (cut taxes), and then decided that they could push off balancing the budget for about eight years (creating an impressive deficit).

I'm not going to pile on with the whole war expenses; they obviously did not see that coming when they took office in 2001, but they certainly did not adapt by cutting spending, and now the government is pretty helpless from a financial standpoint.

Perhaps that will actually be a good thing. Even if it's Obama gets elected, he'll be forced to cut spending, which is something that needed to be done about 15 years ago. Problem is, there will be time to be spent digging out of the deficit as opposed to solving real problems like the impending energy crisis and potential food crisis that will follow.

So while I think the decision to go to war can be debated, and the decision to stay can be debated, I really don't think the lack of a solid economic plan to support said war can be defended.

Re: Taxing the rich - what is the cutoff?
 

[quote=GTripp0012;453088]
So while I think the decision to go to war can be debated, and the decision to stay can be debated, [B]I really don't think the lack of a solid economic plan to support said war can be defended[/B].[/quote]

what part of "let your grandchildren pay for it" don't you understand?


it's perfect, no one has to sacrifice, and everyone gets what they want... well, except your grandchildren.

;)

Re: Taxing the rich - what is the cutoff?
 

After going all war-talk in this thread, I'm ready to get back to the topic.

Are you guys kidding in saying that $250K per year is not a good cutoff for higher taxes? This thread title may have been chosen poorly. Obama's $250K cutoff is not designed to define who is "rich." To me, you're not rich unless you have assets, excluding your primary residence, totaling $1.0 million or more. "Rich" is a balance sheet definition, not a cash flow definition. In other words, rich is based on what you have, not what you make.

But Obama does not intend to set a cutoff to tax the "rich." He's setting it up to increase revenues from a group that can afford to pay it. I understand the area in which most of us live has a very high cost of living. But if you can't live extremely comfortably in the DC area on $250,000 a year, something is extremely wrong with your budgeting process. That's what Obama's going after, those who can afford to give up 3% of their savings. If people are living paycheck to paycheck on $250K, and can't afford to give up 3% in additional taxes, they need to be smacked upside the friggin head.

To suggest the cutoff needs to be $500K, let alone $750K, makes me question the financial literacy of Americans even more than I already do.

Re: Taxing the rich - what is the cutoff?
 

[quote=Schneed10;453096]After going all war-talk in this thread, I'm ready to get back to the topic.

Are you guys kidding in saying that $250K per year is not a good cutoff for higher taxes? This thread title may have been chosen poorly. Obama's $250K cutoff is not designed to define who is "rich." To me, you're not rich unless you have assets, excluding your primary residence, totaling $1.0 million or more. "Rich" is a balance sheet definition, not a cash flow definition. In other words, rich is based on what you have, not what you make.

But Obama does not intend to set a cutoff to tax the "rich." He's setting it up to increase revenues from a group that can afford to pay it. I understand the area in which most of us live has a very high cost of living. But if you can't live extremely comfortably in the DC area on $250,000 a year, something is extremely wrong with your budgeting process. That's what Obama's going after, those who can afford to give up 3% of their savings. If people are living paycheck to paycheck on $250K, and can't afford to give up 3% in additional taxes, they need to be smacked upside the friggin head.

[b]To suggest the cutoff needs to be $500K, let alone $750K, makes me question the financial literacy of Americans even more than I already do.[/b][/quote]

Enter the voice of reason. I wonder if it has something to do with the American myth of 'up from your bootstraps success'. I doubt many people commenting on the thread pull down $250K+, but maybe they think that they could if only for that one big break. Plus we live in a celebrity obsessed culture where we watch all these 'stars' make millions and we talk about athletes pulling down multi-million dollar signing bonuses. Perhaps all of it makes it seem that the money just flows like mana from heaven (even if we don't ever see it ourselves) and $250K just doesn't seem like that much money.

On a side note, if anyone really despises taxes you might consider moving to South Carolina (where our libertarian heritage, like the Confederate flag, waves in the wind for all to see). It seems to me that I pay ridiculously low state taxes (especially compared to what I used to pay in Virginia) and my property taxes dropped by 50% this past year (from less than $900 to less than $450 for a house assessed at $115,000 - oh yeah, you can still get house for $115,000). Plus, all the politicians do is talk about is cutting our 'onerous tax rates'. Our public schools rank 48th or 49th (so it could be worse!) and I'm sure there isn't any corelation anyway.

Re: Taxing the rich - what is the cutoff?
 

[quote=Schneed10;453096]After going all war-talk in this thread, I'm ready to get back to the topic.

Are you guys kidding in saying that $250K per year is not a good cutoff for higher taxes? [B]This thread title may have been chosen poorly. Obama's $250K cutoff is not designed to define who is "rich."[/B] [/quote]
Feel free to substitute "wealthy" for "rich", but that's a quote from the article.

[quote=Schneed10;453096] To me, you're not rich unless you have assets, excluding your primary residence, totaling $1.0 million or more. "Rich" is a balance sheet definition, not a cash flow definition. In other words, rich is based on what you have, not what you make.[/quote]
Well said. You've hit on the problem as I see it - people equate $250k/year with being "rich" or "wealthy". That just isn't the case.

[quote=Schneed10;453096]But Obama does not intend to set a cutoff to tax the "rich." He's setting it up to increase revenues from a group that can afford to pay it. I understand the area in which most of us live has a very high cost of living. But if you can't live extremely comfortably in the DC area on $250,000 a year, something is extremely wrong with your budgeting process. That's what Obama's going after, those who can afford to give up 3% of their savings. If people are living paycheck to paycheck on $250K, and can't afford to give up 3% in additional taxes, they need to be smacked upside the friggin head.[/quote]
I agree. However, it's naive to think that $250k in an area like DC, San Diego, San Francisco, etc. buys you complete economic freedom. I think that is no-question possible at $500k, but I don't exactly have experiential data to prove that.

[quote=Schneed10;453096]To suggest the cutoff needs to be $500K, let alone $750K, makes me question the financial literacy of Americans even more than I already do.[/quote]
Any cutoff is arbitrary. Why not $225k? Or $300k? Maybe $250k is ridiculous, and it should be $175k? I'm sure they didn't pick that number out of a hat, but I'm equally sure there is no basis to establish $250k as the optimal cutoff.

Re: Taxing the rich - what is the cutoff?
 

Being a financial analyst by trade, I put together a quick budget for a couple, with 3 kids, living in Maryland around the DC area, making $250,000 per year. I calculated their Federal Income Tax liability, their tax return assuming they're susceptible to the Alternative Minimum Tax, their Maryland State Income tax liability, and made a bunch of other assumptions shown in the table below.

As you can see, this couple can afford to put away 10% of their income towards retirement, save $300 per month per child for each of their 3 kids' college education, take a $5000 vacation each year, spend $5000 on Christmases and Birthdays, spend $400 per month on fun stuff, pay someone to take care of their yard, make $5000 in annual upgrades to their home, drive two very nice cars without worrying about gas, and spend $200 per month eating out. It even assumes that the youngest of the 3 kids needs daycare.

Even after all that, this couple saves money. You're going to tell me they can't cut out some of that lavish spending to give 3% more to the US Government? I tell you one thing, I wouldn't feel sorry for them at all, they can cry me a river.
[QUOTE]
[B]PreTax Income $250,000 [/B]

Expenses
Federal Taxes (61,229)
State Income Tax: Maryland (11,948)
Healthcare Insurance: PPO @ $120 per Paycheck (3,120)
Dental Insurance: $20 per Paycheck (520)
Mortgage: $750K House, $600K Mortgage @ 6.0% (43,168)
Childcare (8,000)
Car Payment 1: $30,000 Car (6,453)
Car Payment 2: $40,000 Van/SUV (8,604)
Car Maintenance (2,000)
Gasoline @ $300 per Month Per Car (7,200)
Groceries for Family of 5: $1200 per Month (14,400)
Electricity & Heat (2,400)
Water (540)
Cable TV, Phone, Hi Speed Internet, Cell Phone (3,000)
Home Maintenance (5,000)
Groundskeeping (2,000)
[B]Total Expenses (179,581)[/B]

Discretionary Income before Federal Tax Return 70,419
Federal Tax Return: Assuming AMT Kicks In 21,407
[B]Discretionary Income 91,827[/B]

Discretionary Spending
Retirement Savings @ 10% of Income (62,500)
College Savings: 3 Kids @ $300 per Month Per Child (10,800)
Vacation (5,000)
Christmas, Birthdays, and Gifts (5,000)
Entertainment & Merchandise @ $400 per Month (4,800)
Eating Out @ $200 Per Month (2,400)
[B]Discretionary Spending (90,500)[/B]

[B]Annual Savings (Loss) $1,327 [/B][/QUOTE]

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453105]
I agree. However, it's naive to think that $250k in an area like DC, San Diego, San Francisco, etc. buys you complete economic freedom. I think that is no-question possible at $500k, but I don't exactly have experiential data to prove that.

Any cutoff is arbitrary. Why not $225k? Or $300k? Maybe $250k is ridiculous, and it should be $175k? I'm sure they didn't pick that number out of a hat, but I'm equally sure there is no basis to establish $250k as the optimal cutoff.[/quote]

All you have to do is budget it out. See my post above. It becomes abundantly clear that $250K is a perfect cutoff.

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453105]Feel free to substitute "wealthy" for "rich", but that's a quote from the article.


Well said. You've hit on the problem as I see it - people equate $250k/year with being "rich" or "wealthy". That just isn't the case.


I agree. However, it's naive to think that $250k in an area like DC, San Diego, San Francisco, etc. buys you complete economic freedom. I think that is no-question possible at $500k, but I don't exactly have experiential data to prove that.


Any cutoff is arbitrary. Why not $225k? Or $300k? Maybe $250k is ridiculous, and it should be $175k? I'm sure they didn't pick that number out of a hat, but I'm equally sure there is no basis to establish $250k as the optimal cutoff.[/quote]
Yes you are correct the 250,000 number picked was for a good reason. The lower the income Obama wants to increase tax on the great % of Americans it affects and the more people it affects the more people less likely to vote for him. If I'm correct the % of people in the US making over 250 is 2% drop that to $150,000 and the percentage of Americans affected jumps much higher.

Re: Taxing the rich - what is the cutoff?
 

Schneed- thanks, this gives a practical point for discussion.

One problem, though is that your childcare costs are off. It's around $1200/kid in NoVa (it goes down as they get older and the teacher/student ratios decrease, and, obviously, goes away once they hit grade school). We have 2 kids in daycare, so that puts a big hurt on the budget. I realize it's temporary, but who's to say a 3rd isn't in the picture? That gets into a separate issue, though - having kids you can't afford.

Also, it looks like you added AMT as income - wouldn't that [U]reduce[/U] income?

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453109]Yes you are correct the 250,000 number picked was for a good reason. The lower the income Obama wants to increase tax on the great % of Americans it affects and the more people it affects the more people less likely to vote for him. If I'm correct the % of people in the US making over 250 is 2% drop that to $150,000 and the percentage of Americans affected jumps much higher.[/quote]

I'm a righty, but I have to give him credit. He picked $250K very carefully. As you say, it sets a level affecting only 2-3% of Americans. Yet the revenue generated by the increase on this small group will make a significant difference to assuaging our bloated federal deficit.

Where I really disagree with him though is on that Capital Gains tax, he wants to go above 20%. Historically that has been a terrible idea. But that's another discussion.

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453110]Schneed- thanks, this gives a practical point for discussion.

One problem, though is that your childcare costs are off. It's around $1200/kid in NoVa (it goes down as they get older and the teacher/student ratios decrease, and, obviously, goes away once they hit grade school). We have 2 kids in daycare, so that puts a big hurt on the budget. I realize it's temporary, but who's to say a 3rd isn't in the picture? That gets into a separate issue, though - having kids you can't afford.

[B]Also, it looks like you added AMT as income - wouldn't that [U]reduce[/U] income[/B]?[/quote]

First, on childcare, I'm assuming that if you're making $250K as a couple, you're typically not a young couple. I imagined two 40-year old parents with accomplished careers, with one high schooler, one middle schooler, and one 5 year old. Jack up the childcare cost if you feel necessary, I can see that.

As for the bolded part, I added it as income because it's a tax return, money they get back from the government every year. If not for AMT, this couple would get back more than $35K each year in tax returns. With AMT, they only get back $21K.

In reality, nobody gets a tax return this big because people claim more than 0 on their W-2 at work, hence less tax is taken out from their paycheck. But that's a zero-sum affect in this example. If this couple were doing that, their 61K income tax liability would be reduced by the same amount in which their tax return went down.

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453109]Yes you are correct the 250,000 number picked was for a good reason. The lower the income Obama wants to increase tax on the great % of Americans it affects and the more people it affects the more people less likely to vote for him. If I'm correct the % of people in the US making over 250 is 2% drop that to $150,000 and the percentage of Americans affected jumps much higher.[/quote]
I agree. However, changing it by $25k in either direction would have [URL="http://en.wikipedia.org/wiki/Household_income_in_the_United_States"][URL="http://www.census.gov/compendia/statab/cats/income_expenditures_poverty_wealth/household_income.html"]nominal [/URL]impact[/URL]. It's not random, but it is arbitrary.

Re: Taxing the rich - what is the cutoff?
 

[quote=Schneed10;453113]As for the bolded part, I added it as income because it's a tax return, money they get back from the government every year. If not for AMT, this couple would get back more than $35K each year in tax returns. With AMT, they only get back $21K.

In reality, nobody gets a tax return this big because people claim more than 0 on their W-2 at work, hence less tax is taken out from their paycheck. But that's a zero-sum affect in this example. If this couple were doing that, their 61K income tax liability would be reduced by the same amount in which their tax return went down.[/quote]
I'll be the first to admit that I am awful with taxes, but I'm trying to understand the chart, because I think it's a useful framework for this discussion. Are you saying that the total federal income tax liability for a couple making $250k is about $40k? I'm seeing a $61k federal tax expense and a $21k federal tax return.

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453115]I'll be the first to admit that I am awful with taxes, but I'm trying to understand the chart, because I think it's a useful framework for this discussion. Are you saying that the total federal income tax liability for a couple making $250k is about $40k? I'm seeing a $61k federal tax expense and a $21k federal tax return.[/quote]

Yes that's exactly right, you've got it.

If you take the federal tax bracket tables, if you make $250,000 in TAXABLE income, your liability comes out to $61K.

But not all of your $250K income is taxable. On your tax return, you'd deduct mortgage interest, healthcare premiums if they weren't already reflected on your W-2 (as is the case here), take the deductions for your dependents, and retirement savings (assuming you're ineligible for Roth benefits because you make too much).

In the end, the $250K in pretax income comes down to about $138K in Taxable income, so their tax return would be $35K. But then the AMT kicks in, because the government says this couple needs to pay their fair share, so they reduce the tax return down by about $14K in this example, to help balance things out. So the tax return comes out to $21K.

So the $61K liability, minus the $21K tax return, means they pay $40K in federal taxes.

Re: Taxing the rich - what is the cutoff?
 

[quote=Schneed10;453107]Being a financial analyst by trade, I put together a quick budget for a couple, with 3 kids, living in Maryland around the DC area, making $250,000 per year. I calculated their Federal Income Tax liability, their tax return assuming they're susceptible to the Alternative Minimum Tax, their Maryland State Income tax liability, and made a bunch of other assumptions shown in the table below.

As you can see, this couple can afford to put away 10% of their income towards retirement, save $300 per month per child for each of their 3 kids' college education, take a $5000 vacation each year, spend $5000 on Christmases and Birthdays, spend $400 per month on fun stuff, pay someone to take care of their yard, make $5000 in annual upgrades to their home, drive two very nice cars without worrying about gas, and spend $200 per month eating out. It even assumes that the youngest of the 3 kids needs daycare.

Even after all that, this couple saves money. You're going to tell me they can't cut out some of that lavish spending to give 3% more to the US Government? I tell you one thing, I wouldn't feel sorry for them at all, they can cry me a river.[/quote]
It not a point if they can afford the addtional 3% its more of a question of "is it fair". They are allready working 3 1/2 months to pay taxes how much should they pay.

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453119]It not a point if they can afford the addtional 3% its more of a question of "is it fair". They are allready working 3 1/2 months to pay taxes how much should they pay.[/quote]

According to Schneed's calculations, they are only working 2 months ($250k/12 = $21k/month). Not sure it changes your opinion, just pointing out the math (which I still am not 100% on).

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453119]It not a point if they can afford the addtional 3% its more of a question of "is it fair". They are allready working 3 1/2 months to pay taxes how much should they pay.[/quote]

Yeah now there's the philosophical discussion which I am totally inclined to agree with (see my earlier posts).

I was just coming at it from the angle of "if you have to set a cutoff for higher taxes, should it be $250K or higher?" I'd say $250K is a good cutoff.

But you're asking whether there should be higher taxes for anybody. And I'd tend to agree from a philosophical standpoint.

Re: Taxing the rich - what is the cutoff?
 

schneed, im not sure how long it took, but we agree on this subject :)

Re: Taxing the rich - what is the cutoff?
 

And may I add that the $250K budget I drew up was for a family living in the DC area, one of the highest cost of living locations in the US.

If you live here in Philly, $250K takes you further. In places like Charlotte NC and other cities all across the land, it takes you much much further.

Re: Taxing the rich - what is the cutoff?
 

[quote=Schneed10;453130]And may I add that the $250K budget I drew up was for a family living in the DC area, one of the highest cost of living locations in the US.

If you live here in Philly, $250K takes you further. In places like Charlotte NC and other cities all across the land, it takes you much much further.[/quote]
True, but it also doesn't account for student loans, which can exceed $100k easily for law/medical school. That can add an extra $15k-20k/year.

If you have at most one kid in daycare and no student loans, I agree.

If you have young kids requiring daycare and student loans, this budget goes out the window, and the 3% is going to be felt.

Your budget is a useful discussion point, but you haven't proved the $250k cutoff is optimal.

I still agree that it is affordable, though. The point of the article (and one that I agree with and I think you agree with) is that Obama has labeled this income bracket as "wealthy", which is not likely true for most of the demographic. That's fine to increase it 3% now, but it's not a well you can keep going back to.

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453119]It not a point if they can afford the addtional 3% its more of a question of "is it fair". They are allready working 3 1/2 months to pay taxes how much should they pay.[/quote]

After many pages of parry and thrust, you summed up the issue in one line.
It is not right.............

Re: Taxing the rich - what is the cutoff?
 

I racked up $240,000 in student loans ([I]excluding[/I] interest) between undergrad and law school. My monthly payments are north of $1,000 per month and I'll be paying them until I am about ready to retire. If I wanted to pay them off quickly (which would make sense for the private loans, but not for the subsidized ones), I'd be looking at $2,400+ per month. If you are a similarly situated couple, have fun paying up to $5,000 combined in student loan payments per month.

Re: Taxing the rich - what is the cutoff?
 

Excellent posts Schneed10...praise lord...hallelujah.

Re: Taxing the rich - what is the cutoff?
 

[quote=Sheriff Gonna Getcha;453137]I racked up $240,000 in student loans ([I]excluding[/I] interest) between undergrad and law school. My monthly payments are north of $1,000 per month and I'll be paying them until I am about ready to retire. If I wanted to pay them off quickly (which would make sense for the private loans, but not for the subsidized ones), I'd be looking at $2,400+ per month. If you are a similarly situated couple, have fun paying up to $5,000 combined in student loan payments per month.[/quote]

Look on the bright side, it' an investment in yourself and potential earning. Plus your interest is tax deductible, and I'm not sure about this one but couldn't you deduct your loan payment as an educational expense as well?

Re: Taxing the rich - what is the cutoff?
 

[quote=Sheriff Gonna Getcha;453137]I racked up $240,000 in student loans ([I]excluding[/I] interest) between undergrad and law school. My monthly payments are north of $1,000 per month and I'll be paying them until I am about ready to retire. If I wanted to pay them off quickly (which would make sense for the private loans, but not for the subsidized ones), I'd be looking at $2,400+ per month. If you are a similarly situated couple, have fun paying up to $5,000 combined in student loan payments per month.[/quote]

Holy shit, that's a friggin huge amount of debt. Keep in mind that student loans like that would deduct your taxes like crazy, reducing your tax liability by quite a lot, but still, in that case you're not comfortable even at $250K.

Which makes one question the logic of racking up that much debt. You'd have to make partner by your 40s to break even on the investment in schooling. That's not to question your decision to go to law school on your own dime, which I commend, but it's an indictment of the insane expenses (and growth rates) tied to higher education.

Re: Taxing the rich - what is the cutoff?
 

Also how many people making around 250,000 will decide that it does pay to make the 250,000 and instaed make 245,000 and still bring home more money then if they make $250,000. Heres the math. If a person makes 250,000 their additional tax is $7,000 which drops their pay to 243,000 and if they made $245,000 they do not have this additional tax. For people who have their own business they would just change how they pay themself. For the person who said they only work 2 months to pay taxes here is the math. Their tax bracket is around 33% and 33% of 12 months is 3.96 months or around $82,500 if making 250,000. If we jump that an additional 3% now they are working 4.32 months to pay taxes. I just feel thats not fair.

Re: Taxing the rich - what is the cutoff?
 

Not necessarily - most 5th year attorneys at major firms make around $250k. Starting salary for 1st years at major firms is $160k. Partner track is 8-10 years, so partner at 35 (which actually results in a pay [U]cut[/U] at first) is not an unreasonable plan. It's doable, but SGG would feel the 3% hit. If another tax increase comes in a few years, it may [U]not[/U] actually be doable.

Of course, if you want to be a public defender, then you're screwed.

Re: Taxing the rich - what is the cutoff?
 

Student loans can be a real killer. You're damned if you do, damned if you don't. On one hand a college degree greatly increases your overall earnings potential, but you do pay for it, literally. I'd like to see more loan forgiveness programs.

Re: Taxing the rich - what is the cutoff?
 

[quote=onlydarksets;453132]True, but it also doesn't account for student loans, which can exceed $100k easily for law/medical school. That can add an extra $15k-20k/year.

If you have at most one kid in daycare and no student loans, I agree.

If you have young kids requiring daycare and student loans, this budget goes out the window, and the 3% is going to be felt.

Your budget is a useful discussion point, but you haven't proved the $250k cutoff is optimal.

I still agree that it is affordable, though. The point of the article (and one that I agree with and I think you agree with) is that Obama has labeled this income bracket as "wealthy", which is not likely true for most of the demographic. That's fine to increase it 3% now, but it's not a well you can keep going back to.[/quote]

Major student loans definitely throw a wrench in the works. But few have to rack up the kind of debt that SGG did. Usually, you either get grants or aid, or go to a state school in college to keep the debt lower in undergrad. Law school or med school will undoubtedly be expensive.

As for kids in daycare, I still maintain that there are so few people making $250K who also have 2 or more kids in daycare that it's not even worth discussing. Not too many late 20s/early 30 somethings make that much money, it takes a while to work up to $250K for most folks.

Re: Taxing the rich - what is the cutoff?
 

[quote=firstdown;453143]Also how many people making around 250,000 will decide that it does pay to make the 250,000 and instaed make 245,000 and still bring home more money then if they make $250,000. Heres the math. If a person makes 250,000 their additional tax is $7,000 which drops their pay to 243,000 and if they made $245,000 they do not have this additional tax. For people who have their own business they would just change how they pay themself. For the person who said they only work 2 months to pay taxes here is the math. Their tax bracket is around 33% and 33% of 12 months is 3.96 months or around $82,500 if making 250,000. If we jump that an additional 3% now they are working 4.32 months to pay taxes. I just feel thats not fair.[/quote]
That's the marginal tax rate, not the average tax rate. You pay the percentage on the bracket in which that particular dollar of income falls:
[url=http://en.wikipedia.org/wiki/Tax_rate#Marginal]Tax rate - Wikipedia, the free encyclopedia[/url]