Taxing the rich - what is the cutoff?

[FRPLG]

I think I agree with those who said that the question isn't "What is rich?" but rather "Is it fair that the 'rich' should pay a higher percentage?" Whether it is 250k, 500k or whatever is minutae to me. All the same. You're still arbitrarily making someone fork over more money than the next guy.

[SC Skins Fan]

Originally Posted by FRPLG

I think I agree with those who said that the question isn't "What is rich?" but rather "Is it fair that the 'rich' should pay a higher percentage?" Whether it is 250k, 500k or whatever is minutae to me. All the same. You're still arbitrarily making someone fork over more money than the next guy.

Is it really arbitrary if it is based on income? Arbitrary indicates randomness, like everyone whose social security number ends it 8 is placed in tax bracket X. That would be arbitrary.

I mean, even the Fair Tax people argue that their plan is a progressive form of taxation. I guess I'm confused by what you would offer in place of progressive taxation. A flat tax for everyone regardless of income?
Abolishing the Federal Government entirely?

[Sheriff Gonna Getcha]

Originally Posted by SC Skins Fan

I guess I'm confused by what you would offer in place of progressive taxation. A flat tax for everyone regardless of income?
Abolishing the Federal Government entirely?

I would like to see a flat tax, with people making under $X exempt altogether. Of course, that would force the government to drastically reduce spending, but I'm all for slashing various budgets (e.g., defense, certain farm subsidies, etc.).

[Schneed10]

One final point, doesn't saying that you need more than $250K to be comfortable in DC just fail to pass the sniff test? If anybody wants to see how $250K can be comfortable in any market, give it to me, I promise I'll show you!

Keep in mind, the budget I laid out is LAVISH. That is a ton of discretionary spending. If you need more than $250K to be comfortable, you need to have your head examined.

[onlydarksets]

Originally Posted by Schneed10

One final point, doesn't saying that you need more than $250K to be comfortable in DC just fail to pass the sniff test? If anybody wants to see how $250K can be comfortable in any market, give it to me, I promise I'll show you!

Keep in mind, the budget I laid out is LAVISH. That is a ton of discretionary spending. If you need more than $250K to be comfortable, you need to have your head examined.

Sorry, Schneed, but that's just picking and choosing. You laid out what you believe is an average budget. You missed a number of huge expenses, which we discussed. Let's look at another realistic budget, based of your initial work:

PreTax Income $250,000

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 (all 3) -43,200
Car Payment 1: $30,000 Car -6,453
Car Payment 2: $40,000 Van/SUV
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
Student Loans -15,000
Total Expenses -221,178

Discretionary Income before Federal Tax Return 70,419
Federal Tax Return: Assuming AMT Kicks In 21,407
Discretionary Income 91,826

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
Discretionary Spending -90,500

Annual Savings (Loss) ($40,271)

That's a $40k negative budget. I think that covers all of the "lavish discretionary funds". I even took out one of the cars (assuming you have a jalopy that's paid off). You can even remove one of the kids, and it doesn't get you down to break even.

I am certainly not saying you can't live comfortably at $250k. I'm saying it sure ain't "rich" (even from a cash flow perspective), which was the original question.

[Schneed10]

Originally Posted by onlydarksets

Sorry, Schneed, but that's just picking and choosing. You laid out what you believe is an average budget. You missed a number of huge expenses, which we discussed. Let's look at another realistic budget, based of your initial work:

That's a $40k negative budget. I think that covers all of the "lavish discretionary funds". I even took out one of the cars (assuming you have a jalopy that's paid off). You can even remove one of the kids, and it doesn't get you down to break even.

I am certainly not saying you can't live comfortably at $250k. I'm saying it sure ain't "rich" (even from a cash flow perspective), which was the original question.

You're way biased on this one though. There are very few couples with 3 kids requiring daycare who also make $250K, mainly because people who make $250K are in their 40s or higher. If all 3 kids do require some form of care, it would be of the after-care variety for at least one (if not two) of the kids, which is a fraction of full daycare costs. I maintain that your daycare cost has to come out of the equation. Is there a scenario where someone could have 3 kids who were born back to back to back, ages 3, 2, and 1, all requiring full daycare? And at the same time owing $200K in student loans? I guess so, but it's so friggin rare and not worth discussing from a political standpoint.

Student loans are an issue in this budget, I'll grant you that. But I can find room for those. Drive a $20,000 car and a $20,000 minivan instead. Cut your grocery bill back by $200 a month by buying chicken instead of steak. Don't spend so much on Christmas. Do the yardwork your damn self. And cut your $400 a month in entertainment down by half.

[onlydarksets]

Originally Posted by Schneed10

You're way biased on this one though. There are very few couples with 3 kids requiring daycare who also make $250K, mainly because people who make $250K are in their 40s or higher. If all 3 kids do require some form of care, it would be of the after-care variety for at least one (if not two) of the kids, which is a fraction of full daycare costs. I maintain that your daycare cost has to come out of the equation. Is there a scenario where someone could have 3 kids who were born back to back to back, ages 3, 2, and 1, all requiring full daycare? And at the same time owing $200K in student loans? I guess so, but it's so friggin rare and not worth discussing from a political standpoint.

Student loans are an issue in this budget, I'll grant you that. But I can find room for those. Drive a $20,000 car and a $20,000 minivan instead. Cut your grocery bill back by $200 a month by buying chicken instead of steak. Don't spend so much on Christmas. Do the yardwork your damn self. And cut your $400 a month in entertainment down by half.

Daycare is 3 mos-6 years, not 1-3 years. Even so, I addressed that:

Originally Posted by onlydarksets

You can even remove one of the kids, and it doesn't get you down to break even.

Look, you setup a budget for one demographic and applied it across the entire tax bracket. You've made assumptions about the average age, education level, debt, parenting age, and child age that are not as universal as they once were. Pointing that out is not bias - it's informing the discussion.

And where did I ever say that you could not live comfortably on $250k?

[SC Skins Fan]

Originally Posted by onlydarksets

Sorry, Schneed, but that's just picking and choosing. You laid out what you believe is an average budget. You missed a number of huge expenses, which we discussed. Let's look at another realistic budget, based of your initial work:

That's a $40k negative budget. I think that covers all of the "lavish discretionary funds". I even took out one of the cars (assuming you have a jalopy that's paid off). You can even remove one of the kids, and it doesn't get you down to break even.

I am certainly not saying you can't live comfortably at $250k. I'm saying it sure ain't "rich" (even from a cash flow perspective), which was the original question.

Holy crap! Looks like your fictitious couple has bigger problems then the $0 extra tax dollars they would be paying under a system that added 3% to income over $250K. Better get them some food stamps and start up the welfare payments pronto! Hope no one in the D.C. area makes any less than $250K because they might as well put a gun to their head right now!

[Schneed10]

Not to mention that a portion of the couples who make $250K or more are made up of one bread-winner and one stay-at-home parent. Surgeons, high-level lawyers in the firms you mentioned, executives, brokers, real estate agents, and salesmen are some that come to mind. In which case there are no childcare costs.

You can come up with a scenario where someone would struggle on almost any income, but that doesn't mean it's worth discussing from a policy perspective. If we're setting a cutoff for a higher tax rate, we should be talking about whether MOST people would be comfortable. From a policy standpoint, we can't try to account for every worst case scenario.

[onlydarksets]

Originally Posted by Schneed10

Not to mention that a portion of the couples who make $250K or more are made up of one bread-winner and one stay-at-home parent. Surgeons, high-level lawyers in the firms you mentioned, executives, brokers, real estate agents, and salesmen are some that come to mind. In which case there are no childcare costs.

That's incorrect. Everyone pays for preschool.

Originally Posted by Schneed10

You can come up with a scenario where someone would struggle on almost any income, but that doesn't mean it's worth discussing from a policy perspective. If we're setting a cutoff for a higher tax rate, we should be talking about whether MOST people would be comfortable. From a policy standpoint, we can't try to account for every worst case scenario.

That, we agree on. The difference of opinion is that I believe the demographic I describe makes up a larger portion of the population than I think you would admit. I can't find any numbers on it, but send them on if you have them.

[saden1]

onlydarksets, your budget isn't realistic, it's someone living beyond their means budget.

[onlydarksets]

Originally Posted by saden1

onlydarksets, your budget isn't realistic, it's someone living beyond their means budget.

I never said it was - I said the "lavish discretionary money" that Schneed put in capital letters has to go away. With a couple of very realistic tweaks, it's a comfortable, but not lavish, budget.

[Sheriff Gonna Getcha]

Originally Posted by saden1

onlydarksets, your budget isn't realistic, it's someone living beyond their means budget.

Perhaps, but it's not like they are driving around in BMWs with gold-plated 22s and sippin' on $500 bottles of champagne. Households earning more than $250K live very comfortably in any market with any reasonable number of kids, but they are by no means "rich" (which is what this thread is about).

It strikes me as somewhat unfair to say to upper-middle class families, "You make more money than the rest of us, so hand over your money to the rest of us by allowing the government to tax you at a rate that is four times higher than mine." True, those upper-middle class families benefitted from our current government and infrastructure. But let's not act like families earning $250K are just sitting on trust funds their parents set up or merely have to breathe in order to make the cash; that is by far the exception to the rule. Most households earning $250K+ have breadwinners who have to bust their asses to make that kind of money and took enormous risks to get there (see, e.g., school debts incurred without any promise of a good ROI). Many people earning $40-$50K per year work 9-5 jobs. Most people earning $250K work 11 hour days, don't leave work at the workplace, etc. Moreover, even under a flat tax system, their per capita tax burden is far and away more onerous than that which others have to carry.

Don't get me wrong, the lives of those earning $250K or more is not a sob story. But, these people are NOT rich IMO.

[SC Skins Fan]

Originally Posted by Sheriff Gonna Getcha

Perhaps, but it's not like they are driving around in BMWs with gold-plated 22s and sippin' on $500 bottles of champagne. Households earning more than $250K live very comfortably in any market with any reasonable number of kids, but they are by no means "rich" (which is what this thread is about).

It strikes me as somewhat unfair to say to upper-middle class families, "You make more money than the rest of us, so hand over your money to the rest of us by allowing the government to tax you at a rate that is four times higher than mine." True, those upper-middle class systems benefitted from our current government and infrastructure. But let's not act like families earning $250K are just sitting on trust funds their parents set up; that is by far the exception to the rule. Most households earning $250K+ have breadwinners who have to bust their asses to make that kind of money and took enormous risks to get there (see, e.g., school debts incurred without any promise of a good ROI). Moreover, even under a flat tax system, their per capita tax burden is far and away more onerous than that which others have to carry.

Don't get me wrong, the lives of those earning $250K or more is not a sob story. But, these people are NOT rich IMO.

Well frankly this thread is ridiculous because it began with an article about how these people would be nailed if they had to pay an additional 3% on the $50,000 they make over $250K (i.e. the extra $1,500 they wouldn't see each year and that would sink them apparently). I think the whole idea of a progressive tax structure has really flown over a lot of people's heads here. Those tax cuts were bad financial policy to begin with, but if we are so intent on keeping helping those who make significantly more than $250K then let's do some serious cost cutting. Stop paying for the Iraq War with supplementals that hide the true cost, have massive cuts to social programs, cut government spending across the board. I'm sure that will not increase economic inequality and a healthy society is all that important anyway. Get yours if you can get it, if you can't then clearly you were not cut out for the great race of life. Survival of the fittest as Herbert Spencer would say.

[firstdown]

Originally Posted by SC Skins Fan

Well frankly this thread is ridiculous because it began with an article about how these people would be nailed if they had to pay an additional 3% on the $50,000 they make over $250K (i.e. the extra $1,500 they wouldn't see each year and that would sink them apparently). I think the whole idea of a progressive tax structure has really flown over a lot of people's heads here. Those tax cuts were bad financial policy to begin with, but if we are so intent on keeping helping those who make significantly more than $250K then let's do some serious cost cutting. Stop paying for the Iraq War with supplementals that hide the true cost, have massive cuts to social programs, cut government spending across the board. I'm sure that will not increase economic inequality and a healthy society is all that important anyway. Get yours if you can get it, if you can't then clearly you were not cut out for the great race of life. Survival of the fittest as Herbert Spencer would say.

Sounds like a good plan to me. Can we also do away with SS? I also would like to see a source that this is a progressive tax the one someone did give was to a post in this thread.