Taxing the rich - what is the cutoff?

[onlydarksets]

Originally Posted by firstdown

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.

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).

[Schneed10]

Originally Posted by firstdown

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.

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.

[dmek25]

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

[Schneed10]

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.

[onlydarksets]

Originally Posted by Schneed10

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.

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.

[Hog1]

Originally Posted by firstdown

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.

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

[Sheriff Gonna Getcha]

I racked up $240,000 in student loans (excluding 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.

[saden1]

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

[saden1]

Originally Posted by Sheriff Gonna Getcha

I racked up $240,000 in student loans (excluding 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.

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?

[Schneed10]

Originally Posted by Sheriff Gonna Getcha

I racked up $240,000 in student loans (excluding 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.

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.

[firstdown]

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.

[onlydarksets]

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 cut 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 not actually be doable.

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

[MTK]

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.

[Schneed10]

Originally Posted by onlydarksets

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.

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.

[onlydarksets]

Originally Posted by firstdown

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.

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:
Tax rate - Wikipedia, the free encyclopedia