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About Those Tax Increases for the “Rich”
I listened to Obama the other day. He was pretty clear on the issue of
taxes. He said that marginal tax rates on those making $250,000 or
more would go up if he got his way. It is a fair bet that this
is the way it will work out. The Bush tax cuts for those under 250K will
be retained for a few more years and taxes are going up for the fat
cats making over $250k. That sounds reasonable. After all, we are broke
and have to raise taxes someplace.
But I did not hear word one from the Big O about AMT taxes. That is
another set of tax laws that is subject to a sunset at the end of the
year. This is a screwy tax (that I have been subject to for years). If
one is subject to the AMT you lose deductibility of a number of things.
Charitable contributions, property taxes and child-care deductions are
lost. It is also dependent on the ratio of earned versus unearned
income. It is an ugly tax that everyone will hate.
This a big deal. Congress has been putting a patch on this every year
for the past five. The 2010 patch cost Treasury $70billion. According to the CBO,
if the AMT is allowed to sunset it will increase the number of
individuals that are subject to this tax from 4.5mm to 27mm in 2011.
This would result in nearly every individual or family with income of
$100k+ to pay more tax. The CBO estimate is for an increased tax bill of
$3,900 per filer. That would come to $90 billion of additional tax. The
vast majority of those making $250k or higher are already stuck in the
AMT trap. Therefore the bulk of this increased tax burden would fall on
those making between $100k and $250k.
Watch as this evolves over the next few months. Should we see the “Great Compromise”
from D.C. where marginal taxes go up for the wealthy but no action is
taken to address the AMT problem a significant percentage of the
population will be screwed. When and if that happens you will hear that
great sucking noise from the economy. When 30 odd million people get hit
with another 4k in taxes the economy will stall, again.
Of course it could go the other way. We could extend the Bush tax cuts
and “patch up” the AMT for a few more years. That would get the deficits
north of 10% of GDP. Depending on the economy we would be looking at
annual deficits pushing $2t. Debt would explode. I can’t see the upside
in that either.
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Highest tax rate under the AMT for people who have jobs/ordinary income -- 28 percent/35%
Taxes on dividends if you're already mega-rich and just buy AMT/tax-exempt muni bonds and money market funds and spend dividends as they roll in -- zero
It's good to be the king (or rich)...
A TAD OT, but how would you feel if you WERE one of these POOR Schmucks.......
When is a Good Deal, not a Good Deal?.
Depends huh?.
http://money.cnn.com/2010/09/09/real_estate/who_repays_tax_credit/index.htm
There go the charitable contributions...
Damned if you do, damned if you don't. The answer lies in cutting expenditures!
Expenditures by the taxpayer?
Or by the gov (tax spender)?
You know, the AMT is "tax simplification". Just a few deductions and rates.
I say tweak the rates and let the AMT replace the whole IRS code.
Yes, and as mentioned below the "flat tax" as it is referred to has a suggested level of about 17% of income. The AMT is 28%. So it is a deep gouge.
Trust me.If this happens and you make 101k you will just hate it. You sit there with the tax guy and watch the screen that says Due: You enter your property taxes paid. Due is the same. Adjust for State taxes paid. Due is unchanged. Got Kids? Due is unchanged. Make charitable contributions? Due is still Due. Depressing.
But as you say it's easy. No more deductions, no need for receipts. They are worthless.
Simplify the Code? Never happen. Too many accountants would fold. That block has power in dc.
Absolutely right: probably part of the reason behind the muni bubble.
If they don't band aide it again, they are asking for millions of Sched. C's to suddenly appear. And they will.
Most people think that government is broken and if they suddenly find that they have to pay a bunch they are going to say fuck it!
I remember when my first C appeared out of nowhere.
It cost me $80!
... Every penny, but not a penny more.
If they simplified the code they could not sell dispensations.
I agree with simplify the code never will happen. That is BIG buisness; TurboTax, HRBlock, etc will never stand for simpler tax law.
Don't forget the AICPA. I'm not sure what they have said recently but back in about 1979 or 1980 they were against tax simplification at congressional hearings. They are an embarrassment.
I've got an Andrew Jackson that says Timmah would still forget something on his return.
CONsider how many of the current administrations appointees have had a similar tax story as Timmah. Think about that...
Timmah & company will never see an enforcement action for opting not to pay their 'voluntary' federal income taxes. Judicial enforcement actions are reserved for folks who dare oppose TPTB's agenda.
"one of those situations"
You make it sound as if the Gubmint lying to us is a rare occurrence.
And there is NO ONE talking about the AMT in the news media, so the probability of an AMT fix this year is near zero. Thanks for bringing this to our attention!
Because the news media does not know what AMT is.
needs to be on the drudge report. instead of money bombs. we need something like zero bombs. just sayin...
Wonderful. I knock off my debt this year, saving about $4k in interest... which will then be confiscated by the dipshits in D.C. Meanwhile, I didn't buy a stupidly large house since I saw the bubble for what is was well in advance... expected house prices to drop. Instead, those oblivious to it or reckless get bailed out.
Now for the billionth time, I've had it.
No debt and no big house and a job? You are the one paying for all of the big house bailouts and the health insurance cobra payments for the ones on the dole.
The AMT is just a sorry bad deal. All the deductions and credits are taken back with no carry foreward or back, then the rate is applied after a modest allowance. And I thought Alternative MINIMUM Tax was about making sure everyone paid some minimum tax? Not a chance.
Augie! Well stated. What happened to you? Did you morph from a shill for the O&G industry into a tax accountant? Or are you a tax accountant for the O&G industry? Lots of rules there, I know.
BRUUUUUUUUUUUUUUUUUUUUCE
\o/
Anyone looking for the (final) playlist and a cool RadioZero link check 9/10's Frontrunning :)
cheers
AMT is very nice. Pay your tax guy twice because for whatever reason he has to compute your tax both ways, then you wind up inevitably paying the AMT anyway. Simple, no deductions except for mortgage interest.
For a plain vanilla filing in the no no income brackets it becomes essentially a flat tax. Are you happy Steve Forbes? (to be fair, the flat rate is quite a bit higher than 17% ...)
Imagine the crash in April 2011 when tens of millions have to find $3-4K of under-witheld taxes to send in. Oh the humanity!
The spin? Let people charge tax returns on their credit cards. TBTF banks get 3% and more debt for everyone!
Bruce,
I think you'd be surprised how many people (particularly couples) making under $100k who would be subject to the AMT if it's not "fixed" for 2010.
You are correct. This is where the ratio of earned and unearned comes into play. If your retired and have no earned income but you have investments that generate earned income (interest/dividends) you can get caught in AMT if total income is below $100k. The numbers I used are those from the CBO.
So yes, this could be worse....
Yes, but are the returns larger than the 6% (government made inflation) enough to be sustainable under the continuously manipultaed stock market hence the Quadrillion dollar derivative market in which the government is so helplessly bailing out continuosly to delay the inevitable crash of the dollar? Just a question, not being a dick. P.S. Bruce, you are one of the elite zerohedgers, thank you for your postings.
The only reason retirees won't get an even worse screwing is that Banana Ben has forced rates down so much that their investment income has been more than cut in half. Another reason tax collections will decrease rather than increase.
Bruce, thanks for your articles. I especially appreciate the one in which you laid out your circumstances. I hope your truck serves you for many more years.
Means testing without the stigma.
In other words, our economy looks like RDCM today?
It is ATM time or in other words "we need campaign donations, aka bribes'!
How is that these so called leaders have the ability to pass LAW but have no idea how LAWS are changed?
The ATM should be abolished. If Barracky and Ben can spend till they drop what difference does this money make?
Most people in America do not earn 50k, no less 100k. There are two agendas in America.
Here is the great compromise that Bammy should do. While eliminating the tax breaks for those over 250k, he should also eliminate the AMT tax for those under 250k. Permanatly. Problem solved.
Otherwise, the Richies of 1 million or more will steal Social Security and put it in the market just to steal it again.
One just needs to see what the Supreme Court has done on campaigns allowing unlimited and unfiltered contributions to any person by any corporation, banker, rich person, from any country in the world, including terrorist.
Otherwise we will need a new preamble.
We the people for and by the bankers, corporations, and the richest secure the wealth and prosperity
for ourselves in order to maintain a more divided union.
Actually, median US income is 52k
http://quickfacts.census.gov/qfd/states/00000.html
So, Most people in the country do in fact actually make 50k
Mean Median Mode. You want standard deviation around the mean.
Is the median not fairly heavily skewed by the tubby felines right at the very top? (Particularly as however dirt-poor you are, you can't make a negative amount.)
I don't think you can go from 'median' to 'most'.
I actually thought it was 46,326 and got it from a different site. But, it is close enough for the me, sorry.
http://fedupusa.org/2010/01/07/how-much-does-the-average-american-make-breaking-down-the-u-s-household-income-numbers/
Read my print, I also screwed up the word permanently, I need to proof read. Will do in the future.
Simple test
Anyone pumping latest jobless claims report is a shrill
9 states including cali didn't report claims and it was totally made up by da Gov
Expect revisions later in fine print
1 in 3 in Maine is on welfare of some sort.
http://maineville.com/detail/153460.html
50% do not pay taxes, well geee, the money has to come from somewhere.
Just dig a little deeper, the govinmint is looking out for you.
When the mayor of Lewiston asked Somalis to stop relocating here because the residents were unable to collect any help due to the fact that the money was all gone, he was booted out as a racist.
The unemployment numbers do not matter, deficits do not matter....feel good be happy...
"When the mayor of Lewiston asked Somalis to stop relocating here because the residents were unable to collect any help due to the fact that the money was all gone, he was booted out as a racist."
Ah yes!! The secular religion of human equality with its ever at hand racism canard!! A millennial wave delusion that will sink us - on a par with the delusions that drove the crusades some 900 years ago!
We live in a propositional nation based on a proposition - "we hold these truths to be self evident, that all men are created equal" - that everyone sees on a daily basis with his or her own eyes is plainly and profoundly false.
We seem to recognize the stresses created by the aging of the baby boom, but we refuse to recognize the burden created by importation of many millions of persons with 70 and 80 IQ's lacking skills and talent needed to become self supporting in a complex society.
We now have 50 to 60 millions on some form of welfare. Can we afford to support this rapidly growing voting block which our elites feel is easily deceived and cheaply bought - or are they just the vanguard of a revolution that will carry us toward collapse into a less complex society in which their "skills" of aggression and violence will be more useful?
I suspect that our elites do not fully understand the type of tiger they have by the tail.
Although they certainly must understand that I would never lift a finger to help should that tiger turn and bite them.
Joseph Tainter, phone home!!
We live in a propositional nation based on a proposition - "we hold these truths to be self evident, that all men are created equal" - that everyone sees on a daily basis with his or her own eyes is plainly and profoundly false.
Jefferson's remarks, when taken in context, quite clearly apply to the equality of individuals in regard to the nature and protection of their civil rights. Nothing more. There can be no question but that under natural law all men do have an equal right to life and liberty. Jefferson should have completed the trifecta with "property," but he failed in that regard.
Jefferson may have fudged a bit, but life and liberty are impossible when one does not own ones body, person, things and effects and such. Property is an expression of freedom, not what rises as a result.
That property has been separated out is probably the real sin. Once life becomes life+property, the attack on liberty has already divided the enemy against itself, and made our property a sitting duck against centralized coercive attacks on behalf of lifeless borg/corp gunships outfitted with scrip cannons, heat-seeking debt bombs, and high-frequency pain weapons to keep the reapers in wool socks and golden spigots, tapped straight into the blood vein of the heart of America.
You are absolutely right to point out that 230 years ago the quoted statement would have been widely understood to refer to a very limited set of "natural law" rights. Sadly, its meaning has evolved along with what passes for culture in this nation to mean entitlement to equal material outcomes. Hence the impending disaster.
Jefferson should have completed the trifecta with "property," but he failed in that regard.
No, he finessed it. Why? Because he had people who were property and thus couldn't follow in the tradition of Hume and Locke. Let's face it, in this respect the Constitution is profoundly hypocritical. And we are by no means through paying for it.
At the time slaves were not considered "persons" they were considered property.