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Topic: Fairness and income taxes?< Next Oldest | Next Newest >
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PostIcon Posted on: Nov. 28 2012, 10:27 am  Skip to the next post in this topic. Ignore posts   QUOTE

The top 2% of taxpayers need to pay their fair share to generate more revenue from income taxes.

I understand why they exist; but, just in terms of “fairness” how do these items stack-up?

Mortgage interest tax deductions (about 100 billion/ year)
I don’t see the fairness in reducing someone’s taxes because they pay mortgage interest. Take two individuals with the same household income. The first has a more modest home or a better loan, the second has a more expensive home or a worse loan. Where is the fairness in the first person having a higher income tax burden?

Child tax credit (50 billion/ year)
I understand that children increase household budget needs. However, children increase the federal budget needs as well (not even taking into consideration the population issue). How is it fair that a household that costs the government less (less children), has a higher income tax burden? It seems upside down to me….that is it would be fair if the opposite were true.

EITC (60 billion/ year)
A tax refund for money not earned? I understand the fairness behind a progressive income tax, but I fail to see the fairness on using the tax code as welfare. Where is the fairness in taxing earned income, and refunding income not earned?
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PostIcon Posted on: Nov. 28 2012, 10:36 am Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

When people realize there is little to be gained for most folks by a mortgage deduction, that it takes a mortgage of about $400K to really benefit, then we might see more acceptance of it being phased out.

If we limit the child tax credit to only the first 2, we might influence some people to stop having kids, but probably not.  By then taxing the remaining income, we will gain a little revenue, while still showing a responsible population policy.  

EITC is welfare. No need to change it.  Some people need the help.  


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PostIcon Posted on: Nov. 28 2012, 11:06 am Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

You do realize that cutting the mortgage deduction and the child tax credit would impact the middle class much more than the rich, right?

Rich people usually don't qualify for the child tax credit, and often own their homes outright.
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PostIcon Posted on: Nov. 28 2012, 11:22 am Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

EITC mostly benefits the lower income households, the child tax credit is probably most beneficial to the middle class, and I’m not sure about the impact of the mortgage deduction on the middle class vs upper class (I think that it is more beneficial to upper income households). That is why I selected those three items…one for each income level. I actually benefit (slightly) from all three above either directly or indirectly (help support a relative that benefits directly). However, just because I (or any single group) benefits does not somehow make it fair.
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PostIcon Posted on: Nov. 28 2012, 1:40 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

The term "fair" applied to taxes is very subjective and not very useful in trying to decide upon the "best" policy. Some people will argue that a "flat tax" (same tax rate for all, regardless of income) is much more "fair" than any progressive tax structure, even though a flat tax would hurt the working poor and widen the gap between the rich and everyone else.

I will try to define the word "best" that I put in quotation marks:
The best  tax policy would reduce deficits while helping economic recovery.

Our economy will not  recover if the vast majority of people have less  disposable income. Like it or not, consumer spending is what drives economic activity. Supply-side (aka "trickle-down") economics is a fallacy conjured up by those who want the wealth concentrated "up."

Economic activity involves the circulation of money, changing hands from buyers to sellers, who then hire more workers to meet demand. Big chunks of money concentrated in a few hands at the top and sequestered in tax havens is money taken out of circulation.

Economic and tax policies should encourage the opposite of that trend, and start putting all that money into economic activity.

Reducing budget deficits through austerity measures -- taking money out of the pockets of people who spend most of their disposable income -- will only serve to decrease economic activity and increase the need for governmental social safety net programs. It's a recipe for a race to the bottom.


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PostIcon Posted on: Nov. 28 2012, 3:47 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

I certainly agree that the best tax policy is not the same as the fairest policy especially when making comparisons among the different economic groups. Let’s be honest, the top 10%-20% is pretty much paying the tax bill for all of us….I’m not sure that can ever be distorted enough to be considered fair.

As for best, the wealthy have more than they can spend, and the poor spend on necessities that have less of an economic impact than the disposable income dollars spent by the middle class. So, the best policy would be to put more disposable income in the hands of the middle class. I’m all for that, and I think that can be done fairly.

The tax credits/deductions above greatly contribute to the differences in tax burden within economic groups (I think that it is even more pronounced than their contribution between economic groups). Within groups, maybe best and fair could be one in the same?

For example,

Married with household income of $65K

No children = $9528 tax burden
2 children = $6358 tax burden

Difference in tax burden = $3170

That might not seem like a lot to many here, but that represents almost 5% of total income. At that income level (with or without children), most of that will be immediately circulated back into the economy.

In this example, I think that eliminating the child tax credit, and lowering the tax liability for all within the economic group would serve as both the best and fairest tax policy. Both would pay $7943 (revenue neutral), the family with two children would still be benefiting much more from government spending, but they would be contributing more, and the family without children would be contributing less to subsidy their children.
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PostIcon Posted on: Nov. 28 2012, 4:00 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(Lamebeaver @ Nov. 28 2012, 8:06 am)
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You do realize that cutting the mortgage deduction and the child tax credit would impact the middle class much more than the rich, right?

Yep.  The same middle class who decry both tax breaks for the rich and health benefits for the poor.  But hey, tax breaks on mortgage interest for folks who are financially fortunate enough that they can borrow -- well, that one is conveniently left off by most all 'angry' tea baggers (and others)!

Collectively, we are a spoiled bunch; and thus, we much prefer pointing fingers at others than at our own ugly selves...


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PostIcon Posted on: Nov. 28 2012, 4:04 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

Who really benefits from the mortgage interest deductions?

http://www.nytimes.com/2012....ns.html
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PostIcon Posted on: Nov. 28 2012, 4:12 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(Lamebeaver @ Nov. 28 2012, 9:06 am)
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Rich people usually don't qualify for the child tax credit, and often own their homes outright.

Not really true.  They simply usually own bigger homes with bigger mortgages on them.  The myth that the poor and middle-class pay for more on credit while the rich pay more with cash is just a myth.  The rich often have more debt than those whose incomes are far less, simply because they have far more lending credit available to them.

For better or worse (likely for worse in most folks' opinions) 'tis the American way. :p

ETA: markinOhio's article link just verifies that.

Edit 2: nevermind my initial comments on the child tax credit.  I looked it up and you're right about that.


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PostIcon Posted on: Nov. 28 2012, 4:16 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(GoBlueHiker @ Nov. 28 2012, 1:12 pm)
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(Lamebeaver @ Nov. 28 2012, 9:06 am)
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Rich people .... often own their homes outright.

Not really true.  They simply usually own bigger homes with bigger mortgages on them.  The myth that the poor and middle-class pay for more on credit while the rich pay more with cash is just a myth.  The rich often have more debt than those whose incomes are far less, simply because they have far more lending credit available to them.

For better or worse (likely for worse in most folks' opinions) 'tis the American way. :p

ETA: markinOhio's article link just verifies that.

Plus why let capital just sit there in a home? The home will appreciate (or not) just as much with a mortgage as not so having the money out to play with makes even more sense, probably especially for a person whose into playing with money in the first place.

And even mores with mortgage rates as low as they are so other investments can beat the rates with ease.
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PostIcon Posted on: Nov. 28 2012, 4:26 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

Given the historically low home interest rates, you would have to be crazy to chose to pay cash rather than borrow. I would think that the investment gains (minus the interest) over 30 years would more than pay for the house…...10 times.
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PostIcon Posted on: Nov. 28 2012, 4:26 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

A few thoughts...

Saying that a certain amount of income makes you "wealthy" anywhere in the country is hard to do.  If you make 200k combined in many parts of the country, you're wealthy.  In the DC suburbs, not so much where childcare can easily run 2K a month for an infant and homes under 500K can be tough to find in a good neighborhood.

I know that as my income rose, I lost some deductions.  I can claim my daughter's childcare, but I receive no real break because I make too much.  My wife and I are seriously weighing our career paths, wondering if it's worth it to keep climbing in our jobs if we're going to cross that $250K threshold and pay out more and more in taxes.


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PostIcon Posted on: Nov. 28 2012, 4:38 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(markinOhio @ Nov. 28 2012, 4:26 pm)
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Given the historically low home interest rates, you would have to be crazy to chose to pay cash rather than borrow. I would think that the investment gains (minus the interest) over 30 years would more than pay for the house…...10 times.

Really?  At the peak of the boom, my house was almost worth as much (after inflation) as I paid for it 25 years ago.   After the crash, it's back down to being a 35% net loser.  Not that I care.  I bought a place to live with no expectation of capital gain.
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PostIcon Posted on: Nov. 28 2012, 4:44 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(markinOhio @ Nov. 28 2012, 10:27 am)
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The top 2% of taxpayers need to pay their fair share to generate more revenue from income taxes.

I understand why they exist; but, just in terms of “fairness” how do these items stack-up?

Mortgage interest tax deductions (about 100 billion/ year)
I don’t see the fairness in reducing someone’s taxes because they pay mortgage interest. Take two individuals with the same household income. The first has a more modest home or a better loan, the second has a more expensive home or a worse loan. Where is the fairness in the first person having a higher income tax burden?

Child tax credit (50 billion/ year)
I understand that children increase household budget needs. However, children increase the federal budget needs as well (not even taking into consideration the population issue). How is it fair that a household that costs the government less (less children), has a higher income tax burden? It seems upside down to me….that is it would be fair if the opposite were true.

EITC (60 billion/ year)
A tax refund for money not earned? I understand the fairness behind a progressive income tax, but I fail to see the fairness on using the tax code as welfare. Where is the fairness in taxing earned income, and refunding income not earned?

All these things are done to encourage certain behavior.

Home ownership is seen as desirable, giving people a stake in their country and also fuels a huge financial industry.

Children - decent birth rates are needed if you're not to suffer massive problems as a nation ages. Big issue for Japan now and a huge issue for China in coming years with its one child policies.

EITC - designed to encourage people to work on low incomes where the benefits of otherwise working over seeking public assistance may be marginal.


So what is it you want to do.

Discourage home ownership and kill the financial and banking sector?

Store up a massive demographic problem down the road?

Encourage low earners to give up work and seek Welfare?
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PostIcon Posted on: Nov. 28 2012, 4:50 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

"cross that $250K threshold and pay out more and more in taxes."

Paying "more" in taxes on more money still means more money. Eisenhower era confiscatory rates don't exist any longer and haven't for decades.

Now if the extra income isn't worth the job hassles that's another issue.
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PostIcon Posted on: Nov. 28 2012, 4:54 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(big_load @ Nov. 28 2012, 1:38 pm)
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(markinOhio @ Nov. 28 2012, 4:26 pm)
QUOTE
Given the historically low home interest rates, you would have to be crazy to chose to pay cash rather than borrow. I would think that the investment gains (minus the interest) over 30 years would more than pay for the house…...10 times.

Really?  At the peak of the boom, my house was almost worth as much (after inflation) as I paid for it 25 years ago.   After the crash, it's back down to being a 35% net loser.  Not that I care.  I bought a place to live with no expectation of capital gain.

So then if 25 years ago you'd taken the money that you would have used to purchase your house free and clear and instead invested it in say an index fund, you'd be ahead rather than 35% in the hole. That tends to make the point of cash versus mortgage and investment.
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PostIcon Posted on: Nov. 28 2012, 4:55 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE

Sorry, I just think that taxes should be used to pay for government, not as a means to guide people into making decisions like purchasing a home, having children, or getting a job.
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PostIcon Posted on: Nov. 28 2012, 4:57 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(big_load @ Nov. 28 2012, 1:38 pm)
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...[A]t the peak of the boom, my house was almost worth as much (after inflation) as I paid for it 25 years ago.   After the crash, it's back down to being a 35% net loser.  Not that I care.  I bought a place to live with no expectation of capital gain.

You think your 'not caring' might be the reason?   :D   :p


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(markinOhio @ Nov. 28 2012, 1:55 pm)
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Sorry, I just think that taxes should be used to pay for government, not as a means to guide people into making decisions like purchasing a home, having children, or getting a job.

Yet what is the purpose of "government"?

"We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America...."

So the promotion of the general welfare is conducted by supporting community stabilizing things like home ownership, stable families, citizen education and such many of which arguably also contribute to our "common defense", weak, sick, ignorant members of the military not very good for "defending" I would suggest.

Justice Holmes (1904) had a reasonable take on it, IMHO: "Taxes are the price we pay for a civilized society."
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(markinOhio @ Nov. 28 2012, 1:55 pm)
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Sorry, I just think that taxes should be used to pay for government, not as a means to guide people into making decisions like purchasing a home, having children, or getting a job.

My view too.  I'd like my government to take the lead in ensuring decent security, justice, education and infrastructure -- plus monetary and social support for the relatively few who truly cannot work and have no family to support them -- and a very limited and very temporary help for the able-bodied.

As for morphing our government into a feeding trough where "the rich" is milked -- so that those less able or less willing to work can also enjoy one of the world's highest standard of living... I see that as a formula for ultimate national failure.


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(High_Sierra_Fan @ Nov. 28 2012, 4:50 pm)
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"cross that $250K threshold and pay out more and more in taxes."

Paying "more" in taxes on more money still means more money. Eisenhower era confiscatory rates don't exist any longer and haven't for decades.

Now if the extra income isn't worth the job hassles that's another issue.

I understand and worded that poorly.  It is a quality of life issue.  To get there would mean both of us chasing promotions, longer hours and doing harder jobs.  Knowing that we'd pay a comparatively high tax rate on the higher wages means that we have another factor to weigh.

Short form, we'd have to work a good bit harder and the extra return may not make it worth it.


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(JimInMD @ Nov. 28 2012, 2:03 pm)
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(High_Sierra_Fan @ Nov. 28 2012, 4:50 pm)
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"cross that $250K threshold and pay out more and more in taxes."

Paying "more" in taxes on more money still means more money. Eisenhower era confiscatory rates don't exist any longer and haven't for decades.

Now if the extra income isn't worth the job hassles that's another issue.

I understand and worded that poorly.  It is a quality of life issue.  To get there would mean both of us chasing promotions, longer hours and doing harder jobs.  Knowing that we'd pay a comparatively high tax rate on the higher wages means that we have another factor to weigh.

Short form, we'd have to work a good bit harder and the extra return may not make it worth it.

Ah, I do agree: diminishing returns is a real consideration.
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PostIcon Posted on: Nov. 28 2012, 5:58 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(JimInMD @ Nov. 28 2012, 5:03 pm)
QUOTE

(High_Sierra_Fan @ Nov. 28 2012, 4:50 pm)
QUOTE
"cross that $250K threshold and pay out more and more in taxes."

Paying "more" in taxes on more money still means more money. Eisenhower era confiscatory rates don't exist any longer and haven't for decades.

Now if the extra income isn't worth the job hassles that's another issue.

I understand and worded that poorly.  It is a quality of life issue.  To get there would mean both of us chasing promotions, longer hours and doing harder jobs.  Knowing that we'd pay a comparatively high tax rate on the higher wages means that we have another factor to weigh.

Short form, we'd have to work a good bit harder and the extra return may not make it worth it.

Typically this would only be a small increase in taxes on the final chunk of your income.

If you are at the threshold of the supposed new tax rate before say a pay rise you can do a pretty easy calculation.

$10k pay rise will be taxed say 5% more than the existing part of your salary. meaning what, an additional $500 in taxes on that particular amount.

Ok, you'll be taxed on the rest of it, but are you telling me that's suddenly doesn't become worth getting the pay rise - ok, so you'll net a few dollars less each pay cycle, but it's hardly becoming worthless is it, especially considering how low the overall tax burden already is by historical standard.
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PostIcon Posted on: Nov. 28 2012, 5:59 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(Ben2World @ Nov. 28 2012, 5:02 pm)
QUOTE

(markinOhio @ Nov. 28 2012, 1:55 pm)
QUOTE
Sorry, I just think that taxes should be used to pay for government, not as a means to guide people into making decisions like purchasing a home, having children, or getting a job.

My view too.  I'd like my government to take the lead in ensuring decent security, justice, education and infrastructure -- plus monetary and social support for the relatively few who truly cannot work and have no family to support them -- and a very limited and very temporary help for the able-bodied.

As for morphing our government into a feeding trough where "the rich" is milked -- so that those less able or less willing to work can also enjoy one of the world's highest standard of living... I see that as a formula for ultimate national failure.

But you haven't really characterized reality there Ben have you. You're looking at a country where wealth gaps are widening to banana republic levels. We are not in a situation where the rich are being "milked" and are in no danger of getting there.
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PostIcon Posted on: Nov. 28 2012, 6:08 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(Land Rover @ Nov. 28 2012, 2:59 pm)
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(Ben2World @ Nov. 28 2012, 5:02 pm)
QUOTE

(markinOhio @ Nov. 28 2012, 1:55 pm)
QUOTE
Sorry, I just think that taxes should be used to pay for government, not as a means to guide people into making decisions like purchasing a home, having children, or getting a job.

My view too.  I'd like my government to take the lead in ensuring decent security, justice, education and infrastructure -- plus monetary and social support for the relatively few who truly cannot work and have no family to support them -- and a very limited and very temporary help for the able-bodied.

As for morphing our government into a feeding trough where "the rich" is milked -- so that those less able or less willing to work can also enjoy one of the world's highest standard of living... I see that as a formula for ultimate national failure.

But you haven't really characterized reality there Ben have you. You're looking at a country where wealth gaps are widening to banana republic levels. We are not in a situation where the rich are being "milked" and are in no danger of getting there.

OMG, the rich are getting richer -- stop them!
Better yet -- understand why -- so more can join the gravy train?


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(JimInMD @ Nov. 28 2012, 5:03 pm)
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(High_Sierra_Fan @ Nov. 28 2012, 4:50 pm)
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"cross that $250K threshold and pay out more and more in taxes."

Paying "more" in taxes on more money still means more money. Eisenhower era confiscatory rates don't exist any longer and haven't for decades.

Now if the extra income isn't worth the job hassles that's another issue.

I understand and worded that poorly.  It is a quality of life issue.  To get there would mean both of us chasing promotions, longer hours and doing harder jobs.  Knowing that we'd pay a comparatively high tax rate on the higher wages means that we have another factor to weigh.

Short form, we'd have to work a good bit harder and the extra return may not make it worth it.

Jim - you also have the fact that you won't be paying social security tax on individual income over 109k.... though I suppose that may have gone up, I haven't checked for 2012.

So that additional you are making over 250k is already taxed at a lower rate that that income below $109.

I'm not sure why that cap is in place. Even as someone who sees his paychecks go up at a certain point in the year I'm not sure why both me and the wife get that benefit.
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PostIcon Posted on: Nov. 28 2012, 6:23 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(Ben2World @ Nov. 28 2012, 4:57 pm)
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(big_load @ Nov. 28 2012, 1:38 pm)
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...[A]t the peak of the boom, my house was almost worth as much (after inflation) as I paid for it 25 years ago.   After the crash, it's back down to being a 35% net loser.  Not that I care.  I bought a place to live with no expectation of capital gain.

You think your 'not caring' might be the reason?   :D   :p

I doubt I have much influence on real estate prices.  Maybe I just wasn't wishing hard enough.  :laugh:
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PostIcon Posted on: Nov. 28 2012, 6:26 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(Ben2World @ Nov. 28 2012, 6:08 pm)
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(Land Rover @ Nov. 28 2012, 2:59 pm)
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(Ben2World @ Nov. 28 2012, 5:02 pm)
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(markinOhio @ Nov. 28 2012, 1:55 pm)
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Sorry, I just think that taxes should be used to pay for government, not as a means to guide people into making decisions like purchasing a home, having children, or getting a job.

My view too.  I'd like my government to take the lead in ensuring decent security, justice, education and infrastructure -- plus monetary and social support for the relatively few who truly cannot work and have no family to support them -- and a very limited and very temporary help for the able-bodied.

As for morphing our government into a feeding trough where "the rich" is milked -- so that those less able or less willing to work can also enjoy one of the world's highest standard of living... I see that as a formula for ultimate national failure.

But you haven't really characterized reality there Ben have you. You're looking at a country where wealth gaps are widening to banana republic levels. We are not in a situation where the rich are being "milked" and are in no danger of getting there.

OMG, the rich are getting richer -- stop them!
Better yet -- understand why -- so more can join the gravy train?

Are you really not acknowledging the widening wealth gap in this country?

This isn't about the rich getting richer.  On average the "rich" are always getting richer over time, and nobody here would dispute that fact.  I might even venture to say that no one here would argue that there's anything wrong with the accumulation of wealth at any level (so long as it is done through honest means).

What LandRover is saying is that the disparity between the most and least fortunate in this country is at its highest point in recorded history.  That's just a fact.

Understand why they're getting richer?  Um, some of the lowest tax rates in US history, including a 15% capital gains tax certainly doesn't "hurt" their ability to generate more wealth.


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PostIcon Posted on: Nov. 28 2012, 6:27 pm Skip to the previous post in this topic. Skip to the next post in this topic. Ignore posts   QUOTE


(High_Sierra_Fan @ Nov. 28 2012, 4:54 pm)
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(big_load @ Nov. 28 2012, 1:38 pm)
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(markinOhio @ Nov. 28 2012, 4:26 pm)
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Given the historically low home interest rates, you would have to be crazy to chose to pay cash rather than borrow. I would think that the investment gains (minus the interest) over 30 years would more than pay for the house…...10 times.

Really?  At the peak of the boom, my house was almost worth as much (after inflation) as I paid for it 25 years ago.   After the crash, it's back down to being a 35% net loser.  Not that I care.  I bought a place to live with no expectation of capital gain.

So then if 25 years ago you'd taken the money that you would have used to purchase your house free and clear and instead invested it in say an index fund, you'd be ahead rather than 35% in the hole. That tends to make the point of cash versus mortgage and investment.

It sure does.  And I figured as much at the time.  I considered the expenditure unlikely to produce financial gain, but worthwhile for the quality of life it would (and did) provide.

I'm not sure how it would play out in today's market, thought.  The spread is a lot different than it was back then.
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PostIcon Posted on: Nov. 28 2012, 6:39 pm Skip to the previous post in this topic.  Ignore posts   QUOTE


(Land Rover @ Nov. 28 2012, 6:10 pm)
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(JimInMD @ Nov. 28 2012, 5:03 pm)
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(High_Sierra_Fan @ Nov. 28 2012, 4:50 pm)
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"cross that $250K threshold and pay out more and more in taxes."

Paying "more" in taxes on more money still means more money. Eisenhower era confiscatory rates don't exist any longer and haven't for decades.

Now if the extra income isn't worth the job hassles that's another issue.

I understand and worded that poorly.  It is a quality of life issue.  To get there would mean both of us chasing promotions, longer hours and doing harder jobs.  Knowing that we'd pay a comparatively high tax rate on the higher wages means that we have another factor to weigh.

Short form, we'd have to work a good bit harder and the extra return may not make it worth it.

Jim - you also have the fact that you won't be paying social security tax on individual income over 109k.... though I suppose that may have gone up, I haven't checked for 2012.

So that additional you are making over 250k is already taxed at a lower rate that that income below $109.

I'm not sure why that cap is in place. Even as someone who sees his paychecks go up at a certain point in the year I'm not sure why both me and the wife get that benefit.

That's interesting and I'll sure need to spend some time with the tax guy this year.  Before I remarried, I wasn't close to needing to worry about this.  My wife though makes a nice salary and her career is limited probably only by her aspiration.  I admit that I'm operating largely in the theoretical here since it will be a year or two before we might get close to that number.

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