Posted on 12/10/2012 7:56:08 AM PST by Kaslin
I was shocked by something I heard from one of my friend’s sons the other day. He is a college graduate with a business degree and fortunately has a job. We were all talking about the fiscal cliff and how it would affect people making over $250K a year. His reaction to the top rate rising to 39% along with the California State tax increase due to Proposition 30 prompted him to say, “Whew, I think I dodged a bullet! I was up for a promotion with a pay raise but someone else got it. I’m pretty sure my taxable income will be under the level where I would have gotten punished.” PUNISHED.
He was basically saying that he would rather earn less and stop advancing in his career than be hit with massive taxes. I asked him to explain and he said that basically he didn’t want to work and then fork over 50% or more of his earnings to the government. He said that he had gone to school, studied hard and gotten a job but was still burdened with excessive student loans and he felt that with that hanging over his head he couldn’t afford to pay more in taxes.
As for buying a home and starting a family, well that was not even an option for him. He said that if they were talking about taking away the mortgage home deduction then why buy a house anyway?
This is where we have come in this country. It is now a better option to take a lower paying job, rent a home or live with mom and take government benefits than it is to climb up the ladder to success. The American dream is fading folks. Like an old photograph from a Polaroid instant camera, the picture is slowly disintegrating.
Our entitlement society is out of control. It is a sad fact that a head of a household of four making minimum wage has more disposable income than a family making $60,000 a year. In an article in August 2010 this issue was discussed in The National Review.
“In many cases, economists have calculated, welfare recipients who enter the work force or receive pay raises lose a dollar or more of benefits for each additional dollar they earn. The system makes fools of those who work hard.
“Recently the chairmen of two important subcommittees on Capitol Hill convened a hearing on this issue. The hearing elicited some revealing testimony from one of the chairmen’s congressional colleagues.”
“The more benefits the government provides, the stronger the disincentive to work,” Representative Geoff Davis (R., Ky.) pointed out. The great irony, he added, is that although federal welfare programs “are designed to alleviate poverty while promoting work,” collectively they have “an unintended side effect of discouraging harder work and higher earnings.”
Less work and lower earnings, in turn, translate into greater dependency on the government — and zero or even downward social and economic mobility for those mired in poverty.”
Working women who are single with children often forego a raise because it would push them into the dilemma of losing Title 20 daycare if they made more money. There are over 70 Federal welfare programs right now and the list will continue to grow under Obama. If a person works and climbs the ladder, they will become disqualified for these programs and lose all of the benefits that they have become so accustomed to.
This creates a moral dilemma. When good people continue to stay on unemployment because taking a job would not pay them as much as their benefit, how can you really blame them? We don’t live in a culture where people are embarrassed to ask for a handout. It is so easy just to file for benefits by computer, have the funds deposited directly into your bank account or take your EBT credit card to buy anything you want. There is no shame in taking government assistance, you are entitled to it.
“Today, more people than ever before—67.3 million Americans, from college students to retirees to welfare beneficiaries—depend on the federal government for housing, food, income, student aid, or other assistance once considered to be the responsibility of individuals, families, neighborhoods, churches, and other civil society institutions. The United States reached another milestone in 2010: For the first time in history, half the population pays no federal income taxes.” - National Review
So the tipping point has been reached and now the government is scrambling to grab any and all money that working people make just to pay these entitlements. Unfortunately, the American people are waking up and becoming more like the young man I talked to. They are seeing that their hard work and effort is not benefiting their own families, but being redistributed to others; some who need it and others who just don’t bother to work. Look at the major companies that are paying out dividends before the huge taxes kick in. They can see the writing on the wall and are preparing for it.
The young already know that they will probably never see social security or Medicare benefits in their lifetime yet they see it withdrawn from their checks every week. They are the ones sensing the “unfairness” of all of this, not the people reaping the benefits.
This is NOT America, this is not who we are as a country. If we don’t stop punishing success and achievement, future American generations (if there are any) will be content to sit at home and count their government goodies but will never excel at anything, never strive to be anything. There will be no incentive to achieve success. Why should you? It will just be taken away.
Once the so-called “rich” have been drained dry the only option left for the government will be to just keep printing money. That lasts until the economy collapses in on itself and by that time the country we knew will be just like that fading Polaroid, a memory.
Morgan Brittany
Politichicks.tv
@Morganbrittany4
Hahaha, too true. :hifive:
HMmmmmm. Good point, but I see them as one and the same, namely, that I value my lifestyle more than I value the extra money sacrificing it would command. The higher marginal tax rates that are under discussion exacerbate the situation.
Not to hijack the thread and turn it into a flat tax discussion....but, if my compensation grew at a linear rate (which it does approximately), and was taxed at a linear rate, then I could reasonably expect my compensation to correspond with my level of responsibility. In this wonderfully ideal world, it would be far easier for me to choose my level of output. "If I want to make "X", then I need to work at 'Y'....and if I want to make "2X", then I need to work at "2Y".
Now, this doesn't scale out to infinity...if I want to make "10X", I likely need to find a new profession (or a more gullible employer)...but within reason, I think it would work. Particularly in my field (IT) where it would be very easy to pick up a consulting gig on the side for a few hours a month.
However, instead our current structure forces employees into a system of ever diminishing returns. "I work at "Y", so I take home "X". If I want to take home "2X", I might need to work at "2.5Y" or "3Y"." It's hard to double your output. Tripling or more? Forget it. As I related in my long-winded story that I impolitely imposed on you, I chased those two-birds-in-the-bush once. Never again.
So, ....I choose not to play. I make "X", and that particular bird-in-the-hand is enough.
I don't know if I'm in the minority here, for thinking this way. I see 2-income couples all the time, whose second earner - after day care, commuting, and 40-ish percent (the marginal rate of earner #1) in taxes - is only making a few dollars a week, if that. I figure that if they actually sat down and did the math, they'd be flabbergasted. Or maybe not. People tie an unnecessary amount of self-worth to their jobs.
Does any of this make sense? And BTW, it's nice to have a polite discussion on a topic. 'Tis why I love FR, so many other boards that will remain nameless, usually de-evolve into name-calling and poo-throwing. :-)
We settled for one income over 30 years ago. We don't vacation much and don't eat out much. I wish we had saved more for retirement instead of spending so much on the kids, but I think we still have time to improve that situation.
I don't pick my job for the tax impact, but I do consider the tax impact when considering a move to a new job.
There are three different definitions of INCOME. Since we still haven’t been told exactly which one Obama is using in his $250,000 figure, I must remind all here the 3 different amounts:
GROSS INCOME
ADJUSTED GROSS INCOME
TAXABLE INCOME. GROSS appears on your 1040 as your BEGINNING amount.
The bottom of page 1 of the 1040 has the ADJUSTED GROSS income amount.
Then, 1/2 way down page 2, after other deductions, you will find the TAXABLE INCOME amount.
Look at all your own tax returns and see which one might apply to you.
Obama HAS NOT announced which number will apply.....& I don’t know if he will before the end of December, 2013.
“I have found that to be the case in the majority of my dealings with people making more than $200k/yr.”
Let me give you a hint about life there troll. If you want to make $200K a year, hang out with people that make $200K a year. If you want to remain in your parent’s basement, trolling FR and bragging on DU, then keep doing what you are doing.
It is a fact that 99.99% of those making more than $100K are NOT idiots. They might now know much about mopping floors, so they hire you for that. But they are earning their keep from either a customer base (market) that they service well, or from an employer that tasks them with adding value in excess of 10x their fully fringed cost to the company.
I’ll give you another hint, if you want to be a millionare, do what millionare’s do. One of the single most predictive behavours of success is reading. Read at least 1 non-fiction book per month. Here is a good list for you to start the new year with:
1. QBQ
2. Thou Shall Prosper by Rabbi Lapin
3. The Monk and the Merchant
4. Good to Great
5. EntreLeadership
Amazingly, not one of these is political. Instead, it might change your brain to start thinking about how you can be successfull on your own, without feeling the need to leach on others.
I doubt you will heed either of my suggestions, but figured it won’t be a waste as some of the more interested FReepers will be interested in some good reads.
“Being an independent and paying both sides of FICA is a real backbreaker, for sure.”
We all pay both sides of FICA, but as a direct employee the Feds think that they have convinced my employer to hide it from me. The independents and actual employers get to feel the pain out in the open....
;-)
Ben voted for Obama, didn’t he? At least in ‘08.
You're absolutely right, we all pay "both sides". Independents just get to see what it is.
IMHO, the fastest way to tax reform (and a lot of tarred-and-feathered politicians) would be to eliminate withholding completely. Just make people write a check on April 15th.
It will never happen, but I can dream, can't I?
“When government (elected officials) gets too big, to solve the problems it alone creates...Time to clean house, fire them ALL...” ~ Stevie-D (2010)
The problem is that both sides of the political equation are benefitting from the ignorance and political apathy of the voting public, or lack thereof...
But hey, what do I know...
A friend won’t marry her live-in boyfriend because that would expose her to risk of total financial loss should his startup business fail. Just doesn’t make economic sense to do what she otherwise would.
It depends on where you live and the cost of living there.
My 2,000 SF house, built in 1971, was $730,000.
We live in CA and unless we move, there is no way to live cheaper, unless you want to live where the pay is low. It’s a trade off.
I lose way over 50% in taxes. Feds, State, Property, Sales, Gas.
You actually net about 30% of your pay, after you pay Uncle Sam(s).
There are plenty of professionals that could make that choice. High end IT consultants, doctors, lawyers, big 6 type consultants, etc.
If I were one of those people and my adjusted gross income was at 245k on December 1 (in a new tax structure), I would certainly think about taking December off.
Would you pay to work for the month of December, or take time off?
Besides, this is a discussion about how tax policy affects behaviour not personal impact of tax.
I personally would need to win a scratch off lottery ticket to start being concerned about personal implications. But it doesn’t change the fact that I think it will alter behaviour to the detriment of the economy as a whole.
I recently turned down a job opportunity that would have been a promotion and more $ - turned out when I did the math I would have lost money (not a tax issue - I don’t play in that league - higher cost insurance was the main culprit). People will do what is best for themselves and their families.
Yes I know there are plenty, but I don’t know any of them.
I like your idea of forcing folks to write one big check for their taxes, I would only ammend it to be due the first Monday in November!
From you to the President, EVERYONE leaves out expenses.
So assume you just have a job, and the normal expenses a typical family would have.
You have a mortgage, maybe even a second mortgage for home improvement, electric, gas, sewer and water bills. Your kid goes to college so you help pay a couple of grand a semester for them. You have a car payment, insurance, license fees and daily commute costs like gas, maintenance and repair. You have a family health care plan at work costing $200 a month with a 5% co-pay. Groceries cost $150 a week (that kid's hungry).
You make $90,000 a year. After all expenses and taxes are paid you have just enough to save a little, buy an occasional “keep of with the Jones bling item” and take a vacation somewhere nice every year.
Sure, then suddenly jumping to $250,000 a year with no increases in expenses except federal taxes is GREAT! But that's not likely to happen. Pie in the sky.
Suppose your job could be that much... I know, be a doctor, an MD!
Except medical doctors paid through the roof, generally, and probably have some debt even decades after, due to education. It costs a LOT and they spend productive years others are getting paid in while they stay in school. Then they have HUGE malpractice insurance bills. $80,000 - $150,000 is NOT unheard of, especially if you're in a high-risk of lawsuit practice like dealing with the elderly (who happen to die a lot) or deliver babies (every malformity is a lawsuit simply waiting for a lawyer). Now that $250,000 a year isn't such good money now, is it?
Now, say you own your own business. Say you have a small manufacturing plant that makes some widget used by other industries to make their widgets. Your dear old genius Dad, ever the tinkerer, got the business started and you got it when he passed.
You have a work force of 25 people or so. Over the years you used every profit you got to improve and automate your assembly line. It cost a lot but you saved a lot due to improved efficiency. In fact, your continued streamlining of the shop floor, including training for your workers, had an effect on the economy around you. The money you spent went to those businesses that served you, and this went on by the hundreds and into thousands participating, like you, in the American economy. So now you enjoy a nice profit. Then things went south. The economy tanked in 2008. You lost several contracts. Businesses that bought plenty of your widgets are buying fewer. Your profit margin sunk. you're barely breaking even, but Dang it! This is the company dear old Dad founded and I'm going to do all I can to keep it. I'll have to let go a few folks. Dang, I love ‘em all. Who to let go?
While your thinking this, Ole Obama is calling you a greedy rich b@st@rd. He's gonna raise your taxes, because your profits, which is also your income, is over $250,000 a year. Of course, you pay all your expenses from that profit, not just the bills the average guy has, but the payroll, loan debt for equipment improvments and any local taxes and rules, envorinmental, labor, etc that your sadled with. You wish you could afford one of those high-end, big corporation account/lawyer teams to find you tax shelters, but you reduced what you had last year to just stay afloat.
Now what happens to this business? Isn't it like hundreds, even thousands, tens of thousands of businesses around the country? Small factories, restaurants, stores, etc? And some of them have profits up to a million $. Yup, their taxes go up.
So they lay off people. Those people go on unemployment, maybe disability, welfare. More mouths to feed. Less revenues to big fedgov. Less to the state your in.
No, people, who should know better, are either stupid, lazy, ignorant, or just don't give a sh!t. But that's all right, it's all about “fairness”.
Since this isn’t a valid scenario for me, I’m assuming I will get the money and not have anymore expenses than I already have. Sort of like winning a work lotto. My car payments would not go up, my groceries would not go up, my mortgage payments and real estate taxes would not go up, my expenses in general would not go up.
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