| Author | Message | ||
     Ft_bstrd |
What's funny is that every election we bitch and moan how there are no regular folks running, that it's only career politicians, that none of them have any idea what it's like to be a real person. We get one, and everyone spends their time trying to tear them down and expound on how unqualified they are. You don't go from Hockey Mom to Governor with an 80% approval rating without knowing how to get things done, work with others, come up with solutions, and how to listen to constituents needs. I would say that she is significantly more qualified than 99.9% of the people on this board. | ||
| Spatten1 |
Dude, wealthy families do not pay taxes Please explain what you mean by this? Weathy families, old money, generally shelter their earnings in trusts, swap real assets, etc. and pay relativeley little tax on it. There are very wealthy stock brokers, wealth planners, lawyers, and insurance agents that make their entire living with this sector. High W2 earners and small business owners cannot shelter thier earnings beyond retirement plans and healthcare, both of which are capped. They pay the bulk of taxes. They are also the most productive members of society, and we punish them for it. | ||
| Greenlantern |
I would say that she is significantly more qualified than 99.9% of the people on this board. Thank you. As the remaining .1%, I will endeavor to do the BadWeb justice in my administration.  | ||
| Ft_bstrd |
Weathy families, old money, generally shelter their earnings in trusts, swap real assets, etc. and pay relativeley little tax on it. There are very wealthy stock brokers, wealth planners, lawyers, and insurance agents that make their entire living with this sector. High W2 earners and small business owners cannot shelter thier earnings beyond retirement plans and healthcare, both of which are capped. They pay the bulk of taxes. They are also the most productive members of society, and we punish them for it. You do realize that only qualified trusts (those designed to hold assets for qualified retirement and benefit plans) provide tax free growth of the assets held inside, correct? When wealthy people utilize trusts to hold assets, the primary reason is to provide ownership continuity not tax deferral. In fact, most trusts distribute all earnings to the beneficiaries of the trust in order to be taxed at the individual rates rather than personal rates. If the trust is going to be creating lots of growth, the grantor (rich person) will actually create what is called an Intentionally Defective Grantor Trust so that any and all growth is taxed at the grantor (rich person's) tax rate. The trust tax rates are worse than either personal or corporate tax rates. You hit the maximum tax rate after only $11,000 of income. Here are the rates for 2007 2007 Federal Tax Rates for Estates and Trusts The 2007 federal estate and trust tax rates are as follows. 2007 Federal Estate and Trust Tax Rates If taxable income is: The tax is: Not over $2,150 15% of the taxable income Over $2,150 but not over $5,000 $322.50 plus 25% of the excess over $2,150 Over $5,000 but not over $7,650 $1,035.00 plus 28% of the excess over $5,000 Over $7,650 but not over $10,450 $1,777.00 plus 33% of the excess over $7,650 Over $10,450 $2,701.00 plus 35% of the excess over $10,450 An individual holding assets in trust actually pays MORE in taxes than holding the assets themselves. If you look at the tax code, nearly all retirement benefits phase out by $150,000 of income. Roth IRA, 401(k), charitable deductibility, itemized deductions, child tax credit, etc. Lower income folks can actually put away more of their money pre-tax and tax deferred through qualified plans than can highly compensated individuals. In fact, the IRS views anyone making more than $110,000 "highly compensated" for the purposes of qualified plans. Individuals making more than $110,000 are limited to the ADP (Average Deferral Percentage) contribution limit of their plan. Here's the formula: Take 100% of the deferrals of all of the employees making less than $110,000. Divide by the total payroll of all of the employees making less than $110,000. This gives you the average deferral of the "non-highly compensated" employees. Highly compensated employees can defer 2% more than the average. The national average for deferrals by non-HCE's is 3-4%. This means that HCE's can defer at best 6% of compensation into their companies 401(k) whereas someone making less than 100% could put in 16% or more of their income. These phase outs exist throughout our tax code. | ||
| Spatten1 |
You do realize that only qualified trusts (those designed to hold assets for qualified retirement and benefit plans) provide tax free growth of the assets held inside, correct? Are you familiar with charitable remainder trusts? | ||
| Spatten1 |
Are you familiar with rabbi trusts? | ||
| Spatten1 |
Not to mention, that if you have old money, you can earn primarily long-term capital gains income through investments. Sure, it's the second time that money was taxed, but often the first time in the current generation for old money families. The current cap gains rate is 15%. Marginal active income is taxed at 35%. Big difference. | ||
| Ft_bstrd |
CRT's are great as long as you want to give away ALL of your money. Rabbi Trusts are not tax deferred and are utilized to prevent current and future management of corporations from spending monies promised to employees in ways other than as specified by the trust. How would a "rich" person's tax exposure be any different than yours or mine for the same long term capital gains for assets held over one year? | ||
| Spatten1 |
The rabbi trusts are used in conjunction with life insurance annuities to defer tax on large gains, such as selling an S-Corp. You borrow against the charitable remainder trusts at minimal rates for 20 years or so until the original amount is disounted to a fraction of the original value. You used the dough for the 20 years and recieved the tax benefit of the donation at year one, not the discounted NPV for the end of the 20 years. Hell of a deal. I used to work for Citi, under the division that houses the high net worth group (not my job, I was just housed with them). The entire industry is focused on keeping wealthy families from paying taxes, and succession planning. If you are second generation wealth, you can live off of capital gains, 15% fed tax. If you earn active income, you pay 35%. If you earn the income, then pay cap gains, you are screwed by double taxation. I understand that the inheritance was taxed already too, but the purpose of cap gains tax is really to ensure latter generation wealth are not getting a free ride, just living off of inheritance and not paying tax. | ||
| Ft_bstrd |
Rabbi trusts can be used in conjunction with any asset. The asset may be tax deferred (annuities/life insurance), tax free (muni bonds), or taxable (stocks, bonds, mutual funds). The trust itself is not a tax vehicle and it is subject to the tax rate of the grantor. The purpose is to limit the use of these funds to only those purposes specified by the trust. It would make sense to use a Rabbi Trust in business succession and executive benefit funding. It would provide that current and future management couldn't touch these assets for other uses not intended by the beneficiaries. You wouldn't want to get to the point where you needed the money to effect the intent of the funding and the funds not be there. Again, though, these assets are not tax free via the Rabbi Trust. You can borrow against a CST, but the debt must be repaid and there is no discounting of the principal or waive of the interest. The benefit is in getting the use of the money while at the same time getting the up front deduction. You hope to create an arbitrage between the interest rate earned and the interest rate owed. The gains on the money are still taxable to the grantor like any other income. To address your original point, this structure doesn't keep rich people from paying taxes. It simply creates as much of an arbitrage possible. Sometimes a 2-4% arbitrage is all that it takes to make the strategy worth it. | ||
| Spatten1 |
To address your original point, this structure doesn't keep rich people from paying taxes. It simply creates as much of an arbitrage possible. Sometimes a 2-4% arbitrage is all that it takes to make the strategy worth it. I'll re-phrase my point, and properly temper it: Rich families can utilize strategies to defer and minimize taxes, resulting in a lower marginal rate than high-income W2 or business owners. I still contend that successful small business owners get hit the hardest. My clients often worked for $50-$75k per year most of their career, started a business and risked everything, made a few hundred grand in cash flow while paying tax on a couple of million profits for a few years, and got the hell taxed out of it. All the while they were employing people and had all of their wealth was on the line every day. Those people will get hit hardest. | ||
| Ft_bstrd |
Scott, I completely agree with you on that point. Those at the bottom have the greatest number of opportunities to reduce taxes via savings programs as a percent of income. They may not chose to use them all, but they have them available. The highest income folks are willing to work harder to utilize even smaller benefits and arbitrages. It's a volume game. 2-4% on $100M is still significant. Business owners in the middle are hardest hit. They make high incomes, but they lack the ability to use the leverages higher income folks can utilize. Most of the folks in the $150-1.5M mark operate their businesses as S-Corps and LLCs taxed as S-Corps. This results in their options for tax deferral and tax deduction being no better than their employees at the lower end of the income structure. They can't deduct healthcare, have virtually no qualified plan options, can't deduct LTC, can't deduct itemized items like home mortgage interest, etc. These are precisely the folks who will be hardest hit under an Obama administration. These folks will see their tax rates growing but will still be limited in their ability to reduce or minimize taxes. Uncle Sam always gets his. There is no way for rich people to avoid paying taxes. There are no attorneys or CPAs that qualified to make that taxes zero. The conflict I see is the belief that those who pay 55% of all the taxes are somehow not paying taxes and doing their fair share. I don't believe you believe that, but I do believe that there are those here who do. | ||
| Blublak |
Hmmmm.. I stumbled on this thread and thought I'd post up this little missive I got from my Brother In-Law... I'm posting it just so some folks may understand some (only some) of our tax mess.. Suppose that every day, ten men go out for beer and the bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go like this: - The first four men (the poorest) would pay nothing. - The fifth would pay $1. - The sixth would pay $3. - The seventh would pay $7. - The eighth would pay $12. - The ninth would pay $18. - The tenth man (the richest) would pay $59. So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20." Drinks for the ten now cost just $80. The group still wanted to pay their bill the way we pay our taxes, so the first four men were unaffected. They would still drink for free. But what about the other six men - the paying customers, how could they divide the $20 windfall so that everyone would get his "fair share"? They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink beer. So, the bar owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so: Under the new cut, the fifth man, like the first four, now paid nothing (100% savings). - The sixth now paid $2 instead of $3 (33%savings). - The seventh now pays $5 instead of $7 (28%savings). - The eighth now paid $9 instead of $12 (25% savings). - The ninth now paid $14 instead of $18 (22% savings). - The tenth now paid $49 instead of $59 (16% savings). Each of the six was better off than before. And the first four continued to drink for free. But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20", declared the sixth man. He pointed to the tenth man," but he got $10!" "'Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than I got". "That's true!!" shouted the seventh man. "Why should he get $10 back when I got only two? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and complained nonstop. The next night, the tenth man didn't show up for drinks so the nine sat down and had beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill! And that, ladies and gentlemen, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they (Corporations) just may not show up anymore. In fact, they might start drinking overseas where the atmosphere is somewhat friendlier. David R. Kamerschen, Ph.D. Professor of Economics; University of Georgia } | ||
| Spatten1 |
The conflict I see is the belief that those who pay 55% of all the taxes are somehow not paying taxes and doing their fair share. I truly believe that the Dems sell that point much better than the Republicans seem to. It is obvious if you look at the numbers, not the summaries or rhetoric, that the few pay most of the taxes already. This proposed rebate for those that didn't even pay taxes is just dumb. The biggest issue most people don't understand follows: Business profits: $1MM Tax: $350k Reinvestment in equipment, inventory, A/R: 500K "Rich" business owner cash flow: 150k on $1MM pre-tax profit. Dude "makes $1MM per year in "profit" and takes home 150k. Very common. This is oversimplified, but the summary numbers are realistic. | ||
| Swordsman |
LOL, you're 7 hours too late Blublak. Already posted.  ~SM | ||
| Ft_bstrd |
What is really sad is that the thick meat of the torque curve of our economy is the small business. It isn't uncommon for a small business to go from $100,000 of annual receipts to $5M of annual receipts in a very short period of time. How long would it take for Nabisco or Coca Cola to grow 50 times their current size? Why would we want to create a hole in the fat part of the torque curve by taxation? It sucks on a motorcycle. It will suck in the economy. | ||
| Spatten1 |
It isn't uncommon for a small business to go from $100,000 of annual receipts to $5M of annual receipts in a very short period of time. True, and that is when the taxes hurt the most, because the after-tax cash has to be rolled back into higher A/R and inventories. The theoretical value of the business grows, but the owner can't get much money out of the business. Taxes are getting paid, slowing the ability to fund the business. Sure, taxes need to be paid, we need roads, schools, cops (not for traffic citations). I'd just prefer something more along the lines of a consumption tax. | ||
| Court |
I started my own business and ran it for 20 years. The years I did the best . . . .
The years I didn't make a profit were pretty much the reverse. When my tax rates were lowered I could create more jobs, buy more Ford pickups that in turn created jobs. You wanna see things come to a grinding standstill . . . tax "Joe the Plumber". I'm sure if wealthy folks pay no taxes that my wife's boss will want his $7M he paid the IRS last year back.  Most of the doom and gloom we hear is the product of the same group who are voting for Obama because he was "smart enough to choose Sarah Palin as his VP running mate". . . | ||
| Xb12mel |
Finally a debate based on facts not opinions. I can read verifiable details all day long. | ||
| Bomber |
interesting thread -- no one wants to pay taxes, but many want what comes from them . . . reminds me of an election cycle a decade or so ago when the electorate was fed up with a d-nothing congress -- big surge in "throw the bums out" all round the country . . . once the precints had all reported, sitting congressmen and senators had been re-elected almost everywhere seems that we LIKE our own bums, it's the others that need to go away . . . . . while tax code may be fubared (not much doubt about that), evidence that taxes have fouled up the republic is tough to find | ||
| Glitch |
I was thinking about all this and during my thinking I wondered... Has there been a president that lived up to any of their grand promises? I'm thinking they're all a bunch of liars. Senators! Who thought of senators for president anyway! Yeah, what America needs is a career politician as Commander in Chief! Obama included, if he's not elected he'll stay until he is I'm sure. Where can a man be free? Is there anywhere left? Freedom, the last frontier.. | ||
| Chellem |
My dad was talking the other day, and he said something that really struck me. Businesses pay NO taxes. Think about THAT. To business, big or small, taxes are just another business expense. Businesses have really two states of being: Profitable, and closed (or closing). If a business wants to stay in business, they are profitable. They make a profit by charging more than things cost. If taxes are raised, costs go up, and so either the price goes up, or the business goes away. So no matter what any person thinks, raising taxes to business costs the end-user money. The consumer, the ultimate recipient of goods and/or services, pays ALL taxes, in one form or another. And then, besides all the hidden taxes in the product, the product is ITSELF taxed - for the most part - in the form of sales tax. One final insult. So next time someone says you won't be affected by higher taxes to XXX% of the population, think about that. (He explained it better. I'm paraphrasing.) ->ChelleM | ||
| Glitch |
You're Dad's right. Taxes are passed along to the consumer. Look at all the taxes on gasoline. | ||
| Ft_bstrd |
Yep. Part of the result of higher corporate taxes is outsourcing of jobs. If you like your job, push for lower corporate taxes. | ||
| Glitch |
Push for Fair Tax and change the way it all works! | ||
| Greenlantern |
Push for Fair Tax and change the way it all works!  I'd like to teach the world to sing....in perfect HARMonEEEEE..........  | ||
| Chellem |
You wanna REALLY screw rich people? Push for NO income tax, and universal sales tax! Regular people who spend regular money could keep ALL their income, and spend it how they best see fit, paying an admittedly higher rate than now, but you'd at least have control over it. Rich people, who spend WAAAAY more than me, on cars, planes, houses, whatever, would pay the same rate but woooo, would they be paying their fair share then. No hiding money in trusts, no business expenses. No raising costs to businesses or whatever. You want a second giant mansion? Fine. 12% to the gubment. Think about THAT. ->ChelleM | ||
| Glitch |
Chellem, visit www.fairtax.org and you'll find that's exactly what I'm saying. What I don't understand is why Obama isn't for Fair Tax, after all it's liberal, and it helps the poor, and benefits the middle class, allows the rich to keep doing what they're doing, changes the way government works (lobbyists will have to find another job), K street will be non-existent, businesses will boom, and all the worlds businesses will be beating a path to our door! | ||
| Ratyson |
Fair Tax... it's the only way to fly. | ||
| Chellem |
Darn. I thought *I* thought of that. Oh well, I'm still a fan. Even though I'm a conservative. I didn't know it was partisan. Is any rich politician pro-fair-tax? Libertarians, perhaps? ->ChelleM |
