american ignorance on how our tax system works

PHOENIX TRADING · Nov 21, 2012

Quote from Free Thinker:

i detected this same ignorance in some of the righties on et in debates before the election:

For whatever reason, an article titled "Investors Rush to Beat Threat of Higher Taxes" was published by The New York Times despite the fact that it contains a galling bit of stupidity, which could spread like a supervirus to the general public.

It is these three paragraphs in particular:

Kristina Collins, a chiropractor in McLean, Va., said she and her husband planned to closely monitor the business income from their joint practice to avoid crossing the income threshold for higher taxes outlined by President Obama on earnings above $200,000 for individuals and $250,000 for couples.
Ms. Collins said she felt torn by being near the cutoff line and disappointed that federal tax policy was providing a disincentive to keep expanding a business she founded in 1998.

âIf weâre really close and itâs near the end-year, maybe weâll just close down for a while and go on vacation,â she said.

This is a stupidity as persistent as it is avoidable. Ms. Collins, chiropractor from Virginia, is among the many people of affluence who have somehow survived without understanding how marginal tax rates work. As always, I am obligated to provide the following paragraph from Dean Baker's post, "Marginal Tax Rates: How To Explain Them To A Five-Year-Old Child" (not its actual title, but still):

The tax system brackets give marginal rates. This means that if the raise bumps you into a higher bracket then you pay more taxes only on the income in the higher bracket. Suppose that the tax bracket for income under $200k is 25 percent, and for income over $200k is 33 percent. If you get a raise that pushes your income from $195,000 to $205,000 then you only pay the higher 33 percent tax rate on the $5,000 that is above the $200k threshold not your whole income. Therefore, there is no (as in none, nada, not any) way that getting more money, and being pushed into a higher tax bracket will leave you with less money after taxes.

http://www.huffingtonpost.com/2012/11/20/new-york-times-tax-rates_n_2166967.html

I don't get where you presume avoiding going into a higher tax bracket is evidence of "ignorance about our tax system?

I'm probably going to try to avoid the 36% level myself next year.

why pay that & the punitive 3.8 % medicare tax?

mrbill · Nov 21, 2012

Quote from PHOENIX TRADING:

I don't get where you presume avoiding going into a higher tax bracket is evidence of "ignorance about our tax system?

I'm probably going to try to avoid the 36% level myself next year.

why pay that & the punitive 3.8 % medicare tax?

I think the point was that many think their tax rates will jump to the higher bracket for ALL income, which is, as I'm sure you know, is totally wrong.

If I pay 25% for the first $250K or so, and then pay 33% for the next $250K, I'm certainly not going to stop trying to make the whole $500K, just be thankful for the savings on the first $250K.

In spirit of Thanksgiving and the Holidays, can I ask how your change into trading is going? Last time you said a bit slow, and perhaps your old employer still needs your services. Only 5 weeks to go until 2013, hope it's working out. Please let me know.

L-Kabong · Nov 21, 2012

Quote from PHOENIX TRADING:

I don't get where you presume avoiding going into a higher tax bracket is evidence of "ignorance about our tax system?

I'm probably going to try to avoid the 36% level myself next year.

why pay that & the punitive 3.8 % medicare tax?

So you would deliberately stay under what may be the threshold for the top bracket in 2013, $250K?

If you earned $300k trading, how much Obamacare tax would you end up paying?

mrbill · Nov 21, 2012

Quote from L-Kabong:

So you would deliberately stay under what may be the threshold for the top bracket in 2013, $250K?

If you earned $300k trading, how much Obamacare tax would you end up paying?

That's the whole point. If we were talking about going from 25% to 90% and have it retro to dollar one, then I can see the argument. But the way it is, is simply not that way.

Hell, if it scaled up to 50 or 60% I still would not stop trying to earn more, who would?

BSAM · Nov 21, 2012

Brother Bong; you're back!
I can stop my crying now.
When you indicated you were thru here, I, and I'm sure many others, were heartbroken.
I thought this place would fold.
I assume Baron contacted you and begged you to return?

denner · Nov 21, 2012

Quote from mrbill:

In spirit of Thanksgiving and the Holidays, can I ask how your change into trading is going? Last time you said a bit slow, and perhaps your old employer still needs your services. Only 5 weeks to go until 2013, hope it's working out. Please let me know.

Why?

Are you going to hit him up for one of your $5000 trading seminars?

mrbill · Nov 21, 2012

Quote from denner:

Why?

Are you going to hit him up for one of your $5000 trading seminars?

I have no idea what you're talking about. I have never been in the $5000 seminar business or anything similar.

I have been pretty successful trading, and have helped others in my life, and don't mind sharing.

Lately, I've been finding some nice put sales, decent IV and quick return, that's just something I would share.

What are you trading these days?

denner · Nov 21, 2012

Quote from mrbill:

I have no idea what you're talking about. I have never been in the $5000 seminar business or anything similar.

I have been pretty successful trading, and have helped others in my life, and don't mind sharing.

Lately, I've been finding some nice put sales, decent IV and quick return, that's just something I would share.

What are you trading these days?

Do you take medication for schizophrenia?

mrbill · Nov 21, 2012

Quote from denner:

Do you take medication for schizophrenia?

Nope, no need to. Do you always switch to some nonsense when you have no valid discussion points? Aliases, medical conditions, how trite. But, it's what I login for, the entertainment value.

Am I to assume you don't trade? Which is fine, just wondering.

L-Kabong · Nov 21, 2012

Quote from mrbill:

That's the whole point. If we were talking about going from 25% to 90% and have it retro to dollar one, then I can see the argument. But the way it is, is simply not that way.

Hell, if it scaled up to 50 or 60% I still would not stop trying to earn more, who would?

I want to see if PT understands the issues. I am not sure he does. The Obamacare 3.8% is on investment income and the first 250K is excluded. If you are a trader, then the surcharge should not deter you from seeking greater income beyond 250k

It should not make one happy about paying it either, but if one's investment income is composed mostly of short term capital gains, the tax will not be a deterrent to pursuing income over 250k. The tax might provoke a rare ideological protest: someone may be so opposed to the tax as to arrange one's financial affairs to avoid it.