Discussion 70% U S Tax Rate

[Sig]

Funny - but he ran on a platform for a constitutional change to instituting a graduated tax in Illinois.
Pretty ethical guy, but Illinois is headed for a 10% marginal personal rate. We are going to tax snow to pay the State's bills.

I have business there and of the dozen or so states we operate in it is the most punishing tax regime. They have both a standard income tax and this crazy thing called a personal property replacement tax, plus they use single factor apportionment which is very costly to multi-state companies without significant real-estate or payroll in the state because you end up paying state tax twice on the same income to both IL and the 3 factor states where you do have employees and real estate.
That said, it's punishing because I earn a significant amount of income there. So better off paying lots of tax to IL where I earn lots of income than no tax to Mississippi or Kansas where we can't earn a cent. I kind of feel the same way about CA. You pay a lot of tax but there is also a ton of opportunity there. I feel more sorry for Kansas where the "Kansas Experiment" showed that simply having lower taxes does not create opportunity.

 

[piezoe]

My reasoning is based on logic

Not really. But take heart, as long as unearned income is taxed at lower rates than earned and the top marginal rate on earned income is 70%, you'll never reach the 70 % rate unless your a professional trader whose income is earned, and then its highly unlikely unless you are trading other peoples money . Personally I'd love to pay a top marginal rate of 70% on earned income over 10 million. I say bring it on.

 

[ironchef]

Funny - but he ran on a platform for a constitutional change to instituting a graduated tax in Illinois.
Pretty ethical guy, but Illinois is headed for a 10% marginal personal rate. We are going to tax snow to pay the State's bills.

You cannot top California's 13.3 top marginal tax rate + gasoline tax of ~$0.45 per gallon + 10.25% sales tax (LA) + overprice real estates + pollution + wild fire + flooding + traffic + crumbling infrastructure.... but I love LA.

 

[ajacobson]

@ironchef - I wish you were correct, but we're on a path to make California look reasonable. They proposed an additional $.20 -$.30 gas tax today. Our infrastructure is poor, but we drive less out of fear of being shot on a couple of our expressways. Isn't California running a surplus?

 

[ironchef]

@ironchef - I wish you were correct, but we're on a path to make California look reasonable. They proposed an additional $.20 -$.30 gas tax today. Our infrastructure is poor, but we drive less out of fear of being shot on a couple of our expressways. Isn't California running a surplus?

We used to run a huge multi billions deficits a few years back under Republican Governors. But now we are running a surplus, thanks to former Democratic Governor Jerry Brown. I thought he was a nut case in his younger days but I must admit he and our booming economy saved California from ruin.

We do have a couple of "structural advantages": Our sunny weather and an environment for innovation. So in spite of high taxes I am happy to pay my fair share instead of taking up residency in Las Vegas like many of my former colleagues.

 

[ajacobson]

@ironchef

Our weather is great with the exception of January through December.

 

[ajacobson]

Why a 70% Top Tax Rate Will Miss Its Mark

http://knowledge.wharton.upenn.edu/...tter&utm_medium=email&utm_campaign=2019-02-12

 

[rubibond007]

Most people don't understand that you can tax rich at 100% rate, yet they will never paid a dime, because they know how to use Debt as an income. Rich are rich, Not because a salary, but because Assets Appreciation!!

Lets simplify an example: Say I Found a Distressed property for 100K when its after Repair Value is 300K. The House need 40K in Rehab. I ask for a high Interest hard Money at 12% Interest only. Lets say that I could rent the House for 1500 a month. My Monthly payment to the hard lender s 1400.

3 Months later I go to the Bank and Refi the house at 3,7% 15 years fixed rate annually for 15 years for 80% of the Value (300K) Or 240K, Wala! I just made 100K tax free profit and on top of that I lowered the monthly payments from 1400 to $1000, netting me a gross cash flow of $400 a month (again, tax free) On top of that I can write off the 3 month hard money payments.

Do that 10 times and you will have One million dollar tax free and a 4000 monthly gross cash flow tax free.

Under that scenario, you don't give a fuck income taxes rates. Better, You can do that with CEO stock options and other assets, including debt itself.

The world have two tax system. One for investors and entrepreneurs (the rich folks) and one for the rest (employees).

The right thing to do is less tax for the employees and universal consumer tax. One for the rich and one for the rest. And cut spending bullshit like Bureaucracy.. I bet that Bureaucracy spending in the US and Europe tops the Trillion dollar mark annually.

 

[vanzandt]

Most people don't understand that you can tax rich at 100% rate, yet they will never paid a dime, because they know how to use Debt as an income. Rich are rich, Not because a salary, but because Assets Appreciation!!

Lets simplify an example: Say I Found a Distressed property for 100K when its after Repair Value is 300K. The House need 40K in Rehab. I ask for a high Interest hard Money at 12% Interest only. Lets say that I could rent the House for 1500 a month. My Monthly payment is 1400.

3 Months later I go to the Bank and Refi the house at 3,7% 15 years fixed rate annually for 15 years for 80% of the Value (300K) Or 240K, Wala! I just made 100K tax free profit and on top of that I lowered the monthly payments from 1400 to $1000, netting me a gross cash flow of $500 a month (again, tax free) On top of that I can write off the 3 month hard money payments.

Do that 10 times and you will have One million dollar tax free and a 5000 monthly gross cash flow tax free.

Under that scenario, you don't give a fuck income taxes rates. Better, You can do that with CEO stock options and other assets, including debt itself

You sure $240K at 3.70% over 15 years is $1000/month? That sounds pretty light without looking at a mortgage calculator. But I like the spirit of your post for sure.

 

[rubibond007]

The S&P long-term average return (including dividends) is about 7-8% per year

It's been giving ~11% per year since the GFC recovery

All of Jack Bogle's interviews have him reciting the "Reversion to the mean" concept. This means for the next decade we are going to expect 3-4% return per year for the S&P500. I researched it myself and it is in fact true for the past 100 years.

Since a recession will eventually come, don't be fooled by all the media outlets claiming "we won't recover for 20 years" and "the next great depression" etc. These are the same spastics who never dip their toes in an investment because they're Perma-Bears.

USA is the worlds best built machine

You sure $240K at 3.70% over 15 years is $1000/month? That sounds pretty light without looking at a mortgage calculator. But I like the spirit of your post for sure.

Actually its a little higher, but is just an over simplified example why higher tax on income is irrelevant for smart investors.