Interesting post...
Now with that Inflation role , add whats below to your "Theory".
"Assuming the Senate passes the package of changes, the biggest tax increases will be in Medicare payroll taxes. Those take two forms, both starting in 2013:
Singles earning more than $200,000 and couples earning $250,000 will pay 0.9% more on wages and self-employment income.
All investment earnings will be taxed an additional 3.8%. This includes capital gains, dividends, and interest, the first time in history the Medicare tax is applied to them.
But keep in mind that the Bush tax cuts expire at the end of this year, which will push the Medicare tax on capital gains to 23.8% in 2013 on these earners. Dividends, currently taxed at the top rate of 15%, will be taxed as ordinary income, with the top rate scheduled to rise to 39.6% (from 35%).
This means that the tax on dividends could go as high as 43.4% when the new Medicare tax goes into effect in 2013. (Obama has proposed a top dividend tax rate of 20%, so if Congress enacts his proposal, the top tax rate for dividends would âonlyâ rise to the 23.8% level in 2013.)
You may think youâll escape this tax if youâre not ârich.â But itâs those darn Unintended Consequences politicians never seem to think about that could still sting you. For example, the 3.8% Medicare surtax could snag you if you happen to sell some real estate for a big gain.
The other major tax increase is the one imposed on health insurance plans that are more generous, the so-called âCadillacâ health plans. And this tax increase doesnât just apply to high-income earners; those state and union workers that lobbied for better health coverage instead of big pay increases are going to find theyâre included with the ârichâ in a new excise tax. Starting in 2018, family insurance plans valued at more than $27,500 ($10,200 for individuals) would pay a 40% tax above that level.
Ouch.
And thereâs other ways youâll be taxed, particularly through the magic of âpassing it on to the consumer.â
For example, pharmaceutical manufacturers will pay an annual fee based on their market share starting in 2011; same for health insurers, starting in 2014. A 2.3% excise tax on the sale of medical devices will start in 2013. A 10% excise tax on indoor tanning services goes into effect this July.
How will all these businesses afford the additional tax? They wonât. Youâll pay it, through higher prices.
Further, were you one of those who incurred medical expenses above 7.5% of your income, thus allowing you to deduct them? That ceiling will be 10% starting in 2013. (It remains 7.5% for those over 65.)
Thereâs more, most of it in the form of greater restrictions, increased penalties, and higher fines on various entities, businesses, health plans, or individuals. But what I especially cringed at was this: the bill vastly expands the responsibilities of, and gives greater strength to, the IRS. The agency will hire as many as 16,500 additional auditors, agents, and other employees just to enforce all the new taxes and penalties.
Specifically, the bill will empower the IRS to do the following: verify citizens have âacceptableâ health care coverage; impose fines up to $2,085 or 2% of income (whichever is greater) for failure to purchase âminimum essential coverageâ; confiscate tax refunds; and increase audits.
The upshot is that this will force many taxpayers to be more conscientious of monitoring their income and tax withholding.
Perhaps most damaging to the governmentâs plans is if the bill leads some to ask the Ayn Rand/Atlas Shrugged questions: What if I just stop being productive? What if I stop working once my income approaches the threshold? What if I invest less so that I stay under the limits?
And last, hereâs the time bomb that could trump the tax concerns: none of these taxes are indexed to inflation. Since the bill fails to index to inflation the exemption threshold for the Medicare taxes on both earned and unearned income, itâs almost certain many taxpayers will get to these tax levels a whole lot quicker than they think.
What this essentially means is there is now more incentive on the part of the government that we have inflation. If inflation reaches 10% at some point, which is below the 14%+ rate it hit in 1980 and far below any hyperinflationary level thatâs possible, the $100,000 earner gets to the magical $200,000 level in seven-and-a-half years. From the governmentâs perspective, it makes the printing of money a lucrative affair.
Yes, higher taxes are coming. But with the governmentâs built-in incentive for inflation, along with the reward that comes from getting more citizens to higher tax rates, many may find the tax issue an annoying mosquito bite compared to the alligator chomp of inflation.
And high inflation affects every citizen, regardless of income or tax rate. Those who think theyâve escaped the cold may find theyâve walked into a freezer.
With this added push to inflate, our investment strategy for the foreseeable future is now clear: We must invest in assets that not just keep up with inflation but outpace it.
All wise citizens do tax planning. Have you done inflation planning?"
__________________________________________________-
THINGS THAT MAKE YOU GO HUMM?
Now with that Inflation role , add whats below to your "Theory".
"Assuming the Senate passes the package of changes, the biggest tax increases will be in Medicare payroll taxes. Those take two forms, both starting in 2013:
Singles earning more than $200,000 and couples earning $250,000 will pay 0.9% more on wages and self-employment income.
All investment earnings will be taxed an additional 3.8%. This includes capital gains, dividends, and interest, the first time in history the Medicare tax is applied to them.
But keep in mind that the Bush tax cuts expire at the end of this year, which will push the Medicare tax on capital gains to 23.8% in 2013 on these earners. Dividends, currently taxed at the top rate of 15%, will be taxed as ordinary income, with the top rate scheduled to rise to 39.6% (from 35%).
This means that the tax on dividends could go as high as 43.4% when the new Medicare tax goes into effect in 2013. (Obama has proposed a top dividend tax rate of 20%, so if Congress enacts his proposal, the top tax rate for dividends would âonlyâ rise to the 23.8% level in 2013.)
You may think youâll escape this tax if youâre not ârich.â But itâs those darn Unintended Consequences politicians never seem to think about that could still sting you. For example, the 3.8% Medicare surtax could snag you if you happen to sell some real estate for a big gain.
The other major tax increase is the one imposed on health insurance plans that are more generous, the so-called âCadillacâ health plans. And this tax increase doesnât just apply to high-income earners; those state and union workers that lobbied for better health coverage instead of big pay increases are going to find theyâre included with the ârichâ in a new excise tax. Starting in 2018, family insurance plans valued at more than $27,500 ($10,200 for individuals) would pay a 40% tax above that level.
Ouch.
And thereâs other ways youâll be taxed, particularly through the magic of âpassing it on to the consumer.â
For example, pharmaceutical manufacturers will pay an annual fee based on their market share starting in 2011; same for health insurers, starting in 2014. A 2.3% excise tax on the sale of medical devices will start in 2013. A 10% excise tax on indoor tanning services goes into effect this July.
How will all these businesses afford the additional tax? They wonât. Youâll pay it, through higher prices.
Further, were you one of those who incurred medical expenses above 7.5% of your income, thus allowing you to deduct them? That ceiling will be 10% starting in 2013. (It remains 7.5% for those over 65.)
Thereâs more, most of it in the form of greater restrictions, increased penalties, and higher fines on various entities, businesses, health plans, or individuals. But what I especially cringed at was this: the bill vastly expands the responsibilities of, and gives greater strength to, the IRS. The agency will hire as many as 16,500 additional auditors, agents, and other employees just to enforce all the new taxes and penalties.
Specifically, the bill will empower the IRS to do the following: verify citizens have âacceptableâ health care coverage; impose fines up to $2,085 or 2% of income (whichever is greater) for failure to purchase âminimum essential coverageâ; confiscate tax refunds; and increase audits.
The upshot is that this will force many taxpayers to be more conscientious of monitoring their income and tax withholding.
Perhaps most damaging to the governmentâs plans is if the bill leads some to ask the Ayn Rand/Atlas Shrugged questions: What if I just stop being productive? What if I stop working once my income approaches the threshold? What if I invest less so that I stay under the limits?
And last, hereâs the time bomb that could trump the tax concerns: none of these taxes are indexed to inflation. Since the bill fails to index to inflation the exemption threshold for the Medicare taxes on both earned and unearned income, itâs almost certain many taxpayers will get to these tax levels a whole lot quicker than they think.
What this essentially means is there is now more incentive on the part of the government that we have inflation. If inflation reaches 10% at some point, which is below the 14%+ rate it hit in 1980 and far below any hyperinflationary level thatâs possible, the $100,000 earner gets to the magical $200,000 level in seven-and-a-half years. From the governmentâs perspective, it makes the printing of money a lucrative affair.
Yes, higher taxes are coming. But with the governmentâs built-in incentive for inflation, along with the reward that comes from getting more citizens to higher tax rates, many may find the tax issue an annoying mosquito bite compared to the alligator chomp of inflation.
And high inflation affects every citizen, regardless of income or tax rate. Those who think theyâve escaped the cold may find theyâve walked into a freezer.
With this added push to inflate, our investment strategy for the foreseeable future is now clear: We must invest in assets that not just keep up with inflation but outpace it.
All wise citizens do tax planning. Have you done inflation planning?"
__________________________________________________-
THINGS THAT MAKE YOU GO HUMM?
) Biophysical economics and Econophysics would be examples I am begining to follow.