Economy
Related: About this forumHow do I talk to my parents (and other naive questions) about tax increases...
I've had disagreements with my parents for the past 4 years with regard to tax increases. I'm not sure what the latest proposals are, but it has generally been my understanding they would not kick in unless you are a couple making over $250k. (My parents are making that off interest and dividends in their retirement, so they have been trying to persuade me to embrace the evil side, by insinuating that they will pass that on to me and my brother someday, although by that time I'll be 70 or 80, 30 years from now, and I'd rather have a good economy that will support everyone's financial well being instead of selfishly relying on unearned money.).
So say someone makes $251k... do huge tax increases instantly kick in, or would the taxes start to gradually increase? If the latter is true, how much would you have to make before the maximum tax increase takes effect? Is there an actual table of what is being proposed for dividend tax increases?
They also argue that business owners cannot hire after they make over $250k which, again, makes no sense to me because business hires to make more money, NOT just because they just happen to have extra money onhand. And if they did hire for altruistic reasons, they might go below $250k and then not get taxed as much. The lack of logic in their arguments drive me nutts!
They argue that there is no point trying to earn more than $250k because of tax increases, but that seems ludicrous to me. People will still want more. They'll just make a little 'less more' but definitely more, and I can't imagine anyone not wanting to make more. It's almost as though they pretend they won't want more, only because they do not want to give anything to support the government.
I'm not sure how to talk to them since their rationale seems just plain stupid. I'm also concerned about their grasp on reality and logic skills deteriorating even more with age, although at least they have plenty of their own financial resources to get them through it.
sinkingfeeling
(51,482 posts)proposal would raise tax rates on above $250K to 40%. Your parents would pay 40% only on the $1k above the $250K line in your example:
Here's the tax brackets and rates for married, filing together, for 2012:
10% on taxable income from $0 to $17,400, plus
15% on taxable income over $17,400 to $70,700, plus
25% on taxable income over $70,700 to $142,700, plus
28% on taxable income over $142,700 to $217,450, plus
33% on taxable income over $217,450 to $388,350, plus
35% on taxable income over $388,350.
This example is for earned income, a.k.a. wages. And taxes will change back to 2003 levels if something else isn't adopted.
The tax rates for 2013 are scheduled to change as follows: the 10% rate will be collapsed into the 15% rate; the 25% rate will become 28%; the 28% rate will become 31%; the 33% rate will become 36%; and the 35% rate will become 39.6%. These tax rate changes will take effect beginning in 2013 absent further legislation.
If it's all from dividends and capital gains, then I don't know what it would be since I've not heard of anything except increasing capital gains from 15% to 30%.
If your parents are pullling over $250K in interest and dividends, then they are in the top 1%.
http://taxes.about.com/od/Federal-Income-Taxes/qt/Tax-Rates-For-The-2012-Tax-Year.htm
DaveJ
(5,023 posts)They are like Leprechauns protecting their pot of gold, which is fine, it's their money and they can take it with them, it's totally their prerogative, but their logic is befuddling. I do not know what exactly they are trying to accomplish. At least I can draw upon these facts next time. Thanks.
rfranklin
(13,200 posts)Back in the 1950s, when the top marginal tax rate was more than 90 percent, real annual growth averaged more than 4 percent. During the last eight years, when the top marginal rate was just 35 percent, real growth was less than half that.
jtuck004
(15,882 posts)through their own and other American's (our neighbors) investment and sacrifices,
and then you could go a variety of ways. They got any grandkids? Talk about how their future will be impacted in a country where half the population, willing to go to school to learn and work, can't afford an education. Or maybe that the best way to insure their wealth is to invest in their country so it stays strong.
Their money is likely being invested now to pay workers 24 cents an hour in China while Americans stand idle and uneducated, or perhaps interest paid from other taxpayers on Treasury Bonds, money that is in effect increasing the debt that they, or perhaps you, will have to pay in the future, without getting much if any benefit. Are they planning to use their wealth to build gates to protect themselves from the kind of future that will bring?
What most people are saying is that they don't see the value in tax increases, and you need to figure out why. They may have some very reasonable objections - we are likely wasting money and lives in the Mideast, because we could invest that cash by paying for technical and engineering education for a few million people, set them to work on energy or medical alternatives to the crappy ones we have today - and I don't see much value in increasing taxes to just pay for more waste.
Talk about investing in their life, their comfort, roads, fire, police, building inspecctors that keep the places they go safer. Then it becomes a discussion about how the money is invested and how much, and not just knee-jerk objections to taxes in general.
my < 2 cents, anyway...
DaveJ
(5,023 posts)Last edited Thu Mar 22, 2012, 06:31 PM - Edit history (1)
My dad only sees the bottom line and is not concerned about social issues and how they indirectly impact us. Not until it hits home, like when my bother was denied insurance due to pre-existing conditions, then he's fine with that aspect of health care reform, just as long as it personally helps him and his kids. He's a classic Limbaugh type republican, claims to be independent though. He also believes there is more than another 100 years of oil, which I do not know if any credible sources would agree with. The fact that oil will run out in a generation or 2, or less, might be the most persuasive fact at this point.
jtuck004
(15,882 posts)but back then his issue was getting rid of ad valorem tax so seniors didn't lose their home to tax bills.
Different conservatives in those days, 50 or so years ago
Good luck.
Warpy
(111,383 posts)and the first $250K would be at the present rate, so tell them the truth: they're not likely to miss it to the extent the wolf will be howling at the door. In present dollars, they're likely to be out one night at a Chinese restaurant a year at that rate, thirty bucks.
I don't know why people who are making that much money tend to go insane over such a small increase, but they do.
DaveJ
(5,023 posts)They act as though all their money disappears after $250k, which is ludicrous. The way they got any money in the first place is by extreme saving though, so even a Chinese dinner is a nice night out for them. Maybe I'll say one golf game. They'd understand that I think.
Fuddnik
(8,846 posts)I had that conversation with a guy, whose wife was a doctor, and she would have to quit working during the year to keep paying an extra 3% or whatever the proposal at the time was.
I told him that I'd never let his wife treat me. He asked, "Why not"?
I said that if she was too stupid to understand the term "marginal tax rates", she's too stupid to have a medical license.
Demeter
(85,373 posts)you are bound to frustration. Parents won't listen to kids. (Well, an occasional rare one would, but anyone 75+ is culturally incapable).
Send your Dad to this website, instead. He'd listen to anonymous strangers before he'll hear you. Point him to the Stock Market Watch daily thread.
Fuddnik
(8,846 posts)SMW, indeed.
happyslug
(14,779 posts)First, that the Top ten items in Federal Budget are
1. Social Security,
2. Defense excluding spending in Iraq and Afghanistan,
3. Medicare,
4. Other Medical Coverage,
5. Spending on Low Income Families, i.e. Public Housing, Section 8 housing, Food Stamps, Collage education grants and loans etc.
6. Interest on the Debt,
7. Spending in Afghanistan and Iraq,
8. Military retirement, including pensions to people injured in Iraq and Afghanistan (as while as Vietnam and the few Korean and WWI veterans we have left).
9. Non-military, non-Social Security retirement,
10, Transportation.
Second, point out Social Security taxes EXCEED Social Security outlays, i.e. the Federal Government collects more in Social Security Taxes then it pays out and has since Reagan. Medicare cost exceeds Medicare taxes, but the Social Security surplus exceeds the Medicare deficient.
Third, The rest of the budget is minor compared to Defense, thus if you want to balance the budget you have to CUT DEFENSE or raise taxes.
Fourth, Transportation is paid by Gasoline and Diesel fuels taxation, again a tax that exceed what is spent, i.e. the excess money go to other parts of the Budget.
AND Both the Social Security Surplus and transportation tax surplus will continue for many years. In the not to distant future Social Security will have to go to Congress and ask Congress to give it back all Social Security Taxes Congress spent on Defense since 1980s but that is in the future not for the next few years.
Here is a Budget simulator from 2006:
http://www.nathannewman.org/nbs/
Comment on the next two budget Simulators, neither will BALANCE the budget for the option of massive Defense Cutting is NOT permitted under either simulation, thus I like the 2006 simulator for you CAN balance the budget with that Simulator, but it requires MASSIVE increase in Taxes OR Massive cut in Defense Spending (It also permits massive cut in Social Security outlays and use Social Security Taxes to pay for Defense Spending, if that is what people want).
A New York Times 2010 Budget Simulator:
http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html
A 2012 Budget Simulator, this is a very pro-GOP plan budget simulator:
http://crfb.org/stabilizethedebt/#
2012 Budget Simulator, but starts 10 years from today:
http://www.marketplace.org/topics/economy/budget-hero