More Bad News - Obama Reducing Mortgage Interest Deduction for "Top Earners"

Can someone give an example of how this might affect people earning more than 250k

A. recent homeowner with 600k mortgage
B. Recent landlord with 600k mortgage on his rental property (is he affected because its considered business?)

Is it really bad for housing related expenses or only for certain types of deductions?

it basically takes a 5% and 7% reduction to the effective tax deduction for any incomes over 250k on mortgage interest.

i love how obama simply does a flat number across for all americans earning 250k. like 250k in kansas is the same as 250k in nyc. not only is this contrary to helping the housing market, it effectively is a transfer of wealth.

The vast majority (if not all) of Obama's moves, non-moves and tweaks to the Tax Code are and will be targeted at the expense of the "higher earners". I realize this states the obvious, but it actually goes beyond raising taxes. For instance, I wouldn't expect to see any assistance for jumbo loans any time soon. I really believe that the administration views NYC and other pockets of wealth as luxury items that are either meant to be taxed, or certainly not subsidized.

Not only is the deflation of these "luxury markets" desirable to Obama from a sociopolitical standpoint, but there's much revenue that can be skimmed off of these markets as they deflate.

"i love how obama simply does a flat number across for all americans"

Dude, it's not Obama. That has ALWAYS been the rule - taxes have NEVER been adjusted for the cost of living.

If you look closely at the figures you will see that with the exception of Maryland and Virginia (for obvious reasons) the states that receive the greatest benefits from the federal governments are the RED states; the states that get the least back from the government are the BLUE states. The blue states are the states with the highest taxes. It's a vast subsidy for the very people who decry government subsidies.

Income tax is *supposed* to be a transfer of wealth. That's its purpose.

If you think you can make as much in Kansas as here, then you could always move there. It all balances out.

"It's a vast subsidy for the very people who decry government subsidies."

Exactly Steve, that's what makes the whole thing so funny. I have still not stopped laughing at Jindal for decrying government spending while his state soaks up a lot of the money, uh, probably from us.

It's actually a vast sucking sound right out of Manhattan, which subsidizes the outer boroughs, and the city subsidizes the rest of the state.

There is NO relationship between wealth and low taxes - it is, in fact, the opposite: the wealthier a place is, the higher its taxes are.

You pick: England, or Bolivia.

I feel really bad for the super high earners. They have been so good to the country by creating all this derative wealth based upon poor loans that they initiated then they were so good at trickling on us.

The American way is to give all the money to a select few then allow them to trickle down on us as they see fit and in areas of the economy that this select few want to stimulate. That is the greatness of america - allow a select few to rape and pillage all the country's wealth then allow those same people to determine where that money should go in our economy.

God I miss Republican rule..

Ah, Steve, but at least we have a lot of diversions, like theater, great restaurants, a beautiful park, and takeout places that stay open all night long. Plus, we get to live in a walkable city, unlike all of those car-centric suburbs. I'll pay more to stay on the island. The little extra won't break me.

I appreciate the irony of this whole situation. High earning liberal Obama supporters may have voted against their economic best interests in order to prevent a McCain-Palin theocracy from being implemented. Money be damned, it will be worth every extra penny if that is what it takes to save us from their "leadership". Just like Republicans voted against their economic interests for years because of sexual issues (abortion, gay marriage, etc), Democrats may find themselves in the same boat.

"Households paying income taxes at the 33% and 35% rates can currently claim deductions at those rates. Under the Obama proposal, they could deduct only 28% of the value of those payments."

This is the nail in the coffin on carrying costs:
1) Taxes on the highest tax bracket going up to 39.6% in 2010 (from 35%) AND tax deduction for mortgages now at 28%.
2) To offset massive losses in state & city revenue from wall street, bloomberg is going to continually increase real estate taxes over the next couple of years.
3) Tax abatements naturally keep on rolling off for new construction owners that purchased at artificially higher prices (during the boom, most of the monthly costs savings from tax abatements was captured by the develop in the form of higher prices)

I think when all of this sinks in to the nyc population, it's going to be devastating.

Democrats are always frustrated because the people who seem to need their policies the most are often the ones most likely to vote against them. What were the people of Louisiana thinking?

"I feel really bad for the super high earners."

And here, petrfitz, what with living next door to Celine Dion, I thought you were one of the super high earners! You must be bummed.

Forget ye not, Special_K, that the super-high earners don't pay Social Security on all their wages, meaning they actually pay about 6% less than lower-wage earners. If you're in the 28% bracket you pay an additional 6% in Social Security, making your marginal rate 34%. If you make $500,000 your marginal rate will be 40% since you don't pay Social Security on it, so the difference isn't that grand.

But I agree with you about the property tax abatements - they will be disastrous for lots of people, unless the city wakes up and readjusts its property tax formula, where a single-family homeowner with a property worth $1 million might pay $3,000 in property tax, whereas a $1 million condominium will pay $15,000.

Oh look - a potential fix to the city's tax revenue problems!

"What were the people of Louisiana thinking?"

* That a guy named Bobby must be all right, even if he changed his name to Bobby from Piyush. I have a hard time trusting a guy who changes his name like that, it rings false and appears to have been done only for political gain.
* Jindal also converted to Catholicism, maybe that helped sway people to his side. lots of Catholics in Louisiana.
* Blanco was a nightmare but electing Jindal proves it is possible to go from bad to worse.
* Lots of Democrats were run out of the state by Katrina so that helped his numbers.

Special_K,
Bloomberg will also cut spending in New York, and I believe is has already started doing that, no? I am not saying that things will not be tough for the city but I hope we have to leadership to find our way through this crisis.

As for raising real estate taxes every year, do you have some word from the mayor on that one?

As for 421A abatements, yeah, well, I have always felt that game was rigged against buyers. I'll stick to coops, which are more stable in a downturn and have a more stable cost structure. Sure, there will be cost pressure everywhere, I do not deny that.

Steve - I am a super high earner and I don tmind paying taxes. I love America and realize that is my tax dollars that make it possible for me to live here and to earn what I earn.

"Forget ye not, Special_K, that the super-high earners don't pay Social Security on all their wages, meaning they actually pay about 6% less than lower-wage earners. If you're in the 28% bracket you pay an additional 6% in Social Security, making your marginal rate 34%. If you make $500,000 your marginal rate will be 40% since you don't pay Social Security on it, so the difference isn't that grand."

i am pretty sure (not 100%) that mortgage interest is not deductible against social security and medicare taxes. so this 28% cap will definitely affect higher-end earners more than those in sub 28% brackets. however, i agree with your point. the caveat of course being that social security benefits cap out at a certain lifetime contribution level. which is partly why the tax does as well. it's sort of like a forced savings mechanism so not so fair if i am contributing my savings to other people's retirement.

"i love how obama simply does a flat number across for all americans earning 250k. like 250k in kansas is the same as 250k in nyc. not only is this contrary to helping the housing market, it effectively is a transfer of wealth."

Even in NYC...even in MANHATTAN an individual making 250k a year is in the top ONE PERCENT of earners. If top one percent is not "rich", then I do not know what is.

petrfitz: "allow a select few to rape and pillage all the country's wealth" --> "I am a super high earner"

So, petrfitz, you're an admitted rapist?

"Bloomberg will also cut spending in New York"

The problem in New York is the benefits of public employees, and Medicaid. I say get rid of both.

"The problem in New York is the benefits of public employees, and Medicaid. I say get rid of both."

And how exactly do you suggest insuring millions of suddenly uninsured people? Ridiculous.

At the end of the day this doesnt matter...

People over 250k get slammed with the AMT which limits your deductions anyways....

"People over 250k get slammed with the AMT which limits your deductions anyways...."

It matters a lot. i agree that AMT hits and higher income levels (it obviuosly depends on a person's specific situation), but if you keep going up the income bracket, AMT no longer applies. you can actually earn your way past AMT, so to speak.

"And how exactly do you suggest insuring millions of suddenly uninsured people?"

You don't have to do that at all. New York spends twice per capita as most states spend on Medicaid. Medicaid covers podiatry in New York. It is more comprehensive than any private insurance you can buy. It is also highly inefficient.

California, with twice the population, spends half as much on Medicaid. I don't see people dying in the streets there.

"People over 250k get slammed with the AMT"

AMT phases out over a certain income level ($350k, I don't remember for sure). Capital gains are taxed at a far lower level than ordinary income, and are not subject to Social Security. Hedge fund managers get to claim "carried interest," and are taxed at capital gains levels for gains on assets that aren't even theirs.

Ergo, Warren Buffett pays a lower total tax rate than his secretary, percentage-wise. It's a false argument by Republicans. Our total tax system is highly regressive, especially once you add sales tax in.

steve i made my wealth creating educational software, technology, and content that teach kids how to read, deal with emotions, kinesthetics, etc. Most of the above was free or funded through charities to the end user. Does thta sound like raping?

Whyare you such a prissy a hole Steve? is the per word rate tanking even more?

You can outearn the AMT? Wow, I didn't know that...kind of goes against what its suppose to do...

At least I learned something new today....i better start working harder to earn more...oh wait, any incentive to do that just got pummeled with the new proposals....

I can see the expiration of the Bush Tax cuts for the rich....i can see the ability for them to not have any chance of taking advantage of the new stimulus opportunities (house buyer credit, make work pay credit, etc) due to making too much....but now we have a 3rd proposal of taking away some deductions...wow, when it rains it pours...

At least we'll have a basis for a new Robin Hood movie....

petrfitz, you have an ever-changing story.

Yes, garelj, you can out-earn the AMT.

"You don't have to do that at all. New York spends twice per capita as most states spend on Medicaid. Medicaid covers podiatry in New York. It is more comprehensive than any private insurance you can buy. It is also highly inefficient.

California, with twice the population, spends half as much on Medicaid. I don't see people dying in the streets there."

Steve, comparing Medicaid spending across states is a bit of a flawed exercise. New York Medicaid pays for quite a bit of long-term care, which is very expensive. I don't think the system is by any means perfect, but to suggest getting rid of it is very shortsighted.

"I feel really bad for the super high earners. They have been so good to the country by creating all this derative wealth based upon poor loans that they initiated then they were so good at trickling on us."

In Manhattan, ~$250K is not a super high earner. In fact, you've just broken into the highest tax bracket, and, God forbid you have kids, you are actually going to be struggling. My wife and I have a combined of about that much, we hardly vacation, we rent, and we cannot save as it is - not even for their college (we will raid our 401K's likely). "High earner" varies dramatically depending upon cost of living. I could have the same standard of living with less than half this income in many places in the US, I could own a home, and pay less taxes. Of course, I would have to give up a position at one of the world's foremost research universities, which means the last 20 years of hard work would be for nothing.

Keep in mind that that the 33% tax bracket cut-off starts MUCH lower for a single earner- something like $167K. And that kind of income is not even enough to afford to rent a decent 1 BR apartment or buy a decent studio. So somehow single high earners, who can barely afford to live in substandard, tiny NYC housing, are subsidizing lazy, large families who live in large, lavish rent-regulated spreads for peanuts. Yeah, that's a fair system.

This is just his proposal at this point, though, so there could/will be changes when the final product gets passed. Does anyone remember how much usually gets altered from the initial proposal to passed budget?

Top 1% ($388k) pay 39.89% of taxes

Top 5% pay 60.14% of taxes

Top 10% pay 70.79% of taxes

Top 25% pay 86.27% of taxes

Top 50% pay 97.01% of taxes

How is this not extremely progressive? Half the country essentially pays 0 taxes. How is it that the "rich" aren't paying there fair share, when 1% of the population is paying almost 40% of all taxes?

If passed, this can be devestating to NY market and other large cities. It isn't the amount reduction, which will probably equal a few hundred dollars per year. It is the idea that the deduction for mortgage interest, which has been untouchable for so long, is now fair game to be changed again and again. Who is to say that it won't be lowered from 28% to 25% and then 20% at some point in the future? Without this deduction, prices need to massively fall in line with rents, or home ownership in a place like NY or other large cities is essentially a losing proposition.

This proposal might start the Exodus that Rufus has been alluding to.

I don't think that it will be sustainable for "high income" (>250K!) families to live in New York.

UES,
don't forget the massive tax increase being tossed around by the State legislature. I think current top rate is 7.7%, proposal is 10.3% for a sweet 33% increase.

obama has something against people who choose to succeed. That is bad for this country.

UES: The top 1% gets 21% of the income and pays nearly 40% of the INCOME taxes. I'm not sure I agree with some of the ideas either but at least present the correct data to support your position.

Look, with all of the spending that had gone on in the last eight years, did you really think that there weren't going to be any measures taken to increase revenue? I guess it is time to work longer hours at the office, take a second job, and drop some unnecessary expenses.

The real blow will come when a wealth tax is implemented. The problem with an increase in the marginal income tax rate is not so much that it hurts high earners but that is hurts those trying to get wealthy much more so than those already wealthy. I expect the younger generations to lead the charge in changing the debate towards a wealth tax. Why should those trying to get rich (within a system that is now broken) be penalized as much as those who spent several decades reaping the rewards of an illegitimate boom. I'm not saying I agree; but I do think the debate will shift in that direction at some point.

I wish we would go back to a tax system that allowed some type of income averaging. The way it is now, you get creamed if you have a few good years in the context of some bad years. If you are a consistently high earner, fine, but for those people whose income varies quite a bit, the tax system, as it stands, puts on a big hurt.

malthus: "The top 1% gets 21% of the income and pays nearly 40% of the INCOME taxes. I'm not sure I agree with some of the ideas either but at least present the correct data to support your position."

Shouldn't that be "The top 1% earn 21%..."

And fine, I could have been more precise, but point still holds.

"Owners of capital will stimulate the working class to buy more and more
expensive goods, houses, and technology pushing them to take on more
and more expensive credits, until their debt becomes unbearable. The unpaid
debt will lead to the bankruptcy of banks, which will have to be nationalized,
and the State will have to take the road which will eventually lead to communism"

Karl Marx, 1867

why do you think we elect limousine liberals (pelosi), to insure that wealth tax never happens. That's the beauty of high marginal rates, it keeps others from getting rich. Rich is relative, not absolute.

"The top 1% gets 21% of the income and pays nearly 40% of the INCOME taxes"

So are you suggesting that the top 1% pay just 21% of income tax because they earn just 21% of all income?

What is the difference between someone who makes $400,000 a year, and someone who makes $40,000?

Add Social Security into that equation, do it on a total tax rate basis, and you will see that the system is highly regressive.

Someone who makes $40,000 pays a much higher total tax percentage than someone who makes $400,000.

"Add Social Security into that equation, do it on a total tax rate basis, and you will see that the system is highly regressive."

Who the hell would do this.? It is a govt sponsored retirement program, a social welfare program. Has nothing to do with Federal Income taxes.

> Add Social Security into that equation, do it on a total tax rate basis, and you will see that the system is highly regressive.

> Someone who makes $40,000 pays a much higher total tax percentage than someone who makes $400,000.

It's irrelevant. Social Security is a forced saving mechanism. It's not meant to be taxed per income.

Using income as the denominator when taxes like SS and excise are based on entirely non-income matters renders this "total tax percentage" calculation moot.

To say this "total tax percentage" should be more even would be suggesting we should pay for gas or cigarette taxes based on income. The homeless guy pays $2 for his pack, Donald Trump $15.

the idea that the federal government should subsidize the choice to live in new york city is absurd. as rightly said above, if you think you can make the same salary in kansas that you make here, and you think you'd be happy in kansas, then move to kansas. if you choose to live in manhattan--again, it is a choice--you can't turn around and say that your 250k income doesn't make you a high earner. it does, and your choice to live in an expensive place is just that: your choice.

high taxes are possible because the country is wealthy, and they are what enable our country to be wealthy. i want to live somewhere with clean water, protected forests, strong defense, high quality schools and hospitals, safe streets, retirement insurance, facilities for the disabled, etc. etc. that costs $$$. low-tax societies do not do well over any long period of time.

as for regressive taxation, completely true. social security taxes are used to fund government services, same as income taxes. it is quite proper to include them in a measure of total taxation.

"Add Social Security into that equation, do it on a total tax rate basis, and you will see that the system is highly regressive."

Social Security is not a tax....

But anyways....

I see we have two flat-taxers posting.

Social Security is a tax. Of course you get a benefit from it. You pay property taxes, it pays for your schools. You get a benefit from it. The only difference between Social Security and any other income-based tax is the way you think about it.

"It's not meant to be taxed per income." That's ridiculous on its face, as it is a tax levied on income.

Consumption taxes ARE highly regressive, another of my points. The poor save little; a much higher percentage of their income goes into paying sales taxes than for the wealthy. Just one more point to support my theory.

There is NO correlation between low taxes and wealth. The correlation is the other way around.

HR: The Federal Govt has always subsidized your choice to live in NYC, NYS and anywhere else. Your NYC income tax, along with your ST income tax is tax deductible at the federal level. The high tax states reidents have always received a federal subsidy relative to low tax states.

stevejhx: I agree with you. I was refuting the idea connotation that the top 1% pay 40x what their tax burden should be, as implied in an earlier post. I was also noting that even when you consider they "earn" 21% of the overall income they are only paying 40% of INCOME tax, not all tax.

"obama has something against people who choose to succeed. That is bad for this country."

Agree & I think this thinking will corrode the tax base. Right or left, we need better ideas to deal with our finances. One thing I wish would happen is to bring back manufacturing to this country. Manufacturing would create jobs for all tax levels, which would create wealth & taxes. By off shoring manufacturing, we've off shored our tax base. They're even off shoring medical care: xrays being read by MDs in India as opposed to a local MD. We're just shooting ourselves in the foot.

"the idea that the federal government should subsidize the choice to live in new york city is absurd. "

They aren't giving money, so it isn't subsidizing. They are deciding how much money to take away. It's no more absurd than adjusting taxation for income level. Income level per se is meaningless. You could turn this around and argue that without adjusting for cost of living, the gov't is subsidizing people to leave in Kansas (or Alabama, or wherever). If you want to create a system where the tax burden is adjusted for a person's ability to pay, then cost of living should be in it.

btw, the Karl Marx quote, if real, was freaky prescient.

"obama has something against people who choose to succeed. That is bad for this country."

I think that's the wrong way to look at it (the Republican misunderstanding of liberal views). Obama likely feels people should pay in a "fair" way, so that those who can shoulder the burden of larger amounts should pay more. If you make $10 million a year, really, quality of life isn't an issue even if you are taxed 70%. For someone making $25K a year, that's the difference between scraping by and being homeless. I'm sure he is all for success. Of course, there is a different view that whatever you make is yours and "fair" has nothing to do with it. That is an ideological divide. But conservatives too often misunderstand liberals, I believe, on points like this.

Have any of you mentioned that the money would be used to pay for health care? Are we only going to rail against taxation without any mention of where the money is going to be spent? We spent $800+ billion in Iraq. At least this money would go to help Americans who don't have health insurance.

"The combined effect of the two revenue-raising proposals, on top of Mr. Obama’s existing plan to roll back the Bush-era income tax reductions on households with income exceeding $250,000 a year, would be a pronounced move to redistribute wealth by reimposing a larger share of the tax burden on corporations and the most affluent taxpayers.

Universal health care is worth that price, Mr. Obama said.

"We must make it a priority to give every single American quality, affordable health care," he said. "With this budget we are making a historic commit to comprehensive health-care reform."

The officials said the increase in revenues, estimated at $318 billion over 10 years, would account for about half of a $634 billion “reserve fund” that Mr. Obama will set aside in his budget to address changes in the health care system. The other half would come from proposed cost savings in Medicare, Medicaid and other health programs."

http://www.nytimes.com/2009/02/27/us/politics/27web-budget.html?hp

stevejhx
"I see we have two flat-taxers posting."

Wow, you HR drank the same mix. It is ok to state position but redirecting to a statement the was never made or a statement that is incorrectly interpreted is dumb. You put your post in the bin of irrelevancy by doing so.

I am not a flat taxer, I believe in progressive systems. Period. The Social Security Administration is a seperately funded Gov't organization with a single purpose that has been expanded to include a few other purposes, nothing more, nothing less. I think it should be closed and included in the general ledger of Income taxation and disbursements. However, that is not current policy. It currently is a seperate taxable entity and has nothing to do with the general fund. just because me, you and HR want to see it included doesn't make it so. It will take an act of congress. So, until then, it is not reasonable to include in the tax burden discussions.

"obama has something against people who choose to succeed. That is bad for this country."

I think that's the wrong way to look at it (the Republican misunderstanding of liberal views). Obama likely feels people should pay in a "fair" way, so that those who can shoulder the burden of larger amounts should pay more. If you make $10 million a year, really, quality of life isn't an issue even if you are taxed 70%. For someone making $25K a year, that's the difference between scraping by and being homeless. I'm sure he is all for success. Of course, there is a different view that whatever you make is yours and "fair" has nothing to do with it. That is an ideological divide. But conservatives too often misunderstand liberals, I believe, on points like this.

I am an Anti-Obama/democrat for one reason. Stop spending our hard earned dollars on useless crap such as illegal alien's health care/education, city run hospitals, providing access to McD with food stamps, providing free cell phones to welfare, etc, etc, etc. I once had this Russian couple walk in my office asking if we accept Medicaid Health insurance, and they proceeded to look to buy a property worth over a million.

"It currently is a seperate taxable entity and has nothing to do with the general fund."

Actually, social security purchases treasury bonds, so it is what finances the deficit (in part).

Your argument is flawed further: does it matter if I have a credit card or an HELOC or a mortgage, if I still owe the money? No. For me they are liabilities; how the bank counts them as assets is the bank's problem. Where the government spends the money is irrelevant to me; all that matters is that I'm paying it.

This is good. We're going to be "hit" by the mortgage interest rate deduction limitation, and it's just fine. We've paid millions in taxes - my beef is not progressive taxation but the horribly bureaucracy that wastes money. I'm a left-leaning realist who thinks that boarding schools should be the answer for some inner-city kids who need a break from their parents, that adolescent boys might be better served by learning trades instead of formal schooling after 11, food stamps should be spendable on groceries and not garbagey processed foods. As for illegal aliens' health care/education - I'm fine with free education for kids up to 18 and beyond if they can prove they paid taxes. Ditto with health care. And welfare cut off after the 1st two kids/mother, if the parents don't undergo sterilization.

"Where the government spends the money is irrelevant to me; all that matters is that I'm paying it."

So, Steve, you believe that you do not benefit from government spending? That's ridiculous.

"you believe that you do not benefit from government spending?"

Who said that? I said just the opposite. Not that the NYS/NYC governments can't be waaaaay more efficient, but of course I benefit from it.

Karl Marx quote is utter nonesense by the way. Quote is no where in Das Kapital or anything else. The truly frightening thing is that you all somehow believed that founder of a uniersally discredited political philosophy and econmic theory could ever have any bearing on unfolding events. Hysteria has taken over.

Steve,
You said it was irrelevant to you where the money was spent, all that mattered is that you were paying it. It sounded to me like you were saying that government spending did not benefit you in any way and was only a cost. Perhaps I misunderstood.

":Karl Marx quote is utter nonesense by the way. Quote is no where in Das Kapital or anything else. The truly frightening thing is that you all somehow believed that founder of a uniersally discredited political philosophy and econmic theory could ever have any bearing on unfolding events. Hysteria has taken over."

This quote is ALL over the internet (which doesn't mean it's real, of course):
http://davos.wsj.com/quote/0gwf1Ane4k5U0?q=Wen+Jiabao
http://news.scotsman.com/letters/Folly-of-relying-on-corporate.4864430.jp
etc

And, as far as I'm concerned, there is no coherent and meaningful economic theory anywhere, no more than there is one for human psychology. Chasing windmills in my opinion.

Agreed.

The quote is a fake. Sorry. Just on the face of it: "Owners of capital will stimulate the working class to buy more and more expensive goods, houses, and technology...."

How, when the whole thesis is that the owners of capital don't pay their workers enough money?

ba294 - Are you a doctor or a realtor? " I once had this Russian couple walk in my office asking if we accept Medicaid Health insurance, and they proceeded to look to buy a property worth over a million."

Bottom line is everyone keeps focusing on those that ear $25K per year and those that earn $25M...These anti capitalist changes that are being proposed are going to hurt those of us in the $400K - $1M bracket and that is a fact. And, by hurting this group the ramifications are going to trickle down to those earning $25K and that is a fact and if you cannot see it then keep voting for your leaders who have some perverse social ideology and an obvious agenda.

nba,
Doctor, my leased property is for sale.

you think it is a 'fact' that these changes are a. 'anti-capitalist' and b. will hurt people making 400k-1m per year? these so-called facts are highly debatable. if you consider your interest as only how much money you keep in your pocket over the sort-term then you may be right. if you consider your interest to be a healthy and vibrant society that enables you to live happily and peacefully, to make gobs of money over many years, and to provide your children with the same opportunity, then in fact i think it is clear that the policies the president is pursuing are going to help you.

as for this idea that it is 'anti-capitalist' to expand access to healthcare, what definition of capitalism are you using here? from where i sit, all the wealthy capitalist societies that have maintained their wealth and success over decades have widespread access to healthcare and to quality free education. the low-tax places--places like Nigeria, Russia, Bolivia, etc. do not have those things, and have not maintained stable prosperity. great britain, sweden, canada, japan, germany, and the united states are all high tax countries.

Thanks happyrenter, well said.

Japan and Europe have been declining for some time. Nice examples you used there, happyrenter!

The high tax places are going through some difficult times, there is no doubt about that, but they still provide a high standard of living, certainly compared to Nigeria, Russia, and Bolivia!

"Japan and Europe have been declining for some time. Nice examples you used there, happyrenter!"

By most measures, their societies are doing far better than ours. US is way down on health care and education, for example. Infrastructure also comes to mind as a place we are lagging. We are now falling several notches on innovation as well.

Once the country gets the taste of good living, it raises another bar and spending gets out of control. What we need is a balance. Countries like France, Greece, Italy, China/HK, S. Korea sets good example. Canada and US is the worst of all. Canada topping at over 50% income tax plus upto 19% in daily sales tax resulting in direct 69% tax of the income.

nba. I agree. The new national debt and changes in tax policies are going to break the backs of those earners in the 250k to 1 million range who have not inherited money to lean on. I have mentioned this in another post; many of these people are educating children, taking care of their own parents and are, at this point, enjoying homeownership, and maybe a vacation or two a year....nothing extravagant.
I believe that the inheritance tax should be nearly 100% if not 100%. Its better to tax the dead than the living working.
The divide between rich and poor is going to become much greater. So long to the upper middle class. Those like Happy Renter will be fine. . . lots of earnings, no dependents. Those high but not super high earners with obligations will be hurting.

Anyone who is somewhat reasonable will agree that we need to keep things in balance. However, at the rate we are going the 'balance' is being shifted in a way that peoples' motivations will be greatly affected and not for the good.

What the new administration is doing will hurt the $400k - $1M income crowd and I would have to say this is a fact rather then highly debatable. Moreover, this is not about how much I get to keep... This is about how much I can afford to invest and spend. And, what I invest and spend trickles down directly to make jobs for and pay for programs for everyone you are trying to 'save.' I am not trying to simply the problems that we have but let's get real and understand what we are doing!

" "Japan and Europe have been declining for some time. Nice examples you used there, happyrenter!"

By most measures, their societies are doing far better than ours. US is way down on health care and education, for example. Infrastructure also comes to mind as a place we are lagging. We are now falling several notches on innovation as well."

I almost spit up my drink when i read this as Japan cant get out of its own way (lost decade) and is in serious trouble once again while Eastern Europe is on the brink of anarchy

And we'll see how well Western Europe does of the next few months as like most other things, they are slow to act and the pain is only starting to hit them....

Funny cause we are waiting for ANY OF THEM to take the lead and lead us to a better place....there're answer..."its up to the USA to get us back to where we were"

Of course....

I can no longer contain myself...for the silly people on this board who want us to emulate high tax countries like France , Canada I would remind you that our great country was created after a few people got fed up with ridiculous tax hikes.

I wonder if Henry Ford, Alexander Graham Bell, Thomas Edison, Steve Jobs etc stood around waiting for the government to provide them with universal health care

PEOPLE WAKE UP...How many times are they going tax us for christsakes...Get a brain

let's see let me count the way I am taxed:

1) the corporation that pays me get taxed on my comp
2) then the federal and state and city tax the same exact comp
3) then when I buy smething I pay a sales tax on the same compenstion
4) if I invest that compensation and an extra dollar they tax that as interests/dividends
5) when i die and I try to give the money to the kids...they tax the money they already taxed 4 times another time...If I try to give it directly to my grandkids that is an additonal tax as well

they tax me so much...but yet the publc school system, transportation, medical system etc all still suck and they need even more of our money...where the hell is all the money they're already getting going to (they're taxing us 4-5 times on the same money for christ sake)

I recommend that some of you immediatley go to your public library and read a copy of ANIMAL FARM tout de suite. You have some fantasy that govt will help....THEY ONLY WANT TO CONTROL US...OUR HEALTH SYSTEM WILL STILL BE IN A SHAMBLES EVEN AFTER UNIVERSAL HEALTHCARE PASSES.

They will just keep raising your taxes and you'll be foolish enough to believe that more money will improve the system. WHAT A BUNCH OF SHEEPLE....We deserve everything that is going to happen

oh I forgot all those special real estate transaction taxes (milionaire tax etc) and there are people who actually think we aren't taxed enough.

maybe we need a breathing tax...because we're hogging all the oxygen unfairly we should get taxed on that as well

Great post, flmd! These silly liberals have no idea what they're talking about. We pay high taxes and get so little out of it. Meanwhile, the poor people are living off of our earnings, and Obama wants to reward them.

This guy is a buffoon. He's the next Jimmy Carter.

metalhead: thanks but its not a liberal vs. conservative rant... I think all the government clowns waste our money and this has to come to a stop..I am not a big fan of my tax dollars going to policing the world

I agree. I don't like the money we spent on the Iraq War.

But if McCain had won, he would at least veto these insane liberal tax hikes.

> "It's not meant to be taxed per income." That's ridiculous on its face, as it is a tax levied on income.

I'll rephrase. It's not meant to be taxed parallel to all income. Unless they plan to index benefits more closely to what you pay in, they'd better not tax amounts above 250k.

> Consumption taxes ARE highly regressive, another of my points. The poor save little; a much higher percentage of their income goes into paying sales taxes than for the wealthy. Just one more point to support my theory.

That may be technically true by calculation, but I don't feel the righteous horror. It's a meaningless calculation. Consumption taxes are based on consumption, not income. If they are regressive to income, then they are rightfully regressive ot income.

O.M.G.

I am DOOMED! How in the world will a $400,000-$1MM income earner like myself live now that I am set to lose 4% of my income deductions?

You are all idiots.

thank you 599. since when is 400k not an incredibly high income? this whining on the part of the rich is just beyond ridiculous.

as to this idea that high tax countries are falling behind...falling behind who? the united states, canada, britain, france, sweden, and japan are falling behind where exactly?

599GTB: If you think this post is about people worrying about losing a ridiculous bit of a deducution then you cant read...we're talking bigger issues here

"I recommend that some of you immediatley go to your public library and read a copy of ANIMAL FARM tout de suite"

After that they should move on to Atlas Shrugged and The Fountainhead.

"high taxes are possible because the country is wealthy, and they are what enable our country to be wealthy."

I almost fell out of my chair on that one. If this is what you crazy socialists really believe then we are in for some deep shit. If this is your thesis, why don't we just tax everyone at 100% and redistribute the wealth after that...

Again, how scary is that - we have people who actually believe wealth is created through taxes.

"You pick: England, or Bolivia."

How about Hong Kong or Singapore?

how about hong kong or singapore: one is an authoritarian dictatorship, the other is a part of a massive authoritarian dictatorship. you would really trade the rights and privileges of a united states citizenship in order to pay lower taxes in singapore?

be the way, hong kong became affluent as part of Great Britain--a classic high tax society.

jgr,
what the hell are you talking about? if you think taxes should be relatively low and i think they should be relatively high, does that mean you think taxes should be 0 and i think they should be 100%?

you think our society would be better off with no taxes--no military, no public education, no emergency management, no police forces, no fire departments? what do you think pays for that? but it just seems blatantly obvious that the world's high tax countries--canada, the united states, britain, sweden, etc. etc. also happen to be the affluent, safe, pleasant places to live. if high taxes were so damn awful, then how come the high tax societies do so well?

happyrenter:

I think you are incorrect in listing the US as a high tax country in comparison to other countries around the world...we may be headed there but we aren't there yet

also where are you getting your crazy causation...countries are great because they have high taxes is that what you're saying

no that's not what i am saying that countries are great solely because of high taxes, obviously that would be absurd. the situation is much more complicated. first, a certain level of affluence is necessary before taxes can be raised significantly. if people are living hand to mouth they just don't have much to spare in the form of taxes. indeed, in deeply impoverished countries the rate of tax evasion is extraordinarily high: if you have to choose between feeding your kids and paying your taxes, it is safe to say you will choose the former.

but it is also true that the things that allow a country to be affluent require high taxes: free public education, sanitation, vaccination programs, decent infrastructure (roads, airports, trains, dams), clean air and water, public safety, etc.etc.etc. do you really think our country would be better off without these things? well, we need relatively high taxes to pay for them.

the united states is and has for decades been a relatively high tax country. it is somewhat lower than some of the european countries and canada. but, interestingly, canada, sweden, and several of the other higher tax countries actually do better than the united states on most measures of social well-being. people live longer, they are happier, healthier, etc. so even among the high tax countries it seems that higher rates of taxes generally have a positive impact on a society.

hr, income tax is fair.
What about sales tax? I think that's where it begins to rot. A person's income should be taxed, but all and any transaction? Where is justification for that?

"people live longer, they are happier, healthier, etc. "

a lot of those 3 has to do with not being obese. hey, somebody wonders whether high productive people will prefer to live overseas to avoid the future tax burden? or shift more $ offshore?

"but it just seems blatantly obvious that the world's high tax countries--canada, the united states, britain, sweden, etc. etc. also happen to be the affluent, safe, pleasant places to live"

It's also blatantly obvious that low-tax places are tremendous places to live (Hong Kong, Singapore, Monaco). I'd take any of those three over Canada, Britain, and Sweden. Your correlation of taxes and wealth is bunk. Do you run your "hedge fund" with that math?

mbz "The real blow will come when a wealth tax is implemented. The problem with an increase in the marginal income tax rate is not so much that it hurts high earners but that is hurts those trying to get wealthy much more so than those already wealthy. I expect the younger generations to lead the charge in changing the debate towards a wealth tax. Why should those trying to get rich (within a system that is now broken) be penalized as much as those who spent several decades reaping the rewards of an illegitimate boom. I'm not saying I agree; but I do think the debate will shift in that direction at some point."

i can see that happening. the more "unfair" the distribution of wealth, on a democracy, the more voters are going to succeed voting for transfers to themselves making them permanent "entitlements". now, that will push more people towards hiding their wealth and working less if hiding it is not possible. it doesn't mean that tax revenues will actually go up.

i'm kind of concerned about the politicians not taking into account the disincentive to work that higher taxation brings with it. federal, state, city, property taxes, FICA, ... all of them set to rise, wonder whether they actually think that willingness to work hard will diminish.

admin & jgr : I would not worry too much...if Obama continues with the tax the rich rhetoric and actions he will be voted out of office, simple as that.

the american populace do not "hate" the rich, they want to become rich themselves...class warfare eventually blows up in the other parties face whether they be republican or democrat

flmd, right on target. americans admire success, don't despise it (as many in other countries). but still, income taxes had been above 77% for decades not so long ago even though they started on 1913 at 7% max rate. the maximum rate went up and down (but not that much down) like a rollercoaster. i would like to be able to pin point why and what to look for to anticipate them. somehow the implicit tax of high persistent inflation is likely IMHO.

1. Who actually lives in Monaco? I would gladly take high-tax places like France, Italy, UK, Switzerland any day over a dreadful homogeneous society Hong Kong or Singapore where your chance of being successful are very slim if you're not an Asian. The high tax societies i.e. Switzerland are always at the very top when it comes to quality of life.

2. The "rich" voted for Obama.

Voters >$250,000

Obama: 52%
McCain: 46%

"thank you 599. since when is 400k not an incredibly high income? this whining on the part of the rich is just beyond ridiculous."

happyrenter: Someone making $400, pays 50% of it in taxes, so they keep $200. IIs that rich beyond ridiculous. C'mon, happy, you're smarter than that.

correction: Is that rich beyond ridiculous?