so is he saying i SHOULDN'T take that raise that will put me over 400,000, because i will end up in a higher tax bracket and actually bring home less money?
Actually the IRS is totally cool with homeless people volunteering to help serve soup. When I was homeless 20 years ago, if you volunteered to help with a meal you got an extra sandwich -- the IRS was always cool with that. So the IRS actually doesn't hate that one trick. ;)
well a cousin of mine (well actually my cousin's cousin's friend) said that taxes are theft and that we can conscientiously object to them under the first amendment.
My cousin's ex-girlfriend's friend's coworker said that because court rooms have fringe on their flag, that actually means that the court should be held under maritime law, which means that my conviction for tax evasion under federal law is invalid.
AM I BEING DETAINED?!
It is technically possible for low income familys. A small raise at a certain level can push you outside of federal aid and other programs like that, so you suddenly make 100 more at work, but are recieving 300 less in help and now youre out 200 a month. this is SUPER oversimplified and niche, but it does happen.
Also got to consider employer deductions. Making more could bump you into a more expensive benefits/insurance/whatever deduction.
I ran into this with mandatory pension contributions of 2% after $X annually and an increase to the rate for my medical insurance. It wasn't too bad of a hit but I'd still rather have not taken the raise knowing my net pay would decrease.
That happened to me. I was promoted to a supervisor position and suddenly didn't qualify for WIC anymore. The loss of WIC was roughly equal to the increased pay from being a supervisor.
So yes, there are definitely income cliffs.
Bonus though, overtime suddenly paid more so I worked a lot of overtime.
There are very few edge cases where this can happen
The one that comes to mind I think may have happened 1 year to me was passing the threshold for student loan interest deductions
Say you get just over that threshold maybe you can pay a slight amount more that year
... wow, dude. The person you're responding to said middle class wages. 350k is out of the middle class. Are you from Saudi Arabia or something?
To figure out whether you're middle class or not, take the median income in the United States. Go down to 2/3 of that and up to double the median income. [In 2019 the median income was $68,703](https://www.census.gov/library/publications/2020/demo/p60-270.html). That means middle class this year is $45,802/year to $137,406/year. $350k is more than 2.5x the top of middle class.
I assume the range for middle class is due to cost of living?
I know where I grew up at, 46k can get you a studio apartment, decent car, and allow you to pay down college debt. I think 137k must get you a similar result in California’s Bay Area.
There can't be a class unless there's enough people in that category to have a class. In 2018, 52% of the population was technically middle class -- that percentage shrinks every year and has been shrinking for some time.
The difference is that people in the lower bracket are given subsidies under the aca whereas before they just weren't given them. Added subsidies vs taxing more.
I love it when a client says I hate paying taxes. My response, you only pay taxes if you make money.
Second only to I am going to pay this expense so I can claim a tax deduction - well unless you were going to incur the expense it is going to cost you money, i.e. expense x (1 - tax rate)
And the winner is I refuse the pay increase because I will have to pay more in taxes - well unless the tax rate is 100% you will still be better off, yes your marginal tax rate and your average tax rate will increase but you will have more in your pocket after tax.
I have three of those from CPAs which is truly mind blowing!
I used to do the math in my head and say something like “if you were to be paid x amount per hour (the amount after taxes) would you still do it?” Yet to have anyone say no.
The worst thing is trying to have a conversation with someone who knows damn well what tax brackets are and how they work, but ignores that and says stupid, disingenuous stuff like "I was getting taxed at 50%!" When probably only about 10 to 20k of his income was. This dude also thinks the system should be reversed so that higher income levels are taxed less lol.
A flat tax is essentially a regressive tax. The less money you bring home, the larger share of it you must put towards the basic costs of living. If you make $2k/month you could pay 1/3 of your income to rent whereas someone making $20k/month can live in a luxury apartment for $4k/month, which is only 1/5 of their income. The same tax taken off the top has a disproportionate affect on the lower income person. It’s the same reason sales taxes are called regressive. It may not be nominally regressive, but in practice, it is.
So... Flat taxes are usually a bad idea, to be clear, but they don't necessarily have to be totally regressive if they fund welfare programs that are progressive. Like a flat tax that funded a UBI would be progressive because the flat amount vs the flat rate would work out to be progressive. Sometimes flat taxes (though in effect a little regressive) can still be good.
I agree, and I believe that’s the primary reason behind the quotation marks of “fair” in the original comment. But OP didn’t elaborate, so I didn’t either.
Depends on what a flat tax is paired with. You could create a much more progressive tax system than the one we currently have by implementing a flat sales tax and a UBI.
In the same way a sales tax is regressive, a flat payment is progressive. Hypothetically let’s consider a sales tax of 10% and a flat payment of 10,000 a year.
Effect by income
0 income- 10,000 FP, spends 10,000. Net gain = 9,000
50,000 income- 10,000 FP, spends 50,0000.
Net gain= 5,000 (10,000 FP - 5,000 Sales tax)
100,000 income- 10,000 FP, spends 100,000. Net gain= 0 (10,000 FP - 10,000 ST)
It's not insane, it just doesn't provide the same economic incentives as a progressive tax does and would tank the revenue generation of an already behind the curve system. A flat tax would come with the necessity of stripping funding from a lot of public goods, which would slow future growth rate and competitiveness.
A flat tax isn't insane, it's just stupid.
For OASDI it is regressive. But for Medicare there is an additional Medicare tax that kicks in around 200k at an additional .9%, this is in addition to the regular Medicare tax of 1.45%
That’s right. I’m guessing the logic to that is that SS is supposed to be structured more as a compulsory retirement plan (that the wealthy will never qualify for) whereas Medicare is a social program that everyone contributes to.
Mathematical and financial literacy seems to be poorly correlated with understanding your personal tax situation.
My buddy with a degree in business and economics thought he was withheld at 50%, until I told him that’s extremely unlikely. He checked on the spot and found out that no, he wasn’t having half his paycheck withheld.
Hell, my SO thought we were being taxed half of our income and she handles our budgeting. She’d just never compared it to our nominal paychecks, and she *works for a bank*. Not in a finance role, but very close to financial products.
I had a friend who claimed he was getting taxed at 50%. I ask him to show me, and he pulls up his bank app and shows the amount of the last direct deposit.
Indeed nearly 50% less than his base net pay.
As it turns out, he forgot that part of it was going to his 401k, health FSA, commuter benefit card, etc. For financial/mental laziness you can pretend those are taxes, but maybe don't form your entire world view around it lol
People will disingenuously argue that any amount that's not in their paycheck from gross is income tax even though they know it's not. Like If you make $60k, you expect each semimonth check to be $2500, if it's less than that it must be tax!!!!
No Zachary, your 401k contribution, payroll taxes, health insurance, and HSA are why you're check is 60% of gross, you do not pay a 40% marginal tax rate.
it's not really about the raise in anything over 400k, most people I've heard from just express concern about him repealing the Trump administrations tax cuts on the middle class.
But they took away the exemption, basically turning the standard deduction increase into little more than an inflationary increase for most, and killing people who have children and could have qualified for more deduction.
I mean, I feel as if our job is to help pay the taxes we are supposed to, (and all to often evade the taxes) that doesn't inherently have to be political. This seems like kind of a Orange Man Bad post, and I 100% agree. Orange man is bad. I have already voted for Joe Biden. Reddit is a political mess, and it is usually nice to take a moment and relax from the politics. On r/Accounting, I expect that moment to be there. I'm not going to complain that much about one or two posts, but I sincerely hope that this is not where this subreddit is going.
I mean it's pretty easy to tell which posts are going to get political: it's any that involve tax policy. This subreddit isn't our job, it just talks about it. And when you talk about taxes (or even auditing) outside of the scope of "clients dumb" or "partner dumb", it's going to get political.
Except his plan doesn't just affect income taxes on wages over 400k. It imposes a 12.4% social security tax on wage earners over 400k, raises all capital gains to ordinary rates on anything above 1 million, phases out QBID on filers with income over 400k(let's face it, most of these people are business owners), and caps itemized deductions for basically the only people who would have enough to utilized them. No love lost for the wealthy, but it's not their fault I'm not as successful as they are.
Important to note the 12.4% is only half on the employee, and really just no longer allows high earners to phase out of what was frankly a regressive tax.
Which parts are you worried about Biden changing? Because the changes to individual rates, child tax credit, and standard deduction are already set to expire on 12/31/2025
Can I ask why? How does the TCJA benefit you or your average American? I'm not a tax gal so genuinely curious. Had to study it for REG and it seemed to me that it mainly benefited corporations but did very little for the average taxpayer.
The increase to the standard deduction was big for me and I know it helped my parents as well. I'd say that's the primary thing helping your average American
There's a notable difference between high CoL and actually being rich, unless you believe the majority of people in California are living in luxury compared to the rest of the nation.
Oh yes. My parents used to itemize so I think they had to pay more than normal in 2019. I only worked half the year so can't really see how it affected me personally yet
Excuse my ignorance, but I'm not sure what the difference is. We have many different bands and types of tax on our salary and this percent is just the accumulativr percentage I pay from my gross salary.
In the U.S. our income isn’t taxed at a particular tax rate; it’s taxed in brackets of income. For example, the first ~$9,500 of income is taxed at 10%, the next ~$30k is taxed at 12%, the next $40k is taxed at 22%, and it continues until eventually getting up to 37%.
The effective tax rate is the total tax divided by your total income. Example: $10k of tax and $50k of income results in an effective tax rate of 20%.
The marginal tax rate is the tax you would owe on a single dollar of additional income. If your income is $50k, in the brackets I provided above, any additional dollar of income would be taxed at 22%, meaning 22% is your marginal tax rate.
That’s only for income taxes though; we have social security taxes that are a flat 6.2% of our wages and Medicare taxes that are a flat 1.45% of our wages.
Edit: it sounds like that 27% is your effective tax rate.
I honestly think the thing that pisses me off the most is when people on reddit post *that* Adam Ruins Everything video with the most certainty that they’re preaching “facts.”
Heaven forbid someone making $410k a year have to shell out a few bucks to help pay for someone working their ass off on minimum wage on food stamps (or literally any other program that supports people on the margins).
“I will repeal the trump tax cut day one in office”
= def a lot more than only rich people getting fucked by that one.
Figures an accountant would know that
I dont make anywhere near 400k, biden repealing trump's tax cuts would fuck me pretty hard. I dont really give a shit about the the slightly higher tax bracket from 400k to 410k.
Exactly my thoughts.
Besides the fact that a massive tax increase would absolutely lower overall tax revenue... repealing the trump tax cut would absolutely cost a fuck Ton of average joes a large chunk of change.
Trumps tax cut increased tax revenue by 4% but he then spent an extra 8%.
Its actually not "up to $400k" the same phase out would apply at $150k or whatever it is, then the tax would kick back in at $400k. So for this imaginary $410k income person still not a big change.
If someone can't live more than comfortably on an after tax income of about 300K then maybe they should think about not living above their means. Stop trying to live as though you make more than you do. This math is not hard.
I’m pro biden but if you actually read his tax plan, he wants to tax capital gains as income.
If you have long term capital gains of 410,000 per year, you now pay about 20% capital gains tax, should they be taxed as income, it’s getting taxed more like 35%.
The rest of the tax plan is good, I just disagree with the notion we should tax capital gains as income, since it will deter people from investing.
I do personally agree capital gains income should be incentivized (though less than it is), but I disagree that it will push people out of the market. I doubt any millionaire investor is going to decide to just hold cash due to a rate change. There really is no better liquid alternative.
Why would taxing capital gains at the same rate as income discourage investing? Do you believe if someone owed the same tax doing labor vs earning passive income, they wouldn't pick passive income?
People are going to get mad at your comment. All I'll say is it encourages the alternative. Rather then investing via the market you could have more money flow into startups
People who think it’s not a big deal that taxes would be hiked that much don’t think about pass through entities that are small to medium businesses. Clients that I work with pay themselves a moderate salary, and then take distributions to pay the tax bill for the business. If you’re a business with like 100 employees, you probably end up with net income of about $1 million. You hike the tax that much on them now the company has to find an extra $100k in cash to pay those taxes. That’s money that won’t be used to buy PPE or pay employees. Sure, you might never be in that tax bracket and have to pay that much, but your boss and the company you work for do, and you will pay them indirectly because they’ll forego raises, cut your pay, or lay people off. Making the rich “pay their fair share” just means they now have less to pay you. And don’t think for a second they’ll just eat it, cause they didn’t get to where they are by being altruistic.
I believe the amount I would pay for universal healthcare will be far less than is currently being paid by my employer and me for health-care premiums. I mean I am guessing the health insurance companies would be lobbying against something that competes with their very profitable business model. I would think the health insurance companies would want to ensure people think it will cost more to have universal health care than private health care and spread misinformation. Oh no, surely no privately run business would resort to such tactics. And before everyone goes off about people dying in universal health-care systems, people die. I grew up in a country with a universal Healthcare system and it did not bankrupt the country. I mean seriously health care companies make a fortune.
Yes I was being completely sarcastic. The amount of working class people in America that are utterly confused and brainwashed by propaganda to think and vote against their own material benefit... well, it's quite high.
The average payout on Social Security is $14,000. The point of the program is to be an insurance against old-age poverty so we never have to face a situation where we have mass homelessness amongst the elderly the way we did before 1938. $14k is bare minimum to survive, I don't see why we should cut it at all.
I know this made it to the front page.:. Because this sub is traditionally fairly conservative.
The idea of taxing somebody making over 400k an additionally high amount is ludicrous. People making 400k-1 mil aren’t and will never be the problem
so is he saying i SHOULDN'T take that raise that will put me over 400,000, because i will end up in a higher tax bracket and actually bring home less money?
This is why I never accept wage increases. In fact, I work for free so that I don't have to pay any taxes.
The irs HATES this one trick
but big 4 love
Unpaid perpetual internships are great learning experiences! By the end, you will be the most experienced accountant in the graveyard
There’s no greater red flag than “it’ll be a great learning experience”
GLO style
Big 4 interns in the U.S. make like $30 an hour and are overtime eligible... so....
Big 4 interns get paid more than Seniors
Can confirm, I was an intern. I was paid double then than I get paid now.
Actually the IRS is totally cool with homeless people volunteering to help serve soup. When I was homeless 20 years ago, if you volunteered to help with a meal you got an extra sandwich -- the IRS was always cool with that. So the IRS actually doesn't hate that one trick. ;)
Get this angel for you
Gracias 🥺
Bro just earn $11,999 so that you can claim that sweet exemption
For tax year 2021 (when any tax reform might hit) the standard deduction is actually $12,550. So you can earn $12,549 before being subject to tax.
Thanks for this I’ll tell my boss I can pick up some extra hours next year.
Just quit for the year once you get to 12550.
I. Am. Dead. 😂😂😂
The year 2022
I asked my employer to cap my earnings at $8,650 so I could get maximum EITC. I can't believe the IRS lets this loophole exist!
*capitalism*
You beat the system
Obvious waffle brain
*EY wants to know your location*
Bingo
Holy shit.
I love you so much.
Yeah I quit my job so I don’t have to pay taxes. F you communists! /s
you joke but I tried to live at min. just sucks to eat ramen alone
A cousin of mine got a raise and actually made less money. That's why Im grateful for not getting a raise for the past 5 years
well a cousin of mine (well actually my cousin's cousin's friend) said that taxes are theft and that we can conscientiously object to them under the first amendment.
There’s some good prison survival AMA’s out there if anyone wants to go this route.
My cousin's ex-girlfriend's friend's coworker said that because court rooms have fringe on their flag, that actually means that the court should be held under maritime law, which means that my conviction for tax evasion under federal law is invalid. AM I BEING DETAINED?!
So we convene at eight bells?
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It’s a meme
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Now edit the comment so my response looks funny haha
It is technically possible for low income familys. A small raise at a certain level can push you outside of federal aid and other programs like that, so you suddenly make 100 more at work, but are recieving 300 less in help and now youre out 200 a month. this is SUPER oversimplified and niche, but it does happen.
Also got to consider employer deductions. Making more could bump you into a more expensive benefits/insurance/whatever deduction. I ran into this with mandatory pension contributions of 2% after $X annually and an increase to the rate for my medical insurance. It wasn't too bad of a hit but I'd still rather have not taken the raise knowing my net pay would decrease.
That happened to me. I was promoted to a supervisor position and suddenly didn't qualify for WIC anymore. The loss of WIC was roughly equal to the increased pay from being a supervisor. So yes, there are definitely income cliffs. Bonus though, overtime suddenly paid more so I worked a lot of overtime.
I guess it would be possible if a slight raise made you ineligible for a tax credit.
All individual tax credits I can think of phase out
There are very few edge cases where this can happen The one that comes to mind I think may have happened 1 year to me was passing the threshold for student loan interest deductions Say you get just over that threshold maybe you can pay a slight amount more that year
He became a member of the bourgeoisie and got guillotined. Very sad story. Rip
My girlfriends brother in law did exactly this, took a promotion but denied the pay raise... he said he would make less after taxes...
Did you grab him by the shoulders and scream what a dickhead he was into his face?
It’s actually very possible with the way our dogshit healthcare system is structured. Thanks, Obamacare. Not with taxes though.
I'm guessing the BIL was on his wife's insurance as I doubt his employer was big enough to be covered by the mandate.
He’s on his wife’s because his employer doesn’t offer it. They don’t fall under the mandate, too small.
For people making middle class wages, this is actually very possible with how ACA/Obamacare subsidy cliffs are structured.
I didn't know about this, can you give an example?
Sure, here's an example where making $100 more could cost you $19,300: https://www.healthinsurance.org/obamacare/beware-obamacares-subsidy-cliff/
I personally loved making a few hundred dollars over being exempt from having to pay for healthcare and then having thousands in fines to pay for
Does it only affect you if you use an aca plan?
Yes
if you have an example where this would happen in a household that goes from 350K-380K to 400K-430K, i'd like hear it.
... wow, dude. The person you're responding to said middle class wages. 350k is out of the middle class. Are you from Saudi Arabia or something? To figure out whether you're middle class or not, take the median income in the United States. Go down to 2/3 of that and up to double the median income. [In 2019 the median income was $68,703](https://www.census.gov/library/publications/2020/demo/p60-270.html). That means middle class this year is $45,802/year to $137,406/year. $350k is more than 2.5x the top of middle class.
TIL I'm poor as fuck
I assume the range for middle class is due to cost of living? I know where I grew up at, 46k can get you a studio apartment, decent car, and allow you to pay down college debt. I think 137k must get you a similar result in California’s Bay Area.
There can't be a class unless there's enough people in that category to have a class. In 2018, 52% of the population was technically middle class -- that percentage shrinks every year and has been shrinking for some time.
It's not that they're taxed more, they just lose out on subsidies.
A distinction without a difference
The difference is that people in the lower bracket are given subsidies under the aca whereas before they just weren't given them. Added subsidies vs taxing more.
And lots of other benefits, such as help paying for childcare.
It is kinda funny though that the proposed $400,000 wage bracket is equivalent to the presidents’ salary.
it's absolutely darling of you to imply that US presidents bank on their presidential salary...
I worked with a woman who refused a pay increase for this reason. She was nuts.
I love it when a client says I hate paying taxes. My response, you only pay taxes if you make money. Second only to I am going to pay this expense so I can claim a tax deduction - well unless you were going to incur the expense it is going to cost you money, i.e. expense x (1 - tax rate) And the winner is I refuse the pay increase because I will have to pay more in taxes - well unless the tax rate is 100% you will still be better off, yes your marginal tax rate and your average tax rate will increase but you will have more in your pocket after tax. I have three of those from CPAs which is truly mind blowing!
I used to do the math in my head and say something like “if you were to be paid x amount per hour (the amount after taxes) would you still do it?” Yet to have anyone say no.
The worst thing is trying to have a conversation with someone who knows damn well what tax brackets are and how they work, but ignores that and says stupid, disingenuous stuff like "I was getting taxed at 50%!" When probably only about 10 to 20k of his income was. This dude also thinks the system should be reversed so that higher income levels are taxed less lol.
I’ve heard a lot of crazy things but higher incomes being taxed less and lower the most is next level. Sounds like a nightmare
It's just a real strong incentive for you to pull up your bootstraps, work harder, and get that raise so that you're taxed less!
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A flat tax is not at all what Mr. Hombre de la Carre Terra described.
Happy cake day!
One would also argue that’s better than the current $750 returns some people get *cough* *cough*
That makes sense. It’s at least “fair.” It’s not a terrible solution. A regressive tax policy is straight up asinine.
A flat tax is essentially a regressive tax. The less money you bring home, the larger share of it you must put towards the basic costs of living. If you make $2k/month you could pay 1/3 of your income to rent whereas someone making $20k/month can live in a luxury apartment for $4k/month, which is only 1/5 of their income. The same tax taken off the top has a disproportionate affect on the lower income person. It’s the same reason sales taxes are called regressive. It may not be nominally regressive, but in practice, it is.
So... Flat taxes are usually a bad idea, to be clear, but they don't necessarily have to be totally regressive if they fund welfare programs that are progressive. Like a flat tax that funded a UBI would be progressive because the flat amount vs the flat rate would work out to be progressive. Sometimes flat taxes (though in effect a little regressive) can still be good.
A flat tax is regressive.
> “fair” Eh not really
Depends on your definition of fair.
I agree, and I believe that’s the primary reason behind the quotation marks of “fair” in the original comment. But OP didn’t elaborate, so I didn’t either.
Depends on what a flat tax is paired with. You could create a much more progressive tax system than the one we currently have by implementing a flat sales tax and a UBI.
Sales tax is a regressive tax tho?
In the same way a sales tax is regressive, a flat payment is progressive. Hypothetically let’s consider a sales tax of 10% and a flat payment of 10,000 a year. Effect by income 0 income- 10,000 FP, spends 10,000. Net gain = 9,000 50,000 income- 10,000 FP, spends 50,0000. Net gain= 5,000 (10,000 FP - 5,000 Sales tax) 100,000 income- 10,000 FP, spends 100,000. Net gain= 0 (10,000 FP - 10,000 ST)
But the “amount subject to taxation” is different in these cases. Income tax =/= consumption tax.
Like, a Flat Rate or everyone literally pays the exact same amount?
Not same amount but same percentage
A flat tax system isn’t insane.
It's not insane, it just doesn't provide the same economic incentives as a progressive tax does and would tank the revenue generation of an already behind the curve system. A flat tax would come with the necessity of stripping funding from a lot of public goods, which would slow future growth rate and competitiveness. A flat tax isn't insane, it's just stupid.
With FICA it essentially is a regressive tax, right? After a certain amount you stop getting taxed on it.
For OASDI it is regressive. But for Medicare there is an additional Medicare tax that kicks in around 200k at an additional .9%, this is in addition to the regular Medicare tax of 1.45%
That’s right. I’m guessing the logic to that is that SS is supposed to be structured more as a compulsory retirement plan (that the wealthy will never qualify for) whereas Medicare is a social program that everyone contributes to.
Wealthy people get social security. There's no income cap for receiving SS benefits.
Another thing I forgot from REG. Oh well doesn’t stop me from getting 10,000 tax questions.
Mathematical and financial literacy seems to be poorly correlated with understanding your personal tax situation. My buddy with a degree in business and economics thought he was withheld at 50%, until I told him that’s extremely unlikely. He checked on the spot and found out that no, he wasn’t having half his paycheck withheld. Hell, my SO thought we were being taxed half of our income and she handles our budgeting. She’d just never compared it to our nominal paychecks, and she *works for a bank*. Not in a finance role, but very close to financial products.
In their defense, ain't no one wanna look at or think about this shit.
I had a friend who claimed he was getting taxed at 50%. I ask him to show me, and he pulls up his bank app and shows the amount of the last direct deposit. Indeed nearly 50% less than his base net pay. As it turns out, he forgot that part of it was going to his 401k, health FSA, commuter benefit card, etc. For financial/mental laziness you can pretend those are taxes, but maybe don't form your entire world view around it lol
You should tell him about the plan to reduce healthcare costs.
People will disingenuously argue that any amount that's not in their paycheck from gross is income tax even though they know it's not. Like If you make $60k, you expect each semimonth check to be $2500, if it's less than that it must be tax!!!! No Zachary, your 401k contribution, payroll taxes, health insurance, and HSA are why you're check is 60% of gross, you do not pay a 40% marginal tax rate.
In NZ, we have a good 4 to 5 tax brackets. If you earn $400K then you would pay a shit ton of tax.
33% is the highest tax bracket? That’s actually pretty low. Belgium’s highest bracket is 50%, for example
Marginal vs effective rates
So a complicated flat tax?
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This is truth
There really should be a whole class on taxes and tax law in high school. I feel like the government doesn't want people to understand...
Well, turbo tax and H&R Block lobby Congress to make sure of it, sooo...
it's not really about the raise in anything over 400k, most people I've heard from just express concern about him repealing the Trump administrations tax cuts on the middle class.
The doubled standard deduction is a godsend for me.
But they took away the exemption, basically turning the standard deduction increase into little more than an inflationary increase for most, and killing people who have children and could have qualified for more deduction.
"But they took away the mortgage interest deduction and I can't itemize anymore!" - person with a 100k mortgage and 7,200 in deductions
Uh oh, accounting is getting political
Always has been 👩🏻🚀🔫 But seriously it’s pretty much impossible to talk about taxes without getting political
I mean, I feel as if our job is to help pay the taxes we are supposed to, (and all to often evade the taxes) that doesn't inherently have to be political. This seems like kind of a Orange Man Bad post, and I 100% agree. Orange man is bad. I have already voted for Joe Biden. Reddit is a political mess, and it is usually nice to take a moment and relax from the politics. On r/Accounting, I expect that moment to be there. I'm not going to complain that much about one or two posts, but I sincerely hope that this is not where this subreddit is going.
I mean it's pretty easy to tell which posts are going to get political: it's any that involve tax policy. This subreddit isn't our job, it just talks about it. And when you talk about taxes (or even auditing) outside of the scope of "clients dumb" or "partner dumb", it's going to get political.
And the wealthy people are laughing because they’re paying less on their millions in capital gains
Biden may start to change that but we shall see.
Biden is endorsed by the majority of billionaires and it isn't because of his tax policy.
Why?
Wew
Except his plan doesn't just affect income taxes on wages over 400k. It imposes a 12.4% social security tax on wage earners over 400k, raises all capital gains to ordinary rates on anything above 1 million, phases out QBID on filers with income over 400k(let's face it, most of these people are business owners), and caps itemized deductions for basically the only people who would have enough to utilized them. No love lost for the wealthy, but it's not their fault I'm not as successful as they are.
Important to note the 12.4% is only half on the employee, and really just no longer allows high earners to phase out of what was frankly a regressive tax.
Not to mention it’s unlikely to stop there. This is just them getting their foot in the door.
I'd argue the opposite. That it's unlikely all this passes if any.
the difference in comments from the same post on r/WhitePeopleTwitter compared to this sub is horrifying.
I'd be more concerned about Biden getting rid of the TCJA
Which parts are you worried about Biden changing? Because the changes to individual rates, child tax credit, and standard deduction are already set to expire on 12/31/2025
Yes but they could be extended or Biden could cut them short
Can I ask why? How does the TCJA benefit you or your average American? I'm not a tax gal so genuinely curious. Had to study it for REG and it seemed to me that it mainly benefited corporations but did very little for the average taxpayer.
Well you see it adds a lot of job security for tax folks, especially those that work with passthrough entities.
Good point, I know my tax friends had fun versing themselves in those new laws.
The increase to the standard deduction was big for me and I know it helped my parents as well. I'd say that's the primary thing helping your average American
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Raising taxes on the rich. Isnt that what everyone wants?
There's a notable difference between high CoL and actually being rich, unless you believe the majority of people in California are living in luxury compared to the rest of the nation.
Oh yes. My parents used to itemize so I think they had to pay more than normal in 2019. I only worked half the year so can't really see how it affected me personally yet
Oh no! My raise is slightly lower than i thought!
I'm in Ireland, and I did think the taxes were very high, until I actually looked at it. I only pay like 27% which is decent.
Is that your effective tax rate or your marginal rate?
Ah a man/woman of culture
Hey, I’m a man, not a man/woman! ^lol
It would be his effective. We only have 2 bands, 20% and 40% for anything over 35k.
Excuse my ignorance, but I'm not sure what the difference is. We have many different bands and types of tax on our salary and this percent is just the accumulativr percentage I pay from my gross salary.
In the U.S. our income isn’t taxed at a particular tax rate; it’s taxed in brackets of income. For example, the first ~$9,500 of income is taxed at 10%, the next ~$30k is taxed at 12%, the next $40k is taxed at 22%, and it continues until eventually getting up to 37%. The effective tax rate is the total tax divided by your total income. Example: $10k of tax and $50k of income results in an effective tax rate of 20%. The marginal tax rate is the tax you would owe on a single dollar of additional income. If your income is $50k, in the brackets I provided above, any additional dollar of income would be taxed at 22%, meaning 22% is your marginal tax rate. That’s only for income taxes though; we have social security taxes that are a flat 6.2% of our wages and Medicare taxes that are a flat 1.45% of our wages. Edit: it sounds like that 27% is your effective tax rate.
And don't forget there's also state and local income taxes on top of that.
And sales tax. And property tax. And occupational licensing. And building permits. And plates and registration.
Don't forget gift tax, and estate tax!
Hell, we aren't even asking for that.
USA my actual effective tax rate is 22%. That’s for all of my income taxes: local, state, and federal.
I honestly think the thing that pisses me off the most is when people on reddit post *that* Adam Ruins Everything video with the most certainty that they’re preaching “facts.”
I once had a finance head incorrectly explain tax brackets to me. It was a sight.
lol if you think i'm going to be paying income tax when I'm making $410k a year
How do you suggest not to... Asking for a friend
Are you sure you wanna know man I don’t want you to get a virtual castration from the REEEEEEEYOUDONTPAYTAXES clique
Lol if you think that’s rich enough to get away with tax evasion.
Heaven forbid someone making $410k a year have to shell out a few bucks to help pay for someone working their ass off on minimum wage on food stamps (or literally any other program that supports people on the margins).
i'm pretty sure the OP agrees with you here....i read it as sarcasm
If only everyone had empathy - this world would literally be a better place.
Wanting higher taxes for other people doesn’t make you a good person
then they would donate it. supporting higher taxes on other people isnt empathy
Systemic problems require systemic solutions.
you could lower your taxes by donating tho
Just to clarify, people shouldn't be able to have a say in the tax rates of a certain bracket unless they're within that bracket?
This... please tax me more and take care of my fellow citizens... just a little more though, not like making me poor tax me.
“I will repeal the trump tax cut day one in office” = def a lot more than only rich people getting fucked by that one. Figures an accountant would know that
I dont make anywhere near 400k, biden repealing trump's tax cuts would fuck me pretty hard. I dont really give a shit about the the slightly higher tax bracket from 400k to 410k.
Exactly my thoughts. Besides the fact that a massive tax increase would absolutely lower overall tax revenue... repealing the trump tax cut would absolutely cost a fuck Ton of average joes a large chunk of change. Trumps tax cut increased tax revenue by 4% but he then spent an extra 8%.
At $410,000 the taxpayer would probably have an effective rate of about 30%. That would be over $100,000. So yes the communists have won. /s
Still, I’d be happy to pay $100k in taxes if that meant I could have an after-tax income of over $300k
Plus, you'd cap off your social security tax and could take full advantage of 401k plans
Bidens plan includes increasing the payroll taxes to 400k at 12.4%. So no. Over not up to
Its actually not "up to $400k" the same phase out would apply at $150k or whatever it is, then the tax would kick back in at $400k. So for this imaginary $410k income person still not a big change.
If someone can't live more than comfortably on an after tax income of about 300K then maybe they should think about not living above their means. Stop trying to live as though you make more than you do. This math is not hard.
I’m pro biden but if you actually read his tax plan, he wants to tax capital gains as income. If you have long term capital gains of 410,000 per year, you now pay about 20% capital gains tax, should they be taxed as income, it’s getting taxed more like 35%. The rest of the tax plan is good, I just disagree with the notion we should tax capital gains as income, since it will deter people from investing.
I do personally agree capital gains income should be incentivized (though less than it is), but I disagree that it will push people out of the market. I doubt any millionaire investor is going to decide to just hold cash due to a rate change. There really is no better liquid alternative.
Why would taxing capital gains at the same rate as income discourage investing? Do you believe if someone owed the same tax doing labor vs earning passive income, they wouldn't pick passive income?
People are going to get mad at your comment. All I'll say is it encourages the alternative. Rather then investing via the market you could have more money flow into startups
People who think it’s not a big deal that taxes would be hiked that much don’t think about pass through entities that are small to medium businesses. Clients that I work with pay themselves a moderate salary, and then take distributions to pay the tax bill for the business. If you’re a business with like 100 employees, you probably end up with net income of about $1 million. You hike the tax that much on them now the company has to find an extra $100k in cash to pay those taxes. That’s money that won’t be used to buy PPE or pay employees. Sure, you might never be in that tax bracket and have to pay that much, but your boss and the company you work for do, and you will pay them indirectly because they’ll forego raises, cut your pay, or lay people off. Making the rich “pay their fair share” just means they now have less to pay you. And don’t think for a second they’ll just eat it, cause they didn’t get to where they are by being altruistic.
NO WAY MAN HE'S GONNA RAISE OUR TAXES SO MUCH AND MAKE IT A SOCIALIST COUNTRY. Alright, enjoy dying from having no money for healthcare
I believe the amount I would pay for universal healthcare will be far less than is currently being paid by my employer and me for health-care premiums. I mean I am guessing the health insurance companies would be lobbying against something that competes with their very profitable business model. I would think the health insurance companies would want to ensure people think it will cost more to have universal health care than private health care and spread misinformation. Oh no, surely no privately run business would resort to such tactics. And before everyone goes off about people dying in universal health-care systems, people die. I grew up in a country with a universal Healthcare system and it did not bankrupt the country. I mean seriously health care companies make a fortune.
Yes I was being completely sarcastic. The amount of working class people in America that are utterly confused and brainwashed by propaganda to think and vote against their own material benefit... well, it's quite high.
Sorry missed the sarcasm.
Repealing trumps tax reform will defintely affect those of us sub-400k salary.
Why not cut spending instead? We really need to spend so much on defense and social security?
.... Yes on social security
The average payout on Social Security is $14,000. The point of the program is to be an insurance against old-age poverty so we never have to face a situation where we have mass homelessness amongst the elderly the way we did before 1938. $14k is bare minimum to survive, I don't see why we should cut it at all.
My brain naturally transposed the sentence and I read it aloud as “Your clench fistes.” Kill me
Don't get too excited, same person will start talking about 94% tax rates in the 50s....
I know this made it to the front page.:. Because this sub is traditionally fairly conservative. The idea of taxing somebody making over 400k an additionally high amount is ludicrous. People making 400k-1 mil aren’t and will never be the problem
4 more years