[RickFLM4]

Originally Posted by smrtypants44

Taxes don't work that way. Only the portion you make in each bracket is taxed.

Sure they do. The more you make the more you pay on each extra dollar you make because tax rates go up as you move up in brackets.

[MKSixer]

AMT.

[smrtypants44]

Originally Posted by RickFLM4

Sure they do. The more you make the more you pay on each extra dollar you make because tax rates go up as you move up in brackets.

But you are still making more money? I'm not sure how it makes people want to work less?

[RickFLM4]

Originally Posted by smrtypants44

But you are still making more money? I'm not sure how it makes people want to work less?

1. It was literally suggested by someone a few posts back.

2. At some point making less of each extra dollar isn't worth it. Would it be worth it to make that extra dollar if you were taxed 99% on it? Of course not. Everyone has a point where making a smaller % of each incremental dollar isn't worth it.

Making more and keeping less of the incremental amount still leaves you with more, but the effort to make the incremental portion you keep isn't always worth it.

[Joekerr]

Originally Posted by RickFLM4

1. It was literally suggested by someone a few posts back.

2. At some point making less of each extra dollar isn't worth it. Would it be worth it to make that extra dollar if you were taxed 99% on it? Of course not. Everyone has a point where making a smaller % of each incremental dollar isn't worth it.

Making more and keeping less of the incremental amount still leaves you with more, but the effort to make the incremental portion you keep isn't always worth it.

Precisely.

[xQx]

Originally Posted by RickFLM4

1. It was literally suggested by someone a few posts back.

2. At some point making less of each extra dollar isn't worth it. Would it be worth it to make that extra dollar if you were taxed 99% on it? Of course not. Everyone has a point where making a smaller % of each incremental dollar isn't worth it.

Making more and keeping less of the incremental amount still leaves you with more, but the effort to make the incremental portion you keep isn't always worth it.

A subject close to me heart, that's often misunderstood by taxpayers.

Yes, you reach a point where it's not worth it, but the more gradual you can make it, the less people will work to stay under it. If we had a true sliding scale tax system where you paid slightly more tax for every dollar you earned, there'd be no 'threshold' to manage your money beneath. This would be an ideal system but you need a computer to work out your tax liability. The advantage of the current system is that it can easily be worked out and explained with a pen and paper.

However, many people believe in a system where (i'm making these thresholds and rates up) you pay 20% up to $50k, then 30% from $50k to $80k then 40% from $80k upwards, that you should really try to make $49k or $79k to minimize your bracket. But it doesn't work this way. If you earn $51k, you pay 20% tax on $50k, then $30% tax on $1k.

You're still $700 better off earning $51k than you are earning $49,999.99.

After WWII, the UK had a maximum tax rate of 95%. The beatles wrote a song complaining about it called "taxman".

Most countries these days have a maximum tax rate of 50%, so it's still worth your while working, because you get to keep 50c in every dollar you earn. Also, people who've worked to get themselves into the top tax bracket, generally aren't people who'd be happy then sitting on their arse doing nothing to avoid paying more tax ... they're much more likely to pay an accountant or lawyer to work out how to transfer their income out of that tax jurisdiction and pay higher accounting fees but less tax.

There are some notable exceptions, usually in the form of handouts or credits. For example, low income earners in Australia get cheaper car rego, free dental, subsidized child support, and free public health insurance if you earn less than a particular amount. This means if you earn $1 more than the threshold, you suddenly have to pay for a $2,000 service that you previously got for free.

These sort of thresholds are (economically) poor public policy and do elicit the unwanted effect of incentivizing people to work less.

[RickFLM4]

Originally Posted by xQx

Most countries these days have a maximum tax rate of 50%, so it's still worth your while working, because you get to keep 50c in every dollar you earn. Also, people who've worked to get themselves into the top tax bracket, generally aren't people who'd be happy then sitting on their arse doing nothing to avoid paying more tax ... they're much more likely to pay an accountant or lawyer to work out how to transfer their income out of that tax jurisdiction and pay higher accounting fees but less tax.

I think there is a difference between paying someone to avoid a tax and being ok with paying the tax. In fact, they are quite opposite.

We can agree to disagree that a 50% marginal tax rate is a disincentive. Self-employed people, for example, often need to take risks to make more money (hire employees, open another store, etc.) and giving up 50% (vs. for example 30%) changes the risk / reward evaluation. Similarly, spouses of those making enough to hit that bracket end up getting taxed at that high rate even though what they earn would be in a far lower bracket if they were not married. So I think there are plenty of people who would be disincented to work harder (or at all) to make more money if they gave up half of what they made.

[xQx]

Originally Posted by RickFLM4

We can agree to disagree that a 50% marginal tax rate is a disincentive.

I think we should agree to disagree but I'm not sure I entirely disagree with you.

Say you're one of the lucky members of our society who was born with a trust fund that pays you $100k pa. ... In that case, I'd say going to work and knowing 50% of it is going to the government would make a material difference to your willingness to work.

Also if you've worked your arse off through school etc. to now earning in the top income bracket, and you have the opportunity to do some weekend contracting - again, it changes the equation .. I'm far more likely to go and work on the weekend for $100 per hour than for $50.

But in the second scenario, the individual has a higher propensity to work for fulfillment and work for money - and is likely to keep working even though they only keep 50c than to not work and get nothing. These people aren't stupid enough to turn down a pay rise, or not try to land another $100k opportunity just because they don't want to earn in the top tax bracket.

But yes, I'll agree it is a factor. ... Especially if the top tax rate was 95% - I'd be buggered if I was going to do any extra work on the weekend for $5 per hour compared with $100.

I guess what I'm saying is I think people who've worked their way to the top tax bracket are going to fall into one of two categories of though:
1) The answer to taxation is to earn more.
2) The answer to taxation is intelligent structuring to minimize tax (ie. avoidance).

Also, I'd say a significant proportion of people in the top tax bracket aren't solely trading their time for money. (ie. entrepreneurs, investors, business owners, etc.) So the money they earn in the top tax bracket isn't entirely in their control, and doesn't always represent incremental extra work.

[PoorLurker]

Originally Posted by SFCM3

im married, that is household stats, and i make half of poverty income....



$130k is not the official poverty level, but a new statistic shows that households need to make over $130k in SF to live comfortably. i disagree, i say you need to make closer to $200k in SF to be comfy.

Wow! Your definition of comfy is far different than mine. Last time I was walking around SF, I was looking at housing prices and was blown away. i knew about how expensive it was from articles and random searches, but when I Was in the trenches it became so much more real.

There's no way I would want to live there on anything less than twice your "comfy" number per year.

[xQx]

Originally Posted by PoorLurker

Wow! Your definition of comfy is far different than mine. Last time I was walking around SF, I was looking at housing prices and was blown away. i knew about how expensive it was from articles and random searches, but when I Was in the trenches it became so much more real.

There's no way I would want to live there on anything less than twice your "comfy" number per year.

Fook me.

So, how hard is it to land a $150k USD job in SF?

[TheWatchGuy]

Originally Posted by RickFLM4

1. It was literally suggested by someone a few posts back.

2. At some point making less of each extra dollar isn't worth it. Would it be worth it to make that extra dollar if you were taxed 99% on it? Of course not. Everyone has a point where making a smaller % of each incremental dollar isn't worth it.

Making more and keeping less of the incremental amount still leaves you with more, but the effort to make the incremental portion you keep isn't always worth it.

To bring this into real world examples, there was a time that I was able to work anywhere from 0-40hrs Overtime a week a couple years back. @ 10-20hrs, I was taxed the same as my normal tax rate, so the benefits were there, and I was effectively doubling my hourly rate. @ 20-30hrs, taxes jumped up and my OT rate was ~1.5x my normal rate, so still worth it in my mind. @ 30-40hr mark, taxes again went up significantly, and it dropped my OT rate to a spot where it just wasnt worth killing myself for the extra money.

End of year, I could get a decent chunk back in my tax return, but it was still something that I had an exact amount of OT hours i would work that maximized my labor.

Now, as salaried and percentage based compensation, I make sure I make just enough to stay within a certain bracket, and by December, if Im trending towards going over, i back off on my performance metrics to make sure I stay in that bracket. Does everyone do this? no, but I know there are plenty that do this.

Higher taxes dont encourage people to work harder so they can make more, higher taxes encourage people to game the system to maximize their money. I dont think Ive ever heard of someone saying, "I dont think i paid enough to the government, I'm not going to take advantage of all these tax breaks."

[Taskmaster]

Originally Posted by 1MOREMOD

And therein lies the problem. It creates an incentive to work less same as any govt handout. The harder you work the more you should be rewarded. Govt creates a system now that rewards you for doing nothing and leaching off them.

But it doesn't, and that's the dumbest parallel I've ever heard.

You don't need an incentive to make money - money is it's own reward. If you want to give up driving nice cars, dining at nice restaurants, traveling to nice places, banging your nice wife (who can afford to maintain herself) and having nice things - you'll work for it.

Or you can live in section 8 housing and have none of those things.
The hyperbolic rambling in here are absolutely absurd.

[Taskmaster]

Originally Posted by smrtypants44

But you are still making more money? I'm not sure how it makes people want to work less?

It doesn't. Taxes are at a historic low in this country, and yet people are STILL complaining.

[Taskmaster]

Originally Posted by TheWatchGuy

To bring this into real world examples, there was a time that I was able to work anywhere from 0-40hrs Overtime a week a couple years back. @ 10-20hrs, I was taxed the same as my normal tax rate, so the benefits were there, and I was effectively doubling my hourly rate. @ 20-30hrs, taxes jumped up and my OT rate was ~1.5x my normal rate, so still worth it in my mind. @ 30-40hr mark, taxes again went up significantly, and it dropped my OT rate to a spot where it just wasnt worth killing myself for the extra money.

End of year, I could get a decent chunk back in my tax return, but it was still something that I had an exact amount of OT hours i would work that maximized my labor.

Now, as salaried and percentage based compensation, I make sure I make just enough to stay within a certain bracket, and by December, if Im trending towards going over, i back off on my performance metrics to make sure I stay in that bracket. Does everyone do this? no, but I know there are plenty that do this.

Higher taxes dont encourage people to work harder so they can make more, higher taxes encourage people to game the system to maximize their money. I dont think Ive ever heard of someone saying, "I dont think i paid enough to the government, I'm not going to take advantage of all these tax breaks."

This is stupid.

It's already pointed out that you'll make more money, regardless of what the "tax bracket" it bumps you into. The next bracket up means every dollar over that amount gets taxed more - but you still get the remainder.

[Hawkeye]

Originally Posted by RickFLM4

How much are property taxes and homeowners insurance there? I'm paying about $6K in property taxes / year (because we've been in our home since 2002 and annual increases are capped) and homeowners insurance just renewed for $4K, which pissed me off because it was $3K last year.

We also have a sales taxes, although far less than 13%, property taxes, mobile phone taxes, etc. (not to mention $1,400/mo. for high deductible health insurance). It would be interesting to do an apples-to-apples comparison across countries because simply comparing income tax rates isn't necessarily comparable.

That stinks you pay $1,400 for a HDHP. I am only paying $381 a year. According to my pay stubs, the total cost is ~4,800 a year, but my company foots a lot of it thankfully.

My property taxes are a little higher than yours but thankfully my homeowners insurance is much more affordable. For my house, 3 cars, motorcycle, personal items policies and $1m personal liability umbrella I am only paying ~3,600 a year. Feels good to live in boring old Iowa sometimes

Originally Posted by evoq007

Same 33% bracket... same as last year. DINK really doesnt help come tax time

I am hoping my DINK status this upcomming year will at least be better than my SINK status last year... Last year I had an effective 28.3%

[Hawkeye]

Originally Posted by xQx

Fook me.

So, how hard is it to land a $150k USD job in SF?

That might be minimum wage in SF

That is a decent job here in the midwest. In STEM fields at least that would be entry level management based on people that I know and what they make here in the midwest.

[TheWatchGuy]

Originally Posted by Taskmaster

This is stupid.

It's already pointed out that you'll make more money, regardless of what the "tax bracket" it bumps you into. The next bracket up means every dollar over that amount gets taxed more - but you still get the remainder.

you are missing the point. I know i make more money, but im making it at a lower rate. I have a certain threshold that I have. If I make money above it, im good, if its below, im not going out of my way to do it.

I agree taxes are low right now, so there isnt much to complain about. If taxes were higher, I'm not sure where my threshold would move to. Havent done the calcs.

[Joekerr]

Originally Posted by TheWatchGuy

you are missing the point. I know i make more money, but im making it at a lower rate. I have a certain threshold that I have. If I make money above it, im good, if its below, im not going out of my way to do it.

I agree taxes are low right now, so there isnt much to complain about. If taxes were higher, I'm not sure where my threshold would move to. Havent done the calcs.

I've already tried explaining this point before, but I still don't think he is willing to acknowledge it. Everyone has a tipping point where they discover that the incremental extra dollars is not worth the incremental effort it takes to earn it, and so they take a hard pass.

[Hawkeye]

Originally Posted by Joekerr

I've already tried explaining this point before, but I still don't think he is willing to acknowledge it. Everyone has a tipping point where they discover that the incremental extra dollars is not worth the incremental effort it takes to earn it, and so they take a hard pass.

I feel this really applies to consultants or hourly employees only. In my industry, at least, the hours worked doesn't result in more pay unless you get a promotion, and those are generally in the $30k+ range.

[JimVonBaden]

Originally Posted by aozer

i owe $1300

dunno how the fuck that happened

Hah, I paid $26K in Federal alone!

[Joekerr]

Originally Posted by Hawkeye

I feel this really applies to consultants or hourly employees only. In my industry, at least, the hours worked doesn't result in more pay unless you get a promotion, and those are generally in the $30k+ range.

Yes, largely those and the other high earning self employed individuals. But in yours, can you get bonuses - if so, that can be a factor where people sit back and wonder if the extra effort to earn a bonus is worth it after tax.

Admittedly, at a salary of $30K, this is usually not a significant concern. Its more when you start to pay a painful amount of every extra dollar.

[JimVonBaden]

Originally Posted by Alfisti

You guys sit a fair bit further right than i do but damn, this shit has got to be illegal.

Was talking to a teacher the other day (i know, i know) and discussing the deficit she said .. i swear it ... "i don't really get this abstract number, all i know is what i see in my classrooms and the conservatives will cut resources".

Abstract.

SHE'S A TEACHER.

FOR
FUCK'S
SAKE.

Sad that teachers are the same everywhere in NA. (Says a former teacher.)