Tax Policy

[BigBlueFanGA]

Not at all. It's much easier for large companies to tamp down rising competition because of the advantages i mentioned in my post.

Again you arent responding to what I said.

 

[FtWorthCat]

You can't do more than 15% in deferred compensation?

I think the maximum amount that you can put into a 401k out of your pay check is 15%, could be wrong. I've never put that high of a % in my 401k. I just contribute enough to get the max employer match. That is about the only way I can defer income. Some companies offer stock options to regular employees above and beyond the 401k and you can do a Roth IRA every year as well.

 

[Deeeefense]

Every time the subject of taxes comes up I think back of a time when then President Reagan was delivering a state of the union message and the subject of taxes was on the table. Just as Reagan made a point about how vastly over complex and unfair our 30,000 page tax code was he picked it up, slammed it down and declared "we need to get rid of this behemoth"

Today the tax code is 70,000 pages.

 

[CatsFanGG24]

I think the maximum amount that you can put into a 401k out of your pay check is 15%, could be wrong. I've never put that high of a % in my 401k. I just contribute enough to get the max employer match. That is about the only way I can defer income. Some companies offer stock options to regular employees above and beyond the 401k and you can do a Roth IRA every year as well.

Yeah, you are wrong on 15%. It’s a dollar amount limit.

Your 401K plan likely allows deferrals from 1-100% of your pay.

The 402g limit is $23,000 in 2024. 50 and older can put an extra $7,500 of catchup.

You can also put in more into an IRA.

Some companies do offer deferred compensation plans - which are non qualified plans - drafted by attorneys and not within the same set of rules.


Small business owners like @Ron Mehico should set up a cross-tested profit sharing plan and he could put away around $70k annually (including employer contributions). But what many don’t know / is that for the ownership to do so, they have to give minimums to the employees. Which again - are funded by guys like Ron.

Small businesses rolling in dough can put even more in with a Cash Balance plan in addition to their 401K plans. But guess what? More funding required to the employees. Guess who pays for the plans and plan compliance? Guess who indirectly create more jobs for people to manage these plans? Business owners.

Those that have a lot have likely created a lot for others.

 

[Caveman Catfan]

But he hasn't actually been paid the deferred compensation. Thats kinda what the word "deferred" means.

And, the value of that payment fluctuates and is used by the corporation as capital for various functions. I assume his basis in the stock is zero, so he will pay taxes on that when he realizes the gain.

I think the complexity of the code is a better argument for the wealthy getting advantages. Politicians who pit classes against one another for political gain rarely talk about simplifying the code.

 

[Tskware]

Personally, I never minded paying my share of taxes. And I was always self-employed. Meaning I paid double for social security. The normal rate plus the self-employed rate. About 15% or so by the time I retired. I also was a partner in a professional firm. Employed lots of people and paid their benefits salaries. Etc. Flip side was I benefited from a very generous 401 k and profit sharing deferral which allowed me to retire early.

That being said, whether or not the taxes we pay are being used appropriately and whether government is too big or not is completely separate from whether or not wealthy people should pay lots of taxes. And obviously our tax system is progressive. Those at the very top end of income pay much more income taxes than the lower 50% do - has been that way for a long, long time. That's not news.

 

[Caveman Catfan]

I don’t think you shouldn’t have to pay taxes. But I do think if you run your own business you find out how many different ways small businesses get to stimulate the economy. The benefits of trickle down have been exaggerated but they aren’t nothing.

And, trickle down taxes are also a real thing.

 

[CatsFanGG24]

That’s the point. He is able to defer more compensation because of his wealth while middle class is limited to 15%. He shouldn’t be able to defer more than you or I.

Just to reiterate/ 15% limit on 401k deferrals does not exist.

In 401ks, if anything, they are set up with more restrictions on the highly compensated employees than non highlys.

 

[BigBlueFanGA]

I think the maximum amount that you can put into a 401k out of your pay check is 15%, could be wrong. I've never put that high of a % in my 401k. I just contribute enough to get the max employer match. That is about the only way I can defer income. Some companies offer stock options to regular employees above and beyond the 401k and you can do a Roth IRA every year as well.

The answer is that, yes, you could take advantage of deferred compensation if your employer so desired...with some caveats. You are using what is legally available to you as anyone should. That is the point.

 

[Bill Cosby]

This thread is a case study…

“My sister said this…”

… a bunch of people relying on that guys post about what his sister said to discuss complex US tax policy, with no concern to the accuracy of what his sister said, per him.

 

[Cold Stout Beer]

My sister is a CPA who does income tax returns for high net worth individuals. She will tell you that tax policy is still slanted toward the wealthy. As one example, a few years ago it was reported that Bob Simpson (founder of XTO Energy/current owner of Texas Rangers) was paid a total yearly compensation package of $56 million. Of that $56 million, $55.5 million was deferred compensation in the form of company stock, for which he paid $0 in tax. In essense, he was allowed to put 99% of his income into a 401k, while the rest of us can only put 15% per year into a 401k. He will never pay taxes on that money until he sells the investments, likely when his great, great grandson goes on a cocaine binge sometime in the future.

Your but hurt?

 

[Cold Stout Beer]

Our income tax is progressive and the top 1% are paying 46% of all income tax collected. The bottom half pay nothing in income tax. This 3 minute report aired today on CNBC.

View embedded media

Thanks for posting that. The whiners don't seem to understand that if it weren't for the top, the bottom would be paying a heck of a lot more so they should go inside if they are going to cry.

 

[bigblueinsanity]

Again you arent responding to what I said.

I did. You just dont see it because you want to stick to your two flawed premises.

1) tax policy does not favor the rich

2) growth is tougher on small business than large business, because capital matters.

These arent complicated. But youre free to take your false premises and go home if thats what you want.

 

[phunterd]

My sister is a CPA who does income tax returns for high net worth individuals. She will tell you that tax policy is still slanted toward the wealthy. As one example, a few years ago it was reported that Bob Simpson (founder of XTO Energy/current owner of Texas Rangers) was paid a total yearly compensation package of $56 million. Of that $56 million, $55.5 million was deferred compensation in the form of company stock, for which he paid $0 in tax. In essense, he was allowed to put 99% of his income into a 401k, while the rest of us can only put 15% per year into a 401k. He will never pay taxes on that money until he sells the investments, likely when his great, great grandson goes on a cocaine binge sometime in the future.

Can I have her contact info? I’m going to get creamed this year unless I buy a bunch of stuff. Thanks in advance.

 

[AIChatGPT]

So many temporarily embarrassed millionaires in this thread.

 

[rbs]

I had 401(k), 457, and Roth that I invested in. Once I became eligible for catch-up amount, I maxed out in both 401k and 457 and maintained max on Roth … combined that was a nice sum annually.

 

[BigBlueFanGA]

I did. You just dont see it because you want to stick to your two flawed premises.

1) tax policy does not favor the rich

2) growth is tougher on small business than large business, because capital matters.

These arent complicated. But youre free to take your false premises and go home if thats what you want.

No you aren't and I never came close to saying tax policy doesn't favor the rich but you would need to define "favor" since the rich pay almost all personal taxes. Please show me where I said it.

I also didn't claim the second set of words you put in my mouth. Duh is the answer. Once again, the post you took that from wasn't even discussing growth in that manner.

Actually you're free to stop making statements for people then acting like a smug a**hole when you tell them what they never said to begin with is wrong. Pretty easy to take a position when you're debating yourself.

You didn't use to do this. Is there something wrong with you?

Go ahead and quote me on saying those things. I'll wait.

 

[LowerLevelSeatA]

So if this big money man brought up in original post paid triple what he pays in taxes now to the government, then the government in turn would give that money back to us regular citizens, right? Or they would use it to start up some great government program they can’t currently afford to start up that would help me and you, right? The government needs more of his money so they can do great things, right? If any of these are true, yeah let’s tax the hell outta that dude and his friends. Take 75% of their money!

 

[UK_Dallas]

The original story doesn’t make a lot of sense imo.

Yes, he probably took deferred compensation in stock but I doubt it went in to a 401k. Likely went in to a regular account where he later sold the stock and paid capital gains tax instead of income tax. Saved himself about 20-25% in that case. Smart move.

 

[bigblueinsanity]

No you aren't and I never came close to saying tax policy doesn't favor the rich but you would need to define "favor" since the rich pay almost all personal taxes. Please show me where I said it.

I also didn't claim the second set of words you put in my mouth. Duh is the answer. Once again, the post you took that from wasn't even discussing growth in that manner.

Actually you're free to stop making statements for people then acting like a smug a**hole when you tell them what they never said to begin with is wrong. Pretty easy to take a position when you're debating yourself.

You didn't use to do this. Is there something wrong with you?

Go ahead and quote me on saying those things. I'll wait.

Just because you don't explicitly state something doesn't mean its any less said. I synthesized your two arguments based on what you actually stated

Your entire story was at best incorrect and there to support the two flawed premises i mentioned. It was intended to create a set of facts so people would agree with you that rich people don't pay enough taxes. Many sniffed that out and cut off the argument before it reached the point of reveal.

That isn't being an a$$hole. Its debating on the issue.

 

[downw/ball-lineD]

My fellow BBN brothers and sisters - I call on us to start a second revolution - today it begins!

When the revolutionaries saw the bloated British government wanted to tax tea - did they see their fellow neighbors who weren’t taxed on the coffee they drank and say - But you should tax my neighbor that drinks coffee too! No of course not! They were not battered wives that advocated for the obese government to eat more. No my friends, they had the courage to see what’s right! They realized the common enemy was the bloated government, not their fellow citizen that was simply trying their best like them!

Say it loud and say it proud folks:

“WE DO NOT WANT MORE TAXES FOR SOME, WE WANT LESS TAXES FOR ALL!”

The government spent 1.3 TRILLION dollars just on defense LAST YEAR. Does this sound like an entity that needs more money? No! If your neighbor has a lower interest rate on their mortgage do you fight for the bank to increase their interest rate?’ Of course not! You know the bank has more money than it knows what to do with - you fight for everyone to have a lower interest rate!!

“WE DO NOT WANT MORE TAXES FOR SOME, WE WANT LESS TAXES FOR ALL!”

Who’s with me?? WHOS WITH ME?!

Amen to this right here! Overhaul of our bloated govt!

 

[bigblueinsanity]

Amen to this right here! Overhaul of our bloated govt!

This absolutely must happen if this nation is to make it. We dont have a revenue problem. Not even close. We have a massive spending problem.

We're already probably beyond the point of ever being able to pay this back.

 

[Tskware]

This absolutely must happen if this nation is to make it. We dont have a revenue problem. Not even close. We have a massive spending problem.

We're already probably beyond the point of ever being able to pay this back.

Few if any would disagree with you, certainly not me.

But where to cut is the 64 Trillion dollar question? A huge percentage of the budget goes to defense, medicare, SS and interest on the debt. One of the reasons I was ready to vote for Nikki Haley was she was the ONLY candidate on either side that stated the obvious - we have to address entitlements if we ever hope to have anything like a balanced budget. And I would also include the so called "Safety Net" which allows the lowest 25% of earners to actually live better than the next 25% of earners, which tends to disincentivize working harder to make more money. As for SS, I would start by capping the top end payment at around $3500 a month (think that is close to the top end). Every year when COLA increase occurs, the lower payouts increase, but the absolute max would remain at $3500. The people getting that amount paid in the most, meaning they made the most money during their career and presumably have other assets to live on.

There, that is my 2 cents worth.

 

[bigblueinsanity]

Few if any would disagree with you, certainly not me.

But where to cut is the 64 Trillion dollar question? A huge percentage of the budget goes to defense, medicare, SS and interest on the debt. One of the reasons I was ready to vote for Nikki Haley was she was the ONLY candidate on either side that stated the obvious - we have to address entitlements if we ever hope to have anything like a balanced budget. And I would also include the so called "Safety Net" which allows the lowest 25% of earners to actually live better than the next 25% of earners, which tends to disincentivize working harder to make more money. As for SS, I would start by capping the top end payment at around $3500 a month (think that is close to the top end). Every year when COLA increase occurs, the lower payouts increase, but the absolute max would remain at $3500. The people getting that amount paid in the most, meaning they made the most money during their career and presumably have other assets to live on.

There, that is my 2 cents worth.

Its a politically impossible situation. Libs know things need cut but double down on spending those items just for politics. That makes pubs back away.

You must start with entitlements imo. If someone didn't earn it, cut it off. Then shortly after eliminate all non essential government offices. Every office by definition is essential or non essential and we see that come out during budget shut downs. If they arent essential - goodbye.

That wouldn't completely solve it but would be a massive start.

Then pass a federal statute allowing the line item veto. That way a prudent president can get rid of the insane pork tacked on to these bills.

 

[Tskware]

Then pass a federal statute allowing the line item veto. That way a prudent president can get rid of the insane pork tacked on to these bills.

Every President has asked for a line item veto, which I too would support. Good luck getting Congress to limit their own ability to tack pork onto every bill possible.

 

[WayneDougan]

The richest counties in the country surround Washington DC, with degenerate psychopaths gorging on a feast of your hard earned tax dollars, people are on a Kentucky message arguing more money needs to be sent to DC.

You guys are lunatics.

I am not arguing more needs to be sent to DC.

1) The government should not run deficits - so if they spend more they need to collect more. Simple as that. Don't like it; then vote for somebody else. I would prefer spending less, but whatever.

2) I don't think we should tax income. That worked when labor wasn't competing in a global market against Indians who make $8K a year. The tax alone that a US IT worker pays a year is more than his competition makes. That makes us less competitive.

3) As wealth has grown - we should shift the tax burden more towards wealth? Why? I'd argue that the military - for which we spend like $1T+ per year - is more about protecting our wealth than our annual earnings.

4) I also think we need to tax consumption - as it ties more to wealth. Say your dad won the lottery and you inherited $50M. You, personally, could never work a day in your life and sit around snorting coke all day, and not pay federal taxes. Meanwhile, your lawn guy would be paying 20% on the $20 / hour he makes. I don't think this is right. I'd rather tax the millionaire dickhead who is only consuming as opposed to the guy who is working.

 

[DSmith21]

Every President has asked for a line item veto, which I too would support. Good luck getting Congress to limit their own ability to tack pork onto every bill possible.

Congress actually passed the line item veto in 1996. The US Supreme Court ruled it was unconstitutional via Clinton vs City of New York.

Line-item veto in the United States - Wikipedia

en.m.wikipedia.org

 

[bigblueinsanity]

Congress actually passed the line item veto in 1996. The US Supreme Court ruled it was unconstitutional via Clinton vs City of New York.

Line-item veto in the United States - Wikipedia

en.m.wikipedia.org

Every President has asked for a line item veto, which I too would support. Good luck getting Congress to limit their own ability to tack pork onto every bill possible.

I remembered that case making it unconstitutional and you can track massive pork projects right to that ruling.

I still think they can craft a mechanism around it. Maybe not.

I am not arguing more needs to be sent to DC.

1) The government should not run deficits - so if they spend more they need to collect more. Simple as that. Don't like it; then vote for somebody else. I would prefer spending less, but whatever.

2) I don't think we should tax income. That worked when labor wasn't competing in a global market against Indians who make $8K a year. The tax alone that a US IT worker pays a year is more than his competition makes. That makes us less competitive.

3) As wealth has grown - we should shift the tax burden more towards wealth? Why? I'd argue that the military - for which we spend like $1T+ per year - is more about protecting our wealth than our annual earnings.

4) I also think we need to tax consumption - as it ties more to wealth. Say your dad won the lottery and you inherited $50M. You, personally, could never work a day in your life and sit around snorting coke all day, and not pay federal taxes. Meanwhile, your lawn guy would be paying 20% on the $20 / hour he makes. I don't think this is right. I'd rather tax the millionaire dickhead who is only consuming as opposed to the guy who is working.

Imo

1) for every new dollar in tax they should cut at least $2 in spending. Preferably $20. They could probably easily do $200. Maybe $2000.

2) i agree on not taxing income. A progressive tax system is a huge obstacle to upward financial mobility.

3) wealth tax is a good idea but would be awful in practice. Who decides the value of a non liquid asset? Its ripe for government bloat and abuse

4) i think taxing consumption is great. It captures all the same taxation youd get through a wealth tax but without bloat and abuse. Plus removes the oppressive upward punishing income tax.

 

[BigBlueFanGA]

Just because you don't explicitly state something doesn't mean its any less said. I synthesized your two arguments based on what you actually stated

Your entire story was at best incorrect and there to support the two flawed premises i mentioned. It was intended to create a set of facts so people would agree with you that rich people don't pay enough taxes. Many sniffed that out and cut off the argument before it reached the point of reveal.

That isn't being an a$$hole. Its debating on the issue.

In other words you did what I said, you put words in my mouth again. Keep spinning, you'll knit a sweater before long.

You are laughable at this point. I think "rich" people pay too much in taxes. I also think any business has the opportunity to become large, I never mentioned capital issues or anything else.

Poindexter, this is all made up in your head, again. No, putting words in peoples mouths then telling them how wrong they are is both narcissistic and being an a**hole.

Give it up, you are 100% wrong on this.

 

[8titles]

He probably needs the infrastructure of the United States a whole lot more than the 65K worker.

So no, he should not get a break on his personal taxes.

He is not getting a tax break, he is going to get taxed at the same rate as anyone else gets taxed when he pulls that money out. As a matter of fact it may very well be a bad financial decision from a taxation perspective since he likely will pay more tax in the future given the current economic situation within the US, so if it bit the bullet now it could save him money.

 

[cat_in_the_hat]

Why don’t you let us know what is inaccurate? Most in his post about the owner of the Rangers was easily verifiable.

I'm not a CPA, but taking compensation in stock does not alleviate one from paying taxes. He will have to pay capital gains tax.

 

[bigblueinsanity]

In other words you did what I said, you put words in my mouth again. Keep spinning, you'll knit a sweater before long.

You are laughable at this point. I think "rich" people pay too much in taxes. I also think any business has the opportunity to become large, I never mentioned capital issues or anything else.

Poindexter, this is all made up in your head, again. No, putting words in peoples mouths then telling them how wrong they are is both narcissistic and being an a**hole.

Give it up, you are 100% wrong on this.

Ok if i am not correctly stating your ultimate argument, apologies. But its definitely the inevitable ultimate argument of whomever gave you that story you relayed to the board.

If your points are different than the original story teller, please tell us what they are.

 

[cat_in_the_hat]

My sister is a CPA who does income tax returns for high net worth individuals. She will tell you that tax policy is still slanted toward the wealthy. As one example, a few years ago it was reported that Bob Simpson (founder of XTO Energy/current owner of Texas Rangers) was paid a total yearly compensation package of $56 million. Of that $56 million, $55.5 million was deferred compensation in the form of company stock, for which he paid $0 in tax. In essense, he was allowed to put 99% of his income into a 401k, while the rest of us can only put 15% per year into a 401k. He will never pay taxes on that money until he sells the investments, likely when his great, great grandson goes on a cocaine binge sometime in the future.

One comment on the general theme of your post that tax policy favors the rich. I have bothered to look it up recently, but the top 50% of earners pay over 95% of Federal taxes. I would say that policy favors the rich.

 

[cat_in_the_hat]

That’s the point. He is able to defer more compensation because of his wealth while middle class is limited to 15%. He shouldn’t be able to defer more than you or I.

How is the middle class limited to 15%?

 

[bigblueinsanity]

My sister is a CPA who does income tax returns for high net worth individuals. She will tell you that tax policy is still slanted toward the wealthy. As one example, a few years ago it was reported that Bob Simpson (founder of XTO Energy/current owner of Texas Rangers) was paid a total yearly compensation package of $56 million. Of that $56 million, $55.5 million was deferred compensation in the form of company stock, for which he paid $0 in tax. In essense, he was allowed to put 99% of his income into a 401k, while the rest of us can only put 15% per year into a 401k. He will never pay taxes on that money until he sells the investments, likely when his great, great grandson goes on a cocaine binge sometime in the future.

Is it tax policy that favors the rich? Or is it the rich inherently have money with which they hire the best professionals to navigate and create tax avoidance.

I would argue its clearly the latter. For example here, if that plan document wasnt crafted just so, this person has a massive tax hit. Same thing with estate tax and numerous other examples.

If anyone wants to level the playing field while also capturing the most tax from the wealthiest people with the most efficiency, it is best achieved by consumption tax.

 

[Bill - Shy Cat]

If anyone wants to level the playing field while also capturing the most tax from the wealthiest people with the most efficiency, it is best achieved by consumption tax.

Respectfully disagree. Low-income households spend a larger proportion of their income on taxable goods and services compared to high-income households. High income folks build up their investment portfolio, etc with their excess income not needed for ordinary living purchases.

 

[bigblueinsanity]

Respectfully disagree. Low-income households spend a larger proportion of their income on taxable goods and services compared to high-income households. High income folks build up their investment portfolio, etc with their excess income not needed for ordinary living purchases.

I see this argument often as a counter to consumption tax. Its essentially saying poor people are impacted more with a consumption tax. That is true. However the cost of everything disproportionately effects the poor. Plus under the current progressive scheme, poor are likely to stay poor longer because its harder to climb the ladder.

While its true the rich can hoard away money under consumption tax, its also true their vast luxury expenditures will capture a greater amount of money than what is lost vs a wealth tax. Plus with a consumption based scheme, you don't have an endless amount of government employees arbitrarily determining how wealth is defined. If there are rules, then rich will undoubtedly hire professionals to help with tax avoidance and you are back to where we are today.

So im not saying its perfect by any stretch. Im just saying its the most fair way currently devised, to approach an inherently unfair issue.

 

[BigBlueFanGA]

Ok if i am not correctly stating your ultimate argument, apologies. But its definitely the inevitable ultimate argument of whomever gave you that story you relayed to the board.

If your points are different than the original story teller, please tell us what they are.

? What story did I relate to the board? I think you have me confused with someone else and that would explain why you thought I said those things you mentioned.

 

[cat_in_the_hat]

I see this argument often as a counter to consumption tax. Its essentially saying poor people are impacted more with a consumption tax. That is true. However the cost of everything disproportionately effects the poor. Plus under the current progressive scheme, poor are likely to stay poor longer because its harder to climb the ladder.

While its true the rich can hoard away money under consumption tax, its also true their vast luxury expenditures will capture a greater amount of money than what is lost vs a wealth tax. Plus with a consumption based scheme, you don't have an endless amount of government employees arbitrarily determining how wealth is defined. If there are rules, then rich will undoubtedly hire professionals to help with tax avoidance and you are back to where we are today.

So im not saying its perfect by any stretch. Im just saying its the most fair way currently devised, to approach an inherently unfair issue.

Plus some proposals exempt certain item from the consumption tax to try offset its impact on the poor. I haven't looked at it in a long time, so I could be remembering this wrong, but with some proposals, the tax only applies to new products. The poor buy second hand lot more than the rich, and used goods wouldn't get taxed.

 

[JonathanW]

I think the maximum amount that you can put into a 401k out of your pay check is 15%, could be wrong. I've never put that high of a % in my 401k. I just contribute enough to get the max employer match. That is about the only way I can defer income. Some companies offer stock options to regular employees above and beyond the 401k and you can do a Roth IRA every year as well.

I think it is 15% and something like $20K. So if you earn $1M, you can't put in $150K (limited to $20K). And if you earn $50K, you can't put in $20K (limited to 15% of $50K = $7.5K).
Like the SS max, the approximate $20K goes up a little each year.