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Old Nov 14, 2012, 01:36 PM   #1
MacNut
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Why is $250,000 the magic number?

Everyone says the 1% starts at $250,000 but is that really a lot of money? What was the reasoning for making that the starting point. Why not $500,000 or 1 million? Would it be better to tax say under 1 million less and go hard on those earning 10 million or higher. Could there be a better scale in how to tax earners? Someone making 100 million could easily swallow a 30% tax on income vs someone making 5 million. Is there a reason not to tax the super wealthy more than the barely wealthy?
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Old Nov 14, 2012, 01:42 PM   #2
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probably because of the tax brackets in place and the % of those that are in that income bracket?

I think one earning 5mill can easily swallow 30%...
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Old Nov 14, 2012, 01:45 PM   #3
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probably because of the tax brackets in place and the % of those that are in that income bracket?

I think one earning 5mill can easily swallow 30%...
I would maybe say 5 million should be the starting point and then escalate the scale from there. Earn 10 mill pay 40% 100 mill 50%. The scale should go up the higher you earn and not be stuck at %30.
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Old Nov 14, 2012, 01:46 PM   #4
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i'm surprised it's such a round number, given the government's panache for loopholes, i'm wondering why it's not $252,049.99
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Old Nov 14, 2012, 01:48 PM   #5
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Everyone says the 1% starts at $250,000 but is that really a lot of money? What was the reasoning for making that the starting point. Why not $500,000 or 1 million? Would it be better to tax say under 1 million less and go hard on those earning 10 million or higher. Could there be a better scale in how to tax earners? Someone making 100 million could easily swallow a 30% tax on income vs someone making 5 million. Is there a reason not to tax the super wealthy more than the barely wealthy?
Does the 1% really start at $250,000 per year? Personally I think people who are pulling in $250,000 are going to be really well off and a small tax increase will not hurt them. The problem is the way the tax system is setup as many small businesses are ran and reported through individual tax returns. I don't want small businesses to be increasingly taxed, especially in the face of corporations getting bailouts, welfare, and everything else under the sun spoon fed to them.
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Old Nov 14, 2012, 01:49 PM   #6
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I would maybe say 5 million should be the starting point and then escalate the scale from there. Earn 10 mill pay 40% 100 mill 50%. The scale should go up the higher you earn and not be stuck at %30.
I'm curious how many individuals earn 5mill + a year?
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Old Nov 14, 2012, 01:49 PM   #7
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Originally Posted by MacNut View Post
Everyone says the 1% starts at $250,000 but is that really a lot of money? What was the reasoning for making that the starting point. Why not $500,000 or 1 million? Would it be better to tax say under 1 million less and go hard on those earning 10 million or higher. Could there be a better scale in how to tax earners? Someone making 100 million could easily swallow a 30% tax on income vs someone making 5 million. Is there a reason not to tax the super wealthy more than the barely wealthy?
Also think about it this way. If you make $250,000 in the north east it isn't as much money as $250,000 would be in the south. Many areas of the US money doesn't go as far as it does elsewhere. So why is this a stable number across the board.

But I believe in a flat tax with NO exemptions.
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Old Nov 14, 2012, 01:53 PM   #8
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Does the 1% really start at $250,000 per year? Personally I think people who are pulling in $250,000 are going to be really well off and a small tax increase will not hurt them. The problem is the way the tax system is setup as many small businesses are ran and reported through individual tax returns. I don't want small businesses to be increasingly taxed, especially in the face of corporations getting bailouts, welfare, and everything else under the sun spoon fed to them.
At what point do you tax the wealthy out of their wealth? Going after the super high earners would never see a difference vs the low end of the "well off". 250,000 in the big picture isn't that much. Of course it's a lot to me as I am no where close.

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I'm curious how many individuals earn 5mill + a year?
The percentages get lower the higher you go, but the higher you go they can take more of a tax hit so why not tax them more.
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Old Nov 14, 2012, 01:58 PM   #9
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Originally Posted by Zombie Acorn View Post
Does the 1% really start at $250,000 per year? Personally I think people who are pulling in $250,000 are going to be really well off and a small tax increase will not hurt them. The problem is the way the tax system is setup as many small businesses are ran and reported through individual tax returns. I don't want small businesses to be increasingly taxed, especially in the face of corporations getting bailouts, welfare, and everything else under the sun spoon fed to them.
Even small businesses taxed as individuals are taxed on PROFITS, not gross income. Meaning that's after salaries, business expenses, everything. And you can only be taxed that way as a small business if it's a sole proprietoriship, meaning nobody else is sharing that profit.

So you could be grossing $10M/year, but if all but $100K of that goes directly into running the business, then the $100K take-home is all you get taxed on.

If your sole proprietorship is making $250K in profit, then you are personally making $250K/year, no different from making $250K/year as a salaried employee of a C-corp (since even the self-employment portion of payroll tax goes into the business expense column for income tax bracket purposes).

Raising tax rates on sole-proprietor business profit over $250K doesn't hurt competitiveness, it only slightly reduces the amount of luxuries you can buy with the $250K you take home.
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Old Nov 14, 2012, 02:04 PM   #10
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There is also this..

$250,000 is also the limit that both the FDIC and NCUA will insure on a given bank account. So if you incurred any loss in your account, its restoration to normal will only be backed by the government up to $250K. Anything more than that, you're on your own, unless you open up another account, which that limit would apply there as well.

That, plus the aforementioned tax brackets would also play a part into why that is the magic number.

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Old Nov 14, 2012, 02:05 PM   #11
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Even small businesses taxed as individuals are taxed on PROFITS, not gross income. Meaning that's after salaries, business expenses, everything. And you can only be taxed that way as a small business if it's a sole proprietoriship, meaning nobody else is sharing that profit.

So you could be grossing $10M/year, but if all but $100K of that goes directly into running the business, then the $100K take-home is all you get taxed on.

If your sole proprietorship is making $250K in profit, then you are personally making $250K/year, no different from making $250K/year as a salaried employee of a C-corp (since even the self-employment portion of payroll tax goes into the business expense column for income tax bracket purposes).

Raising tax rates on sole-proprietor business profit over $250K doesn't hurt competitiveness, it only slightly reduces the amount of luxuries you can buy with the $250K you take home.
Unless you are very clever at spending everything your company takes in or have somewhere to invest money in your business at all times of the year this is going to cause headaches. Especially since most of the businesses affected are ran by one or two people who aren't tax specialists/accountants.
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Old Nov 14, 2012, 02:06 PM   #12
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The median household income between 2006 and 2010 is $51,914. $250,000 is FIVE TIMES that. So yes, to many people it is a lot of money.

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Old Nov 14, 2012, 02:10 PM   #13
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The median household income between 2006 and 2010 is $51,914. $250,000 is FIVE TIMES that. So yes, to many people it is a lot of money.

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Why tax someone making 250k and someone making 100 mill the same rate? They are both considered wealthy.
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Old Nov 14, 2012, 02:11 PM   #14
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Why tax someone making 250k and someone making 100 mill the same rate? They are both considered wealthy.
This is a good point, I am not sure why the tax bracket increases stop at a certain point.
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Old Nov 14, 2012, 02:13 PM   #15
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Because of how the tax brackets work. I would also say we need to add some more higher tax brackets that have even higher rates.
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Old Nov 14, 2012, 02:16 PM   #16
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Because of how the tax brackets work. I would also say we need to add some more higher tax brackets that have even higher rates.
I have no problem taxing your worth, but the uber sickening wealthy seem to not be phased at all. Instead we seem to be targeting the low end of the wealth range.
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Old Nov 14, 2012, 02:18 PM   #17
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Unless you are very clever at spending everything your company takes in or have somewhere to invest money in your business at all times of the year this is going to cause headaches. Especially since most of the businesses affected are ran by one or two people who aren't tax specialists/accountants.
But the point is that anything your sole proprietorship takes in and doesn't spend is *personal* income. It's *after* business expenses. And if it's over $250K, taking a small additional cut is clearly not affecting the business owner's ability to make a profit or live off their business income (if they can't get by on $250/year, they have major problems and should spend some time talking to someone who makes $25K).

How does taxing it make the business less competitive?
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Old Nov 14, 2012, 02:20 PM   #18
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I have no problem taxing your worth, but the uber sickening wealthy seem to not be phased at all. Instead we seem to be targeting the low end of the wealth range.
How so ? It's 250k and up. All the way to the top.

Personally I think they should change the rates back to the Clinton rates.
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Old Nov 14, 2012, 02:21 PM   #19
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How so ? It's 250k and up. All the way to the top.

Personally I think they should change the rates back to the Clinton rates.
If you are making 100 million you should be taxed even higher.
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Old Nov 14, 2012, 02:30 PM   #20
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Originally Posted by Zombie Acorn View Post
Does the 1% really start at $250,000 per year? Personally I think people who are pulling in $250,000 are going to be really well off and a small tax increase will not hurt them.
Keep in mind that the 1% will shift in a given tax year, but currently that starts around $343,927 with an average of $960,000. This represents about 1.4 million households.

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But the point is that anything your sole proprietorship takes in and doesn't spend is *personal* income. It's *after* business expenses. And if it's over $250K, taking a small additional cut is clearly not affecting the business owner's ability to make a profit or live off their business income (if they can't get by on $250/year, they have major problems and should spend some time talking to someone who makes $25K).

How does taxing it make the business less competitive?
Really, I don't see how someone could operate a small business and not have an accountant working the numbers to ensure their tax liability is low. FFS, I have an accountant and I'm just a freelancer.


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If you are making 100 million you should be taxed even higher.
Sure and in 1920 there were 55 tax brackets from 4 percent for up to $4,000 to 73 percent for more than $1 million, but overtime those different tax brackets were narrowed to six—though there's more options for filing status.

In 1963, there were 23 brackets from 20 percent for $4,000 to 91 percent for $400,000.

There's simply no reason that we can't split the $250,000 earners from $1 million except for politics and I'm sure Republicans are wary of doing so since it wouldn't allow them to protect billionaires under the aegis of protecting small businesses.
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Old Nov 14, 2012, 02:32 PM   #21
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This is a good point, I am not sure why the tax bracket increases stop at a certain point.
Politics. Back in the 50's and 60's their were more brackets and the top was as high as 85% or 90%.
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Old Nov 14, 2012, 02:32 PM   #22
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How so ? It's 250k and up. All the way to the top.

Personally I think they should change the rates back to the Clinton rates.
again tax brackets. it is where the top bracket falls. Hence the reason we need to add more higher brackets and increase their values.
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Old Nov 14, 2012, 02:37 PM   #23
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Why tax someone making 250k and someone making 100 mill the same rate? They are both considered wealthy.
I agree. There should be more tax brackets.

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Old Nov 14, 2012, 02:55 PM   #24
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$250k is not the 1%, I've looked it up previously, I think it is $388k or so. I'm not sure why $250k is some magic number.

Oh and I think a flat tax would be great and fair with no exemptions. As someone in the $250k+ tax bracket, I'm surprised how little tax I pay and I don't think I have that many exemptions. I'm not going to be giving any more than necessary but I think my tax rate is around 16% or was last year.
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Old Nov 14, 2012, 03:04 PM   #25
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Enough with the brackets, just draw a straight line. Start it at 10% for those making twice poverty, end it at 90% for anyone making 0.1% of GDP or more. Nice straight line, though maybe steeper at the lower end than I would like.
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