Obama's $80B tax cuts

[Finglefinn]

Listen to you whine. We already know you'd squirrel away as much of your cash into some type of tax haven, anyways, Embar - governments are not built to provide balm for the hurt feelings of sociopaths like yourself.

You're killing me Partha. Why is it wrong to defer taxes on your income for future use? Do you just know nothing about tax deferral investing so you think that its some kind of sinister tax avoidance l33t strat that only the rich can afford to utilize? C'mon. Pull your head out and realize that every American utilized some kind of tax deferral. Anything deducted from your paycheck pre-tax is a kind of deferral. Your health insurance, for example. No you don't pay payroll taxes on the income, but you pay taxes as you use medical services and those providers pay loads of taxes.

Every single American could take defer a lot of their taxes. Standard deductions and simply popping out more kids is not the only option middle class, "paycheck-to-paycheck" people have. Just like other life choices, a lot of those people just choose to not take advantage of it. Don't blame the achievers in this country for doing whatever they can to defer their taxes.

And don't give me this shelter or haven bullshit. You either pay the taxes now or later. Nobody get out of paying tax completely.

[Ddrak]

So if I set up a nest of holding accounts in the Cayman Islands, channel my investments through those accounts and then bring the money in via a Swiss bank, you wouldn't call that a tax haven?

How about simply moving all my business accounts to Delaware if I'm really scraping the bottom of the rungs?

I'm pretty sure Partha isn't referring to "tax deferral investing", but is referring to the ways you can minimize your taxable income as it appears to the IRS without significantly altering your real discretionary income either now or later. These sort of schemes do take a bunch of cash to set up properly, but once established they are fairly worthwhile. Naturally the IRS takes a dim view of this sort of thing, but a skilled accountant shouldn't have any real issues bouncing stuff all over the planet.

Of course, to have "tax deferral investing" you need to actually have discretionary income to invest. This is simply not true for about the bottom 40% of income earners in the US.

Dd

[Embar Angylwrath]

to actually have discretionary income to invest. This is simply not true for about the bottom 40% of income earners in the US.

Dd

I disagree here completely. People don't "need" SUVs, plasma screens, cable, Starbucks, nail appointments, three televisions, $100 pairs of jeans and $200 dollars pairs of tennis shoes. They don't "need" McDonalds, Arbys, KFC, and Popeyes (well.. maybe Popeyes, that shit is GOOOD). They don't "need" air conditioning (heat, yes, air conditioning, no). They don't "need" bottled water, which costs more than gasoline, ounce per ounce. They don't "need" smokes or booze.

There is a LOT of discretionary spending that people think they "need", but they don't.

[Finglefinn]

So if I set up a nest of holding accounts in the Cayman Islands, channel my investments through those accounts and then bring the money in via a Swiss bank, you wouldn't call that a tax haven?

Your example is quite extreme, Dd. I was talking about your average independently wealthy individual, like the President of my Bank, for example, or maybe my best customer, who's net worth is about $42MM. They don't have accounts in Switzerland or the Caymans. They invest their money in stocks, bonds, mutual funds and in US banks.


What lower income people really need is supplemental retirement income aside from SS income. Those others that Embar points out are wants. They'll be a lot happier later in life if they take some small steps to save some extra money for retirement, especially since health care costs continue to increase exponentially.

[Ddrak]

I disagree here completely. People don't "need" SUVs, plasma screens, cable, Starbucks, nail appointments, three televisions, $100 pairs of jeans and $200 dollars pairs of tennis shoes. They don't "need" McDonalds, Arbys, KFC, and Popeyes (well.. maybe Popeyes, that shit is GOOOD). They don't "need" air conditioning (heat, yes, air conditioning, no). They don't "need" bottled water, which costs more than gasoline, ounce per ounce. They don't "need" smokes or booze.

I wasn't adding many of the things you were tossing in to get that number, and I was leaving out other things to offset the variance. Stats are over at the BLS if you want to look them up. The bottom 40% of income earners in the US do not have any discretionary income to speak of.

For the 4th quintile:

avg income before tax = $23,400 (range = $17k - $33k)
food at home = $2,500
housing = $10,200
transportation = $5,300
health care = $2,300
tax = about $2,800

Doesn't leave much (I count about $200 left over per year) and there's a bunch of essentials I haven't even started to consider in there. I'm not sure what you were thinking, but perhaps you didn't realize the bottom 40% was quite as low income as that?

Dd

[Embar Angylwrath]

Let me clarify something on the 40% (the devil's in the details). Are you saying that of all the wage earners in the US, 40% of the wage earners make an average of $23K/year? So if there are 100 million wage earners in the US, is it your position then that 40 million would ba making an average of $23K/year or less?

[Finglefinn]

It sounds like that $23,000 is an average of $17-33,000.

[Ddrak]

Let me clarify something on the 40% (the devil's in the details). Are you saying that of all the wage earners in the US, 40% of the wage earners make an average of $23K/year? So if there are 100 million wage earners in the US, is it your position then that 40 million would ba making an average of $23K/year or less?

40% of the family units earn $33k or less (the $23k is the mean for the 4th quintile), yes. At least in 2005 when the BLS survey was taken. If I'm not reading it correctly I'll be happy to listen to refutation.

Dd

[Partha]

Evidently somebody's never REALLY looked at how the lower half lives.

[Embar Angylwrath]

Evidently somebody's never REALLY looked at how the lower half lives.

Correct that quintile for college kids living in dorms or on their own, and retireess, and self-employed business people, and I think you'll get a much higher number.

[Ddrak]

I tend to agree with Embar there - the stats are going to be seriously skewed by retirees and such that have very low gross income but spend more than that income allows (ie winding their retirement savings down). This particular band ($13k-$33k) is going to cover quite a few of the people in that situation.

I'm still saying that people in low income situations, say $30k and below, really don't have any real discretionary income to speak of after taxes which makes the whole "we tax the rich too much" argument somewhat misguided. If we could devise a tax system that worked on discretionary income rather than gross income then it would more than likely be a lot more "fair", but I don't see how you could do that without opening up massive holes for accountants to drive tax shelters into.

Dd

[Partha]

Evidently somebody's never REALLY looked at how the lower half lives.

Correct that quintile for college kids living in dorms or on their own, and retireess, and self-employed business people, and I think you'll get a much higher number.

Why? Don't they count as people too? Or is it just that they're not useful in your grand scheme of things?

[Embar Angylwrath]

Evidently somebody's never REALLY looked at how the lower half lives.

Correct that quintile for college kids living in dorms or on their own, and retireess, and self-employed business people, and I think you'll get a much higher number.

Why? Don't they count as people too? Or is it just that they're not useful in your grand scheme of things?

Sure they count. However their life circumstances don't accurately reflect the typical "wage earner", nor the burdens a typical "wage earner" faces. Retirees and college kids are less burdened by large mortgages. Also. a college kid's life circumstance is typically temporary, and not indicative of the top-out wage they'll enjoy later. Conversely, retirees don't have to plan for growing families. In either case, both cohorts are in very different life circumstances than Joe Lunchbox.

[Partha]

Ah, so because they don't fit your preconceived stereotypes of how things should be, they don't REALLY count. Okay.

[Embar Angylwrath]

Ah, so because they don't fit your preconceived stereotypes of how things should be, they don't REALLY count. Okay.

Yeah, ok Partha. Because a college student and a retired senior citizen are so alike in life circumstances they should be lumped together and treated the same for statistical purposes.

[Partha]

Ah, so because they don't fit your preconceived stereotypes of how things should be, they don't REALLY count. Okay.

Yeah, ok Partha. Because a college student and a retired senior citizen are so alike in life circumstances they should be lumped together and treated the same for statistical purposes.

You mean like lumping together Paris Hilton and Bill Gates for statistical purposes?

[Ddrak]

What he's getting at is both college students and retired people have income that doesn't show as taxable on this sort of report, so skews the results. At least, I think that's the idea.

Dd

[Embar Angylwrath]

What he's getting at is both college students and retired people have income that doesn't show as taxable on this sort of report, so skews the results. At least, I think that's the idea.

Dd

Thats part of it Dd. But also that people see that 4th quintile number and think that all of the families in that quintile are starving. Since students and retirees skew that number, the REAL wage number for people in the actual workforce is higher than indicated.

In Partha's mind, a college student making 8K/year is a family below the poverty level. Same with a reitred couple with a fully paid off mortgage, no car payment, and drawing out of a retirement account.

If I was retired, and drawing off a 300,000 savings account to supplement my social security, anything I'd already paid taxes on would not count as income. Only the interest on the savings. I could be "officially" under the poverty level, and still be able to spend 40K a year (which is about 60K/year pre-tax to a worker). With no mortgage or other payments, I could live ok on that.

Partha doesn't seem to get that.

[Partha]

If I was retired, and drawing off a 300,000 savings account to supplement my social security, anything I'd already paid taxes on would not count as income. Only the interest on the savings. I could be "officially" under the poverty level, and still be able to spend 40K a year (which is about 60K/year pre-tax to a worker). With no mortgage or other payments, I could live ok on that.

Partha doesn't seem to get that.

http://www.epinet.org/content.cfm/ib206

Although Social Security is an important insurance program for people of all ages, at any given point in time the largest single demographic group of recipients is those age 65 and over. For a large majority of this group, the program is critical to their quality of life. 65% of these elderly rely on Social Security for over half their income (see Figure 1 and Figure 2). That's a total of over 15 million individuals and couples. One-third (33%) rely on Social Security for over 90% of their income. Nationally, the median married couple or individual recipient age 65 and over relies on Social Security for 67% of income. High reliance on Social Security for the well-being of the elderly is typical regardless of sex, race, or state of residence (shown in Table 1 and Table 2).

http://www.ssa.gov/policy/docs/statcomp ... /sect6.pdf

Most people don't have the fallback plan you seem to think is the universal condition.

[Embar Angylwrath]

35% of all seniors rely on SS for less than half of their income, according to your citations. That's enough to skew any statistic.