View Full Version : Tax Reform - GOP's Next Congressional Failure?
Eurodriver
09-27-17, 17:15
The Treasury Dept released the reformed tax plan today. Read the framework for yourself here: https://www.treasury.gov/press-center/press-releases/Documents/Tax-Framework.pdf
Big changes include:
Corporate AMT is eliminated
Personal AMT is eliminated
Three tax brackets 12%, 25%, 35%
Eliminates deductions that encourage "government dependency"
Corporate Tax Rate of 20%
Expensing of Capital Assets
Elimination of Death Tax
Ends offshoring tax practice
Doubles the Standard Deduction
Small business tax rates capped at 25% (With rules to prevent those with higher income to limit their income to 25%)
An overall more simple, less loophole ridden tax code
Thoughts? I like the plan - but I see the GOP failing at life again and not getting anything to the President for signature.
In other news, I'm excited to make a thread on M4C GD that I can claim almost-SME status in :)
Euro -
Do you have any idea of the moneys involved in eliminating the AMT? Where will that be made up, or will it?
Isn't that a 15% drop in the corporate rate? What will that impact be? Expect to be made up by closing loopholes and increased production?
I assume, no I know, you are more ear to the ground on this than most of us, but understand the answers to those questions may not be available.
And finally, doesn't a simplified tax code bode ill for young accountants and CPAs?
Eurodriver
09-27-17, 18:22
Euro -
Do you have any idea of the moneys involved in eliminating the AMT? Where will that be made up, or will it?
Isn't that a 15% drop in the corporate rate? What will that impact be? Expect to be made up by closing loopholes and increased production?
I am not an economist, so I can't really speak to these questions as an "expert". My personal feelings probably lie somewhere between yours and a heartless libertarian's. I think without steep spending cuts this will cause the deficit to increase, but I believe the likelihood of the decrease in revenues being made up for by repatriation of businesses and income as well as an increase in production is high. The cuts being offset entirely by the increases is unlikely.
I have several clients that are Fortune 500 companies - some with a significant manufacturing presence. Of those, most have significant overseas manufacturing facilities, but one is almost entirely US based. The fact that they are all unanimously optimistic about tax reform is certainly interesting. And aside from the liberal fresh-out-of-college openly proud Communist staff accountants I have not met anyone (who matters) in the business world that really opposes anything about this plan...(The elimination of DPAD seems to be a sticking point with them, of all things) Without giving out too much PII, I have coworkers who have been directly involved with the Trump Administration developing this tax code. They wouldn't be openly proud of that if they felt it was going to harm our clients.
I assume, no I know, you are more ear to the ground on this than most of us, but understand the answers to those questions may not be available.
And finally, doesn't a simplified tax code bode ill for young accountants and CPAs?
I can promise you that the finalized version of income tax reform will not be simple :) Additionally, there is a lot more that goes into tax work (which is not my primary area of practice, anyway) other than federal income tax. I.E. SS, FUTA, SUTA, property taxes, sales taxes, state income taxes, local taxes, international taxes, etc. I am sure if I had my life's earnings tied up in a small personal income tax practice I'd feel different, but my desire to see the country succeed far outweighs any career goals. (I'll become a cop if things go south)
Thoughts above.
26th,
Eliminate the EITC and you'd make up quite a bit of revenue. I can see (maybe, but personally I think EVERYONE should pay something) having no federal income tax burden due to income being "low", but getting a check and you didn't even pay anything? Horsepuckey since Reagan signed it.
As of 2012 the EITC spent $56 billion of other taxpayer's money. That's not a small amount.
SeriousStudent
09-27-17, 18:48
I'd love to see this happen.
I'd also love a 3-day weekend with Charlize Theron in a Las Vegas hotel room. Sadly, I think both have about the same likelihood of occurring.
Euro -
Do you have any idea of the moneys involved in eliminating the AMT? Where will that be made up, or will it?
Isn't that a 15% drop in the corporate rate? What will that impact be? Expect to be made up by closing loopholes and increased production?
I assume, no I know, you are more ear to the ground on this than most of us, but understand the answers to those questions may not be available.
And finally, doesn't a simplified tax code bode ill for young accountants and CPAs?
The AMT will bring in $38 billion in 2017. Dropping the EITC makes up for that and then almost another $20 billion.
I'd also love a 3-day weekend with Charlize Theron in a Las Vegas hotel room. Sadly, I think both have about the same likelihood of occurring.
From what I saw on Atomic Blonde, a pack of quality cigs and a bottle of Stoli and you'd at least have a shot.
Ends offshoring tax practice
People do not understand how US tax treatment of corporate profits outside the US (repatriation treatment) directly leads to offshoring. Actually, even enables offshoring.
Politicians make repatriation out to be a gift to corporations, when in fact not having a rational treatment incents corporations to move pretty much every job they can offshore.
1) cut staff in the US. Reduce US costs, profit up
2) hire them back offshore. Int'l costs go up
3) higher int'l costs used to offset Int'l profits, to the point of cancelling them out (local country and US)
4) avoid the double taxation on the int'l profits
Most Int'l corporations will offshore any position they can due to this. US, and to a certain extent, Canadian, companies are actively doing this.
All due to tax code. Without that, labor arbitrage is probably not worth the double bubble, inefficiencies, and cust sat hit.
The AMT will bring in $38 billion in 2017. Dropping the EITC makes up for that and then almost another $20 billion.
I'm not sure how I feel about the EITC, other than I think that the rates need adjusting (down). Beyond that I see it as a safety net for folks who are working but can not get a decent enough job.
I'm more than willing to help out folks who are trying, and like to think I am generally protective of children.
skywalkrNCSU
09-27-17, 19:11
I figure if they don’t get this passed I’ll use it as a good opportunity to get into some more stocks as the market will definitely take a hit, tax reform getting passed was priced in during the post election spike and if they can’t get healthcare done or tax reform there will likely be a correction. If it does get passed then I’ll enjoy some tax cuts. Sounds like a win win.
RetroRevolver77
09-27-17, 19:41
I'm not sure how I feel about the EITC, other than I think that the rates need adjusting (down). Beyond that I see it as a safety net for folks who are working but can not get a decent enough job.
I'm more than willing to help out folks who are trying, and like to think I am generally protective of children.
That's more of that wealth re-distribution. Seems like people are getting a lot of money they didn't earn and that needs to stop entirely. Times are tough for a lot of people but the person who actually earned that money should be the one to keep it.
7n6
PatrioticDisorder
09-27-17, 22:45
The Treasury Dept released the reformed tax plan today. Read the framework for yourself here: https://www.treasury.gov/press-center/press-releases/Documents/Tax-Framework.pdf
Big changes include:
Corporate AMT is eliminated
Personal AMT is eliminated
Three tax brackets 12%, 25%, 35%
Eliminates deductions that encourage "government dependency"
Corporate Tax Rate of 20%
Expensing of Capital Assets
Elimination of Death Tax
Ends offshoring tax practice
Doubles the Standard Deduction
Small business tax rates capped at 25% (With rules to prevent those with higher income to limit their income to 25%)
An overall more simple, less loophole ridden tax code
Thoughts? I like the plan - but I see the GOP failing at life again and not getting anything to the President for signature.
In other news, I'm excited to make a thread on M4C GD that I can claim almost-SME status in :)
If this is the same plan from a few months ago it wil punish a lot of "higher" income people like myself. Trump's plan while he was running for office was much better than this, that plan would have saved me a bunch. This is a lot like Rubio's proposed plan when he was running and I didn't like that at the time. I'm all for simplifying, but not if I am going to be punished. I hope it doesn't go through.
FromMyColdDeadHand
09-27-17, 23:27
If this is the same plan from a few months ago it wil punish a lot of "higher" income people like myself. Trump's plan while he was running for office was much better than this, that plan would have saved me a bunch. This is a lot like Rubio's proposed plan when he was running and I didn't like that at the time. I'm all for simplifying, but not if I am going to be punished. I hope it doesn't go through.
How will it increase yours?
I work for an American "Mittelstand" company that competes with divisions of Fortune 500 companies. I can't point to it directly, but since we have all of our production here in the US, but do supply globally (I've got 10 year VISAs for 3/4 of the BRIC)- I have always felt that our 'native' international competitors have been able to play with the books a bit- and that this small, but real advantage, compounded over years, is a significant part of their advantage.
I really want to get away from giving an exemption for state income taxes. We are subsidising these high tax states. They want to spend the money, don't make me chip in for it. Plus, it will hit the coastal elites right in the nuts.
If this is the same plan from a few months ago it wil punish a lot of "higher" income people like myself. Trump's plan while he was running for office was much better than this, that plan would have saved me a bunch. This is a lot like Rubio's proposed plan when he was running and I didn't like that at the time. I'm all for simplifying, but not if I am going to be punished. I hope it doesn't go through.
I take it that you are currently in between the proposed 25% tax bracket and the proposed 35% tax bracket and this new plan will push you into the higher bracket? That's the only place I can see someone not liking this plan. I'd love to know the circumstance that punishes you.
As for me, as the sole shareholder in a small business corporation, it looks like a significant savings for me and my company. Getting rid of the death tax is also a huge plus since I am a second generation owner with the third generation coming aboard next year.
The GOP will fail as usual. They couldn't negotiate thei way out of a wet paper bag with a sharp knife. :(
That's more of that wealth re-distribution. Seems like people are getting a lot of money they didn't earn and that needs to stop entirely. Times are tough for a lot of people but the person who actually earned that money should be the one to keep it.
7n6
That's another viewpoint, and a valid one, depending on your world view.
My view is that I've been pretty blessed, I don't mind helping folks that are trying. As I said, I'd like them to lower the threshold for maximum earnings.
PatrioticDisorder
09-28-17, 05:18
I take it that you are currently in between the proposed 25% tax bracket and the proposed 35% tax bracket and this new plan will push you into the higher bracket?
I don't like getting into specifics of what I do but I am a physician and I've been out of residency training for 15 months. It took me a long time to get here, I do ok but (especially with student loans) I can assure you I am very much middle class. I hope this fails, the last thing I need is to be punished by paying even more in taxes. Give me the Reagan tax cut that drops the top rate to 28% and I'd be very happy about that.
I don't like getting into specifics of what I do but I am a physician and I've been out of residency training for 15 months. It took me a long time to get here, I do ok but (especially with student loans) I can assure you I am very much middle class. I hope this fails, the last thing I need is to be punished by paying even more in taxes. Give me the Reagan tax cut that drops the top rate to 28% and I'd be very happy about that.
Agreed 100% I currently pay 33% and expect under this plan to pay 35% but it doesn't say where the lines are drawn.
Eurodriver
09-28-17, 06:50
Agreed 100% I currently pay 33% and expect under this plan to pay 35% but it doesn't say where the lines are drawn.
No it doesn't, so I'm not sure how anyone can get too worried yet. Not that I have any faith in government to fix anything but I doubt they are going to make 35% start at $200k.
It will be interesting to see how the Dems respond.
PatrioticDisorder
09-28-17, 07:10
No it doesn't, so I'm not sure how anyone can get too worried yet. Not that I have any faith in government to fix anything but I doubt they are going to make 35% start at $200k.
It will be interesting to see how the Dems respond.
35% started around 150k with the plan proposed in the spring (which I believe this is), I crunched the numbers and my taxes would go up, similar to Rubio's proposed garbage tax plan.
Grand58742
09-28-17, 07:39
It's very simple.
Five gallons of gas, delayed igniter, all the current US code on taxes. Start over.
Way, way, way too many loopholes and deferred situations and exemptions and whatnot to really get a good "reform" going. How to fix it? Plain and simple...
Start by making six brackets. $0.01 - $15K, $15K-35K, $35K-50, $50K-100, $100K-150, $150K+ of taxable income.
Bracket 1 - 5%
Bracket 2 - 10%
Bracket 3 - 15%
Bracket 4 - 20%
Bracket 5 - 25%
Bracket 6 - 30%
Zero exemptions, deductions, loopholes, credits, nothing. All income is taxable. If you are a US citizen and you earn money, regardless of where it is in the world, you pay taxes on it. None of this offshore sheltering nonsense. If you want to give up your US citizenship to avoid taxes, go for it. But you permanently give up that right and no visa shall be issued allowing you back into the country for any reason. You choose between your citizenship and playing the system that has been played for far too long.
No death taxes either. If States and local counties/cities want tax breaks and loopholes, let the individual citizens decide.
You want fair? There's fair. Take lawyers and accountants out of the equation and start fresh. Furthermore, reform welfare/unemployment benefits to the point where no work over a period of time equals no income. And stop making it pay better not to work rather than to work. Honestly, there's work in this nation to be had. But we've managed to convince the upcoming generation they are "better" than manual labor. The world needs ditch diggers, Danny. And just because you got your degree in Micronesian Historical Studies and can't find a job doesn't mean you get to live your life on my dime.
Turn unemployment/DHS type places into a works retraining program. You can't find a job and are in $100,000 debt from college loans? Here's a list of places that need workers and here's your list of schools to attend to change that paradigm that we'll pay for. Oh, you're only making $15 an hour starting out? Well son, learn to live within your means for a change.
ETA: Forgot to add in getting rid of payroll taxes. Businesses are taxed at the same rates on income as individuals.
My wife and I are D.I.N.K. We are in the neighborhood of ~ $140K combined gross. We don't itemize as our mortgage is an 8-year with like 2.99% APR and we pay extra each month, so not enough mortgage interest to write off. If it looks like we will pay more taxes I will be against this plan. Patriotism and my "fellow countrymen" ends at my wallet.
Eurodriver
09-28-17, 08:37
Patriotism and my "fellow countrymen" ends at my wallet.
Do you own any machine guns?
Do you own any machine guns?
Negative, no NFA items.
My wife and I are D.I.N.K. We are in the neighborhood of ~ $140K combined gross. We don't itemize as our mortgage is an 8-year with like 2.99% APR and we pay extra each month, so not enough mortgage interest to write off. If it looks like we will pay more taxes I will be against this plan. Patriotism and my "fellow countrymen" ends at my wallet.
With the house being paid off, the biggest deduction I have is my real estate taxes, which in Travis County are pretty stiff. Looks like that will go away. Sure gonna hate to lose it. Of course it depends on what I get in FIT reductions, if anything.
Eurodriver
09-28-17, 10:13
With the house being paid off, the biggest deduction I have is my real estate taxes, which in Travis County are pretty stiff. Looks like that will go away. Sure gonna hate to lose it. Of course it depends on what I get in FIT reductions, if anything.
The benefit, I see, is that it will force municipalities to reconsider raising rates and consider reducing them. Dems play the long game, so should we.
If your property taxes are $4000 and your current tax rate is 25%, that is $1,000 a year you are saving in income taxes by that write off. So your property taxes are really $3,000. Municipalities know this and are able to get away with taxing their citizens to run social programs. States are the same way.
Averageman
09-28-17, 10:15
I'm up for everyone paying something.
No one should get more back than they paid in.
FromMyColdDeadHand
09-28-17, 10:21
I don't have as much problem with the EITC. Look at it as the way lesser of three evils. At least they have a job, they are earning something and it is like a block grant at the individual level- no social program structure to soak up resources and determine if you are eligble for what is left over.
I don't have as much problem with the EITC. Look at it as the way lesser of three evils. At least they have a job, they are earning something and it is like a block grant at the individual level- no social program structure to soak up resources and determine if you are eligble for what is left over.
This makes the assumption that no one getting the EITC is receiving any other .gov bennies like SNAP.
Like I said, I'd tax a welfare check if it was up to me (I know that is an oxymoron). That said, even cutting them the slack of no federal income taxes owed is "enough". No way can I wrap my mind around paying them anything when they didn't contribute anything. I listed the cost of the EITC earlier in this thread. It's no small amount.
As of 2012 the EITC spent $56 billion of other taxpayer's money.
skywalkrNCSU
09-28-17, 10:38
I'm up for everyone paying something.
No one should get more back than they paid in.
Economics tells us that will only encourage sucking on the proverbial government teet for longer. If you remove the incentive for someone to work then they won’t. There needs to be a tiered approach that rewards people on government assistance for making more money so that they can, and are encouraged, to get off of said government assistance. Government assistance isn’t going anywhere so saying we should take it away is a pipe dream, given that we should look at how we can incentivize people to get themselves off of it.
The benefit, I see, is that it will force municipalities to reconsider raising rates and consider reducing them. Dems play the long game, so should we.
If your property taxes are $4000 and your current tax rate is 25%, that is $1,000 a year you are saving in income taxes by that write off. So your property taxes are really $3,000. Municipalities know this and are able to get away with taxing their citizens to run social programs. States are the same way.
I know all of that. Using your numbers (the real ones are much higher) if my property taxes are really 3,000, but will be 4,000 after losing the deduction, my property taxes just went up 33% per year! Not good when living on retirement income.
Whiskey_Bravo
09-28-17, 13:02
I like the plan - but I see the GOP failing at life again and not getting anything to the President for signature.
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Agreed 100%
35% started around 150k with the plan proposed in the spring (which I believe this is), I crunched the numbers and my taxes would go up, similar to Rubio's proposed garbage tax plan.
If that is the case mine will go up. Eff that.
I feel like I like the plan, but until I know the income levels for each proposed bracket I can't say for sure. If they are going to make 150k + be the top bracket it's a terrible plan. Especially with some of the deductions that would go away.
From what I saw on Atomic Blonde, a pack of quality cigs and a bottle of Stoli and you'd at least have a shot.
It'd be my luck that the "Monster" Charlize version would show up.
As far as the tax plan, I'm optimistic...for the moment.
"I've just got like, this 5.56 okay? And it's 55 grain ball. And everybody I've ever seen shot with it, it dicks them up."
---Clint Smith
Thunder Ranch
FromMyColdDeadHand
09-28-17, 16:10
I know all of that. Using your numbers (the real ones are much higher) if my property taxes are really 3,000, but will be 4,000 after losing the deduction, my property taxes just went up 33% per year! Not good when living on retirement income.
You could limit it to something like the average write off. I'd prefer if they just took it away after a certain income- but that is mainly to stick it to the progressive elites in the coastal high tax states.
It would make state single payer even more expensive.
You could limit it to something like the average write off.
Don't unserstand what you mean by this.
FromMyColdDeadHand
09-28-17, 16:58
Don't unserstand what you mean by this.
What is the average deduction that people take for state and local taxes, and then just cap the deduction to max out at that amount. That way you cover most peoples state taxes, but the place with really high taxes don't get subsidized by the rest of us.
Averageman
09-28-17, 17:17
Just a couple of things about taxes that I truly believe.
We're Americans, we are in this together, everyone needs to pay something, no matter how small that something might be.
If we don't get a firm hand on the rudder and get real with spending, the tax cuts are just a quicker way to go broke faster.
Why not come up with a damned budget and decide what we are going to spend before we decide what we are going to cut?
Repeal the ACA anyone?
No, there simply aren't enough adults in the room, this too will fail.
Eurodriver
09-28-17, 17:58
I know all of that. Using your numbers (the real ones are much higher) if my property taxes are really 3,000, but will be 4,000 after losing the deduction, my property taxes just went up 33% per year! Not good when living on retirement income.
So get your local officials to lower them back down to a more reasonable level!
The Federal govt should not subsidize the tendency for states and municipalities to tax the shit out of people.
Id like to see where the brackets are drawn. How those are set will determine more for me than anything else. My family has been standard deductions + some teacher expenses and student loan interest deductions. Need more detail on implementation before being able to decide if it'll be good or bad for me.
FlyingHunter
09-28-17, 19:44
The AMT will bring in $38 billion in 2017.
I think that $38 Billion estimate is too high...I just checked Gunbroker and found an AMT for a little under $300. A Hardballer .45 no less...
http://www.gunbroker.com/item/699585864
PatrioticDisorder
09-28-17, 21:05
Id like to see where the brackets are drawn. How those are set will determine more for me than anything else. My family has been standard deductions + some teacher expenses and student loan interest deductions. Need more detail on implementation before being able to decide if it'll be good or bad for me.
Bottom line is the top bracket needs to come back down to 28%.
The thing I notice about discussions about things such as taxes, mandatory service, and so on: Everybody wants the other guy to jump on the grenade.
ramairthree
09-29-17, 02:35
At the end of the day,
.gov need to:
Spend less money
Pay out less benefits to less people
Take in revenue other than taxes on its citizens
Not take in legal or illegal non productive personnel
Trickle down economics gets a bad rap.
It works like this.
Joe highly productive, trained, educated citizen pays 120k in taxes. He turns down extra work and business instead of working for 50 cents on the dollar in federal, state, and local taxes in the highest bracket now. Or he schemes ways to shelter, hide, etc.
If he paid 60k in taxes on the same income, he would likely take on that extra work and be more productive, and end up paying more than the 60k. He would likely spend the 60k he did not spend on taxes at the local engine shop, car dealership, pool installer, gun store, etc. Directly injecting that 60k into the pockets of working citizens who will make more money, pay more taxes, etc. It works great. It is money put to better use, most assuredly, than what the government would do with it.
But, it is a hated concept that " does nothing for those that need it most!"
No shit, if you are a sit on your ass leach, you are not getting injections of that money. Because you are not out working selling fishing boats, repairing motorcycles, building decks, or otherwise gainfully employed doing shit I would rather spend my money on instead of taxes.
There is a ton of money to be saved.
50% VA disability for some underperforming shitbag that got a hysterectomy for chronic pelvic pain in the service. WTF?
A GS14 job for the most mediocre underwhelming shit branch O5 when they retire. In a GS job they created before they retired? Hell no.
You want help with decent housing and medical benefits for doing nothing but sitting on your ass all day and laying on your back all night pumping out crotch fruit? Nope. Work any job, no matter how little it pays. Then .gov can step in to keep your head above water. The working poor being worse off than the non working has got to end.
Disability? Ok. You can come sit and watch TV at "work." Like study hall or something.
And it's not just the Feds. Cities are beyond bankrupt with some of the salaries and pension plans that are far more genourous than they are for cohorts of much more quality dense personnel. Does it make sense an obese NYC cop with a 2 digit IQ can make more and have a better retirement than a Delta Operator? (Apologies to NYC cops that are not obese and have three digit IQs)
And for the taxes that are collected, put it where it belongs. It's bad enough the vast majority of citizens will take more SS and Medicare than they ever paid in, but at least put the money in the pot.
And make it a law to spend what you have, not more than you have. .gov took in X dollars. The budget is x dollars nest year. Not three times x dollars.
The worst part is .gov takes half our money, and we can do nothing about it. At least if someone came to my house in the middle of the night to take my shit I have the option to do something.
skywalkrNCSU
09-29-17, 08:46
I have never heard anyone say, well I would try to make some more money but it will be taxed so I better not. Instead people who want to earn more money do the work anyways. It’s a good story and all but it’s just not realistic.
Reaganomics sounds good but it has never been proven and if anything it has been shown to not work, especially since the gov can’t get spending down ever.
I have never heard anyone say, well I would try to make some more money but it will be taxed so I better not. Instead people who want to earn more money do the work anyways. It’s a good story and all but it’s just not realistic.
Reaganomics sounds good but it has never been proven and if anything it has been shown to not work, especially since the gov can’t get spending down ever.
Me. I have turned down work. As a RN there is a magic number with overtime that once I cross it it ceases to be profitable because the taxes are so onerous. A holiday weekend? Forget about it.
I agree that Reaganomics creates more economic problems than it solves, especially because the government just can't stop spending money.
skywalkrNCSU
09-29-17, 09:13
Me. I have turned down work. As a RN there is a magic number with overtime that once I cross it it ceases to be profitable because the taxes are so onerous. A holiday weekend? Forget about it.
I agree that Reaganomics creates more economic problems than it solves, especially because the government just can't stop spending money.
Fair enough. That’s not creating a net negative for the economy though as someone else will pick up those hours I would imagine.
ramairthree
09-29-17, 10:09
I have never heard anyone say, well I would try to make some more money but it will be taxed so I better not. Instead people who want to earn more money do the work anyways. It’s a good story and all but it’s just not realistic.
Reaganomics sounds good but it has never been proven and if anything it has been shown to not work, especially since the gov can’t get spending down ever.
I did not see it in the military obviously.
I see it frequently now.
Someone's at a point where everything they work past a certain point is something along the lines of 46% state and federal income taxes. Your time back and forth, gas, not having a day off that week, etc. Just add up to fuk it, I would rather have the day off.
Now, i am not asking you to fell sorry for someone making that much. Maybe it's the best damn tuner in the state charging over 200$ an hour working on fun cars, some people have a knack or a talent for stuff. Maybe it's the best paint and body work man doing restorations, with artistic skill. Or the emergency department physician with 11 or more years of higher education and training. Or a veterinarian catering to rich trust fund old money families with expensive horses. Or the former operator that can pocket 10k in a weekend class. Either way, they each have some ability, education, training, work hard doing something most can't, and there is a reason they make more than the guy holding the stop sign on the road crew.
I AM asking you to consider it ludicrous for the government to take so much of somebody's earnings.
I AM asking you to consider what you would have done with 50% of what you paid in taxes still in your pocket, and if it would have been better off the way you spent it than what the government did with it.
skywalkrNCSU
09-29-17, 10:18
I did not see it in the military obviously.
I see it frequently now.
Someone's at a point where everything they work past a certain point is something along the lines of 46% state and federal income taxes. Your time back and forth, gas, not having a day off that week, etc. Just add up to fuk it, I would rather have the day off.
Now, i am not asking you to fell sorry for someone making that much. Maybe it's the best damn tuner in the state charging over 200$ an hour working on fun cars, some people have a knack or a talent for stuff. Maybe it's the best paint and body work man doing restorations, with artistic skill. Or the emergency department physician with 11 or more years of higher education and training. Or a veterinarian catering to rich trust fund old money families with expensive horses. Or the former operator that can pocket 10k in a weekend class. Either way, they each have some ability, education, training, work hard doing something most can't, and there is a reason they make more than the guy holding the stop sign on the road crew.
I AM asking you to consider it ludicrous for the government to take so much of somebody's earnings.
I AM asking you to consider what you would have done with 50% of what you paid in taxes still in your pocket, and if it would have been better off the way you spent it than what the government did with it.
Oh I’m all for lower taxes but we can’t lower taxes and not lower spending. Before we cut taxes we need to get spending under control but that is far more difficult.
ramairthree
09-29-17, 10:28
I have never heard anyone say, well I would try to make some more money but it will be taxed so I better not. Instead people who want to earn more money do the work anyways. It’s a good story and all but it’s just not realistic.
Reaganomics sounds good but it has never been proven and if anything it has been shown to not work, especially since the gov can’t get spending down ever.
First line from me was spending has to be kept down.
Example- schools are spending a fortune on smart boards, computers, etc. And still putting out uneducated dumbasses.
My daughter went to a science high school, with most rooms having chalk or dry erase boards. She got 4s and 5s on AP calc, bio, etc. And was a national merit finalist. Over a million and a half students took a test. One percent of that became semi-finalists. That was trimmed further to become finalists. With, gasp, chalkboards instead of a giant iPad on the wall.
trickle down, by the time politicians get done with it, ends up being more along the lines of,
The guy with a vast fortune has a better way to increase that fortune and might buy an extra yacht if he pays less taxes.
Those are not guys directly doing work for pay kind of thing. The above average income to affluent people directly working for compensation is who it needs to benefit. They get squeezed the hardest. They drop the free coin locally when they have it.
Yes, it is theory. Based on stuff like what people do with their tax refunds.
If I was in prison getting ass raped, my theory would be that I would like it better being out of prison not getting ass raped. You say that sounds good and all but has never been proven. I am willing take a chance and step out on that limb.
skywalkrNCSU
09-29-17, 10:34
We’ve stepped out on that limb before though, that’s why it has the moniker Reaganomics
ramairthree
09-29-17, 10:35
Fair enough. That’s not creating a net negative for the economy though as someone else will pick up those hours I would imagine.
Nope. Stuff like that goes short all the time. shittier conditions for those working and less safe conditions to the people being served.
There are beyond just financial issues for some of this.
A lot of it is, as I mentioned in my post, just financial, recreational, etc.
But by now are you getting the point that what " you have never seen" is stuff going on and happening everyday? Or what you "would imagine" is in fact, exactly not what is going to happen?
What we should do:
Limit the federal government drastically. I mean cut two heads off the beast, slash every single alphabet agency and outright get rid of others. Create firm budgets and not allow over spending.
End the war on drugs and the war on poverty. They both failed from there inception and have exacerbated the issues ten fold.
Abolish the Federal Reserve
Abolish the IRS
Institute an actual flat tax, not percentage based but a flat sum tax that every person pays the same amount.
Stop injecting billions of dollars into other countries.
Focus on revitalizing our manufacturing and mining industries- this means getting rid of 75% of the BS regulation on the the books.
Re engineer our education system to create critical thinkers so we can lead the way in the technologies and robotics industries and ignite another space race.
Start reaching out to other planets for resource mining and exploration. This fuels growth and innovation across the entire spectrum of industries and of our economy.
Subsidies need to be reighned in across the board. Can't compete and be profitable- innovate and find a way to, your getting cut off.
I have never heard anyone say, well I would try to make some more money but it will be taxed so I better not. Instead people who want to earn more money do the work anyways. It’s a good story and all but it’s just not realistic.
Reaganomics sounds good but it has never been proven and if anything it has been shown to not work, especially since the gov can’t get spending down ever.
Absolutely corporations decide to do or not do work based on tax impact. To think otherwise is naive.
At an individual level, I've had to tell my wife that her part time job pushed us in different tax situations. (AMT a couple of times)
Then again, that's not paying a few more percent on overtime work, etc
skywalkrNCSU
09-29-17, 17:45
Absolutely corporations decide to do or not do work based on tax impact. To think otherwise is naive.
At an individual level, I've had to tell my wife that her part time job pushed us in different tax situations. (AMT a couple of times)
Then again, that's not paying a few more percent on overtime work, etc
Of course corporations do, the example was an individual forgoing potential money strictly because of the taxes. My broader point was directed to trickle down economics and how it doesn’t quite work as advertised. Everything is a cost benefit analysis with scarcity and choice and you reach a point where the next dollar isn’t worth the time for all tax brackets. If someone really wants to make some more money they are going to go for it if their tax implications are 28% or 35% because the alternative is $0.
Averageman
09-29-17, 18:11
You know just as a test, I would like to see someone say, "lets make tax brackets with letters A through D" four brackets" then we have a budget and at the end of the year you get your bill.
Oh the holy hell and ramifications due when your Reps demand a check for screwing up finances.
It would change the whole way things are run.
Oh, that and everyone pays in, no one gets more than they paid in and everyone has a chance to punch their rep in the face when he overspends come election day.
PatrioticDisorder
09-29-17, 19:50
If someone really wants to make some more money they are going to go for it if their tax implications are 28% or 35% because the alternative is $0.
Nonsense, it's a disincentive to work more and spend less time with family and doing what it is you really like spending your time doing. On the flip side, jacking up the tax rate is certainly an incentive to find your work-life balance. People like myself who are basically enslaved will work regardless (until they are no longer enslaved), but for many people who have achieved economic freedom will work less. Nobody likes being punished for working hard.
Nonsense, it's a disincentive to work more and spend less time with family and doing what it is you really like spending your time doing. On the flip side, jacking up the tax rate is certainly an incentive to find your work-life balance. People like myself who are basically enslaved will work regardless (until they are no longer enslaved), but for many people who have achieved economic freedom will work less. Nobody likes being punished for working hard.
You are ascribing your motivations and feelings to everyone. Folks aren't all wired the same.
I've worked with folks (same organization, same time frame) who on the one hand said 'eff it, she's getting X more than me and doing half the work, I ain't doing nothing I don't have to' and then on the other hand guys that demonstrated 'hey, I don't give an eff what she makes, I'm compensated fairly and I'm creating shit, get the eff out of my way.'
Right now I can think of two guys who are making less and apparently enjoying it more. Both quit good jobs, one started a lawn care service, the other an independent shipping store. Talked to them both about it, both said 'I wanted to work for myself.' (ETA: one will probably grow it to be equal to or slightly greater than what he had, the other will probably fail, JMO)
I get that some people feel enslaved at work, but just as many don't, they enjoy their work, for many reasons beyond just pay.
All fish don't swim the same.
If your work is actualizing, if what you do is worthy of you, it isn't all about the money, is it?
PatrioticDisorder
09-29-17, 21:25
You are ascribing your motivations and feelings to everyone. Folks aren't all wired the same.
I've worked with folks (same organization, same time frame) who on the one hand said 'eff it, she's getting X more than me and doing half the work, I ain't doing nothing I don't have to' and then on the other hand guys that demonstrated 'hey, I don't give an eff what she makes, I'm compensated fairly and I'm creating shit, get the eff out of my way.'
Right now I can think of two guys who are making less and apparently enjoying it more. Both quit good jobs, one started a lawn care service, the other an independent shipping store. Talked to them both about it, both said 'I wanted to work for myself.' (ETA: one will probably grow it to be equal to or slightly greater than what he had, the other will probably fail, JMO)
I get that some people feel enslaved at work, but just as many don't, they enjoy their work, for many reasons beyond just pay.
All fish don't swim the same.
If your work is actualizing, if what you do is worthy of you, it isn't all about the money, is it?
I am enslaved due to the necessity of taking out student loans for medical school, then going through residency for several years accruing a ton of interest because the student loan payment during residency would have litterally been more than I netted in a month.... This after working full time and paying my way through undergrad (no undergrad student loans). I love what I do, days fly by, long days, I get to help people, I also have to deal with other non-clinical BS but overall I enjoy it. I am in the red just starting life in my 30s and I almost certainly will be in the red for many many years to come... Anyway I just wanted to straighten that point out.
As to your other point, yes not everyone would respond to increasing taxes by cutting back on work. Many would cut back and beli from it is a majority of people, however I do not have hard data on that to give you.
I am enslaved due to the necessity of taking out student loans for medical school, then going through residency for several years accruing a ton of interest because the student loan payment during residency would have litterally been more than I netted in a month.... This after working full time and paying my way through undergrad (no undergrad student loans). I love what I do, days fly by, long days, I get to help people, I also have to deal with other non-clinical BS but overall I enjoy it. I am in the red just starting life in my 30s and I almost certainly will be in the red for many many years to come... Anyway I just wanted to straighten that point out.
As to your other point, yes not everyone would respond to increasing taxes by cutting back on work. Many would cut back and beli from it is a majority of people, however I do not have hard data on that to give you.
I completely understand. I hope your joy from what you do helps you 'through your slavery.' What you are doing takes a dedication that I did not think I had when choosing careers.
I am enslaved due to the necessity of taking out student loans for medical school, then going through residency for several years accruing a ton of interest because the student loan payment during residency would have litterally been more than I netted in a month.... This after working full time and paying my way through undergrad (no undergrad student loans). I love what I do, days fly by, long days, I get to help people, I also have to deal with other non-clinical BS but overall I enjoy it. I am in the red just starting life in my 30s and I almost certainly will be in the red for many many years to come... Anyway I just wanted to straighten that point out.
As to your other point, yes not everyone would respond to increasing taxes by cutting back on work. Many would cut back and beli from it is a majority of people, however I do not have hard data on that to give you.
As someone who who went through med school with only a 100 grand on debt by virtue of luck more than intention, pay off those loans quickly. Be crazy, live cheaply. Make money. Put yourself in a higher tax bracket. Live on a tight budget, and punch it in the nose. It won't go away unless you focus on it.
My wife Amy I paid it off in 2 years, and it was freeing deciding on whether to do fellowship, where we were going to live, and what kind of job I'd get. You were accurrate. You are a slave more than you know.
Sorry for the tread interrupt.
My marginal federal taxes is 33%, and I consider myself a higher than average earner. I probably wouldn't work less if taxes were 40%.
PatrioticDisorder
09-30-17, 07:28
I appreciate those words Texas42 & 26 Inf. Back on topic, I do like just about everything else about the tax plan, I like that many people (both lower income and higher income) than myself will be getting a tax break. I like what Trump is doing on the corporate side, I do believe that portion of his plan will help create jobs in the economy, which will certainly help many people.
I guess I just feel like I'm being punk'd after voting for a guy in the primary and general whose tax plan was very different when he was a candidate and here I am one of the few that would see their taxes go up from Obama levels, by a Republican. I remember barely having a dollar in my pocket as a teenager and believing it was immoral to soak high income earners with higher tax rates. I thought it was wrong then, I certainly believe it is wrong now.
I'm just curious, what is the average MD debt after completion of all schooling? For some reason I was thinking $200-250k for postgrad, but that may be dated.
Just can't imagine. Worked very hard (and scrimped) to get three kids graduated from undergraduate college and on their own debt free. Even state schools with great scholarships and graduating on time or early (3.5 or 4 years), 2 were $40k'ish out of pocket each, and 1 was still $15-20k'ish even at USMA. With any tax breaks largely phased out even before #1 graduated.
I know the breakeven for MDs can be pretty quick (under 5 years?) but this does not seem like a sustainable situation.
I'm just curious, what is the average MD debt after completion of all schooling? For some reason I was thinking $200-250k for postgrad, but that may be dated.
Just can't imagine. Worked very hard (and scrimped) to get three kids graduated from undergraduate college and on their own debt free. Even state schools with great scholarships and graduating on time or early (3.5 or 4 years), 2 were $40k'ish out of pocket each, and 1 was still $15-20k'ish even at USMA. With any tax breaks largely phased out even before #1 graduated.
I know the breakeven for MDs can be pretty quick (under 5 years?) but this does not seem like a sustainable situation.
My class median was 140k. I did go to one of the cheaper school in the country. I knew a fellow that owed 600k ...and wasn't making career decisions to pay it off. Those stories aren't that hard find. Medscape survey show that almost half have over $200k
It's not hard to find a job making $200k... but a lot of jobs make $150k too.
http://www.medscape.com/slideshow/residents-salary-and-debt-report-2017-6008931#12
Trickle down economics gets a bad rap.
It works like this.
Joe highly productive, trained, educated citizen pays 120k in taxes. He turns down extra work and business instead of working for 50 cents on the dollar in federal, state, and local taxes in the highest bracket now. Or he schemes ways to shelter, hide, etc.
If he paid 60k in taxes on the same income, he would likely take on that extra work and be more productive, and end up paying more than the 60k. He would likely spend the 60k he did not spend on taxes at the local engine shop, car dealership, pool installer, gun store, etc. Directly injecting that 60k into the pockets of working citizens who will make more money, pay more taxes, etc. It works great. It is money put to better use, most assuredly, than what the government would do with it.
But, it is a hated concept that " does nothing for those that need it most!"
No shit, if you are a sit on your ass leach, you are not getting injections of that money. Because you are not out working selling fishing boats, repairing motorcycles, building decks, or otherwise gainfully employed doing shit I would rather spend my money on instead of taxes.
Trickle down certainly does work. I don't know why this is such a hard concept to understand. Off the top of my head i can think of at least two dozen people I grew up with that owned their own businesses before they were 25. Plumbers, roofers, auto mechanics, concrete and pool business, landscaping, personal training and then their own gym, nail salon, hair salon, barber shop, auto detailing, used car lot, restaurant, home remodeling, tree cutting.
In the end, each of those people need the other for their services. The less taxes each of them pay, the more goods and services they can spend their money on, either as individuals or as a business.
ramairthree
10-01-17, 11:01
Yeah, i’m Not sure what it is skywalker has a bone to pick with.
He says nobody declines more work as the taxes get to a point it is not worth it to them.
I know a ton of people that do. Contractors that carefully manage their earnings, stateside time, etc.. emergency physicians in demand that could work every day of the month backing offf hard when they hit the top bracket. An bodywork, paint guy that only takes on what he wants to do. He works 4 days a week. An engine guy that only likes to work on certain builds. All turning down more work based on it not being worth it to them to do more,
He says someone else just covers that work. Nope.
He says trickle down does not work. My theory is based on tax refunds. Entire economies are based on getting people’s tax refunds spent on their products. I assure, while just a theory, my concept of,
If you pay more than 125k in taxes, you get half of it back, will result in the exact kind of trickle down spending you see at tax refund time. Those checks, just like the other tax refunds, will quickly find their way into the local economy.
The whole tax system is ridiculous. It rewards the unproductive and lazy. It is a pretty good deal for the wildly wealthy living off the money they already have making money or fantastically rich.
It is pretty punishing on those working for direct compensation.
An bodywork, paint guy that only takes on what he wants to do. He works 4 days a week. An engine guy that only likes to work on certain builds. All turning down more work based on it not being worth it to them to do more,
I stay out of tax debates, outta my lane so to speak.
However, most body & paint shop guys as well as engine builders are way more "cash in pocket types" then most think. Unless they're part of a dealership or getting a repair check from an insurance company. Want to get a better deal at the engine builders....ask him how much for the same thing in cash with no receipt! Same thing at body shops. Those guys usually take all the work they can get. A lot of them pay the help in cash or at least in part in cash. Been in the car thing along time, dealt with a lot of them.
Back to tax talk, NYH1.
We shouldn't even have tax brackets in the first place. There shouldn't be different percentages or even different amounts people pay in taxes. We should all pay a flat sum tax. Everyone pays the same amount.
It's complete and utter madness that everybody gets an equal vote in this country, but some pay for the vast majority of taxes. It's ludicrous!
Can you imagine if companies handled shareholders/voting rights the same way?!?!?!? Guy with one share has the same vote as a guy with a 100 shares...
Can anyone articulate a logical reason why some have to pay more, but don't get anything more for it?
It's theft. Redistribution of wealth. It's bullshit!
It only really hurts the hard working middle class. The poor stay poor and the top 1% stay wealthy.
Averageman
10-01-17, 16:53
I was thinking that depending on how the brackets end up shaking out, it might be a very, very smart time to move money out of a 401k and in to a tax deferred retirement fund.
Depending on your age, bracket and income this might be a very smart move.
We shouldn't even have tax brackets in the first place. There shouldn't be different percentages or even different amounts people pay in taxes. We should all pay a flat sum tax. Everyone pays the same amount.
I'm for a flat tax or a federal sales tax. The problem with 'everyone pays the same amount' is that while 25,000 may be a third of my taxable income, it is half to three quarters of some folks.
Can anyone articulate a logical reason why some have to pay more, but don't get anything more for it?
I can give it a shot, but I'm sure you won't agree. :rolleyes:
Position: In Defense of a Progressive Tax Rate, by 26 Inf
If you leave out folks that are getting EITC, as your income rises, so does the amount you depend on government services/infrastructure to make your money, or enjoy yourself.
As an example, I don't know what the FAA spends each year on our airport, the traffic in and out consists of business aircraft and some general aviation, generally not the realm of the lower income folks.
If the infrastructure supported by taxes wasn't in place how would anyone get their goods to market? (I'm assuming you are in some kind of fund - so you probably have a stake of some sort in those companies).
Folks in the south end of my community are not nearly as worried about an invasion by a foreign enemy upsetting their applecart as are the folks who live around the golf course.
Speaking of that, how much money have we spent insuring that oil continues to flow? Sure that benefits us all, but who benefits the most? Those guys are getting more bang for their buck out of the dollars they pay in taxes for defense, than Carl the Custodian is.
Folks at higher tax levels are generally more established and a progressive rate taxes the pressure off younger members of society, and those in lower paying jobs, giving them opportunity to prosper as well.
That's all I got.
In the next episode: Progressive Tax Codes Oppress the Masses
I was thinking that depending on how the brackets end up shaking out, it might be a very, very smart time to move money out of a 401k and in to a tax deferred retirement fund.
Your 401K is a tax-deferred retirement fund, no?
Averageman
10-01-17, 18:48
Your 401K is a tax-deferred retirement fund, no?
No it isn't tax deferred. It's taxable as income when I begin drawing from it at as soon as 59.5 years of age.
I was thinking depending on how the brackets work out I might begin moving it in to a tax deferred IRA. Only the good Lord and my Tax Guy know how many times I will pay taxes on the money I earned and set back for retirement. If I can eliminate one it might mean a difference.
The beating these guys at the IRS put on my Military Retirement is enough to make you cry.
No it isn't tax deferred. It's taxable as income when I begin drawing from it at as soon as 59.5 years of age. I was thinking depending on how the brackets work out I might begin moving it in to a tax deferred IRA. Only the good Lord and my Tax Guy know how many times I will pay taxes on the money I earned and set back for retirement. If I can eliminate one it might mean a difference. The beating these guys at the IRS put on my Military Retirement is enough to make you cry.
Still not sure I am following you. Is it manditory that you start drawing on your 401K at 59.5 YOA? If not why not let it ride there or are the investment options not good?
Also, tax deferred IRAs have required minimum required distributions (RMDs) at age 70.5 and they (RMDs) are fully taxed as ordinary income.
When I retired I had the option of leaving my 401K in place but I did not. I took the whole amount and rolled it into a tax-deferred IRA because the investment options were much better where I reinvested, but now I am in the RMD trap, which has increased my ordinary income to the point where it is also costing me taxes because the level of my total ordinary income increased to the point where:
1. I lost tax-free status on certain other income
2. Certain deductions were limited or lost, and
3. My new income level also bumped me up a bracket.
Your 401K is a tax-deferred retirement fund, no?
Zackly, and unless you plan on pulling out enough each year to get into higher brackets ($100-200/yr) probably a non issue.
Remember, you are taxed only on withdrawls.
Put another way, unless you have $3.5-4m in your 401k, probably won't be an issue.
When I retired I had the option of leaving my 401K in place but I did not. I took the whole amount and rolled it into a tax-deferred IRA because the investment options were much better where I reinvested, but now I am in the RMD trap, which has increased my ordinary income to the point where it is also costing me taxes...
Maybe I'm just lucky, but my 401ks have had great options, including a brokerage where pretty much any stock or fund can be held. And low fees.
My current one is not great, but has the fund's I need. But I was able to leave my main nest egg in my past company 401k and it's pretty good.
Never been tempted to move it into an IRA for the reasons you've stated.
Will probably roll some or all of my minimal pension into an IRA as a lump sum, though.
Averageman
10-01-17, 20:43
The cash in my 401k will be considered taxable income.
The money in my IRA will be tax free when I withdraw it.
My thought is dependent on how the brackets shake out and where I am in them I am considering moving the money around in to an investment plan that will be tax free when I need to take it out.
The chance to make such a move might not come again later.
Considering everything else I plan to live on when I retire will be taxed, I'm looking for an edge here.
No it isn't tax deferred. It's taxable as income when I begin drawing from it at as soon as 59.5 years of age.
That's pretty much the definition of tax deferred. Not taxed at contribution, nor is growth. Tax is deferred until you withdraw it.
The cash in my 401k will be considered taxable income.
The money in my IRA will be tax free when I withdraw it.
My thought is dependent on how the brackets shake out and where I am in them I am considering moving the money around in to an investment plan that will be tax free when I need to take it out.
The chance to make such a move might not come again later.
Considering everything else I plan to live on when I retire will be taxed, I'm looking for an edge here.
Except you pay tax on your IRA before you put the money in, at typically higher rates than you would during retirement. The only difference is:
- IRA growth/compounding is not taxed
- the IRA min withdrawal, which has the effect of increasing the tax you pay.
- relative tax rates during working years vs retirement
Long way (10-15 yrs) from retirement it may be worth converting.
Less than that, I'm inclined to gamble.
I can give it a shot, but I'm sure you won't agree. :rolleyes:
Position: In Defense of a Progressive Tax Rate, by 26 Inf
If you leave out folks that are getting EITC, as your income rises, so does the amount you depend on government services/infrastructure to make your money, or enjoy yourself.
As an example, I don't know what the FAA spends each year on our airport, the traffic in and out consists of business aircraft and some general aviation, generally not the realm of the lower income folks.
If the infrastructure supported by taxes wasn't in place how would anyone get their goods to market? (I'm assuming you are in some kind of fund - so you probably have a stake of some sort in those companies).
Folks in the south end of my community are not nearly as worried about an invasion by a foreign enemy upsetting their applecart as are the folks who live around the golf course.
Speaking of that, how much money have we spent insuring that oil continues to flow? Sure that benefits us all, but who benefits the most? Those guys are getting more bang for their buck out of the dollars they pay in taxes for defense, than Carl the Custodian is.
Folks at higher tax levels are generally more established and a progressive rate taxes the pressure off younger members of society, and those in lower paying jobs, giving them opportunity to prosper as well.
That's all I got.
In the next episode: Progressive Tax Codes Oppress the Masses
I could be wrong, but I think he meant a flat tax. Everyone pays the same %, not amount.
That makes the most sense to me anyways. It's the right way to do it. Should be a flat tax, no exemptions/exemptions. Corporate rate and individual rate.
Crow Hunter
10-02-17, 13:07
The cash in my 401k will be considered taxable income.
The money in my IRA will be tax free when I withdraw it.
My thought is dependent on how the brackets shake out and where I am in them I am considering moving the money around in to an investment plan that will be tax free when I need to take it out.
The chance to make such a move might not come again later.
Considering everything else I plan to live on when I retire will be taxed, I'm looking for an edge here.
We may be getting some terminology mixed together. Not calling you out specifically Averageman.
There are multiple types of tax deferred accounts.
-401k, 403b, 457, etc:
These are workplace accounts allow you to put up $18,000/year ($24,000 over 50) tax free money from your pay into an account that grows tax free until you withdraw it. At the time you choose to pull it out of the account, it will be taxed at normal marginal income tax rate. You can begin taking them out at 59.5 without paying a penalty but don't have to until you reach 70.5. At that time, you HAVE to take Required Minimum Distributions (RMDs) based on a specific schedule tied actuarially to your age and the total account value. Investment options are generally restricted as to what is offered in your employer plan. (Unless you are lucky and have a brokerage plan)
-Traditional IRA:
These are also a tax-deferred account (pre-tax if you meet the income restrictions) that lets you put up to $5,500 ($6,500 over 50) into an investment of your choosing at a provider of your choosing with identical rules to the 401k et al plans.
-Roth IRA - These have the same limits as the Traditional IRA above but you make after tax contributions and you pay no taxes when you take distributions after 59.5 and no RMD requirements (you can leave them intact to your heirs)
-Roth 401k - Like a 401k but with Roth rules.
Under certain circumstances (normally separation from employment) you can do a rollover from a 401k to a rollover IRA (which is what AustinN4 did) which still follows the same rules as a 401k/Traditional IRA but allows you more choice in where to put your money.
You can also convert your Traditional IRA to a Roth IRA, but you have to pay taxes on what you convert at your marginal tax rate. So if you have a Traditional IRA with $10,000 in it and you convert it to a Roth IRA, you pay taxes on that $10,000 at whatever your highest marginal tax rate is. So if you are $5,000 away from the 25% bracket and you do the conversion, you will pay 15% on $5,000 and 25% on the remaining $5,000.
It is technically even more complicated than this but this is the general overview. My other hobby beside guns is investing. ;)
No method allows you to avoid paying taxes on it at some point. Either pay me now (Roth) or pay me later (IRA/401k).
You can do some manipulation of what you do pay though by maxing out your marginal brackets and tax loss harvesting, etc but that presumes that all the tax laws stay the some and obviously, that shouldn't be counted upon.;)
We may be getting some terminology mixed together. Not calling you out specifically Averageman.
There are multiple types of tax deferred accounts.
---snip---
It is technically even more complicated than this but this is the general overview. My other hobby beside guns is investing. ;)
No method allows you to avoid paying taxes on it at some point. Either pay me now (Roth) or pay me later (IRA/401k).
You can do some manipulation of what you do pay though by maxing out your marginal brackets and tax loss harvesting, etc but that presumes that all the tax laws stay the some and obviously, that shouldn't be counted upon.;)
Good post. I thought about doing something similar but was too lazy. IRS Pub 590 answers a lot of questions.
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