quote:

Originally posted by BurtonRW:
the median income in our county is in the mid-40K range last I checked.
-Rob

Check again. Looks like $97K now.

https://datausa.io/profile/geo...e-arundel-county-md/

Yeah, inflation is a bitch.

I would say their tax burden is somewhere in between excessive and ludicrous.

As stated, "rich" is heavily dependent on where they live.

$400k is ~10x the median income around here (~$40k), or ~15x the average income (~$27k).

And also happens to be about 2x the average home sale price around here (~$200k). They could literally buy a moderately nice, fairly new medium-sized home in this area for around half their income in one year.

So around here, $400k would certainly be classified as "rich". Not Bill-Gates-style ludicrous rich, but richer than nearly all of the other folks in this area could ever hope to come close to.

quote:

Originally posted by mjlennon:




Personally, anybody that can't take better control of their finances than that and only has $34 left over at the end of the year is a loser.

Can we look at that chart a bit?

It looks like they're coming out with a little more than $34 a year. They're budgeting in their savings by fully funding their 401k and contributing to their kids 529 plan. So, we're looking at something like $57k in savings right off the top--or about a 22% savings rate after taxes.

Also a large chunk of their money is going towards housing--which can't be helped--but, it's not entirely wasted. There is still some equity built in that home, and after paying down the mortgage they'll still be left a fairly large nest egg that might also appreciate over time.

I think the point that they're trying to make with the chart though is that you don't see a bunch of extravagance on $400k in SF. Yes, a $2M house sounds like a lot, but that's just what houses cost there. You don't see a pair of Range Rovers on there, or a nanny.

$100k in income taxes and another $24k in property tax is a bummer though.

quote:

Originally posted by Hay2bale:

quote:

Originally posted by BurtonRW:
the median income in our county is in the mid-40K range last I checked.
-Rob

Check again. Looks like $97K now.

https://datausa.io/profile/geo...e-arundel-county-md/

Yep. You’re correct. I was looking at average per capita, which makes a lot more sense.

-Rob

Odd how dependence on government subsidies is inversely proportional to how much one pays into them. It's like Geico requiring terrible, accident-prone drivers a $10 a year premium, while good drivers pay $30,000 a year.

quote:

Originally posted by Aeteocles:

quote:

Originally posted by mjlennon:




Personally, anybody that can't take better control of their finances than that and only has $34 left over at the end of the year is a loser.

Can we look at that chart a bit?

It looks like they're coming out with a little more than $34 a year. They're budgeting in their savings by fully funding their 401k and contributing to their kids 529 plan. So, we're looking at something like $57k in savings right off the top--or about a 22% savings rate after taxes.

Also a large chunk of their money is going towards housing--which can't be helped--but, it's not entirely wasted. There is still some equity built in that home, and after paying down the mortgage they'll still be left a fairly large nest egg that might also appreciate over time.

I think the point that they're trying to make with the chart though is that you don't see a bunch of extravagance on $400k in SF. Yes, a $2M house sounds like a lot, but that's just what houses cost there. You don't see a pair of Range Rovers on there, or a nanny.

$100k in income taxes and another $24k in property tax is a bummer though.

Of course a family in the top 1.8% of household incomes spends a lot, they make a lot.

The given chart makes no sense from a financial analysis perspective.

It is also not probable that this family even exist's from a probability and statistic's standpoint. (my field of study and work actually)

Now if it was redone with actual government standards that hold up in court and are revised year to year then I would agree but this chart is fully made up as if someone was just plucking numbers and making a meme. (DERP!)


https://www.irs.gov/businesses...ousing-and-utilities

https://www.irs.gov/businesses...hing-and-other-items

https://www.statista.com/stati...ld-income-in-the-us/

Neutral observations: Why does the family in the top 2% of household income(actually top 1.8%) "allowed" on this chart for no given reason multiple times higher figures for items like food, child care, etc. than local and national government-set standards.

The real truth is in an actual financial analysis no one is going to give you a luxurious standard of living and then also say "You're right you can't afford anything else, wow!!"

It isn't essential to spend multiple times as much on daycare/food as is allowed and no actual financial analyst would agree that this is a correct analysis that shows the true amount of excess funds available to this family to pay some debt or save money etc.

BTW The allowable amount for all housing and utilities/maintenance/telephone/cellphone in San Francisco County for 2020 is $4,474, not $6,746 just for the mortgage so any amount over 4,474 has no legal ground in a financial analysis where the top 2% income family would be disputing an ability to pay some other debt or saying they can't "save money"

Now if the chart is just a "meme" that we can just make up whatever numbers we like I guess, but then it truly means nothing.

Paying for your Children's 529 account is also not essential for the parents production of income so that too would be zero out on a real financial analysis.

In addition the monthly NATIONAL Standard for Food/Housekeeping supplies/apparel and services/personal care products & services and all miscellaneous items is $1740 for a family of four, multiple items such as just food is higher than that, if someone didn't have diabetes or something like Celiac or Crohns,etc that required a special diet it wouldn't be allowed

You'd be given 1 year at most to lose the expenses above standards or you'd be having a not good time.

"Charity" would not be included in any financial analysis unless it's a requirement of a job(like tithing for certain church employees,etc)

Also there is no "Vacation" allowance either, yea that's part of miscellaneous in the national standard of $1740/mth for four people household.

Again if its not necessary for the production of income/health/safety/welfare no judge/fed/banker would ever allow it as a allowable expense on a financial analysis.

Miscellaneous items includes all entertainment too - once you use that in place of all the different items that exceed that you see a much clearer picture of this "family".

The daycare and preschool costing $5,300 would also be scrutinized and likely they'd have to change to somewhere more in line with the average price of daycare in San Francisco County


"Child Care Costs
Estimated cost of full-time care in San Francisco*
Child care center
0-2 year old 2-5 year old
Monthly $2,459 $1,880
Annual $29,508 $22,560"

So again that limits that expense to around $4200 a month if one kid is in day care and one in preschool.

Also if there are public Pre-schools the family would not be allowed the expense as private school is not necessary for the parents production of income.

The chart is disingenuous at worst and just a meme at best :

Families in the top 2% of income tend to make a good deal of income from "Long-Term Capital Gains" -which are not taxed at 33% at all (the rates for that are 0 percent, 15 percent, and 20 percent) (a 400K family falls into the 15% tax bracket for capital gains)

So in all "Long-Term Capital Gains" i.e. stock options they may be getting/investments they have. -items that have been held for longer than a year (again the $400K family is 90% likely to own stock which can have long term capital gains while a poorer family is likely to have none.

Hitting you with some facts from www.forbes.com (a trusted source)

"The Federal Reserve study found that only about one-third of families in the lower half of the income scale had stock holdings. In the next 40% of the income scale, about 70% of households held stocks, while households in the top 10% of the income scale had stock ownership rates above 90%.Aug 31, 2020"

I'd explain why I know so much about this but I'll summarize it as its been my job for the last 15 years to do financial analysis on businesses and individuals.

They could easily pay standard allowable prices for food, child care, etc.

In fact when an government or private entity comes after someone who owes money and gets a judgement or civil case with the Feds/etc this kind of analysis would be immediately discounted as a luxurious standard of living.

The US National Standard "allowances" for food/clothing/misc items are the exact same regardless of income, i.e. in that sort of legal financial analysis everyone is treated the same.

There are also local standards for every county in the US for items like housing/utilities/car ownership/car operating cost, etc.

You get what has been determined to be required, not a luxurious standard of living.

PS My brother whose a IT guy lived in San Francisco in the 90's and it was already ridiculously overpriced but guess what...you can always sell your home/stop renting and move! (he did)

PS if you owe money and got a judgement you'd have to stop the 401K deduction too.

So the real version of this with actual legal standards!

Monthly Income

33,333 income per month (Using a more probable source of income for a top 1.8% household, 33% as capital gains)

Effective tax rate - 15% for capital gains if married income is between $75,901 and $470,700.

Effective tax rate for $133,333.33 of capital gains income = 15% or $20k even

Effective Tax Rate on wages of 266,666.67 with 60K of itemized deductions(which is more likely) = closer to 24% or lower in total

also the limit on 401K contributions in 2019 was 19,000 per person, plus $6k if person is 50 or older, if the parents were older than 50 and in the top 1.8% of income it would be even more probable to have a higher amount of long term capital gains as income and thus a much lower effective tax rate.

Also with high income often comes more than just the standard deduction of $24K this year but I'll pretend their mortgage interest on the allowable 3% interest of the first million dollars and property taxes don't already outweigh $24k

(the total interest on the million over 30 years is $517,775, and if you know anything about mortgages at the beginning you're usually paying almost all interest)

(Mortgage Interest payments in the first year assuming this couple never made anything before this would exceed $40K), as the property taxes are already over $24k, so the magic chart fails us again as the couples itemized deduction is easily over $60K just from mortgage interest and property taxes alone without having to use any mental magic)

Actually if you read what I now call the "magic chart" you'll easily see mortgage interest at 3% on a 1.6 million dollar home over 12 months and the "DUH" $24,804 in property taxes goes way over the 24K standard deduction. (you can deduct the interest on the first 1 million of your mortgage for married, $500K for single)

(1 million over 30 years at 3% is $517,000 or so in interest, with most being front-loaded, so if this family was just starting their dual doctor/lawyer business and buying that home in the first years the interest could well be in the 40K+ range)

Because of that the family would have a much higher itemized deduction based on just the information provided, and have a high probability to deduct other items and have even more of their income not taxed.

Thus the family even in this scenario would have a lower effective tax rate than what is shown (actually even without the effective rate is lower)

Here's a still incorrect because I still used a standard deduction when itemized would likely be $40k-$60K but more correct than what was on the "magic-meme chart of spending"
(it's name is gaining a life of it's own-Sorry the more I see it the more I see wrong with it)

Your Income Taxes Breakdown
Tax Type Marginal Tax Rate Effective Tax Rate 2019 Taxes*
Federal 32.00% 17.59% $70,345
FICA 2.35% 3.85% $15,390
State 9.30% 6.77% $27,066
Local 0.00% 0.00% $0
Total Income Taxes 28.20% $112,800
Income After Taxes $287,200
Retirement Contributions $39,000
Take-Home Pay $248,200

So above is a breakdown if they really made $400K in wages in San Francisco-

Also in the above I'm accounting for the fact this couple must have severe learning disabilities.

These learning disabilities prevent them from counting over the over 60K in itemized deductions they have by merely adding their mortgage interest statement to the property taxes and state income taxes.

Which is again not probable at all, especially for a couple in the top 1.8% of household income.

Here's a more realistic but still not probable as the couple still has no capital gains but is using a itemized deduction of $60k(24K property taxes + 16K mortgage interest + 22K state taxes are also itemized deductions)



Location San Francisco

Filing Status MFJ
Advanced
401(k) Contribution 38K (2019 being used, 19K was max per person)


Itemized Deductions 60K+ (24K from property taxes, state taxes of $22,423 is also itemized deductible as state income taxes are, 16K mortgage interest is actually not even possible for a 1 million dollar home.

In fact its less than spreading the $517,500 over 30 years, but again this is just aiming at a more "probable" income and tax rate. (if mortgage interest was spread evenly over the years(its not) the average would be $17,233.

But if we are assuming this family doesn't own any long term investments and just got great new jobs the mortgage interest would be huge in the first year (easily 40K+ alone) and they might have PMI (mortgage insurance) too.

Number of State Personal Exemptions
Your 2019 Federal Income Tax Plus FICA : $73,819
Your Income Taxes Breakdown
Tax Type Marginal Tax Rate Effective Tax Rate 2019 Taxes*
Federal 24.00% 14.61% $58,429
FICA 2.35% 3.85% $15,390
State 9.30% 5.61% $22,423
Local 0.00% 0.00% $0
Total Income Taxes 24.06% $96,241
Income After Taxes $303,759
Retirement Contributions $38,000
Take-Home Pay $265,759

So the above shows with 60K in itemized deductions but 400K in wages.

PS No capital gains being on this one, which would reduce the effective tax rate even further by making 1/3 of the income(or even more) only taxed at 15%

The magic chart of spending would only work if magic was real.

There are no valid numbers/tax rates being used that would hold up under any legal challenge or actual financial analysis by an financial analyst looking at this families ability to pay debts/expenses....

I could show what the expenses should be limited too but I've done enough to show how wrong this thing is.

I think the chart is just an example budget submitted by someone who makes $400k, showing how he spends his money. I don't think it is the basis for any rulemaking or debate.

For example, the guy pays $5300 in child care costs because that's what market value is for his neighborhood or whatever.

I'm not sure what "allowances" are being discussed.

In any case, for 2019 there was a State and Local Tax deduction cap of $10k. Also, the mortgage interest deduction is capped at the first $750k in 2019. Granted, this couple should have itemized their deduction, but they likely would have gotten closer to $30k rather than $60k in deductions.

quote:

Originally posted by Aeteocles:
I think the chart is just an example budget submitted by someone who makes $400k, showing how he spends his money. I don't think it is the basis for any rulemaking or debate.

For example, the guy pays $5300 in child care costs because that's what market value is for his neighborhood or whatever.


I'm not sure what "allowances" are being discussed.

In any case, for 2019 there was a State and Local Tax deduction cap of $10k. Also, the mortgage interest deduction is capped at the first $750k in 2019. Granted, this couple should have itemized their deduction, but they likely would have gotten closer to $30k rather than $60k in deductions.

The "allowances" I used are the IRS national and local standards.

The child care average was specifically taken for San Francisco, so he can pay more but thats luxurious and wouldn't be allowed

For the mortgage interest deduction It depends when the house was purchased.

Its 1 million for married filing joint if the house was bought before 2017, but again if this was a first year of the mortgage the interest on even the first 750K of mortgage would exceed 30K)

Also the State Income Tax deduction was $12.2K for a SINGLE person in 2019 not $10k, and $24.4K for a married filing joint couple which was what this chart was supposed to be showing.

(it's not 10K for 2019...not sure where you're getting that, check www.IRS.gov for true tax answers.

the $10K deduction is whats allowed for a "sales tax" deduction in states without income tax

24.4K for Married Filing Joint was deductible in state income taxes in tax year 2019

So again the itemized deduction with just state taxes, mortgage interest and property taxes is way over 60K.

Value added tax, now and forever. No income tax. Even money earned selling drugs get taxed when 18 year old drug dealers buy BMW's.

quote:

Originally posted by Austin228:
[QUOTE]Originally posted by Aeteocles:

24.4K for Married Filing Joint was deductible in state income taxes in tax year 2019

https://www.irs.gov/newsroom/w...nd-local-tax-refunds

"The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025."

I'm pretty certain that the TCJA screwed me last year and the year before.

quote:

Originally posted by Aeteocles:

quote:

Originally posted by Austin228:
[QUOTE]Originally posted by Aeteocles:

24.4K for Married Filing Joint was deductible in state income taxes in tax year 2019

https://www.irs.gov/newsroom/w...nd-local-tax-refunds

"The Tax Cuts and Jobs Act (TCJA), enacted in December 2017, limited the itemized deduction for state and local taxes to $5,000 for a married person filing a separate return and $10,000 for all other tax filers. The limit applies to tax years 2018 to 2025."

I'm pretty certain that the TCJA screwed me last year and the year before.

I was wrong, yea 10K in taxes total, but then you can also deduct Mortgage interest and mortgage insurance (if you only put down 20% on a 1.6M you'd have PMI)

In any case if we add 10K for taxes, easily 40K in mortgage interest and PMI or more if the couple didn't put enough down and had to get a "Jumbo Loan" or similar the effective tax rate would still be around 25% (and even less if they had any long term capital gains at 15%)

As others have said in this thread, let's just go with a flat tax and be done with it. Everybody pays in, everybody has skin in the game and it makes life a hell of a lot easier. All of this other bullshit is just made to incite class warfare, any and garner votes with their political base.

quote:

Originally posted by 2000Z-71:
As others have said in this thread, let's just go with a flat tax and be done with it. Everybody pays in, everybody has skin in the game and it makes life a hell of a lot easier. All of this other bullshit is just made to incite class warfare, any and garner votes with their political base.

But how can politicians play favorites with a flat tax?

quote:

Originally posted by tleddy:
Here is California income taxes on $400k; there would be property taxes as well.

Tax Type Marginal Tax Rate Effective Tax Rate 2019 Taxes*
Federal 35.00% 27.05% $108,194
FICA 2.35% 3.96% $15,840
State 11.30% 8.69% $34,740
Local 0.00% 0.00% $0
Total Income Taxes 39.69% $158,773
Income After Taxes $241,227
Retirement Contributions $0
Take-Home Pay $241,227

And California is still broke!

And that's not the end of it. In Commiefornia you still get raped another 9-10% sales tax .

For those arguing for a sales tax, it’s a bit more complicated, if you want to avoid making retailers pay the entire tax burden.

(EG, you have to ensure lawyers and doctors, and masseuses, bankers, stock brokers, carpenters, etc also pay taxes.)

quote:

Originally posted by 2000Z-71:
As others have said in this thread, let's just go with a flat tax and be done with it. Everybody pays in, everybody has skin in the game and it makes life a hell of a lot easier. All of this other bullshit is just made to incite class warfare, any and garner votes with their political base.

pretty much

---------------------------

quote:

Originally posted by Aglifter:
For those arguing for a sales tax, it’s a bit more complicated, if you want to avoid making retailers pay the entire tax burden.

(EG, you have to ensure lawyers and doctors, and masseuses, bankers, stock brokers, carpenters, etc also pay taxes.)

I think you are referring to business taxes not individual. The lawyers and doctors would be paying when they purchase things in stores, just like everyone else.

I’m amazed that in a country where there seems to be a fight for equality that there isn’t one for taxes as well. If some has the both the ability & ambition to excel, they shouldn’t be burdened with paying for those who don’t...

I voted 1 and either two or three. If they were essay questions, the answers would be:

Cool, I wonder what they do and what their business is like.*

And:

None of my darned business. Their taxes are between them and the government and no concern of mine.

*I’ve always found business interesting. One couple I randomly ran into had a business reselling clothes that charities couldn’t use. It wasn’t good enough for goodwill or whatever so the charity sold it to these guys for pennies on the pound. They filled up seatrain containers and sold them in bulk to folks in countries all over the world. They made some money, the charities made some money instead of adding to the landfill, and their customers in whatever third world country marked the stuff up and sold it making money too. The ultimate custome got something they wanted enough to pay money for that they could afford. Everybody won. Not something I’d want to take on, but it was interesting learning about it.