Most money used to earn capital gains has already been taxed once. You don't think 15% is enough to take from gains on money that has already been taxed? What rate do you feel capital gains tax should be?

 

Well, maybe not so much. Dividends have been taxed once at the corporate level. Capital gains, no. The amount of capital gain may have been reduced by the taxes paid at the corporate level, but the capital gain itself has not been taxed. To the extent that the capital gain reflects retained earnings, it has been taxed, but, most of the time, retained earnings constitutes only a portion of the capital gain and often not a big part.

Let me be clear. I do not think that Gov Romney should pay any more than he is obligated to pay. My gripe is that the system itself is skewed. I would also point out that Gov Romney, if his political career is over in six weeks, can file an amended return and get that extra back. He paid extra for political reasons. Let's take three examples. A family of four making 35k to 45k, all from wages. They make enough that they don't qualify for the earned income credit, but they have enough deductions that they pay zero income tax. They still pay 15.3 percent payroll tax, so their effective tax rate on their income is 15.3 percent. We have a second family of four that makes 100k, also from wages. They pay about $12,000 in income taxes amd $15,300 in payroll taxes for an effective rat of 27.3 percent. We have a third family of four that earns $1,000,000 from capital gains. That family pays less than 15 percent, depending on their deductions. That is a skewed tax system. Gov Romney thinks that is a fair system. I don't. Our current system favors taxing wages over taxing capital. In effect, it is picking winners and losers.

 

A couple of things.

 

1. The 15.3% tax is FICA. Your employer pays half of that.

2. FICA is not considered when talking about effective tax rate.

4. The family of 4 making 35k - 45k would qualify for the EITC. They would likely receive a bigger refund then they paid into fed income tax.

3. It's funny you don't consider deductions when talking about the 2nd family but you made sure to mention it with the captial gains. The family of 4 making $100k would likely pay less than a 10% effective rate.

 

The capital gains would be taxed at 15%. The only way to lower that is if you also have capital loses to deduct. It's also not an apples to apples to comparison.

Why do people insist on mixing what is basically a pension plan with federal income taxes? They do not belong in the same conversation as they are nowhere near similar items in any way shape or form.

A couple of things.

 

1. The 15.3% tax is FICA. Your employer pays half of that.

2. FICA is not considered when talking about effective tax rate.

4. The family of 4 making 35k - 45k would qualify for the EITC. They would likely receive a bigger refund then they paid into fed income tax.

3. It's funny you don't consider deductions when talking about the 2nd family but you made sure to mention it with the captial gains. The family of 4 making $100k would likely pay less than a 10% effective rate.

 

The capital gains would be taxed at 15%. The only way to lower that is if you also have capital loses to deduct. It's also not an apples to apples to comparison.

 

1. NO!!! If you have ever made a payroll you know that salary, vacation, holiday, insurance, FICA etc, are all part of what you pay your employee. They are earned by the employee as payment for labor.

2. FICA is not considered by whom? Polititions that are trying to make 47 percent of the people out to be freeloaders? Certainly they are considered by the people that pay them.

3. To get to $12,000 for the family making $100,000 you would need some deductions. But, if you want, make it 10 percent. The point is the same.

4. Again, whether the number is 35, 45 or 50, the point is the same. People of very modest income pay taxes at a higher rate than people of very substantial income.

 

The tax system is skewed to favor earnings from capital over earnings from labor. The fact is that when people use people paying no income tax to demean lower earning families, they leave out the very substantial taxes those same people pay on their income.

Why do people insist on mixing what is basically a pension plan with federal income taxes? They do not belong in the same conversation as they are nowhere near similar items in any way shape or form.

 

No, sorry they are. The federal budget was unified in the late 60s. SS and Medicare money, both receipts and payments, are included in the federal budget.

1. NO!!! If you have ever made a payroll you know that salary, vacation, holiday, insurance, FICA etc, are all part of what you pay your employee. They are earned by the employee as payment for labor.

2. FICA is not considered by whom? Polititions that are trying to make 47 percent of the people out to be freeloaders? Certainly they are considered by the people that pay them.

3. To get to $12,000 for the family making $100,000 you would need some deductions. But, if you want, make it 10 percent. The point is the same.

4. Again, whether the number is 35, 45 or 50, the point is the same. People of very modest income pay taxes at a higher rate than people of very substantial income.

 

The tax system is skewed to favor earnings from capital over earnings from labor. The fact is that when people use people paying no income tax to demean lower earning families, they leave out the very substantial taxes those same people pay on their income.

1. This is a first for me. I have never, NEVER, heard anyone try to claim FICA as part of a benefits package. That is the worst logic/argument I have ever heard on here. You just gave BGH so competition for mayor of lala land wiht that. Just flat awful.

 

I'm done the rest. It's obvious by your FICA is a benefits argument this is going nowhere. When you decide you want to have an intelligent discussion let me know.

1. This is a first for me. I have never, NEVER, heard anyone try to claim FICA as part of a benefits package. That is the worst logic/argument I have ever heard on here. You just gave BGH so competition for mayor of lala land wiht that. Just flat awful.

 

I'm done the rest. It's obvious by your FICA is a benefits argument this is going nowhere. When you decide you want to have an intelligent discussion let me know.

 

Have you ever made a payroll? I have. I have also spent a lot of time looking at financial statements. Believe me, FICA is a salary expense. Would one of the CPAs on here back me up on this.

Let me be clear. I do not think that Gov Romney should pay any more than he is obligated to pay. My gripe is that the system itself is skewed. I would also point out that Gov Romney, if his political career is over in six weeks, can file an amended return and get that extra back. He paid extra for political reasons. Let's take three examples. A family of four making 35k to 45k, all from wages. They make enough that they don't qualify for the earned income credit, but they have enough deductions that they pay zero income tax. They still pay 15.3 percent payroll tax, so their effective tax rate on their income is 15.3 percent. We have a second family of four that makes 100k, also from wages. They pay about $12,000 in income taxes amd $15,300 in payroll taxes for an effective rat of 27.3 percent. We have a third family of four that earns $1,000,000 from capital gains. That family pays less than 15 percent, depending on their deductions. That is a skewed tax system. Gov Romney thinks that is a fair system. I don't. Our current system favors taxing wages over taxing capital. In effect, it is picking winners and losers.

 

Just curious...do you know how capital gains are derived? Usually by divestiture or earnings on a capital asset or tangible investments. The investements were usually made by spending money already taxed at least once....such is also the situation with a corporation.

1. NO!!! If you have ever made a payroll you know that salary, vacation, holiday, insurance, FICA etc, are all part of what you pay your employee. They are earned by the employee as payment for labor.

2. FICA is not considered by whom? Polititions that are trying to make 47 percent of the people out to be freeloaders? Certainly they are considered by the people that pay them.

3. To get to $12,000 for the family making $100,000 you would need some deductions. But, if you want, make it 10 percent. The point is the same.

4. Again, whether the number is 35, 45 or 50, the point is the same. People of very modest income pay taxes at a higher rate than people of very substantial income.

 

The tax system is skewed to favor earnings from capital over earnings from labor. The fact is that when people use people paying no income tax to demean lower earning families, they leave out the very substantial taxes those same people pay on their income.

 

I believe the people getting the short end of the stick with the higher tax rates are the middle to upper middle. The very low income have wage earner deductions, government support, and opportunities to get out of the lower class in many cases, but can't afford it. My concern with the "taxing the rich" movement is that the reality is that it affects the truely rich very little, but dips down to take a big bite of the middle and upper middle class eating at many of our core values of rewarding achievement, education, hard work and risk.

1. This is a first for me. I have never, NEVER, heard anyone try to claim FICA as part of a benefits package. That is the worst logic/argument I have ever heard on here. You just gave BGH so competition for mayor of lala land wiht that. Just flat awful.

 

I'm done the rest. It's obvious by your FICA is a benefits argument this is going nowhere. When you decide you want to have an intelligent discussion let me know.

 

Have you ever made a payroll? I have. I have also spent a lot of time looking at financial statements. Believe me, FICA is a salary expense. Would one of the CPAs on here back me up on this.

 

I hope we can agree that FICA and Medicare is a drag on the economy. I do not see it going down but the idea that it should go up is only going to make it worse.

 

FICA has 2 specific drags on the economic engine.

 

First, for those who are 'employed' it creates a hidden cost of your employment. 'The company' pays half. Its a shell game by the government but it is a real company cost. Is it a 'benefit' the way its done. Not really. Just a way to keep the masses from seeing the real cost IMHO. It is a real cost directly associated with cost of employing someone. Now in today's global world you have to ask what is the 'fully burden cost' for each employee - this is salary, benefits and additional cost directly associated with the employment of that individual. This includes office space, unemployment insurance, IT support (PCs, networks), mandatory healthcare (think ACHA) and, yes, the other half of FICA. All of these go into the 'cost' of an employee. When it comes to making a decision where to locate a job companies more and more can and do go global. What are the mandatory costs in India, Brazil, etc.? Do they make a company add 7 1/2 percent to each salary? No. So that 'other half' makes Americans less attractive in this global jobs market.

 

Second, self employed people pay 'both halves'. There is no hiding the tax. This used to not be the case until the early 80s I believe. I think self-employed paid a higher rate but not the entire 'half'. Now they do. So as a self employed person that apx 15% is a direct take out. Can you imagine how discouraging this is to a generation that could leverage the internet and their education to be self made entrepreneurs?

 

FICA started out as a small percentage but grew and grew. It is now a drag, AND - revenues are now materially going down. And that is not due to the 2% cut. The total 'earned income' of the country is materially going down for first time in history. The social security crisis that we have been warned is coming is now speeding up. I remember a CIO encouranging people to do 401K because 'social security will not be there'. That was 1990 - he was very correct. It will crash - and sooner than we think.

I hope we can agree that FICA and Medicare is a drag on the economy. I do not see it going down but the idea that it should go up is only going to make it worse.

 

FICA has 2 specific drags on the economic engine.

 

First, for those who are 'employed' it creates a hidden cost of your employment. 'The company' pays half. Its a shell game by the government but it is a real company cost. Is it a 'benefit' the way its done. Not really. Just a way to keep the masses from seeing the real cost IMHO. It is a real cost directly associated with cost of employing someone. Now in today's global world you have to ask what is the 'fully burden cost' for each employee - this is salary, benefits and additional cost directly associated with the employment of that individual. This includes office space, unemployment insurance, IT support (PCs, networks), mandatory healthcare (think ACHA) and, yes, the other half of FICA. All of these go into the 'cost' of an employee. When it comes to making a decision where to locate a job companies more and more can and do go global. What are the mandatory costs in India, Brazil, etc.? Do they make a company add 7 1/2 percent to each salary? No. So that 'other half' makes Americans less attractive in this global jobs market.

 

Second, self employed people pay 'both halves'. There is no hiding the tax. This used to not be the case until the early 80s I believe. I think self-employed paid a higher rate but not the entire 'half'. Now they do. So as a self employed person that apx 15% is a direct take out. Can you imagine how discouraging this is to a generation that could leverage the internet and their education to be self made entrepreneurs?

 

FICA started out as a small percentage but grew and grew. It is now a drag, AND - revenues are now materially going down. And that is not due to the 2% cut. The total 'earned income' of the country is materially going down for first time in history. The social security crisis that we have been warned is coming is now speeding up. I remember a CIO encouranging people to do 401K because 'social security will not be there'. That was 1990 - he was very correct. It will crash - and sooner than we think.

 

In 2012 as part of the economic recovery act...the employee portion went down, but the employer portion did not. So it is not 50/50 at present. It is a clever way to buy votes.

No, sorry they are. The federal budget was unified in the late 60s. SS and Medicare money, both receipts and payments, are included in the federal budget.

 

You have got to be kidding me, right? Just because the government is playing games with their accounting tricks doesn't make them anything similar. They are not. Never have, never will. One is a pension plan. Sure it's used to prop up the overspending of the rest of the budget but ultimately it is supposed to be used for a single purpose. Same as private pension plans investing their funds. Ultimately these funds are to be used to pay out pensions and benefits. The two programs do not belong in the same conversation. Ever.

Have you ever made a payroll? I have. I have also spent a lot of time looking at financial statements. Believe me, FICA is a salary expense. Would one of the CPAs on here back me up on this.

 

Fica is a personnel expense which is usually on a separate line item from salaries but yes, it is obviously an expense tied to salaries.

I think it's a stretch to claim the 15.3% as contributed by the employee for FICA. That assumes that if it were not federally regulated, those dollars would be paid to the employee anyway. In some cases it would for the more sophisticated employers that monitor and budget total employee costs by staff position. Many, particularly smaller employers, do not. They just look at wages.