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<p>I haven’t really seen any news on corporate tax rates lately.</p>
<p>"“The tax proposal that limits deductions, and I bet many posters supported that proposal, could lead to income tax rates above 100 percent of income. The pick your number deductible plan, pick any number, was not thought out.”</p>
<p>“If for example, somebody had 100,000 in income and 100,000 in deductions so they really made nothing, somebody could get a nice tax bill if deductions were limited to 25,000 for example.”</p>
<p>So, they’d pay 28% on $75K or $21,000. That’s a tax rate of 21%. That’s not a tax rate of over 100%."</p>
<p>Uhhhhh…in the example I gave, the taxpayer made nothing so a tax of $21,000 on zero income is…?</p>
<p>“How did you lose money this year? All of the indexes are in the green.”</p>
<p>Is that an assumption?</p>
<p>“If for example, somebody had 100,000 in income and 100,000 in deductions so they really made nothing, somebody could get a nice tax bill if deductions were limited to 25,000 for example”</p>
<p>I guess it all depends upon what that deduction is. If it is for capitol gains loss on stock or mutual funds, then that really is a true loss of money, and your example is valid.</p>
<p>But I don’t consider most of my deductions as losses, we don’t trade much. Our mortgage interest, property taxes and charitable donations were about 60K (?) last year. They are deductions, but they aren’t a loss of income. So if I made 60K and had 60K deductions…and they threw away all the deductions and I had to pay 12K or so on that amount instead of 0, it doesn’t mean I’m paying tax on 0 income.</p>
<p>It all depends on what the deductions are…that is correct. </p>
<p>Real estate can really get ugly if deductions are limited.</p>
<p>The comments in the following on the wealthy working and capital gains are similar to my thinking and my experiences.</p>
<p>[More</a> Chips For Tax Reform - NYTimes.com](<a href=“http://opinionator.blogs.nytimes.com/2012/11/24/more-chips-for-tax-reform/]More”>More Chips For Tax Reform - The New York Times)</p>
<p>"Inevitably, a chorus of outrage would greet any such increase. Capital investment would be severely impaired! Some of the wealthy might decamp from America! With a new 3.8 percent Medicare tax on unearned income about to take effect, this would exacerbate the disincentives for investment!</p>
<p>Put me down as skeptical about such dire forecasts. During my 30 years on Wall Street, taxes on “unearned income” have bounced up and down with regularity, and I’ve never detected any change in the appetite for hard work and accumulating wealth on the part of myself or any of my fellow capitalists."</p>
<p>Don’t most of us pay AMT? If most deductions are added back in calculating AMT. I am not sure why deductions make much difference.</p>
<p>20% on dividends and cap gains is weak. They’d raise far more revenue and it would be fairer (if one cares about that) to make it ordinary income. Up it to 39.6% or whatever they settle on, and add Medicare taxes. Even the author’s suggested 28% tax is too preferential.</p>
<p>Around 4 million taxpayers pay AMT. If it is not patched, as many as an additional 30 million taxpayers could be liable.</p>
<p>Aren’t those 4 million taxpayers who benefit most from deductions? They will lose that when AMT kicks in. If they are gonna pay either through AMT or disallowed deductions, it seems just a matter of semantics. What am I not getting?</p>
<p>AMT was originally established out of outrage that a few millionaires were somehow managing to avoid paying any income tax.</p>
<p>In the first year, 19,000 people had to pay it.</p>
<p>This year, almost 4,000,000 will pay it. If not patched, it could be 34,000,000.</p>
<p>It no longer even applies to the people it was originally intended for, because the highest marginal income tax rate is higher than the highest AMT rate, which means that eventually high income earners will pay more in income tax than AMT.</p>
<p>So it has in essence become a backdoor tax increase on the middle and upper-middle class. It (unfairly IMO) targets people with large families and those who live in high tax states.</p>
<p>And it is a pain in the butt to calculate.</p>
<p>I know where AMT comes from. Have been paying it for sometime now. just saying eliminating deductions or capping it at certain income level may not increase taxes all that much for most people. I am assuming if you benefit greatly from deductions, you are also likely to be subject to AMT.</p>
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<p>Single parent of one kid with ~52k of wage income and no itemized deductions at all will be in AMT for 2012, unless it gets patched.</p>
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<p>Not really. Purchase money mortgage interest and charitable contributions are both fully allowed against AMT. Business writeoffs other than employee business expenses are fully allowed against AMT (although there are some timing difference for depreciation).</p>
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<p>If the taxpayer made nothing, then they would pay nothing in taxes.</p>
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<p>Of course.</p>
<p>This has been a pretty good year in the indices, especially the NASDAQ $compq.</p>
<p>The income tax was originally designed for the rich. Most people didn’t pay the tax when it first started.</p>
<p>I hate the original intent argument. Circumstances change.</p>
<p>We could just change the tax system and go with something close to the amt. It would make things a lot simpler. Have all income taxed the same and use the amt exemption and brackets. The amt is progressive. We wouldn’t have to calculate taxes using two systems.</p>
<p>Igloo, what you are not getting is the amt is not an issue for the wealthy because most of their income is exempt from paying the amt. That is why the wealthy complain about capital gains taxes, and estate taxes. The amt is an upper middle class issue. Looking at some of the tax proposals, the upper middle class is dog meat. The tax proposals show who rules the world. Nobody would care about the top .1 percent in a democracy. Yet, better not touch those capital gains. That is where the .1 percent make their money.</p>
<p>[Warren</a> Buffett reiterates call for higher taxes on wealthy, urges Congress to compromise - The Washington Post](<a href=“http://www.washingtonpost.com/business/warren-buffett-reiterates-call-for-higher-taxes-on-wealthy-urges-congress-to-compromise/2012/11/26/c741f446-37dc-11e2-9258-ac7c78d5c680_story.html]Warren”>http://www.washingtonpost.com/business/warren-buffett-reiterates-call-for-higher-taxes-on-wealthy-urges-congress-to-compromise/2012/11/26/c741f446-37dc-11e2-9258-ac7c78d5c680_story.html)</p>
<p>How do the wealthy avoid paying the amt? We converted a portion of 401k to Roth this year. It pushed our income sky high just this year. I ran TurboTax and it looks like we still owe AMT. What is the trick to be exempt?</p>
<p>I agree with Warren Buffet to tax the top earners. To equalize wealth distribution somewhat. As for reducing deficit, taxing the wealthy alone is not effective. It looks like the conversation is now moving toward taxing the rich and not cutting the spending. I had hoped that they will finally get their acts together.</p>
<p>Most capital gains aren’t affected by the amt so they are taxed at 15 percent. Make people think your income is a special kind of income compared to others so it should be taxed at lower rates. Higher lobbyists. :)</p>
<p>The deficit issue is a bs issue. The deficit is coming down on its own as the economy grows.</p>
<p>A balanced budget is not necessary. Getting the deficit down to 500 billion or so would be sufficient. </p>
<p>The way to cut the deficit is to take some money from one place, some from another. You are not going to get all the money from one area. Watch your pockets. Spending cuts have effects. Spending cuts may take money away from you. Spending cuts may hurt more than tax increases.</p>
<p>Igloo, you are paying the amt so you are not getting the full Bush tax cut. Be careful what you wish for…</p>
<p>The wealthy avoid AMT by either having income that isn’t subject to AMT, like capital gains, or by paying so much income tax that the AMT amount is smaller than what they are paying.</p>
<p>IRS figures show that the dreaded 1%'ers make about 17% of all income, but pay about 37% of all income tax. So it doesn’t seem that in aggregate they are avoiding income tax.</p>
<p>I could be mistaken but I believe capital gains are subject to AMT. If true, increasing long term capital gains tax is academic. AMT kicks in increasing the ltcg tax rate to that of AMT.</p>
<p>I wonder if anyone studies what the optimal tax rate will be for an ideal society, like top 1% earners pay 5% tax, top 10% earners maybe 20%, and so on.</p>
<p>We are not at the optimal rate for the wealthy. There are studies. The top 1 percent own 40 percent of private assets. The income is disproportional. The top 1 percent would love your numbers, Igloo.</p>
<p>Capital gains can be subject To amt taxes until the exemption runs out.</p>
<p>I made over 250,000 last year and my real federal tax rate, including social security and medicare was 11 percent. That is ridiculously low.</p>
<p>Oh yeah. I paid 26,000 in amt too.</p>
<p>I argued for years that taxes were too low. Now I am retired, so sorry. Society can only get me in a few ways now. Hopefully, the lobbyists will make sure I come out ok. :)</p>