Cut this, cut that - America has a budget crisis - excuse me??!

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I guess we are going to have to agree to disagree. To my way of thinking he is only called a tax-cutter because he didn't get his way. If he had gotten his way, overall he would have been a tax-increaser.

 

I quote Dickens to introduce this post:

Now, Ragusa seems to believe that the current situation can be dealt with by collecting more taxes. Particularily from the wealthy. I would say that is part of the equation. But I firmly believe that there are other things that need to be done on the expenditure side. I am in total agreement with Chandos' assertion that military expenditures are at an astronomical level, and that they should come down. There's tons of pork barrelling going on, with taxpayer money going to the stupidest things imagineable -- stuff that helps no one, let alone the poor. Lots of cuts and streamlining can be done that won't damage the precious poor one iota.

The bottom line, if you want to balance a budget, you either increase your income, you decrease your spending, or you combine both. Not popular moves, but if you have any dreams of getting out of debt, this is the way to do it. There's no magic bullet for this.

 

All while turning a blind eye to the same in the Democratic union. They pander to minorities and unions the same way, and do just as much 'bad' (an almost entirely relative standard in politics).

And that, unfortunately, is because of the way the US does it's taxes. Whatever is done to taxes hits the wealthy the most. This is because the wealthy see a cumulative effect of everything done to all groups. Cut taxes on the lowest tax bracket and you cut taxes on the Rich's first $XX,000. Raise taxes on a higher bracket and you raise taxes on ther Rich's income in that bracket. Essentially, what you've said is a non-statement, unless you're criticizing the whole way taxes work in the US, in which case I say 'Welcome to the club'.

"Anything", because they handle the problems individually. In the end it may mean 'everything' if applied to the extreme, but it seems the liberals don't want to solve 'everything'.

You have to be careful cutting military spending for one critical reason: military machine design and manufacturing is as much a skill as it is a science. We're already seeing drastic reductions in our workforce capable of performing welding on an aircraft carrier, for example, and if we want to have such skilled labor in 30 years, then we need to keep employing those people (not necessarily with a new aircraft carrier, but with work that requires the same skills). If we cut all military production because the current military doesn't need it, we risk loosing those skillsets. On the other hand, if we employ those skills in some less-than-top-secret projects, we can then sell the results to allies for, usually, about what it cost to make. Sometimes more.

Of course, some of that stuff is exactly what Chandos thinks. The new F-35 engine isn't needed, isn't wanted, and isn't the only (or even best) way to employ the engineers and manufacturers needed to make it. Boeing could do that for the 787.

 

That is true. The US tax code is progressive. For example, the standard deduction for a married couple filing joint taxes is $11,400. So any married couple doesn't pay any tax on the first $11,400 of income they earn, regardless of if they earn $50K or $500K (and if you itemize, it can be a hell of a lot more than $11,400 - but that's the minimum).

Here are the 2010 tax brackets from the IRS homepage:

And those number represent the remainder after you've talen all of you deductions and exemptions. The remainder is "taxable income", and it's only that figure where you go to the table. So if you have $16,750 of taxable income, that married couple, at a minimum earned at least $28,150 ($16,750 + $11,400 standard deduction).

Even if Obama's plan was to raise taxes on those making over 250K was implemented, it would only affect their earning in excess of 250K. They would still keep all of their tax cuts on the first 250K of earnings.

 

What about these "tax shelters" I hear about? My understanding of them (which may be urban myth level understanding) is that the rich in the US can hire a really good accountant and get all sort of extra deductions and end up paying less money than a guy with a $24,000 year job. Is this true or a mere myth?

 

It was a campaign promise, before he was elected, and he did what he said he would, so you can't get around be saying "he didn't get his way," when clearly he did.

 

If the majority of Americans want more government services in their lives (which isn't my cup of tea, but it's not Armageddon either) then they have to realize that they will have to pay more taxes to get those increased government services. If they want to keep more of their hard earned cash to spend as they please, (as I believe is best, and nothing less than a GOD agrees with me!) then they need to accept the fact that there will fewer government services for them to enjoy.

 

I do think that America has no choice but to raise taxes. I don't see that not as desirable but as inevitable. There is no other way to pay for the national debt other than inflation. Cuts are necessary, and also inevitable, but they alone can't do it. Better to get real about that quick and not succumb to the mesmerising lures of a meme like TAXES MUST BE CUT, as Republicans nowadays do.

Taxes are a means to an end, and the end is a functioning government beyond the military budget. To Republicans cutting taxes is almost an end in itself. Budgets are dynamic. Tax revenue is dependent on taxation, and tax revenue is what makes up (most of) the money available in the budget. IMO it is dereliction of duty in governance (for free, no less, since the Obama administration is nominally in charge, they get blamed for everything) to recklessly reduce tax revenue and then push for policies that in the absence of a 'crisis' nobody in his right mind would accept, because there wouldn't be a need. The tax cuts generated crises create that artificial need. The Republican approach is actually quite straightforward: Kneecap the budget, generate a crisis to then push through otherwise unpopular cuts that support their policies.

For instance Republicans oppose the Nixon founded EPA not because they don't believe in the environment (though some sure don't) but because their campaign donors are heavy industries who want the EPA and their hassle some regulations to go away. That is because impact testing, dust filters and stuff cost a lot of money, easily double to triple digit millions, hard earned money that in the eyes of company execs and servile Republican pols is better spent on bonuses, shareholder value and campaign donations.

People who are not shareholders but neighbours of such a plant, or who simply happen to live in the same country, may beg to disagree, but as they don't finance Republican campaigns as lavishly, their view is not that, shall we say, audible, and can be swept in case of doubt with the self serving myth that tax cuts always benefit the economy and so benefit the constituents at large. Never mind that bromide rain, with the EPA cuts, non-shareholders got their taxes cut, too, they now have a hundred bucks more per month. Speaking of bromide ...

The tax cut generated budget crises give them a fiscal pretext to cut things they want to cut anyway. It is the idiocy of starve the beast at work. That, and the equally harebrained idea that cutting taxes is a cure all. There is a reason why the medieval practice of blood letting is no longer considered a viable treatment for all but very few illnesses by contemporary physicians.

 

Though in the example you give, the person whom that faith was aimed at was a professional thief, and not particularly friendly to various government services .

 

LKD,

Regarding your previous question on tax shelters...

Most tax shelters apply to things like companies, corproations, businesses, etc. The tax code for those type of things is completely different than what it is for regular people earning a salary. However, I'm not an accountant, so someone like Snook is probably needed to supply the details.

Also, a lot of people earn money through capital gains (from stocks), and that is also taxed at a much lower rate than most other income. (It's been a while since I checked, but I think capital gains is taxed at 15%.) So if you earn $1 million in salary, most of it will be taxed at 35%, but if you earn $1 million in capital gains, it will be taxed at 15%.

Like I said, I'm sure Snook could provide a lot more details.

 

Now guess why stock options are so popular with executives.

 

Stock options are a bit different. Getting a bonus in stock options actually provides you with... an option. Like whether to get the shares now or at some future date, and you make the decision based on relatively short term prospects of what direction you think the stock is headed.

Basically, if you get a stock option, the company may say that they'll give you 100 shares of stock at any point in the upcoming year. After that they are yours, and you will make or lose money based on the performance of the stock. With this information, it is clear that you want to get the stock at the point where the stock will be at it lowest value in the next year. Or to put it another way, you want to get the options when there is a reasonable expectation that their value will increase over the short term.

But yes regaring your larger point - generally investing in stock is popular for the reason of lower taxation of capital gains. If you're wealthy you pay less taxes on your capital gains than you do on your income. However, keep in mind there is no standard deduction on capital gains. The 15% starts from the first dollar earned, unlike with income where the first $11,400+ isn't taxed at all.

 

Perhaps stock options are different elsewhere but in two companies I've been in they have been the same. Options are allocated to employees (at various levels not necessarily only to executives) at a specific value. The employee can then exercise the options after a specified amount of time. The employee can purchase the options at the value specified when the options were allocated or the employee can do a "buy/sell" option and basically get any gains the options have made since allocation, in the form of cash or stock. If the value of the stock has dropped, the employee does not get anything, the options are worthless.

Tax for stock options depends on how you exercise them and the type that was granted. If you simply take the gains in cash then it is income (or if the options were "unqualified"). If you purchase the stock, or a portion of the stock represented by the gains, you can claim the stock options as capital gains as long as you wait at least another year to sell the stock.

 

T2B's explanation of stock options is much more precise. But many companies pay executives in actual company shares as well.

 

What kind of mutual fund? Is it part of a Roth IRA? I know those you pay for on after-tax dollars. But why would you pay capital gains taxes on a mutual fund that decreased in value? Or do you just mean you already paid taxes on it before you invested it?

 

Texas House panel approves tax break for yachts

 

I don't understand what cutting the taxes on yachts and government cuts have to do with each other. We have the same situation here in the northeast. MA charges a 6.25% sales tax on the purchase and improvements made to people's boats. Then MA also charges an annual excise tax that is based on the value of the boat. Well, the state next to us (Rhode Island) very cleverly did away with their sales tax and excise taxes on boats/yachts. Now if you were a gambling man and had to place a wager on which state has more boats docked in their harbors and has a thriving waterfront which state would you pick?

People on the left seem to think their is a one to one relationship between how much you can tax a rich person and a poor persons food stamps. There are other things involved. What Rhode Island has done is sacrifice some sales and excise taxes for the benefit of having people employed (who pay income taxes and reduces their burden of unemployment and welfare), profitable businesses (who pay corporate taxes and payroll taxes) and the same can be said for all of the ancilliary businesses at the waterfronts and marinas that all of these boats/yachts support.

I can't mention this without mentioning former Presidential candidate John Kerry (and Senator D-MA). His billionaire wife purchased for him a "huge" yacht as a present. Guess which state he had it registered in? I'll give you a hint, it starts with a "RH". Luckily the Boston Herald discovered it and the outrage by the citizens forced the Kerry's to change the registration and pay the sales to tax and I assume pay the annual excise taxes. You would have thought such an enlightened liberal like Kerry would have done the right thing in the first place and paid additional taxes as everyone knows it is his responsibility to do so. Then again the limousine liberal set has always been more about "Do as I say, not as I do". Oy!