Real world reaction if/when markets crash? Will this time be different?

Dave Taylor said:

Wealthiest Americans pay just 3.4% of income in taxes, investigation reveals | US income inequality | The Guardian

Tax records from 2014 to 2018, analysed by ProPublica, show 25 Americans collectively earned $401bn but paid just $13.6bn
amp.theguardian.com amp.theguardian.com
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I get it, but the article references the top 25 richest Americans, and those 25 people still paid $13.6 billion in taxes, at the 3.4 % rate. That's still $544 Million each, that's a shit ton of money. They drive the same roads, have the same police departments.

I'll never be anywhere near where they are, so I really don't know why I care, but I do think they pay their fair share.
 
shrpshtr325 said:
that makes sense if you expect your tax bracket to drop in retirement, but what if you expect it to stay flat (say within 10% of your earnings)???
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Even with the same tax brackets now and later, traditional makes sense because you can do a Roth conversion... not when tax rates are lower... but when the values in the IRA are lower. You choose when to pay the tax, and can choose now, when the market is down 24% YTD.
 
im would think that of some in each would be good, wouldnt it lower the RMDS? and taxable income when yous tart withdrawing?
 
roc said:
its supposed be 21%.
I have no idea what the major global conglomerates do, but your basic HVAC, Bakeries, Paint store, builders, Construction, DME, Bike Stores, have to pay taxes, there is no magic loophole. Maybe they run some stuff through their company, but they always run the risk of an audit. And some people who are audited do go to jail.

any CPA’s on here? maybe they can explain it better, or maybe there are more loopholes that I don’t know of? My accountant has never found me one!
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Retired CPA here. I did corporate tax audits for years. From a tax form view, corporations are subject to tax. From an economic view, corporations don't pay tax, because corporations are conduits. Any tax paid by corporations reduces the dividends or salary that would have been paid, and then subject to tax. It just moves the tax burden, and does not deliver much tax revenue. Taxing corporations is futile, as corporations can decide how much money to earn, and where to earn it. What people get wrong is when they compare annual report income (worldwide) with US tax payments.

Since individual taxpayers (that includes married!) are not conduits, and cannot pass any tax cost through, that is the ideal place to impose tax. Tax havens will entice corporations by offering low tax rates—on the corporation! It then puts high taxes on the many jobs created in that tax haven by the corporation seeking competitive tax rates.

Addressing another point, we should all be in this together, yet half of people earning income pay no income tax! I assert that the poor are not paying enough tax. Any wild and crazy spending idea seems good to the half who will never have to pay for it. Even the poor need skin in the game.
 
That whole tax the rich and pay your fair share!?!
I was working on and supplying some custom woodwork and cabinetry this spring on a $5,000,000 $ custom home.
For at least 6 month there where at any time at least 20-30 workers on the job.
The way I look at it, all those workers had salaries, materials where used, lunches where bought, vehicles where driven , gas was bought,….! Creating also a good amount of sales taxes.
Lots of money put in circulation by employing people!
This was all paid for by the customer with “after tax” money (probably some fancy accounting involved for part of it I understand).
My point is that I still rather have money being spent by the “rich” versus have the government confiscate it!
I will be paying taxes on my salary and profits made from working there and so will others on the project too.
And for the most part, my sales calls and meetings with those clients are rarely during the day, that’s when most of them are busy working themselves to pay for my work!
 
shrpshtr325 said:
im would think that of some in each would be good, wouldnt it lower the RMDS? and taxable income when yous tart withdrawing?
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Absolutely. And Roth conversions will get you to some of each.
Right now, my kids are doing Roth contributions, because they are not yet in the 24-26% brackets. Once there, traditional IRAs will make sense for them. And then in a market crash, Roth conversions will make sense.

Something to consider with RMDs is Medicare Part B premiums. The premiums get high fast with additional income, and RMDs will raise those premiums fast.
 
Fire Lord Jim said:
Absolutely. And Roth conversions will get you to some of each.
Right now, my kids are doing Roth contributions, because they are not yet in the 24-26% brackets. Once there, traditional IRAs will make sense for them. And then in a market crash, Roth conversions will make sense.

Something to consider with RMDs is Medicare Part B premiums. The premiums get high fast with additional income, and RMDs will raise those premiums fast.
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we should probably talk about this at some point, id like a better understanding to make some decision on my own path (not going to go into detail i public)
 
PRus said:
That whole tax the rich and pay your fair share!?!
I was working on and supplying some custom woodwork and cabinetry this spring on a $5,000,000 $ custom home.
For at least 6 month there where at any time at least 20-30 workers on the job.
The way I look at it, all those workers had salaries, materials where used, lunches where bought, vehicles where driven , gas was bought,….! Creating also a good amount of sales taxes.
Lots of money put in circulation by employing people!
This was all paid for by the customer with “after tax” money (probably some fancy accounting involved for part of it I understand).
My point is that I still rather have money being spent by the “rich” versus have the government confiscate it!
I will be paying taxes on my salary and profits made from working there and so will others on the project too.
And for the most part, my sales calls and meetings with those clients are rarely during the day, that’s when most of them are busy working themselves to pay for my work!
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Imagine is that rich guy had to pay millions more in taxes... all that economic activity you described could disappear.
 
roc said:
I get it, but the article references the top 25 richest Americans, and those 25 people still paid $13.6 billion in taxes, at the 3.4 % rate. That's still $544 Million each, that's a shit ton of money. They drive the same roads, have the same police departments.

I'll never be anywhere near where they are, so I really don't know why I care, but I do think they pay their fair share.
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Dividend and capital gains income is taxed at a lower rate.
This was to stimulate investment - of course the ones who can invest the most would reap the most gains.
Kinda creates a positive feedback loop when you make more on investment than you spend.....which is the goal btw.
 
Patrick said:
Dividend and capital gains income is taxed at a lower rate.
This was to stimulate investment - of course the ones who can invest the most would reap the most gains.
Kinda creates a positive feedback loop when you make more on investment than you spend.....which is the goal btw.
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Yup, and those benefits are available to everyone. Not sure, if you're living paycheck to paycheck, how you ever take advantage of them, but they are there.
Patrick said:
It is still a team thing tho - Hungry people living outside do get desperate.
Not providing for basic needs just doesn't seem right.
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It's tough to argue
Patrick said:
Sure there are some taking advantage of the system - but for the most part, the people I meet really need support.
2.5% of the population have an IQ less than 70. With 200MM adults in the US, that is 5MM people.
If it is genetic, that means the parents don't have the skills to deal with it.
Downward spiral.
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That's rough, "there but for the grace of God"
Patrick said:
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On taxes - i'm still perturbed about the untaxed change in basis of equities inherited.
How can a gain go unaccounted for? Cause the wealthy make the rules.
Same with Roth IRA. Wealthy people are going to stack it when they can.
then never touch it, so they can pass it through. (in case you don't know,
the inheritor does not pay tax on the inheritance)
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I don't have a problem with low or no taxes on inheritance, to me, it's already been taxed. But it's not something that will affect me either way, unless there's an Aunt Birgit out there I don't know about.
Patrick said:
Hell, my kid made $5k this summer, so I gave him $5k to open a roth.
Cause that is the rule, and we can take advantage of it.
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and why shouldn't you?
 
roc said:
it's already been taxed.
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It hasn't

i invest in Weed.Inc at $1/share - The day before i die, I sell it at $100/share - I pay tax on the $99 gain.
The day after I die, my inheritor sells it at $100/share, and pays no tax, because the basis is reset.

I have a big problem with this - even tho I hope it affects my kid some day.

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inheriting an IRA is different, they need to be liquidated in 5 years now - no need to do it equally, so time to plan.
and they are taxed. Inherit a ROTH, and it isn't taxed! ever. It can't be passed through again, but you'd liquidate that, and save your own
to pass down...

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The current estate tax threshold is around $12MM - and the tax is assessed on the amount above that to the estate of the person who dies.
There are ways around this - for a couple, when the first one goes, they reduce the estate by as much as possible.
also multiple trusts, skip level trusts, life insurance trust (this is a good one - buy a $10MM policy for $11MM,
and it is net positive, cause life insurance isn't taxed - can't value when the loss is the person - as long as it doesn't MEC out. queue FLJ)

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Now consider who makes these rules.....
 
Patrick said:
inheriting an IRA is different, they need to be liquidated in 5 years now - no need to do it equally, so time to plan.
and they are taxed. Inherit a ROTH, and it isn't taxed! ever. It can't be passed through again, but you'd liquidate that, and save your own
to pass down...
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Because you paid the tax. Why? Let the inheritor pay tax. And your years are wrong - rules changed. With both IRA or Roth, the kid inheriting it has 10 years to withdraw all funds.
 
The idea behind the estate tax was to level the playing field for each generation. We all start crying, naked and poor. The problem with the estate tax is that it encourages rich people to foolishly spend it before it gets taxed: think Ross Perot. People with names like Kennedy and Rockefeller run for political office and change the rules. Face it, the government is not going to collect much on estate tax. People will instead play Brewster's Millions, and we will end up the worse for it. More money is spent on estate planning than is collected in estate tax. If a sales tax-ish rate of 6-7% were imposed on estates, we might see some Laffer curve pick up in estate tax revenue.

Appreciated assets in an estate get a date of death (or nine months later) step up in basis. Pat bought Weed for $1, and if his estate owns it, his heirs can liquidate it with no income tax.

So, the goal is: Leave you appreciated assets to your kids, sparing them the income tax. Leave your IRAs to charity, as charity is tax-exempt. Oh, and don't run out of money while you are still alive.
 
rick81721 said:
$100K income, married jointly, no kids - 11% total tax rate

$500K (top 1% min) - same parameters - 24% total tax rate
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Dont get dragged into the numbers. Creators and risk takers make out better financially in our system. Simple as that.
 
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