Should The Rich Pay More Taxes?

[QUOTE=duckheads;740374]

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Originally Posted by paul young

social security is nowhere near bankrupt, and you know it. do you know anyone who has not received the benefit check that they were eligible for?quote]

you do realize ss is now paying out more than it is collecting? Where will this lead to?

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a higher rate of FICA tax, i hope. that's the responsible way to handle it. if you're lucky enough to work for 40 years or so at a good paying job, you'll qualify for the maximum benefit. right now that's just shy of $21,000 per year, which is around 35% of what it takes for a husband and wife to maintain a decent standard of living, assuming they don't have a lot of debt. it's not a lavish benefit. think about how far that would go if you didn't have Medicare.

you're all a bunch of whiners. i have paid taxes all my adult life and will until i'm dead. that's the way it is. that's the way it's always been. do you think they invented taxation 10 years ago just to piss you off? my parents, their parents and their parents parents paid taxes. if you think we can lower taxes and pay of the debt, you're just dreaming.

where do you think the funding comes from for the national parks, the interstate highway system, national defense, veteran's hospitals, the border patrol, NASA, NOAA, etc. and yes, SS and Medicare. if you don't think you NEED SS and Medicare you are either planning on death at an early age or that you can amass a nest egg of at least $2,000,000 to sustain yourself for the 20 or so years at the end of your life when you are no longer working.

you act like you get no value for your contribution. that is definitely not the case.-Paul

[QUOTE=paul young;740423]

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Originally Posted by duckheads

a higher rate of FICA tax, i hope. that's the responsible way to handle it. if you're lucky enough to work for 40 years or so at a good paying job, you'll qualify for the maximum benefit. right now that's just shy of $21,000 per year, which is around 35% of what it takes for a husband and wife to maintain a decent standard of living, assuming they don't have a lot of debt. it's not a lavish benefit. think about how far that would go if you didn't have Medicare.

you're all a bunch of whiners. i have paid taxes all my adult life and will until i'm dead. that's the way it is. that's the way it's always been. do you think they invented taxation 10 years ago just to piss you off? my parents, their parents and their parents parents paid taxes. if you think we can lower taxes and pay of the debt, you're just dreaming.

where do you think the funding comes from for the national parks, the interstate highway system, national defense, veteran's hospitals, the border patrol, NASA, NOAA, etc. and yes, SS and Medicare. if you don't think you NEED SS and Medicare you are either planning on death at an early age or that you can amass a nest egg of at least $2,000,000 to sustain yourself for the 20 or so years at the end of your life when you are no longer working.

you act like you get no value for your contribution. that is definitely not the case.-Paul

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The key is to retire debt free, or else you are screwed!!!




RK

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Originally Posted by Buzz

I'm not going to get into the question of whether the rich should pay more taxes or not. I just wanted to ask a few questions to clear some things up in my mind.

It does not seem fair that you should pay taxes on money that you're not getting. It sounds like you were paying taxes on your $150k salary, plus your 1/4 share of the business earnings an amount somewhere between $2 and $2.5 million during the last 5 years you were in the business. It's likely that your tax bill was more than your salary.

Did your company distribute the amount necessary to pay the taxes on the retained earnings?

So you're saying that you could not reinvest all of your earnings, only earnings minus the tax?

When you reinvest retained earnings, does that increase your basis in the company?

In most of these entities you are only able to take losses up to the amount of your basis. If the company later lost money or went bankrupt could you then have deducted the amount of your increased basis as a loss?

If the company builds up enough cash at some time, can it distribute this cash to its shareholders or partners essentially tax free up to the level of their basis in the company?

When you sell your company and calculate your capital gain, can you subtract the amount of your basis in the company from your share of the sale price?

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I'll answer in order of the questions asked:

Yes, in two of those 5 yrs I paid over $1M in personal income taxes each year but had an actual take home income of $150K.

By definition all profit is distributed to the stockholders of a s-corp via a IRS form K-1. Whether the money is actually distributed or not, the K-1 total must be reported as income. Of course profit is never as simple as having that amount of cash available because the cash is routinely reinvested to some extent in the company as inventory, equipment (i.e., profit doesn't equal available cash). A growing company will normally reinvest a larger percentage than a mature company in order to fund the growth (as opposed to borrowing the money). However the IRS doesn't care, the K-1 distribution is just as much income to them as a salary. So as a company we had to hold back so much cash as necessary to cover the taxes. Which created another problem the year, because I had to report more income than actual salary received because I received the income (via K-1 distribution) to pay the taxes.

Any reinvestment in the company falls generally into one of two categories, capital assets (which should increase the basis) and expenses, which are used to reduce income (employee salaries & wages and consumed inventory are major categories). But again it is not that simple/straight forward. Excess positive cash flow is required to increase expenses without incurring debt.

Basis has nothing to do with income (directly). It only comes into play when a company is sold. And taxes don't increase basis.

Taxes were a major deterrent to hiring. In two of the 5 yrs where we were growing & extremely profitable, we paid over $4M annually in income taxes among the stockholders (4). This $4M would have been plowed directly back into growing the company & would have hired an additional 20-30 engineers ($100K jobs) to further development work. Each of those engineers would have been in the 39% tax bracket. And more importantly would have further increased the growth of our company.

Again, retained earnings are retained (not distributed) & used for capital expenditures which then should increase basis of the useful life of the capital assets purchased. And the rub regarding capital assets is that they can only be expensed (depreciated) over their useful life not as the investment is made (creating severe cash flow issues). K-1 distributions are income (income statement, revenues less expenses), not retained earnings (balance sheet, basis related). All income not otherwise expensed is by definition distributed - remember a s-corp pays no income taxes so any & all revenue not consumed by expenses will be taxed as stockholder income via the K-1 distributions whether actually paid to the stockholder or not.

"In most of these entities you are only able to take losses up to the amount of your basis. If the company later lost money or went bankrupt could you then have deducted the amount of your increased basis as a loss?" I brought this statement down specifically because it is a generalization that is not accurate. Basis only comes into play when a company is sold. I.e., over the entire life of the company certain investments are made that will increase a stockholder's basis. This basis can also be reduced during that same period by reporting depreciation of the investments as they wear out or are used up. Income is never offset by the basis a stockholder/owner accumulates. When a stockholder sells his interest in a compnay he can offset the capital gains received by his basis but not income.

If cash has been reported as a K-1 distribution, it is taxed just like salary - its income to the IRS.

When the company was sold, the stockholder basis is calculated. At that time (1999) the capital gains were then taxed at a 45% rate.

Again small businesses more than pay their share of income taxes, because ALL income is reported via K-1 equal to each stockholder's share & taxes are paid at the rate of the total of salary and K-1 distributions combined. Jobs in the US are driven by small businesses which employ approx 80% of all wage earners in the US. 98% of all small businesses are s-corps, LLCs, partnerships or sole proprietorships and are taxed just like my company was (except that the capital gains rate is substantially lower now). So when politicians want those with incomes over $250K indiscriminately to pay more taxes they are creating the biggest deterrent to jobs grow possible. Instead there should be a distinction between small business owners & those who have inherited wealth. Those who have PASSIVE income from stocks, bonds etc and have income over $250K, OK tax them (they don't create jobs). But don't add more taxes to the very people who create the jobs.

BTW, to the comments about being a beneficiary of gov paid education etc, I paid every dollar of my college education out of my pocket. No gov loans, grants, no parents to pay. It was soley on me. My dad died while I was a child, my mom was a school teacher, no wealth accumulation there.

And my company won every contract based upon competitive bids.;)

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Originally Posted by paul young

Half of Ameri

ahhh, the old "half of america doesn't pay taxes" claim. please cite a source for this revelation.

social security is nowhere near bankrupt, and you know it. do you know anyone who has not received the benefit check that they were eligible for?

you are now advocating a coup and civil war?

you don't live in Cuba- you live in your own LITTLE world.......-Paul

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Here you go Paul, take note (according to the IRS):

The top 1% earn 20% of the income & pay 38.2% of all income taxes
The next 4% earn 14.73% of the income & pay 20%
So the top 5% pay 58.2% of all taxes
The next 5% earn 11.03% of the income & pay 11.73% of the taxes
The next 15% earn 21.62% of the income & pay 16.43% of the taxes
So the top 25% pay 86.34% of all taxes
Top 50% pay 97.30% of all taxes

Bottom 50% pay 2.7% of all taxes


If you want all the dirty details, here's the info direct from the IRS:

http://www.taxfoundation.org/news/show/250.html

And the COB (Congressional Budget Office) announced yesterday that the social security trust fund is as of yesterday paying out more than it is taking in (technical definition of bankrupt) & would be completely out of money in 2037.

[quote=paul young;740423]

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Originally Posted by duckheads

you act like you get no value for your contribution. that is definitely not the case.-Paul

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In all honesty if I had been allowed to invest that money as I chose I would be much better off. Don't bother quoting the dow because that is not where the money would be.
Doing every well right now on my investment rental properties. I would love to have had that gov't taken money in addition invested that way.

poor Duckheads is taking the heat for my post. i don't know how that happened. that post was in response to Duckheads.-Paul

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Originally Posted by paul young

Half of Ameri

ahhh, the old "half of america doesn't pay taxes" claim. please cite a source for this revelation.

social security is nowhere near bankrupt, and you know it. do you know anyone who has not received the benefit check that they were eligible for?

you are now advocating a coup and civil war?

you don't live in Cuba- you live in your own LITTLE world.......-Paul

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If you think for a minute that social security is anything but a gigantic ponzi scheme you're delusional. There's nothing in the "Trust" fund but a big, fat IOU from the Treasury and in case you haven't noticed we're $14 trillion in debt already. None of the "Trust" fund assets are marketable. They're WORTHLESS! Absolutely worthless. These assets cannot be sold to anybody so our government either has to print more money to cover the social security checks they have to write or borrow money from some moron stupid enough to loan us money. Social Security is flat-ass bankrupt and will not survive for long with 20% unemployment. Bernie Madoff would be proud. Wake up, son!

We live in Cuba now.

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Originally Posted by Goose

If you think for a minute that social security is anything but a gigantic ponzi scheme you're delusional. There's nothing in the "Trust" fund but a big, fat IOU from the Treasury and in case you haven't noticed we're $14 trillion in debt already. None of the "Trust" fund assets are marketable. They're WORTHLESS! Absolutely worthless. These assets cannot be sold to anybody so our government either has to print more money to cover the social security checks they have to write or borrow money from some moron stupid enough to loan us money. Social Security is flat-ass bankrupt and will not survive for long with 20% unemployment. Bernie Madoff would be proud. Wake up, son!

We live in Cuba now.

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2 QUESTIONS, "SON".....

how old are you?

do you plan to or are you now refusing social security benefits?

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Originally Posted by Granddaddy

Here you go Paul, take note (according to the IRS):

The top 1% earn 20% of the income & pay 38.2% of all income taxes
The next 4% earn 14.73% of the income & pay 20%
So the top 5% pay 58.2% of all taxes
The next 5% earn 11.03% of the income & pay 11.73% of the taxes
The next 15% earn 21.62% of the income & pay 16.43% of the taxes
So the top 25% pay 86.34% of all taxes
Top 50% pay 97.30% of all taxes

Bottom 50% pay 2.7% of all taxes


If you want all the dirty details, here's the info direct from the IRS:

http://www.taxfoundation.org/news/show/250.html

And the COB (Congressional Budget Office) announced yesterday that the social security trust fund is as of yesterday paying out more than it is taking in (technical definition of bankrupt) & would be completely out of money in 2037.

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well, according to them, i'm at the top of the bottom 50%. funny thing is, 20% of my wages doesn't feel QUITE like im paying no federal taxes. i don't know ANYBODY who doesn't pay federal taxes. even the people on unemployment pay some federal tax.

addressing your second point: it's clear to me that the rate of taxation for FICA needs to be increased.-Paul