6 ms·

> $100k from someone who's making $250k 40% tax? Sounds about right. So long as there are good social services. That's about the taxation level in the Nordic c

by dalke 11y ago

> $100k from someone who's making $250k 40% tax? Sounds about right. So long as there are good social services. That's about the taxation level in the Nordic countries, so with that I expect universal health care, 1 year combined parental leave per child, free college tuition to state colleges, state coverage of old age homes, free college, 30 days of holiday, good roads, clean water, etc. > Someone who studied hard (for example), got into student debt, etc If tuition is free, there's no need to go into massive student debt. Cuba, with the Latin American School of Medicine, pursues medical diplomacy by providing free medical education to international student, including US citizens. It cost Cuba about $15K/year/student or about $90K total. Some of the US citizens do this so they can return home and worked at a free clinic or volunteer in communities that are underserved by those who go into $100Ks of debt. (See http://www.pbs.org/newshour/rundown/cuba-offers-poor-med-students-a-free-ride/ http://www.pbs.org/newshour/rundown/cuba-offers-poor-med-stu... ). Those medical students are making a statement as well - that $250k/y isn't what drives them to be a medical doctor. (I bring this up to highlight that a lot of people make statements, not just those with high incomes.) > Billionaires should get taxed %50 Note that "billionaire" refers to wealth, not income. Are you proposing a global wealth tax of 50% of the richest people? Picketty's proposal is only 5 or 10% for billionaires. FWIW, the highest income tax bracket in the US used to be ~90%. > If you make 1 million dollars a year you'll never become a millionaire If you make $1M/year with 50% income taxation and no wealth taxation then you have 500K. If your lifestyle costs $250K/year than you bank $250K/year. It will take 4 years to become a millionaire. If there is a 50% income tax and 2% wealth tax on $1M/year income and no savings (and the same spend) then you'll have $250K in savings for the first year, $490K the second, $720K the third, $940K the fourth, and by the fifth year you'll have over a million in savings.

montbonnot 11y ago
Regarding your last point, assuming you'd be an employee with a steady income of one million dollars per year. I believe you'd be a CEO in a large corporate or you'd have a very generous employer. Then yeah, you could chill and plan for the next 5 years. What if you're a small business with no regular income? You made a million dollars thanks to your hard work in 2015, which might not happen again in 2016. They took away %50 of that million dollars. I agree, billionaire refers to wealth not income. At that level your income is the money you generate from your own money. Which is an income, which should be taxed at %50 if your wealth is in the billions of dollars. That's what I was referring to.
- dalke 11y ago
  Oddly enough, I am a small business with no regular income. (Self-employed. Was an LLC in the US. Now an AB in Sweden.) Regarding the "You made a million dollars thanks to your hard work" - first, that's misdirection. Don't make the mistake and think that working hard is all that was needed for $1M; many more people work much harder than I do, and make even less. $1 million also requires a non-trivial amount of good fortune. It means I did not get a heart attack, did not get into a car accident, didn't become depressed or burnt out from working too hard, etc. It means I guessed right about where the market was going, and how to reach customers. Regarding the question of how to handle tax on $1M if I am uncertain about the following years. First, I can live for 5 years on $100K/year, so 50% tax still leaves a huge amount. My business is little more than me and a few computers, plus conference and customer travel. Second, quoting http://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html http://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29... : > If you will regularly need to keep a substantial amount of profits in your LLC (called "retained earnings"), you might benefit from electing corporate taxation. Any LLC can choose to be treated like a corporation for tax purposes by filing IRS Form 8832, Entity Classification Election, and checking the corporate tax treatment box on the form. Third, I would look into setting up a Delaware C Corp. What's wrong with any of these three options?
  - montbonnot 11y ago
    I went over these options when I incorporated. Nevada, Delaware and Wyoming. Unfortunately, I'm the only member of my LLC and my office is my house. For a software company selling online it is not recommended to incorporate in a foreign state with these conditions. Usually more than 5 members and at least a physical office located in Delaware for instance. Otherwise the tax burden can become overwhelming and my tax liability may actually increase because I'd be viewed as a foreign entity operating in these states. It's easy on paper but when you start digging it's not that easy. Filing as a C-Corp? :) I'd be taxed twice. The LLC would have to pay income tax on its earnings then I'd have to pay taxes during the distribution to all the members (myself). This will be viewed as income tax. Definitely not. Though, filing as an S-Corp would take away the annoying/abusive self-employed tax of %15. Problem, again, the IRS... they hate S-Corps and they will make sure I fail to comply. My problem with filling as an S-Corp is that the LLC wouldn't pay self employment tax but the member would have to. So if I make $1 million, I withdraw $1 million (which is the goal), I'd pay the full self employment tax anyway. Does it make sense? Last but not least, regarding your 1st point it all depends on your goals. I'm not rich and I'm still alive. Obviously I already know I can survive with $100 k/y not a problem. Now, majority of the people are looking for security first, then comfort and finally, they want to become rich. I personally want to become rich first. Then I'll be looking for comfort then security last. I'm looking for freedom, that's my main goal. We have different goals so we can't argue with each other on that specific point unfortunately. I view taxes as an obstacle... some don't which is fine.

by dalke 11y ago

montbonnot 11y ago

Regarding your last point, assuming you'd be an employee with a steady income of one million dollars per year. I believe you'd be a CEO in a large corporate or you'd have a very generous employer. Then yeah, you could chill and plan for the next 5 years. What if you're a small business with no regular income? You made a million dollars thanks to your hard work in 2015, which might not happen again in 2016. They took away %50 of that million dollars. I agree, billionaire refers to wealth not income. At that level your income is the money you generate from your own money. Which is an income, which should be taxed at %50 if your wealth is in the billions of dollars. That's what I was referring to.

dalke 11y ago
Oddly enough, I am a small business with no regular income. (Self-employed. Was an LLC in the US. Now an AB in Sweden.) Regarding the "You made a million dollars thanks to your hard work" - first, that's misdirection. Don't make the mistake and think that working hard is all that was needed for $1M; many more people work much harder than I do, and make even less. $1 million also requires a non-trivial amount of good fortune. It means I did not get a heart attack, did not get into a car accident, didn't become depressed or burnt out from working too hard, etc. It means I guessed right about where the market was going, and how to reach customers. Regarding the question of how to handle tax on $1M if I am uncertain about the following years. First, I can live for 5 years on $100K/year, so 50% tax still leaves a huge amount. My business is little more than me and a few computers, plus conference and customer travel. Second, quoting http://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29675.html http://www.nolo.com/legal-encyclopedia/how-llcs-are-taxed-29... : > If you will regularly need to keep a substantial amount of profits in your LLC (called "retained earnings"), you might benefit from electing corporate taxation. Any LLC can choose to be treated like a corporation for tax purposes by filing IRS Form 8832, Entity Classification Election, and checking the corporate tax treatment box on the form. Third, I would look into setting up a Delaware C Corp. What's wrong with any of these three options?
- montbonnot 11y ago
  I went over these options when I incorporated. Nevada, Delaware and Wyoming. Unfortunately, I'm the only member of my LLC and my office is my house. For a software company selling online it is not recommended to incorporate in a foreign state with these conditions. Usually more than 5 members and at least a physical office located in Delaware for instance. Otherwise the tax burden can become overwhelming and my tax liability may actually increase because I'd be viewed as a foreign entity operating in these states. It's easy on paper but when you start digging it's not that easy. Filing as a C-Corp? :) I'd be taxed twice. The LLC would have to pay income tax on its earnings then I'd have to pay taxes during the distribution to all the members (myself). This will be viewed as income tax. Definitely not. Though, filing as an S-Corp would take away the annoying/abusive self-employed tax of %15. Problem, again, the IRS... they hate S-Corps and they will make sure I fail to comply. My problem with filling as an S-Corp is that the LLC wouldn't pay self employment tax but the member would have to. So if I make $1 million, I withdraw $1 million (which is the goal), I'd pay the full self employment tax anyway. Does it make sense? Last but not least, regarding your 1st point it all depends on your goals. I'm not rich and I'm still alive. Obviously I already know I can survive with $100 k/y not a problem. Now, majority of the people are looking for security first, then comfort and finally, they want to become rich. I personally want to become rich first. Then I'll be looking for comfort then security last. I'm looking for freedom, that's my main goal. We have different goals so we can't argue with each other on that specific point unfortunately. I view taxes as an obstacle... some don't which is fine.