5 ms·

I always thought it's silly for the Congress and WH to be focusing on raising the tax for the high income people (doctors, lawyers, senior engineers, people who

I always thought it's silly for the Congress and WH to be focusing on raising the tax for the high income people (doctors, lawyers, senior engineers, people who are well off but still live off paychecks), whom are already paying a very high effective tax rate. Meanwhile the ultra-rich are mostly untouched by these new laws and people like Romney can still get away with a 13% effective tax rate. The only significant portion of the new law that MAY make an impact on the uber-riches is raising long-term capital gain to 20% for people who make over $400k (so actually now even better reason for CEOs to take $1 salary and get the rest in stocks) and limit deductibles to $250k per family (So hopefully people like Romney can longer claim the expenses on their horses and everything else as deductibles). Well, like MA said, the aspiring rich people took a bullet for the real rich people.

_delirium 14y ago
Side question: are there really senior engineers who make >$400k in salary? I thought you had to go into upper management to break much above $200k in actual salary (paycheck, not equity), even in the Bay Area. But I could well be out of touch with recent developments in Valley pay.
- prostoalex 14y ago
  Restricted stock units are treated as income, so while not technically "in salary", tax implications are the same.
- Cookingboy 14y ago
  What prostoalex said, while it's still rare, but for senior engineers who work for companies that give out a lot of valuable RSUs such as Google/Apple, etc, it's very possible for them to make more than that amount.
- jspthrowaway2 14y ago
  A lot of people at Google are north of $500k, I've heard. We're talking engineering and product, not management. I mean, what would you pay someone like Ken Thompson? There are the outliers like him, of course, but I've also heard that even the less-known folks do well. Though I've heard all of that from Xooglers, it remains anecdotal. I also remain slightly old-school when dealing with other peoples' salary and give them respect; I'll freely tell you what I make (if permitted legally), but I understand people are not as open as I am and I try to respect their privacy.
  - dllthomas 14y ago
    Anecdotes are perfectly valid evidence for "there exists", albeit checked for all the usual biases of any testimonial evidence.
    - jacques_chester 14y ago
      The problem here is the distinction between discrimination (there exists X) and calibration (X is close to true figure Y +/- Z, where Z is inflation from anecdotal inflation bias).
prostoalex 14y ago
Government taxes things (cigarettes, gasoline, high incomes) to discourage them.
- turing 14y ago
  Government taxes things to raise income.
  - anigbrowl 14y ago
    Both statements are true. Taxing as a method of altering spending patterns is very well understood by economists. In the case of cigarettes, it seem sot have been quite effective since smoking rates in the Us have fallen to historic lows.
    - deleted 14y ago
      [deleted]
    - tommorris 14y ago
      I'd suggest that education campaigns and the natural human desire to not get lung cancer may have also played a part.
      - anigbrowl 14y ago
        Surely, though it's worth noting that education campaigns and research are financed with both tax dollars and cigarette company settlement money (from a large lawsuit many years back).
- MartinCron 14y ago
  And as a result, people decide that being rich isn't worth it and become welfare queens instead. Tragic, really.
  - prostoalex 14y ago
    They still pursue wealth, just not through the income venue.
smsm42 14y ago
One of the reasons Romney has 13% effective tax rate is that he gives a lot to charity - about 13% of his AGI on average, if you believe the auditors: http://content.usatoday.com/communities/onpolitics/post/2012/09/21/mitt-romney-tax-returns-2011/70000874/1 http://content.usatoday.com/communities/onpolitics/post/2012... So when using Romney as an example, it is good to know that if he did not give this much to charity, the rate would be somewhere around 27%, maybe more if charity deductions avoided triggering some higher rates, etc. Average effective income tax rate (don't confuse with marginal!) for millionaires is 23%, for "middle class" is 20% and below (the figures is for tax year 2010, other years I imagine they may differ).
- gerhardi 14y ago
  I find it weird that you can reduce charity contributions from taxation. Isn't it like grant for the rich to "choose where they pay their taxes"? And have nice dinners...
  - SatvikBeri 14y ago
    Correct me if I'm wrong, but I believe charity contributions can only reduce your taxable income. For simplicity, let's say you have an income of $1M and a tax rate of 35%. Normally you'd pay $350k in taxes. If you donate $100k to charity, then you pay 35% * $900k = $315k in taxes, for a total payout of $415k. The real picture is a bit more complicated than that due to variable tax rates, but I don't think there's a case where donating to charity doesn't increase your total payout, since you give up 100% of what you donate instead of whatever tax rate you'd have paid.

_delirium 14y ago

Side question: are there really senior engineers who make >$400k in salary? I thought you had to go into upper management to break much above $200k in actual salary (paycheck, not equity), even in the Bay Area. But I could well be out of touch with recent developments in Valley pay.

prostoalex 14y ago
Restricted stock units are treated as income, so while not technically "in salary", tax implications are the same.
Cookingboy 14y ago
What prostoalex said, while it's still rare, but for senior engineers who work for companies that give out a lot of valuable RSUs such as Google/Apple, etc, it's very possible for them to make more than that amount.
jspthrowaway2 14y ago
A lot of people at Google are north of $500k, I've heard. We're talking engineering and product, not management. I mean, what would you pay someone like Ken Thompson? There are the outliers like him, of course, but I've also heard that even the less-known folks do well. Though I've heard all of that from Xooglers, it remains anecdotal. I also remain slightly old-school when dealing with other peoples' salary and give them respect; I'll freely tell you what I make (if permitted legally), but I understand people are not as open as I am and I try to respect their privacy.
- dllthomas 14y ago
  Anecdotes are perfectly valid evidence for "there exists", albeit checked for all the usual biases of any testimonial evidence.
  - jacques_chester 14y ago
    The problem here is the distinction between discrimination (there exists X) and calibration (X is close to true figure Y +/- Z, where Z is inflation from anecdotal inflation bias).

prostoalex 14y ago

Government taxes things (cigarettes, gasoline, high incomes) to discourage them.

turing 14y ago
Government taxes things to raise income.
- anigbrowl 14y ago
  Both statements are true. Taxing as a method of altering spending patterns is very well understood by economists. In the case of cigarettes, it seem sot have been quite effective since smoking rates in the Us have fallen to historic lows.
  - deleted 14y ago
    [deleted]
  - tommorris 14y ago
    I'd suggest that education campaigns and the natural human desire to not get lung cancer may have also played a part.
    - anigbrowl 14y ago
      Surely, though it's worth noting that education campaigns and research are financed with both tax dollars and cigarette company settlement money (from a large lawsuit many years back).
MartinCron 14y ago
And as a result, people decide that being rich isn't worth it and become welfare queens instead. Tragic, really.
- prostoalex 14y ago
  They still pursue wealth, just not through the income venue.

smsm42 14y ago

One of the reasons Romney has 13% effective tax rate is that he gives a lot to charity - about 13% of his AGI on average, if you believe the auditors: http://content.usatoday.com/communities/onpolitics/post/2012/09/21/mitt-romney-tax-returns-2011/70000874/1 http://content.usatoday.com/communities/onpolitics/post/2012... So when using Romney as an example, it is good to know that if he did not give this much to charity, the rate would be somewhere around 27%, maybe more if charity deductions avoided triggering some higher rates, etc. Average effective income tax rate (don't confuse with marginal!) for millionaires is 23%, for "middle class" is 20% and below (the figures is for tax year 2010, other years I imagine they may differ).

gerhardi 14y ago
I find it weird that you can reduce charity contributions from taxation. Isn't it like grant for the rich to "choose where they pay their taxes"? And have nice dinners...
- SatvikBeri 14y ago
  Correct me if I'm wrong, but I believe charity contributions can only reduce your taxable income. For simplicity, let's say you have an income of $1M and a tax rate of 35%. Normally you'd pay $350k in taxes. If you donate $100k to charity, then you pay 35% * $900k = $315k in taxes, for a total payout of $415k. The real picture is a bit more complicated than that due to variable tax rates, but I don't think there's a case where donating to charity doesn't increase your total payout, since you give up 100% of what you donate instead of whatever tax rate you'd have paid.