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I'm surprised no one has picked up on this yet: families who make $249,999 may actually pay far fewer taxes than families making $250,000. Why? Capital gains ta
by rm999 18y ago
I'm surprised no one has picked up on this yet: families who make $249,999 may actually pay far fewer taxes than families making $250,000. Why? Capital gains taxes, which Bush set to 15%. Obama will increase this tax to 20% for families making >= $250,000 (http://www.google.com/hostednews/ap/article/ALeqM5jd7Vs2tjPAplFaABT9kaFRR9a56wD96JIAI03 http://www.google.com/hostednews/ap/article/ALeqM5jd7Vs2tjPA...). Also, all sorts of other possible deductions would be removed.
Wealthy families often make much of their money from investing, so a 5% capital gains tax increase can be pretty significant.
- lasthemy1 18y agoI think you're mis-stating how the capital gains rate will change, although that's the obvious interpretation based on the linked article. Based on Wikipedia (which may be wrong, but at least explains it more clearly), the long-term capital gains rate will be 0% for those in the 10% income tax bracket, 10% for those in the 15% income tax bracket, and 20% for all others, meaning the discontinuity for joint filing happens around $65k. http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United...
- rm999 18y agoI think you are referring to how short term capital gains are taxed, but I am referring to long-term gains (most investors stick with long-term gains to lower their taxes). Long term gains are taxed at a flat rate. If you make N dollars in capital gains, you are taxed the same % on those N dollars. This % is determined by what tax bracket you are in, but is the same over all your gains. That was my original point: Under Obama's plan, people who enter the highest tax bracket will suddenly see all of their capital gains taxed at a higher rate.
- pibefision 18y agoI live in Argentina. We know a lot about that.
- gnaritas 18y ago> families who make $249,999 may actually pay far fewer taxes than families making $250,000. That's not how tax brackets work. Jumping into the higher bracket doesn't mean you make less money, it means you pay more taxes for the amount above the bracket, but you'll pay the same tax rate on the 249k as the guy only making 249k. So he'd only pay the 20% rate on the extra dollar, hardly far more than the other guys.
- rm999 18y agoNotice that I'm talking about capital gains, not income. They are taxed differently. A family making 190,000 dollars a year in normal income and 50,000 dollars a year in long-term capital gains will pay the normal taxes on 190,000 dollars (as you describe it, with brackets and what-not), and 15% on the 50,000 dollars. A family making 200,000 dollars plus 50,000 in LTCG, however, will break the 250,000 dollar barrier and will have to pay 20% on that 50,000. That means the cost of that extra 10,000 dollars in income cost them 2,500 dollars in additional taxes.
- gnaritas 18y agoHmm.. you're right, I didn't realize cap gains weren't bracketed like income. Still, I have no sympathy, getting nailed for extra taxes because you make more than a quarter million a year is a nice problem to have, I wish I had it.
- xenophanes 18y agoit's stupid to have this huge jump in taxes when you make one more dollar. 5% of the gains on your investments is a big difference.
- gnaritas 18y agoDonate that dollar to charity and deduct it, you're below the cap, easy enough; you're right though, it is stupid.