Taxes Blah

[ilikeaces86_]

In 2006 my taxable income was reaching new heights from poker (BRAG). Now to the taxes part. I payed about 28% in federal taxes on my earnings plus FICA which is about 15.3% . On top of that I had to pay about 7% in state taxes (MN) and I also pay 6.5% sales tax on non-groceries non-clothes purchases. Plus I pay random fees for licenses, tabs, and other random crap. Basically when you work it all out I payed somewhere around 1/2 my income to government taxes or fees. Does that sound ridiculous to anyone else? I wouldn't mind so much if I didn't think my money was basically going to be pissed away by the federal government. I don't mind them spending my money on defense or useful programs but the amount of money they flush down the toilet every year is really amazing. I can't help but think they would be better of letting the citizens keep more of their $ ala lower taxes and letting us distribute it into the economy via spending and investing. Seems the economy would be even stronger if people had more $ to invest and spend(obv). Sorry for the rant but just wanted to see what others opinions are on current tax rates and the out of control federal budget.

[BradleyT]

http://thomas.loc.gov/cgi-bin/query/z?c110:H.R.25.IH:

Fair Tax act 2007. It basically eliminates the IRS and all income taxes. It is then replaced by a 30% tax on all goods and services. So you're only taxed when you spend money.

Note they introduce this every year since like 2001 and it never passes....

[ilikeaces86_]

Interesting basically its a flat tax that favors investors over spenders?

[BradleyT]

Yes. No taxes on anything (investments, income, inheritance, etc.) until you spend the monies.

[TheMetetron]

My 2007 taxes will be truly taxed at a 22% rate including federal income tax and self-employment tax. I don't owe state taxes. I do pay a 21% sales tax (VAT/IVA) in Argentina, however. This is making low-mid 6 figures.

Take advantage of all of the deductions that you can. You know what is sort of funny is that I believe I'd actually owe more taxes %-wise on $100k in income because of the Social Security tax phasing out after $90kish. Maximize your retirement.

[TheMetetron]

[ QUOTE ]
My 2007 taxes will be truly taxed at a 22% rate including federal income tax and self-employment tax. I don't owe state taxes. I do pay a 21% sales tax (VAT/IVA) in Argentina, however. This is making low-mid 6 figures.

Take advantage of all of the deductions that you can. You know what is sort of funny is that I believe I'd actually owe more taxes %-wise on $100k in income because of the Social Security tax phasing out after $90kish. Maximize your retirement.

[/ QUOTE ]

Just realized someone is probably going to want some proof of this. Note that these estimates are high because they don't take into account any business expenses I will be able to write off. Also, the foreign housing exclusion isn't included because I haven't been able to take it yet so I don't know exactly how it works.

I'm just going to copy/past from my blog:

As for the tax thing I've been meaning to touch on. I ran some rough numbers for my taxes next April (for the money I make in 2007). It is looking like I will make around $275k or so if I continue to make $25-30k per month for the rest of the year (I made almost nothing in January). Fortunately, I'm an optimist and I'm going to just pretend I will make $300k. It is definitely do-able and it is my goal for the year. I wanted to know how raped I would get by taxes making that amount and the results were surprising.

First I owe Self-Employment tax on that $300k. That works out to $14.8k on the first $97k and $5.8k on the next $203k (the social security part stops after $97k). So that is a total of $20.6k in SE tax. Now for income tax. I'll make $300k but I have a lot of deductions. First half of the SE tax ($10.3k) is deductible. Then I am going to max out my SEP IRA for another $45k deduction. Standard deduction is $5.3k or so. Then the foreign earned income exclusion is $82.4k (but is taken on the first $82.4k, not the last like the other exclusions).

What that means is that for the federal income tax I owe taxes on the tax schedule for the amount between $82.4k and $239.4k which works out to $47.9k for federal income taxes. So my total tax bill is $47.9k + $20.6k or $68.5k total on $300k in income. My effective tax rate including federal income tax and SE tax is 22.8%. That is so insanely low that it is almost sickening. I'm pretty sure my effective tax rate was higher last year when I made between $100k and $200k. Thank you social security cap, foreign earned income exclusion, and SEP IRA contributions; it wouldn't have been possible without you.

Still, I am paying the federal government $68.5k next year so I can't be too excited. Feel free to look over the rough numbers and tell me what you think and if I made any mistakes.

Like I said I believe the 22.8% figure to actually be higher than it will end up being, but it was just a rough calculation. I think by finding some more deductions and business expenses I can get it under 20% effective tax rate on $300k in income.

[ctj]

[ QUOTE ]
[ QUOTE ]
My 2007 taxes will be truly taxed at a 22% rate including federal income tax and self-employment tax. I don't owe state taxes. I do pay a 21% sales tax (VAT/IVA) in Argentina, however. This is making low-mid 6 figures.

Take advantage of all of the deductions that you can. You know what is sort of funny is that I believe I'd actually owe more taxes %-wise on $100k in income because of the Social Security tax phasing out after $90kish. Maximize your retirement.

[/ QUOTE ]

Just realized someone is probably going to want some proof of this. Note that these estimates are high because they don't take into account any business expenses I will be able to write off. Also, the foreign housing exclusion isn't included because I haven't been able to take it yet so I don't know exactly how it works.

I'm just going to copy/past from my blog:

As for the tax thing I've been meaning to touch on. I ran some rough numbers for my taxes next April (for the money I make in 2007). It is looking like I will make around $275k or so if I continue to make $25-30k per month for the rest of the year (I made almost nothing in January). Fortunately, I'm an optimist and I'm going to just pretend I will make $300k. It is definitely do-able and it is my goal for the year. I wanted to know how raped I would get by taxes making that amount and the results were surprising.

First I owe Self-Employment tax on that $300k. That works out to $14.8k on the first $97k and $5.8k on the next $203k (the social security part stops after $97k). So that is a total of $20.6k in SE tax. Now for income tax. I'll make $300k but I have a lot of deductions. First half of the SE tax ($10.3k) is deductible. Then I am going to max out my SEP IRA for another $45k deduction. Standard deduction is $5.3k or so. Then the foreign earned income exclusion is $82.4k (but is taken on the first $82.4k, not the last like the other exclusions).

What that means is that for the federal income tax I owe taxes on the tax schedule for the amount between $82.4k and $239.4k which works out to $47.9k for federal income taxes. So my total tax bill is $47.9k + $20.6k or $68.5k total on $300k in income. My effective tax rate including federal income tax and SE tax is 22.8%. That is so insanely low that it is almost sickening. I'm pretty sure my effective tax rate was higher last year when I made between $100k and $200k. Thank you social security cap, foreign earned income exclusion, and SEP IRA contributions; it wouldn't have been possible without you.

Still, I am paying the federal government $68.5k next year so I can't be too excited. Feel free to look over the rough numbers and tell me what you think and if I made any mistakes.

Like I said I believe the 22.8% figure to actually be higher than it will end up being, but it was just a rough calculation. I think by finding some more deductions and business expenses I can get it under 20% effective tax rate on $300k in income.

[/ QUOTE ]

I believe that gambling winnings are not 'earned income' and thus do not qualify for the exemption.

[spider]

A few counter-points:

1) It's easy to forget a lot of benefits you receive (roads, police, all that).

2) FICA/SECA are arguably not taxes in the sense that in theory you get this money back when you are older (i.e. it's just a mandatory temporal shift in when you receive your income). Of course, that's only a partial argument b/c there is means testing and the return is going to almost certainly be worse than if you put it in stocks. Still, the argument is valid for some percent of your FICA/SECA.

3) The real issue by far, is equity w/ respect to wealth, aka fairness. Even at the 28% bracket, you come out pretty wealthy compared to the median citizen and I'll grant that from the standpoint of gov't benefits you receive that you are not getting your money's worth.

But... most people outside of the whack jobs like Forbes & Norquist are going to allow that a progressive income tax is more fair than a proportional one (i.e. ability to pay), although of course you could argue forever as to the degree of progressiveness that is fair.

[frozzor]

1) yeah but the gov wastes most of our money sending kids to iraq

2) this is complete not true. FICA/SECA is just income transfer from rich to poor

3) i guess, but everyone has diff definitions of fairness. why don't we just all be communist?

[riverdance]

http://thomas.loc.gov/cgi-bin/query/...CYPV4:e111698: