The Fiscal Cliff

[byu71]

President Obama, you just have to love the guy. His latest is, the over the cliff problem can be solved in one week if the republicans agree to the tax hikes on the wealthy. Side note: Wealthy is defined as making over $250,000, it isn't millionaire's and billionaire's as the dems like to scream and the press doesn't call them on it. If you are honest it is "incomes over $250,000".

Now my question is why would it take a week. If I am negotiating with you and give you what you want and don't get anything in return, except a promise you will work with me in the future on my concerns, why wouldn't we have it done in 15 minutes.

Maybe you would need a week to let the press shout your praises and beat the crap out of me.

He is lucky he doesn't have a board of directors or stockholders to answer to. Only people who don't get it and believe what they are spoon fed by the press.

Yes, I am saying that anyone on this board who thinks what Obama is proposing is a good deal, doesn't get it, but I would be happy to negotiate with you on something if I get what I want along with a promise to work on what you want later. Hard for me to believe you would be that stupid, but if you are supporting Obama's position, well...............

[The_Douger]

I don't get how 250k is wealthy.

It's not close to someone who makes 1m+. Those are some different lifestyles for sure.

[Clark Addison]

I am comfortable saying that people who make over $250K are wealthy. They are not all rich; they are not all millionaires, but they are wealthy. They have houshold incomes in the top 1.5% of all households. I think that it is fair to say that anyone in the US whose income is in the top 1.5% could be considered wealthy.

[New Mexican Disaster]

I am comfortable saying that people who make over $250K are wealthy. They are not all rich; they are not all millionaires, but they are wealthy. They have houshold incomes in the top 1.5% of all households. I think that it is fair to say that anyone in the US whose income is in the top 1.5% could be considered wealthy.

That's outrageous!

[Uncle Ted]

I am comfortable saying that people who make over $250K are wealthy. They are not all rich; they are not all millionaires, but they are wealthy. They have houshold incomes in the top 1.5% of all households. I think that it is fair to say that anyone in the US whose income is in the top 1.5% could be considered wealthy.

It may come down to where you live. If you live in NYC then $250K/yr is not going to make you wealthy.

Taxes take a hefty toll. Everything from property taxes and the alternative minimum tax to the taxes added to cell phone bills and the cost of gasoline, when combined, takes a massive bite out of earnings -- in some cases even more than the federal income tax. And it's not likely to get better soon. States and municipalities have been steadily raising income tax rates to help close gaping holes in their budgets. Property taxes are also increasing, even though real estate values have cratered. And sales taxes are hitting record levels, in some areas nearing 10%. Gas taxes, alcohol taxes and hidden surcharges on everything from airline flights and ferry rides to vehicle registrations, rental cars and even sodas have also been stealthily rising.

On top of that, additional tax increases for couples with salaries of $250,000 or more (and single people earning $200,000 or more) are scheduled to go into effect in 2013 under the health care bill passed a year ago.

As educated professionals, the Joneses buy books, newspapers and magazines; they own computers and pay for Internet access. But they don't take lavish vacations, don't belong to a country club, don't play golf, don't drive luxury cars, don't have a swimming pool, don't buy designer clothes, don't own or rent a second home and don't send their kids to private schools. They don't even shop at high-end grocery markets. (They spend what the U.S. Department of Agriculture defines as a "moderate" amount on food for the average family of four.) In short, they're not "wealthy," even if they're in the top 5% of earners.

Consider the tax profile of the Joneses when they're based in Huntington, a suburb of New York City. Thanks to all their smart pretax contributions and a fat deduction for mortgage interest and state and local taxes, the couple's federal income tax is only $29,344. But what often goes overlooked is the toll taken by state and local taxes. In this case, it exceeds that of the federal income tax bill: $31,066. State income taxes, taken alone, are just $10,557. But factor in the gas tax ($2,679), property tax ($15,222), phone service taxes and surcharges ($350), and sales tax ($2,258), and the picture looks far different. Their total tax bill, including the AMT and payroll taxes: $78,276.

And costs assumed by the Joneses could be significantly higher if their circumstances changed. For example, if they worked for themselves, they would have to foot the bill for all their medical insurance premiums, which average $14,043. As it is, they pay 30% of the premiums, and their employers pay the rest.

The bottom line: For folks like the Joneses -- who live in high-tax, high-cost areas, who save for retirement and college, who pay for child care to enable them to earn two incomes and who pay higher prices for housing in top school districts -- $250,000 does not a rich family make.

Now if you are living on the Indian reservation in NM then $250K/yr would make you seem like a billionaire.

[byu71]

I am comfortable saying that people who make over $250K are wealthy. They are not all rich; they are not all millionaires, but they are wealthy. They have houshold incomes in the top 1.5% of all households. I think that it is fair to say that anyone in the US whose income is in the top 1.5% could be considered wealthy.

Seriously, you equate income to wealth?

I guess anyone can equate it how they want though, it is all in one's perspective.

From my perspective if someone said they know someone who has a family of five, a spending nut to crack of $7,000 a month, no assets but an income of $250,000, I wouldn't want to spend a minute pursuing that person as a client.


Now a little old lady with $2,000,000 in assets and $75,000 in income, I would love the chance to chat.

[Donuthole]

From my perspective if someone said they know someone who has a family of five, a spending nut to crack of $7,000 a month, no assets but an income of $250,000, I wouldn't want to spend a minute pursuing that person as a client.

But you wouldn't disagree that this person is wealthy, would you? Or perhaps I am misunderstanding your poorly-worded example. FYI, nut to crack has a different meaning now than it did back in the olden days.

[byu71]

But you wouldn't disagree that this person is wealthy, would you? Or perhaps I am misunderstanding your poorly-worded example. FYI, nut to crack has a different meaning now than it did back in the olden days.

Poorly worded is my trademark. Either because I am not good at word construction or for some reason I do it on purpose. I haven't figured out which it is.

I define a person as wealthy based on his Net Worth which is Assets less liabilities (I know you know that, but someone might not). I don't define it on their income.

Certainly someone who earns $250,000 has a better shot at becoming wealthy than someone who earns $50,000, but there is no guarantee because of their spending habits.

[Clark Addison]

Seriously, you equate income to wealth?

I guess anyone can equate it how they want though, it is all in one's perspective.

From my perspective if someone said they know someone who has a family of five, a spending nut to crack of $7,000 a month, no assets but an income of $250,000, I wouldn't want to spend a minute pursuing that person as a client.


Now a little old lady with $2,000,000 in assets and $75,000 in income, I would love the chance to chat.

No, income doesn't equal wealth, though I would imagine there is a pretty high correlation between the two. But we don't have an asset tax, we have an income tax. $250K is in the top 1.5% of household income, so I do not have a problem, when discussing income taxes, in drawing the line there as "wealthy".

Also note that I have not indicated what I think our tax policy should be for those who make $250K, I am just saying that there is an argument made here fairly frequently that $250K is middle class, which it clearly is not (acknowledging that there are exceptions for everything, and I am sure we can all come up with examples of people making $250K who are just scraping by)

[byu71]

No, income doesn't equal wealth, though I would imagine there is a pretty high correlation between the two. But we don't have an asset tax, we have an income tax. $250K is in the top 1.5% of household income, so I do not have a problem, when discussing income taxes, in drawing the line there as "wealthy".

Also note that I have not indicated what I think our tax policy should be for those who make $250K, I am just saying that there is an argument made here fairly frequently that $250K is middle class, which it clearly is not (acknowledging that there are exceptions for everything, and I am sure we can all come up with examples of people making $250K who are just scraping by)

Although I wouldn't call them wealthy, I can see why a large number of Americans would feel they are. That is a damn good income.

Why though do you think from a political viewpoint the dems keep saying they are going after the millionaire's and billionaire's. Why not the quarter of a millionaire's and billionaire's. My guess is because people aren't quite so envious or covetous (don't know if that is a word) of those making $250,000 to $1 million.

Of all the money that is going to be raised through the tax on those over $250,000 or $125,000 if you are single, what percent of the total will come from those making over a million a year and what percent from the $250K to a $999,999 crowd.

[FMCoug]

Defining wealth based on income is ridiculous. It was mentioned above but if they really want this to be "fair", they should index it based on location. 250K in NYC vs. 250K in UT or TX are entirely different things.

Also for what it's worth anecdotally, I have talked to several other owners of small consulting firms like mine and it seems to be universally accepted that growing our businesses is kind of pointless right now if the gov't is just going to commandeer any profits over 250K. Why take the risk?

[FMCoug]

Of all the money that is going to be raised through the tax on those over $250,000 or $125,000 if you are single, what percent of the total will come from those making over a million a year and what percent from the $250K to a $999,999 crowd.

I don't think that's the right question. Obvious a larger % of the overall money wil come from those over 1M. But I do think looking at the real impact to those in the 250K - 1M range makes sense.

[byu71]

I don't think that's the right question. Obvious a larger % of the overall money wil come from those over 1M. But I do think looking at the real impact to those in the 250K - 1M range makes sense.

I wouldn't be so sure. I have a gut feeling that in actual dollars, more will come from those making $250,000 to $999,0000 because there are so many more of them. You only need to have 4 to equal a millionaire.

I will google it to find out.

As a side comment to you comment in your post above mentioning consultants and the tax rate affecting your plans. Warren Buffet made one of the most idiotic statements a person of his financial knowledge has ever made.

He said investors and business people don't make decisions based on taxes. He has been out of the real world too long.

Right now I am making a decision on whether I should take SS now or at age 70. The only hang on taking it now is I am still working and will be taxed really high on the income I bring in.

Sure SS is a different decision and not quite the same, but I also have been approached on doing things that could increase my income. I don't do it, because of the net return for the effort I would put in.

Old people who used to be smart should not be allowed to make public statements.

[PaloAltoCougar]

...
Old people who used to be smart should not be allowed to make public statements.

And with that, '71 and I bid the board a fond adieu...

[byu71]

And with that, '71 and I bid the board a fond adieu...

I meant really old, 75 and up.