Money Matters
Dear Community,
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Our tech team has launched updates to The Nest today. As a result of these updates, members of the Nest Community will need to change their password in order to continue participating in the community. In addition, The Nest community member's avatars will be replaced with generic default avatars. If you wish to revert to your original avatar, you will need to re-upload it via The Nest.
If you have questions about this, please email help@theknot.com.
Thank you.
Note: This only affects The Nest's community members and will not affect members on The Bump or The Knot.
Re: Ideas on Taxes?
This (in my opinion) just goes to show the problem is with the tax code itself (too complicated, too many exemptions, too many loopholes and carve outs). If I could find a way to get my tax liability to zero without breaking the law I would do it too!
I think this is why a consumption tax would help. After a certain level of spending EVERYONE would be paying taxes, from the "welfare queen" to the Donald Trumps of the world. And those with a large disposable income or those who have millions/billions would be paying "their fair share" because they will still want the newest expensive toys and building new houses and new cars/jets/boats, etc.
I'm not saying a consumption tax is the answer...though I'm intrigued by it. But I've also wondered if a secondary benefit might be that we, as a country, become better savers.
Not so much the folks on this board, lol. But I think that is a major failing, overall, for people in the U.S. There is no "saving for a rainy day". We are a nation of "spenders".
Which is great during prosperous economic times. Countries with "spenders" expand their GNP more quickly in "good times" than countries with "savers". But during times of recession, "spender" countries are harder hit and have a lengthier recovery.
Unfortunately, the tax code is really antiquated and is most beneficial for a family with a single bread-winner where the spouse stays at home with the children. Because a lot of people DO have this family structure (and it was very common until the last few decades), there is a common misconception that getting married always saves you money on your taxes. However, in families where both spouses work - especially if they make similar incomes and either income is in one of the upper tax brackets on their own - eventually you start paying more than you would pay if you were divorced and paying as singles. This is the marriage penalty.
http://taxfoundation.org/article/2016-tax-brackets
Notice that at the very top, a single person has to make $415,000 to hit the top bracket, whereas the married couple has to hit $466,000 to make the top bracket. The married couple has an advantage here if there is one spouse working. But if you have two professional spouses then you get the penalty. This is purely hypothetical, but if there was ever a year where H and I each had a taxable income of exactly $400,000, it would save us over $30K per year in federal taxes to get divorced.
My best advice for you is to change your withholdings to single and then have them withhold extra if you can afford it.
I am in favor of a consumption tax. Everything I have read indicates it would need to be in the 30-40% range to work, but that's fine by me. It would encourage saving. The VAT tax in Europe is a quasi-consumption tax (at 20%), and the interesting thing is that the final cost of goods isn't that different than in the US - and in many instances it is actually cheaper. That's because the goods aren't taxed at each point of production, so it lowers the cost to produce them. That makes the base cost lower, and then the 20% VAT gets added onto a lower base cost.
Anyway on tax "loopholes," I have no problem with people and companies using them. I hate the term "loophole" because that implies something shady - when really everything is written there in the tax code, and it's incredibly overregulated. If you don't like it, write to your congressperson. And on a similar note, if somebody DOES do something shady/illegal, I'm all for the IRS going after them with every resource available, and I actually wish the IRS was given more funding for this very purpose. Congress keeps cutting the IRS's budget, which is really stupid considering they are the ones who collect the nation's money.
One major issue with the tax code generally is that it's gotten so long that Congress often fails to consider how changes to one section intersect with another section. Here's an example. I do a good bit in the 280G/golden parachute area. Executive comp work is a hell of a lot of fun because it often produces absurd results. The last 280G project I worked on involved a guy who was going to get about $50 million from the sale of a company's stock. Of this $50 million, approximate $350,000 was through accelerated vesting of stock options, and therefore this one tiny piece (relatively speaking) was a "golden parachute." So we spent a crapton in legal fees dealing with the $350K golden parachute, while not having to worry about the other $49.7 million he was going to receive. That was really stupid. There was no prior tax planning involved, so this was the situation created purely out of the ridiculous rules of the tax code.
Another ridiculous rule: pretending like there are income caps to Roth IRA's. Practically, there are not. Let's call a spade a spade and just simplify it.