
Obama Will Seek to Raise Taxes on Wealthy to Finance Cuts for Middle Class - jpgvm
http://www.nytimes.com/2015/01/18/us/president-obama-will-seek-to-reduce-taxes-for-middle-class.html
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byoung2
I feel like the tax code needs a much bigger overhaul than anyone has
proposed. For example, AGI should be weighTed relative to cost of living. A
couple living in San Francisco or LA filing jointly and earning $210k doesn't
qualify for the child tax credit or even the IRA deduction, but they are by no
means living lavishly. That same couple could make $100k in Atlanta and have a
huge mansion but qualify for every tax credit available.

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mc32
I would agree with you but I think people are apt to tolerate 'big' injustices
over 'small' injustices. If you had some kind of COLA apply to taxes --which I
think would be more just, you know there would be people suing over the COLA
being miscalculated or that their living within a given neighborhood as
opposed to the one two blocks away should mean their adjustment is greater...
it could get byzantine and unweildly quick.

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martingordon
The government puts out cost of living indexes for select urban areas, so we
could just go by that:
[http://www.census.gov/compendia/statab/cats/prices/consumer_...](http://www.census.gov/compendia/statab/cats/prices/consumer_price_indexes_cost_of_living_index.html)

The data is from 2010, so a bit outdated, but it puts Manhattan at 2.1x the
national average and SF at 1.64x the national average. The high cost of
housing also pushes more people to renting instead of buying, eliminating any
tax deductions for mortgage interest that people in low-cost areas are more
likely to take.

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zaroth
A rent deduction, up to a maximum amount determined by that index. Now that
would be a pro middle-class policy that I would support.

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EGreg
How exactly will Obama achieve this with a republican House and Senate?

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zaroth
I think the point is he can say whatever he wants without any downside since
it doesn't matter anyway. I think as we see here, showing the 'grand vision'
however is not without its risks.

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cpursley
The top 10% already pay 65% of the federal tax burden. I'd prefer to see a
less "punishment" motivated approach and make up the difference needed with
strategic budget cuts.

I'd also prefer to see a move away from the divisive progressive income tax
towards a tiered national sales tax. We should be taxing luxury items the way
Singapore taxes automobiles.

This would allow low income earners to keep their entire paycheck, encourage
thrift for the middle income earners and destroy the tax evasion mechanisms
high income earners employ.

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cpursley
BMW at $260,000 as Singapore Tax Keeps Cars for Rich:
[http://www.bloomberg.com/news/2011-02-16/bmw-3-series-
costs-...](http://www.bloomberg.com/news/2011-02-16/bmw-3-series-
costs-260-000-as-singapore-tax-keeps-cars-for-rich.html)

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zaroth
"Capital gains at 28 percent"

That's one way to kill venture capital! Title could just as easily read "Obama
will seek to raise taxes on Startups to finance ...".

Thankfully startups have at least the QSBS Section 1202 100% exclusion on the
first $10m of capital gains through 2014. It helps smaller funds and founders,
but there are enough gotchas (e.g. 5 year holding period) that VCs would still
be looking at that 28 percent pretty seriously. I wish they would make the
100% exclusion permanent to eliminate the uncertainty, it's hard making decent
planning decisions when all the tax rates are changed retroactively at the end
of the year.

"The administration’s proposal on capital gains at death would exempt the
first $200,000 in capital gains per couple plus $500,000 for a home, along
with all personal property except for valuable art and collectibles. The rest
would be treated for income-tax purposes as if it had been sold." \--
Bloomberg.

That is absolutely terrifying. It would be bad enough to eliminate the step-up
in basis and make heirs pay tax on the full nut when selling... but to
actually _treat_ the property as if it were sold, that means you actually
_have_ to sell it in order to pay the tax! This is actually extremely hostile
to middle-class taxpayers.

Imposing taxes in the absence of an actual sale is brain dead. If your parents
spend their lives accumulating a couple million dollars in assets they want to
pass onto the children, you should not have to liquidate their entire estate
just to give nearly half in taxes the day after they die.

Maybe all of this is after the estate tax exemption, in which case it wouldn't
be nearly as catastrophic. But it doesn't sound like it from what I can find.

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yuhong
How about making the capital gain and normal income tax equal?

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zaroth
A lot of capital gain, particularly for the middle class, is actually
inflation.

You buy a house, pay your mortgage for 30 years, and perform regular
maintenance. After 30 years your basis is nearly $0 and the market price has
gone up 4x-10x what you paid.

Now you've paid for the house once, plus all the local taxes year after year.
Trivia, how much more should you have to pay?

Currently the basis of the house would step-up to market value when you
bequeath it to an heir, so no taxes are due. If you take that away, there's
30% of the value of the house in federal and possibly more in state taxes that
would have to be paid.

A $500k exclusion is grossly insufficient. Home ownership is the golden road
to middle-class. A tax policy like this is akin to saying you have to be able
to buy the house all over again. E.g. If you can't afford to pay a 20% down
payment (to the IRS) on the house you just inherited then you can't keep it.

To put some hard numbers in an example, your parents buy a $120k house with a
30 year mortgage in 1970. Due to nothing but inflation the house is now worth
over $700k. That is not current income, and should not be taxed as current
income.

That's (one reason) why long term capital gain is taxed at a lower rate. In
many cases it's just double taxation on the same dollars over time.

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yuhong
Good point, though I was thinking about doing it by reducing the income tax.

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dctoedt
As @EGreg says downthread, this package has zero chance of enactment any time
in the next two years (or longer).

It sounds to me like "highball" negotiating [1] --- ask for the world so that
you can make "concessions" and still end up with what you _really_ want.

[1] E.g.,
[http://changingminds.org/disciplines/negotiation/tactics/hig...](http://changingminds.org/disciplines/negotiation/tactics/highball.htm)

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chrisbennet
I think it is shortsighted to increase taxes on the .1%. Everyone knows that
if they (those that have managed to capture most of the fruits of production)
have less money, the less likely they are to leave crumbs for the rest of us.
/sarcasm

"Those darn native Americans. Once we destroyed their food supply (the
buffalo) and took all the good land for ourselves, now they want a handout.
The nerve!"

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glomph
Predictably the top comment here says that this is unjust. No idea why....

