In addition to that, another way of interpreting the numbers is that jobs in California continue to pay well.
There is obviously a difference between California being so great that all the people who make a lot of money want to live there and California being so expensive that companies can only attract people to move there by paying a lot of money.
I mean, you won't be buying right now, but you will be able to save money; if we have another big drop in housing prices, you will be all set: otherwise, you will just have to move when you retire. (which actually is pretty sad, 'cause those social connections are really important. but just saying, if you have $125K/yr, two people can live here comfortably.)
If it's really important that you have a lot of room, you aren't going to like it here. Really, I think that's the big difference.
My own impression is that as a sysadmin without a degree, I get like 2x here what i would other places, and yeah, housing is more than 2x, but... housing is a kinda small part of my budget. I save a lot more working here, and have access to a lot more luxuries that don't involve personal space.
Honestly, if you wanted to get me to move? Probably the best thing you could promise me is a job with an office... or even just the sort of large cubicle my job role rated in the mid to late aughts. I mean, my job pays really well, the food is good and people are nice to me, and I really appreciate it, but it seems like every year my desk shrinks. I think the parking spot they reserve for the car I don't use is allocated more space than the desk where I sit all day.
Most adults do have kids, though. It's unreasonable to expect that one will not have kids, seeing how we're all here because our parents were in a position to have kids. So I chose to live elsewhere instead.
The idea is to give good stories multiple chances at attention, since otherwise the randomness in what makes it off /newest is too great.
The LA Times must be so proud.
And who will provide all the services that the sophisticated rich demand?
A high-earning couple with $500k in combined income (roughly $45k in state taxes) and a $2m home (roughly $20k in local taxes) will go from a $65k deduction to a $10k deduction.
I realize that the lower rates help out high earners and can mitigate the effect of the SALT cap. But all high earners across the country get the benefit of low rates, whereas only the ones in high tax states get hit with the cap. So when weighing the choice between being a relatively high earners in a low tax state or a super high earners in a high tax state, the balance shifts toward the low tax state.
Don't misunderstand me: I am responding only to the parent comment that the new tax law will massively change things for a 500k couple due to deductions. For that specific range for a married couple it won't (because they likely already were paying higher taxes due to AMT).
To your second point, that's also highly individual. My household income is ~800k. That makes my California effective tax rate 8.9%. I personally would have a hard time finding jobs for both my husband and myself in a new state taking only an 8.9% pay cut.
The phenomenon discussed in the article of continuing net inflow of high earners to California and out flow of middle and lower earners is not new:
I am not saying this is good! But the simplistic "everyone is fleeing high CA taxes" narrative is not supported by the data. What is happening is not good for California but also more complicated than that.
I would say the burden of high housing costs absolutely dwarfs the effect of taxes for most people.
It hits people with lower-but-still middle-class to upper-middle-class, who weren't hitting the AMT before but still would have state/local taxes above the SALT cap.
The media wants it to effect the middle class, so they leave that part out.
I like NYC but I’m not sure I still like it tens of thousands of dollars much after this latest tax reform.
A high-earning couple might make $500K spread across 2 W-2 salaries, and then pay those $45K in state and ~$200K in federal taxes. A wealthy couple owns a network of business, reinvests all profits of those businesses in capital improvements to make more money in the future, pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes.
For most people, their values are an extension of their identity. (This, BTW, is why we get values voters on both sides of the aisle who vote against their own economic self-interest for a party that supports the kind of world they want to live in.) If you're making 2x+ times what you actually need to live the personal lifestyle you want, the rest is going to shape the world around you anyway. If you give to 501(c)3 organizations whose values happen to line up with yours (or better yet, control your own family foundation so you can set the agenda entirely), you get to write that influence off against the money that you spend on personal expenses.
I've often heard of the dividing line between upper middle class and wealthy as "Upper middle class people think income. Wealthy people think control." The vast majority of a wealthy person's wealth is held in various legal fictions anyway - a network of corporations, trusts, funds, and foundations that are each separate legal entities, but are all controlled by members of their family. Who cares if the money is in your name if it's the name of an entity that you can sign for?
"pulls out only enough in salary to meet their expenses, makes an equivalent donation to charity to offset all their "income", and then pays zero in taxes."
and that's confusing, 'cause say I can live off $100K/yr. So I pay myself $140K (or whatever) and pay the taxes on that and I have $100K left to pay for groceries and rent or whatever.
Sure, my company maybe donated a bunch of money to some nonprofit I liked, and that decreased the company's tax liability. Maybe my company even lost money after the donations, and maybe I get to carry those losses forward... but that's not going to impact the personal income taxes on those wages I pay myself, or personal capital gains tax on the dividends I pay myself.
But that's a different thing from the tax liability on that $140K I took out to buy my groceries, and pay my rent.
I'm not a tax person, though I have been in the situation of paying both corporate and personal taxes- all I can say is that you need a properly licensed tax person in that situation, even if your business makes less than a google engineer.
Of course, that's how it's supposed to work, because the reason it's set up that way is that if people actually do that, they have to donate $100K to charity in order to reduce their taxes by about a third that amount.
Assuming the charity has about equal effectiveness as the government in using the money to benefit society (note that this is not a high bar), allowing the deduction significantly increases the amount of money going to benefit society compared to if the deduction wasn't allowed and as a result the donation wasn't made.
You can argue about whether one organization or another shouldn't be considered a charity, but that's a separate question as to whether charitable donations should be deductible in general.
I can see the argument that maybe society would be better served by a bunch of independent charities that all take voluntary donations. I'm not sure everybody buys that, or that these are donations that wouldn't otherwise be made if there were no tax deduction.
I think this is mostly just the argument about what should be considered a charity again. If people are donating money to the Foundation for the Preservation of High Housing Costs, that is almost certainly not better than what the government would have done with it (or, for that matter, than setting the money on fire and doing nothing), but then why should that be considered a charity?
Meanwhile the idea that the Gates Foundation isn't making better use of a dollar than the mean government expenditure is pretty ridiculous.
At that point the argument would have to be that you still need money for government services that wouldn't be provided by charities -- assuming that the roads being in disrepair wouldn't cause anyone to donate money to a road-improving charity (and that having one of those wouldn't, as is the case now, be proscribed by law). But that's only a problem if almost everyone prefers to give more of their money to charity than to give less of it to the government, otherwise there are still many people paying taxes to fund government services. And given the size of government revenues despite the existence of the charitable deduction, that is clearly not the problem.
> or that these are donations that wouldn't otherwise be made if there were no tax deduction.
It still works even if it goes the other way. If you were inclined donate $100K of your income regardless but it wasn't deductible then you'd have lost about a third of that to taxes (or more than half if you also take into account state and local taxes in California), leaving that much less for the charity.
1. you are running this all as a sole proprietorship, with no separation of business and personal money. In that case? sort of. Your accounting is going to be complex as heck. if you have $100K of assets to donate, donating those assets can offset $100K of income. you are giving up an amount equal to what you are earning to avoid taxes, it's a lot like not paying yourself, and selling and living off of the assets you donated, except you avoid some of the extra taxes you would have paid on doing that. Also note, in this case, the stuff you have to pay FICA on is... complicated, and your charitable donations usually don't get you out of FICA (which if you are rich you don't care about, but we're talking about $125K/yr, and as you are paying employee and employer, thats 15% - without selling the company or without paying both corp income tax and personal capital gains for a dividend, it's hard to take money out of a company without paying FICA.)
Note, this is pretty unusual for people who know what they are doing. This is how I started out, and it was a real mess to untangle. Most people compartmentalize their businesses into several entities, and not just for liability protection (though that is nice, too) - Accounting works much better when your money isn't just one big pool.
2. this is the common thing. your businesses are their own tax entities. You have a LLC (often several) for your real estate, an S corp for your consulting/speaking income, C corps for a lot of your other businesses:
In that case? having a business entity I control that is taxed as a c corp donate a bunch of money is going to change taxation for that entity. Not for the personal money I pay myself.
"The secret to success is to own nothing, but control everything." ~ Nelson Rockefeller
Honestly, this thread just sounds like something pulled from someone busted on NBC's "Greed" show. Not that I am opposed to reducing one's tax burden, mind you. It's just that this doesn't sound like a feasible way of doing it.
Why, yes, I am still salty that the Mormons didn't get their tax-exempt status revoked over Prop 8 in California. Thanks for asking.
Planned Parenthood Action Fund (PPAF) is a properly taxed 501c4 and does political action.
Planned Parenthood are quite scrupulous about this given how often they wind up in the crosshairs. Would that the religious organizations received such scrutiny.
Please take your GOP disinformation points somewhere else.
With no deductions, it's closer to $135k (24% tax rate). The marginal tax rate on 500k of income is only 35% (plus FICA, but that's 2.4%).
$45k in state (i.e. CA) taxes is about right.
And with the near-elimination of AMT, it may end up being a wash for many people in this situation.
Two examples I know of. One guy who had a $200,000 RV parked in a warehouse in SF. With his office upstairs. But he didn't 'live there'. And another whose llc owns a condo by the Marina. That guy doesn't 'live there' either. Both those guys probably paying $100k/year for 'convenience'
Things change radically when you where you live for tax purposes and where you spend your time are the same place. And you can't decide how you are paid. Some friends of mine, high paid working for a fortune 500 wanted to relocate them to Waco Texas. $200k goes a lot farther in Waco TX. And yeah fuck no.
That sounds very comfortable and affordable
The very reasonable argument questioning this 13.3% top-level rate is: do the outcomes match the investment?
Not much less. It works out to 10.8%, according to CA's tax calculator.
I'd like to think he got downvoted because his information was wrong (which it might be, I'm not sure, as I am not an authority on taxes).
Be civil. Don't say things you wouldn't say face-to-face. Don't be snarky. Comments should get more civil and substantive, not less, as a topic gets more divisive.
When disagreeing, please reply to the argument instead of calling names. "That is idiotic; 1 + 1 is 2, not 3" can be shortened to "1 + 1 is 2, not 3."
For what it's worth, the tax information is more or less accurate to the best of my knowledge.
Alright, you got me, they do say that in the rules after all. But, I still don't think "broseph" is bad. People call each other bro(seph) in real life all the time and it's usually a synonym for "dude", "hey", "listen". I'd say OP was going for a funny comment rather than a derisive one.