Hike Taxes, Hemorrhage Jobs

There isn't any that you pay once someone isn't working for you.

http://www.irs.gov/publications/p926/ar02.html#en_US_publink100086745

 

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I agree there is no US law requirement but that does not mean it is never part of a seasonal work contract, say between the employees of a ski resort who come back to work every winter for the ski resort. I don't know what is typical in those seasonal industries, but can imagine that skilled workers (say the ski instructor) may get money by the contract during the summer to insure he returns next winter. - The unskilled, perhaps illegal one who makes beds or sweeps the floor, washes dishes, etc. may just be told to go back to Mexico or at least don't come back looking for a job next year.

How do you know this is never done - is "fiction."? Are you an expert in seasonal industry employment contracts?

 

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But Billy, that's not what you said:

You didn't say, "If the employee had a seasonal work contract that requires it".

You said "have to" and gave no exemptions. That's the fiction.

Because in fact, Federal and State Unemployment Tax is paid as part of Wages.

Once you stop paying an employee wages, you stop paying Unemployment Taxes.

Arthur

 

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No Author, I only quoted* a source and said I did not know what that source was reporting until I read it.
I did not say "have to," my source did.

Unemployment payments can be required by law or by private contracts. Most important company CEOs have that in their contract - some times called severance pay given over many years (or perhaps terminating if they get another job).

"A rose, by any other name is still a rose."

"Severance pay," "golden parachuts," & "poison pills" requiring large payments to employees who lose job when company is taken over are "unemployment pay". Payments to a ski instructor in the summer, required by his contract, is unemployment pay.

Unemployment pay is pay received when you no longer work because your job has terminated, regardless of why it is required.

* Here is my post 56 in full:

 

Ok, but I don't see any proposals limiting the increased taxes to those with either a salary of $1 million or a net worth of $1 million. Most Americans aren't as frugal as you. I"d wager that very few families with a salary of $250k or less are millionaires by any definition.

 

If true, that is part of why dollar and US are collapsing. Much too much spending on frills and too little saving, which forced too much borrowing by both people and government.

If you work only 32 years with average of earning of $100,000 / year (40% of the salary where Obama's would have taxes go up) and spend only $50,000 /year, you have a total, simply saved, income of 32x5E4 = 1.6 million dollars. Are you telling me you (and others) cannot live (even well, eat red meat, etc. more than is good for you) spending $50,000 each year?

But let's assume that on average you annually earn 5% on the 50K you can invest. I.e. at the end of first year you have saved capital of 1.05x5E4 = $52,500 or at end of 32 years of working you have:
(1.05)^32 =(1.1025)^16 = (1.2155..)^8 = (1.4775..)^4 = (2. 1829..)^2 = 4.765 so just the compounding of interests will increase your wealth 476.5%.

I.e. instead of the 1.6 million you would have just by sticking 50K each year under the mattress, you would have 4.765 x 1.6 = 7.62 million dollars.

That is why the rich grow richer or why "it takes money to make money." is true. The economic system is designed to concentrate wealth, even before you consider that 700,000 pages of the tax code exists to allow the wealthy, like Warren Buffett to pay taxes at half the rate on his income that his secretary does, (17% instead of her 34%)

It is really just simple, fair, justice, but Republicans/ tea party types/ hurl all sorts of names (soak the rich, class war fare, envy, etc.) at those who want the supper rich (who are multi-millionaires if earning above $100,000 for an average income during their working years*).

* Which would typically be more than the 32 years of my illustration. (I chose 32 as it is 2^5 to be able to make the above simple computation anyone can follow.)

BTW I strongly oppose any annual tax on wealth - that just encourages spending on frills and saving/ investing less. Another part of why US and dollar are collapsing is that many years of negative savings by many have taken place in the last few decades - Spending more than you earn by borrowing, maxing out credit cards, consuming the capital gains most do have instead of letting them compound.

I do think the tax free limit on inheritance is much too high - should not be more than million dollars, tops. I expect it will soon be greatly reduced, so have already given my kids more than $100,000 each (First at 10K/year but now at 13K/year rate) to reduce my estate. This year will give to the four grandchildren $13,000 each also as not sure to be living long into my 80s and I am sure the estate tax free limit is coming way down, as it should, IMHO.

As they say: "You can't take it with you" and I don't want the IRS, instead of my heirs taking any of it.

 

LOL

Billy, you didn't refer to a source when YOU said it was a FACT.

It isn't.

Nor did you reply to special contract requirements, you claimed that it was a requirement of ANY seasonal business.

It isn't.

Arthur

 

No I said I was unaware of this fact until reading it. (from a financial advisory service I forgot to identify with my usual "From....")

Again no. I clearly stated this claim, WAS MADE BY THAT FINANCIAL SERVICES GROUP I quoted but did not name, NOT ME, was "news to me."

I am sorry I failed to include the "From ..." which terminates more than 95% of my posts quoting others, but from the very first sentence (telling quote was news to me) It is clear that I am making no claims. - Just telling what I read.

You should stop making two false claims: (1) that I said it was fact or (2) that I claimed it "was a requirement of ANY seasonal business." as your two claims are FALSE and I made NO claims. Just reported what I read.

 

Billy, we are all typically unaware of facts until we read them.

You read something, thought it was true, and posted it as a FACT, without attribution.

Then when I challenge you on it, you say, "I did not say "have to," my source did"

Well Billy, you posted it without attribution and thus I can indeed refer to it as something you said.

You DID say it was a FACT:

You DID say it was for any seasonal Business as there are no exclusions in this statement:

Arthur

 

NONSENSE. I am clearly quoting an unnamed source. You can infer this both by fact the statement is in quotes and by fact I said I did not know this until reading it. I am clearly just reporting something I read and did not know. - Making no claims, certainly not the two you said I did.

 

Say what you will, the average US savings rate has been close to or even below zero. With the recent recession the rate is now up to about 5%.

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http://www.plantingdollars.com/pers...us-savings-rate-holding-steady-but-still-low/

So the average American making 100k per year would save only about 5k per year. Even the guy making $250k would save only $12.5k, if he was saving at the new improved average rate for 32 years. Of course, before the recent recession, the savings rate was even lower.

Furthermore, the rates posted in the graph above are percent of disposable income, not gross income! So the actual rate is even worse!

Thus I'll pose my question to you again, how can you call people making $250k millionaires?

 

You data about the AVERAGE saving rate in the US I think is accurate, but totally irrelevant when we are discussing the saving rate of people making more than $250,000 per year.

Thus my answer, mathematically demonstrating that even if only making an average annual salary of $100,000 and spending half and saving half, for only 32 years produces 1.6 million dollar (even if the $50,000 is only stuffed under the mattress each year) completely PROVES it feasible /probable that one with $100K average annual income should be a millionaire. Again I am a millionaire and had peak salary of only $80,000 and never owned a business. I did make a good investment in 16 acres of land (with seller's loan financing my buying except for $5,000 down) before I invested in first house, and was still driving my 8 year old VW bug later when I did buy a house.

If instead of stuffing under the mattress, the $50 not spent is invested at 5% The math PROVES he has 7.62 million dollars after ONLY 32 years.

Why make long, irrelevant post, with graphs, when we are not concerned with Joe American's saving (percent of income invested) rate? We are concerned with the fraction of income the "super rich" invest and those making enough for Obama's tax increase to apply to them to increase. Your claim they will not usually be millionaires is nonsense.

I will not do the numbers out again in detail but simply note that one averaging for 32 years an annual income of $250,000, and spending $100,000 of it each year (including paying his taxes) has $150,000 to invest annually. I.e. three times more than the $50K of the numerical example I did work out in detail.

The problem is a "linear function" of the amount annually saved / invested. Thus this guy who is just at the edge of paying more in taxes will after 32 years have 3 x1.6 = 4.8 million dollars (just by stuffing his mattress and no investing). If he too invests and earns 5% on it, then after 32 years he has 3 x 7.62= 22.86 million dollars!

SUMMARY: Your idea that those making $250,000 on average during their working years would not be multi-millionaires is nonsense unless they are "play boys" spending most of that huge income.

 

Who cares? They are damn rich.

 

Pretty optimistic senario Billy.

Federal taxes on $250k is $67,417

10% on taxable income from $0 to $8,500, plus
15% on taxable income over $8,500 to $34,500, plus
25% on taxable income over $34,500 to $83,600, plus
28% on taxable income over $83,600 to $174,400, plus
33% on taxable income over $174,400 to $379,150


FICA tax is $10,246
State Income taxes are around $20,000 (@8%)
Local taxes around $5,000 (@2%)

Total Income taxes & FICA is ~$102,663

Then a house in an area where $250k salaries are to be found:

http://www.realtor.com/realestatean...33259802&cmid=1104432,1104435,1104436,1104437

At 20% down, with a 5% 30 Year Mortgage, plus $7,200 Property tax + Insurance = $4,663 month or ~$56,000 per year

Add in typical expenses for a family of 4

$12000 Two cars (payments, gas, insurance and maintainence)
$12000 food at home, lunches at work
$5000 heating/cooling/water/trash/security/pest
$2000 Pets
$6000 Church/Charities/Political donations
$5000 internet/phone/cable/magazines
$6000 clothes, hair & grooming
$6000 Vacation & holidays besides xmas
$5000 kids - education/sports/video games/toys
$6000 entertainment, hobbies, restaurants
$4000 Xmas, birthdays,
$8000 Medical & Dental & Vision (insurance + out of pocket)
$6000 Home maint, yard maint


$137,963 annual expenses
or
$240,626 including taxes

 

Yeah, that's a rich person.

 

That is 27% tax rate. Warren Buffett pays at a 17% rate and has an income more than 30 times greater.

Why do you think the tax code is 700,000 pages long? Don't you think that most making >$250,000 /year have tax advisers to help them, know how to pay much smaller than 27%? GE paid a negative tax rate in 2010 - Got net payments from the government! Get real. Not "optimistic" but typical.

 

Because as Buffet points out, most of his income is from Capital Gains, and thus has a maximum tax rate of 15% and no FICA or State/Local tax either. Nor can you compare Corporate taxes to Personal Income because they are based on entirely different concepts.

However your typical wage earner (like those in this bracket) is being paid a salary and has few tax dodges open to them because most of their income is flowing out for Home, Cars, Food, Clothes, Medical and Entertainment expenses.

Note, most places have a 8 or 9% sales tax as well, but I just lumped that into the monthly expenses.

But you are right about one thing, I didn't figure in exemptions/deductions which should lower the taxes by about $25,000, putting expenses at about $215,546

Or about $3,000 per month to invest, which is why he probably doesn't have, or need, a tax adviser.

And most of that money, with two kids is going into a 401K and/or safe investment for their education.

Clearly these people aren't hurting, but they aren't living that extravagantly either.

Arthur

 

I think, annual expenses for home, HAC, yard care of:
$56,000 +5000 + 6000 = $67,000 is quite excessive as one could rent a very nice apartment for much less in most cities. I.e. $5,584 per month rents a luxury place to live. Then, if living nearer work, you would not need to spend $1000 / month on your cars

$10,000 for Christmas and vacation each year seems excessive to me also.
$5000 internet/phone/cable/magazines plus $6000 for entertainment, hobbies,* restaurants, $11,000, also seems excessive, but I don’t know what it costs to download a movie or The NY Times, etc. via your cable connection, etc.

I have wonderful pet – A Cocktiel. She flies free in the house, comes when I call her better (and seems smarter) than most of the dogs I have had. Total annual cost of her is less than $50 in bird seed. We are very attached to each other. Point is you don’t need to spend $2000 annually on your pet. You can have a very nice / interesting tropic fish tank for less than half of that.

I admit it is possible to spend all of $250,ooo income but most Americans live on 1/5 of that of less. If you have an average income of $250,000 and you want to end up with 20 million dollars when you retire, you certainly can, as my math examples show. That was what I was pointing out to MadAnthonyW.

Of course if spend so much that you have only $3000 /month to invest you don’t need and can’t afford paid investment adviser as there is free advice from 50 or more services on the internet. (If 2/3 of them are telling to buy the same “hot stock,” I don’t – in this sense the advise me.) It is sad to say but most brokers mainly want to churn your account for the commissions. It has been my experience that you do better, by trying to keep up with economic news and, most importantly, trying to understand the long term trends it implies.

For example, many advisors are now telling how good a long term buy MolyCorp is as it will be the main western (and only US) miner of Rare Earth elements but last week I read in Forbes (on line, for free of course) that Hatachi (maker of 45% of the world’s RE magnets) will move its manufacturing of them to China. A lesser scale maker moved its production to China in June.

So I bought a few far out of the money (low cost) January 2012 “puts” on MCP as I project China will do again what it did a few years ago to close US production of REs. Only this time instead of selling the REs themselves so cheaply others cannot compete, they will sell the magnets cheaper than makers in the West can and as a bonus get more high-tech jobs making them. I.e. MolyCorp will have few buyers for its REs, if I am correct. If true, it is way over priced now and if others realize what I forecast, my ~50% out of the money puts will be worth 5 or more times what I paid for them.

-----------
* Cooking is a great hobby - My Chinese wok cost ~$15 and lets me use up things in the frig that otherwise would go to waste. That hobby must SAVES me more than $1000 /per year. Sao Paulo has the largest Japanese urban population in the world except for two cities in Japan. - A whole district has all the signs in Japanese. - I can get any oriental food supply I need there, and cheap too.

 

That's an $850k house, let's note.

Two cars - that would be something like $20-30k in assets, depending.

So you're talking about a household with net worth of about $900k right there. Add in a few other standard things for that set - 401(k)'s, some jewelry and other stuff, maybe a stock portfolio - and you're easily on track to a net worth of over $1Million. Those people are millionaires, or will be with a bit more mortgage payments and inflation.

Related example: I make substantially less than $250k per year, and am not particularly frugal. I have been working full-time for less than 5 years (still have at least 30 years before retirement). My net worth is already well into the 6 figures - at this rate, I'll retire a multi-millionaire. If I were making $250k per year, I'd retire a multi-millionaire before age 50.

 

I said a family of four.
Which is the typical US family and so I gave a fairly modest house on a half acre in a Suburban area where one might expect to make that kind of money on two incomes and which a lot of people do when raising kids, but you do need at least two cars, more once the kids reach 16.

http://www.realtor.com/realestatean...33259802&cmid=1104432,1104435,1104436,1104437

Really?
Flying four people somewhere nice for a week, 84 meals, hotel rooms, rental car and event tickets etc, plus a nice Xmas tree and trimmings and primary presents for 4 along with presents for kin is going to cost that (or nearly that) and remember this is a family that makes $250,000 so they ARE going to go on vacation and they are going to decorate their home and they are going to throw birthday parties for their kids.

Phone service for 4 with 4g unlimited data and smart phones is going to be $200 month. Cable/Internet/land line/magazines is going to be $100. Eat out dinner once per week, or 16 meals + a few movies will easily be $400 per month and that leaves a piddly $100 month for hobby = $11,000

You can, but kids like cats and dogs and fish, so food, vets and boarding when on vacation is easily that much.

But that's the point, you don't have $250,000 to spend.
After taxes you start out with $170,000, but then you need to pay for the house and cars and food and clothing and medical and communication and then finally the fun things, so no your math might work for a monk, but not for most of us.

Arthur