Tax reform is moving ahead. Republicans propose huge middle class tax increase

a reply to: projectvxn

I also know we aren’t getting a tax cut.

And be "we" you mean...

originally posted by: Aazadan

originally posted by: Gothmog
You are as confused by that as you were the military in the other thread.
Did you read the words "tax deferred retirement accounts" ?
Did you read the word "considering" ?
Did you read the words "House Ways and Means Committee" ? (hint : any committee in Congress is made up of a mix of Parties . Yes , Democrat AND Republican)
Stick around and keep posting.

Both parties vote on bills, one party proposes them.

Well , you learned something again

originally posted by: Chromium51It doesn't work out the same lol

You clearly do not know how to do math.

Lets set up a quick scenario. Lets say the tax rate is a flat 20%. Your investment rate is $5000/year and you get 8% interest for 30 years.

If you pay tax on the withdrawl you're paying 20% on $566,416.06 or $113,283.21, leaving you with 453,132.85 in income.

If however, you pay on the tax going in, you'll instead be investing $4000/year at 8% for 30 years which leaves you with 453,132.85. Go put it in a spreadsheet if you don't believe me.

Now, that's assuming an equal tax rate now and in the future. What generally happens though is that in the present you're paying a higher rate than you will at retirement. This is because your retirement income is less taxable, your income will be coming from capital gains and will likely be lower. The two combine so that you could only be paying an effective rate of say 13% at retirement where as you're paying 21% working.

This means that if you pay 21% while working in the above scenario you'll be at $447,468.68 at retirement. Where as if you defer it and pay as you withdraw you'll be at $566,416.06 which you'll then owe 13% tax on leaving you with $492,781.97.

originally posted by: mOjOm

originally posted by: projectvxn
a reply to: links234

I think the idea is that instead of “paying for the tax cut” they’re simply going to start cutting spending.

Yeah, when they say they're going to "cut spending" that means they're going to stop funding for a bunch of public services which are primarily used by poor and middle class people. Once again taking from the poor and middle class in favor of the wealthy.

The problem isn't Government spending when that spending is going to the people. That's in our favor. That's what the Government should be doing with the money they collect. Spending it on public projects and services for us to enjoy.

What they're doing however is continuing to limit the public spending calling it "spending cuts", then continuing to spend only in the area's of special interests. They don't cut spending in the area's where they've been lobbied to spend their money, that keeps getting funding, just the public goods get cut.

This allows them to then cut Taxes, again for the wealthy, by eliminating those public spending areas. So the poor and middle class get a double punch. We loose what public spending was being done on one hand while getting screwed in taxes as well. While the wealthy private interests get the best of both sides. Lower taxes and continued spending on their projects.

You forgot the most important part. They take those cut to social programs and give it to the DoD. Thus doing absolutely nothing to decrease government spending.

originally posted by: Aazadan

originally posted by: Chromium51It doesn't work out the same lol

You clearly do not know how to do math.

Lets set up a quick scenario. Lets say the tax rate is a flat 20%. Your investment rate is $5000/year and you get 8% interest for 30 years.

If you pay tax on the withdrawl you're paying 20% on $566,416.06 or $113,283.21, leaving you with 453,132.85 in income.

If however, you pay on the tax going in, you'll instead be investing $4000/year at 8% for 30 years which leaves you with 453,132.85. Go put it in a spreadsheet if you don't believe me.

Now, that's assuming an equal tax rate now and in the future. What generally happens though is that in the present you're paying a higher rate than you will at retirement. This is because your retirement income is less taxable, your income will be coming from capital gains and will likely be lower. The two combine so that you could only be paying an effective rate of say 13% at retirement where as you're paying 21% working.

This means that if you pay 21% while working in the above scenario you'll be at $447,468.68 at retirement. Where as if you defer it and pay as you withdraw you'll be at $566,416.06 which you'll then owe 13% tax on leaving you with $492,781.97.

Yes but you would only pay 30,000 dollars over the 30 years in taxes instead of paying 113k upon withdrawal, if you want to pay an extra 83k to the government to put yourself in the exact same spot go for it. That was what I was saying.

originally posted by: Chromium51
Yes but you would only pay 30,000 dollars over the 30 years in taxes instead of paying 113k upon withdrawal, if you want to pay an extra 83k to the government to put yourself in the exact same spot go for it. That was what I was saying.

You're forgetting about the fact that present money has less value than future money. $1000 now has a lot more value than $1000 in 30 years. If you figure that you're getting money at an 8% return rate, $1000 now is worth $10,062.66 on it's own. In fact, if you follow this through, and add it all up, the total value of what you paid in taxes in 30 years time will have a value of $122,345.87 cents in present value.

originally posted by: Aazadan

originally posted by: Chromium51
Yes but you would only pay 30,000 dollars over the 30 years in taxes instead of paying 113k upon withdrawal, if you want to pay an extra 83k to the government to put yourself in the exact same spot go for it. That was what I was saying.

You're forgetting about the fact that present money has less value than future money. $1000 now has a lot more value than $1000 in 30 years. If you figure that you're getting money at an 8% return rate, $1000 now is worth $10,062.66 on it's own. In fact, if you follow this through, and add it all up, the total value of what you paid in taxes in 30 years time will have a value of $122,345.87 cents in present value.

If you assume that inflation stays at a steady rate. There are times Roth IRA's make sense, if you max your 401k or if you have under the table income for example

a reply to: seasonal

Maybe the best thing about the current political climate is that it will finally give independents a better chance in 2020?

Wishful thinking?

Once again taking from the poor and middle class in favor of the wealthy

That's all Republicans ever do, yet somehow a lot of people are dumb enough to vote for them.