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Old 09-17-2008, 09:18 PM   #1 (permalink)
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tax cuts for dummies

I have a question about taxes. When Obama says he will be giving tax breaks to 95% of Americans, what does this mean vis a vis the 5% (ultra-wealthy) that won't get tax breaks? Does this mean he is raising the PERCENTAGE of taxes that the ultra-rich will have to pay, and lowering the percentage (or maintaining it?) for those who aren't ultra wealthy?

And, why do rich people generally vote Republican vis a vis taxes, because Republicans take less of the rich people's money for taxes, or more? Or offer them tax deductions/shelters/loopholes that Democrats don't offer?

Basically what I am trying to find out is why the ultra rich vote republican, while the other 95% do not. On the issue of personal taxes.

Yes, I am confused.
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Old 09-17-2008, 09:23 PM   #2 (permalink)
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I can't speak to to what the differences of Obama vs. McCain, but most "rich" are concerned with capital gains taxes, which are taxes paid on any investment profits. Buy a house, sell it for a profit? Pay taxes not on the whole sale price, but only on the gain from what you sold minus what you paid.

Investment instruments like stocks and bonds? pay taxes only on what profits you made.

think of it like a slightly different form of income tax because it is a way that many make income without having to "work" (trading time for money going to a job)
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Old 09-18-2008, 02:24 AM   #3 (permalink)
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This may help.
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Old 09-18-2008, 04:24 AM   #4 (permalink)
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From this thread: http://www.tfproject.org/tfp/tilted-...ore-taxes.html

http://media3.washingtonpost.com/wp-...8061200193.gif

The problem is that most people in the middle class dream of being rich or having their business really take off. Therefore, they worry about being in a high tax bracket when they're not (and probably won't be).
Other people don't want to pay for all the services of the freeloaders and unemployed. And if the government provides the same level of care/services for all, what incentive is there to work?
The third thing is why should the rich have to pay for all the government programs?
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Old 09-18-2008, 05:11 AM   #5 (permalink)
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In relation to this, The Economist has a great article in August detailing why neither candidate's economic or tax plan was viable. I don't see it online, but I'll see if our MBA office still has has the hard copy so I can scan it.
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Old 09-18-2008, 05:16 AM   #6 (permalink)
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From the opposite end of the spectrum, the poor haven't voted in their class interest in most of the country (there are exceptions) in about 30 years. They contine to vote on social issues and ignore economic ones. They vote Republican hoping to stop abortion or gay marriage or (insert conservative talking point here) and pay little or no attention to what the economic policies of a candidate are. That doesn't mean that they're stupid, just that they've been convinced to become so myopic in their views that they pay little attention to "periferal" issues.

The super-rich are the inverse. Often they will vote with their wallets and pay little attention to the social views of candidates.

Hmmm. Maybe this is just further proof for my theory that all humans are stupid and that we just have fleeting moments of brilliance.
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Old 09-18-2008, 07:16 AM   #7 (permalink)
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Quote:
Originally Posted by Cynthetiq View Post
Investment instruments like stocks and bonds? pay taxes only on what profits you made.
While this is true, it would be more accurate to say...

"Pay taxes on what profits you make, but not the difference of your total worth."

If you start with $10,000 in stock, then it doubles in value - you've made $10,000. If it then drops to a net worth of $5,000 - you STILL pay tax on the $10,000 you made previously in the year.

Which is bullshit.
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Old 09-18-2008, 07:40 AM   #8 (permalink)
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I read an article recently that put it this way:

Quote:
The Tax Policy Center, a think tank run jointly by the Brookings Institution and the Urban Institute, concluded that Obama's plan would increase after-tax income for middle-income taxpayers by about 5 percent by 2012, or nearly $2,200 annually. McCain's plan, which cuts taxes across all income levels, would raise after tax-income for middle-income taxpayers by 3 percent, the center concluded.

Obama would provide $80 billion in tax breaks, mainly for poor workers and the elderly, including tripling the Earned Income Tax Credit for minimum-wage workers and higher credits for larger families.

He also would raise income taxes, capital gains and dividend taxes on the wealthiest. He would raise payroll taxes on taxpayers with incomes above $250,000, and he would raise corporate taxes. Small businesses that make more than $250,000 a year would see taxes rise.
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Old 09-18-2008, 07:57 AM   #9 (permalink)
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Quote:
Originally Posted by The Faba View Post
While this is true, it would be more accurate to say...

"Pay taxes on what profits you make, but not the difference of your total worth."

If you start with $10,000 in stock, then it doubles in value - you've made $10,000. If it then drops to a net worth of $5,000 - you STILL pay tax on the $10,000 you made previously in the year.

Which is bullshit.
I think the question would be how'd you get to a net worth of 5K? Did you sell the stock you owned at a loss? If so then the loss is tax deductible.

Let's say you buy 100K in XYZ. Over the year it goes up 20%. Do you pay tax on that 20% gain? I believe the answer is yes... if you sell it. If it goes down 20% and you sell it you take it as a loss and write it off. Now if XYZ pays out a dividend during the year you usually have the option to take that as cash and pay gains tax on it or buy more XYZ.
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Old 09-18-2008, 12:55 PM   #10 (permalink)
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So you have a rich guy saying he's not voting for candidate x because he will raise my taxes...but wouldn't candidate x be raising taxes across the board? Wouldn't middle class guy have the same complaint, that candidate x is raising his taxes too?
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Old 09-18-2008, 12:59 PM   #11 (permalink)
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all candidates raise taxes.. don't just believe the ads you see on tv .. go to some independent sites and check out what's really going down.

factcheck.org is one and you can always check out the website for the Tax Policy Center
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Old 09-18-2008, 07:04 PM   #12 (permalink)
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The President can recommend that taxes get raised, and they have to approve them, but Congress needs to pass them first. Now, if both branches are controled by the same party, it is more likely that the campaign promises will happen, but we'll see what really will go down in the next 4 years.

As for now, we should be lucky that we aren't paying 50% taxes in order to have a balanced budget, but then again it is going to cause major problems when we can't/don't pay down the national debt...
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Old 09-20-2008, 05:55 PM   #13 (permalink)
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You can not cut income taxes on 95% of Americans because almost 50% don't pay ANY income taxes now. Tax issues are very complex because people talk about them in different ways depending on their viewpoint. It is important to do a little research about income vs payroll taxes. I would suggest you look into the Fair Tax which is a plan to replace both with a consumption tax. If you read about this, you can not help but learn about the other types of taxes as well. The Fair Tax book is easy and quick reading.

Americans For Fair Taxation: Americans for Fair Taxation
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