Obama to cap tax-preferred retirement accts to $3MM

[rkbabang]

The government is looking at the huge pile of money sitting in these accounts and is salivating at the prospects of getting their hands on it.  This is just the fist salvo in a process that will lead to just that.  There is no escape from the looters.  None.

[rkbabang]

I think I am now officially a Republican.  I just need to go and register (formality at this point).

 

Hopefully my vote in the primaries for the most pro gay-marriage and pro secular-education candidate (etc... etc...) will reform that party to something I find far less revolting.  It's not a completely broken party, but just needs major renovation. 

 

Eric, I think you'll find that (all campaign rhetoric aside) Republicans aren't all that keen on reducing taxation.  There's billions of people in the world in need of bombing and that takes cash.  Lot's of it.

 

The two party system is a ratcheting effect for increasing the size and scope of the state.  The D's create programs and raise taxes which the R's never repeal, the R's pass drug laws and start wars which the D's won't end.  Back and forth, up and up, and on and on it goes, with both of the constituencies always blaming the other side, and neither ever realizing that both sides are really just two faces of the same coin.

 

Government is what it is, it does what it does.  This has been the case for over 5000 years.  If you have it, this is what you get.

 

[SouthernYankee]

Posted by: rkbabang

« on: Today at 07:09:48 AM » Insert Quote

Quote from: ERICOPOLY on April 07, 2013, 12:32:13 PM

I think I am now officially a Republican.  I just need to go and register (formality at this point).

 

Hopefully my vote in the primaries for the most pro gay-marriage and pro secular-education candidate (etc... etc...) will reform that party to something I find far less revolting.  It's not a completely broken party, but just needs major renovation. 

 

Eric, I think you'll find that (all campaign rhetoric aside) Republicans aren't all that keen on reducing taxation.  There's billions of people in the world in need of bombing and that takes cash.  Lot's of it.

 

 

;D Good way to end it!

[constructive]

After 16 pages, has anyone pointed out that this is not likely to pass the House and not really worth worrying about?

[ERICOPOLY]

So I think the solution is to get a bunch of wealthy Californian investors together to run an insurance company.  Similar to how HWIC banded together and bought their first insurer in 1984.

 

The corporate 35% tax rate might look high, but for short term capital gains that's better than paying the higher than 35% tax rate on short term gains at the personal level.  It goes well over 40% after adding in California state taxes.

 

Even the long term tax rate is lower at the corporate level.  The Californian pays 20% to the US, then pays 13% to the California state treasury, then pays ObamaCare take, that medicare tax, and maybe I forgot something else.

 

In California, both short and long term capital gains tax rates wind up being higher than 35%.

 

And of course the insurer only pays 14.5% tax rate on dividends -- that one is just a no brainer.

 

Later, we buy up entire companies where the tax rate on dividends is 0%.  Buffett talks about how they are really just passive investments -- he buys them with management intact and keeps himself out of their business.  But technically, under the tax law, they are not considered to be "passive" and thus he doesn't need to keep them within insurance companies.

[rkbabang]

After 16 pages, has anyone pointed out that this is not likely to pass the House and not really worth worrying about?

 

Yes, probably not this year.  But this is an indication of what they are thinking.  Maybe it gets through in two years with the cap at $10M rather than 3, in some kind of compromise.  That will be a foot in the door to loot a little out of these accounts.  They can reduce the cap in the future and of course inflation will be reducing the cap passively year in and year out, allowing them to loot more and more each year.

 

This is why I've never trusted the Roth IRA.  I want my tax break now, while I can get it.  I don't want to have to trust that these accounts will work anything like they do now someday when I retire.

 

[matjone]

Certainly complicates decision making when you have to start figuring odds on the government keeping their word.  I always figured the roth was better because I figured tax rates would go up, but if you are going to tax the money in the roth then it is useless.  I used to work with a guy who would say "if you want to know whether you can trust the U.S. government, just ask an american indian".  I should have listened to him closer.

[boilermaker75]

So I think the solution is to get a bunch of wealthy Californian investors together to run an insurance company.  Similar to how HWIC banded together and bought their first insurer in 1984.

 

The corporate 35% tax rate might look high, but for short term capital gains that's better than paying the higher than 35% tax rate on short term gains at the personal level.  It goes well over 40% after adding in California state taxes.

 

Even the long term tax rate is lower at the corporate level.  The Californian pays 20% to the US, then pays 13% to the California state treasury, then pays ObamaCare take, that medicare tax, and maybe I forgot something else.

 

In California, both short and long term capital gains tax rates wind up being higher than 35%.

 

And of course the insurer only pays 14.5% tax rate on dividends -- that one is just a no brainer.

 

Later, we buy up entire companies where the tax rate on dividends is 0%.  Buffett talks about how they are really just passive investments -- he buys them with management intact and keeps himself out of their business.  But technically, under the tax law, they are not considered to be "passive" and thus he doesn't need to keep them within insurance companies.

 

 

 

If you do decide to spend anything in CA, you then have the 9% sales tax.

 

Edit: When I was a kid in IN, there was no sales tax. I remember when it started, at 2%. It is now 7%.

 

They'll probably add a federal sales tax. Start off at something they can push through, 1%, and within a couple of decades it'll be in double digits.

[rkbabang]

Just look at the US Federal income tax, the top rate of a whopping 7% didn't kick in until your income was over $500K per year which is almost $12M in 2012 dollars.

 

"people supported the income tax because it was originally meant to impose only very low tax rates on only the highest incomes. Proponents argued that the 16th amendment to the U.S. Constitution would force the so-called "robber barons" to pay taxes. It was not supposed to provide a mechanism for Washington to reach into most Americans' pockets...high-octane fuel for the growth of government spending. Between 1913 and 1994, inflation-adjusted federal government expenditures increased by 13,592 percent! Over this same period, personal and corporate income taxes grew from 7 percent of total federal revenues and 0.1 percent of the economy, to more than 54 percent of total federal revenues and over 10 percent of U.S. GDP."

 

Original Intent and the Income Tax

 

[boilermaker75]

Just look at the US Federal income tax, the top rate of a whopping 7% didn't kick in until your income was over $500K per year which is almost $12M in 2012 dollars.

 

"people supported the income tax because it was originally meant to impose only very low tax rates on only the highest incomes. Proponents argued that the 16th amendment to the U.S. Constitution would force the so-called "robber barons" to pay taxes. It was not supposed to provide a mechanism for Washington to reach into most Americans' pockets...high-octane fuel for the growth of government spending. Between 1913 and 1994, inflation-adjusted federal government expenditures increased by 13,592 percent! Over this same period, personal and corporate income taxes grew from 7 percent of total federal revenues and 0.1 percent of the economy, to more than 54 percent of total federal revenues and over 10 percent of U.S. GDP."

 

Original Intent and the Income Tax

 

Speaking of income tax, Wesley Snipes was just released from prison,

 

http://gma.yahoo.com/blogs/abc-blogs/wesley-snipes-released-prison-153022942--abc-news-celebrities.html

[Kraven]

Speaking of income tax, Wesley Snipes was just released from prison,

 

http://gma.yahoo.com/blogs/abc-blogs/wesley-snipes-released-prison-153022942--abc-news-celebrities.html

 

"Always bet on black."

 

-Passenger 57 circa 1992

[ERICOPOLY]

I was thinking about this $100m that Romney has in his IRA.

 

Should he die today, this is how much it's worth:

 

$60m approximately after the income tax bill is settled.

 

$36m approximately after the estate tax bill is settled.

 

So his "tax shelter" is going to leave 36% for him, and 64% for the US Treasury.

 

And Obama doesn't think that is "fair".  Romney is keeping too much!

 

He only gets to keep 36% people!  I'd say that's a pretty darned good deal (for the Government) compared to Mr Buffett's secretary.

[Valuemunger]

Eric,

 

Sorry for my ignorance, Im not very familiar with the IRA - but I thought you can only contribute $5000 a year to an IRA. So how can one make $100M in an IRA with on.y $5000  a year deposits?

 

Thank you in advance

[Guest valueInv]

So I think the solution is to get a bunch of wealthy Californian investors together to run an insurance company.  Similar to how HWIC banded together and bought their first insurer in 1984.

 

The corporate 35% tax rate might look high, but for short term capital gains that's better than paying the higher than 35% tax rate on short term gains at the personal level.  It goes well over 40% after adding in California state taxes.

 

Even the long term tax rate is lower at the corporate level.  The Californian pays 20% to the US, then pays 13% to the California state treasury, then pays ObamaCare take, that medicare tax, and maybe I forgot something else.

 

In California, both short and long term capital gains tax rates wind up being higher than 35%.

 

And of course the insurer only pays 14.5% tax rate on dividends -- that one is just a no brainer.

 

Later, we buy up entire companies where the tax rate on dividends is 0%.  Buffett talks about how they are really just passive investments -- he buys them with management intact and keeps himself out of their business.  But technically, under the tax law, they are not considered to be "passive" and thus he doesn't need to keep them within insurance companies.

 

I have a solution for you: buy Berk and don't buy or hold any stocks that have received a govt. bailout.

[ERICOPOLY]

So I think the solution is to get a bunch of wealthy Californian investors together to run an insurance company.  Similar to how HWIC banded together and bought their first insurer in 1984.

 

The corporate 35% tax rate might look high, but for short term capital gains that's better than paying the higher than 35% tax rate on short term gains at the personal level.  It goes well over 40% after adding in California state taxes.

 

Even the long term tax rate is lower at the corporate level.  The Californian pays 20% to the US, then pays 13% to the California state treasury, then pays ObamaCare take, that medicare tax, and maybe I forgot something else.

 

In California, both short and long term capital gains tax rates wind up being higher than 35%.

 

And of course the insurer only pays 14.5% tax rate on dividends -- that one is just a no brainer.

 

Later, we buy up entire companies where the tax rate on dividends is 0%.  Buffett talks about how they are really just passive investments -- he buys them with management intact and keeps himself out of their business.  But technically, under the tax law, they are not considered to be "passive" and thus he doesn't need to keep them within insurance companies.

 

 

 

I have a solution for you: buy Berk and don't buy or hold any stocks that have received a govt. bailout.

 

The trustbusters are coming for Berk.  Once it has purchased the rest of the companies in the s&p there will no longer be any taxpayers collecting dividends!

 

He robs the IRS of cash flow when he buys a dividend payer like Burlington northern.

[Guest valueInv]

So I think the solution is to get a bunch of wealthy Californian investors together to run an insurance company.  Similar to how HWIC banded together and bought their first insurer in 1984.

 

The corporate 35% tax rate might look high, but for short term capital gains that's better than paying the higher than 35% tax rate on short term gains at the personal level.  It goes well over 40% after adding in California state taxes.

 

Even the long term tax rate is lower at the corporate level.  The Californian pays 20% to the US, then pays 13% to the California state treasury, then pays ObamaCare take, that medicare tax, and maybe I forgot something else.

 

In California, both short and long term capital gains tax rates wind up being higher than 35%.

 

And of course the insurer only pays 14.5% tax rate on dividends -- that one is just a no brainer.

 

Later, we buy up entire companies where the tax rate on dividends is 0%.  Buffett talks about how they are really just passive investments -- he buys them with management intact and keeps himself out of their business.  But technically, under the tax law, they are not considered to be "passive" and thus he doesn't need to keep them within insurance companies.

 

 

 

I have a solution for you: buy Berk and don't buy or hold any stocks that have received a govt. bailout.

 

The trustbusters are coming for Berk.  Once it has purchased the rest of the companies in the s&p there will no longer be any taxpayers collecting dividends!

 

He robs the IRS of cash flow when he buys a dividend payer like Burlington northern.

 

Short it then. ;D

[ERICOPOLY]

Eric,

 

Sorry for my ignorance, Im not very familiar with the IRA - but I thought you can only contribute $5000 a year to an IRA. So how can one make $100M in an IRA with on.y $5000  a year deposits?

 

Thank you in advance

 

My wife was a realtor from 2003 to 2006, I did all of the tax scheming/planning/filing so I can answer your question fairly well.

 

She had a Fidelity self-employed 401k plan.  She was allowed to do the usual $15k or so contributions to the 401k, then she was also allowed to make a contribution of up to 25% of the profits up to $160,000 worth of profits.  So maximum profit-sharing contribution was $40,000.

 

So right there that's a $55,000 of contribution.  All on a pre-tax basis.

 

But then you can also contribute to the IRA, $5,000 like you said (after-tax due to the income restrictions).

 

So that's $60k per year of maximum contribution.  Per person.

 

Now if you make 20% compound annual returns, it's worth $2,300,000 after 20 years.  But that's only from 20 years of growth, and only from a single year's contributions.  So imagine what you can achieve if you contribute that much money to your account every year and work a full life.

 

All of this money from the 401k can be rolled into an IRA after retirement.  That's what I did with my wife's plan, I rolled it into a IRA, then I did a RothIRA conversion.

 

 

[ERICOPOLY]

So if you follow my argument about Romney's plan being taxed at a 64% rate, then think of it this way:

 

Taxpayers already have equity in his account of $64 million compounding away.

 

Romney seems to be a good investor -- let's say he makes 15% a year for 20 years, then dies. 

 

Well, that $64m of taxpayer equity will be worth $1.05 billion of taxpayer equity.

 

Do you really want Obama to withdraw the taxpayer equity today?  You've got a capable capital allocator in Mr. Romney and he can apparently grow "the taxpayer's" equity at a rate that far exceeds that at which the Treasury can borrow money.

 

So instead of taxing him now, just borrow more money while the 30 yr treasury rates are low.  Then reap the windfall later.

 

Ahh.... but envy is the killer.

[Guest valueInv]

Eric,

 

Sorry for my ignorance, Im not very familiar with the IRA - but I thought you can only contribute $5000 a year to an IRA. So how can one make $100M in an IRA with on.y $5000  a year deposits?

 

Thank you in advance

 

My wife was a realtor from 2003 to 2006, I did all of the tax scheming/planning/filing so I can answer your question fairly well.

 

She had a Fidelity self-employed 401k plan.  She was allowed to do the usual $15k or so contributions to the 401k, then she was also allowed to make a contribution of up to 25% of the profits up to $160,000 worth of profits.  So maximum profit-sharing contribution was $40,000.

 

So right there that's a $55,000 of contribution.  All on a pre-tax basis.

 

But then you can also contribute to the IRA, $5,000 like you said (after-tax due to the income restrictions).

 

So that's $60k per year of maximum contribution.  Per person.

 

Now if you make 20% compound annual returns, it's worth $2,300,000 after 20 years.  But that's only from 20 years of growth, and only from a single year's contributions.  So imagine what you can achieve if you contribute that much money to your account every year and work a full life.

 

All of this money from the 401k can be rolled into an IRA after retirement.  That's what I did with my wife's plan, I rolled it into a IRA, then I did a RothIRA conversion.

 

How did you swing that? I thought the limit for 401k was about 16k and you can't contribute to Roth if your income is over 120k?

[ERICOPOLY]

Eric,

 

Sorry for my ignorance, Im not very familiar with the IRA - but I thought you can only contribute $5000 a year to an IRA. So how can one make $100M in an IRA with on.y $5000  a year deposits?

 

Thank you in advance

 

My wife was a realtor from 2003 to 2006, I did all of the tax scheming/planning/filing so I can answer your question fairly well.

 

She had a Fidelity self-employed 401k plan.  She was allowed to do the usual $15k or so contributions to the 401k, then she was also allowed to make a contribution of up to 25% of the profits up to $160,000 worth of profits.  So maximum profit-sharing contribution was $40,000.

 

So right there that's a $55,000 of contribution.  All on a pre-tax basis.

 

But then you can also contribute to the IRA, $5,000 like you said (after-tax due to the income restrictions).

 

So that's $60k per year of maximum contribution.  Per person.

 

Now if you make 20% compound annual returns, it's worth $2,300,000 after 20 years.  But that's only from 20 years of growth, and only from a single year's contributions.  So imagine what you can achieve if you contribute that much money to your account every year and work a full life.

 

All of this money from the 401k can be rolled into an IRA after retirement.  That's what I did with my wife's plan, I rolled it into a IRA, then I did a RothIRA conversion.

 

How did you swing that? I thought the limit for 401k was about 16k and you can't contribute to Roth if your income is over 120k?

 

16k limit is for employees, not the go getters who are the lifeblood "job creators" of the economy (I'm being sarcastic).

 

Read about the tax-advantages of the self-employed:

https://www.fidelity.com/retirement-ira/small-business/self-employed-401k

 

The same profit sharing plan is available to executives of a corporation, such as Romney at Bain Capital.

 

You don't have income if you quit your job  :D  The amount of the IRA conversion does not itself count as income.

 

Also, during Obama's presidency, they lifted the income limitation in 2010 -- so everyone no matter what their income was could execute the conversion.  And you had the option of spreading the conversion over 2011 and 2012 tax years if you liked.

 

So absent that special 2010 conversion gimmick, there would have been a lot less tax revenue (but future tax receipts would have been higher).

 

During Obama's first term, that meant the deficit was slightly worse than it looked -- he benefitted from all that future tax revenue being realized in 2010, 2011, and 2012.

 

[ERICOPOLY]

Along came a passive investor who found in an insurance company two things of very high value:

1)  float

2)  a way to protect passive investments from the undistributed profits tax

 

I have next to no doubt that what you talk about is exactly what the appeal was here.

 

Go through Buffett's annual letters to shareholders and over and over again he will repeat himself that these wholly owned businesses practically run themselves, that there is a very small head office, he doesn't spend time thinking about how to run those business, etc... etc... etc...

 

He is practically begging someone to call them passive investments.  In which case, Congress could amend the Personal Holding Company rules and hit Berkshire with required annual distributions.

 

In this sense Buffett reminds me of Rumpelstiltskin (excerpt out of Tales From the Brothers Grimm):

 

"I'm smarter than the wind that blows and I'll win at every game, for no one guesses, no one knows that Rumpelstiltskin is my name!"

 

[Guest valueInv]

Along came a passive investor who found in an insurance company two things of very high value:

1)  float

2)  a way to protect passive investments from the undistributed profits tax

 

I have next to no doubt that what you talk about is exactly what the appeal was here.

 

Go through Buffett's annual letters to shareholders and over and over again he will repeat himself that these wholly owned businesses practically run themselves, that there is a very small head office, he doesn't spend time thinking about how to run those business, etc... etc... etc...

 

He is practically begging someone to call them passive investments.  In which case, Congress could amend the Personal Holding Company rules and hit Berkshire with required annual distributions.

 

In this sense Buffett reminds me of Rumpelstiltskin (excerpt out of Tales From the Brothers Grimm):

 

"I'm smarter than the wind that blows and I'll win at every game, for no one guesses, no one knows that Rumpelstiltskin is my name!"

 

To be a PHC, fewer than 5 people will have to hold more than 50% of the company.

[ERICOPOLY]

Along came a passive investor who found in an insurance company two things of very high value:

1)  float

2)  a way to protect passive investments from the undistributed profits tax

 

I have next to no doubt that what you talk about is exactly what the appeal was here.

 

Go through Buffett's annual letters to shareholders and over and over again he will repeat himself that these wholly owned businesses practically run themselves, that there is a very small head office, he doesn't spend time thinking about how to run those business, etc... etc... etc...

 

He is practically begging someone to call them passive investments.  In which case, Congress could amend the Personal Holding Company rules and hit Berkshire with required annual distributions.

 

In this sense Buffett reminds me of Rumpelstiltskin (excerpt out of Tales From the Brothers Grimm):

 

"I'm smarter than the wind that blows and I'll win at every game, for no one guesses, no one knows that Rumpelstiltskin is my name!"

 

To be a PHC, fewer than 5 people will have to hold more than 50% of the company.

 

I'm aware.

 

I've looked up all the rules before  ;)  I stand in awe of his approach.

 

[Guest valueInv]

So, no holding company should be able to retain their earnings? They should be structured like REITs?

[ERICOPOLY]

So, no holding company should be able to retain their earnings? They should be structured like REITs?

 

I used to have a couple of single family homes as rentals.  They have different rules for how they tax you based on whether they meet the "active" vs "passive" test.  If you were deemed "passive", you were limited in how many of your expenses you could deduct against your other income.

 

To be deemed "passive", you merely needed to hire a property manager.

 

Well...  uhh.... how is that different from how a holding company operates?  They have managers run their businesses, but that isn't considered "passive"?

 

I just think the very rich mainly have better lobbyists.