Narrator’s voice. No it is not common. But someone on the internet insisted they use the acronym. |
FFS the IRS uses it in its own forms, instructions and publications. This isn’t something the PP made up. If a tax lawyer hasn’t seen the term before it means he’s either practicing in an area other than individual income taxes or he doesn’t bother to read the IRS publications. |
The people who don’t think this is common clearly so not do their own taxes, converse with anyone in the financial service industry, speak with their accountants, etc. I am constantly interacting with CPAs in my job and every single one of them uses MFJ. Why would you spell it all out when it is common knowledge in the industry.
I invested in IBM, oops.. International Business Machines! |
Tax economist here, and I agree ... any tax related professional should be embarrassed to admit they don't know what MFJ means. |
$400K HHI for a couple each making $200K is NOT a working class family. A working class family, even in DC is making $150-250K jointly. The median income of an individual in DC was around $75K in 2020. The median HHI in DC in 2020 was $95K. 80th percentile individual in DC was $140K in 2020, 80th percentile HHI in DC in 2020 was $210K 90th percentile individual in DC was $180K in 2020, 80th percentile HHI in DC in 2020 was $300K $200K individual in DC in 2020 was the 92nd percentile, $400K HHI in DC in 2020 was 95th percentile. Top 8% individual and top 5$ household is NOT working class. The working class averages around the median, maybe the 40th-60th or even 75th percentile. And for those who feel working class, I'm sorry, but owning a home in NW DC is by definition NOT working class. Owning a home in one of the most expensive portions of the metropolitan area is a luxury. It is by definition a luxury that is only available to the rich. The working class in DC who own their own homes live in the other quadrants of the city and they don't own in NW DC. If you choose to spend your rich income on housing in the more desirable parts of town, that is a luxury that true working class residents cannot afford. Besides, if you make $400+, you are only going to see the taxes raised on the portion that is above $400K. If you had an HHI of $450K, you would only see a tax increase on the top $50K of your income. Even if there was a 3% increase, you would only see an increase annually of $1500. If you think that paying an additional $1500 on an income of $450K is so onerous, then you are even more out of town with reality than most people think of the truly wealthy. Is the difference between say $150K and $151,500 in taxes going to seem that big to you? +1 This is the best analytical response in this whole thread. Many posters are getting emotionally caught up in the fact that they hear the word "rich" and associate it a lifestyle they don't have, when in reality, if you are in the top 10% of earners ... (in one of the wealthiest cities in the country, meaning you are most likely top 5% nationwide) ... you are far from middle class. If 90+% of the population look at you as RICH, even if you don't identify with that moniker, you are rich. Accept and appreciate that blessing. If you don't feel rich at 90th plus percentile that is a spending problem on your part, and you are very out of touch with true middle class life. |
The tax increases being proposed are quite a bit bigger than this. Biden is saying that the rate will 39.6 for income over $400k. Right now, $400k is 32% and that goes up to 35% at $418,850. So we're talking a increase of 7.6% and 4.6% respectively. He is also proposing SS tax on wages over $400k, which would be an additional 6.2%. Plus he is proposing two caps on itemized deductions (a 28% cap and return of the Pease limitation). Someone with $450k of income is probably looking at a good $15k in additional taxes if all this goes into effect (obviously depends on what your itemized deductions are). |
That's only compared to the unusually low tax brackets during the Trump years. The tax brackets from 2015 prior to the tax cuts were: So, essentially Biden is proposing to restore the tax brackets to what they were before TCJA. Think of it like you got a Republican tax write-off for 4 years that cost the country a lot of money and services and we are no longer giving the rich folks that tax write-off. |
Even in this scenario, (and that is a big IF all of those proposal gets passed) and someone making nearly half a million a year has to pay a measly $15k in taxes, that is a 3.3 percentage point increase. So they go from paying an effective 21.3% rate (on average) to 24.6%: https://www.taxpolicycenter.org/statistics/effective-tax-rate-agi-1935-2015 For the past 75 years legislation has been passed continuously lowering their effective tax rates, bringing their effective tax rates closer in line with the rest of the population - (in other words, a less progressive and more regressive tax system). Personally, I think a progressive tax system is necessary in our society, and if someone making $450k annually can't handle 3% more in taxes, they need to assess their spending habits because you should NOT have liquidity constraints at that income level. https://www.taxpolicycenter.org/taxvox/effective-income-tax-rates-have-fallen-top-one-percent-world-war-ii Need I remind people that we used to have a top statutory tax rate of 94 percent. |
+1 this! also to remind people ... these rates were set to expire in 2025 anyways! Trump only passed individual cuts as temporary measures, while most corporate provisions were made permanent. It was an attempt to make it appear as a middle income tax cut when in reality it was funneling tax payer dollars to millionaires and corporations. |
First off, I was simply trying to correct the gross misstatement from the PP. The tax increases under discussion are actually 10 times larger than PP suggested. Second, you are still not being accurate. There was never a 6.2% SS tax for over $400k. This would be entirely new. The TCJA took effect for tax year 2018. In 2017, the year before, $400k was in the 33% bracket. |