Reply to Face It: You (Probably) Got a Tax Cut

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous]The only reason ours didn’t go up was because we put an extra $50k in a retirement account to shield income. Had to restructure retirement vehicles to do it.  We lost $120k in SALT deductions so not insignificant. [/quote]

Again, if you're paying $120k in state and local taxes, just pipe down.  You should have seen a massive tax increase, in a rational world.  [/quote]

We pay about about a 50% effective rate now (37% federal + 9.5% state +15% SS on a portion + 2.9% medicare on all - I am self employed so pay both sides of SS and medicare). [b]A massive tax increase would not be effective because the additional work required to earn the marginal income wouldn't be worth it if I was paying at 60-70% tax rate on that income.[/b][/quote]

Rich people claim this all the time, and it's nonsense.  Say the top two tax brackets went to 40% and 45%, respectively.  You're suggesting that you would just say, "that's it - I'm only working enough to accrue 200,000 in taxable income.  It's just not worth it otherwise!"

That's complete nonsense.  You're full of it.

Also, to reiterate, if you lost $120k in SALT deductions, you had $130k in SALT.  At 9.5% state tax, you had taxable income of what, $900,000, with a property tax bill of $44,500?

Yeah, I'm sure you'd just throw it all away because your taxes went up.

[/quote]

Higher income and much lower property taxes. I am not talking about 5% increases, which I agree doesn't influence behavior, but some of the proposals out there are for a 70% marginal tax rate. There are economists who have looked at a 70% rate and don't think it produces the right outcome. My situation may be somewhat unique because I am self employed so I look at the relative value of working an extra hour vs free time. At a certain point if my return on that hour is only 30 cents on the dollar, I value free time. At a high income the marginal $ are worth less to me since they aren't covering basic needs. So yes, i would work less, and pay less in taxes. If I were paid a salary obviously the incentives are much different.

Also the premise of this thread is that everyone is getting a tax cut. Well I did not, and the reason is that we live in a high tax state. I totally get the reason why SALT deductions don't actually make sense and are unfair to those in lower tax states, but that doesn't make the transition any easier.[/quote]

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