@chipperd, Anyone who has a 401k /403b , variable or whole life insurance, or any pension fund is invested in the markets. That is over half of the families in the US. The ones who do not are overwhelmingly poor and young. The amounts are not relevant because it is important to them, whether it is $5000 for the recent college grad or $2 million for someone in their 50’s. The youngest are affected the most because they would not experience the same level of growth of the parents and older siblings. Retirees depend on those balances for survival, or if they have more, fun things.
In addition, higher corporate taxes cause the price of everything for everyone to increase and employment to drop. Investors will still demand and executives will only approve projects with return above their cost of capital. That means higher prices affecting everyone , especially the poor who spend the largest percentage of their income on goods and services. Higher prices mean lower demand, which means less employment, which means lower wages. That is why the corporate tax rate should be zero, because that results in the lowest prices and highest wages overall, and reduces poverty the most - far better than any government program.
Looks like standard supply-side trickle-down economic theories. Except that they do not work, since the already-wealthy and big business capture the gains instead of letting them disperse to everyone else in the economy through lower prices for consumer and higher pay for labor. See http://eprints.lse.ac.uk/107919/1/Hope_economic_consequences_of_major_tax_cuts_published.pdf for example. See The Great Reversal — Harvard University Press for how big businesses worked on building oligopolies and monopolies to better capture economic gains instead of allowing them to spread across everyone else in the economy, helped by lobbying and buying politicians.
Don’t forget if you’re making 200k in SF you’re also paying more than 9% in state taxes if you’re single, so 200k isn’t 200k. Most people there can’t afford to buy anything on 200k which is why they rent and until covid rents have been out of control. They’re still outrageous but have finally come down. Legal fees are also through the roof. I couldn’t believe the cost difference for what my son had to pay to incorporate his business there than if he had used an attorney here. Everything is more there. It’s ridiculous. I think the only thing we find cheaper there are when we rent a car, but the parking more than makes up for it, and when we go to restaurants it seems to be cheaper.
And totally agree with you. There are a hell of a lot more than hundreds of homeless people in SF. You can walk one block around Union Square and find more than 100 in an given day. Walk over to the tenderloin area and pre-covid easily count multiple 100’s if not a 1000 and now? God only knows? I had a friend that had to leave the area after many years because it just became too expensive for her. If you’re not in tech it is sometimes just too expensive to live.
@ucbalumnus You keep going back to the same argument but neglect to take into account other expenses that are required to live. Car insurance is going to cost more in SF, health insurance, sales tax, utilites, etc. Just because someone has net income of 146k or whatever number you think they may have, that doesn’t mean they have 146k of disposable income either.
Many people with 401k or 403b’s do not pick funds that are in the market. Some are so risk averse they just allocate their money into straight money market funds. Many people don’t work for companies where a 401k/403b is even an option and many Gen Z’s don’t even know what some of these are unless they’re sat down and educated on it, sadly. They also have trouble thinking about retirement when they are 20!
Lower corporate taxes only puts more money into the executives pockets. This is pretty much what happened this last go around. It’s all a function of supply and demand so higher prices don’t necessarily mean lower demand or vice versa. If demand increases prices often go up. The corporate tax rate will and never should be zero. If they ever make it zero, the middle income earners as usual will bear the brunt of that and the wealthiest earners who are the biggest investors in the market, more than just with 401k/403b etc will just continue to reap the gains. As @ucbalumnus said and something we agree on, trickle down economics absolutely does not work. Been there done that.
@srparent15 Just at home getting receipts prepared. We have a friend who is also our attorney. We started a spin-off business back in March (bad timing, we know). Attorney fees were 10K ( and he gives us a deal). That was just to get the basic things done.
It’s not only San Fran that’s expensive. We live in the Boston area and have paid about the same for things since the 90’s as CA. Housing ( check), property taxes ( 20K per million sometimes more), state tax and on and on and on. We don’t seem to have the issue with having as many homeless people downtown but that might also be due to the weather.
No one making 200K is considered rich in this area. Would be comfortable. Many young people with good salaries cannot buy a home due to high down payment( and many have huge student loans). People who are older get a huge windfall due to housing prices. Younger people might never catch up. It’s bad for kids starting out. People who inherit a home in MA often receive 500-2million in value. That beats many retirement savings accounts. Many young professionals live with their parents for good reasons.
Federal Income Tax Calculator (2022-2023) includes estimation of state income taxes as well as federal income taxes. Net of $146k as mentioned above was for married with two kids in California. For single with no kids, the net is $132k. Either number is still greater than the median gross household income in San Francisco.
What, other than income or payroll taxes (which are accounted for above and in net income after income taxes), requires someone with $200k gross income (net $132k single, $146k married with two kids) to spend more than someone with $122k gross income (net $84k single, $95k married with two kids)?
Well as the owner of two corporations, even I don’t support zero tax rates. We want tax rates to be low enough to keep our corporations from going offshore and high enough to recoup some value.
Every year I look at the items that can be deducted. They are ridiculous. Things like entertainment (for pricey sports tickets) why?
And when you mention corporations are you talking IBM or are you talking about my small business. Because one can create many thousands of jobs and mine might create just a handful ( or none by choice). As you likely know, most jobs are created by small businesses. So getting it right is important. But zero isn’t the solution. The optimal rate creates growth and also takes some of the profits and feeds them back into society.
Just think about zero tax rates and billionaires and we can figure out pretty quick that we have a problem. All that money going to a single person and never to be recouped. That’s a societal loss of immense proportions. I’m a happy to pay my corporate taxes!!! So is my spouse.
@Happytimes2001 You don’t have to tell me! I hear ya - I live in the Chicago suburbs. My property taxes are crazy, very similar to what you stated, actually more. Our sales tax is high also. 200k doesn’t get you much at all here and that’s not even sending your kid to a private school. I took a beating on my house in the 2008 decline and if I moved now would see at a loss and downsizing would sadly cost me more or close to the same as I could get for this house. Something is so wrong with that scenario.
My son (the SF one) told me in Feb the first weekend after the market tanked due to covid that they were starting their VC raise the next week. He was oblivious to the market tanking and I told him what bad timing. They didn’t want to delay it either. They were fortunate that they completed their raise and maybe covid helped because they were cheaper than some of their competitors so that actually brought more clients hence more revenue at the same time. Who knows. But at 200k no one is going to be saving much of anything for retirement. One just has to hope they took advantage of when they were young, single and living at mom and dad’s before they had big expenses and could save. My kids have had Roth IRA’s since they were 16 so I’ve started them young since they don’t need that money for anything now but in a few years, they might need their income so while they’re in school it’s the time to stash it away and invest.
Suppose they live in the same neighborhood in similar price housing and have the same luck in the SFUSD lottery. What (besides income and payroll taxes) requires the one with $200k gross to spend more than the one with $122k gross?
And depending what kind of Corporation you are, you even get the QBI Deduction now!
This year if this next stimulus bill ever gets signed you’ll also be able to go back and take 100% of certain business deductions, which is ridiculous because who the heck is dining out for business together during covid?
I hate paying taxes but I agree with you. And, if we didn’t make money, we wouldn’t have any taxes to pay!
@srparent15 With 200K, you could definitely not go the private school route. Yes, Chicago is expensive too.
Tell your son this story, my spouse had a VC check coming on 9/12/01 from a Swiss Investment company. The investor never made it out of Zurich. LOL. We survived and my spouse went on to build several companies over the years which were sold, spun off and became parts of other companies. So don’t tell him not to give up. Keep trying. Keep changing. Never stop. It’s really hard but he can do it. Keep experimenting.
Does the Roth depend on your income or his? We have never been able to do Roths due to income limitations. But if it’s based on kids incomes, I am going to start them right away. That is a great idea!!!
OMG. We have an S corp and a C corp. What is the QBI deduction? Never heard of that one. No restaurant deductions this year, that’s for certain.
Wow, I can imagine that the treasury will be getting a LOT less money this year from everyone. So many businesses on hold, closed, failed or in trouble. Going to be a tough ride.
@Happytimes2001 Oh that one isn’t giving up. He and his partner completed their raise “a few weeks later” than they expected. Seriously they talk such nonsense. A few weeks? Haha. He’s 23 and this is all over my head. At the first company he worked at he didn’t even qualify at first for their 401k plan because you had to be 21 (I guess in silicon that’s common because they’re used to having so many interns and people in and out that it’s too costly to have a revolving door for putting people on and off the plan just for internships so a lot just set it at 21), so he had to wait 2 years before he could join.
This one doesn’t have a Roth. He never worked until he was 18 and went right out to silicon skipping college. He then made too much money to qualify for a Roth and it was hard enough getting him to put in a Traditional IRA that converting it was not going to happen. Lol. My younger 3 have the Roth based on their incomes. The best thing about it is they don’t earn more than 12k so they will never pay taxes on it, unlike most normal people who put money in a Roth since it’s usually after tax income. So as long as they’re in the lowest bracket it is a huge win. Those 3 are all under 20 so it’s totally worth it.
@Happytimes2001 , My point is simple. Lower corporate taxes mean higher returns which bump up the value of every individual’s - meaning well over 50% of the country- pension and retirement funds. Life insurance rates fall. Competition increases. Prices remain steady or fall. How exactly is that a bad thing? It means a lot more people will have a prosperous retirement, and greater employment means a lot more people will participate in the system. This promotes a virtuous cycle. And faster growth will keep the social security system intact.
And both families have healthy kids (no one can have a health issue), the same houses in the same condition (deferred maintenance like trees, dry rot and termites are huge in SF), cars and insurance companies, same wireless carriers, both spouses in each family have exactly the same jobs (I know people in the fire and police departments, which have different hours), same daycare costs and both have water sprinklers and drip irrigation for their lawns and shrubs, etc. Silly.
Haha. Don’t forget also buying the cheapest crappiest toilet paper, as my kids have accused me of, not realizing last spring it’s all I could find!
Btw, I learned a few years ago that Tmobile (they don’t advertise this) has a great 55+ phone plan. 2 phones, unlimited talk and text only $70 (that includes tax).
My ex inlaws pay for all 4 of my kids cell phone plans, so I guess that’s one way to save money!
. I understand your premise but don’t agree with your conclusions. I like the idea of many economic theories. I have a masters in econ so I like to think about them/ Some work, most don’t. Mainly anything with a zero basis doesn’t work because it doesn’t have a baseline. You either incent people to do something (that they otherwise would not) and give them a reason to do it ($$) or you let the market decide how people allocate their money. Or you legislate.
Taxes while a huge pain in the neck are necessary. Corporate taxes in particular. If you think about corporate taxes and a company like Amazon, you will see huge $$$$. That money is going to Bezos right now. Not his employees, not the states in which his employees work. And some of the money is going to me ( because I am a shareholder). There is a lot of money that won’t ever be recouped. That means that the economic gains in the billions are going to a single person and a small group of shareholders. Is that ok? What if Amazon’s business grew to 10% of GDP? 50%? 75% Is it still ok that there be zero taxation on this corporation? Of course not.
There are many corporations in which the owner is a billionaire. Or even a millionaire. Why shouldn’t they pay taxes? Makes zero sense.
