$4.8 trillion - Interest on U.S. debt

[Heracles 417]

Ah AGI, Didn't see that..

Does NY have personal property tax?

I don't think so... at least I never paid it.

I see. State income tax, fuel excise etc is low here but we pay personal property tax.

[Heracles 417]

50% on your AGI. What's your gross income when you have a $500,000 AGI? Double that?

It could be double that, or 10 times that, or almost the same.

For example, I deduct all my business expenses (vehicle expenses, garage, travel,

food, entertainment and other stuff), but as a one-man business, I don't think I've

ever deducted more than maybe $50-70k in total.

Someone who buys a lot of equipment can use the maximum section 179 depreciation

deduction and deduct up to $250,000 in one year.

My point is, even at $500k your combined tax rate is already pretty close to 50%.

So they still allow that here do they? Reason being, since everyone was choosing to be a 'contractor' and claiming everything as 'business expenses', the conservatives downunder closed this option. If more than 80% of your income comes from one source, you cannot claim to be a business.

Edited November 21, 2009 by Booyah!

[mawilson 2,133]

Your calculation had a bit of an error, though. Your federal AGI is reduced by your state income tax.

Well...sort of - only if you itemize your deductions.

So basically, if you suddenly start making a lot of money this year (2009), you probably

wouldn't itemize this year's deductions because the state income tax you paid this year

(for 2008) is probably less than the standard deduction.

[mawilson 2,133]

So they still allow that here do they? Reason being, since everyone was choosing to be a 'contractor' and claiming everything as 'business expenses', the conservatives downunder closed this option. If more than 80% of your income comes from one source, you cannot claim to be a business.

I don't see why not or how that's different than creating a one-member LLC.

As for the 80% rule, it's probably reasonable, but consider this:

My business did well in 2006, really well in 2007, but then everything fell apart and I took some

serious losses in 2008. Now I'm profitable once again.

According to your country's rules, my business is not really a business because I didn't

make any money in 2008, which is not really fair.

[Mr. Big Dog 10,747]

Your calculation had a bit of an error, though. Your federal AGI is reduced by your state income tax.

Well...sort of - only if you itemize your deductions.

So basically, if you suddenly start making a lot of money this year (2009), you probably wouldn't itemize this year's deductions because the state income tax you paid this year (for 2008) is probably less than the standard deduction.

I itemize deductions and I don't make 500K gross, let alone AGI. I also don't pay state income taxes and still, I itemize deductions. Mortgage interest and property taxes alone are more than the standard deduction. And no, I do not live in a castle.

[Heracles 417]

So they still allow that here do they? Reason being, since everyone was choosing to be a 'contractor' and claiming everything as 'business expenses', the conservatives downunder closed this option. If more than 80% of your income comes from one source, you cannot claim to be a business.

I don't see why not or how that's different than creating a one-member LLC.

As for the 80% rule, it's probably reasonable, but consider this:

My business did well in 2006, really well in 2007, but then everything fell apart and I took some

serious losses in 2008. Now I'm profitable once again.

According to your country's rules, my business is not really a business because I didn't

make any money in 2008, which is not really fair.

The whole point of it was to stop individuals from being hired as a contractor and escape paying tax.

It's the same whether you make $1 or $100 million. As long as no more than 80% of your revenue comes from one source, you are free to be a business. As an example, if 50% of your revenue comes from once source A and 50% comes from Source B, you are free to be a business. However, if you are contracted to Goldman Sachs and they're your only source of revenue, you have to sign up under an umbrella company or be contracted through an employment agency. Under the latter, you claim exemptions as a company or small business.

Edited November 21, 2009 by Booyah!

[mawilson 2,133]

Your calculation had a bit of an error, though. Your federal AGI is reduced by your state income tax.

Well...sort of - only if you itemize your deductions.

So basically, if you suddenly start making a lot of money this year (2009), you probably wouldn't itemize this year's deductions because the state income tax you paid this year (for 2008) is probably less than the standard deduction.

I itemize deductions and I don't make 500K gross, let alone AGI. I also don't pay state income taxes and still, I itemize deductions. Mortgage interest and property taxes alone are more than the standard deduction. And no, I do not live in a castle.

As a renter, I don't have mortgage interest or property taxes. It only makes sense for me

to itemize when my state and local taxes exceed the standard deduction ($11k for married,

filing jointly). Usually they do, but probably not this year because 2008 really sucked and

I think I paid NY less than $11k (which corresponds to AGI ~= $100k... big losses reduced

my AGI a fair bit.

[Heracles 417]

Fixored

The whole point of it was to stop individuals from being hired as a contractor and escape paying tax.

It's the same whether you make $1 or $100 million. As long as no more than 80% of your revenue comes from one source, you are free to be a business. As an example, if 50% of your revenue comes from source A and 50% comes from source B, you are free to be a business. However, if you are contracted to Goldman Sachs and they're your only source of revenue, you have to sign up under an umbrella company or be contracted through an employment agency. Under the latter, you cannot claim exemptions as a company or a small business.

[mawilson 2,133]

The whole point of it was to stop individuals from being hired as a contractor and escape paying tax.

It's the same whether you make $1 or $100 million. As long as no more than 80% of your revenue comes from one source, you are free to be a business. As an example, if 50% of your revenue comes from once source A and 50% comes from Source B, you are free to be a business. However, if you are contracted to Goldman Sachs and they're your only source of revenue, you have to sign up under an umbrella company or be contracted through an employment agency. Under the latter, you claim exemptions as a company or small business.

I still don't get it. Let's you started a successful business and got your first customer.

There, 100% of your revenue comes from one source - your first (and only) customer!

Is the business not really a business because it only has one customer? Do you need two

customers to be classified as a business? What if Customer A buys 1000 items and

Customer B only 100 items? 90% of your revenue (1000/1100) still comes from one source.

What if the 80% rule works for you this year and doesn't work next year? Are you no

longer a business because you're struggling to stay afloat in a recession?

[Heracles 417]

Obviously most businesses will not just have one client. What they are looking for is an individual contracted out to a firm claiming to be a business. I was at one firm for two years as a contractor. In the past I could have claimed all of my expenses as any business does, something employees do not get to do. Whereas, after the new tax ruling, I had to basically be sub-contracted out through an employment agency like Manpower. Manpower billed the client and then paid me. That way I was essentially an employee of Manpower. AKA no business tax write-offs.

[Mr. Big Dog 10,747]

Your calculation had a bit of an error, though. Your federal AGI is reduced by your state income tax.

Well...sort of - only if you itemize your deductions.

So basically, if you suddenly start making a lot of money this year (2009), you probably wouldn't itemize this year's deductions because the state income tax you paid this year (for 2008) is probably less than the standard deduction.

I itemize deductions and I don't make 500K gross, let alone AGI. I also don't pay state income taxes and still, I itemize deductions. Mortgage interest and property taxes alone are more than the standard deduction. And no, I do not live in a castle.

As a renter, I don't have mortgage interest or property taxes. It only makes sense for me to itemize when my state and local taxes exceed the standard deduction ($11k for married, filing jointly). Usually they do, but probably not this year because 2008 really sucked and I think I paid NY less than $11k (which corresponds to AGI ~= $100k... big losses reduced my AGI a fair bit.

Of course, at ~100K, you're even further away from paying 50% in taxes.

Now let's get back to where this discussion started - excessive federal taxes. Top income tax rates of 70% or more - that's federal alone. And that certainly is excessive. So bringing the tax rates down from there would increase revenues as people are less likely to spend a great deal of money to accountants and lawyers to finagle the numbers. Paying your taxes at that lower rate becomes the cheaper option. However, with the top rate at 35%, it can be argued that lowering the rates won't increase but decrease revenues. The numbers following Bush's three rounds of tax cuts show that quite impressively. Based on that, I think there is no way to support the notion that reducing rates further will increase revenues. The numbers just don't support it.

[mawilson 2,133]

Of course, at ~100K, you're even further away from paying 50% in taxes.

In the midst of the recession, sure. This year and definitely next year I'll be a lot closer.

[mawilson 2,133]

Obviously most businesses will not just have one client. What they are looking for is an individual contracted out to a firm claiming to be a business. I was at one firm for two years as a contractor. In the past I could have claimed all of my expenses as any business does, something employees do not get to do. Whereas, after the new tax ruling, I had to basically be sub-contracted out through an employment agency like Manpower. Manpower billed the client and then paid me. That way I was essentially an employee of Manpower. AKA no business tax write-offs.

The question is, why shouldn't you be able to write off some of your expenses as a contractor?

Contractors here don't have the same benefits as full-time employees -- health insurance,

flexible spending accounts, 401(k) matching, TransitChek, etc - it's only fair that they get to write off

certain things.

[Mr. Big Dog 10,747]

Of course, at ~100K, you're even further away from paying 50% in taxes.

In the midst of the recession, sure. This year and definitely next year I'll be a lot closer.

But that's all taxes. Not just federal income taxes. You'll still be far below 50% on those. Some 10% - 20% of the tax burden (less for income over 100K since Medicare taxes are capped at that amount) actually will come back to you later in life when you retire and benefit from Medicare and SSI. Again, the issue that was being discussed is whether further reduction of federal income tax rates will actually increase tax revenues. I don't think there's any support for the argument that they would.

[IR5FORMUMSIE 850]

I need to pm you but your box is full.

Edited November 21, 2009 by IR5FORMUMSIE