- State & Local Sales Tax Rates for 2016 - Chicago, is highest @ 10.25%
- State Income Tax Rates For 2016 California has highest tax rate of 13.3%
Taxifornia, aka California, is expensive but it sure has nice weather, mountains and beaches!
Showing posts with label Taxes. Show all posts
Showing posts with label Taxes. Show all posts
Monday, December 05, 2016
State Income and Sales Taxes Rate Maps
When deciding where to live or retire, taxes matter. Here are some maps to help make the decision.
Monday, April 15, 2013
Proposal to Cap Retirement Accounts & 2013 Taxes
Moneytalk with Bob Brinker Commentary for April 14, 2013 Radio Show
PROPOSAL TO CAP RETIREMENT CONTRIBUTIONS
Brinker Comment: Bob discussed an expected proposal from the White House on the budget that would limit individuals form accumulating more than $3 million in individual retirement accounts and other tax-preferred retirement accounts. The proposal would cap an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, equal to about $3 million this year. Bob slammed the proposal and that it was totally outrageous and would never pass Congress and was pandering to politics.
Caller: This caller has heard of situations where Mitt Romney a ton of money to his children by gifting severely undervalued stock that then increased dramatically in value. The caller said if you drove the stock down to nothing and then gifted it to someone, then you move the company to China and the value of the stock starts to accelerate in value like crazy and do that a few times you could end up with $100 million in your retirement account.
Bob said he doesn’t think the proposed policy to cap retirement accounts is aimed at that kind of thing which would be a rare thing if it did happen. Bob said this looks like an anti-wealth accumulation policy measure and is consistent with the policy momentum that we have in Washington that wants to make it harder and harder for you to put money away. There are politicians that are responsible for raising the kiddie tax liability age into adulthood. This is really bad policy and the sooner we get past that thing the better. On top of that, it doesn’t even raise any countable money toward the deficit. It is just lashing out at people’s efforts to accumulate a nest egg.
EC(David Korn): US News and World Report wrote a detailed article about it entitled, “Obama Budget Proposes Cap on Retirement Savings” that you can read for free at the following url: http://tinyurl.com/cupd3m6
Kirk Comment: I stopped putting money into regular IRAs in 1998 when I started to work for myself and don't get a match from my employeer like I did when I worked for HP. Instead I put the money into a ROTH IRA. Unless you are paying at the very top tax rate in 2013, I think it makes much more sense to pay the taxes now when they are low, put the money into a ROTH and take it out tax free. Money above the ROTH should go into index funds or individual stocks where you get lower capital gains or dividend rates (0 to 20%) compared to the much higher normal income tax rates you are charged with IRA RMDs (required minimum distributions.)
For more on tax rates, see:
If you would like a free sample of David's complete "Brinker related newsletter" and his "Retirement Advisor" newsletter, then click this link to send an email request and please tell us a bit about yourself too.
The following commentary is from my "Retirement Advisor" writing partner, David Korn.
PROPOSAL TO CAP RETIREMENT CONTRIBUTIONS
Brinker Comment: Bob discussed an expected proposal from the White House on the budget that would limit individuals form accumulating more than $3 million in individual retirement accounts and other tax-preferred retirement accounts. The proposal would cap an individual’s total balance across tax-preferred accounts to an amount sufficient to finance an annuity of not more than $205,000 per year in retirement, equal to about $3 million this year. Bob slammed the proposal and that it was totally outrageous and would never pass Congress and was pandering to politics.
Caller: This caller has heard of situations where Mitt Romney a ton of money to his children by gifting severely undervalued stock that then increased dramatically in value. The caller said if you drove the stock down to nothing and then gifted it to someone, then you move the company to China and the value of the stock starts to accelerate in value like crazy and do that a few times you could end up with $100 million in your retirement account.
Bob said he doesn’t think the proposed policy to cap retirement accounts is aimed at that kind of thing which would be a rare thing if it did happen. Bob said this looks like an anti-wealth accumulation policy measure and is consistent with the policy momentum that we have in Washington that wants to make it harder and harder for you to put money away. There are politicians that are responsible for raising the kiddie tax liability age into adulthood. This is really bad policy and the sooner we get past that thing the better. On top of that, it doesn’t even raise any countable money toward the deficit. It is just lashing out at people’s efforts to accumulate a nest egg.
EC(David Korn): US News and World Report wrote a detailed article about it entitled, “Obama Budget Proposes Cap on Retirement Savings” that you can read for free at the following url: http://tinyurl.com/cupd3m6
Kirk Comment: I stopped putting money into regular IRAs in 1998 when I started to work for myself and don't get a match from my employeer like I did when I worked for HP. Instead I put the money into a ROTH IRA. Unless you are paying at the very top tax rate in 2013, I think it makes much more sense to pay the taxes now when they are low, put the money into a ROTH and take it out tax free. Money above the ROTH should go into index funds or individual stocks where you get lower capital gains or dividend rates (0 to 20%) compared to the much higher normal income tax rates you are charged with IRA RMDs (required minimum distributions.)
For more on tax rates, see:
- April 15 US Federal Income Tax Brackets - Federal Tax Rates for 2013
- April 15 US Federal Capital Gains Tax Rates for 2013
- April 15 Historical Top Marginal Income Tax Rates: Top US Tax Rates from 1776
David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2013
Monday, February 25, 2013
Moneytalk Summary & Bob Brinker's Current Advice
Items Covered
New Bull Market Highs
Bob Brinker did not talk about the stock market hitting a new bull market high this weekend. I find that rather odd as some of us are very happy our portfolios are at record all-time highs!
I wrote an article for Seeking Alpha about the new highs on Friday. You can read it at:
Affect of High Inflation on Stock Market
A caller asked Brinker what affect high "runaway" inflation would have on the stock market. Brinker said this would be the worst case thing for stocks which is why you want a system that prevents this. He then talked about how the Federal Reserve has a dual mandate from congress for stable inflation and maximum employment.
Read more about this at the Chicago Fed's web site The Federal Reserve's Dual Mandate
Brinker's Stock Market Outlook
Kirk Here: Bob Brinker has been "Fully invested" in the stock market since March 2003. His "balanced" model portfolio three is currently about two thirds in equities and one third in fixed income. The other two model portfolios are 100% in equities. My opinion, he takes excessive risk with these portfolios because if the market crashes, like it did in 2008 with him very bullish, he can screen calls and advertise his fixed income advisor newsletter. For more, read:
Moneytalk with Bob Brinker Commentary for February 17, 2013 Radio Show
The following commentary is from my "Retirement Advisor" writing partner, David Korn.
STOCK MARKET
Brinker Comment: The stock market indexes are all at or close to their 2013 year-to-date highs and for the most part the highest levels in several years. Those indexes have been strong year-to-date. Having said that, there is a lot of bullish sentiment. A lot of the indicators are showing a lot of bullishness. Usually, at some point, that kind of over-zealous participation is very frequently cause for profit taking. So if you see some profit taking coming into the market, you should not be surprised given the high level of sentiment in a number of indicators.
EC: It is relatively rare for Bob to make these kinds of clear cautionary remarks. His comments about sentiment mirror the focus of the e-mail I sent to subscribers one week ago tonight. He and I are on the same page on this issue.
SEQUESTTRATION
Brinker Comment: The big story this weekend is the sequestration that takes place on March 1, 2013. That is when the automatic spending cuts take place. This is basically an $85 billion mandatory spending cut program agreed to in the summer of 2011. The President this weekend is announcing that he has an idea to reduce the deficit by $1.5 trillion over 10-years, which is a significant amount of money even though our deficit is high. He wants to speak with the House to get this done. On one side, people say they don’t want to cut spending by $85 billion because that will hurt the economy, whereas others say that’s a drop in the bucket and if you can’t handle this kind of cut, what can you handle?
If you can get the annual deficit down to 3% or less of GDP (total goods and services) you can probably grow your way out of the problem. Our country was at a point where our annual deficits were 10% of GDP but now we are down to 6% which is a major step forward but is still way to high. We have $16.5 trillion in debt and the only reason we are getting a pass on it right now is because interest rates are near zero, but we have to pay the interest on that.
EC: Read “Obama chief of staff warns of sequester” at the following url: http://tinyurl.com/beyqxep
New Taxes to Avoid Sequestration
Brinker Comment: The President is talking about tax increases with the wealthy the target. They got hit with the 2013 increases, the affordable care act and now the “balanced approach” discussed by the President with five areas at risk for tax increases which can include reductions in tax deductions. Bob said we are not going to be talking about marginal rate increases because that battle was fought in December. But reductions in deductions are on the table. Bob discussed the various potential areas for increasing tax revenue.
Mortgage Interest Deduction. One of the things that is inherent in changing the mortgage interest deduction is taking the money out of the pocket of high earners and the way you can do that is eliminating part of the mortgage interest deduction some high earners tend to have large mortgages (if they have one). Right now, there is a cap on mortgage interest for mortgages over $1 million. They could reduce that cap as it is currently a high level which is a gift to high earners. If they reduced that they would raise tax revenue. Another mortgage-related deduction on the table is the second home deduction which is very valuable for high earners who have a vacation home. And finally, there could be a “means test” used to determine whether you make too much in earnings to allow you to take the full mortgage deduction.
Deduction for State and Local Taxes. Right now you can deduct your real estate taxes, your sales taxes, etc. for those who itemize. The last year we have numbers for this is 2010 and taxpayers deducted $260 billion in state and local taxes. If you took 20% of that, you would increase revenue by $52 billion a year. Once again, this would be skewed to high earners. The camel’s nose on this one is already under the tent because they have already eliminated the state and local tax deductibility for victims of the alternative minimum tax. So keep an eye on this one.
Charitable Deductions. The President has already proposed a cap on the deductions to charity. They could easily set an income threshold like they do for medical expense deductions.
Employee-Sponsored Health Care Benefits: There are 150 million beneficiaries of this. If you work for a company that pays for all of your health care, you get that benefit without being required to pay taxes on that benefit. If your neighbor pays his own premium, he doesn’t get a tax break on it. The average premium per family is $16,000. If they made that taxable, that would be a tremendous amount of money. The joint committee on taxation estimates this is $150 billion annual revenue!
Municipal Income Tax: Right now, municipalities are benefiting from near zero rates. They could cap the amount of income you can earn tax free.
Bob said the overriding theme in all of the ways the government wants to bring in revenue is to go after the high earner.
EC: Republican Senator John Barrasso said today that the country should be prepared for sequester because it is going to happen on March 1st. Read more here: http://tinyurl.com/a2pv6kt
Check out these portfolios at record highs:
Kirk Comment: Read: Best Retirement Portfolio For You
- New Bull Market Highs
- Affect of High Inflation on Stock Market
- Brinker's Stock Market Outlook
- Sequestration
- New Taxes to Avoid Sequestration
New Bull Market Highs
Bob Brinker did not talk about the stock market hitting a new bull market high this weekend. I find that rather odd as some of us are very happy our portfolios are at record all-time highs!
I wrote an article for Seeking Alpha about the new highs on Friday. You can read it at:
Here is a chart showing SPY, the exchange traded fund for the S&P500, making a new record high last week after including dividends paid.
Affect of High Inflation on Stock Market
A caller asked Brinker what affect high "runaway" inflation would have on the stock market. Brinker said this would be the worst case thing for stocks which is why you want a system that prevents this. He then talked about how the Federal Reserve has a dual mandate from congress for stable inflation and maximum employment.
Read more about this at the Chicago Fed's web site The Federal Reserve's Dual Mandate
"The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices and moderate long-term interest rates."
Brinker's Stock Market Outlook
Kirk Here: Bob Brinker has been "Fully invested" in the stock market since March 2003. His "balanced" model portfolio three is currently about two thirds in equities and one third in fixed income. The other two model portfolios are 100% in equities. My opinion, he takes excessive risk with these portfolios because if the market crashes, like it did in 2008 with him very bullish, he can screen calls and advertise his fixed income advisor newsletter. For more, read:
Moneytalk with Bob Brinker Commentary for February 17, 2013 Radio Show
STOCK MARKET
Brinker Comment: The stock market indexes are all at or close to their 2013 year-to-date highs and for the most part the highest levels in several years. Those indexes have been strong year-to-date. Having said that, there is a lot of bullish sentiment. A lot of the indicators are showing a lot of bullishness. Usually, at some point, that kind of over-zealous participation is very frequently cause for profit taking. So if you see some profit taking coming into the market, you should not be surprised given the high level of sentiment in a number of indicators.
EC: It is relatively rare for Bob to make these kinds of clear cautionary remarks. His comments about sentiment mirror the focus of the e-mail I sent to subscribers one week ago tonight. He and I are on the same page on this issue.
SEQUESTTRATION
Brinker Comment: The big story this weekend is the sequestration that takes place on March 1, 2013. That is when the automatic spending cuts take place. This is basically an $85 billion mandatory spending cut program agreed to in the summer of 2011. The President this weekend is announcing that he has an idea to reduce the deficit by $1.5 trillion over 10-years, which is a significant amount of money even though our deficit is high. He wants to speak with the House to get this done. On one side, people say they don’t want to cut spending by $85 billion because that will hurt the economy, whereas others say that’s a drop in the bucket and if you can’t handle this kind of cut, what can you handle?
If you can get the annual deficit down to 3% or less of GDP (total goods and services) you can probably grow your way out of the problem. Our country was at a point where our annual deficits were 10% of GDP but now we are down to 6% which is a major step forward but is still way to high. We have $16.5 trillion in debt and the only reason we are getting a pass on it right now is because interest rates are near zero, but we have to pay the interest on that.
EC: Read “Obama chief of staff warns of sequester” at the following url: http://tinyurl.com/beyqxep
New Taxes to Avoid Sequestration
Brinker Comment: The President is talking about tax increases with the wealthy the target. They got hit with the 2013 increases, the affordable care act and now the “balanced approach” discussed by the President with five areas at risk for tax increases which can include reductions in tax deductions. Bob said we are not going to be talking about marginal rate increases because that battle was fought in December. But reductions in deductions are on the table. Bob discussed the various potential areas for increasing tax revenue.
Mortgage Interest Deduction. One of the things that is inherent in changing the mortgage interest deduction is taking the money out of the pocket of high earners and the way you can do that is eliminating part of the mortgage interest deduction some high earners tend to have large mortgages (if they have one). Right now, there is a cap on mortgage interest for mortgages over $1 million. They could reduce that cap as it is currently a high level which is a gift to high earners. If they reduced that they would raise tax revenue. Another mortgage-related deduction on the table is the second home deduction which is very valuable for high earners who have a vacation home. And finally, there could be a “means test” used to determine whether you make too much in earnings to allow you to take the full mortgage deduction.
Deduction for State and Local Taxes. Right now you can deduct your real estate taxes, your sales taxes, etc. for those who itemize. The last year we have numbers for this is 2010 and taxpayers deducted $260 billion in state and local taxes. If you took 20% of that, you would increase revenue by $52 billion a year. Once again, this would be skewed to high earners. The camel’s nose on this one is already under the tent because they have already eliminated the state and local tax deductibility for victims of the alternative minimum tax. So keep an eye on this one.
Charitable Deductions. The President has already proposed a cap on the deductions to charity. They could easily set an income threshold like they do for medical expense deductions.
Employee-Sponsored Health Care Benefits: There are 150 million beneficiaries of this. If you work for a company that pays for all of your health care, you get that benefit without being required to pay taxes on that benefit. If your neighbor pays his own premium, he doesn’t get a tax break on it. The average premium per family is $16,000. If they made that taxable, that would be a tremendous amount of money. The joint committee on taxation estimates this is $150 billion annual revenue!
Municipal Income Tax: Right now, municipalities are benefiting from near zero rates. They could cap the amount of income you can earn tax free.
Bob said the overriding theme in all of the ways the government wants to bring in revenue is to go after the high earner.
EC: Republican Senator John Barrasso said today that the country should be prepared for sequester because it is going to happen on March 1st. Read more here: http://tinyurl.com/a2pv6kt
Check out these portfolios at record highs:
Kirk Comment: Read: Best Retirement Portfolio For You
Tuesday, January 22, 2013
Phil Mickelson, Tiger Woods and Intel: CA Taxes are Too High to Invest or Live Here
Bob Brinker has spoken at length about what he calls the dysfunctional government in California (Taxifornia) and our excessive tax rates. In the last election, CA voters voted to enact a retroactive tax hike of an additional 3.0% on its richest citizens for all of 2012. Those "only" making $250,000 a year will "only" have to pay an additional 1.0% for a total rate of 10.3% on ALL income (earned and capital gains are taxed at the same rate in Taxifornia.) We also raised our sales taxes so I now pay 8.625% in Santa Clara county.
Those making over $500,000 a year in California will pay the highest rate of 12.3% on 2012 and 2013 income. I posted a full summary of the rates and changes here:
Bob Brinker said the rich might get tired of this nonsense and leave the state. This weekend, 42-year old PGA Tour star Phil Mickelson, with $67 million in PGA Tour earnings which does not count his endorsement income that can be far more, said he would make drastic changes because of higher Federal and California taxes.
Today Tiger Woods, in his Tuesday morning news conference before this week's Farmers Insurance Open at Torrey Pines, said he agrees with Phil Mickelson.
Those making over $500,000 a year in California will pay the highest rate of 12.3% on 2012 and 2013 income. I posted a full summary of the rates and changes here:
Bob Brinker said the rich might get tired of this nonsense and leave the state. This weekend, 42-year old PGA Tour star Phil Mickelson, with $67 million in PGA Tour earnings which does not count his endorsement income that can be far more, said he would make drastic changes because of higher Federal and California taxes.
"It's been an interesting off-season," Mickelson said. "And I'm going to have to make some drastic changes. I'm not going to jump the gun and do it right away, but I will be making some drastic changes."Mickelson did not rule off just flat-out retiring from golf. "I'm not sure what exactly, you know, I'm going to do yet," he said.
"I'll probably talk about it more in depth next week. I'm not going to jump the gun, but there are going to be some. There are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and, you know, it doesn't work for me right now. So I'm going to have to make some changes.Mickelson could save as much as 12.3% just by moving to Florida where there is no state income tax. He's on the road most of the year so staying in California might be more of a family decision. From Phil Mickelson warns of ‘drastic changes’ because of state, federal tax situation
"If you add up all the federal and you look at the disability and the unemployment and the Social Security and the state, my tax rate's 62, 63%. So I've got to make some decisions on what I'm going to do."
He acknowledged that he could end up leaving his home state of California. And he further agreed that the financial issues were the reason why he pulled out of an ownership team that purchased the San Diego Padres back in August.This is the first I've heard of people making a decision NOT to invest in CA due to the higher taxes. Of course, Intel builds its factories outside of CA even though its headquarters is here and the whole Silicon Valley used to be full of expensive (high property tax) chip making factories. They are almost all gone now... gone to states with lower tax rates.
Today Tiger Woods, in his Tuesday morning news conference before this week's Farmers Insurance Open at Torrey Pines, said he agrees with Phil Mickelson.
"Well, I moved out of here back in '96 for that reason. I enjoy Florida, but also I understand what he was, I think, trying to say. I think he'll probably explain it better and in a little more detail."I bet Bob Brinker will break his arm this next weekend patting himself on the back while saying "I told you so!"
Friday, November 30, 2012
California Income Tax Rates
Due to passage of Proposition 30, the tax rate for 2012 income in California is 13.3% for taxpayers with state taxable income in excess of $250,000. This change from the November 6, 2012 election is retroactive to income earned for the full year, since January 1, 2012. Here is a summary of 2012 and 2013 California tax rates.
State sales tax rates are also increasing another .25%, up to a new base-level sales tax rate of 7.5% (before county/city tax) for every California taxpayer beginning January 1, 2013. Even the poor get to enjoy this portion of Prop 30.
In Santa Clara County, where I live, the current sales tax rate is 8.375%. This goes up to 8.675% on January 1, 2013.
Los Altos, CA 940224 Beds 3 Baths
Sunnyvale, CA 94086 - 4 Beds 2 Baths
This "average home" in Santa Clara County will have property taxes of about $10,000 in 2013!
Sunnyvale, CA 94086 - 4 Beds 2 Baths
This "average home" in Santa Clara County will have property taxes of about $10,000 in 2013!
This "average home" in Santa Clara County will have property taxes of about $10,000 in 2013!
Monday, November 19, 2012
3.8% Medicare Surtax on Unearned Net Investment Income
This weekend a caller to Moneytalk asked Bob Brinker about the new tax on unearned income to fund Obamacare. Brinker gave a "clarification" of the new 3.8% Medicare Surtax on "unearned" Net Investment Income which becomes effective starting Jan 1, 2013 for those with "Adjusted Gross Income" (AGI) exceeding $200,000 for taxpayers filing as "Single" and exceeding $250,000 for taxpayers filing "Jointly".
What bothers me about this tax is people like me who live in the expensive parts of California or New York who have very large capital gains on our homes bought long ago will have to pay this tax if we want to move or sell our home to move to a smaller, retirement home. Much of the gain I have on my property is due to inflation so the government has found a way to tax me on inflation it creates!
I found a very good summary of the new tax, who qualifies and how it will be implemented with a few examples at: http://health.burgess.house.gov/...pdf
Here is the gist:
Net investment income- Income received from investment assets such as bonds, stocks, mutual funds, loans and other investments
Capital gain- When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for (or a capital loss if it is sold for less)
Basis- the cost of an asset which includes the purchase price, shopping, installation, and other services associated with the asset
Adjusted gross income (AGI) - measure of income used to determine how much of your income is taxable and is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, alimony and deductible retirement plan contributions.
You have a capital gain if you sell the asset for more than your basis. You have a capital loss if you sell the asset for less than your basis.
Who is subject to this tax?
Taxpayers with incomes or an adjustable gross income (AGI) over $200,000 who file individually or $250,000 for married couples filing jointly could be subject to this tax. The provision imposes a 3.8 percent tax (identical to the combined employer/employee tax rates on earned income) on income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business, excluding active S corporation or partnership income. Gross income does not include items, such as interest on tax-exempt bonds, veterans’ benefits, which are excluded from gross income under the income tax. If capital gains on a primary home sale exceed $250,000 for individuals or $500,000 for a married couple, and the income threshold is met, the excess realized gain is subject to the 3.8% tax.
How does this relate to the sale of a home?
There is no sales tax on home sales in the Reconciliation Act; instead, there is a tax which includes capital gains, rents, dividends and interest income that will only apply to taxpayers under limited conditions.
When determining if an individual or a couple is subject to the 3.8% tax:
How is this different from the Medicare payroll tax?
Unlike the Medicare payroll tax, this is an unearned income tax. Unearned income is the income that an individual derives from investing capital. It includes capital gains, rents, dividends and interest income.
For more, read "New 3.8% Medicare Tax on "Unearned" Net Investment Income"
What bothers me about this tax is people like me who live in the expensive parts of California or New York who have very large capital gains on our homes bought long ago will have to pay this tax if we want to move or sell our home to move to a smaller, retirement home. Much of the gain I have on my property is due to inflation so the government has found a way to tax me on inflation it creates!
I found a very good summary of the new tax, who qualifies and how it will be implemented with a few examples at: http://health.burgess.house.gov/...pdf
Here is the gist:
Net investment income- Income received from investment assets such as bonds, stocks, mutual funds, loans and other investments
Capital gain- When a capital asset is sold, the difference between the basis in the asset and the amount it is sold for (or a capital loss if it is sold for less)
Basis- the cost of an asset which includes the purchase price, shopping, installation, and other services associated with the asset
Adjusted gross income (AGI) - measure of income used to determine how much of your income is taxable and is calculated as your gross income from taxable sources minus allowable deductions, such as unreimbursed business expenses, medical expenses, alimony and deductible retirement plan contributions.
You have a capital gain if you sell the asset for more than your basis. You have a capital loss if you sell the asset for less than your basis.
Who is subject to this tax?
Taxpayers with incomes or an adjustable gross income (AGI) over $200,000 who file individually or $250,000 for married couples filing jointly could be subject to this tax. The provision imposes a 3.8 percent tax (identical to the combined employer/employee tax rates on earned income) on income from interest, dividends, annuities, royalties and rents which are not derived in the ordinary course of trade or business, excluding active S corporation or partnership income. Gross income does not include items, such as interest on tax-exempt bonds, veterans’ benefits, which are excluded from gross income under the income tax. If capital gains on a primary home sale exceed $250,000 for individuals or $500,000 for a married couple, and the income threshold is met, the excess realized gain is subject to the 3.8% tax.
How does this relate to the sale of a home?
There is no sales tax on home sales in the Reconciliation Act; instead, there is a tax which includes capital gains, rents, dividends and interest income that will only apply to taxpayers under limited conditions.
When determining if an individual or a couple is subject to the 3.8% tax:
- A home sale MAY result in a capital gain that increases net investment income
- A home sale MAY result in a capital gain that increases a taxpayer’s AGI
How is this different from the Medicare payroll tax?
Unlike the Medicare payroll tax, this is an unearned income tax. Unearned income is the income that an individual derives from investing capital. It includes capital gains, rents, dividends and interest income.
For more, read "New 3.8% Medicare Tax on "Unearned" Net Investment Income"
Wednesday, October 31, 2012
California Income Tax Rate Proposition 30
Bob Brinker's comments on California Taxes and Tax Rates.
Brinker Comment: Bob opened the broadcast discussing the new figures on gross domestic product. Bob said his projection has been for a slow-growth economy as defined by a slow rate of growth in real GDP (adjusted for inflation) and we continue to see that with the number for the third quarter coming in at 2.0%. When you couple that number with the first half of the year, you are looking at an annual rate of growth of 1.8% for the first 9 months which is the type of slow growth that Bob thinks we will see for the remainder of the year.
The following commentary is from my "Retirement Advisor" writing partner, David Korn.
CALIFORNIA INCOME TAX
Caller: This caller is seeing businesses pulling out of California in droves.
Bob said one of the reasons you are seeing that is Jerry Brown’s proposition 30. You already have a 10.5% maximum state income tax rate in California. Jerry Brown wants to raise it and if you make over $1 million the income tax rate will go up to 13%.
If you take the federal income rate for the highest earners it is supposed to go to 39.6% in January. When you add the 13% California state tax, the uncapped Medicare tax to 3.8% all of a sudden you are in the 60% tax rate for top earners in California if the Proposition passes.
The caller said it is 64%. Bob said when a tax rate gets that high, and you are taking most of the money someone makes and people will say that’s too much, I am out of here. Bob noted that in France they just passed a new top rate of 75% and there are a lot of one-way tickets leaving France by the well-to-do. You can run the rates as much as you want and as high as you want, but people will run away and leave.
EC (David Korn): : An article out this weekend entitled, “Would Prop. 30 really drive millionaires out of California” can be found at this url: http://tinyurl.com/8b3rxza
Kirk's Comment: Bob has it wrong. The really rich stay after giving themselves pay raises to make up for higher taxes.
The truth is the rich stay but they move jobs for those who work for them out of CA so they can lower their overall costs and make up for the higher taxes. They save a ton by not having to pay extra for workers to move to CA where costs and taxes are very high. A worker making $100,000 in Texas might need to make $150,000 to move to CA to afford a mortgage on a much more expensive home and offset the higher taxes. Jobs have been leaving California since the 1970s!
When I graduated from UC Berkeley in 1979 with a degree in Electrical Engineering and Computer Science, I went to work in the Silicon Valley designing semiconductors for communications, what was to become the internet. I actually started as a summer intern in 1978. What struck me then was HP was ALREADY starting to move jobs out of California to lower cost states and countries. California has a business property tax which I believe drove out most of the semiconductor industry. The managers stay in CA since they can just give themselves a bigger raise to pay to live here.
Back in 1978, Intel, HP, and many other companies built semiconductors in the Silicon Valley. Today almost all the plants are gone. New plants cost about $5 billion to build. Why would anyone sane build a $5B plant in a state that charges 1% a year tax on that plant? Other states and countries like Singapore gave HP and Intel "tax holidays" to build new plants so they would have highly paid workers whom they could tax. Also, the workers would spend their paychecks near the new factories making new jobs.
Check out my recent articles:
Moneytalk with Bob Brinker Commentary for October 28, 2012 Radio Show
Brinker Comment: Bob opened the broadcast discussing the new figures on gross domestic product. Bob said his projection has been for a slow-growth economy as defined by a slow rate of growth in real GDP (adjusted for inflation) and we continue to see that with the number for the third quarter coming in at 2.0%. When you couple that number with the first half of the year, you are looking at an annual rate of growth of 1.8% for the first 9 months which is the type of slow growth that Bob thinks we will see for the remainder of the year.
CALIFORNIA INCOME TAX
Caller: This caller is seeing businesses pulling out of California in droves.
Bob said one of the reasons you are seeing that is Jerry Brown’s proposition 30. You already have a 10.5% maximum state income tax rate in California. Jerry Brown wants to raise it and if you make over $1 million the income tax rate will go up to 13%.
If you take the federal income rate for the highest earners it is supposed to go to 39.6% in January. When you add the 13% California state tax, the uncapped Medicare tax to 3.8% all of a sudden you are in the 60% tax rate for top earners in California if the Proposition passes.
The caller said it is 64%. Bob said when a tax rate gets that high, and you are taking most of the money someone makes and people will say that’s too much, I am out of here. Bob noted that in France they just passed a new top rate of 75% and there are a lot of one-way tickets leaving France by the well-to-do. You can run the rates as much as you want and as high as you want, but people will run away and leave.
EC (David Korn): : An article out this weekend entitled, “Would Prop. 30 really drive millionaires out of California” can be found at this url: http://tinyurl.com/8b3rxza
It's refreshing, therefore, to see some hard data on the issue, and illuminating to learn what it tells us, which is: Not so.
The 2005 increase did not boost out-migration among the $1-million-plus population — in fact, the rate of millionaire out-migration declined after the hike. The 1996 tax cut didn't increase the flow of millionaires into California, either.
Kirk's Comment: Bob has it wrong. The really rich stay after giving themselves pay raises to make up for higher taxes.
The truth is the rich stay but they move jobs for those who work for them out of CA so they can lower their overall costs and make up for the higher taxes. They save a ton by not having to pay extra for workers to move to CA where costs and taxes are very high. A worker making $100,000 in Texas might need to make $150,000 to move to CA to afford a mortgage on a much more expensive home and offset the higher taxes. Jobs have been leaving California since the 1970s!
When I graduated from UC Berkeley in 1979 with a degree in Electrical Engineering and Computer Science, I went to work in the Silicon Valley designing semiconductors for communications, what was to become the internet. I actually started as a summer intern in 1978. What struck me then was HP was ALREADY starting to move jobs out of California to lower cost states and countries. California has a business property tax which I believe drove out most of the semiconductor industry. The managers stay in CA since they can just give themselves a bigger raise to pay to live here.
Back in 1978, Intel, HP, and many other companies built semiconductors in the Silicon Valley. Today almost all the plants are gone. New plants cost about $5 billion to build. Why would anyone sane build a $5B plant in a state that charges 1% a year tax on that plant? Other states and countries like Singapore gave HP and Intel "tax holidays" to build new plants so they would have highly paid workers whom they could tax. Also, the workers would spend their paychecks near the new factories making new jobs.
Check out my recent articles:
- Oct 26 S&P500 PE & CAPE History - Price to Earnings Ratio - Historical PE Ratios
- Oct 24 FB Facebook Stock Share Lock-up Expiration Timetable
- Oct 24 Stock Markets vs. Federal Funds Rate: A 20-Year Historical Chart
The above commentary is courtesy of my writing partner, David Korn:
David Korn's Stock Market Commentary, Interpretation of Moneytalk (Bob Brinker Host), Financial Education, Helpful Links, Guest Editorials, and Special Alert E-Mail Service. Copyright David Korn, L.L.C. 2012
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Sunday, July 18, 2010
Bob Brinker Says Cut Taxes To Help Economy
Today Bob Brinker gave his advice to president Obama and the congress about how to help the economy. His advice was
#1 Cut corporate tax rate from 35% to 25% so US corporations are paying the same taxes as most other industrialized nations.
#2 Allow same year expensing of business investment.
#3 Postpone plan to increase taxes in January. He got pretty worked up over this: "This is no time for a country that is dealing with a slow growth economy like this and a housing malaise..... to be raising taxes.... NO TIME TO BE RAISING TAXES."
Brinker says all three would be positive for the economy.
FWIW, I agree but I would settle for #1 and #2 and let the president save face by increasing taxes on those making over $250,000 in exchange for cutting the corporate tax. That would bring more jobs into the US in exchange for a higher tax on those who already have a good job.
Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 152% (a double plus another 52%!!) vs. the S&P500 UP a tiny 1.4% vs. NASDAQ down 3.8%!!! (All through6/30/10 )
Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 152% (a double plus another 52%!!) vs. the S&P500 UP a tiny 1.4% vs. NASDAQ down 3.8%!!! (All through
In 2009, "Kirk's Newsletter Explore Portfolio" gained 33.5% vs. the DJIA up 18.8%
For 2010, as of 7/15/10, the explore portfolio is up 2.3% YTD
vs. DJIA down 0.7% vs. S&P500 down 0.7%!
For 2010, as of 7/15/10, the explore portfolio is up 2.3% YTD
vs. DJIA down 0.7% vs. S&P500 down 0.7%!
Friday, March 05, 2010
Top US Tax Rates
This weekend Bob Brinker said there a great deal of misinformation being spread around the country right now. Brinker said people have been complaining this year that their taxes were just raised. Brinker said the reality for the 2009 to 2010 tax year is 95% of Americans have received a tax cut but when they take surveys, they get the opposite answer. Bob singled out the "tea baggers" (Tea Party movement) as being guilty of not recognizing the recent tax cuts.
I think I know why Brinker is confused by the polls that say people think their taxes went up and will explain it below.
From the table "Top United States Federal Ordinary, Capital Gains & Dividned Tax Rates by Year"
I think I know why Brinker is confused by the polls that say people think their taxes went up and will explain it below.
From the table "Top United States Federal Ordinary, Capital Gains & Dividned Tax Rates by Year"
Top US Tax rates
| Years | Top ordinary Income rate |
| 1970s | 50% |
| 1982 to 1986 | 50% |
| 1987 | 38.5% |
| 1988 to 1990 | 28% |
| 1991 to 1992 | 31% |
| 1993 to 1996 | 39.6% |
| 1997 to 2001 | 39.6% |
| 2002 | 38.6% |
| 2003 to 2010 | 35% |
| 2011 to ??? | 39.6% |
- Top long-term capital gains rate
- Top dividend rate
- Federal Tax Rates for 2009
- Tax Rates by State for 2008
Why Brinker is confused by the polls that say people think their taxes went up last year.
I believe Bob Brinker claims he resides in the state of Nevada for tax purposes so he doesn't have to pay state income taxes. Many if not the majority of the country lives in states like California and New York that recently raised taxes since they can't print money like the US Government. In California, our income tax rate, our sales tax rate and for many of us, our property taxes went up in 2009 over 2008. For us if California, if you don't count the one time US tax credits to stimulate the economy such as cash for clunkers, our overall 2009 tax rates have gone up significantly over 2008!
I believe Bob Brinker claims he resides in the state of Nevada for tax purposes so he doesn't have to pay state income taxes. Many if not the majority of the country lives in states like California and New York that recently raised taxes since they can't print money like the US Government. In California, our income tax rate, our sales tax rate and for many of us, our property taxes went up in 2009 over 2008. For us if California, if you don't count the one time US tax credits to stimulate the economy such as cash for clunkers, our overall 2009 tax rates have gone up significantly over 2008!
Thursday, August 27, 2009
2009 California Tax Rates
Bob Brinker loves to bash California politicians for "out-of-control" spending and a "totally dysfunctional government." I agree 100% with Brinker on this.
At $117.4 billion, last year California collected 80% more taxes than the next highest taxed state, New York. New York "only" collected a total of $65.4 billion from its citizens. (Source 2008 tax collections)
On Saturday, August 1, 2009, Bob Brinker said:
Not only is the rate for California's top bracket going up 2.7% from 9.3% to 9.55% but California is lowering the income level at which this takes effect by 1.31% from $47,055 to "only" $46,439.
At $117.4 billion, last year California collected 80% more taxes than the next highest taxed state, New York. New York "only" collected a total of $65.4 billion from its citizens. (Source 2008 tax collections)
On Saturday, August 1, 2009, Bob Brinker said:
California is obviously a totally dysfunctional government from a fiscal standpoint.... It's a joke. They are going to have to redo their constitution or they're not going to get past it on a long-term basis.... That's how screwed up it is."Despite having the highest tax collections in the US, Californians will pay higher taxes this year even if they make less money!
Not only is the rate for California's top bracket going up 2.7% from 9.3% to 9.55% but California is lowering the income level at which this takes effect by 1.31% from $47,055 to "only" $46,439.
Table courtesy of the LA Times, article "Even higher taxes coming for Californians."Federal Tax Rates for 2009
Note CA tax rates are indexed to inflation. We have 1.3% CPI deflation year-over-year so the brackets were lowered.)
This is not the only gain in our tax rates. Besides rising the income tax rate by 0.25%, California went to the well for more money by:
- Slashing the dependent credit by more than two-thirds.
- Nearly doubling the vehicle license fee to 1.15% of a car's value.
- Increasing the California sales tax by 1%. In some counties like Los Angeles, the sales tax rate is 9.75%!!!
I just bought a new van for my windsurfing equipment. I more than made up for the higher tax rates by the large discount Ford is giving to get slow-to-sell, low MPG metal off its lots but I sure don't like paying the highest tax rate in the country.
By buying a new van, I've done my part to both stimulate the economy and help California raise cash to pay its IOUs. It is always good to have cash for economic downturns so you can take advantage of the bargains.The new van did not qualify for the "Cash For Clunkers" program despite my old van only getting 11 MPG and the first tank of gasoline saw my MPG improve over 30% to 15 MPG!
More info:
Since 12/31/98 "Kirk's Newsletter Explore Portfolio" is UP 128% (over a double!) vs. the S&P500 DOWN 0.4% vs. NASDAQ down 7.8% (All through 8/27
As of August 27, 2009, "Kirk's Newsletter Explore Portfolio" is up 17.3% YTD vs. DJIA up 9.1% YTD.
Wednesday, August 27, 2008
Bob Brinker on Obama Tax Plan Marginal Rate
Honeybee's summary of Bob Brinker's Sunday's Moneytalk show contains Brinker's comments on Senator Barack Obama's proposed tax plan.
"Brinker went on to explain how easy it would be (under the Obama tax plan) to construct this 60%+ marginal tax bracket for a lot of American entrepreneurs who create jobs."It looks like Brinker was talking about the MARGINAL TAX RATE and I believe his numbers are correct.
Marginal tax rate is the effective tax you pay on additional income above the threshold, $250,000 in this case. You already deducted your home mortgage, etc. so that is not relevant in this discussion.
That is if you make $260,000, how much tax will you pay on that extra $10,000 under Obama vs McCain. He seems to have made an allowance for deducting state taxes since his number is less than adding up all the components.
Brinker showed how, in a high tax state like California or New York, the marginal rate for those making over $250,000 AGI will be about 62%.
Lets do a quick comparison (2008 tax rates)
Current Federal Taxes under Bush Tax Plan for single taxpayers who own their own business (pay both sides of Social Security tax) making $260,000:
So under the Obama tax plan, small business owners who have to pay both sides of the Social Security tax will see their Federal tax rate on what they make in excess of $250,000 skyrocket (19%/35.9% x 100%) 53% in total tax dollars paid.
For California, he got the numbers close. The marginal tax rate in CA is 9.3%. Under current law, this is deductible on your federal return.
Current marginal Fed + CA Tax Rate:
If Brinker only has 20,000 subscribers to his newsletter (we have read he has as much as 200,000 subscribers) then his gross income is about $3.7 million! ($37 million income if he has the reported 200,000) It is not in his best interest to want higher taxes and I can't fault him for doing all he can to keep his rates low. His listeners only need to know he is not unbiased.
Obama supporters say those making over $250,000 should pay this extra $1,840 in tax for every $10,000 they make above $250,000 since they are doing so well under the current plan and can afford it. They also say McCain's plan will raise taxes on middle income workers by adding employer paid health care to taxable income. Let me know if there is a complete analysis with all the proposed changes to compare the two tax plans for all income groups.
Please leave comments about any tax rate changes, errors or omissions. Please note I am just a writer with a calculator, not a tax accountant so there could be some errors in my assumptions. Please feel free to point them out in the comments section.
Current Federal Taxes under Bush Tax Plan for single taxpayers who own their own business (pay both sides of Social Security tax) making $260,000:
Marginal Federal tax rate = 33%Proposed Taxes under proposed Obama Tax Plan for single taxpayers making $260,000 :
Social Security Tax = 0% + 0% = 0%
Medicare Tax = 2.9%
Total = 35.9%
Marginal Federal tax rate = 39.6%Change in tax rate 54.9% - 35.9% = 19%
Social Security Tax = 6.2% + 6.2% = 12.4%
Medicare Tax = 2.9%
Total = 54.9%
So under the Obama tax plan, small business owners who have to pay both sides of the Social Security tax will see their Federal tax rate on what they make in excess of $250,000 skyrocket (19%/35.9% x 100%) 53% in total tax dollars paid.
For California, he got the numbers close. The marginal tax rate in CA is 9.3%. Under current law, this is deductible on your federal return.
Current marginal Fed + CA Tax Rate:
35.9% + 9.3% x (1 - .33)Marginal FED + CA Tax Rate under Obama:
35.9% + 6.3%
Total = 42.1%
54.9% + 9.3% x (1 - .396)A 60.5% marginal rate in California means that a small business owner who makes $260,000 will pay $6,050 in taxes on that $10,000 above $250,000. Under the Bush tax plan, she now only pays $4,210.
54.9% + 5.6%
Total = 60.5%
If Brinker only has 20,000 subscribers to his newsletter (we have read he has as much as 200,000 subscribers) then his gross income is about $3.7 million! ($37 million income if he has the reported 200,000) It is not in his best interest to want higher taxes and I can't fault him for doing all he can to keep his rates low. His listeners only need to know he is not unbiased.
Obama supporters say those making over $250,000 should pay this extra $1,840 in tax for every $10,000 they make above $250,000 since they are doing so well under the current plan and can afford it. They also say McCain's plan will raise taxes on middle income workers by adding employer paid health care to taxable income. Let me know if there is a complete analysis with all the proposed changes to compare the two tax plans for all income groups.
Please leave comments about any tax rate changes, errors or omissions. Please note I am just a writer with a calculator, not a tax accountant so there could be some errors in my assumptions. Please feel free to point them out in the comments section.
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