You can read a pro and con on the private equity stuff here. It’s several years old, but the issues haven’t changed.
That David Tuerck guy is just full of regressive ideas:
LOL.
The “con” is mostly a con. IMO the only somewhat-reasonable argument is this:
But I suspect that in practice it’s mostly BS. It’s one thing to earn LTCG on your own investment by putting in sweat equity. It’s another thing to earn LTCG on other people’s money that magically became yours in exchange for your “sweat.”
Actually some kind of tax on consumption would not be that bad. It could help plug some of the current loopholes of some people borrowing against their assets as a source of income. And there could be ways (such as rebates/allowances) to make consumption tax less regressive.
Biden’s latest unlikely claim
https://twitter.com/Breaking911/status/1389279329335529476
“Anybody making less than $400,000 a year will not pay a single penny in taxes.”
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Big joke, but not funny!
Pretty obvious they’d convert to $200k for single filers. Extension of TCJA penalization of single filers. Should be equal $400k for all households.
Edit: whoop, nevermind. Looks like he’s been truthful all along. No raise on households under $400k. The "I want a subsidy rich couples are yelling in outrage that $510k is not enough to get by on… They wanted $800k+.
I had always assumed he was referring to $200k single $400k married, just based on recent GOP tax plans.
Maybe at least the reasonable capital gains brackets will continue to survive after TCJA screwed up the marginal tax rate brackets with a large couples subsidy?
" President Joe Biden wants to raise taxes on single filers likely with income over $452,700 and couples earning more than $509,300."
I am shocked. I thought the TCJA showed you could penalize smaller households, including MFS and people paying child support and alimony to fit a narrative that a “average family of 20” sees a $10 reduction in taxes (along with top 0.1% receiving a huge reduction)
while setting up to raise taxes on everyone else in the middle class and get away with it.
A married couple is making a single income that’s how legal marriage is defined, shared ownership. The proposal is true to the original statement.
While it’s hard to know why the difference between single filer and married filing jointly is so small, it’s also a bit difficult for me to feel tons of sympathy for people making this kind of incomes. The penalty would apply to less than 1% of households according to that article.
Marriage does not mean single income nor shared ownership of everything. Otherwise there would not the option to file separately which in some cases can be very beneficial, especially for some childless couples. Which may actually be an option to avoid this marriage penalty here for some.
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Look at pre-TCJA income tax brackets. Basically, the fixed costs don’t scale. Multiple people in the household share standard of living on slight increase in income. At least that seems to be the most straightforward explanation.
Varies by state. Several states it does mean just that. All income and acquired property during the marriage is jointly owned.
Community property in the United States - Wikipedia.
Even in community states, you can freely file separately as married couples. And even in the 9 community property states, prenuptial agreement can override community property laws. Also if you own properties in several states, you can adopt the laws of the one where you officially declare residence. So if you live in Wisconsin and snow bird in Florida just long enough to qualify for residency there (180+ days), you can adopt common law treatment that is in force in FL and avoid community property law form Wisconsin.
Cost of living under the same household has nothing to do with marriage penalty. You could freely live unmarried under the same household with joint ownership of most of your assets - such as in a joint revocable living trust. You would have the same living expenses as a married couples but you’d each file as single filers.
So to me, considering all this, the reasoning for imposing a marriage tax penalty does not hold much water.
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Except the penalty was largely a myth from people who didn’t understand taxes (they set withholdings wrong with only the higher income set to MFJ and were “surprised” in April, rather than actually comparing filing separately vs filing joint. Or they set their withholdings correctly and didn’t understand how the “tax software” showed a refund when only half the income was entered and then it was “taken away” when the second half was entered), and on average a reduction where the vast majority of MFJ received a subsidy (and the setup provided benefit of simplified tax and finances for most) . Now it’s higher 0% of the time and still a subsidy 90% of the time. Which does not seem to hold much water. Nor does it make sense to penalize someone who is divorced and paying alimony and child support with higher taxes than MFJ in the same situation, even if it seems to some to be reasonable to penalize other single filers because they deem single person and single parent households of less value to society.
IMO, It’s neither here nor there, they’re just pandering to whichever voters (or campaign contributors, with other carveouts) they think the are most useful to keep them in office. They don’t need logic to apply changes.
Not accounting for fixed costs of basic survivability in a living wage, it is a simpler equation to just double all the brackets and thresholds, I understand how it can also be seen as reasonable. There is not always just a single correct answer.
That’s anything but a myth. Look at the caps on SALT for itemized deductions. The cap is $10k for both married and single filers. Two single filers would be able to have a cap of $20k. Take retirees. As single, you don’t pay tax on social security benefits until your income is over $25k(50%) and $34k(85%). That threshold is $32k(50%) and $44k(85%) for married filing jointly. Similar stuff with earned income tax credit where the threshold to get the credit is insignificantly higher if you’re married filing jointly vs single. Phase out limits on Traditional IRA contributions also not doubled between single filers and married filing jointly.
And prior to TCJA, the penalty was even worse since it basically doubled the tax bracket for married filing jointly vs. single filers. And some of the penalties listed above were lowered. Still, it’s anything but a myth when you load Turbotax and try the two scenario of how much money you’d save if you divorced vs. remained married.
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and single parent households of less value to society.
“head of household” is yet another tax table, separate from single and MFJ.
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My understanding is that the “marriage penalty” is not a penalty on people who are married and file jointly vs separately. It’s a penalty on married people vs 2 single people.
My spreadsheet (I’ve been doing taxes in a spreadsheet for over a decade, I may have mentioned that here a few times) has three columns with 2 individual and 1 MFJ taxes, and I can clearly see the difference. It got slightly better when the federal income tax brackets were adjusted with TCJA to where MFJ is exactly 2x single, but the penalty still exists because of things like the $3K capital loss limit, the aforementioned $10K SALT limit, and the $150K MAGI Passive Activity Loss Limitation – those limits are the same for singles and MFJs. It probably doesn’t negatively affect that many people, but it is not a myth.
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It can also have more impact depending on the state. Some states have standard deductions for MFJ that are not double the standard deduction for single filers. (or at least the used to fairly recently)
There’s a million thresholds and sections that affect individual taxpayers one way or the other. The myth I was referring to is that “married” as a group were ever receiving a penalty ‘as a group’. I never meant to imply that not a single MFJ paid even $1 higher taxes than if they were two single filers.
There were a few receiving a small penalty (often where the two individual incomes were nearly equal), but the majority received subsidies, with a net benefit not penalty as a group.
There are now a negligible number of MFJ receiving even smaller penalties (limited to just a few phaseouts, salt, etc) and almost all MFJ receiving large subsidies over other filers.
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The issue is many MFS filers are ignorant To the Community property laws, and don’t get the prenup which would override it.
Could you list these large subsidies that are available to almost all MFJ filers, just for those like me who have only seen penalties ever since they got married?
The only benefit beside easier estate transfer I know of is outside of the realm of taxes. It did lower our auto and homeowner insurance premiums. Tax-wise though, everything went up.
Well, my wife is a SAHM so all our income comes under one SSN. MFJ benefits us greatly in that scenario. Besides the tax backets, I can also make double IRA contributions.
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Good point. It works great for 1 income households. I think that these single income married couple households are no longer the majority now.
The simplest change would be to allow anyone to pick whichever filing status they want. If you’re better off filing single even though you’re married, you should be able to. If you’re better off filing MFJ, then you should be able to select that. And that’d eliminate the need for MFS which helps virtually nobody except in rare cases of large deduction for one of the spouses. Even then, they’d be filing single so nobody would pay more taxes than under the current system.
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So you mean if someone is not married, they should be able to pick File Jointly with anyone of their choice?
You’re right, though. Eliminate MFJ entirely. Everyone files separately is perfectly fair, then there’s no penalty.