Tax code changes will hit high-income Americans hardest

February 7, 2014

On top of that, higher-income taxpayers could see their itemized deductions and personal exemptions phased out and pay higher capital gains taxes — 20 percent for some taxpayers. And there are new taxes for them to help pay for health care reform.

There are different income thresholds for each of these new taxes.

An additional 0.9 percent Medicare tax, for example, kicks in on earnings over $250,000 for married couples filing jointly and $200,000 for singles and heads of household. Same for a 3.8 percent tax on investment income.

But the phase-out of personal exemptions and deductions doesn’t begin until $300,000 for married couples filing jointly and $250,000 for singles.

Taxpayers will still be able to deduct their medical expenses, but it will be more difficult for many to qualify. The threshold for deducting medical expenses now stands at 10 percent of adjusted gross income, up from 7.5 percent. There’s an exception, though, for those older than 65. For them, the old rate is grandfathered in until 2017.

SOURCE: Tax code changes will hit high-income Americans hardest | PBS NewsHour.

It is good to hear that at least some things are changing when it comes to asking the wealthy to pony up a little more of their mammoth discretionary income for the good of the country and for the basic welfare of its citizens. While these gains (you probably say loses if you are on the receiving end) are notable they is still a long way to go in this area…

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3 responses to Tax code changes will hit high-income Americans hardest

  1. 

    RJ,

    It always sounds good to say that the rich need to pay more. I don’t disagree with that statement. But a married couple making 300K is not rich. No doubt they are blessed but 300K isn’t live on a private island type money. They are on the upper scare of middle class, but after fed/state/local taxes they are hit for about 50%.

    They are bringing home about 12K a month, again that is a lot but not quit your job type money. Truly tithing to your church, a descent sized house, two kids in college and a Tahoe wipe out that vast majority of that. Yes they have some left over but still not a amount of money that they can throw out the budget and buy everything.

    The truly rich are those who have 50 million in a tax free trust fund, those who have millions stashed in a Swiss bank. It is those folks who don’t pay their fair share because their W-2 says they made zero dollars. They don’t have to earn a salary because everything is already paid for and they have no need for income. But the argument can be made that they already paid the taxes on that money so they can do whatever they want with it and I cannot argue with that.

    I am paying a 40% tax rate. I am so blessed and I do not mean to seem ungrateful for my career and income. I sleep well at night because I am paying my fair share, But honestly, my motivation to go out and work overtime is not there anymore. Part of that is that I am comfortable but the other part is I don’t want to accidently bump myself up into the category where I hit the 50% mark. I don’t work for the government anymore.

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    • 

      Hi Rob, thanks for the input. Yeah I realize that everything is relative. 50% of the U.S. households earn less than $50,000 per year. Ask a husband and wife who are working full time jobs at near minimum wage whether $300,000 (more than six times what they earn) is being rich? I’m sure you know the answer to that question.

      Ask a guy that make $1,000,000 a year and he will say no that is not rich. Ask the guy who inherited (tax free) an estate of $20,000,000? All I can say is what I see and that is that taxes on the upper 10% are at the lowest levels in decades. Why is that when so many others are suffering?

      But in reality I am totally aligned with the belief that we should not depend of those in the upper income categories to support those who make much much less than they do. Instead we should do what it takes to make sure that everyone who works full time should be able to provide their family with the bare necessities (again that is relative)?

      One way to help that is to raise the minimum wage. The majority of people who earn minimum wage are supporting families. That is a start not a solution however. I just saw a segment on the PBS News Hours that teaching professors with PhDs at many colleges are now making less than $25k a year and so need to be on food stamps. Where has this absurd income inequality come from? For me it is just too much greed in the world today. At what perceived level that occurs is as I have said already is relative.

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  2. 

    Rob, I can see your thought here- but the reality is that you make in the top 10% of the incomes in the US. That does make your salary “rich”. How you work with the money depends on if you can take “rich” to “wealth”. With the bills that you have chosen for these years- your salary is probably used up.

    Does the 50% rate you imply include your state rates? I think the top federal rate is 39.6%. You only pay that rate on anything over $450,000 a year.

    I believe in a flat tax – on everything. If everyone who made over the poverty level paid 10% of what they made (including investments) I believe that many of our problems would be solved.

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