TheHaitian
Senior Associate
Joined: Jul 27, 2014 19:39:10 GMT -5
Posts: 10,144
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Post by TheHaitian on Sept 24, 2019 17:41:43 GMT -5
Not everyone is YM and that is generalizing it for the whole population. Since we are the couple that are in that ~160k range and also hang with a lot of parents in that 150k-250k (2 working parents in DC); I can tell you not everyone is making their 401k’s. We are able to because we do not pay for daycare. Other people with kids our daughter age are either paying 2k/month in daycare or nanny; or mom works PT or a more flexible low paying job... we are meeting a lot of parents like that sending our daughter to nursery 2 days a week for 3 hours. Second most are starting to or already have kid #2 and or working on #3. Higher expenses. Three: Rent / Mortgage : ~$3,000/month and up. Depending on the location in DC that is what you are looking at to rent a 2 bedrooms or like us buy a townhome in the outskirts of DC, technically MD. So while the income is high (I do not deny it) it does not mean everyone can pull a YM and max 401k/403b, HSA / FSA etc to lower our taxable income. I didn't include daycare or the CTC. Back of the napkin math.. A DINK family making 160K a year with 10K in health insurance related costs and putting in 3% into their workplace retirement to get the company match has a tax bill of 24K, give or take. 24K taxes on 160K of income yields a 15% effective tax rate. A family with two kids making 160K a year contributing 3% into retirement, 10K in health care deductions, and 5K in child care costs has an AGI of 116K, give or take. After the CTC, the tax bill would be about 18K a year. Or something between a 10-15% effective tax rate. Still not 24% Just for fun. Say you have the DINK earning 160K that chooses to not make any retirement contributions and does not have any health insurance. Their AGI would still be 136K, with a tax bill of 29K a year. 29K is still not 24% of 160K.
24% of 160K is 38400. I can't come up with a scenerio, in which a DINK family making that much would have to pay 38K in taxes. The only thing I can think of, is perhaps they decide they say no to health insurance, no to retirement, and turn down the 24K standard deduction (or whatever they call it now) that the federal government gives out.
I find this scenario pretty far fetched. I don't know anyone who turns down standard deductions, so they can pay as much taxes as possible..while choosing to turn down health insurance AND retirement. But, maybe you do?
I never said the math in the OP was correct, just that your assumption that a family in that income bracket could easily reduce their taxable income to 89k is just as far fetch as the OP’s statement about tax rate.
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happyhoix
Distinguished Associate
Joined: Oct 7, 2011 7:22:42 GMT -5
Posts: 20,856
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Post by happyhoix on Sept 26, 2019 10:10:56 GMT -5
Is there any precedent for a country switching from a system like to ours to what's being proposed? Just wondering and never thought about it that way before. I am not an expert on this in any way, but I do know that Great Britain switched from our kind of system to a government provided system after WWII.
I believe (again, not an expert) they initially had a basic government policy for everyone, but people who liked their private insurance could purchase additional coverage. Some doctors went with the government plan, others maintained private hospitals for paying patients. I believe (again - no expert!) over time most people dropped the additional private coverage and just use the government provided system now.
I think if we ever transition to a single pay, government run system, we should go the same route. Let companies or individuals pay for Cadillac plans, if they want to (or can afford to) but make sure everyone else has basic coverage. companies that don't want to provide the Cadillac extra insurance for their employees can instead pass on some of the money they don't have to pay for insurance to their employees, so they can either purchase the add on insurance themselves, or use the money for other purposes, if they are ok with the government provided insurance.
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