kenberg Posted February 17, 2009 Report Share Posted February 17, 2009 The New York Times has a piece to help us all understand what the stimulus plan means to us. http://www.nytimes.com/2009/02/13/your-mon...1&8mon&emc=yma1 "INCOME TAX In 2009 and 2010, there is a tax credit of up to $400 for individuals and $800 for married couples filing their taxes jointly. You calculate your credit, subtracted from other federal taxes you owe, by taking 6.2 percent of your earned income. "Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000. Now I know we mathematicians are regarded as picky, but I really cannot make sense of this at all. Suppose we, a couple, make $150,000. As I use the English language, "Your eligibility for this credit begins to phase out if you’re an individual with an adjusted gross income over $75,000 or a couple with income higher than $150,000. " means that since our income is not higher than $150,000, this credit has not yet begun to phase out. So I take 6.2% of $150,000 and get $9,300. Well, I calculate it as $9,300. Saying that I get $9,300 is probably the wrong choice of words. OK, I see the cap listed as $800. But what then is the point of calculating 6.2% of $150,000 if the result is far beyond the cap? Why not just say "Take 6.2% of your income. Your tax credit will be the smaller of that number and $800"? Since 6.2% of $13,000 is $806 I think that most people won't need to bother with the calculation. They do call this a tax credit, not a tax deduction. That is, they say I calculate this 6.2% and then I subtract the result from the taxes I owe, not from the income I pay taxes on. So the $9,300 should be clear savings, not something to adjust my gross income for further calculation. i appreciate the Times' effort to help me here, but I would appreciate it more if I could make sense of what they are saying. I can't even guess at what this means. Quote Link to comment Share on other sites More sharing options...
y66 Posted February 17, 2009 Report Share Posted February 17, 2009 Why not just say "Take 6.2% of your income. Your tax credit will be the smaller of that number and $800"?Good question. Could be worse though. The guys at Consumer Reports Money blog put it thusly: •Making Work Pay Credit: This tax credit amounts to 6.2 percent of a taxpayer's earned income or $400, whichever is larger (joint filers can get as much as $800). It runs retroactively from January 1 of this year through year-end 2010. According to CCH, you'll get that credit either through this year's paychecks--by opting to reduce withholding--or by filing for the full amount next tax season. Self-employed folks also can get the credit. As with all these tax breaks, they're not geared to higher earners; the phase-out begins when a single earner's modified adjusted gross income exceeds $75,000 and joint filers' MAGI exceeds $150,000.Maybe this is where Tim Geithner get's his tax advice. The guys at CCH have a good overview. Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 17, 2009 Author Report Share Posted February 17, 2009 Indeed that description in CCH is much clearer. As I get it now, the credit will be $800 for those joint filers with income at least $13,000 (approximately) and at most $150,000. Between $150,000 and $190,000 the credit drops off linearly, down to $0. It is uncertain what, if anything, really will work but if we are gong to be giving out money this seems like about the right way to do it. Quote Link to comment Share on other sites More sharing options...
helene_t Posted February 17, 2009 Report Share Posted February 17, 2009 Sounds like a terrible idea but what do I know about economics. And it will probably be popular. They should have done it just before an election, who cares about popularity at this stage? Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 17, 2009 Author Report Share Posted February 17, 2009 I am prepared to argue that I know less about economics than Helene or more or less anyone. But hell, it's not like anyone else seems to have it figured out either. Will it help the economy to give $800 to people making $150,000 a year or so? I hope so, since apparently we we going to do it. Honestly it will be fairly tough to stimulate me to go out and spend money. If I can lose some more weight I'll buy some new pants. Sooner or later I'll buy a new car. I see that the tax credit applies to new motorcycles also. Nah. I don't see any of these decisions as much affected by the stimulus plan. I say we all clap our hands if we believe in tax credits. Tinker Bell will thank you. Quote Link to comment Share on other sites More sharing options...
WarrenL Posted February 17, 2009 Report Share Posted February 17, 2009 This will help you learn about economics. https://www.gmo.com/America/CMSAttachmentDo...kH3jel9URyBY%3d Quote Link to comment Share on other sites More sharing options...
jdonn Posted February 17, 2009 Report Share Posted February 17, 2009 This will help you learn about economics. https://www.gmo.com/America/CMSAttachmentDo...kH3jel9URyBY%3d I have noticed over time that you're on a mission to keep anyone who is not an 'expert' from talking about any topic in the water cooler. Quote Link to comment Share on other sites More sharing options...
kenrexford Posted February 17, 2009 Report Share Posted February 17, 2009 I have no earthly idea what all of this is about or means, but I'm nonetheless laughing if what I am reading here is right. Am I to understand that a person who makes between $150K and $190K will have a "linear phase-out," such that you get a credit of (190K-x) divided by (190K-150K), times $400 (or $800)? "X" being the actual income if it is $150K+? That's about stupid. We are going to actually require people to fill out their tax return with a whole bunch of new stuff so that a person making $189K gets $10 back from the government? Quote Link to comment Share on other sites More sharing options...
WarrenL Posted February 17, 2009 Report Share Posted February 17, 2009 Sorry; I didn't mean to offend anybody. I'll change my tone in the future and thanks for pointing it out. Quote Link to comment Share on other sites More sharing options...
helene_t Posted February 17, 2009 Report Share Posted February 17, 2009 Maybe we need an expert-only subforum of the water cooler :( Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 17, 2009 Author Report Share Posted February 17, 2009 I have no earthly idea what all of this is about or means, but I'm nonetheless laughing if what I am reading here is right. Am I to understand that a person who makes between $150K and $190K will have a "linear phase-out," such that you get a credit of (190K-x) divided by (190K-150K), times $400 (or $800)? "X" being the actual income if it is $150K+? That's about stupid. We are going to actually require people to fill out their tax return with a whole bunch of new stuff so that a person making $189K gets $10 back from the government? I think you got it. You can moonlight as a tax consultant. Or maybe just moon tax consultants. Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 17, 2009 Author Report Share Posted February 17, 2009 Sorry; I didn't mean to offend anybody. I'll change my tone in the future and thanks for pointing it out. As I guess the potential offendee, I wasn't. But the website seems to be oriented toward getting me to give them some money. I'll pass. Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 17, 2009 Report Share Posted February 17, 2009 Keep the change. Quote Link to comment Share on other sites More sharing options...
Winstonm Posted February 17, 2009 Report Share Posted February 17, 2009 Maybe we need an expert-only subforum of the water cooler :D You got me. LoL. Quote Link to comment Share on other sites More sharing options...
Chas_P Posted February 18, 2009 Report Share Posted February 18, 2009 I think a real important word in all this is "earned". I could be wrong but I take it to mean that old pharts like me who are now living off dividends and interest from money earned and invested 50 years ago will get no credit since our income is not "earned". I guess that's ok. At my age I don't need too much stimulation. :( Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 18, 2009 Author Report Share Posted February 18, 2009 I think a real important word in all this is "earned". I could be wrong but I take it to mean that old pharts like me who are now living off dividends and interest from money earned and invested 50 years ago will get no credit since our income is not "earned". I guess that's ok. At my age I don't need too much stimulation. :(It has been my experience that whatever they come up with in tax gimmicks, there is always some reason why it doesn't apply to me. I saw that stuff about earned also. If we are going to require that money actually be earned it seems that eliminates most members of congress. Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 18, 2009 Report Share Posted February 18, 2009 I think a real important word in all this is "earned". I could be wrong but I take it to mean that old pharts like me who are now living off dividends and interest from money earned and invested 50 years ago will get no credit since our income is not "earned". I guess that's ok. At my age I don't need too much stimulation. :(It has been my experience that whatever they come up with in tax gimmicks, there is always some reason why it doesn't apply to me. I saw that stuff about earned also. If we are going to require that money actually be earned it seems that eliminates most members of congress. Ken, Ken I am willing to bet the family farm you have used a tax gimmick/loophole....at least one....:)Ok I will bet the farm you have used more than one. :) Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 18, 2009 Author Report Share Posted February 18, 2009 I think a real important word in all this is "earned". I could be wrong but I take it to mean that old pharts like me who are now living off dividends and interest from money earned and invested 50 years ago will get no credit since our income is not "earned". I guess that's ok. At my age I don't need too much stimulation. :DIt has been my experience that whatever they come up with in tax gimmicks, there is always some reason why it doesn't apply to me. I saw that stuff about earned also. If we are going to require that money actually be earned it seems that eliminates most members of congress. Ken, Ken I am willing to bet the family farm you have used a tax gimmick/loophole....at least one....:)Ok I will bet the farm you have used more than one. :) Well, when I was in graduate school in the sixties I think my fellowship was exempt from taxation, all three thousand dollars of it. I lead a pretty simple financial life. When I had a mortgage I deducted the interest. I think it is correct to say that I have never engaged in any activity on the basis of the tax implications. I bought a house because I wanted a house. But I paid off the mortgage because I don't like owing money. Neither was done with tax consequences in mind. People tell me I go at this wrong. Probably so. Quote Link to comment Share on other sites More sharing options...
mike777 Posted February 18, 2009 Report Share Posted February 18, 2009 I think a real important word in all this is "earned". I could be wrong but I take it to mean that old pharts like me who are now living off dividends and interest from money earned and invested 50 years ago will get no credit since our income is not "earned". I guess that's ok. At my age I don't need too much stimulation. :DIt has been my experience that whatever they come up with in tax gimmicks, there is always some reason why it doesn't apply to me. I saw that stuff about earned also. If we are going to require that money actually be earned it seems that eliminates most members of congress. Ken, Ken I am willing to bet the family farm you have used a tax gimmick/loophole....at least one....:)Ok I will bet the farm you have used more than one. :) Well, when I was in graduate school in the sixties I think my fellowship was exempt from taxation, all three thousand dollars of it. I lead a pretty simple financial life. When I had a mortgage I deducted the interest. I think it is correct to say that I have never engaged in any activity on the basis of the tax implications. I bought a house because I wanted a house. But I paid off the mortgage because I don't like owing money. Neither was done with tax consequences in mind. People tell me I go at this wrong. Probably so. Ken, fair enough you have listed 30 years of tax gimmicks you have used...but I will try and guess more....do you have pension, retirement account that used loopholes....... In the future do you plan to use life insurance that is not taxable or gift something tax free to your spouse or kids when you move on? My only point is you could have paid and can pay much much more in taxes to help those of us who pay zero income tax. We need much more in taxes for education and health care for the kids. Quote Link to comment Share on other sites More sharing options...
kenberg Posted February 18, 2009 Author Report Share Posted February 18, 2009 I think I recognize a stacked deck when I see one. I'm opting out of this inquiry unless you have a warrant. Quote Link to comment Share on other sites More sharing options...
helene_t Posted February 18, 2009 Report Share Posted February 18, 2009 It has been my experience that whatever they come up with in tax gimmicks, there is always some reason why it doesn't apply to me. I second that. I lived the first 41 years of my life in countries with mortgage interest deduction, and always rented. Then I moved to a country without interest deduction, and bought an apartment, lol. Quote Link to comment Share on other sites More sharing options...
PassedOut Posted February 18, 2009 Report Share Posted February 18, 2009 I see that Recovery.gov is up today, but lacks detail so far. Should be a good resource in the months ahead. Quote Link to comment Share on other sites More sharing options...
barmar Posted February 18, 2009 Report Share Posted February 18, 2009 That's about stupid. We are going to actually require people to fill out their tax return with a whole bunch of new stuff so that a person making $189K gets $10 back from the government? Most people in that income range probably use tax prep software or a professional tax preparer. One more, simple worksheet is not going to be any problem. The primary beneficiaries of this credit are low-income workers. The full $800 benefit kicks in at about $13K. To families in the $13-50K income range, this is a week to a month of extra wages, which is nothing to sneeze at. Are you just complaining about the phase-out, rather than an abrupt cut-off? I think this is done to avoid employers gaming the system. With a cut-off, companies will forego a raise that puts employees over the limit, so that they can get more from the government. Or worse, they might even drop salaries; e.g. someone everyone earning between $150,000 and $150,800 would have their salaries dropped to $150,000, but they would all end up making $150,800 with the fed making up the difference. Quote Link to comment Share on other sites More sharing options...
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