Got whacked by AMT

[disneysteve]

Actually, there are too many tax related lobbies that court Congress for the flat tax to ever be enacted by Congress.

Certainly. Think about how many people would be put out of work if we switched to a simple, logical system that required little more than a postcard to file taxes. H&R Block, Liberty, and all of those other tax prep services would lose a huge chunk of their customers. CPAs would as well. People would no longer need Turbo Tax or other software programs to do their taxes. If all you had to do was log in to the IRS website, enter your income information, and have it spit out an amount due, the need for all of those people and services would be gone.

[scfr]

But aren't there are options to bring the tax bill down that you choose not to partake in (solo 401k, SEP IRA, or something along those lines)?

[TexasHusker]

But aren't there are options to bring the tax bill down that you choose not to partake in (solo 401k, SEP IRA, or something along those lines)?

All you are doing is DEFERRING some tax to a later date, and making significant compromises to do so.

I'll pass.

[Singuy]

Hmm, I think the math still works in your favor deferring the tax.

Lets just say you invest the same index fund with pretax dollars or post tax dollars...assuming a 30% tax rate

You invest 1000/month pre tax or 700/month post tax.

Your money grow faster at 1000/month, making you 1.1million after 30 years@6.5% return.

The 700/month camp yield you 774k@6.5% after 30 years.

But then you have to deal with capital gaines tax at 15-2%(or whatever it'll be in 30 years)..on the growth in the post tax account. Also you paid taxes on all dividend throughout the 30 years @ your tax bracket %. In the pre-tax account, all dividend were reinvested tax free for the time being. Your growth is 520k out of the 774k in the post tax account, which will be subjected to capital gaines tax if you decide to sell the index funds.

So lets say you decided to take a lump sum of 1.1 mil out of your sep at age 59(which is the least efficient way to do so), you'll end up with 716k (single tax filer..you get more if you are married).
In the post tax camp, you'll end up with 696k.

I did not do the dividend tax advantage for the sep but it's another win for tax efficient account.

So at the end of the day, your tax efficient account(like a sep ira) is much better numbers wise even though you have to pay taxes when you start using it at a later date.

[TexasHusker]

Hmm, I think the math still works in your favor deferring the tax.

Lets just say you invest the same index fund with pretax dollars or post tax dollars...assuming a 30% tax rate

You invest 1000/month pre tax or 700/month post tax.

Your money grow faster at 1000/month, making you 1.1million after 30 years@6.5% return.

The 700/month camp yield you 774k@6.5% after 30 years.

But then you have to deal with capital gaines tax at 15-2%(or whatever it'll be in 30 years)..on the growth in the post tax account. Also you paid taxes on all dividend throughout the 30 years @ your tax bracket %. In the pre-tax account, all dividend were reinvested tax free for the time being. Your growth is 520k out of the 774k in the post tax account, which will be subjected to capital gaines tax if you decide to sell the index funds.

So lets say you decided to take a lump sum of 1.1 mil out of your sep at age 59(which is the least efficient way to do so), you'll end up with 716k (single tax filer..you get more if you are married).
In the post tax camp, you'll end up with 696k.

I did not do the dividend tax advantage for the sep but it's another win for tax efficient account.

So at the end of the day, your tax efficient account(like a sep ira) is much better numbers wise even though you have to pay taxes when you start using it at a later date.

Assuming you are A-OK with being shoehorned into a dizzying myriad of rules, regulations, and restrictions within the gubmit endorsed plans.

I'll pass.

[LivingAlmostLarge]

I think a flat tax fair. VAT will cost people with less money more. unless we give a minimum exempted or essentials untaxed.

[PeggyHefferon]

Does anyone here actually think they will ever simplify the tax code?

I personally don't believe I will live to see that day. I have no confidence in our government fixing much of anything.

[disneysteve]

Does anyone here actually think they will ever simplify the tax code?

I personally don't believe I will live to see that day. I have no confidence in our government fixing much of anything.

Nope. I agree completely. Folks will continue to float ideas like a flat tax or VAT or national sales tax but I don't think we will ever see a significant change to the current system. There is far too much money being made on it.