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I've read a number of articles in the mainstream press about Obama's current proposal. The all say the same thing: That he will leave the rates the same for joint filers under $250K, but increase the top two brackets. When the articles discuss the current brackets, they all go from 25% to 33%. My question is: What happened to the 28% tax bracket? I'm trying to figure out what Obama is actually proposing. For a joint filer with an AGI of $249K, would 25% be the tax bracket, or would it be 28%? Thanks for taking a stab at this.
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I'm trying to figure out what Obama is actually proposing. For a joint filer with an AGI of $249K, would 25% be the tax bracket, or would it be 28%?

Without stat language your guess is as good as mine. What I've heard and read is "preserve the Bush-era cuts for those under...." Since for 2012 joint filers with taxable income of $249K are in the 28% bracket I assume they still would be if that statement is to be taken literally.

Phil
Rule Your Retirement Home Fool
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What I've heard and read is "preserve the Bush-era cuts for those under...."

Does that mean that dividends and cap gains would stay at 15% for those under $250k?

--fleg
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Does that mean that dividends and cap gains would stay at 15% for those under $250k?


..I doubt that we could be so lucky..:)..
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I think this is all in the realm of crystal ball work. Everyone involved (president, democrats, republicans, house, senate) says they want to change something. But what we end up with is unlikely to be what any of them say they want.

Rather than speculate about the gyrations of our government in action, I prefer to spend my time more productively: Looking for new business, spending time with my family, researching investment ideas, things like that.

--Peter
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I prefer to spend my time more productively: Looking for new business, spending time with my family, researching investment ideas, things like that.


..that's great..

..except this is the tax strategies board, where things like, I dunno, potential increases in tax rates may be discussed..
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..except this is the tax strategies board, where things like, I dunno, potential increases in tax rates may be discussed..

As Phil mentioned, give me some proposed statutory language and we'll have something to discuss. Until then it's all conjecture.

I don't recommend making financial decisions based on conjecture.

--Peter
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I don't recommend making financial decisions based on conjecture.


..some might decide that the "fiscal cliff" and it's potential to move the market might make financial decision making "conjecture" by nature..

..I prefer to use the fear induced by this conjecture to invest...like AAPL at 88 at the depths of the last fiscal meltdown..

..I feel strongly that those who wait for the solution of the fiscal cliff will miss enormous opportunities..
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I feel strongly that those who wait for the solution of the fiscal cliff will miss enormous opportunities..

We have a favorite saying here. "Don't let the tax tail wag the investment dog." It's always been used in the context of deciding whether or not to hold an investment, but I don't recall our ever discussing potential tax law changes as they relate to market timing. For my own taste, I was involved in the legislative process for too long to take seriously anything mentioned by any politician until there's a bill assigned to Ways and Means.

You may already be aware of them, but I think there are some boards that discuss economic/market trends. I'm sure there are Fools somewhere who are actively dicussing their thoughts as to what might happen.

I neglected to mention earlier that anyone with opinions to express about proposed changes should voice them where they could do some good, with their members of Congress. I used to recommend proper letters, but post-9/11 and the anthrax scare the best way is through their websites at www.senate.gov or www.house.gov. If a bill is actually introduced you can get complete information about it at http://thomas.loc.gov.

Phil
Rule Your Retirement Home Fool
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For my own taste, I was involved in the legislative process for too long to take seriously anything mentioned by any politician until there's a bill assigned to Ways and Means


in today's political climate I'd don't think I'd take an
actual bill very seriously
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but I don't recall our ever discussing potential tax law changes as they relate to market timing.


..well, right now there's likely the most significant cap gains tax harvesting I've seen in 25 years of investing..
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right now there's likely the most significant cap gains tax harvesting I've seen in 25 years of investing..

I have to wonder whether all of those investors have thought the process all the way through. They are patriots, of course, since they're paying taxes they don't have to pay. But let's say they're selling and immediately buying back since they like the investment for the long haul. Let's also say they're "of a certain age" and plan today that they'll die owning that stock. They've paid taxes that never would have been paid had they not grabbed the perceived 2012 tax bargain. We recently had someone on this board we talked back from the ledge since gain harvesting made no sense for that particular Fool.

I remember a lot of "panic" Roth conversions in 2010 prompted soley by "such a deal" in the tax law. The conversion really didn't make sense in many people's retirement plans.

Phil
Rule Your Retirement Home Fool
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When it comes to taxes, or anything else out of Washington, I learned long ago to take what I read with a large grain of salt. What is said for publication is often completely opposite to what is really being discussed behind the scenes. What is proposed will surely be changed many times before becoming law. It's fine to follow the public discussions and be aware of what is being proposed, but to act on that information before it is set in stone can get you into a lot of trouble.
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I'm not trying to decide investment strategy based on what might or might not happen. My real question is why all the articles I've read omit any reference to the 28% tax bracket. The mentione 25% and then go to 33%. What happened to 28%?
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My real question is why all the articles I've read omit any reference to the 28% tax bracket. The mentione 25% and then go to 33%. What happened to 28%?

You'd have to ask the authors, but I have a guess.

The 1999 tax rates were 15%, 28%, 31%, 36%, and 39.6%.

The BETC's introduced a new 10% bracket, got rid of the top bracket, and reduced the other three 3%, eventually leaving us with
10%, 15%, 25%, 28%, and 33%.

If you adopt a twisted enough view of the current situation the 28% bracket is the old 33% bracket, and a couple with $250K income was well into that bracket. But that's just a guess, and since IMO the effort is pointless, we're back to "beats me."

Phil
Rule Your Retirement Home Fool
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"I have to wonder whether all of those investors have thought the process all the way through"

Excellent point. Anytime short horizon thinking comes into play one should be wary and think it through before jumping.
Thanks Phil.
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Learned my lesson in '87. A week before the crash I sold holdings in a bond fund to harvest the tax loss. Planned to repurchase after 30 days and its price hadn't moved significantly in months. After the stock marekt crash bond prices leaped and I was screwed on the repurchase.
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" Learned my lesson in '87. A week before the crash I sold holdings in a bond fund to harvest the tax loss. Planned to repurchase after 30 days and its price hadn't moved significantly in months. After the stock marekt crash bond prices leaped and I was screwed on the repurchase."

I agree. But that isn't my intention. I'm selling this stock anyway. I will not be repurchasing it.
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