Woodstock Financial Advisor – Third Act Retirement Planning —

US Tax Changes in 2022

The following is the transcript from Cloud’s Retirement Chat. 

Key Talking Points of Episode:

  • Socialistic traits in the tax changes that Joe Biden is making
  • The $94 trillion world economy as it relates to socialism

Mr. Rogers

Brett:

I like that sweater over the top of [your shirt]. That’s lovely.

 Tommy:

Does it remind you of anyone?

 Brett:

Well, Mr. Rogers. It’s a positive feeling. Would you be mine? Would you be mine? Won’t you be mine? Do you randomly change your shoes when talking to people? Because then you’d complete the picture.  Tommy:

I love it. I tell you, I watched the movie. He was very successful, and he was ahead of the curve on a lot of that stuff. I wish I could be more like him in many ways, but I [read] his autobiography. It was great. You know, he talked about equality. He had a Black police officer on his show and washed his feet. He talked about forgiveness. I’m on my phone right now, looking for my notes from the Mr. Rogers movie, now that you’ve brought that topic up.

“It’s hardest to forgive the people that we love.”

This is something that he taught people. One of the common questions he asked was, “Have you ever felt so angry you wanted to hurt someone?” That’s a great question, isn’t it?

 Brett:

Yeah. He asked this of children.

 Tommy:

He said he couldn’t imagine eating anything with a mother. So apparently he was vegan, or at least vegetarian. In the movie, he said that he loves broken people. That was one of his big quotes. He said, “To die is human.”

“Anything human is mentionable, anything mentionable is manageable.”

Great movie. And I think he was a great man. So thanks for bringing him up. I’m glad I look like him today.

 Brett:

Yes. And as I think about Mr. Rogers, what most often comes to mind is taxes.

Woo man, let’s get into it. Let’s do it. Fires me up, baby!

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Income Bracket Changes

Brett:

I understand there are a lot of tax changes coming down the pipe. People need to get ready for it. Do they even know what they are? And do they know how they’re going to be impacted by them? I’m going to say probably not.

 Tommy:

You’re right. The tax brackets are looking like we’re going to get some nice, generous increases across the board on everything, and on income in particular, about a 3.5% bump. So it’s nice to have that go along with inflation, to have a bump like that in the brackets. But I’ll give you an example. One of the things we want to talk about is married filing jointly in 2021 — and I’ll just do the 12% and the 24% bracket. The 12% bracket stopped at $81,000, roughly, for married filing jointly. For married filing jointly in 2022, it’s going to stop at $83,000. So, again, about 3.5%. And then the 24% bracket before you jump all the way up to 32% stopped at $329,000 for married filing jointly in 2021. In 2022, it’s been raised to $340,000. So that’s an $11,000 increase. Across the board, I think it’s good news for us that we’re going to hopefully pay a little less in taxes per dollar, and we need it as Americans’ incomes grow and our expenses have skyrocketed over the past 12 months. And we’ll go over that in a future show where we’ll talk about inflation.

 Brett:

Yeah. As inflation hits, we can be paid more money, but not any more real amount of money, and be pushed into a higher tax bracket.

 Tommy:

Well, that’s exactly it. Your purchasing power just gets eroded and gets banged on.

 Brett:

I think it’s a good thing. And they did it with the capital, the standard deduction.

 Tommy:

They raised it as well.

 Brett:

Not much. Married filing jointly went from $25,100 to $25,900, so only $800 on the married filing jointly. And that’s the only example I’m using.

 Tommy:

So, I’m not that impressed with the standard deduction. You’re going up $800. I mean, it’s something, but it’s probably not as helpful as I think it could be. That $800 divided by $25,100 is a 3.1% increase. I guess that’s not bad.

Charitable Contributions or Transfers

Brett:

Yeah. It feels like there’s more scrutiny, insight, and oversight of our money than ever before. I was just looking at something that affects me and mine. So there’s now a $600 reporting limit on all significant money transfers, particularly when it comes to crypto. I think previously it was $10,000, or something like that.

 Tommy:

It was $10,000.

 Brett:

For the volumes and types of money that are being exchanged for the crypto crowd, that’s an exponential increase.

Socialism A Concern For Some Americans

Tommy:

There are a lot more tax changes that I think Joe Biden is talking about. In this country, I think it’s obvious to a lot of people, particularly the baby boomers. I’ve told you I’m in a Bible study with baby boomers, and these men are in their seventies. One of them is in his eighties and creeping towards socialism is something they are all concerned about. I know you read the news a lot, Brett. What are you seeing? Maybe not even from a financial perspective, what are some socialistic traits you are seeing as we creep towards that?

 Brett:

I try not to read the news as much. It just depresses, drives restlessness, anger, and frustration. Just look at the volume of laws by the foot. If you stack modern legislation up, a lot of these bills and pieces of legislation are single sheets of paper. Add them all together and put them up five, six, or seven feet tall, just piled on top of each other. How can a reasonable person hope to ever understand that legislation, much less the people passing these laws? Laws control so many different elements of life being centralized. So it’s concerning, but as we’ve spoken about many times, my energy is spent on me, my work, my job, my spiritual, emotional, and physical wellbeing. Not worrying about the affairs of the country afterwards.

Attack on the Church

 Tommy:

I agree. As we go forward, one of the things they’ve done has really been an attack on the church a few years back. They removed the charitable deduction if it was below the standard deduction. So, if I’m married and my standard deduction is $25,800, and I don’t have enough deductions to bring my total deductions above $25,900, I can’t deduct my charitable contribution. So if I give $10,000 away, if it doesn’t bump me up above $25,800, it’s not deductible. So someone that gives no money to the church could end up getting the same benefit as someone who gives $20,000 to the church, assuming they don’t have any 1098 deductions or other types that would be counted towards a standard deduction to go above it.

 Tommy:

So they changed that. And it really de-incentivizes people to give to the church. I don’t know how that’s impacted giving to the church. I’ve never done a study on that, but most people were probably giving from their hearts, but there’s a lot going on in our culture. And as we talk about these tax brackets and what we’re getting and what we’re not, there are no changes yet. Well, there are changes as they increase the bracket that we’ve already talked about, but one thing I don’t like is how people try to scare people by talking about what could happen. That irritates me to no end, trying to generate fear in the hearts of people, or worry, or greed when the changes are made. The ones that they’re going over with Biden when those changes are made, we will talk about it on the show, but as of right now, we’re not, but as we talk about creeping towards socialism, we can always go to one of my favorite news sites.

The World Economy – $94T

It’s a site that you may or may not be familiar with, Brett, but it’s none other than the Brett Newman Facebook page. There are lots of interesting articles and fascinating things that we can talk about. Brett, what about this article that you posted on your Facebook page? The good thing about you is that you never judge your posts by the number of likes that you get but by what you say, visualizing the 94 trillion-dollar world economy. What can you tell us about that as it relates to socialism?

 Brett:

I’m really glad you asked me about this, and I’m sure this is going to be very interesting to your listening audience and watching audience. So, in essence, the Visual Capitalist website. A lot of these topics of finance in business and economic change are so complicated and so in-depth, they put you to sleep. These guys represent it really well and establish the trend. So Europe and the United States, which is more commonly known as the West, have been dominant for, say, the last hundred years. Big-picture, though, the East was the economic powerhouse of the world a thousand years ago. Their dedication to academic, business, social, and intellectual pursuits is thousands and thousands of years old.

And they’re determined to recapture that global place in the world. So the concerning part about time socialism is that they’re very much in command in a controlled centralized economy where they even have the social credit system. So, in the United States, your credit and ability to obtain a loan are based on your ability to make timely payments. Over there, it’s based on things like what kind of books you check out at the library and whether you’ve done a search for Tiananmen Square or not. If you do anything to embarrass traditional martial arts, say with somebody that’s a mixed martial artist, they’ll basically stop your ability to get a loan, buy a car, buy an apartment, rent an apartment, any kind of financial transaction that is not purely cash, they will shut you down. So that notion of a centralized authoritarian approach is the socialist tradition, and that’s very scary. We’re all different people who make different decisions based on different things. And we all, at the end of the day, want the freedom to continue to do so and make our own decisions that represent what 51% of the population thinks is best. It’s going to be the way everybody does it. That’s scary.

 Tommy:

That is scary. Well, and there’s some audacious statistic, like the top 1% in America pays 39% of the taxes, and the bottom 50% pays less than 1%. It’s something insane.  Brett:

Yeah, the top 50% of earners paid 99 point whatever percent of taxes.

 Tommy:

So as we move forward, and I’m glad you shared those things that are really communistic in nature, some of those things you talked about, as people listening to this can understand, as we’re doing what we’re doing towards socialism, it almost always slides into something much worse, but we’re out of time. 

Call with Tommy

If you have questions about how the new tax laws will effect you may set up a no cost, no obligation 20 minute call with Mr. Cloud here: https://calendly.com/thomascloud/retirement-ready-success-call

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