On July 17 2012 10:49 JonnyBNoHo wrote: This could possibly be relevant. There might be a few points to nitpick about it but you could most likely nitpick both ways.
Edit: There's only a real problem once you get to the top 1%. If anyone can find the same stats for other OECD countries let me know! I'm have in problem finding numbers that include VAT.
The problem is the that there are plenty of rich people, like Romney, that don't pay close to 30%. They find loopholes, like reporting income as capital gains.
I believe the Ryan budget proposed the 25% figure based on what most people actually pay, and rationalized it by proposing the closing of loopholes in the tax system. The problem with the Ryan budget is that it's incomplete -- it defers what loopholes should be closed to a third-party committee, so there's no way to know if it's viable.
Romney I believe he has already stated he wouldn't raise taxes on capital gains (of course).
That's my rudimentary understanding of the dilemma anyways.
Romney paid an effective tax rate of 13.9% in 2010. I don't know how to tackle the problem but I think it is pretty clear this should be impossible.
When you consider the policies behind the low capital gains tax rate, it becomes pretty clear why it should be possible.
The carried interest tax credit is a joke. Even if you think the current capital gains rate is healthy, there's really no way to justify giving people massive tax breaks for gambling with other people's money. The investors (i.e. the people who are actually carrying the risk) already get a capital gains rate, so eliminating carried interest doesn't pull money out of the market.
Does carried interest actually hurt government revenues? If you paid the managers a salary it would be tax deductible for the business while it would be taxed at a higher rate for the individual. I think I'm going to have to pull out excel.
Edit: now that I'm thinking about it carried interest gets paid from the capital gains so I'm not sure how you'd structure a standard salary ex ante. You'd have to re-write the entire business relationship. Still thinking about the taxes though.
Think of it more like a performace bonus than a standard salary. It's outcome based, not predetermined. The cut you (or the firm) is supposed to get after covering the initial investment is already established in the contract. We're just talking about how much tax you pay on that amount. You should pay capital gains (though more than 15%) on any capital you personally contributed to the investment, but the share of the investors' gains you get as a managing partner isn't capital gains in any sense of the word.
Not sure it makes a difference though. I'm playing around with the numbers and it seems to be a wash. If you structure the carried interest as a management fee it will be tax deductible for the investor (carried interest is not). So there wouldn't be any gain to the government for changing the rules, other than public perception, correct?
It's not a management fee. It's a carry. Closing the tax loophole doesn't change that. Also, management fees aren't tax deductable for all investors, just specific types of non-profit, right? I know these groups make up a big portion of PE and hedge fund investors, but it's worth noting anyway.
You're right about one thing, though. The actual effect on the budget would be negligible - a few billion dollars. It's mostly an issue of basic fairness and optics. The carried interest tax credit is unfair, looks bad, and doesn't do anything productive. It seems like low hanging fruit to me. Or at least it would be, if the tiny fraction of the population that gets it didn't turn around and use a portion of their gains to buy politicians who will maintain the status quo.
This isn't necessarily true. Tax raises on the rich can potentially raise trillions over several years, while it won't solve the deficit straight away, it'll go a long way to helping to balance the budget.
We're talking about a specific tax credit that only hits a small percentage of the wealthiest people in America, mostly private equity (like Romney) and hedge fund managers. If you're rich because you have a massive salary and bonus or you got rich investing your own capital, the current tax credit doesn't touch you. We're talking about a very small number of people, much fewer than 1% of Americans. The actual impact on each individual who gets this credit is actually pretty big, at least in comparison to other potential tax increases (letting the Bus tax cuts expire for the top x%). The effect on the budget is so small because there are so few people who pay this particular rate for this particular reason. Also, there are other ways to mitigate your tax burdon on that income, so you don't have to pay the full non-capital-gains rate anyway.
Taxing the rich more generally can make a big impact on the budget, though.
This is what the whole Bain Retirement fiasco is really about. Force Romney to either lie or admit to a lie, and then hammer him for his lack of transparency.
The nature of his financial success could be easily explained by releasing his tax returns, a custom that has been carried out for decades by candidates, and started by, of all people, George Romney.
Romney is probably the most opaque and shady candidate that I can think of in recent memory. And that includes George W. Bush. Hell, throw Sarah Palin in there, too.
The reason that capital gains tax is so low is because it is considered a double tax. That money was already made by the company and was already subject to corporate tax. It gets funneled to investors which is then subject to capital gains tax. So 'effective tax rate' for capital gains hides the corporate tax that was already taken out.
The gist of Obama's words was that society helped you out, so you have an obligation to help society out.
Obama The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.
That's it. No need to be up in arms about a small statement like that.
I guess the other side would be ... if government would just stop helping me out so much, maybe then I could expand my business and hire on additional workers! Complying with regulation on their business, such as the ACA and an increasing burden of taxes do not impel them to make more risky ventures designed to become richer. To give some examples again,
“While we respect the Court's decision, today’s Supreme Court ruling does not change the reality that the health care law is fundamentally flawed. Left unchanged, it will cost many Americans their employer-based health insurance, undermine job creation, and raise health care costs for all.[emphasis mine]
Perception here is reality, and Romney himself is fighting to stay shiny on creating American jobs despite attacks on him that his track record at Bain shows the opposite (Shady dealings, even though business owners can sympathize with shipping jobs overseas -- they've been faced with the same attractive prospect.) Obama handed him a slow ball he can knock out of the park ... if his campaign gets out of its sluggish track. I think I've seen him fighting hardest at the nomination straits and won't see anything comparable all the way till November.
Then again, last president to be elected with this high of unemployment was FDR back over 60 years ago. Carville got Clinton in yelling, "It's the economy, stupid" at 7.5%. You start to look back 4 years ago and maybe it looks more rosy than it looked then and maybe Obama has had enough time to turn it around (Dems - It was just too big a hole).
The ACA gives small businesses a massive tax credit for the healthcare that they need to give their employees. Look up the Tax Provisions of the ACA.
The problem is the that there are plenty of rich people, like Romney, that don't pay close to 30%. They find loopholes, like reporting income as capital gains.
I believe the Ryan budget proposed the 25% figure based on what most people actually pay, and rationalized it by proposing the closing of loopholes in the tax system. The problem with the Ryan budget is that it's incomplete -- it defers what loopholes should be closed to a third-party committee, so there's no way to know if it's viable.
Romney I believe he has already stated he wouldn't raise taxes on capital gains (of course).
That's my rudimentary understanding of the dilemma anyways.
Romney paid an effective tax rate of 13.9% in 2010. I don't know how to tackle the problem but I think it is pretty clear this should be impossible.
When you consider the policies behind the low capital gains tax rate, it becomes pretty clear why it should be possible.
The carried interest tax credit is a joke. Even if you think the current capital gains rate is healthy, there's really no way to justify giving people massive tax breaks for gambling with other people's money. The investors (i.e. the people who are actually carrying the risk) already get a capital gains rate, so eliminating carried interest doesn't pull money out of the market.
Does carried interest actually hurt government revenues? If you paid the managers a salary it would be tax deductible for the business while it would be taxed at a higher rate for the individual. I think I'm going to have to pull out excel.
Edit: now that I'm thinking about it carried interest gets paid from the capital gains so I'm not sure how you'd structure a standard salary ex ante. You'd have to re-write the entire business relationship. Still thinking about the taxes though.
Think of it more like a performace bonus than a standard salary. It's outcome based, not predetermined. The cut you (or the firm) is supposed to get after covering the initial investment is already established in the contract. We're just talking about how much tax you pay on that amount. You should pay capital gains (though more than 15%) on any capital you personally contributed to the investment, but the share of the investors' gains you get as a managing partner isn't capital gains in any sense of the word.
Not sure it makes a difference though. I'm playing around with the numbers and it seems to be a wash. If you structure the carried interest as a management fee it will be tax deductible for the investor (carried interest is not). So there wouldn't be any gain to the government for changing the rules, other than public perception, correct?
It's not a management fee. It's a carry. Closing the tax loophole doesn't change that. Also, management fees aren't tax deductable for all investors, just specific types of non-profit, right? I know these groups make up a big portion of PE and hedge fund investors, but it's worth noting anyway.
You're right about one thing, though. The actual effect on the budget would be negligible - a few billion dollars. It's mostly an issue of basic fairness and optics. The carried interest tax credit is unfair, looks bad, and doesn't do anything productive. It seems like low hanging fruit to me. Or at least it would be, if the tiny fraction of the population that gets it didn't turn around and use a portion of their gains to buy politicians who will maintain the status quo.
This isn't necessarily true. Tax raises on the rich can potentially raise trillions over several years, while it won't solve the deficit straight away, it'll go a long way to helping to balance the budget.
We're talking about a specific tax credit that only hits a small percentage of the wealthiest people in America, mostly private equity (like Romney) and hedge fund managers. If you're rich because you have a massive salary and bonus or you got rich investing your own capital, the current tax credit doesn't touch you. We're talking about a very small number of people, much fewer than 1% of Americans. The actual impact on each individual who gets this credit is actually pretty big, at least in comparison to other potential tax increases (letting the Bus tax cuts expire for the top x%). The effect on the budget is so small because there are so few people who pay this particular rate for this particular reason. Also, there are other ways to mitigate your tax burdon on that income, so you don't have to pay the full non-capital-gains rate anyway.
Taxing the rich more generally can make a big impact on the budget, though.
There are a lot of complex taxation benefits/problems with high income corporations though. You need to balance over-taxing of corporations with over-taxing of personal income. If you don't, the way corporations provide benefits to owners just shifts around to avoid the taxes. Corporate tax rates too high, and you stunt business growth. Personal rates too different from corporate rates, and then executives just demand the low tax corporate benefits such as a "personal jet for business use" so they can get the same benefit as they'd have if they bought it privately, but at a much discounted price.
And the above post: Double taxation. The last thing you want to do is make pass-through taxation more beneficial at a high income level, as it would destroy our corporate economy. It would likely lead to more S-class corps and even worse "sharing of the wealth" due the restriction on selling shares in non-c-class corps. There would have to be a significant overhaul to our corporate system if we were to drastically change taxation patterns in the corporate world.
Your answer works in thought, but fails in practice.
On July 17 2012 20:59 Defacer wrote: AAAAAAAAANNNNDD here comes the blitzkrieg.
This is what the whole Bain Retirement fiasco is really about. Force Romney to either lie or admit to a lie, and then hammer him for his lack of transparency. + Show Spoiler +
The nature of his financial success could be easily explained by releasing his tax returns, a custom that has been carried out for decades by candidates, and started by, of all people, George Romney.
Romney is probably the most opaque and shady candidate that I can think of in recent memory. And that includes George W. Bush. Hell, throw Sarah Palin in there, too.
I love the part where they imply that McCain chose Palin over Romney because of his tax returns.
Romney paid an effective tax rate of 13.9% in 2010. I don't know how to tackle the problem but I think it is pretty clear this should be impossible.
When you consider the policies behind the low capital gains tax rate, it becomes pretty clear why it should be possible.
The carried interest tax credit is a joke. Even if you think the current capital gains rate is healthy, there's really no way to justify giving people massive tax breaks for gambling with other people's money. The investors (i.e. the people who are actually carrying the risk) already get a capital gains rate, so eliminating carried interest doesn't pull money out of the market.
Does carried interest actually hurt government revenues? If you paid the managers a salary it would be tax deductible for the business while it would be taxed at a higher rate for the individual. I think I'm going to have to pull out excel.
Edit: now that I'm thinking about it carried interest gets paid from the capital gains so I'm not sure how you'd structure a standard salary ex ante. You'd have to re-write the entire business relationship. Still thinking about the taxes though.
Think of it more like a performace bonus than a standard salary. It's outcome based, not predetermined. The cut you (or the firm) is supposed to get after covering the initial investment is already established in the contract. We're just talking about how much tax you pay on that amount. You should pay capital gains (though more than 15%) on any capital you personally contributed to the investment, but the share of the investors' gains you get as a managing partner isn't capital gains in any sense of the word.
Not sure it makes a difference though. I'm playing around with the numbers and it seems to be a wash. If you structure the carried interest as a management fee it will be tax deductible for the investor (carried interest is not). So there wouldn't be any gain to the government for changing the rules, other than public perception, correct?
It's not a management fee. It's a carry. Closing the tax loophole doesn't change that. Also, management fees aren't tax deductable for all investors, just specific types of non-profit, right? I know these groups make up a big portion of PE and hedge fund investors, but it's worth noting anyway.
You're right about one thing, though. The actual effect on the budget would be negligible - a few billion dollars. It's mostly an issue of basic fairness and optics. The carried interest tax credit is unfair, looks bad, and doesn't do anything productive. It seems like low hanging fruit to me. Or at least it would be, if the tiny fraction of the population that gets it didn't turn around and use a portion of their gains to buy politicians who will maintain the status quo.
This isn't necessarily true. Tax raises on the rich can potentially raise trillions over several years, while it won't solve the deficit straight away, it'll go a long way to helping to balance the budget.
We're talking about a specific tax credit that only hits a small percentage of the wealthiest people in America, mostly private equity (like Romney) and hedge fund managers. If you're rich because you have a massive salary and bonus or you got rich investing your own capital, the current tax credit doesn't touch you. We're talking about a very small number of people, much fewer than 1% of Americans. The actual impact on each individual who gets this credit is actually pretty big, at least in comparison to other potential tax increases (letting the Bus tax cuts expire for the top x%). The effect on the budget is so small because there are so few people who pay this particular rate for this particular reason. Also, there are other ways to mitigate your tax burdon on that income, so you don't have to pay the full non-capital-gains rate anyway.
Taxing the rich more generally can make a big impact on the budget, though.
There are a lot of complex taxation benefits/problems with high income corporations though. You need to balance over-taxing of corporations with over-taxing of personal income. If you don't, the way corporations provide benefits to owners just shifts around to avoid the taxes. Corporate tax rates too high, and you stunt business growth. Personal rates too different from corporate rates, and then executives just demand the low tax corporate benefits such as a "personal jet for business use" so they can get the same benefit as they'd have if they bought it privately, but at a much discounted price.
And the above post: Double taxation. The last thing you want to do is make pass-through taxation more beneficial at a high income level, as it would destroy our corporate economy. It would likely lead to more S-class corps and even worse "sharing of the wealth" due the restriction on selling shares in non-c-class corps. There would have to be a significant overhaul to our corporate system if we were to drastically change taxation patterns in the corporate world.
Your answer works in thought, but fails in practice.
Than a massive overhaul is what is needed. Plain and simple. How anyone can defend the insane profits of corporate America while the poor get poorer is beyond me. Might is not right, and economic Darwinism ought to have died many decades ago.
On July 18 2012 02:32 farvacola wrote: Than a massive overhaul is what is needed. Plain and simple. How anyone can defend the insane profits of corporate America while the poor get poorer is beyond me. Might is not right, and economic Darwinism ought to have died many decades ago.
You need to reframe this. Profits are not the problem. In fact, you desperately NEED profits in corporate America because that's how you know companies are generating growth and investing in good projects.
What you want is for management or shareholders to distribute more earnings to workers. When you hear that Apple has $100 billion in cash, that should infuriate you. That's just money that's rotting in the bank. They should be distributing that to shareholders to invest in other companies, investing it themselves in more aggressive projects, paying their workers better, or cutting the prices of their goods for customers.
But the worst case scenario for Apple is to just hoard their cash and try to pump up their stock price, paying executives bonuses on how well they can inflate it.
Don't hate Apple for being a wildly successful company. They have a lineup of excellent products, they deserve their success and they earned it. But you should be angry that they're allocating their profits in a way that benefits very few people and isn't optimal for society.
On July 18 2012 02:32 farvacola wrote: Than a massive overhaul is what is needed. Plain and simple. How anyone can defend the insane profits of corporate America while the poor get poorer is beyond me. Might is not right, and economic Darwinism ought to have died many decades ago.
You need to reframe this. Profits are not the problem. In fact, you desperately NEED profits in corporate America because that's how you know companies are generating growth and investing in good projects.
What you want is for management or shareholders to distribute more earnings to workers. When you hear that Apple has $100 billion in cash, that should infuriate you. That's just money that's rotting in the bank. They should be distributing that to shareholders to invest in other companies, investing it themselves in more aggressive projects, paying their workers better, or cutting the prices of their goods for customers.
But the worst case scenario for Apple is to just hoard their cash and try to pump up their stock price, paying executives bonuses on how well they can inflate it.
Don't hate Apple for being a wildly successful company. They have a lineup of excellent products, they deserve their success and they earned it. But you should be angry that they're allocating their profits in a way that benefits very few people and isn't optimal for society.
I have no problem with profits, as I am quite familiar with how a successful business culture works. The issue is that these profits are isolated in positive effect by virtue of how the current tax and corporate system works. That it is a salient business decision in the united states to cut employment or dilute benefits after a healthy profit return is a clear sign that something is very wrong. To make matters worse, fools then proclaim that regulation is the cause, based on some fantastic ideation with no basis in reality. In relative terms, the middle and lower classes have been hurt repeatedly, while corporations simply warn everyone of what will happen when they are forced to pay their fair share. It's economic blackmail at its worst. In other words, we agree
On July 17 2012 21:17 DoubleReed wrote: The reason that capital gains tax is so low is because it is considered a double tax. That money was already made by the company and was already subject to corporate tax. It gets funneled to investors which is then subject to capital gains tax. So 'effective tax rate' for capital gains hides the corporate tax that was already taken out.
The gist of Obama's words was that society helped you out, so you have an obligation to help society out.
Obama The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together.
That's it. No need to be up in arms about a small statement like that.
I guess the other side would be ... if government would just stop helping me out so much, maybe then I could expand my business and hire on additional workers! Complying with regulation on their business, such as the ACA and an increasing burden of taxes do not impel them to make more risky ventures designed to become richer. To give some examples again,
“While we respect the Court's decision, today’s Supreme Court ruling does not change the reality that the health care law is fundamentally flawed. Left unchanged, it will cost many Americans their employer-based health insurance, undermine job creation, and raise health care costs for all.[emphasis mine]
Perception here is reality, and Romney himself is fighting to stay shiny on creating American jobs despite attacks on him that his track record at Bain shows the opposite (Shady dealings, even though business owners can sympathize with shipping jobs overseas -- they've been faced with the same attractive prospect.) Obama handed him a slow ball he can knock out of the park ... if his campaign gets out of its sluggish track. I think I've seen him fighting hardest at the nomination straits and won't see anything comparable all the way till November.
Then again, last president to be elected with this high of unemployment was FDR back over 60 years ago. Carville got Clinton in yelling, "It's the economy, stupid" at 7.5%. You start to look back 4 years ago and maybe it looks more rosy than it looked then and maybe Obama has had enough time to turn it around (Dems - It was just too big a hole).
The ACA gives small businesses a massive tax credit for the healthcare that they need to give their employees. Look up the Tax Provisions of the ACA.
This tax credit is not the be-all and end-all of helping businesses keep their healthcare. Even CBO says it is likely that some will not be able to keep their employer health insurance (Effects of ACA on Employer Health Insurance. They say only 3 million to 5 million people will get their coverage from their employer.
Flip side is the cost to the employer offering their employees health insurance. Gruber, the bill's architect, says that insurance premiums will rise from between 19% to 30%! Guarenteed issue and community ratings taken together are huge stresses on the insurance companies forcing them to raise prices to compensate for their higher expenses. Please, understand that a tax credit for offering their employees health insurance comes as small consolation when they see a very real possibility that the cost of doing so will trump every tax credit for them in the bill. Obama throws employers a bone, to be sure, but it still may not be enough.source
On July 18 2012 03:00 farvacola wrote: I have no problem with profits, as I am quite familiar with how a successful business culture works. The issue is that these profits are isolated in positive effect by virtue of how the current tax and corporate system works. That it is a salient business decision in the united states to cut employment or dilute benefits after a healthy profit return is a clear sign that something is very wrong. To make matters worse, fools then proclaim that regulation is the cause, based on some fantastic ideation with no basis in reality. In relative terms, the middle and lower classes have been hurt repeatedly, while corporations simply warn everyone of what will happen when they are forced to pay their fair share. It's economic blackmail at its worst. In other words, we agree
We don't agree, you just don't disagree with what I said because I put it in a better way.
I think you're very confused about where private equity fits into the economy. You're like a person who comes across a fence and says "this is stupid, we should tear it down". If you can't see the use of it, then definitely nobody should let you tear it down. You need to go and understand why the fence is there in the first place, then maybe we can talk about whether it's still necessary.
Private equity didn't just grow as this cancer on the US economy out of nowhere, where fat guys with monocles howl with laughter as they throw poor people out of their jobs and out of their homes. There's a reason why owners sell their shares to private equity guys and it's never to screw over the company or their employees. There are far easier and better ways to golden parachute out of a sinking ship than to sell to Bain.
Go and find out how private equity works and more importantly, why they have a good and bad reputation in finance. But most importantly, don't hate Romney because he was good at his job. That's a really stupid reason to say he'll be a bad president.
On July 18 2012 02:32 farvacola wrote: Than a massive overhaul is what is needed. Plain and simple. How anyone can defend the insane profits of corporate America while the poor get poorer is beyond me. Might is not right, and economic Darwinism ought to have died many decades ago.
You need to reframe this. Profits are not the problem. In fact, you desperately NEED profits in corporate America because that's how you know companies are generating growth and investing in good projects.
What you want is for management or shareholders to distribute more earnings to workers. When you hear that Apple has $100 billion in cash, that should infuriate you. That's just money that's rotting in the bank. They should be distributing that to shareholders to invest in other companies, investing it themselves in more aggressive projects, paying their workers better, or cutting the prices of their goods for customers.
But the worst case scenario for Apple is to just hoard their cash and try to pump up their stock price, paying executives bonuses on how well they can inflate it.
Don't hate Apple for being a wildly successful company. They have a lineup of excellent products, they deserve their success and they earned it. But you should be angry that they're allocating their profits in a way that benefits very few people and isn't optimal for society.
I have no problem with profits, as I am quite familiar with how a successful business culture works. The issue is that these profits are isolated in positive effect by virtue of how the current tax and corporate system works. That it is a salient business decision in the united states to cut employment or dilute benefits after a healthy profit return is a clear sign that something is very wrong. To make matters worse, fools then proclaim that regulation is the cause, based on some fantastic ideation with no basis in reality. In relative terms, the middle and lower classes have been hurt repeatedly, while corporations simply warn everyone of what will happen when they are forced to pay their fair share. It's economic blackmail at its worst. In other words, we agree
Businesses generally don't cut jobs and benefits if they are making a healthy profit. Can you expand on that idea for me?
On July 17 2012 21:17 DoubleReed wrote: The reason that capital gains tax is so low is because it is considered a double tax. That money was already made by the company and was already subject to corporate tax. It gets funneled to investors which is then subject to capital gains tax. So 'effective tax rate' for capital gains hides the corporate tax that was already taken out.
That's not what double taxation means. The term is deliberately misapplied by 1% lobbyists in order to create a false distinction between capital gains taxes and other taxes.
The idea that capital gains taxes are double taxation is a myth, as explained by the following sources (the former conservative and the latter liberal):
On July 18 2012 03:00 farvacola wrote: I have no problem with profits, as I am quite familiar with how a successful business culture works. The issue is that these profits are isolated in positive effect by virtue of how the current tax and corporate system works. That it is a salient business decision in the united states to cut employment or dilute benefits after a healthy profit return is a clear sign that something is very wrong. To make matters worse, fools then proclaim that regulation is the cause, based on some fantastic ideation with no basis in reality. In relative terms, the middle and lower classes have been hurt repeatedly, while corporations simply warn everyone of what will happen when they are forced to pay their fair share. It's economic blackmail at its worst. In other words, we agree
We don't agree, you just don't disagree with what I said because I put it in a better way.
I think you're very confused about where private equity fits into the economy. You're like a person who comes across a fence and says "this is stupid, we should tear it down". If you can't see the use of it, then definitely nobody should let you tear it down. You need to go and understand why the fence is there in the first place, then maybe we can talk about whether it's still necessary.
Private equity didn't just grow as this cancer on the US economy out of nowhere, where fat guys with monocles howl with laughter as they throw poor people out of their jobs and out of their homes. There's a reason why owners sell their shares to private equity guys and it's never to screw over the company or their employees. There are far easier and better ways to golden parachute out of a sinking ship than to sell to Bain.
Go and find out how private equity works and more importantly, why they have a good and bad reputation in finance. But most importantly, don't hate Romney because he was good at his job. That's a really stupid reason to say he'll be a bad president.
Go and discover the basics of reading comprehension because I'm not addressing Bain capital at all and am instead merely indicting the actions of companies such as GE and P&G. There are far better means with which to attack Romney. Thanks for the condescension and empty repeated reference to private equity, I'm now oh so enlightened.
On July 17 2012 21:17 DoubleReed wrote: The reason that capital gains tax is so low is because it is considered a double tax. That money was already made by the company and was already subject to corporate tax. It gets funneled to investors which is then subject to capital gains tax. So 'effective tax rate' for capital gains hides the corporate tax that was already taken out.
That's not what double taxation means. The term is deliberately misapplied by 1% lobbyists in order to create a false distinction between capital gains taxes and other taxes.
The idea that capital gains taxes are double taxation is a myth, as explained by the following sources (the former conservative and the latter liberal):
No it's double taxation. The term is not misapplied either - you'll find it used in textbooks aplenty.
If I invest in a corporation by lending to it, the interest expense is 100% tax deductible for the corporation while taxed at ordinary income rates for the individual. Here the cash flow generated by the business is only taxed once - at the individual level.
If I invest in a corporation by buying shares, corporate profits are taxed. If I receive any cash from the corporation I have to pay dividend taxes. So here the same cash flow is taxed twice (corp profits and dividends).
Capital gains are a bit more squishy to show as double taxation since the only cash flow is at the investor level when an asset is bought and sold. However, the value of a firm is the sum of all future after tax cash flows (profits) discounted over time. So the value of the company already includes taxes. So when you tax cap gains you are taxing future expected profits (that will already be taxed). If that sounds too theoretical think of it this way - if it turns out that those future expected profits were imaginary the shares will fall to $0 - and the cap gain tax the government collected will be wiped out by cap losses. So cap gains only exist if profits exist - which are already taxed - and therefore double taxation exists.
On July 17 2012 09:02 Zaqwert wrote: The vast majority of rich people are rich because they have earned it through hard and intelligent work and the vast majority of poor people are poor because they deserve to be.
This simply isn't true, and this sort of vile, hateful thinking is precisely the thing the Republican Party needs to dissociate itself from.
On July 17 2012 09:02 Zaqwert wrote: The vast majority of rich people are rich because they have earned it through hard and intelligent work and the vast majority of poor people are poor because they deserve to be.
This simply isn't true, and this sort of vile, hateful thinking is precisely the thing the Republican Party needs to dissociate itself from.
A more accurate description would be that the vast majority of people are middle class, with an increasing amount becoming poorer due to the higher cost of living and education.
A majority of the middle class earned it through hard, intelligent work, or good fortune with straight forward investments like real estate or the right job opportunity.
A very small percentage of people are rich. A majority of the people that are rich earn it through hard and intelligent work. All of them enjoyed some good fortune -- they had the right product, service or skills at the right time.
Meanwhile some of them simply inherited their wealth, or had a benefactor to fast track their success.
You get into the middle class by doing good work and having a solid work ethic, usually with a culture that values education and hard work. Being extremely wealthy doesn't come from that alone. To be wealthy, you usually need to do one or more of the following: 1. Be born into a wealthy family and get a nice inheritance 2. Have a unique skill people are willing to pay big for 3. Have very good luck 4. Good business (usually requires lots of hard and smart work, but shady deals work all the same)
I'd say a majority of the poor are poor because of cultural reasons. Their priorities aren't in the right place to become middle class. There are plenty of exceptions to the rule.
EPT
