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Jan 24, 2012

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Kim

The perception of "off shore" accounts will be a bigger problem than his effective tax rate. But hey, $3 million in charitable contributions is nothing to be ashamed of.

Mick

So he is rich and uses all legal means at his disposal. I, for one, am not shocked.

Ishmael

Those who control those who write the laws effectively control the country. There's nothing illegal in paying as little taxes as you can using these methods and that is the problem.

Roch101

Okay, Mr. Smarty Pants, what is a good way to spin Swiss bank accounts and offshore holdings in Caribbean tax havens?

Ed Cone

I think Mick and Ish are seeing the trees but not the forest.

Yes, legal means of minimizing taxes under a bad tax code are elements of the story.

But to a lot of people, that story is, holy crap, this zillionaire financier pays taxes at a lower rate than a lot of hard-working people, and he's doing everything he can to pay even less (if there's a shadier image than "Caribbean tax haven," it's "Swiss bank account), and his plan as president would be to do more of the same for himself and his superrich Wall Street pals.

Thomas

It's not hard to imagine a political ad in split screen with numbers from the tax return on one side and clips of "I'm unemployed" and "I know what it's like to worry about getting pink slip" playing on the other.

Mick

Which one of the possible candidates is not "rich"? I didnt say I like zillionaires taking advantage of rules/laws. It is what it is. I agree we could use tax reform in this country. Who doesnt think so? We need to change the rules ... hate the sin and not the sinner so to speak. Romney is doing what we all (or most anyway) would do and is protecting his holdings for is family. I am not surprised in the least. He is one of the rich. And the rich are differant (paraphrased Barney Fife)

What past President has eliminated Swiss and Cayman legal dodges? Why should Romney be held to a differant standard? Does it look good... no. Will his zillionaire status cause folks who might have voted for him not to? I dont know. Or is it more like... folks who wouldnt have voted for him anyway ... REALLY wont vote for him now? We will see as it will definitely be used by any and all who can.

  Bill Yaner

What gives Mitt's wealth a special significance at this point in time is:

1. The steady and consistent redistribution of wealth since 1972 as brought to our nation's wider awareness by Occupy Wallstreet and ensuing discussion

2. Congress' revealing refusal to let the Bush Tax Cuts expire as scheduled, even for the wealthiest.

3. The charges against his wealth, how it was gained, stashed away and taxed, are being leveled by a fellow Republican - one ascending in the polls.

This makes it all different, folks, not just your usual "Ho hum, so he's rich". This gives the issue a personification as dramatic as anything Charles Dickens could have come up with. And the show's just getting going!

polifrog

Ed:

But to a lot of people, that story is, holy crap, this zillionaire financier pays taxes at a lower rate than a lot of hard-working people...

But he doesn't.

The 15% he currently pays in taxes is the rate he pays additional to what everyone else pays. So the idea that he pays his taxes at a lower rate than everyone else is simply Showtime at the Apollo and the references to off shore accounts are an appeal to negative preconceived notions that do not apply.

This whole song and dance sounds very familiar. I suppose that if they can't squeeze wealth from one group, they will squeeze it from another.

Kim

Capital gains are taxed at 15% for a reason.

Kim

Props to Bill. I see where Buffet's secretary will be at The SOU address tonight. Act I begins.

Ed Cone

"Capital gains are taxed at 15% for a reason."

They haven't been taxed at the current low rates for very long, though, and the reasons for doing so are not universally accepted.

Kim

The "pass through" gains is the loop hole.

Ishmael

"The 15% he currently pays in taxes is the rate he pays additional to what everyone else pays."

WTF?

Andrew Brod

The 15% he currently pays in taxes is the rate he pays additional to what everyone else pays.

What's your basis for saying that? I'm looking at his 2010 return, and I see $21.6 in income and $3.0 million in taxes, which is an effective (average) tax rate of 13.9% (hence the permalink). That's his total tax rate, not the excess he pays over and above what "everyone else" pays.

I'm late joining this thread, but I'm surprised to see no one object to a rank misstatement like this. Perhaps you've all decided to start ignoring Frog. Fair enough. I probably should do so too.

Andrew Brod

Scratch that. Ish noticed it too.

Andrew Brod

They haven't been taxed at the current low rates for very long.

Here's a graph showing that. And as you look at it, remember that business investment was stronger during the 1990s than the 2000s.

bubba

A capital gains tax of 15% is over and above the taxes that have previously been assessed on the baseline amount.

Perhaps you would care to argue that the baseline amount should be taxed again.

Andrew Brod

What baseline amount are you talking about, and in what way was it taxed previously?

After all, a large portion of what Romney gets to call investment income is actually earned income. It's the "carried interest" loophole that private-equity funds have managed to keep in place for their principals' compensation packages. It's legal but makes no sense.

If you care about elites sucking at the public teat (as you do when it's Democrats doing the sucking), this is a perfect thing for you to oppose.

Andrew Brod

My question to Bubba stands, but in a sense it's beside the point. Romney's average tax rate in 2010 was 13.9%. Period. Can we justify a tax code that allows that?

I wish I paid only 13.9% of my income in federal income tax. Many people agree with me. And that's the challenge Romney faces. He's done nothing wrong, but he may come to embody something that bothers a lot of people.

Or maybe not. Bubba probably thinks it's great, and maybe he's not alone.

Newt doesn't think too highly of it, however. He paid over 30% of his "historian" earnings in taxes.

polifrog

Andrew Brod:

I suppose it would appear more equitable if we all paid 13.9%, but if we did we would necessarily be forced to lower the capital gains rate further still so as to incentivize saving.

Andrew Brod

It doesn't incentivize saving. If I put money into a money-market account, the interest I earn is taxed as regular income.

I realize that's not what you meant. What you probably meant is that the low capital-gains rate incentivizes investment. And that it surely does. It's such an incentive that anytime people can squeeze their income into the parameters of a capital gain, they surely do so (see, interest, carried). This piece has some discussion of the rent-seeking this entails.

Of course the real question is not whether a lower capital-gains tax rate incentivizes investment, but whether incentivizing investment is good for the economy, e.g. does it create jobs. And that's not at all clear. As in so many other cases, tax rates are not as determinative of economic behavior as conservatives wish they were.

polifrog

Andrew Brod:

I realize that's not what you meant. What you probably meant is that the low capital-gains rate incentivizes investment.

No, I meant saving, as it is a prerequisite to investment.

Of course the real question is not whether a lower capital-gains tax rate incentivizes investment, but whether incentivizing investment is good for the economy, e.g. does it create jobs. And that's not at all clear. As in so many other cases, tax rates are not as determinative of economic behavior as conservatives wish they were.

Ridiculous.

If an individual choosing to invest is unhappy with the yield from a particular investment, they will likely find an investment that pleases them. Thus, investment generally flows toward that which is productive and productivity begets jobs.

However, raising the capital gains rate would necessarily divert investment toward government, a flow of investment that has been repeatedly defended by you, and which would grow government from a fiscal perspective. But unfortunately government investment choices are not dictated by what is productive. It is, instead, governed by what might be productive politically. The result is less productive investment which results in fewer jobs gained per dollar invested than the private investment counterpart.

I realize it does not suite your perspective, but bloated governments fail their citizens. That is what they do. Repeatedly. Throughout history. Before Keynes, during Keynes, and after Keynes. We ,as are the Japanese, are suffering from it now. The Euro is failing because of it now. The Soviets did fail due to it. Cuba is stricken with permanent poverty as is North Korea because of it. Rome fell because of it. On and on and on.

Yet you chirp away.

So whatever prism through which you view the world is distorted if you conclude that investment in greater governance will yield greater growth than the same investment in the private sector.

Frankly, the beauty and learning evident in your writing does not hide a profound underlying stupidity.

Andrew Brod

You're right. I probably am stupid. Except I'm not the one who went off on his standing riff about big government and Keynes and a bunch of other wacked-out crap that have nothing to do with what I actually said. You might at least take off the tinfoil hat when you comment here.

Yes, I am indeed suggesting that capital gains should be taxed as ordinary income, but that position implies nothing about the size of government. In principle, we could reduce other rates when we rationalize (and raise) the tax rate on capital gains. Would we do that? I don't know, but the answer doesn't alter the illogic of taxing capital gains at the preferentially low rate of recent years. It's done little or nothing to improve the economic indicators most Americans care about, like employment.

But it's been great for the rentiers!

Here's my prism. If something works, let's do it. If something doesn't work, let's not. If you think that's a stupid way to view the world, then that says a lot about you.

Andrew Brod

One of the problems with the way many conservatives look at economic policy is that they stop with theory. "X should lead to Y," they tell each other, persuaded by economic theories that fit their preconceptions. But it's essential to make sure that X actually does lead to Y. If not, then who cares about the theory?

Fred Gregory

Kim;

Now how do you figure Warren Buffet's office assistant got suc a choice sdeat for Obama's campaign speeech tonight. Don't figure it had any thing to do with this, do ya ?

Buffett's Burlington Northern Among Pipeline Winners

"Jan. 23 (Bloomberg) -- Warren Buffett's Burlington Northern Santa Fe LLC is among U.S. and Canadian railroads that stand to benefit from the Obama administration's decision to reject TransCanada Corp.'s Keystone XL oil pipeline permit."

Shocking ! But as Ozzie Myers famously said " Money talks and bullshit walks "


polifrog
but the answer doesn't alter the illogic of taxing capital gains at the preferentially low rate of recent years.

But you offer no logic, just pretty words on a lattice of linguistic craftsmanship.

Wacked-out? tinfoil hat? just because I stray off the circumscribed perspective on which you feel at home? If I were you I would not admit to a perspective so small as to ignore world history and current events.

But whatever, if it works for you...

And don't fret, I don't think you stupid.

polifrog

Brod:

One of the problems with the way many conservatives look at economic policy is that they stop with theory. "X should lead to Y," they tell each other, persuaded by economic theories that fit their preconceptions. But it's essential to make sure that X actually does lead to Y. If not, then who cares about the theory?

Well, there are far too many Keynesian conservatives. With that much I can agree.

Roch101

"The 15% he currently pays in taxes is the rate he pays additional to what everyone else pays." -- Polifrog

I doubt if a third request for an explanation of that is going to yield anything better than the silence in response to the first two; but, what?

Ishmael

When government invests in wars (particularly the war on drugs) it is very profitable for some people.
When government invests in research that results in a company earning a patent for that product, that is also very profitable for some people.
When government funds National Guard troops to prevent looting in cities during a crisis, that protects the assets of some people.
Why pay taxes?
Sure there is waste - Galbreath talked about the increase of "the bezzle" when lots of money is at stake. But when you cut government you also cut the oversight of the programs, which increases fraud. Say what you will about regulations, but we owe much of our current predicament to weak oversight of the financial sector as well as two unfunded wars and an unfunded presciption drug plan.
Yet we blame people on food stamps. What kind of double speak do you have to invest in to create this type of disconnect?
One argument that I've heard in recent days is that the money held in the Caymen Islands or Swiss bank accounts comes back to us as investment dollars. What a load of crap! These investment dollars follow the best return - not necessarily to the US, but to countries who do not follow our environmental or human rights standards. Who knows where it is invested?
My point is that the drum banging for lower taxes on the wealthy has dubious merit. Perhaps we can allow ourselves to at least engage in a conversation about the values of educating the populace so that we can once again be considered a powerful country but for a different reason than the fact that our 1% is hugely wealthy and we can go around the world and bomb whoever we want to.

cheripickr

"Here's my prism. If something works, let's do it."

..."works" meaning "satisfies mine and high-minded others' arbitrary notion of equal outcome-based social justice at the expense of whomever I deem". Sigh.

Another glaringly naked example of ideology disguised as pragmatism. Carry on.

Roch101

"Another glaringly naked example of ideology disguised as pragmatism." -- CP

Yeah, that you wrote.

Andrew Brod

Actually, CP, if you look at my comment, my "arbitrary notion" of what works was job creation. If that's arbitrary to you, then you've put yourself in the same category as Frog.

There's no justification for any kind of income to receive preferential treatment in the tax code unless the preference does some good. An ideological belief that it does some good is not the same as evidence.

Ooops, there I go again, getting all arbitrary.

cheripickr

Roch, I take it at this point you are simply caricaturing /lampooning yourself. Otherwise you are taking the concept of the one-trick pony to previously unheard of heights. It is your one-size-fits-all argumentative wet paper bag.

Roch101

CP, your "arguments" are never arguments. They boil down to:

  • Haranguing commenters with comments about how insignificant their comments are.
  • Mocking legitimate concerns like racism by trivializing them.
  • Inaccurately rephrasing someone's position so that you can argue against your own rephrasing instead of the actual argument. A straw man.

It's not my fault your comments keep getting the same criticisms.

HBCU2

Mr. Cheripiker,

I think we know each other.

;)

polifrog

Roch:

I doubt if a third request for an explanation of that is going to yield anything better than the silence in response to the first two; but, what?

By far and away most of Romney's income is the result of choosing not to spend his earnings but to save his earnings and invest in the future. For this choice he penalized approx 15% that those who choose instead to spend their money are not penalized.

Frankly, those who choose to spend their income rather than invest it are playing a game of tax avoidance, as they avoid the 15% Romney is subjected to for his choice to invest in our future rather than his gluttony.

Lost in much of this is, like Buffet, much of his taxes are taken at the corporate level at a rate of 35% to 40% and do not show up in his personal tax returns. However they most definitely show up as lowered returns in his portfolio of investments and in his various business prospectuses.

Ishamael

"those who choose to spend their income rather than invest it are playing a game of tax avoidance"

I've never heard a more ridiculous statement in my whole life.

Marshall

If nearly half of Americans pay no federal tax..why is it the responsibility of the other half to foot their bill? If we choose to go on a toll road, we all get the opportunity to pay the toll and use the road.

Why does our country not have a simple flat tax? Why is it the responsibility of the wealthiest to pay the bulk of the taxes? If the average taxpayer pays nearly zero and the example above pays millions in taxes....when is enough enough? Why is government entitled to this amount of tax? Do any of you prefer the government creating jobs over the private sector? No...then why take more money from the private sector? I guess you like the idea of bigger government.

Capital gains--- The money invested has already been taxed earlier....tax the profit when invested wisely....tax it again after death. Why not encourage our government to invest the same way as Romney so that there is a positive rate of return instead of more debt?

How many that want Romney to pay more taxes added to their tax liability last year and paid an additional amount above what you owed? Anyone paying millions in taxes should be seen as heroic as they provide the funds that keep our country running.

I thought Obama did a good job "campaigning" last night and if he can maintain he will be a very tough competitor in November.

polifrog

Ishmael:

I've never heard a more ridiculous statement in my whole life.

Why?

Those who choose to spend rather than invest in our collective future avoid the 15% tax rate Romney is burdened with.

Note the choice of "choose". I am mindful that not all individuals have a choice in this matter, but of those who do government sides with those who choose personal gluttony over investing in our collective future by not punishing gluttony. Well, outside of campaign rhetoric during the SOTU.

Account Deleted

If people don't spend then won't demand dwindle, production and employment drop and the need for investment grind to a halt? Is there some magic fairy dust the primes the economy?

If we all sat about collecting interest and dividends off of our family trust fund who would have a job besides the good folks at PricewaterhouseCoopers?

bubba

"What baseline amount are you talking about, and in what way was it taxed previously?"

Are you just being obtuse (as usual), or do you really not understand how investing works?

My guess is the latter, based upon your previously demonstrated inability to read a stock volume chart.

bubba

"If we all sat about collecting interest and dividends off of our family trust fund who would have a job besides the good folks at PricewaterhouseCoopers?"

What creates "interest" and "dividends"?

Roch101

"For this choice he penalized approx 15% that those who choose instead to spend their money are not penalized." -- Pfrog

By that "logic" Romney is avoiding sales taxes by not spending his money or, as you might put it, those who choose to spend their money are penalized, while Romney is not.

Absurd.

polifrog

Jeff:

If people don't spend then won't demand dwindle, production and employment drop and the need for investment grind to a halt? Is there some magic fairy dust the primes the economy?

Humanity is burdened with a natural propensity toward gluttony beyond simple needs. That propensity will always prevent any deflationary spiral toward oblivion, thus there is no need for priming any pump. However, if by "fairy dust" you mean demand then need and gluttony would be your fairy dust.

And now, I've never heard a more ridiculous statement in my whole life:

If we all sat about collecting interest and dividends off of our family trust fund who would have a job besides the good folks at PricewaterhouseCoopers?

Ishamael

Poli - please stop sniffing glue. It is bad for your health.

polifrog

Roch101:

By that "logic" Romney is avoiding sales taxes by not spending his money or, as you might put it, those who choose to spend their money are penalized, while Romney is not.

Exactly. Taxes function as a penalty for a given choice. Romney made the moral choice of investing in our collective future despite the the fact that he is penalized for that choice at a higher rate than he would have been had he chosen self interest and spent his money.

And in the context of SOTU "fairness": where is the fairness in that?

His investments represent personal spending sacrificed for the greater good, thus in a fair world his capital gains rate would be zero considering the fact that before any capital gains are realized he has paid a 35% corporate tax ... taxes generated by the very fact that he chose to invest rather than to spend.

And this is the point where Brod feels that "capital gains should be taxed as ordinary income" at which point Romney's taxes would include both a 35% corporate tax plus his personal 35%.

So how does being taxed at approximately 70% for having chosen to forgo gluttony fit with Brod's later assertion?:

There's no justification for any kind of income to receive preferential treatment in the tax code unless the preference does some good.

Beats me. You're welcome to divine his morality.

Roch101

"Exactly." -- Polifrog

Look, my little friend, you said that Romney's taxes were "in addition to what everyone else pays." When I point out that is ridiculous, you needn't offer anything beyond "exactly," except maybe a polite thank you for the correction.

Thomas

Can someone explain how spending money avoids taxes? I'm not getting that one.

polifrog

Roch:

you said that Romney's taxes were "in addition to what everyone else pays."


They are:

Income taxes at around 35%- Most everyone

Corporate taxes at around 35% - Romney
Capital Gains rate around 15% - Only Romney

Romney pays 15% more.

What I answered "exactly" to was the concept that "taxes function as a penalty for a given choice" which you pointed out was a cost associated with spending money in terms of a sales tax.

Again, Romney has the moral high ground here from paying more in taxes in both rate and total than most others in America to foregoing consumption in favor of investing in our future despite being punished for it.

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