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Thread: Buffett: A Minimum Tax for the Wealthy

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    Buffett: A Minimum Tax for the Wealthy

    http://www.nytimes.com/2012/11/26/op...ml?ref=opinion

    A Minimum Tax for the Wealthy
    By WARREN E. BUFFETT

    SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”

    Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
    It also apparently exists for some borderline evil republicans, and people who have absolutely no understanding of how the business world works.

    Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent — and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. Never did anyone mention taxes as a reason to forgo an investment opportunity that I offered.

    Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation’s economic output) increased at a rapid clip. The middle class and the rich alike gained ground.
    He has been paying attention.

    So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.
    Translation: Ayn Rand is dumber than a sack of hammers, as are her adherents.

    Additionally, we need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy.

    Above all, we should not postpone these changes in the name of “reforming” the tax code. True, changes are badly needed. We need to get rid of arrangements like “carried interest” that enable income from labor to be magically converted into capital gains. And it’s sickening that a Cayman Islands mail drop can be central to tax maneuvering by wealthy individuals and corporations.
    I can agree with this for the most part, but I do think it would have some pretty severe negative consequences for business owners in pass through taxation situations. That is not exactly the end of the world...make pass through taxation optional in all cases and the problem is solved.

    Our government’s goal should be to bring in revenues of 18.5 percent of G.D.P. and spend about 21 percent of G.D.P. — levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won’t stem our budget deficits; in fact, it will continue them. But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America’s debt stable in relation to the country’s economic output.
    I think here is departs from reality a bit. We are set to see the number of people on SS and Medicare in this country double in the near future. 21% is too low, as is 18.5% for a revenue number.

    We are facing retirement Armageddon. As of right now, private pension funds in this country are underfunded by about $1.2 trillion dollars. State and municipal pension funds are underfunded by about $2 trillion. That is right now, using current asset valuations. For a more realistic number, triple those, because as the boomers retire, those pension funds are going to have to start converting assets into cash to make payments, and it will be enough to drive the value of those assets down significantly (25% is probably a conservative number for the medium term) resulting in a much greater shortfall.

    Our infrastructure is pretty much shot and our economy is on more or less permanent life support.

    The more I look at the situation, the clearer it becomes that we need another "New Deal" scale spending spree. We need to bring our infrastructure back up to snuff so we can actually compete in todays world. We need the government to spend what is necessary to bring public infrastructure up to snuff, and we need to force utility and communications companies to upgrade critical privately operated infrastructure as well. We need to stop pretending that it is reasonable to allow those companies to operate their government granted monopolies solely based on their own profitability. That is absolutely ludicrous. This is the only nation on the planet that does not routinely require infrastructure upgrades from utilities, and guess what...those utility companies in those other countries still make a profit. Granted it is not as massive as the profits ours make, but they do turn a dime.

    We can certainly afford to cut 40-70% off the military budget (by using them for defense as opposed to using them as a trade negotiation tool). We can means test social security. We can overhaul medicare. All that money and then some needs to be rolled over into infrastructure. Take overall spending cuts off the table completely, change how the money we spend is allocated, then tax the wealthy (they are the only ones left with any spare money) to pay for it.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Daewoo, you said it was pathetic that I had to go out and find third parties to argue over taxation with. I'm right here, if you think you can argue against objectivism or that taking 90% of possible revenue is not a factor in the feasibility of investment why not do it with me instead of addressing the wall when it is obviously my ideas that are still eating at you.
    Morals are a religious Myth.. - Xcaliber
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    Quote Originally Posted by Freedom View Post
    Daewoo, you said it was pathetic that I had to go out and find third parties to argue over taxation with. I'm right here, if you think you can argue against objectivism or that taking 90% of possible revenue is not a factor in the feasibility of investment why not do it with me instead of addressing the wall when it is obviously my ideas that are still eating at you.
    We don't tax revenue in this country. We tax income on the personal level and profits on the corporate level.

    And nothing here was directed at you.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    And nothing here was directed at you.
    Lol, no of course not; it's directed to your imaginary peer support.
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

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    Back on topic...

    Like always, Buffet is half right. Balancing a budget is akin to weight lose. The way to loss weight is eating right and exercise no matter how many "magic" drugs or machines are created. Balancing the budget (in this case) is spending less and taxing more no matter how many "magic" economic theories are created.

    Buffet is right about capital gains. It should be taxed as ordinary income....at most make it tax free for the first 15-20k or something like that (helps with retirement plans).

    Buffet is also wright that rich people aren't going to sit on the sidelines pouting and losing money because they don't like tax rates. Rich people aren't that principled.

    Buffet is wrong about taxing people over $1 million. This doesn't net enough money. We need to lower than to $250k or so. In fact, we need to eliminate the payroll taxes and just make one nice income tax so we can stop screwing over the poor and middle class with regressive taxes.

    Buffet is also wrong about it being ok to constantly run deficits. Buffet is advocating a $500 billion deficit each year. Yippy, he's as bad as Bush Jr. The CBO and GAO were complaining about "fiscal irresponsibility" at $400 billion deficits.


    At the end of the day, none of this matters. I say bring on the "fiscal cliff" because it may be stupid to just cut randomly but it is even worse to not cut at all. Maybe the pain from this will cause some people to wise up about our fiscal future.

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    Quote Originally Posted by Freedom View Post
    Lol, no of course not; it's directed to your imaginary peer support.
    Believe it or not, you are not the only person out there who has Rands economic "theories" stuck in their heads...most people just dont realize that the theories they are relying on were created by a junky with no business experience, no idea how the business world works, and who had to have somebody to balance her checkbook because she could not do it.

    Greenspan was a personal friend of Rand, and a close adherent to her ideology, and has been a financial advisor to every president except for Bush Sr for the last 3 decades and some of Rands "philosophy" has ended up leaking into american politics. That is finally ending. The only question is if it has ended too late to save ourselves.

    Systems of philosophic materialism, so long as they merely circle outside this world’s atmosphere, matter little to most of us. The trouble is that they keep coming down to earth. It is when a system of materialist ideas presumes to give positive answers to real problems of our real life that mischief starts.

    -Whittaker Chambers in his famous (and complete) destruction of "Atlas Shrugged"
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by Steeeeve View Post
    Back on topic...

    Like always, Buffet is half right. Balancing a budget is akin to weight lose. The way to loss weight is eating right and exercise no matter how many "magic" drugs or machines are created. Balancing the budget (in this case) is spending less and taxing more no matter how many "magic" economic theories are created.
    He is advocating increasing taxes and cutting spending.

    Buffet is right about capital gains. It should be taxed as ordinary income....at most make it tax free for the first 15-20k or something like that (helps with retirement plans).

    Buffet is also wright that rich people aren't going to sit on the sidelines pouting and losing money because they don't like tax rates. Rich people aren't that principled.
    Principals hell....they are not just not that dumb.

    I read a study the other day that I think really shines some light on why many members of the American public cant get their heads around the fact that the idea that wealthy individuals will choose not to invest because of a tax increase in upper brackets is downright silly is that apparently over 80% (IIRC the number was 84%)of Americans don't actually understand how tax brackets work. They believe that if you are making $85,650, which puts you in the 25% tax bracket, and then get a $100 raise so you are no making $85,750, which is in the 28% tax bracket, that your entire income would then be taxed at 28%, so you would actually lose money from getting that raise.


    Buffet is wrong about taxing people over $1 million. This doesn't net enough money. We need to lower than to $250k or so. In fact, we need to eliminate the payroll taxes and just make one nice income tax so we can stop screwing over the poor and middle class with regressive taxes.
    I agree with this, but can see if from his perspective. If you are worth $46 billion, $1 million does not look like very much money at all. It is like the proposal to raise taxes for everybody making more than $250,000 per year. Everybody I know who makes more than $250,000 per year thinks that is absurdly low since $250,000 per year is "not that much money". And they are right....$250K isnt what it used to be...until you consider the fact that the median wage in this country is only about $52". Then it suddenly looks like a lot more.

    Buffet is also wrong about it being ok to constantly run deficits. Buffet is advocating a $500 billion deficit each year. Yippy, he's as bad as Bush Jr. The CBO and GAO were complaining about "fiscal irresponsibility" at $400 billion deficits.
    I agree with you that he is wrong about that. You can do exactly what he is proposing if your economy is growing at a pretty good clip...the growth essentially caps the national debt (that is assuming we actually use part of our revenues to retire debt). I simply do not think we can count on that kind of growth rate anymore. Companies operate like that pretty frequently. It works GREAT until it doesn't.....


    At the end of the day, none of this matters. I say bring on the "fiscal cliff" because it may be stupid to just cut randomly but it is even worse to not cut at all. Maybe the pain from this will cause some people to wise up about our fiscal future.
    I agree 100%. I think they should go ahead and run us over the cliff. Then, Jan 2, the president needs to go on television and BEG congress to send him a reinstatment of the bush tax cuts for the middle class, and increase taxes on the wealthy to pay for them (something that 70% of americans can get behind...even 60% of the wealthy support higher taxes for themselves).

    That is my only concern with the fiscal cliff....those middle class tax cuts. The middle class is still in bad enough shape that I think allowing them to go away would lead to another round of loan and mortgage defaults, which we cant afford to take right now. Obviously allowing all the Bush tax cuts would be the fiscally responsible thing to do, but at some point you have to consider practicalities. There is a difference between pain and a kill shot.

    I especially think that is the way to go since both the republican plan and the democrats plan to avoid the fiscal cliff and put our house back in order INCREASES the debt significantly over the next decade. The "fiscally responsible" republicans plan increases it by $5.3 trillion while the "loose spending" democrats increases it by a thrifty sounding $4.3 trillion. Apparently both sides completely missed the fact that your "deficit reduction plan" is supposed to DECREASE the deficit, not increase it.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    Believe it or not, you are not the only person out there who has Rands economic "theories" stuck in their heads...most people just dont realize that the theories they are relying on were created by a junky with no business experience, no idea how the business world works, and who had to have somebody to balance her checkbook because she could not do it.
    Ah so you're target people who have no idea why what they believe should be believed and ignore people like me who claim to know why. That sounds so familiar...

    Quote Originally Posted by daewoo View Post
    Greenspan was a personal friend of Rand, and a close adherent to her ideology, and has been a financial advisor to every president except for Bush Sr for the last 3 decades and some of Rands "philosophy" has ended up leaking into american politics. That is finally ending. The only question is if it has ended too late to save ourselves.
    Yes I can see it finally ending. I'm reminded of it constantly as the world plummets towards financial ruin. (how's about that reduction fallacy you like so much?)
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

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    Quote Originally Posted by Freedom View Post
    Yes I can see it finally ending. I'm reminded of it constantly as the world plummets towards financial ruin. (how's about that reduction fallacy you like so much?)
    It is ending because it caused the world to plummet toward financial ruin.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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    Quote Originally Posted by daewoo View Post
    It is ending because it caused the world to plummet toward financial ruin.
    The world is plummeting towards financial ruin because it's ending.
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

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    Quote Originally Posted by daewoo View Post
    It is ending because it caused the world to plummet toward financial ruin.
    Daewoo, please see the below public service announcement

    Attached Images Attached Images

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    Quote Originally Posted by Steeeeve View Post
    Daewoo, please see the below public service announcement

    You seem to get quite enough to eat as it is.
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

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    SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”

    Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.
    Apparently most people think they would stuff it under the mattress. Have you read the responses to this thing? WSJ has had several opinions on this. Most of them say it is "delusional" to think raising capital gains will not effect investing. I think it is delusional to think it will. Are companies going to stop paying dividends? No. Are investors going to stop investing? No.

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    Quote Originally Posted by Steeeeve View Post
    Apparently most people think they would stuff it under the mattress. Have you read the responses to this thing? WSJ has had several opinions on this. Most of them say it is "delusional" to think raising capital gains will not effect investing. I think it is delusional to think it will. Are companies going to stop paying dividends? No. Are investors going to stop investing? No.
    broken window fallacy

    PS. it might be a reverse slippery slope too; can't remember the name of that fallacy. Basically it's saying knocking down half the mansion is not a bad thing because people will still live in the other half.
    Morals are a religious Myth.. - Xcaliber
    How is Evil Immoral? - Xcaliber
    I am right until you prove otherwise - Xcaliber

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    Quote Originally Posted by Steeeeve View Post
    Apparently most people think they would stuff it under the mattress. Have you read the responses to this thing? WSJ has had several opinions on this. Most of them say it is "delusional" to think raising capital gains will not effect investing. I think it is delusional to think it will. Are companies going to stop paying dividends? No. Are investors going to stop investing? No.
    This is another one of those tax truths that a lot of people on the right seem to accept...mostly people who know very little about taxes and nothing about business or investment.

    This is the same as the "raising taxes on the rich will hurt economic growth" nonsense. The numbers do not back it up. There is no logical argument that could lead you to that conclusion. And yet....there seem to be an awful lot of people who take it as fact, usually without actually being able to tell you why.
    If ye love wealth greater than liberty, the tranquility of servitude greater than the animating contest for freedom, go home from us in peace. We seek not your counsel, nor your arms. Crouch down and lick the hand that feeds you; May your chains set lightly upon you, and may posterity forget that ye were our countrymen. —Samuel Adams

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