Raising taxes on the rich

[Ridgerunner]

In the case of retirement money, it’s equivalent if done under tax-advantaged accounts. Retirement accounts like an IRA or Roth IRA treat dividend money the same as any other income because the taxes are either taken out in the beginning or deferred. In fact, if the retired lady has an IRA and is using it to buy dividend stocks, she’s already paying the full amount when she withdraws.

I would estimate that most people who make modest money on dividends have other sources of income. The level at which capital gains tax affects you is proportional to how much of your income relies on it. But even if that’s not the case, I think just philosophically it seems that people who live off of investing shouldn’t be getting lower taxes than people who live off of working.

Retirement accounts like IRAs, 401k or Roth IRAs all have a certain degree of tax reduction or deferral to them, principally by making the contributions tax free at the time of investment (IRA, 401k) or, when the investment is with after-tax dollars, by making the withdrawals tax free (Roth).

Now, if a person invests in stock (there are other things, but let’s use stock as an example) with after-tax dollars, but does not put it in a Roth IRA, he gets some tax benefit through the lower dividend tax rate, but he is much disadvantaged even at today’s dividend rates relative to one with a Roth. I fail to see why it is not unfair, relative to the other ways of investing for one’s future or one’s family’s future. I particularly don’t see how it’s unfair relative to people who received employer contributions to, say, 401k on which they paid no tax at all, or “defined benefit” pensioned employees who paid in nothing whatever. In the case of private employers, pension contributions are deductible to the employer. In the case of government employees, they get a free pension worth a lot of money, at taxpayer expense.

So, why is the person who invests his own after-tax money to be penalized relative to those who are investing in one government-favored scheme or another? Why, philosophically, is the Roth investor any more deserving that the guy who puts aside some of his wage for investment but just doesn’t want to put it in a Roth? (There are reasons why he might not want to, or even be able to.)

You might object, philosophically, to what you think is a tax benefit for “rich people” simply because you believe they are rich people and don’t like the thought of their receiving income and paying a lower rate on it. But very few stockholders I know (and I know a lot of them) are anywhere near being rich. They are simply the people who are providing for their own futures, and all with after-tax dollars.

And the dividend tax rate does not depend on your other income. It’s a flat 15% unless you didn’t hold the stock long enough to qualify, then it’s just your regular marginal income tax rate.

So the “in and out” professional investor who trades daily is likely to be paying ordinary income rates on a lot of it. It’s the “buy and hold” people who get the 15% rate.

If, philosophically, you simply believe wealthy people should pay more in taxes, why not shoot with a bullet instead of a scattergun that hits small investors all around them? Why not simply increase (and move up the minimum) the Alternative Minimum Tax, or disallow deductions for forming private foundations? And why not do away with all the ways by which the wealthy avoid estate taxes? Lots of ways to soak the rich, if that’s what you want to do.

 

[copperblade]

Now, if a person invests in stock (there are other things, but let’s use stock as an example) with after-tax dollars, but does not put it in a Roth IRA, he gets some tax benefit through the lower dividend tax rate, but he is much disadvantaged even at today’s dividend rates relative to one with a Roth. I fail to see why it is not unfair, relative to the other ways of investing for one’s future or one’s family’s future. I particularly don’t see how it’s unfair relative to people who received employer contributions to, say, 401k on which they paid no tax at all, or “defined benefit” pensioned employees who paid in nothing whatever. In the case of private employers, pension contributions are deductible to the employer. In the case of government employees, they get a free pension worth a lot of money, at taxpayer expense.

Yes, retirement accounts are better for retirement than regular accounts. Those are the rules to encourage people to save for retirement. Do you think saving outside of retirement accounts should be equal to or better than using retirement accounts? To be realistic, most americans don’t have “extra money” to maximize their retirement account contributions and start big investment accounts on the side.

So, why is the person who invests his own after-tax money to be penalized relative to those who are investing in one government-favored scheme or another? Why, philosophically, is the Roth investor any more deserving that the guy who puts aside some of his wage for investment but just doesn’t want to put it in a Roth? (There are reasons why he might not want to, or even be able to.)

The basic answer is because they have agreed to not withdraw their money until they retire, or take a 10% penalty. It’s an incentive designed to make sure people have money when they retire. What would be a reason someone may not be able to contribute to a Roth IRA? I personally can’t think of one…

Ultimately the objection to having these special retirement accounts is a different argument.

You might object, philosophically, to what you think is a tax benefit for “rich people” simply because you believe they are rich people and don’t like the thought of their receiving income and paying a lower rate on it. But very few stockholders I know (and I know a lot of them) are anywhere near being rich. They are simply the people who are providing for their own futures, and all with after-tax dollars.

The only reason I wouldn’t use a retirement account is to trade on margin, or because I maxed out my retirement contributions already. The last I checked the maximum contribution to a deferred tax account was somewhere in the neighborhood of $15k and IRA is 5k. That means if you max out a 401k and then do a Roth IRA on the side, you can get $20k per year in tax-protected accounts.

Don’t get me wrong, I there certainly are salary ranges that I wouldn’t consider “rich” but also $20k per year wouldn’t satisfy their desire to dodge taxes. I don’t know what you call them, middle class, upper-middle class, upper class… whatever. I agree from what Obama says it sounds like they are going to get squeezed unfairly. (Which makes sense politically, by the way: votes from the bottom, contributions from the top.) But I don’t think the capital gains tax is the problem. It’s like you said before, it’s the definition that someone who makes 200k a year is “rich” (or at least it’s implied) that’s wrong.

And the dividend tax rate does not depend on your other income. It’s a flat 15% unless you didn’t hold the stock long enough to qualify, then it’s just your regular marginal income tax rate.

So the “in and out” professional investor who trades daily is likely to be paying ordinary income rates on a lot of it. It’s the “buy and hold” people who get the 15% rate.

It’s true. Day-traders aren’t encouraged the same way investors are. The first reason for lower capital gains tax is to encourage people to invest. The second reason is double taxation on the same money (which I think is done on purpose so that everyone doesn’t just incorporate themselves and pay themselves through dividends to avoid social security tax).

I respect the reasoning. I think philosophically they’re strong, but pragmatically they’re weak.

If, philosophically, you simply believe wealthy people should pay more in taxes, why not shoot with a bullet instead of a scattergun that hits small investors all around them? Why not simply increase (and move up the minimum) the Alternative Minimum Tax, or disallow deductions for forming private foundations? And why not do away with all the ways by which the wealthy avoid estate taxes? Lots of ways to soak the rich, if that’s what you want to do.

Because I think capital gains should be taxed at the same rate as any other income? I do see the point in encouraging people to invest, but in reality I think it’s unfair. I am in no way biased against or jealous of “rich people.”

Buffet’s logic is what convinced me:
“We’re going to have to get more [tax] money from somebody. The question is, do we get more money from the person that’s going to serve me lunch today, or do we get it from me? I think we should get it from me. I have a lower tax rate, counting payroll taxes, than anybody in my office. And I don’t have a tax shelter – I just take the form and fill out the numbers. I think that’s very wrong, and I think that if we’re going to get money – and we’re going to need money; we are not taking in enough money at the federal government level … it shouldn’t be [from] the bottom 98%. It should be more from people at the top.”

The only way you get that kind of a tax rate without a shelter is through capital gains.

 

[Warrior1979]

Buffet’s logic is what convinced me:
“We’re going to have to get more [tax] money from somebody. The question is, do we get more money from the person that’s going to serve me lunch today, or do we get it from me? I think we should get it from me. I have a lower tax rate, counting payroll taxes, than anybody in my office. And I don’t have a tax shelter – I just take the form and fill out the numbers. I think that’s very wrong, and I think that if we’re going to get money – and we’re going to need money; we are not taking in enough money at the federal government level … it shouldn’t be [from] the bottom 98%. It should be more from people at the top.”

Buffett is also giving his money away so it doesn’t get taxed.

I’d be curious as to why he is giving it to private charities rather than the government if the government needs it so bad.

:sarcasm:

 

[Ridgerunner]

Yes, retirement accounts are better for retirement than regular accounts. Those are the rules to encourage people to save for retirement. Do you think saving outside of retirement accounts should be equal to or better than using retirement accounts?

What would be a reason someone may not be able to contribute to a Roth IRA? I personally can’t think of one…

The last I checked the maximum contribution to a deferred tax account was somewhere in the neighborhood of $15k and IRA is 5k.

It’s true. Day-traders aren’t encouraged the same way investors are. The first reason for lower capital gains tax is to encourage people to invest. The second reason is double taxation on the same money (which I think is done on purpose so that everyone doesn’t just incorporate themselves and pay themselves through dividends to avoid social security tax).

Buffet’s logic is what convinced me:
“We’re going to have to get more [tax] money from somebody. The question is, do we get more money from the person that’s going to serve me lunch today, or do we get it from me? I think we should get it from me. I have a lower tax rate, counting payroll taxes, than anybody in my office. And I don’t have a tax shelter – I just take the form and fill out the numbers. I think that’s very wrong, and I think that if we’re going to get money – and we’re going to need money; we are not taking in enough money at the federal government level … it shouldn’t be [from] the bottom 98%. It should be more from people at the top.”

The only way you get that kind of a tax rate without a shelter is through capital gains.

Point 1. Yes, I do think individual investments CAN be a better vehicle. Not all people can do Roth IRAs. Ordinary IRA contributions are very limited ($2500/person). People who are trying to make it on their own do not always have the same amount of money, year-to-year. Certainly, the self-employed do not. Regardless, I think 401k and IRAs are, to some degree, a “tax trap”. You MUST start withdrawing at age 70. If, for any reason, you are still working at that age (and more and more people do), you are almost certainly going to be paying a higher percentage of it in tax than you saved back when you were young and had a lower tax rate, and made the contributions.

Point 2. The maximum annual contribution to a Roth is $5,000.00. You have to pay taxes on that contribution, you can’t just put in stock that you already own. So if you own any, you have to cash it out, pay 15% on that, then put the money in and buy again. All you really did is shift your assets, but you pay the tax anyway. Also, it phases out beginning at $105,000 in income. Your maximum contribution then is $200. It isn’t an entirely realistic vehicle for a person (particularly, again, a self-employed person) whose income goes up and down significantly. But no matter what, the existence of Roths is not an argument in favor of additionally taxing a person 15% if he doesn’t do a Roth, UNLESS the motivation is to get at those “big investors” (read “middle class investors”) this administration loves to hate. But that isn’t a sufficient reason, in my opinion.

Point 3. I have never seen Warren Buffett’s tax return, so I don’t know how he pays less tax than his employees. (probably as a percentage). Capital gain is not the only way to shelter income, not by a long way. Think about this for a minute. Buffett is also a “foundation builder”. Right now, he has merged his private foundation with Gates’. Now, let’s say Buffett bought 100,000 shares of “X Co” 20 years ago at $1.00. Then let’s say he gives it to his 501(c)(3) foundation when it’s at $100. He gets a ten million dollar deduction and can, therefore, cash out ten million in salary or whatever, and put it in his pocket (“discretionary income”) without paying a dime in taxes. For a person who is also fabulously “asset rich” like he is, and can make his income go up or down at will, that’s a major, major thing. I have no problem with Buffett paying more taxes if that’s what he thinks he and people like him should do. But that is not an argument in favor of nailing some retiree or minimally-employed person who worked his whole life to put together a “nest egg” in the form of a diversified stock portfolio.

Again, if “taxing the rich” is the objective (and I’m not sure it should be an end in itself) then an instrument directly aimed at them should be utilized, not some tax cannon loaded with grapeshot that also gets a lot of bystanders who aren’t rich at all.

Because of my geographical location, I know a fair number of people with quite a bit of stock wealth who worked on the line their whole lives at, e.g., Tyson’s, or in some Walmart warehouse. Why do they have that wealth? Because long ago their company’s stock was dirt cheap and the companies had stock purchase incentive plans. I’m sure there are folks like that in other parts of the country as well.

And finally, I’m not as persuaded as Buffet is that this country’s problem is inadequate tax take. It’s only inadequate relative to spending. We have seen two and a half years now of absolutely unbelievable spending. So Buffet believes in current levels of government spending, I guess. But that does not mean I have to share his beliefs, and a lot of people who know a lot more than I do, don’t share them.

 

[valentino]

I think there’s a problem with how you’re looking at the economy. You seem to have the same understanding as the first Wall Street film, “It’s a zero sum game. Someone wins, someone loses”. The point of the American economy is to expand the economy, not re-distribute. Bill Gates is immensely rich, not because he took money from a large portion of the economic pie, but he created a new market and brought new wealth.

-Prophesy

Yes,I agree.But how did it really benefit the middle and lower classes.it didn’t improve their economic situations.It may have put more people to work but the classes were just as poor as before and Gates got much wealthier.Aren’t we trying to find a way that the other classes are better off than before?

 

[Prophesy]

Yes,I agree.But how did it really benefit the middle and lower classes.it didn’t improve their economic situations.It may have put more people to work but the classes were just as poor as before and Gates got much wealthier.Aren’t we trying to find a way that the other classes are better off than before?

The gap between Middle-class and Upper-class have since narrowed. But the thing is that as time progresses they tend to move up in the system, it’s just that the lowest are often replaced with new Lower-class.

The invention of the computer has created millions of jobs globally, these are people who are finding ways to make income with jobs that never would have existed otherwise. So yes, it improved their economic situations or do you really think that no one is better off as a result of this technology?

-Prophesy

 

[valentino]

Thanks Robert. You’re right, it is pretty much a game. For a period of time I was really concerned with how much money I made. I think it has something to do with envy.

I believe in a sense one could call in envy.But thiis is exactly what this country touts to its citizens.O.and every politian talk about the American Dream.What is it?Most people see it as a car or two,definitely a home,probably a vacation once a year,health care which people don’t have to worry about,having enough money for good education for their children,ect.Does the average citizen have that?No way.So this very society tells everyone that the should be envious .

 

[vz71]

Yes,I agree.But how did it really benefit the middle and lower classes.it didn’t improve their economic situations.It may have put more people to work but the classes were just as poor as before and Gates got much wealthier.Aren’t we trying to find a way that the other classes are better off than before?

Without the contribution of Bill Gates, I would not have a job.
The profession that I am in simply would not exist.

And I do not work for Microsoft or any of the other software companies riding along the economic wave.

That is his impact. Not only did he create a business and jobs, but he did it so well that it is impacting in a positive way other fields.

His contribution has kept me out of poverty.

However, I see every day individuals that are on a government program of one type or another that have absolutely no ambition to support themselves. They are perfectly content to stay in poverty and take whatever handout the government will provide them. Their work ethic consists of bare minimum to keep from being fired.
No matter how successful people are, or how much we grow the economy, these people will still be there.

There are some things that economic policy simply cannot fix.

 

[valentino]

I don’t think it was “stolen time” but Gates is just an example regardless. And yes it isn’t a meritocracy, but I believe this is where my concessions end.

Firstly, as I’ve said before, income tax is just about the least helpful way of taxation. Secondly, the problem in the states isn’t a lack of governmental income, but an asinine spending program (outweighing the world GDP with debt and unfunded obligations is asinine, I hope we can both agree).

Thirdly, while I believe in a welfare net, I do not believe in a welfare net for corporations, small businesses, etc.

-Prophesy

It was stolen time.He wasn’t allowed in there and he broke the rules.He just figured taking the risk was worth it.And of course it was obviously.But they didn’t allow him to continue in the same manner.

 

[Ridgerunner]

I believe in a sense one could call in envy.But thiis is exactly what this country touts to its citizens.O.and every politian talk about the American Dream.What is it?Most people see it as a car or two,definitely a home,probably a vacation once a year,health care which people don’t have to worry about,having enough money for good education for their children,ect.Does the average citizen have that?No way.So this very society tells everyone that the should be envious .

I’m not sure the average citizen DOES NOT have it that way, with the possible exception of “having enough money for good education for their children”. I think that one depends on what one considers a “good education”. If it’s Harvard, then no, most people can’t afford that. If it’s a state college, it can be done by almost anyone, particularly if the first two years are a junior college. And, of course, if the public elementary and secondary schools are failing, that’s not a matter of money.

What i do think causes a lot of people to think their situation has declined (and I’m aware that for some it has) is that they find it difficult to purchase all the things they see as “normal” on television and in magazines, and somehow think they’re deprived if they can’t do it, or overextend themselves trying. Ever try to convince some young couple that perhaps they ought to rent for a few years while they save up enough for a substantial down payment on a house? You almost can’t do it. People think they should be able to afford everything all at once and, because they can’t they think there has been a decline in living standards. But they don’t seem to realize most of their parents had to defer purchases as well. What they saw at the height of their parents’ purchasing power was, indeed, the peak, not the starting point.

Right now, there’s a lot of recapitalization going on among the populace. Some have learned valuable lessons; some have not.

 

[Prophesy]

It was stolen time.He wasn’t allowed in there and he broke the rules.He just figured taking the risk was worth it.And of course it was obviously.But they didn’t allow him to continue in the same manner.

I can’t find him doing anything at Harvard aside from generating his pancake sorting program.

The only thing I can see about opening up time with computers that weren’t his was in his grade school.

-Prophesy

 

[rturner76]

I agree with you about trickle-down and the deficits, however I do think Gingrich deserves a lot of credit for balancing the budget. The House was the one that negotiated the deal with Clinton and forced him to gut a lot of programs.

Clinton passed welfare reform and all that. This is what can happen when people put aside political differences and all that trickle down “make the rich richer and they will help make the poor more money.” Put that aside and let the best ideas prevail. I know Clinton campained on a plan to balance the budget. I don’t know the details of who contributed what but I remember things were nice then. I live in a state where Tim Pawlenty was the Governor and I lost out on two career type jobs under his budgets gutting public education and higher education and to me that supports the notion of “if you want a good education, pay for it”

Also, what exactly is “Supporting the common good” liberals also may take that notion too far. I believe as a society is is in your best interest to educate the masses in order to have the best and brightest idea people, inventore, innovators, artist etc. To lead the world’s economy. Also healthcare for children. If you pair free and equal healthcare and education for all citizens. Everyone in society is truely equal. The problem is people take artistic license witht he trerm “Support the common good”

A true capitalist society is utopia because compitition brings about the best of every company, product, employer, health plan etc. Provided there is no corruption in big business.

Socialism provides for all citizens equally and everyone has everything they need provided there is no corruption in government.

I guess you have to choose which corruption you think is the less of two evils or the one you can live with. Big business corruption or Government corruption.

It gets really deep when companies like big oil and tobacco enjoy cirrupt business practices AND enjoy corrupt government protection. That’s big business in the USA

 

[vz71]

I guess you have to choose which corruption you think is the less of two evils or the one you can live with. Big business corruption or Government corruption.

When a business is corrupt, consumer choice can change it.
You don’t like the way Wal Mart does business, you are free to shop elsewhere.

When a government is corrupt, there is often bloodshed.

 

[copperblade]

They’re valid points.

Point 1. Yes, I do think individual investments CAN be a better vehicle. Not all people can do Roth IRAs. Ordinary IRA contributions are very limited ($2500/person). People who are trying to make it on their own do not always have the same amount of money, year-to-year. Certainly, the self-employed do not. Regardless, I think 401k and IRAs are, to some degree, a “tax trap”. You MUST start withdrawing at age 70. If, for any reason, you are still working at that age (and more and more people do), you are almost certainly going to be paying a higher percentage of it in tax than you saved back when you were young and had a lower tax rate, and made the contributions.

Point 2. The maximum annual contribution to a Roth is $5,000.00. You have to pay taxes on that contribution, you can’t just put in stock that you already own. So if you own any, you have to cash it out, pay 15% on that, then put the money in and buy again. All you really did is shift your assets, but you pay the tax anyway. Also, it phases out beginning at $105,000 in income. Your maximum contribution then is $200. It isn’t an entirely realistic vehicle for a person (particularly, again, a self-employed person) whose income goes up and down significantly. But no matter what, the existence of Roths is not an argument in favor of additionally taxing a person 15% if he doesn’t do a Roth, UNLESS the motivation is to get at those “big investors” (read “middle class investors”) this administration loves to hate. But that isn’t a sufficient reason, in my opinion.

I will agree that I don’t think it’s fair to reduce the contribution limit on retirement accounts due to income. I really don’t see any point in that. I think the very fact that the limit is a constant and not based on a percentage of income is progressive enough and anyone should be able to make those contributions.

But you keep comparing investing in a retirement account to normal investments. Maybe that’s my fault for brining them up. My question isn’t “why should I have to pay more tax than a Roth account?” but “why do I get to pay less taxes on my income than someone who earns it through labor?” Even if the income tax rate was the same for capital gains, you still wouldn’t have to pay social security. Isn’t that fair?

Point 3. I have never seen Warren Buffett’s tax return, so I don’t know how he pays less tax than his employees. (probably as a percentage). Capital gain is not the only way to shelter income, not by a long way.

I think he might mention it here: youtube.com/watch?v=Cu5B-2LoC4s

He stated that he doesn’t use any tax shelters. What I was saying was the only way you get that kind of rate without a tax shelter is through capital gains. If you know of any other ways, please let me know

Think about this for a minute. Buffett is also a “foundation builder”. Right now, he has merged his private foundation with Gates’. Now, let’s say Buffett bought 100,000 shares of “X Co” 20 years ago at $1.00. Then let’s say he gives it to his 501(c)(3) foundation when it’s at $100. He gets a ten million dollar deduction and can, therefore, cash out ten million in salary or whatever, and put it in his pocket (“discretionary income”) without paying a dime in taxes. For a person who is also fabulously “asset rich” like he is, and can make his income go up or down at will, that’s a major, major thing. I have no problem with Buffett paying more taxes if that’s what he thinks he and people like him should do. But that is not an argument in favor of nailing some retiree or minimally-employed person who worked his whole life to put together a “nest egg” in the form of a diversified stock portfolio.

Ok, but how would you do that? So you would be in favor of a progressive capital gains tax?

Again, if “taxing the rich” is the objective (and I’m not sure it should be an end in itself) then an instrument directly aimed at them should be utilized, not some tax cannon loaded with grapeshot that also gets a lot of bystanders who aren’t rich at all.

You’re right. I’m sorry, I’m saying two different things. The first is that it’s fair to charge the same rate for all income and not to give preferential treatment to passive income. The second is that this would in effect hit rich people more which is “naturally progressive” in a way that I think is fair. But our system works exactly the opposite in order to influence behavior.

You’re observation that the current system is squeezing people somewhere in the middle unfairly is totally valid. I share your viewpoint about Obama’s 200k/250k cut-off point being too low.

Because of my geographical location, I know a fair number of people with quite a bit of stock wealth who worked on the line their whole lives at, e.g., Tyson’s, or in some Walmart warehouse. Why do they have that wealth? Because long ago their company’s stock was dirt cheap and the companies had stock purchase incentive plans. I’m sure there are folks like that in other parts of the country as well.

It’s great that they’ve made money that way. But why should they be taxed so much more on their labor? I work and I buy stock, and this is the question I ask myself too. It’s easy for me to just be in favor of whatever gives me the most money, but when I look at friends who don’t have the funds to invest, I do have to wonder why my taxes are lower on the part where I’m not actually working to earn it.

 

[Ridgerunner]

They’re valid points.

I will agree that I don’t think it’s fair to reduce the contribution limit on retirement accounts due to income.

But you keep comparing investing in a retirement account to normal investments. Maybe that’s my fault for brining them up. My question isn’t “why should I have to pay more tax than a Roth account?” but “why do I get to pay less taxes on my income than someone who earns it through labor?” Even if the income tax rate was the same for capital gains, you still wouldn’t have to pay social security. Isn’t that fair?

I think he might mention it here: youtube.com/watch?v=Cu5B-2LoC4s

He stated that he doesn’t use any tax shelters. What I was saying was the only way you get that kind of rate without a tax shelter is through capital gains. If you know of any other ways, please let me know

Ok, but how would you do that? So you would be in favor of a progressive capital gains tax?

You’re observation that the current system is squeezing people somewhere in the middle unfairly is totally valid. I share your viewpoint about Obama’s 200k/250k cut-off point being too low.

It’s great that they’ve made money that way. But why should they be taxed so much more on their labor? I work and I buy stock, and this is the question I ask myself too. It’s easy for me to just be in favor of whatever gives me the most money, but when I look at friends who don’t have the funds to invest, I do have to wonder why my taxes are lower on the part where I’m not actually working to earn it.

The capital gains rate was always lower than the top income tax rates. It’s just lower now than it was before Bush, and not by all that much. The dividend rate was always “ordinary income” rate before Bush.

One could make an argument that there should be no preferential tax treatment for any kind of saving or investing. That would be eminently “fair” in terms of equality of treatment. Presumably, the different tax treatments are, as you say, intended to effect behavior; i.e., encourage thrift vs spending. Maybe it works and maybe it doesn’t, but if it works, there really is no good reason for the government to say “if you do it according to a formula we like, you get a break. If, however, you do it according to your own formula, you don’t, even though the effect and purpose are exactly the same.” There’s just no logic to it.

I’ll confess that I have a personal distaste for government-preferred modes. First, because, like the “IRA/401k ‘tax trap’” they might be illusory in effect. It’s clear, too, that this administration favors tipping the scale so people will be encouraged to invest their “government favored” money into annuities. Potential regulations regarding that are wending their way slowly and without fanfare through the regulatory process.

Now, the reason I don’t like that “encouragement to convert to annuities” is akin to the reason I don’t like “government-favored” modes at all. The Social Encyclicals encourage the private acquisition of productive, inheritable assets. The reasoning behind that position is that if individuals and families have at least a certain degree of independence from either government or big business, it is more likely to avoid taking on the ideological messages of the “benefactor”. It seems to me that, inherent within that concept, is maximizing freedom of choices. When the government encourages one mode of providing for oneself and one’s family, and discourages another, it is interfering with that freedom. It is especially doing so when it is intent on devising incentives (and disincentives in the opposite direction) for people to use their acquired assets to buy “lifetime only” annuities. Some say that’s a money grab by the government. i wouldn’t go that far, but I don’t like the whole tenor of it.

So, if we were going to get rid of all tax benefits for any kind of savings or investments, I could more readily accept the idea that private investments in which the government plays no part, should not have a favored tax rate. (though it remains unanswered whether investment is encouraged by lower rates) But that’s not what’s being said here. What’s being said is that favored modes should continue to have tax breaks whereas others should not. Just because the government changes its ideas about what investments should be encouraged and what ones should be discouraged, does that mean I am obliged to accept the government’s point of view? No it doesn’t.

And just because Buffet claims he uses no tax shelters, that doesn’t mean he doesn’t. It just means he doesn’t see it that way. Now, if he pays full taxes on donations he makes to 501(c)(3)s, and I know he makes them, and in a big way, he’ll get a deduction for that against ordinary income. Personally, I can’t imagine that he doesn’t take the deduction. That’s not a “tax shelter” in a manner of speaking, it’s just reducing your income. And, again, a massively wealthy person can control his “income”. It’s not income until you cash out, right? And you don’t pay tax on appreciation until you do. But it’s there anytime you need it or simply want it. So he doesn’t cash out his investments and therefore doesn’t pay any tax on their gain. There’s no merit in that. But he wants that Tyson or Walmart worker to, by golly, pay full “ordinary income” rate because the government spends too much money. There’s no merit in that either.

 

[copperblade]

But he wants that Tyson or Walmart worker to, by golly, pay full “ordinary income” rate because the government spends too much money. There’s no merit in that either.

I can’t really argue with most any of your opinion except the ending statement which I think is unfair. You’re coupling the fact that a person works a Walmart to the idea that some Walmart workers may get stock options. So unless you’re saying that stock compensation in lieu of regular payment is taking the reduced capital gains tax into account, then I don’t see the connection. Walmart workers already pay full ordinary income. I think you know that realistically the vast bulk of capital gains taxes will not be paid by the Walmart greeter.

I agree that this should not be done just to continue wasteful spending habits.

 

[copperblade]

A true capitalist society is utopia because compitition brings about the best of every company, product, employer, health plan etc. Provided there is no corruption in big business.

Socialism provides for all citizens equally and everyone has everything they need provided there is no corruption in government.

I guess you have to choose which corruption you think is the less of two evils or the one you can live with. Big business corruption or Government corruption.

It gets really deep when companies like big oil and tobacco enjoy cirrupt business practices AND enjoy corrupt government protection. That’s big business in the USA

I think the real philosophical problem is that we think if we could just figure out how to make the right rules, we could get the behavior we want. I’m very skeptical about that assumption. It’s really more important that we culturally glorify hard work over wealth–service over greed.

 

[copperblade]

When a business is corrupt, consumer choice can change it.
You don’t like the way Wal Mart does business, you are free to shop elsewhere.

When a government is corrupt, there is often bloodshed.

This is why I think it’s the government’s primary job to force transparency in the market. This is done with things like food labels (and should be improved), and could be done more. Saying that consumer choice can change things means nothing if the consumers don’t have enough information to make intelligent decisions.

 

[Ridgerunner]

I can’t really argue with most any of your opinion except the ending statement which I think is unfair. You’re coupling the fact that a person works a Walmart to the idea that some Walmart workers may get stock options. So unless you’re saying that stock compensation in lieu of regular payment is taking the reduced capital gains tax into account, then I don’t see the connection. Walmart workers already pay full ordinary income. I think you know that realistically the vast bulk of capital gains taxes will not be paid by the Walmart greeter.

I agree that this should not be done just to continue wasteful spending habits.

My point was that a lot of very ordinary people own stock and think of it in terms of helping finance their retirement. They’re not all millionaires. And just to correct one thing, I don’t know about a lot of other companies, but with some of them, they actually gave the stock away to any worker, no matter what their job was. It worked like this. If you bought a share of stock through payroll deduction, the company would issue two to you. Some of that stock was astonishingly cheap at the time, so the deduction was just a few dollars. A lot of people of very ordinary means did very well doing that.

But my bigger point regarding the supposed “investor class” is that if they are to be targeted, then the means should be something that uniquely applies to them, not something that affects millions of people willy-nilly.

But then, there really aren’t all that many massively wealthy people. The government likes to tax with a broad blast because that’s where the real money is. It pretends to go after “the rich” but the target is really the middle class…always.

 

[rturner76]

When a business is corrupt, consumer choice can change it.
You don’t like the way Wal Mart does business, you are free to shop elsewhere.

When a government is corrupt, there is often bloodshed.

To turn that the other way you could say that the biggest business buys the government and now we have slavery.

What’s really equal in the utopian scenario is:

Take your business elsewhere

Take your vote elsewhere

Personally, I believe the mix of the two wings, Right and Left, one never gets too much control so we don’t get communism or facism. If the right goes too far, they get voted out. If the left goes too far they get voted out.

I don’t believe in OVER taxing the rich. Personally, I don’t even think you need to raise their taxes if you close the loopholes and tax shelters they use in order to pay NO taxes.

I know a guy, doesn’t own a thing, the “company” owns it. In this big tax loop hole game. Eliminate the loopholes and you will get the missing monies. Maybe? I just realized I’m not an economist.