Your point only refers to freeloaders. The government does not force me to pay taxes, since I recognize their value. You can’t speak of forcing someone to do something when they are doing it of their own free will.
I’d contend that any reasonable person sees the benefit of taxes, and thus does not have to be forced to pay them. The rate doesn’t matter – you can’t say that you are freely paying 10% but are forced to pay an additional 5%.
Is the government forcing you to not run a red light at a busy intersection? If you do, and survive, and a cop sees you, you’ll get a ticket. But I trust you stop out of rational self interest and as a member of society who doesn’t put others at risk.
And I’m still interested in how a system without force is supposed to work.
These are not really capital gains tax rates. What the tables show is that if you owned the asset for less than a year, you pay tax at your marginal tax rate. That is not the “capital gains tax rate” that people refer to. I think Simplicio has it right in post #139.
Note that Voyager’s cite is from 2010 and the figures they have for 2011 - 2012 are wrong; they assumed expiration of the Bush tax cuts.
[QUOTE=Simplicio]
The max capital gains rate (which seems to be what people usually give if they want to summarize the rate in a single number) was 39.9% in the late 70’s. I presume thats what he meant.
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If that’s what he meant then he might want to check out how dynamic the economy was at that time, and how much total revenue from taxes the government was actually bringing in compared to today. Personally, since I was alive and working at that time, I’ll take today over the late 70’s, even given the ongoing recession. Perhaps Warren has better rose colored glasses of the good old days of the late 70’s than I do, but to me it really sucked, even if the government was better at sticking it to the rich dudes then as opposed to now.
It does mean that it is in his interest to keep the present system going. Whether that makes him more likely to maintain it, or more likely to be shamed into changing it, is an interesting question. I am not going to count on Mitt to have that much shame, but I think it’s good for the country that someone who represents the so-called “job creator” set the way Mitt does is in the public eye this way. It explodes the claims of the Conservative Movement[sup]TM[/sup]
But it’s still Congress that writes the tax code. What’s their excuse?
Not for that reason, no. But we write tax credits to encourage socially responsible behavior because we know many investors would not do the responsible thing otherwise. We assume a certain moral unfitness at least in the majority of the wealthy, arguably in the majority of the populace. Which has disturbing implications for democracy.
Yes. There should be a negative capital gains tax. If you lose $100K, you should have your losses subsidized at the capital gains tax rate. This is not only fairer on a macro level, it removes the disincentive you refer to.
I had forgotten that Obamacare included a capital gains rise on top earners, so unless it is repealed Mitt’s tax liability will go up starting in 2013. And of course it will go up more if the Bush-era tax cuts are allowed to expire. So he could be paying more like 25% come 2013.
He chose a poor example but he is referring to the marginal effect of increasing taxes. It knocks out some marginal investments. For example lets say that the risk free rate is 10%. I have an opportunity to invest in a bee farm that has a lot of risk and has an expected return of 12% or a 2% premium over the risk free rate. Taxes will reduce the spread between 10% and 12% (lets say the tax rate is 50%, then the difference between the after tax returns are reduced by 50% so now making this really risky investment will only yield me a 1% premium over the risk free rate. I might just invest in the risk free investment. When you have high levels of aversion to risk and you need investment, then you want to limit things taht will reduce the risk premium. Or so the theory goes. A Keynesian will say FUCK that shit. If people would rather invest their money with the US fed (risk free investment) then use that fucking money to build infrastructure and you will be setint yourself up for recovery and lower aversion to risk.
There are two things. People can buy risk free investments like US treasuries or people can take their money and leave. Ther is little to no evidence taht this happens but its the threat of every hedge fund manager that visits congressmen.
IMHO, the 1970’s were not as bad as now. The 1970’s recession was almost entirely driven by oil going up 1000% between 1973 and 1980. When the oil situation sorted itself out, so did our economy. Not so with this recession. We are going to need wage driven inflation to get out of this one and noone seems ready to inflate wages.
IMO one of the big transformations of US economic policy since the 1970 is the change of focus away from wages toward assets.
I think inflation fears in the '70s and the beginnings of a global market for labor pushed both political parties to support policies that held down wages. Of course, just doing that would seriously destroy the middle class, so on the flipside more Americans were encouraged/forced to acquire financial assets to offset lost wages. This is why, for example, most pensions were converted to 401k’s, home ownership was incentivized, and credit cards suddenly became ubiquitous; these things took the place of wage increases. Moreover, trade policy in the US–with it’s emphasis on free trade agreements and lower-priced foreign goods–kept low-price goods flowing to America while increasing the stock value of companies engaged in exports. Low interest rates (which encourage borrowing) and tax cuts also offset the effects of stagnant wages.
This system works great when assets grow. But when they fall, the effects seem to be unpredictable, systemic, and devastating. Ecdonomic policy then focuses on reversing the recession the focus not by growing wages but on raising asset values. Thus, rather than help underwater borrowers stay in their home, it’s more important to quickly clear out the foreclosure “dead weight” so that housing assets can grow again.
I might have been more charitable if he hadn’t indicated he didn’t know that capital gains taxes weren’t based on the entire investment.
I certainly am not arguing that capital gains taxes won’t impact marginal investments - which is why I gave the cite that they were higher during the internet boom. That only went back to 1987 which was plenty for my point. Finding even that was surprisingly hard. However, one can argue that forcing money into investments with higher return is good for the economy, since the benefit to the economy as a whole is the entire return, even if the benefit to the investor is reduced by the tax.
Now one could argue that the benefit of making money in the market, as opposed to productive investments, is unclear, but that is a side effect of there being a market, so I think we can neglect this.
Yeah, fucking sad isn’t it? But to be fair, this is only because he donates millions of dollars. I think its pretty accurate to say he is taxed at the 15% rate which is a reasonable tip (at least it was when I was growing up (heck 10% was a reasonable tip when I was a kid, these days I see 20% a lot).
Hmm, the question of whether it has been “taxed” is decided by the effect of the tax rather than semantics, right?
So lets look at what he actually gains each year under 20% income tax + 0% capital gains tax, and under 0% income tax + 20% capital gains tax. If those two are the same, then the effect of increasing his capital gains tax has the same effect as it would have to increase his income tax, and thus “the new income” has in effect already been taxed.
Let’s say there is 20% income tax, 0% capital gains tax. Then he has $80.000, which earns him $30.000 after taxes.
Now let’s say there is 0% income tax, 20% capital gains tax. Here he keeps the full $100.000. Then he gains 3/8 * 100.000 = $37.500. Of this he pays 20% capital gains tax, and ends up earning: $30.000
To be more clear, the point is that his capital gains income has in effect already been taxed, by the income tax.
This I try to illustrate by comparing his capital gains income each year, in a world with no income tax, and in a world with no capital gains tax. Those two are the same. Since the effect of his capital gains income each year is the same whether you raise the income tax or you raise the capital gains tax, I think it’s most correct to say that his capital gains have already been taxed by the income tax.
If you look at the money he has after paying income tax, but without investing it, of course he will have more of it in the world without income tax. But that is not relevant to the argument.
Not at all - though I must confess that I’m a bit confused by your example. In it, he has less to invest in the income tax case, but that has no bearing on capital gains taxes on his earnings. Say he decided to invest not his whole income after taxes but only $40,000. In this case the capital gains tax is exactly the same in the income tax/no-income tax case. Or, say he has a million bucks in the bank, invests it, and makes 10%. Assuming a 20% tax rate on both income and capital gains taxes
Income tax - no capital gains. $80,000 in income after taxes, $100,000 in investment income.
No income tax, capital gains tax: $100,000 in income after (no) taxes, $80,000 in investment income after taxes.
Exactly the same. Your fallacy is that considering the fact that income taxes may affect the amount available for investment as having anything to do with the capital gains rate.
My point is that he has already paid taxes on those money he earns from capital gains, namely income tax. If you make an example where he starts with a million dollars, then this will not be clear, since you don’t consider the taxes he has already paid on those.
I think all the numbers are just confusing things for people in the discussion, including me. The point is that the net effect on his capital gains is dependant both upon the income tax he has paid and the capital gains tax he has paid. If he paid less income tax, he would have more money to invest, and thus gain more in capital gains. Instead those money went to taxes. So therefore his capital gains income (which I gather is taxed with a ~15% capital gains tax) has already been taxed by the income tax.
Wrong. He has paid income tax on the principal, but not on the capital gains. If I pay income tax on $1000, then invest it in the stock market, where it earns 10%, I am taxed only on the $100 capital gain, not the $1000 I have already paid tax on.
You just said it. He pays income tax on $1000, then invest (the rest of) it in the stock market. So it’s already taxed.
Lets say we have a guy A in a world without taxes, and a guy B in a world with 30% income tax, 15% capital gains tax.
Guy A earns $100.000m invests it, earns +50%, and takes home $150.000.
Guy B earns $100.000. $70.000 is left after tax. He invests it, earns 50% which increases it to 105.000. Then he pays 15% capital gains tax and ends up with $89.250. Compared to guy A, guy B has paid 40.5% in tax. Because the final taxation is a result of both income tax and capital gains tax.
