Wait, you think that the mere existence of a lower capital gains rate is a tax break for the super-rich? How’s that? If a guy has one dollar to his name, invests it, and realizes a long-term capital gain, that gain is taxed at the lower capital gains rate.
Many of the richer people generate the wealth for our economy. They create the jobs and influence the Financial markets.
Overtaxing the rich can make them flee the U.S. That’s been a big problem in the UK for a long time.
Even if they stay, there has to be an incentive to work. Put them in a 40% tax bracket and they’ll just close their companies and live off the wealth they already have.
So you guys think that people will stop investing if we lower the income tax rate without lowering the capital gains tax by the same or some proportional amount? Doesn’t seem likely to me. I don’t object to investment incentives, but the blanket idea that capital gains must be lower than income doesn’t make sense.
With wealth comes influence. With influence comes power. Power lets you shape things like tax breaks. I think it’s an age old formula. With the advent of the SuperPAC you can almost outright buy a politician, these days.
What made you believe that I think that? Why don’t you simply read what I wrote I.stead of inventing positions for me?
Sorry, I shouldn’t have lumped you in with aceplace. No, I don’t think the mere existence of a lower capital gains tax is a break for the rich. I think lowering the capital gains rate in correspondence to lowering the income tax rate is.
No; that’s something the rich say they will do, but they don’t. Especially in America. Where are they going to go where the rich are treated better, after all?
Buy their own private island?
Does anybody know offhand if anybody knows how capital gains are taxed in other G8 countries as compared to the U.S.?
(I could google, but I’ll be lazy since I’m busy.)
That’s only true if they expect the rates to come back down, since after all, they’ll have to take that money out of investments eventually. So the solution is just to raise the capital gains tax and keep it high.
No, at most what they’re doing is enabling others to generate wealth. The guy sweating on an assembly line turning low-value raw materials into high-value products is generating wealth. The guy in the climate-controlled office shuffling around pieces of paper isn’t. And those guys on the assembly line do, and historically have, move to other countries if they’re not taking home enough.
In Canada, capital gains are taxed at one half the top marginal rate of your income tax. So if you’d pay 46% on your last dollar earned, you’d pay 23% on your capital gains.
People with very high paying jobs generally have the bargaining power and financial flexibility to restructure their entire income to be taxed at capital gains rates. Look at all the executives who have a $1 salary. Folks with less earning potential do not have that option.
Doesn’t work any more than moving to some Third World hellhole does, and for much the same reason. You just don’t have the same amenities there that you do in a place like America. According to the studies on the matter if you want rich people like CEOs to move in taxes are largely besides the point; it’s local amenities catering to rich people that attract them. Nice private schools, golf courses, that sort of thing. Sure if you give them tax cuts and subsidies they’ll take them; that won’t keep them from moving away anyway.
Nope. You misunderstood the post you quoted. More taxable events have a more detrimental effect than does fewer taxable events due to the fact that the taxable events remove assets from the portfolio, decreasing its rate of growth.
Nope. The high-value products only have a high value because someone sells them, someone organized the company that makes them, someone insures the company complies with all SEC rules so it can remain publicly traded, etc. etc. etc.
I wonder if that might be “cultural” in the sense that high end restaurants and shops while expensive don’t tend to nickle and dime like low end places do.
So you could have rich people more comfortable paying a higher price up front, and pissed off about nickle and diming(you charged me for the ketchup?!? etc.).
Yeah, I’m just going to take this down point by point.
Labor has a different price elasticity than capital so it is more efficient to have higher taxes on labor than capital.
First clause is true, second clause does not follow. There’s actually an argument for doing it the other way around to stimulate the economy.
The point of taxes is not fairness but to maximize revenue with the smallest distortion on economic activity.
- So you admit that you are being deliberately unfair.
- “Smallest distortion” is not the point, raising revenue is the bloody point.
- There’s more deadweight loss from the working class losing their mortgages and healthcare than from Berkshire Hathaway not buying out a family business, so even by that standard regressive taxation fails.
Low taxes on labor leave money on the table which is something governments are loath to do.
High taxes on lower incomes (as in, people who have to work for a living) tend to shrink the economy, create poverty, cost more in government relief, and lose revenue over time. Hence progressive taxation.
High taxes on capital distort economic activity and will end up raising less money because the inflection point on the Laffer curve for capital taxes is so much less than it is for labor taxes.
The Laffer Curve is actually a really tiny effect, so no.
If it makes you feel any better Buffett owns one third of Berkshire Hathaway which pays corporate tax so his actual tax rate is much higher than his personal rate.
Yet that doesn’t justify the tax rate on his personal compensation, on money he doesn’t even use, being ridiculously low. The man is a great argument for high income taxes; he lives in a modest home and eats working-class food, he’s not paying consumption tax or luxury tax.
Because of his lifestyle the burden of his tax rates mostly falls on poor african children, so if you believe in income redistribution you would like him to pay as little taxes as possible.
Do you expect us to take this seriously? Are you just trying to deliberately lie? Do you have some kind of ambition to be a pundit?
Reagan made his money acting in film and on television, Bush made his wildcat oil drilling, both of which count as working in my mind.
Reagan was an actor and guild politics guy. That is work.
Bush was not actually a roughneck, he was a speculator. It’s work in a sense, but less so than armed robbery is work; doesn’t count as working class.
Really?
According to this, if one’s total income is low enough, one pays 0 capital gains tax. I could have $600,000 to my name, have a taxable income of $33,900, all capital gains, and pay ZERO capital gains tax under present law. That’s if it qualified, not if it were short-term, or in real estate, collectibles, or “certain small business stock,” though. Weird.
It’s progressive in any case, at least at the lower end. Why not take long-term capital gains and tax them at the same rate as wages, salaries, prize money, commissions, and even other capital gains in real estate, collectibles, or “certain small business stock”? Why this one special exception, Rand?
They both generate wealth, but I’m not sure why you think the only wealth generating labor is performed by blue collar guys in dirty factories and that people in offices perform some generic undefinable job of “pushing paper around”. The ideas that generate wealth come from the engineers and businesspeople in the air conditioned offices. They don’t come from the guy with the high school education throwing a switch on an assemblyline floor.
High-end restuarants and shops also charge a premium for their products and services. All that swag bullshit they give away is a loss-leader so you’ll spend a lot on the items that actually generate profit.
Low-end vendors have low margins so they have to nickle and dime everything in order to make a profit.
It’s like this:
If I’m going to drop $200,000 on a Lamborghini in your dealership, do you think it might be a little absurd to make me pay for coffee or snacks out of your vending machine?
If your company is spending a million dollars in consulting fees with my firm, does it really cost me anything to spend a couple thousand dollars taking your leadership team out to a fancy dinner?
If there is an argument you should make that argument. The argument for taxing things with lower elasticities more than things with higher elasticities is easily made. Cigarettes have low price elasticity because since people are addicted to them and there are few good substitutes. Therefore is you double the tax on cigarettes you should raise almost twice the money you did with the lower rate. Brocolli has high price elasticity since there are so many other vegetable which make good substitutes. Therefore doubling the taxes on brocolli would probably raise almost no new revenue since people would just start buying cauliflower. Since as you say raising revenue is the bloody point, it makes more sense to tax things with lower elasticities more than those with higher elasticities.
- I am not the government so I am not taxing anyone anything. Also I did not say it was fair or unfair I said that fairness is not the point.
- Smallest distortion is only the point if you care about the economy as a whole and not just government revenue. Prices are important because they carry information. Distortions in prices disrupt that information and cause bad information which leads to bad decisions and sub-optimal growth. The faster the economy grows the sooner everybody gets rich, so even if government does not care about the size of the distortions the rest of us should.
- We seem to have different definitions of deadweight loss, but I am unclear about how your statement could be true with any definition. A working class family’s mortgage would probably be a couple of hundred thousand dollars at most, while Berkshire Hathaway’s deals are worth millions of dollars typically.?
Progressive taxation is usually justified by the diminishing marginal utility of money. That is why those in the bottom 50% of the income distribution pay almost no income taxes and why the United States has the most progressive tax system in the world. This is an argument for higher taxes on labor for those with high incomes, not for higher capital gains taxes. This is because of the different elasticities for capital vs labor income as discussed before.
This is just a bizarre assertion, I assume if you had evidence you have presented it or if you had an argument you would have made it. The fact that at some point raising tax rates lowers the total amount of revenue collected is huge since the whole bloody point of taxation is to raise revenue. Therefore we should not do things which lower revenue such as raise rate above the laffer curve inflexion point.
As the OP was concerned about how little tax Warren Buffett pays, I thought it was germane that Buffett actually pays a lot more taxes than just income taxes.
It is well known that Mr Buffett has committed to giving his wealth away to the Gates foundation which is a charity focused on ending malaria in Africa amoung other goals. I have heard estimates that for each $5000 the Gates foundation spends on anti malaria efforts one life is saved. As you point out Mr Buffett has a modest standard of living and at his level of income it would be almost impossible to tax him enough to affect his standard of living. The only thing increasing his taxes would do is reduce the amount of money he has to give to the Gates foundation. You have not pointed out anything I said that was in error, yet you accuse me of lying. Anger and wild accusations are not hallmarks of reasoned discourse, I would suggest you educate yourself about the issues so that you can present reasoned arguments.
I’m not conceding any of your points, but I’ll respond to these two:
- There is not only one working class family.
- A hedge fund neither has to eat nor uses medical care. Therefore it does not spend money on living expenses, whereas working class families may spend many more millions of dollars (as a demographic) on living expenses, given the opportunity.
As for charity, it’s not like we need to sell all our small businesses to Buffet to support charity, nor that supporting his charity requires the federal government to run in the red.
As for the Laffer Curve, there is no unambiguous evidence that it has a measurable effect distinguishable from background noise and rounding error. I’d call that “tiny.”
A quick search for any evidence of a measurable Laffer Curve finds, well, a cite ( http://biggovernment.com/dmitchell/2010/03/05/real-world-evidence-for-the-laffer-curve-even-from-the-government-of-washington-dc/ ) referring to high local cigarette taxes pushing purchases across state lines, of all things. Gee, you want to hold onto your elasticity-of-ciggie-consumption argument or to the Laffer Curve?