Heh2

[Chia]

Interesting set of articles in today's news.

http://business.timesonline.co.uk/tol/b ... 996735.ece

I am rather amused by the number of hateful comments spewed by the readers to, what to me seems to be, a straightforward argument advancing economical health.

[Lord Zhengyi]

Essentially what he's talking about here is the difference between tax rates based on ordinary income and investment income. I've always held that ordinary income should be taxed at a lower rate than investment income. A greater percentage of money earned by slaving away at a job should stay in the taxpayer's pocket than income from passive activity. Unfortunately, our tax system works in exactly the opposite manner. You have lower income citizens being strangled with higher tax rates, and wealthy citizens paying their accountants to ensure that most of their earnings are not considered ordinary income.

In Florida, we used to have a tax known as the Intangible Personal Property tax. It was designed to collect revenue from wealthy Floridians who had over $360,000 in their investment portfolio. What the state legislature didn't realize is that much of that wealth sat in money market funds with a constant share price. They wrote the law so that tax was calculated on holdings as of December 31 of each year.

So...

Every year on December 29, our office and every other accounting office in the state would call our wealthy clients and have them shift those holdings into cash for 24 hours, thereby completely avoiding the tax and defeating its entire purpose. Many times, we had clients do the same thing with stocks and mutual funds if they had recognized losses and could use them to offset other income.

Anyway, I think the moral is that just like NWN players, taxpayers will always find a way to beat the system. Rather than trying to micromanage and plug every hole someone discovers, they should devise a simple consumption-based system that taxes people only on the goods and/or services they use. The Libertarians have been pushing this idea for years, but they lack the political muscle to get it done. However, I think after our current president leaves office, we may see some radical changes to our tax system.

[Vahene]

I want to kiss the man.

I'm glad to hear someone from the upper-tier of the rich actually standing up and saying "hey, this is wrong." It is wrong. I'd like to be his secretary making 60 grand in a year though - THAT I would push papers and answer phones for - heh.

K

[Jay Four]

Hateful comments on the internet? Shocking! Shocking, I say!

I really admire Warren Buffett, but I have to take a few issues with this piece.

First of all, he doesn't pay less than his secretary. Buffet doesn't actually say he does, but the headline does, and they "quote someone they agree with" (newspaper trick) who makes the same claim.

He may have paid a lower percentage, but it was still a lot more money. He claims he paid 17.7% on 46 million, which is over 8 million USD. Then he claims his secretary paid 30% on 60,000, which is about 18,000 USD.

Also here are the tax rates:
http://www.irs.gov/formspubs/article/0, ... 56,00.html

As you can clearly see, in the general case, you do pay a higher percentage as your income increases. Also there is something very fishy about his secretary paying 30%. In fact at 60K, the secretary is only paying 25% on each additional dollar, the actual total precentage will be somewhat below that....

60,000-30,650=29350 (*.25) = 7337.5 + 4220 = 11557.5
11557.5/60000 = 19.3%

Maybe I am missing something, but I don't think so. Further, you have to realize that the reason he pays only 15% is because he is paying taxes on capital gains, not income. I am not going to attack or defend taxes on capital gains, but it is a very special case.

I am rather amused by the number of hateful comments spewed by the readers to, what to me seems to be, a straightforward argument advancing economical health.

It is not an accident that capital gains are taxed at a lower rate, it was an intentional decision to do that, not a loophole. They were origionally taxed at the normal rate. The decision was made to lower taxes on capital gains in order to spur investment.

While the US economy has continued to climb at an impressive rate, it's relative lead is nowhere near what it once was. In particular we have lost significant pieces of medical, automotive and semiconductor industries. Some people are really concerned with what that means for the future of our country and suggested that reducing taxes on capital gains would encourage investment.

Now, lower capital gains tax may be a good idea or a bad idea, but I wouldn't say that this is "a straightforward argument advancing economical health". It's quite complicated actually, and the people advocating lower capital gains taxes do have a point. I am not sure if I believe in a lower capital gains tax or not, but my point is that rational minds may disagree.

I want to kiss the man.

I'm glad to hear someone from the upper-tier of the rich actually standing up and saying "hey, this is wrong." It is wrong.

I think it is a mistake to cast this in terms of right and wrong. This makes it too easy to demonize people with whom you disagree. Then you start questioning people's motives instead of considering their argument.

I prefer to cast the issue in terms of wise and unwise. There are a lot of ways we can build the tax code and they all have different advantages and disadvantages.

[Chia]

I am rather amused by the number of hateful comments spewed by the readers to, what to me seems to be, a straightforward argument advancing economical health.

It is not an accident that capital gains are taxed at a lower rate, it was an intentional decision to do that, not a loophole. They were origionally taxed at the normal rate. The decision was made to lower taxes on capital gains in order to spur investment.

While the US economy has continued to climb at an impressive rate, it's relative lead is nowhere near what it once was. In particular we have lost significant pieces of medical, automotive and semiconductor industries. Some people are really concerned with what that means for the future of our country and suggested that reducing taxes on capital gains would encourage investment.

Now, lower capital gains tax may be a good idea or a bad idea, but I wouldn't say that this is "a straightforward argument advancing economical health". It's quite complicated actually, and the people advocating lower capital gains taxes do have a point. I am not sure if I believe in a lower capital gains tax or not, but my point is that rational minds may disagree.

I would think that his view of the tax code comes from personal experience.

He made his fortune on the stock market, majority of it by working with covered calls. That type of investment is, for a particular company, temporary at best, and does not promote increase of production or job openings.

One could argue that increased company worth as perceived by the stock market could promote such growth, but, first of all, you can invest in a company downfall as well as growth, and secondly, it is an artificial growth.

The US tax code has much too many loopholes for the high-income bracket of population.

For instance, people with enough income can set their family up as a corporation. This brings out a whole bag of tricks, such as deducting two or three day vacation expenses off of your taxes as board meetings. You can do similar things for "business supplies" - that includes computers, among other things. You can register part of your house as an office, therefore deducting part of utility bills as well.

I do not know all the details, but the truth is that this is precisely why rich people do have personal accountants. The laws which had been passed, even in good will to promote the growth of small business, are being used as loopholes to allow a very narrow population group with very, very high percentage of wealth, to ignore the tax obligations that other people have no way of bypassing. Or they do what was described above, use loopholes in laws means specifically to address the income disparity to ignore them.

Since the government does rely on tax money, it means that the population, as a whole, has to be taxed higher to accomodate for the lost income from a select group.

Moral obligations aside, such accumulation of capital in a very select group is extremely unhealthy for the economy, as it decreases the purchasing power of the middle class, which fuels the economical growth decline further. Moreover, majority of such income is from speculation (the majority of people turning over a million a year in income comes from stock market, followed by real estate - forgot where I read the numbers, so no proof, but it was either WSJ or Forbes).

When you have a few million dollars alone, you can dump that money into a bank account and comfortably live off of the CD rates. Do you think the bank is investing that money into creating jobs locally/nationally? Hah.

What I read is that he is saying that the current tax code is actually hurtful to the economy and social dynamics.

Taking it in very general terms, the economy has been growing, faster or slower, for a number of years. At the same time, the prices also rose.

Meantime, the minimum wage, which is going to still take at least a year and a half to be fully established, does not even suffice to cover expenses of living in larger cities.

Taxing and grants are one of the major methods of alleviating pathological (according to what is considered stable society norm) living condition disaprity. And, unfortunately, that mechanism seems to be broken.

Um. I'll leave it at that. I do tend to ramble on.

[Peregrinus]

Don't get started on the Federal Minimum Wage, its a bare minimum that needs to be paid, and it also should not be a Living Wage.

Why?

Because the Federal Government cannot set a single living wage for the entire country, there is to much economic divergence across the continent. What would be a Living Wage in New York City would be a rich man's wage in Bristow TN/VA. What would be a living wage in a small country town in the middle of Kansas wouldn't even come close to paying the expenses of living in LA. States can't even set a Living Wage, take God's Own Commonwealth, I mean Virginia, for instance. Northern Virginia is in the top ten most expensive areas to live in the country, meanwhile, not fifty miles from that area you get into farmland and small towns that require half that or less to live on. Where do you set a living wage for? Now, if you set a living wage by County, that might work...

Personally, I'm all for consumption based taxes, my biggest fear is that if we ever get something like a Federal Sale's Tax, they won't do away with the Income taxes, and so we'll end up paying twice...

[Chia]

Don't get started on the Federal Minimum Wage, its a bare minimum that needs to be paid, and it also should not be a Living Wage.

And, unfortunately, as we all know it does end up being the "living wage."

Want the job? That's how much you'll get paid. Don't want? Somebody else will.

Meanwhile, bills do not pay themselves...

The rest, snipped

Frankly, there seems to be little reason for a centralized government anymore. We have the communication capacity for any of the developed countries to return power on local decisions to local offices...

Which would also help accountability - it's easier to lie to big faceless masses than the angry old lady down the street.

Of course, that's one of the reasons why it will, most likely, not happen...

[Peregrinus]

Don't get started on the Federal Minimum Wage, its a bare minimum that needs to be paid, and it also should not be a Living Wage.

And, unfortunately, as we all know it does end up being the "living wage."

Want the job? That's how much you'll get paid. Don't want? Somebody else will.

Meanwhile, bills do not pay themselves...

Ok, sorry, but that's blatantly false, nobody I know even works for the minimum wage, even most high school kids work for more than that the present $5.25/hr (I think Congress raised it, but it hasn't taken effect yet). I've never seen statistics that say otherwise either, unless you're talking about unskilled jobs where the "other person" is an illegal alien who'll work for less than the minimum wage (which is a different issue altogether).

[Chia]

Snippy

That's because each state has their own minimum wage requirement.

It does not mean that the minimum federal wage is not dragging the actual minimum pay down, either.

And don't get me started on the whole "illegal alien" issue...

[Peregrinus]

Snippy

That's because each state has their own minimum wage requirement.

Except that many states, including where I live, use only the Federal Minimum Wage as their own. In other words, Virginia's minimum wage is the same as the Federal Minimum Wage, and so, I return to my original point that nobody I know is paid the Federal Minimum Wage, even High Schoolers.

[Chia]

This state's minimum wage is $7.15/hour.

Unfortunately, it is used as base pay. This also affects higher-paid jobs, where the discrepancy between realistic wages and minimum wage is dragging the offered compensation down.

[Eowade]

Snippy

That's because each state has their own minimum wage requirement.

Except that many states, including where I live, use only the Federal Minimum Wage as their own. In other words, Virginia's minimum wage is the same as the Federal Minimum Wage, and so, I return to my original point that nobody I know is paid the Federal Minimum Wage, even High Schoolers.

Wow most the employers in my area don't pay much over the minimum wage for your run of the mill job. Add to that that the mean housing price shot from 130k to 290k in the last 5 years and renters have adjusted their rates accordingly but the mean household income is still around 36k my area is in for a scary adjustment soon I fear. You can't more than double the cost of housing/rent in such a short time without there being some serious repercussions. A whole lot of those folk making 30K a year were convinced they could afford those $300,000 houses for sale and that it would be a good investment.

[broncoblitz]

Man I wish I could live in a place where houses were 300k.

*looks at craigslist and sees one-bedroom condo's for 450k and cries*

[Eowade]

heh it is much more affordable than where I used to live in santa barbera but back then I could have bought a house for close to the same price in S.B. but at least I would be near the beach with college girls running around everywhere.