WatchA small group of protesters in Elkhart, Indiana gathered near a tea party billboard on Monday, decrying the political ad for comparing President Barack Obama to terrorist leader Osama bin Laden.
The billboard, paid for by a tea party group We the People of Marshall and Fulton County, says: “The Navy Seals removed one threat to America. The voters must remove the other.”
http://www.rawstory.com/rs/2012/08/14/tea-party-billboard-compares-obama-to-osama-bin-laden/
Given that Obama killed bin Laden when Bush failed and Romney said he would not go into Pakistan to kill bin Laden, it seems really stupid to make the comparison the Tea Party just did. Killing bin Laden is going to be Obama's "Mission Accomplished" campaign point.
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Call it Crazy says
It depends. What if nobody is applying for loans? Or nobody that qualifies is applying?
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Westport, CT
This tax rate discussion is ridiculous. Let me give you some real numbers. I am a hedge fund employee (this is true), working in NYC. My income is around 10-20 times the national average, and my expenses are also many times the national average: for example, in Connecticut where I live, the $250k national home price wouldn't buy half the land for a garage, let alone the garage itself. Preschool in my town costs me $25k a year and my monthly mortgage payment is around $9000. Even our electricity price is twice the national average.
My tax rate last year was about 38%. That is 28% Federal (would be 35% except for state tax deduction, which activates AMT), plus 10% for New York State. I also had some realized investment return taxed at an average of 17%, but not enough to noticeably affect my overall tax rate.
Since I work in NY, Connecticut receives virtually nothing from me though I do pay real estate tax to my town. If I made a bit more, and as a trader sometimes I do, sometimes I don't, then my taxes would go up to a max of 45%. This is the highest rate you will find in the USA unless you happen to live in New York City, which costs an extra 5% on top. Fortunately since I moved out of the city I don't have to pay that anymore.
I think my tax rate is pretty much where it should be. Of course I wish it were lower, everyone does. However I also understand that the government provides the services that make this a society instead of just a bunch of people competing with each other. If tax rates were much higher I would probably work less, but if they were lower it wouldn't stimulate me to work more. In other words I think its pretty much in the right ballpark for my income now.
What irritates me is that I am at the highest possible tax rate in the country while people like Mitt Romney, who "earned" twenty times more, pay far less than I do as a percentage of income. The reason for this is very simple: our asinine tax code favors passive investment income over employment income. I think this is really the only thing in our tax code that is horribly, horribly out of whack (other than its insane complexity) and yet it receives no discussion at all! People just focus on marginal rates, which have almost no effect whatsoever on the wealthy. The rich do not have significant income relative to their wealth--and when they do, they do whatever it takes to (quite legally) repackage the income and turn it into a capital asset. That's where the lawyers and offshore entities come in, but it can be done totally legit if the amount is worthwhile and you have access to some expensive expertise.
The effects of this system are pretty obvious: if you already have money you will be able to grow it forever and pay almost nothing in tax. But if you are trying to *earn* money by working you will pay ordinary tax rates, which are actually fairly steep already for high earners. This makes wealth an exclusive and hereditary club, especially since we have very, very low estate taxes. In other words, our tax system now creates and nurtures an aristocracy.
The simple fix: treat all income the same. Move dividends and unrealized gains into ordinary income. Rich people would pay as much as I do in percent terms and the deficit would shrink. I would recommend an estate tax in-line with global norms, too; this would be around 75% or so after some deductions. Dead people don't need money.
To anyone who says that raising investment tax rates would reduce capital investment I call total BS: If you have $100mm lying around (I'm talking to you, Mitt) you are going to invest it *somewhere*, or at least spend it, just so long as the tax rate is less than 100%. The only alternative is a guaranteed loss (i.e. opportunity cost) and a rational person would rather get, say, 50% of some return than 100% of no return. This is basic finance and basic common sense to everyone except Republicans.
The weirdest thing to me is that most Republicans don't even have enough investment income to benefit from the dumb system they have supported. Why would someone do that to himself?
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tatupu70 says
Another asinine comment... what does your statement have to do with the reference to "velocity" in my post???
Who cares if anyone is "applying", totally off point!! The point was that the original "investment" in the bank is available to be loaned out to others, thus be available to be re-inserted into the economy per Iwogs "velocity" comment....
Are you sure the two of you aren't twins???
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Lafayette, CA
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MB says
You calling me a communist is like me calling you a Hitler fascist.
It's a lie, it's childish, and it betrays your total ignorance of anything being discussed here. I'm a capitalist and nothing I've ever posted here has ever contradicted that fact.
MB says
Because it's stupid and not something anyone has suggested on this website.
MB says
The best thing about you being an afterbirther is that most people will point, laugh, and ignore anything you say from this point forward. Congrats.
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Call it Crazy says
You have no idea what the velocity of money is. None.
In its most simplest terms, If I have $10 and I spend it, the person who gets what I spend might have $3 to spend himself. Then he spends that and the person who gets his $3 might have $1 to spend again. And so on. No lending. So the $10 I had created 10+3+1 = $14 in economic activity.
When money is lent, it creates economic activity when it is spent but when it is paid back that economic activity is backed out. I loan $10. You spend $10, then somone spends the $3 left over, of which $1 is left and spent again. Then you pay me back with interest, so 10+3+1-10.5 = $3.5.
At least in the above example someone borrows the money and creates the economic activity. What is happening today is no one is borrowing. So I just save the $10. No economic activity.
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krusty says
Yes, there is a difference between the two. If your a Finance major it should be clear as the reason why taxes on investments are lower.
NYC, today is no different form 40+ years ago, regardless of wages/salaries earned. On the other coast, Santa Clara (Silicon Valley) was farmlands transformed by investment dollars, encouraged by favorable tax laws that spawned an industry, created jobs, and incomes. When tax laws as in the case of SV change, it discourages investment and R&D and you see contraction in jobs and investments.
I seen that too.
There is a difference!
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thomaswong.1986 says
No it's not clear. There is no legitimate reason why investments are taxed lower than wages. It's a fraud created by the Heritage Foundation decades ago and has been spread around as a neoconservative myth ever since.
Warren Buffett is an excellent example of someone who has paid very high investment taxes and very low investment taxes. Here's a direct quote. Why don't you go lecture him about not being a finance major:
~ Warren Buffett
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Call it Crazy says
Do you really not get it? There is no velocity of money if people aren't demanding (or qualified for) loans. The money just sits there. Interest rates at almost zero currently is a very good example of this.
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iwog says
Amen. And this should be so obvious to ANYONE that I can't believe it is seriously discussed.
It's akin to me telling someone I don't want a free $10 because the IRS will take $4 today instead of the $3 they took last year. Yes, I'm not making as much, but I'm still $6 ahead.
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Alameda, CA
Mitt Romney can kiss at least 13.6% of my ass. Or something like that.
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tatupu70 says
It must be Friday......
Once again, I made NO REFERENCE about who was borrowing or who was getting loans.... The original topic was about Iwog stating Romney was "hoarding money slowing down velocity".....
Show me where I reference qualifications for loans.....
Regarding loans since you brought it up, and getting money back in circulation in the economy, are you going to to tell me NO ONE is getting loans to buy houses, buy cars or taking any loans to buy anything... Every single dollar deposited/invested is sitting in the banks and not being loaned out..... the "velocity" currently is zero???
Really????
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bdrasin says
Which 13.6%? That can't be all anus.
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thomaswong.1986 says
You need to travel more or study history more. NYC is a very different place than it was 40 years ago. As is the entire tri state area. I lived on 110th in the late 70's, I can personally attest it's an entirely different city today. The amount of investment made in the last 40 years is just stunning. Even former no go under any circumstances war zones like the South Bronx have gentrified.
Am I missing something about SV here? The huge growth in SV happened for the most part before 2001 when capital gains was reduced to it's current very low level. The first wave of really big expansion in SV, along with the invention and big initial big growth of venture capital, happened in the 70's when cap gains was as high as 39%. So what is your point?
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Call it Crazy says
OK
Call it Crazy says
See, your underlying assumption was that by depositing money, it will automatically get loaned out (or at least that's how I understand your point. Correct me if I'm wrong). I'm trying to show you that your assumption is wrong.
Call it Crazy says
Come on--you are better than this. Taking the argument to the ridiculous extreme is a trollish device.
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47 male
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There is now a total disconnect between bank deposits and lending policy. They are not related at all. A billion dollars in deposits will not change bank lending policy by one penny and to insist otherwise is nothing more than fraud.
That's what happens when fed rates are 0%.
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tatupu70 says
How is my assumption wrong? Banks don't loan out money that they have taken in as deposits? Isn't that how they make their money?
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Call it Crazy says
Your original assumption is wrong and now your new assumption is wrong. The correct answer is that banks do NOT lend out money they have taken in as deposits. Banks will take every penny that is deposited and stockpile it with the federal reserve.
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I have $10M in the bank, I paid the taxes I owe on it, since I didn't really earn it without governments's direct involvement.
I hold that money in my account live large and wait to spend it or pass it on through living trusts or some other vehicle to minimize the additional blood letting that Uncle Sam will strive to do.
Or, Uncle Sam gives me incentive to invest that money back into the market where I take all the risks trying to pick a proper investment that will lead to growth of that investment. If that risk and gains on my investment of post tax money is treated as regular income, I'll keep my money on the sidelines. Sure those with $100s millions will invest some, those with 2, 5 or 10 million may not. How many have 100s millions?
No incentive....no investment. Forget it. My risk, not the governments. They are just a bystander trying to figure out how to take more of $$s that are sitting on the sidelines.
If someone inherited money and lives off of the cap gains, good for them. They paid taxes on the inheritance.
The government is trying to tax money at every exchange.
Lower everyone's taxes, cut spending, simplify the tax code, put freeloaders to work and do not covet thy neighbor's goods. Voila! It is that simple.
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Alameda, CA
"Mitt Romney and Paul Ryan" is an anagram of "My ultimate Ayn Rand porn". Just sayin'.
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Lafayette, CA
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MB says
Congratulations. You just argued for letting lazy assholes who don't contribute anything to live tax free.
MB says
You already said you don't want to put freeloaders to work, you want them to live a life of luxury and contribute nothing.
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Cloud says
LOL.. Perosnal insults-the usual. Since you claim you don't watch Fox Nerws, watch it a few days and compare your silly posts-then come back. Of course the only thing I can expect is a few more trollish comments without any substance-more screeching .
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bdrasin says
This is pure genious...
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MB - they've got you in their cross-hairs, the libs here hate common sense. Get used to it.
The productive class is NOT going to resign itself to being tethered to a permanent millstone of egregious taxation in support of the consumption class of bureaucrats and those with a enlarged sense of entitlement. Game on.
Consumption class = Obama supporter
Productive class = Romney supporter
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Honest Abe says
How about the Pissed Off class, who do THEY support??
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Call it Crazy says
LOl so true. On one hand Obama-who seems out of his depth with the economy. He does seem to have good intentions and does seem to care andseems to be following Japan's path .
Then we have Mittens-who is the modern day pirate-pillage, loot, destroy and take anything that is not bolted down. His VP wants to reduce Mittens taxes to zero-while ending Medicare.
Repubs rail about freedom and big govt and then use it for everything from gays, womens issues, anything they don't like
Dems are in bed with the feminists and make all sorts of anti male laws.
Both parties take away our freedoms and are just two sides of the same coin.
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lostand confused says
+100 !!!
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iwog says
Sensible ? but what happens when the risks are higher. Your not buying Sees Candy or Coke which has been around for a long time. Your no long talking about new capital equipment investment either. Would you invest in Sun Micro System.... no not sensible! Where is the incentive to invest ?
http://en.wikipedia.org/wiki/Capital_gains_tax_in_the_United_States
From 1934 to 1941, taxpayers could exclude percentages of gains that varied with the holding period: 20, 40, 60, and 70 percent of gains were excluded on assets held 1, 2, 5, and 10 years, respectively. Beginning in 1942, taxpayers could exclude 50 percent of capital gains on assets held at least six months or elect a 25 percent alternative tax rate if their ordinary tax rate exceeded 50 percent.
Capital gains tax rates were significantly increased in the 1969 and 1976 Tax Reform Acts.[
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thomaswong.1986 says
You demand higher expected returns. Did you skip finance class? With interest rates this low, there is no way an increase in the tax rate would kill any good pojects.
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tatupu70 says
we are talking about government policies which encourage/discourage investments .. individual risk tolerance is a different matter. its the taxing policies which dictate how long your holding period must be .. the longer you hold any investment/asset, you can have a higher systemic risk.
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thomaswong.1986 says
Yes, and so am I. Government policies only influence investing on the very marginal projects. I'd even argue that most companies don't factor tax rate into the capital decisons at all.
thomaswong.1986 says
Who's talking about individuals? Where did that come from?
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Menlo Park, CA
krusty says
Out of short-sighted hate for "liberals", gays, blacks, and pretty much everyone who can spell.
Poor Republicans are little hate machines with easily pushed buttons. If you're extremely rich and want save billions, just push their hate buttons and watch them pay your taxes for you!
They never question why every Congressman who votes to ban gay marriage also happens to vote for ultra-low taxes on unearned investment income.
Rich Republicans know exactly what they're doing, and they push those buttons well.
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iwog says
While you're of course not a "communist", I wouldn't exactly call you a capitalist.
The wikipedia definition is good enough for my purposes here:
"private ownership of the means of production and the creation of goods or services for profit"
While your present business model passes the first test, it fails the latter. You are predominantly involved in merely holding title to existing wealth, not creating new wealth.
This makes you a social parasite in my book, not a capitalist per se.
I thank Henry George for first bringing this critical difference to my attention, and Mason Gaffney for exploring how modern economics was intentionally corrupted to obscure the difference between true capitalism and whatever we are doing now is.
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lostand confused says
We don't want to eat our peas, which means we go Japan, or try to at least
What happens late this year and next is going to be an interesting evolution.
Extending the Bush tax cuts on everyone is a bad idea, fiscally speaking, but coming to any agreement on their replacement is impossible in our ideologically-riven society.
The Republicans have thrown their marker on tax-cut Lafferism.
The Democrats have pussied around with incremental tax rises on the top 5%.
Neither are serious about instituting the tax rates and structures we need to pay for our $6T/yr government expense, nor about tangential issues like energy independence, manufacturing jobs, and the $600B/yr trade deficit that is linked to both of those issues.
Nobody I see even has a handle on what the problems actually are.
Japan actually has a less difficult situation to fix. Their baby boom is tiny compared to ours, they have much fewer economically helpless people, and their trade situation is mostly in balance, and they have the capital position of 30+ years of past trade surpluses -- $3T -- to fall back on.
Japan has a low tax-to-GDP burden like us so they can theoretically switch over their system from low-tax/high-savings to moderate-tax/moderate-savings.
We have a low-tax/zero-savings system (for the bottom 90% at least). We're boned this century.
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Westport, CT
iwog says
Buffet is saying just what I said; an investor will always invest if the expected return is positive because any portion of something is better than 100% of nothing. So long as there is a risk-free asset available (e.g. treasuries), there will always be an investment mix available that satisfies your risk/reward tolerance for any tax rate below 100%.
I would add one caveat: the tax code should treat investment losses symmetrically with investment gains. This goes along with my philosophy of treating all sources of income equally. If you made $100k in salary and lost $100k on investments you should be able to net them out to zero income for that year (and carry any excess losses forward indefinitely, too.) Our current tax code only gives you $3k off your AGI, plus a limited term carryforward for the rest. I can tell you from personal experience that this is a disincentive to take risk, though the argument above is still valid: you still invest, just with a less risky mix than one would pick if the taxes were symmetrical.
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Patrick says
Yes sir. It's not just the US, but all over the world.
My favorite is the Sovereignity crap. We can't join the International Criminal Court, that would put our sovereignity at risk. But then, why are we in the World Bank, IMF, GATT/WTO, etc?
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thunderlips11 says
So true. But if America did join the International Criminal Court it would have to answer for the genocide of Native Americans. That's the whole reason the U.S. hasn't supported the International Criminal Court and anti-genocide laws. Everyone knows our country is as guilty as Germany, Rwanda, Darfur, Armenia, and the Sudan.
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Ruki says
Damn, you sound like Shrek. Oh wait, you are Shrek.
Do you really think that there are many Americans who don't believe that bin Laden was killed by Seal Team 6 under Obama's orders?
By the way, I'm not even saying Obama made the right call. I think he should have captured Osama alive and brought him to stand trial in New York City in an open, fair court. Then again, unlike Bush and Obama and the Tea Party, I believe in rule of law, although not necessarily those who carry it out.
Ruki says
Tell that to anyone living in NYC. You're just saying that because Obama got the credit for killing Osama. Had a republican president like Bush done it, you and your colleagues would be reminding us of that every day.
The fact is that Obama has implemented the Republican agenda far more effectively than any Republican including Bush. That's why you hate him, and that's also why I hate him, although for different reasons.
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krusty says
Ayn Randian maniacs hate Warren Buffett and have no rebuttal to anything he says. How do you tell Warren Buffett that he doesn't understand the economy and investing?
Everything preached by the right regarding how we need to change the economy is a lie now.
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Ruki says
How can you even compare the strategic significance of eliminating uday/qusay with OBL?
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Ruki says
How many Americans did Saddam's sons kill prior to the Invasion?
dublin hillz says
Word.