patrick.net

freak80 says

tatupu70 says

I don't want to tax capital gains at 100%. Just the same as labor.

That's crazy talk!!! Tax capital at the same rate as labor??? Instant Great Depression!!! Like we had in the late 1990s!!

Horrifying!

The most offensive thing I have read since the news accounts of Obama harvesting organs from Christian babies. Stalin is smiling in hell right now.

The half-dozen 20th-century economic booms which occurred with top capital-gains tax rates of 28% and up, are just like global warming and the germ theory of disease: vicious liberal lies meant to control us and defile our precious bodily fluids!

freak80 says

All I need is a shitty business plan, a few good lawyers, and no morals.

I have most of that! Now, where can I get some lawyers?

HydroCabron says

The half-dozen 20th-century economic booms which occurred with top capital-gains tax rates of 28% and up, are just like global warming and the germ theory of disease: vicious liberal lies meant to control us and defile our precious bodily fluids!

You mean the 1950s when US Factor orders were booming to rebuild the world, higher taxes kept inflation down and repaid the war debt. Perhaps you like to point to Kennedys tax act of 1964..

HydroCabron says

The most offensive thing I have read since the news accounts of Obama harvesting organs from Christian babies. Stalin is smiling in hell right now.

I agree completely about how horrible taxing capital gains like ordinary income is with the current tax rates.

Since Social Security is a forced retirement savings plan with pay-outs a function of what you put in I'll ignore that in my calculations.

Assuming married filing status, the standard deduction, personal exemptions for myself plus a spouse, and $100K salary I'd make $2.5M over 25 years coasting through life in a corporate job paying $11,858 each year as income tax totaling $296,450 plus $29,450 for Medicare for a $325,900 grand total which is a 13% effective rate.

If I decided to work five times as hard for five years at a startup for the same base salary but a $2M liquidity event for the same $2.5M total and my earnings were taxed as ordinary income I'd pay $899,397 in taxes which is 36%, 175% more.

That's horribly unfair.

Work which adds up to a big win should be taxed at the same low effective rate people pay when they spread it out over a lifetime.

To keep things fair we need a flat tax on all income like the 15% effective rate many people pay (or used to pay prior to the recent 60% tax hike). That way you wouldn't get punished for compressing your working life.

In historical terms that would still be egregious but you have to start somewhere - in 1913 when we got our first federal income tax the top rate was 7% and only applied to people earning over $11.6M annually in 2013 dollars.

drew_eckhardt says

If I decided to work five times as hard for five years

200-hour work week?

I understand that start-up employees and entrepreneurs put in barbaric hours, but I dislike the assumption that total compensation is proportional to work.

a $2M liquidity event for the same $2.5M total and my earnings were taxed as ordinary income I'd pay $899,397 in taxes which is 36%, 175% more.

You overlook something here: the present value of an annuity.

You have an advantage over the poor corporate drudge: you get the money now, and not paid out over the 20 years after you strike it rich. And the same amount of money right now, instead of spread out over 20 annual payments, is a bird in the hand. (That's why lump-sum lottery payments are so much smaller than the sum of the yearly payments.)

The present value of an annuity paid out over 20 years, assuming 3% interest (not an unreasonable long-term assumption, taking into account taxes and inflation), is $108,000.

That is, your hard-earned payday, at 5 years, of $1.6 million, is worth $108,000 per year for the next 20 years, with nothing taken out of it - no taxes, no Social Security, no Medicare, no disability: it's all yours.

Even under your scenario, you do far better than the corporate schmoe, who'll owe taxes on his $100K each year.

HydroCabron says

That is, your hard-earned payday, at 5 years, of $1.6 million, is worth
$108,000 per year for the next 20 years, with nothing taken out of it - no
taxes, no Social Security, no Medicare, no disability: it's all yours.

Wouldn't the interest be taxed? That is, in year 1 there is about $48k in interest paid and $60k in principle paid back? Meanwhile in year 20 there is only about $3k in interest and $105k in principle.

Regardless, taxes would only be owed through year 10 of the annuity, after which point the deduction and exemptions would exceed the interest income from the annuity. The total of the taxes, assuming a 2% growth in the standard deduction, exemptions, and 10% bracket and no changes to tax law, would be $14,700.

Adding all of that - you have $400k taxes on the liquidity event, $14,700 taxes from the annuity, $54,743 in Income taxes from the 5 years $100k salary, and $14,500 in Medicare taxes. Total is $483,960 on $3.05M in income. 16%.

This is a stupid example though because at $100k income for a married couple, with standard deduction and married, is only in the 15% bracket. Capital gains is 20%. Move the number to the higher portions of the income brackets and it goes the other way. Not to mention good luck selling a small private company for 20 times earnings.

thomaswong.1986 says

Perhaps you like to point to Kennedys tax act of 1964..

Or maybe St. Raygun's tax hike he signed Jan 6, 1983 when unemployment was 10.8%?

Reagan's remarks before signing the law hiking taxes 125% and increasing government spending to create jobs:

"Today, as this bill becomes law, America ends a period of decline in her vast and world-famous transportation system. Because of the prompt and bipartisan action of Congress, we can now ensure for our children a special part of their heritage -- a network of highways and mass transit that has enabled our commerce to thrive, our country to grow, and our people to roam freely and easily to every corner of our land.

"This bill was possible because of the contributions of so many Senators and Congressmen, many of whom are standing here today. Without their leadership, cooperation, and determination, this bill would never have become law.

"Anyone who's driven the family car lately knows what it's like to hit a pothole -- a frustration, expense, a danger caused by poor road maintenance. Woeful tales of highway disrepair have become part of the trucking lore. Bridges are crumbling from under us in many of our older cities while growth is being stifled in our newer ones, because the transportation system can't cope with the expanding population.

"Overall, we have 4,000 miles of Interstate Highway that needs resurfacing and 23,000 bridges that need replacement or repair. Our cities need new buses, new or rebuilt railcars, and track improvements that will cost $50 billion during the next 10 years. Common sense tells us that it will cost a lot less to keep the system we have in good repair than to let it disintegrate and have to start over from scratch. Clearly this program is an investment in tomorrow that we must make today. It will allow us to complete the interstate system, make most -- the interstate repairs and strengthen and improve our bridges, make all of us safer, and help our cities meet their public transit needs.

"When we first built our highways, we paid for them with a gas tax, a highway user fee that charged those of us who benefited most from the system. It was a fair concept then, and it is today. But that levy has not been increased in more than 23 years. And it no longer covers expenses. The money for today's improvements will come from increasing the gas tax, or the highway user fee, by the equivalent of a nickel a gallon -- about $30 a year for most motorists.

"The repairs and construction are expected to stimulate about 170,000 jobs, with an additional 150,000 jobs created in related industries. Another provision in this bill adds up to 6 weeks of unemployment benefits for people who have used up all their unemployment insurance. Such badly needed assistance will put more than half a billion dollars into the pockets of family budgets of our long-term unemployed.

"While the action we take today will bring some relief to those of us who so want to work and yet cannot find jobs, its principal benefit will be to ensure that our roads and transit systems are safe, efficient, and in good repair. The state of our transportation system affects our commerce, our economy, and our future.

"That's why I'm pleased today to sign House resolution 6211, the Surface Transportation Assistance Act for 1982. It will help America enter a brighter and a more prosperous decade ahead. And so saying, and before the bridges fall down, I'll get this bill signed. [Laughter]"

That 125% tax hike followed corporate tax hikes a few months earlier, and a payroll tax hike to preserve Social Security a few months later in April. Unemployment fell back to what it was when he won the election, reversing the unemployment caused by his disastrous job killing tax cuts.

finehoe says

Unemployment fell back to what it was when he won the election, reversing the
unemployment caused by his disastrous job killing tax cuts.

I want someone from the right to refute this. If you run a business - in times of low tax rates you maximize profits. In times of high tax rates you invest in infrastructure and avoid taxes. In short, at 50% tax rates, any investment in the company is paid 50% by tax savings and 50% by the company.

$100k spent hiring someone with a 50% tax rate affects the bottom line by $50k. When taxes are 20%, $100k spent hiring someone is paid by $80k from shareholders and $20k by the government.

Now when they are 12.6% as in the US today...I wonder why productivity is soaring but wages and employment remain stagnant. Profit taking.....

Higher taxes encourage investment. Historically this has been proven.

finehoe,

Why spend money fixing highways and infrastructure when it could be used for war? War kicks ass! ;-)

control point says

Higher taxes encourage investment. Historically this has been proven.

LOL

http://www.voxeu.org/article/france-s-weak-economic-performance-sick-taxation

http://reason.com/24-7/2013/07/11/high-taxes-red-tape-drive-plunge-in-fren

"Honestly, at the moment, I don't see any point in investing," said the 75-year-old Mr. Mizrahi, who founded small auto-part maker Klaxcar in the 1990s. "If I were 40 years younger, I'd move abroad."

Refuted. Btw. this has nothing to do with "left" or "right", but with basic math and common sense.

mell says

Refuted. Btw. this has nothing to do with "left" or "right", but with basic
math and common sense.

No, its an opinoin piece based upon cherry picking data. As if there are no other factors that contribute to Real GDP per capita growth.

I can cherry pick too. I choose....Norway. In figure 2 on your first link, Norway has the highest CIT as a percentage of total tax revenues. It also has higher GDP per capita growth than the US, figure 1.

Do you want to do a correlation analysis between GDP growth rates and tax rates in the US? I have done it in the past - there is a positive correlation between GDP growth and higher taxes, period.

In fact, when the top marginal tax rate is above 50%, GDP has grown, on average, 2% more per year than when the top marginal tax rate is below 50%.

Opinion pieces based upon cherry picked data are hardly factual.

Refute what I said. Explain why low tax rates would not encourage profit taking.

I think mell is on the Koch Brothers' payroll.

Problem with high taxes is that it causes capital to go overseas where tax rate is lower, or to just have special interests seek loopholes. If you can provide a service at $5 but have to pay $1 in taxes... you can't compete with some jackass overseas who can provide it for $3.50 unless you slap a $1 worldwide tariff on it.

Problem with low taxes is we can't afford to have infrastructure, army, law and order.

Golden seed is somewhere in the middle. I think for what I'm paying in taxes I'm not getting enough services from the state. We have crapy education system that caters more to illegals than it does to citizens, police department that is understaffed and underpaid, no border security, welfare state, and way too many jackasses from overseas constantly gunning for a piece of American pie.

I'm mad as hell and I won't take it anymore!

FortWayne says

Golden seed is somewhere in the middle. I think for what I'm paying in taxes
I'm not getting enough services from the state. We have crapy education system
that caters more to illegals than it does to citizens, police department that is
understaffed and underpaid, no border security, welfare state, and way too many
jackasses from overseas constantly gunning for a piece of American pie.

I'm mad as hell and I won't take it anymore

The problem is 50 cents plus out of every tax dollar goes to paying for our military/defense.

freak80 says

I think mell is on the Koch Brothers' payroll.

No, he's just a typical right-wing dim bulb who thinks a quote from some 75-year-old coot refutes actual data.

control point says

I can cherry pick too. I choose....Norway. In figure 2 on your first link, Norway has the highest CIT as a percentage of total tax revenues. It also has higher GDP per capita growth than the US, figure 1.

That has nothing to do with your thesis regarding investments and taxes. Norway is bathing in oil and therefore doing very well. Look, taxes are one of the tools for redistribution and financing, but they are certainly not encouraging investment, even if they happen during a periods of robust investment. It's just basic math and common sense. Are you more likely to make an investment with some of your saved money if you get to keep 75% or 25% of the gains? Come on now ;)
Oh, btw.

http://www.bloomberg.com/news/2013-10-07/norway-s-incoming-government-pledges-tax-cuts-and-asset-sales.html

FortWayne says

Golden seed is somewhere in the middle. I think for what I'm paying in taxes I'm not getting enough services from the state.

Agreed. You wouldn't believe what you get for your taxes in some of the northern European nations, and those services are available for everybody from rich to poor.

mell says

Are you more likely to make an investment with some of your saved money if you
get to keep 75% or 25% of the gains? Come on now ;)

Investments are made with pre-tax dollars. If a corporation hires employees, their income (and tax bill) is lower. If a corporation buys equipment, a portion of that investment lowers their income and tax bill.

If I hire someone and it costs me $100k, but I think I will make $200k more revenue by doing so, I will hire that person. Regardless of if tax rates are 99% or 0%. If they are 99%, It costs me $1k in after tax income for $2k after tax profit. If the tax rates are 0%, it costs me $100k in after tax profit for $200k in after tax income.

The higher tax rates subsidize the risk.

control point says

Investments are made with pre-tax dollars.

Maybe on wall street, not on main street. Anything I invest, is after tax.

control point says

I want someone from the right to refute this. If you run a business - in times of low tax rates you maximize profits. In times of high tax rates you invest in infrastructure and avoid taxes. In short, at 50% tax rates, any investment in the company is paid 50% by tax savings and 50% by the company.

$100k spent hiring someone with a 50% tax rate affects the bottom line by $50k. When taxes are 20%, $100k spent hiring someone is paid by $80k from shareholders and $20k by the government.

Does this mean that companies that make investments are allowed to write off the entire value of their investments as an expense in the year made? A company purchasing a piece of capital equipment or a new building can expense the whole thing in one year to avoid 50% taxes, as opposed to carrying the purchase as an asset on their balance sheet and depreciating it over a number of years? Yes? No?

How exactly is it that if taxes are 20% in your example, $20K of the salary comes from the government?

Take all the corporations, TBTFs, banks that have been bailed out and would have otherwise failed, incl. Buffet and BRK and take 50% of their market cap as a special tax and you will end up easily with 100s of billions to reduce the deficit and debt. It's a small price to pay in the crony capitalist system for being eternally backstopped, subsidized and informed before everybody else by the Fed/government so that it's impossible for them to go belly up. Remove all QE/MBS buying and reduce the deficit/debt instead, or send everybody of the tax-paying middle-class a monthly check if you must insist on spending. Don't punish the middle-class and stifle economic climate for the crimes of a few.

Paralithodes says

Does this mean that companies that make investments are allowed to write off
the entire value of their investments as an expense in the year made? A company
purchasing a piece of capital equipment or a new building can expense the whole
thing in one year to avoid 50% taxes, as opposed to carrying the purchase as an
asset on their balance sheet and depreciating it over a number of years? Yes?
No?

Depends on the type and size of the investment usually. A $2000 laptop is written off. A $200,000 server farm is capitalized typically. Real property is capitalized.

Paralithodes says

How exactly is it that if taxes are 20% in your example, $20K of the salary
comes from the government?

The salary is $100k. If the company does not hire that person, then their net income is $100k higher - but at a 20% tax rate, $20k goes to the government in taxes, and the loss of after tax income to shareholders in $80k.

If they hire at $100k, the after tax cost to shareholders is $80k and the cost to government is $20k.

mell says

Take all the corporations, TBTFs, banks that have been bailed out and would have
otherwise failed, incl. Buffet and BRK and take 50% of their market cap as a
special tax and you will end up easily with 100s of billions to reduce the
deficit and debt.

lol. How about we take the actual out of pocket COST of the bailout and then subtract out the taxes that those companies have paid in the last 5 years and the taxes that the employees of these companies have paid the last 5 years, then subtract out the unemployment that would have been paid out to the employees, etc.

tatupu70 says

mell says

Take all the corporations, TBTFs, banks that have been bailed out and would have

otherwise failed, incl. Buffet and BRK and take 50% of their market cap as a

special tax and you will end up easily with 100s of billions to reduce the

deficit and debt.

lol. How about we take the actual out of pocket COST of the bailout and then subtract out the taxes that those companies have paid in the last 5 years and the taxes that the employees of these companies have paid the last 5 years, then subtract out the unemployment that would have been paid out to the employees, etc.

Paid back some with debased dollars, great. Furthermore I hear all the time that pushing buttons and betting on contracts is not a "job" does not add anything productive to the economy. Yet they keep making record profits and loss-free trading months (impossible without being on the inside), so according to the ones debating for the "other" side there must be NET losers out there, no matter if they paxes and employ people or not. So which one is it? They are constantly getting subsidized and not punished for rigging the markets, what is that worth to you? But glad to see you suddenly defend the FIRE sector ;)

sbh says

Your time machine scenarios designed to stoke deflation

If you are so (unprovenly) worried about deflation, how about this:

Instead of the bailouts the government seized the Fed and printed its own money, created its own intermediate banks and distributed payments regularly to the people. No TBTfs needed for this, let em fail.

control point says

Depends on the type and size of the investment usually. A $2000 laptop is written off. A $200,000 server farm is capitalized typically. Real property is capitalized.

At least you're discussing your point without ad hominem attacks, that's already worth a lot to the debate. I have to extend that credit to tatupu mostly as well.

sbh says

I respectfully suggest you advance your talking points.....for everyone's sake. You haven't had anything new to say since you began.

Hey now, don't knock recycling. Recycling is good for the environment.

mell says

Paid back some with debased dollars, great. Furthermore I hear all the time
that pushing buttons and betting on contracts is not a "job" does not add
anything productive to the economy. Yet they keep making record profits and
loss-free trading months (impossible without being on the inside), so according
to the ones debating for the "other" side there must be NET losers out there, no
matter if they paxes and employ people or not. So which one is it? They are
constantly getting subsidized and not punished for rigging the markets, what is
that worth to you? But glad to see you suddenly defend the FIRE sector ;)

I'm certainly not defending the FIRE sector. But I want the criticism of it to be correct. That's all.

sbh says

trickle-downer conservative hiding in a Libertarian cowl

I always figured the self-described libertarians I knew were just ashamed to be voting the same way as Southern Baptists on issues like abortion, gay marriage, flag burning, what have you.

So they rationalized their voting behavior for the world to see as an unfortunate compromise: go with the party of low personal freedom but more economic freedom - let's assume that the Republics really stand for economic freedom, for the sake of this argument - and then, once economic freedom is achieved, then we would get more social freedoms, either by default - we'd all be rich - or by attacking those issues next.

If this sounds like Marx's "the state shall whither away," that isn't a coincidence. It's essentially inverted Marxism: If we have economic anarchy, total freedom in all things will follow, as opposed to Marx's idea of the rational, economically centralized state purging us of petty class motivations and prejudices, which would then remove the very underpinnings of the state.

Both sound like bullshit to me.

Problem is, many libertarians really, really hate the idea of gay marriage and are fine with an abortion ban.

More and more, I now feel some sympathy for libertarians. I don't see them so much as hypocrites but more as victims of a scam: trickle-down disguised as rational freedom.

HydroCabron says

let's assume that the Republics really stand for economic freedom, for the sake of this argument.

I don't think they do - there's a few amongst them who do but certainly not enough, That's why a second party is needed. I have also consistently been advocating civil/social liberties (so have a even a few Republicans).

sbh says

I respectfully suggest

A valid point does not become invalid just because it isn't addressed. I would suggest you look in the mirror and refrain from personal attacks. Look around, we are all diverse. I don't always see eye to eye with Tom Wong, but he apparently has valuable input and experience (esp. regarding CA/SV business). Same goes for Dan, or Fort Wayne who likely is socially far more conservative than I am. Try to embrace other people's viewpoints instead of labeling them as "foxbots, right-wing shills, tickle-downers etc.", esp. since you know nothing about them beyond the topics discussed on patnet.

SiO2 says

I agree that anarcho-libertarian paradise is going to lead to poverty for the majority.

Whatever your understanding of this nebulous term may be, it certainly isn't debating long-term vs short term capital gains taxes which most of the countries have different tax rates for. Neither is questioning capital flight and/or people with wealth moving out of the country due to higher tax rates. Nowadays where business mostly exist on a couple of servers, you can easily set up a corporation outside of the US where the business transactions will happen, and therefore skirt higher taxes (with some restrictions that a good lawyer can take care of). This is reality, not fiction, happening every day. Nobody is advocating an anarcho paradise.

SiO2 says

I agree that anarcho-libertarian paradise is going to lead to poverty for the majority.

Poverty really doesn't matter. Most people were happier under feudalism - look it up.

Also, they'll still have the right to own guns - even thought they won't be able to afford them - and visit war memorials as often as they can afford to fly to Washington, D.C. and book a hotel room.

SiO2 says

On the other hand, communism (ussr-style in the 60s,70s,80s) led to more poverty and misery

It was almost as bad in the United States. I hope you're sitting down when you read this: we... taxed... (are you ready?)... capital gains (gasp!) at a higher rate than we do today.

Life in the United States was a vast landscape of death and desperation back then.

Regarding capital gains, I would be for taxing them as ordinary income, but would increase write offs from 3K per year to unlimited, however the wash sale rule would have to be strictly enforced.

dublin hillz says

Regarding capital gains, I would be for taxing them as ordinary income, but
would increase write offs from 3K per year to unlimited, however the wash sale
rule would have to be strictly enforced.

This 3k point is a bit disingenuous. It is actually beneficial if you think about it.

You are taxed 20% on capital gains, and can write off up to 3k of capital losses per year against ordinary income. This is important. You are potentially lowering taxable wage income (taxed at higher rate) with losses that would have been taxed at only a 20% rate if they would have been gains.

Further, it is only $3k per year if you never have any other gains. If you lose $50k one year, you write off $3k at your highest marginal rate (lets say 25%) and carry over the $47k remaining. If you gain $50k the next year, you pay no taxes on $47k of that gain, and 20% on the $3k excess.

Net, you have essentially paid less taxes than if you wouldn't have done either trade, but have not gained or lost anything except the opportunity cost of your $50k.

control point says

Further, it is only $3k per year if you never have any other gains

If you never have other gains, perhaps investing is not the right thing to do.

I agree with the sentiment posted that cap gains should be taxed as regular income. Why favor investment over work? But, they should be inflation adjusted. If you buy stock in 1980 for $100, and it's worth $150 now, you are actually worse off. So there shouldn't be tax on that.

Lifting the 3k cap for offsetting losses is an interesting point.

mell says

Nowadays where business mostly exist on a couple of servers, you can easily set up a corporation outside of the US where the business transactions will happen, and therefore skirt higher taxes (with some restrictions that a good lawyer can take care of). This is reality, not fiction, happening every day. Nobody is advocating an anarcho paradise.

your not skirting any taxes... how could you ? Your gonna get taxed by the home countries taxing authority and any foreign nations you do business with.

for USA companies, they pay domestic and foreign tax. there is a foreign tax credit used by corporations are there is one for individual tax payers.

there are no lawyers or accountants that can fix anything to hid transactions or skirt taxes..unless your completely working for a criminal organization.

control point says

Further, it is only $3k per year if you never have any other gains. If you lose $50k one year, you write off $3k at your highest marginal rate (lets say 25%) and carry over the $47k remaining. If you gain $50k the next year, you pay no taxes on $47k of that gain, and 20% on the $3k excess.

Net, you have essentially paid less taxes than if you wouldn't have done either trade, but have not gained or lost anything except the opportunity cost of your $50k.

the carry over provision is there for a purpose.. as was the case with carry over deductions from medical and charitable deductions... yes that too lowers individual
taxes..

thomaswong.1986 says

mell says

Nowadays where business mostly exist on a couple of servers, you can easily set up a corporation outside of the US where the business transactions will happen, and therefore skirt higher taxes (with some restrictions that a good lawyer can take care of). This is reality, not fiction, happening every day. Nobody is advocating an anarcho paradise.

your not skirting any taxes... how could you ? Your gonna get taxed by the home countries taxing authority and any foreign nations you do business with.

for USA companies, they pay domestic and foreign tax. there is a foreign tax credit used by corporations are there is one for individual tax payers.

there are no lawyers or accountants that can fix anything to hid transactions or skirt taxes..unless your completely working for a criminal organization.

Apparently Apple was able to do it and it wasn't illegal:

http://online.wsj.com/news/articles/SB10001424127887324787004578495250424727708