Saturday, August 20, 2011

More on Warren Buffett's "Mega-Rich"

Tax Returns with $10 Million Income or More
Year Number   Total AGI ($1,000s)   Taxes Paid ($1,000s)   Share of Total Taxes 
20025,309$129,421,399$33,738,0654.2%
20036,126$159,126,113$35,416,5094.7%
20049,677$256,932,933$54,202,5686.5%
200513,776$376,274,843$78,268,7198.4%
200615,956$452,475,087$91,013,5548.9%
200718,394$561,612,712$110,843,3889.9%
200813,480$399,968,770$83,558,2168.1%
20098,274$240,133,885$53,790,3246.2%

The chart above shows some federal income tax data for "mega-rich" Americans, those with annual income of $10,000,000 or more. Note the following:

1. When the economy was booming before the recession started, the number of "mega-rich"  Americans reporting income of $10,000,000 or more reached a peak of 18,394 in 2007, almost double the number in 2004 just three years earlier.  In 2007, the "mega-rich" represented only 0.0129% of American taxpayers (a little more than 1/100 of 1%), or just one in 7,773 taxpayers.  And yet that small group of "mega-rich" paid nearly 10% of all federal income taxes paid that year.  It seems like this elite group should be honored as national heroes for shouldering such a hugely disproportionate share of the national tax burden, and not vilified or accused by Warren Buffet of being "coddled" and "protected" by a "billionaire-friendly Congress" and being "spared from the shared sacrifice" that the rest of society supposedly suffers from.      

2. From the WSJ's recent editorial "Millionaires Go Missing":

"Those with $10 million or more in reported income fell to 8,274 in 2009 from 18,394 in 2007, a 55% drop. As a result, their tax payments tanked by 51% (see chart, from $110.8 billion in 2007 to only $53.7 billion in 2009). These disappearing millionaires go a long way toward explaining why federal tax revenues have sunk to 15% of GDP in recent years. The loss of millionaires accounts for at least $130 billion of the higher federal budget deficit in 2009."

3. From the Tax Foundation blog: 

"Mr. Buffett wants those making more than $10 million per year to pay even more [in taxes].  The table below exhibits the effect of imposing a 100% tax effective rate on these individuals (MP: Instead of paying $53.7 billion taxes as they actually did in 2009, we now assume that their entire $240 billion of income (AGI) was confiscated through taxation, raising an additional $186 billion in tax revenue): 

Even taking every last penny from every individual making more than $10 million per year would only reduce the nation's deficit by 12 percent and the debt by 2 percent.  There's simply not enough wealth in the community of the rich to erase this country's problems by waving some magic tax wand."

Bottom Line: As the WSJ points out, "If Warren Buffett wants to reduce the deficit, he should encourage policies to create more millionaires, not campaign to tax them more." 

What we really want is a strong economy that could bring the number of "mega-rich" taxpayers back above 18,000 like in 2007, with an advantage that tax revenues from that group would double to more than $100 billion again.  That would be a much more effective way to raise tax revenues from the super-rich than raising marginal tax rates on Buffett and his super-rich friends as he proposes.  Raising tax rates simply increases the "membership fee" of joining Buffett's elite group and  could reduce the number of Americans willing and able to enter the "mega-rich" club. 

86 Comments:

At 8/20/2011 11:04 PM, Blogger Don said...

Buffett demonstrates the characteristic that businessmen make no better economists than economists make businessmen. It remains an open question whether a country run by Buffett's ilk would be better than one run by politicians and lawyers.

Regards, Don

 
At 8/20/2011 11:44 PM, Blogger PeakTrader said...

Don, Buffett is an economist. He studied under Benjamin Graham, who studied under Irving Fisher.

Economics is usually found in the school of liberal arts, but some universities have it in the school of business.

 
At 8/20/2011 11:51 PM, Blogger Jason Nichols said...

Peak,

I studied under a woman once. Does your logic still apply?

Buffett is known for his ability to make money, not his ability to posit hypotheses on behavioral economics. That why Irving Fisher was an economist, and Buffett is known as a businessman.

-Jason

 
At 8/21/2011 12:11 AM, Blogger PeakTrader said...

Jason, most economists are specialized. It's similar to focusing on the bark on a tree than the forest, for example.

Most are experts in their fields of specialization, e.g. international trade, econometrics, microeconomics, etc., but less knowledgable in other fields, e.g. game theory, central banking, industrial organization, etc..

Moreover, most are technocrats, and many have undergraduate degrees in something other than economics, e.g. math, physics, history, etc..

 
At 8/21/2011 12:24 AM, Blogger PeakTrader said...

Perhaps, John Maynard Keynes wasn't a George Soros, but he did well investing:

How One Investor Made A Fortune In The Great Depression

You will probably know John Maynard Keynes as one of the great economists. What is often forgotten is that he was also one of the greatest investors.

Keynes managed Cambridge’s King’s College Chest Fund. The Fund averaged 12% per year from 1927–1946.

That is a remarkable record given that the period included the Great Depression and World War II.

The U.K. stock market fell 15% during this stretch. It’s even more impressive when you consider that the college spent all the income earned in the portfolio. That means the Fund’s returns only included capital gain.

 
At 8/21/2011 3:53 AM, OpenID Sprewell said...

Eh, I'd rather those making $10 million+ just left. If you're making that kind of money, you can live anywhere and usually you can work from anywhere too, with a few exceptions like Brian Williams hosting the evening news. Better they take that money elsewhere and starve the beast further.

 
At 8/21/2011 5:37 AM, Blogger Larry G said...

I was wondering about the effective tax rate... looks like about 25%, no?

What would the rate be if the Bush tax cuts expire?

 
At 8/21/2011 8:19 AM, Blogger PeakTrader said...

Progressivity of the federal income tax:

21st Century Taxation: Warren Buffett and Income Tax Progressivity
August 16, 2011

For the federal income tax, a married couple in 2010 hit the highest rate of 35% at about $374,000. Less than 2% of filers see that rate (in California, the highest tax rate kicks in at about $95,000 of income for a married couple).

237,000 households reported income exceeding $1 million in 2009. Buffett says they should have a higher tax rate than other individuals.

And the roughly 8,300 filers with income in excess of $10 million should have an even higher rate.

He says the rate should be higher not only for earned income, but also capital gains and dividends.

[Should} the system {be] more progressive given the reality that there is quite a different between $400,000 of income and over $10 million of income.

My comment: Taxes could be more progressive, at higher incomes, but a constitutional amendment may be needed to limit taxes, e.g. at 35%. Is it really fair for anyone to pay 50% of their income in taxes?

 
At 8/21/2011 8:25 AM, Blogger Larry G said...

" Is it really fair for anyone to pay 50% of their income in taxes?"

no.

but a fair system would be progressive and at the same time get rid of the loopholes that allow the high earners to hire experts to reduce their effective tax rate.

At some point - your taxes do get to the point where it's cost effective to hire someone who will work for less than how much they save you in taxes.

Those in the lower incomes - for instance - even those without health insurance still cannot write off any more medical expenses than those who do have insurance and that insurance is tax free.

 
At 8/21/2011 8:53 AM, Blogger juandos said...

"but a fair system would be progressive and at the same time get rid of the loopholes that allow the high earners to hire experts to reduce their effective tax rate"...

Why would any sort of 'progressive' tax system be 'fair' Larry G?

Why should a person making $250K per year pay one more penny in taxes than someone paying $25K per year?

Does a person who has more taxes extorted from him/her get more benefits than a person who has less extorted from them?

 
At 8/21/2011 8:54 AM, Blogger cluemeister said...

I can't believe some posters are even engaging in the discussion about the rich paying more. For god's sake, they're paying 10% of all income taxes, despite representing 1/100 of 1% of taxpayers!

Congratulations. You're buying Barack Obama's class warfare argument, all the while that our gigantic government beast grows and grows and grows.

And when the government beast doesn't get what it wants, it doesn't talk about layoffs or streamlining, it threatens social security checks and military paychecks.

Madness.

 
At 8/21/2011 9:02 AM, Blogger Larry G said...

re: progressive tax system

...room for debate..

re: too much tax...

right now we pay about 1.3 trillion in income taxes and we spend about 2.8 trillion.

yes.. 600 billion is entitlements but 865 is DOD ....

we have to decide what we want to pay for and what we are willing to do without

and no... any plan that says no entitlements and no cuts to the military is going to pass.

and no.. any plan that claims that SS is the problem with the current deficit/debt is going to work either.

We basically have to decide if we still want/need a military that costs us - more than the next 10 armies in the world.

We also have to agree that we have already spent the 14 trillion we are in debt and it has to be paid back.

Even Ron Pauls - 5 year plan to get rid of the deficit and balance the budget still leaves us about 20 trillion in debt.

In other words, even under a draconian cut-only approach - we still end up about 20 trillion in debt 5-10 years from now.

at this point, no one wants to pay that debt much less figure out how to cut 1.5 trillion....(except for Mr. Paul).

there really is no politically realistic way to cut out way out of the deficit/debt though I'll admit agreeing to higher taxes is almost as impossible.

so we essentially play the blame game about how we got the deficit/debt rather than agreeing on how to fix it.

 
At 8/21/2011 9:22 AM, Blogger Hydra said...

Oh, come on. Those people are not suddenly poor. Nor is the amount they pay necessaraily disproportionate to the benefits received.

And we are only talking about us reported adjusted gross income.

Boo hoo. The bad economy affected these guys.

 
At 8/21/2011 9:22 AM, Blogger PeakTrader said...

Is it fair when someone earning $200,000 pays $100,000 in taxes, while someone earning $2 million pays $500,000 in taxes?

 
At 8/21/2011 9:24 AM, Blogger juandos said...

"yes.. 600 billion is entitlements but 865 is DOD ..."...

Total nonsense...

From the Heritage Foundation: Defense Spending Has Declined While Entitlement Spending Has Increased

 
At 8/21/2011 9:26 AM, Blogger Hydra said...

Does a high earner get more govt benefit?

I believe so.

 
At 8/21/2011 9:28 AM, Blogger PeakTrader said...

Hydra, what about a no earner?

 
At 8/21/2011 9:31 AM, Blogger juandos said...

This comment has been removed by the author.

 
At 8/21/2011 9:32 AM, Blogger Michael E. Marotta said...

Keynes was a savvy investor after he took a huge loss, but his success cannot be denied. People are complicated.

It takes some perception and nuance to discuss the ideas and the person in context and contrast.

Ahead of a coming publication, I have pointed out on several libertarian and objectivist sites that Mises, Hayek, and Rothbard were all woefully ignorant about numismatics. As the art and science that studies the forms and uses of money, you would think that they relied more on its facts, and less on their daydreams - oh, I mean "a priori reasoning."

 
At 8/21/2011 9:33 AM, Blogger Hydra said...

They are paying 10% of income taxes and have over half the wealth.

How much do you think you will get from the 47% who pay no income tax and have 5% of the wealth?

You want a flat tax? How about 5% of net worth annually, for everyone?

 
At 8/21/2011 9:34 AM, Blogger juandos said...

hydra says: "Those people are not suddenly poor. Nor is the amount they pay necessaraily disproportionate to the benefits received"...

What are the people having more of their personal wealth extorted from them by the government getting over and above the people who have less money extorted from them?

 
At 8/21/2011 9:36 AM, Blogger Hydra said...

Why do I care if Hayek was ignorant of coin collecting?

 
At 8/21/2011 9:39 AM, Blogger PeakTrader said...

"While numismatists are often characterized as students or collectors of coins, the discipline also includes the broader study of money and other payment media used to resolve debts and the exchange of goods."

 
At 8/21/2011 9:39 AM, Blogger juandos said...

hydra says: "They are paying 10% of income taxes and have over half the wealth"...

What's your point? You're not infering that these people with over half the wealth stole or something, right?

"You want a flat tax? How about 5% of net worth annually, for everyone"...

Nope, a flat tax is still disproportionately extortive towards the successful...

Are you a marxist hydra?

 
At 8/21/2011 9:57 AM, Blogger PeakTrader said...

Is it fair when someone pays a 10% sales tax for a million dollar corporate jet, while another pays a 10% sales tax for a $1 pencil?

Or should the corporate jet have a lower sales tax rate?

 
At 8/21/2011 10:01 AM, Blogger Hydra said...

I assume that is a rhetorical question and I suggest you read "who gets what they want from the federal government" by Martin Giles.

 
At 8/21/2011 10:01 AM, Blogger PeakTrader said...

Of course, a luxury tax makes the sales tax progressive.

 
At 8/21/2011 10:09 AM, Blogger PeakTrader said...

Hydra, if someone earns zero and receives $20,000 worth of benefits from the government, where does that money come from?

 
At 8/21/2011 10:23 AM, Blogger Hydra said...

Lets define the discussion here. Are we talking income tax rates or total of all taxes actually paid?

BTW I hunk you will find that aircraft generally get lower sales tax rates and lower property tax rates.

We have a system in which political power and economic power are exercised differently. Under That system what makes you think the wealthy are entitled to keep what they earn?

I believe the government is obligated to protect minorities. In the case of the wealthy it has arguably and demonstrably done an outstanding job.

 
At 8/21/2011 10:25 AM, Blogger Hydra said...

If someone earns zero and gets 20k in benefits, how much tax would you have him pay?

 
At 8/21/2011 10:26 AM, Blogger morganovich said...

hyfra-

you keep making the claim that high earners get more service, but you have never provided a single valid example.

they get fewer services, not more.

their returns on SS contributions are negative, unlike low earners.

they do not use government services like medicare.

they are far more likely to hold uninsured assets. (and even bank asset insurance is funded by a very specific FDIC tax (10bp on assets, so that's already passed along.

so where are all these "extra" services you keep mentioning?

i don't think they exist.

you keep making this same flawed augment over and over.

if it's fair that you and i pay the same amount for a big mac, why is it fair that i pay 50X what you do for the same EPA, FDA, FAA, etc?

 
At 8/21/2011 10:32 AM, Blogger morganovich said...

"If someone earns zero and gets 20k in benefits, how much tax would you have him pay?"

i'd favor two soultions:

1. do as the baltics do and take away the right to vote from those on the dole. you don't get to live off me and vote yourself more goodies at the same time.

2. require labor from anyone able bodied getting that money. i don't care if it's picking up trash, filling potholes, sorting library books, or providing visitor information, you need to provided benefit to the society that is giving you such largess.

our current system is headed for terminal fail because we we have 51% of people (a constant democratic majority) paying no taxes yet able to vote themselves more goodies.

more than ever live on the dole and provide nothing back for it.

allowing this kind of perpetual "democratic stick up" is utterly anathema to our founding principles and the things that made the US great.

 
At 8/21/2011 10:36 AM, Blogger Hydra said...

No, but I'm not an idiot, either.

How do we know the wealthiest folks didn't steal it, or some of it?

The fundamental question here is what constitutes fair. How would we recognize it if we saw it?

That may have nothing whuatsoever to do with the wealthy or how they got their wealth, and keeping that as part of the conversation only hinders getting at the truth of what is fair.

Suppose we had an economy in which the distribution of income every year was determined by lottery. Who would care how much the rich got taxed in that case?

 
At 8/21/2011 10:38 AM, Blogger morganovich said...

ps.

hydra-

you have never defined what you would call fair.

i laid my definition out for you.

what's yours?

i have real doubts you can support your ideas in any consistent fashion without resorting to marxism.

 
At 8/21/2011 10:39 AM, Blogger Hydra said...

Yet able to vote themselves more goodies. So, why have they voted themselves a whopping 4 to 6% of the total wealth?

 
At 8/21/2011 10:41 AM, Blogger PeakTrader said...

This comment has been removed by the author.

 
At 8/21/2011 10:42 AM, Blogger PeakTrader said...

Hydra says: "How do we know the wealthiest folks didn't steal it, or some of it?"

Who did they steal it from? The no income earner who receives $20,000 of government benefits?

 
At 8/21/2011 10:42 AM, Blogger Hydra said...

You act as if Marxism and progressive were pejoritives.

I must have missed your definition of fair. I have not seen it.

Mine goes along the line of if you get to cut the pie, you don't get first pick of the slices.

 
At 8/21/2011 10:57 AM, Blogger PeakTrader said...

Hydra says: "I must have missed your definition of fair. I have not seen it.

Mine goes along the line of if you get to cut the pie, you don't get first pick of the slices."

Ok, free pie for everyone.

 
At 8/21/2011 11:07 AM, Blogger juandos said...

"Does a high earner get more govt benefit?

I believe so
"...

Well hydra maybe your supposed beliefs should get a grip on reality...

Not everyone who's rich is a crony capitalist...

"I suggest you read "who gets what they want from the federal government" by Martin Giles"...

Which Martin Giles, the one that writes for the Economist or the Tampa area radio guy or someone else?

"You act as if Marxism and progressive were pejoritives"...

LOL! What would you call them hydra, terms of positive accomplishment?

Just curious about something hydra, have you ever read The Black Book of Communism?

 
At 8/21/2011 11:13 AM, Blogger Jon said...

Jon Stewart addresses Mark's argument pretty well. Raising taxes on the wealthy will only generate $700 billion over 10 years. Not even worth the trouble. But cutting spending for the poor? Even a million is worthwhile. You gotta start somewhere.

Mark continues to look only at federal INCOME taxes, ignoring everything else (payroll, excise, capital gains) and it happens this skews the story such that it highlights the suffering of the rich and ignores the contributions of the poor.

 
At 8/21/2011 11:46 AM, Blogger Hydra said...

Free pie for everyone, and you call me a Marxist.

 
At 8/21/2011 11:52 AM, Blogger juandos said...

hydra you're the only saying, "Free pie for everyone"...

Most everyone else has to work for their slice...

 
At 8/21/2011 12:15 PM, Blogger Mark J. Perry said...

At this recent post, I featured a graph of ALL federal taxes including payroll, etc., so I have not ignored all federal taxes paid.

 
At 8/21/2011 12:26 PM, Blogger Hydra said...

Even so, if the argument is what is fair to pay for government you need a systems approach that considered all governments, all taxes, and all fees. Especially since the federal government is so entwined with state and local.

Some claim you need to include the cost of compliance, as well.

 
At 8/21/2011 12:29 PM, Blogger Hydra said...

So you agree that crony capitalists should get a different rate?

 
At 8/21/2011 12:35 PM, Blogger Hydra said...

Are progressive etc.

I believe the use of emotional or value-laden words debases the value of an argument. I discount an argument hyperbolically according to the degree of hyperbole and prejudicial inflammation.

 
At 8/21/2011 12:35 PM, Blogger Larry G said...

simple data:

income tax revenues = 1.3 trillion

FICA revenues = 865 trillion

NO ONE gets to write off FICA taxes.

75% of taxpayers pay MORE in FICA taxes than income taxes.

The PRIMARY reason the un-rich do not pay much in the way of income taxes is kids who are claimed as exemptions and then further deduction for earned income.

The un-rich who really get whacked are single and the divorced who cannot claim the kids.

 
At 8/21/2011 12:40 PM, Blogger Hydra said...

I'm not proposing anything. I am merely pointing out that the idea 51% are voting huge benefits for themselves does not carry much weight when, after voting these huge benefits they wind up with 4 to 6% of the wealth.

Whether I have a Marxist theory or not, yours does not seem to fit with observation.

 
At 8/21/2011 12:41 PM, Blogger Larry G said...

on entitlements - there are two kinds of entitlements

1. - entitlements paid by FICA

2. - entitlements paid by general revenues (income taxes).

Here's the reality:

Social Security - FICA
Disability Insurance - FICA
Medicare Part A (hospital) FICA

Medicare Part B (doctors) Income tax

MedicAid - Income tax

SCHIPS/food stamps/subsidized school lunches/ - income tax.

lumping all the entitlements together regardless of how they are funded - will give an erroneous idea about the budget and the deficit.

The deficit and debt - right now comes from the military, Medicare Part B and MedicAid.

Medicare Part B = 210 billion
MedicAid = 500 billion
Military = 689 billion

It is true that entitlements are going up faster than DOD but DOD itself is almost double what it was under Clinton.

 
At 8/21/2011 12:42 PM, Blogger Hydra said...

I think if you are divorced you still get to claim the kids.

 
At 8/21/2011 12:44 PM, Blogger Larry G said...

" I think if you are divorced you still get to claim the kids"

only if they live with you.....

the one they don't live with only gets to write off the support payments but they do not get the exemptions and deductions.

Single MOMs often receive thousands of dollars in refunds.... between exemptions and deductions...

 
At 8/21/2011 12:54 PM, Blogger Unknown said...

There's one unmistakeable and frightening conclusion. The only way the US will solve it's deficit and debt problems will be cutting entitlement programs and raising taxes on the bulk of the nation- the middle class.

How well will that play in DC or Peoria?

 
At 8/21/2011 12:57 PM, Blogger Hydra said...

Do not know if Giles has been published by the economist, have you?

 
At 8/21/2011 1:00 PM, Blogger Larry G said...

cutting entitlements alone won't balance the budget.

Medicare Part B = 210 billion
MedicAid = 500 billion

Deficit = 1.5 trillion

 
At 8/21/2011 1:01 PM, Blogger Hydra said...

Sorry, I misspelled his name, anyway. It is Gilens and he is from Princeton. Sorry you wasted energy attacking the source rather than the ideas.

Care to try again?

 
At 8/21/2011 1:20 PM, Blogger ctk8mom said...

re: I can't believe some posters are even engaging in the discussion about the rich paying more. For god's sake, they're paying 10% of all income taxes, despite representing 1/100 of 1% of taxpayers!

Maybe the problem is that, in spite of paying 10% of all taxes, they own 50% of the income in the country. Think of it that way; 400 people have more income than 150million others. A problem.

 
At 8/21/2011 1:21 PM, Blogger PeakTrader said...

There are many hard working poor.

And there are many hard working middle class, who are paying 50% of their income in taxes already.

Nonetheless, government continues to pile-up debt, spending $1 1/2 trillion a year too much.

People will pay, one way or another, and it won't be just the rich.

 
At 8/21/2011 1:33 PM, Blogger Hydra said...

If you are wealthy you probably fly 5000% as much as I do. Why shouldn't you pay 50 x more, although I doubt that is a true premise.

 
At 8/21/2011 1:39 PM, Blogger Hydra said...

Juandos: you propose an equal tax per head?

 
At 8/21/2011 2:07 PM, Blogger PeakTrader said...

Paul Ryan on tax reform:

This plan discards a needlessly complex and manipulative tax code, replacing it with a simplified mechanism that promotes work, saving, and investment.

•Provides individual income tax payers a choice of how to pay their taxes – through existing law, or through a highly simplified code that fits on a postcard with just two rates and virtually no special tax deductions, credits, or exclusions (except the health care tax credit).

•Simplifies tax rates to 10 percent on income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts. Also includes a generous standard deduction and personal exemption (totaling $39,000 for a family of four).

•Eliminates the alternative minimum tax [AMT].

•Promotes saving by eliminating taxes on interest, capital gains, and dividends; also eliminates the death tax.

•Replaces the corporate income tax – currently the second highest in the industrialized world – with a border-adjustable business consumption tax of 8.5 percent. This new rate is roughly half that of the rest of the industrialized world.

 
At 8/21/2011 2:30 PM, Blogger Hydra said...

I agree with PT.

The debts are mostly to ourselves. Either we pay the debts and do without the money we would pay with, or we don't pay the debts and do without the money we loaned.

Hmm, maybe default does not look so bad.

 
At 8/21/2011 2:32 PM, Blogger PeakTrader said...

Paul Ryan: "Simplifies tax rates to 10 percent on income up to $100,000 for joint filers, and $50,000 for single filers; and 25 percent on taxable income above these amounts."

For someone earning $1 million, the tax burden is roughly $240,000, and for someone earning $10 million, the tax burden is about $2.5 million.

Is that fair or progressive enough?

 
At 8/21/2011 3:01 PM, Blogger Larry G said...

re: Ryans's proposal - takes until 2030 to balance which means the continuing deficit (though reduced) will continue to add to the 14 trillion we have now.

Does that imply that the 14 trillion debt is not that big a problem - at least in Ryan's plan?

re: tax rates

here's the truth.

No matter how you feel about kids and families - in the current tax code if you have a household income of 50-100K and 2 kids - you're end up paying low taxes

If you are a single mom even if you earn 40-50K - you'll end up not only paying no taxes but getting a refund.

the tax deductions for kids are the primary reason that people in the not-rich income areas pay little or no taxes.

A single/divorced person who earns 50K will pay significant taxes.

On top of this - we pay, on average, about 10,000 a year per kid in the schools with quite a bit of that coming from local property taxes that is in ADDITION to state and federal income taxes.

for the lower incomes - if you have kids - you get a refund - and then some.

A credit, unlike a deduction can not only offset your tax liability but refund the balance to you.

so... not only do many of the rich not pay their progressive share but neither do those with kids and low incomes.

I'm not arguing in favor of or against tax breaks for kids - only pointing out that it's a significant reason that the non-rich pay little in Federal Income taxes.

so when folks are talking about tax "reforms" are they including doing away with the kid factor?

 
At 8/21/2011 7:48 PM, Blogger Methinks said...

The bottom line is that Warren Buffoon owns an insurance company that sells products whose value rises substantially if the top marginal tax rate and the death tax is high.

Similarly, Warren Buffoon struck a deal with Government Sachs in 2008 where he bought preferred stock with an in the money option and then started stumping for TARP to ensure transfer payments from taxpayers to him.

Warren Buffoon is a rent seeking asshole.

 
At 8/21/2011 9:16 PM, Blogger cluemeister said...

Government is broke. It is beyond broke. It is on the edge of total bankruptcy. It took out another credit card last month to keep its spending binge going.

It spends and promises and spends and promises. It can not keep this up.

No amount of taxation will solve this problem. None.

That is an undeniable truth. You can talk about taxing millionaires all you want. It does not change the truth.

There is not enough money to satisfy the beast.

 
At 8/22/2011 8:33 AM, Blogger morganovich said...

hydra-

marxism is a pejorative.

it's a bankrupt and failed ideology.

perhaps you say what it did to china, the soviet empire, and most recently to venezeula?

name one successful marxist nation EVER.

i note you still cannot define fairness.

that pie example is as absurd as it is irrelevant.

you truly are a marxist. it shows in your thinking.

you think there is some fixed pie and that if i get more, i must be hogging yours.

that's absurd.

the pie is anything but fixed.

we all bake pies. some bake more than others.

the real issue is "if i bake a pie, why do you feel entitled to a slice"?

your betray your ideological roots by talking about "slicing the pie" instead of making the pie.

if those who make pies have to let others slice them and take first pick, why would they bother making pies at all?

this is exactly why communism collapses.

no one has incentive to make pie.

then, you, the slice picker, wind up with an even slice of a tiny, tiny pie and we all live in poverty.

you seem to have no understanding at all about where pie comes from.

 
At 8/22/2011 8:42 AM, Blogger morganovich said...

"I'm not proposing anything. I am merely pointing out that the idea 51% are voting huge benefits for themselves does not carry much weight when, after voting these huge benefits they wind up with 4 to 6% of the wealth."

um, no.

you are totally misframing the issue.

it's not wealth, but transferred income and participation in programs.

there is huge income transfer. it's about $1.5tn a year.

that's a lot of dough to go from one group to another.

my fica subsidizes yours.

i get back less than i pay in (negative nominal interest rates).

you get back more.

my work pays for the unemployment of others.

the fact that they are not saving that money but rather consuming it does not make it any less a transfer.

if i mug you and take $500, would you care if i spent it on a DVD player or put it in muni bonds?

the size of the federal government is 13X what is was as a % of GDP now as opposed to when calvin coolidge was president.

(2% to 25%) this is the DIRECT result of social welfare programs.

22% of GDP is no joke. if you don't think that's a massive wealth transfer, i'd hate to see what you would consider one.

 
At 8/22/2011 8:45 AM, Blogger morganovich said...

"The bottom line is that Warren Buffoon owns an insurance company that sells products whose value rises substantially if the top marginal tax rate and the death tax is high.

Similarly, Warren Buffoon struck a deal with Government Sachs in 2008 where he bought preferred stock with an in the money option and then started stumping for TARP to ensure transfer payments from taxpayers to him.

Warren Buffoon is a rent seeking asshole."

methinks-

i had not thought of it that way, but you are absolutely right.

life insurance is no longer bought by 30 year olds. it's almost entirely a wealth management tool for the wealthy to cover estate taxes etc.

that's exactly what warren is up to.

he has become a european style dirtbag seeking to make the feds drive demand for his products.

 
At 8/22/2011 8:58 AM, Blogger morganovich said...

"The debts are mostly to ourselves."

nonsense.

the debts are not to me.

i'll never collect SS. it will be gone long before i am of age. the same is likely true of medicare.

so i am paying someone else's debt, not mine.

they ran it up, they get the benefit, and i pay the bill.

the bill is astronomical.

we have what, $62tn in unfunded liabilities and another 14tn in bond/bill debt? that's $76 tn.

$250k for every man, woman, and child in the US.

a baby born today already has a mortgage.

he doesn't "owe it to himself".

he owes it to a bunch of old people.

 
At 8/22/2011 9:11 AM, Blogger Jon said...

Mark, it's good of course that you noted all federal taxes in a prior post, but I think it's worth recognizing here what is emphasized and what isn't. Bias isn't usually about lies, but instead selection and emphasis. Here the bold is regarding 2007 (emphasizing the suffering of the rich, since this is their peak) and income taxes only (again emphasizing the suffering of the rich).

What I've never seen discussed here is the fact that in every state except Vermont taxes are regressive. The poor pay the highest % of their income to taxes. This makes sense because it's easier for wealth and corporations to bully a smaller, weaker state government than a federal government, so they can more easily create a system that serves their interests.

When we look at all the taxes, not the ones that focus on the suffering of the rich, we find that our tax code is progressive, but mildly so. The rate for the poor is 18.9%. The top 1% pay 30.9%.

 
At 8/22/2011 9:48 AM, Blogger Larry G said...

I think we got started down the wrong path when we created public roads and schools, eh?

from then on it was downhill to Marxism....

 
At 8/22/2011 9:50 AM, Blogger Larry G said...

" i get back less than i pay in (negative nominal interest rates).

you get back more."

same thing happens with auto and homeowner insurance, eh?

is insurance a "wealth transfer" if you get back more for your premiums that others who paid?

is insurance a "Marxist" concept?

 
At 8/22/2011 11:31 AM, Blogger morganovich said...

jon-

taxes are regressive?

what definition are you using?

even a flat tax is highly progressive.

if i earn 50k and you earn 75k, you pay 50% more tax than i do for the same services.

if you think that's regressive, i'd hate to see what you think progressive is.

this is just a bunch of rand style doublespeak that has utterly misframed the debate.

they call progressive regressive and get everyone to buy in.

flat is paying the same for the same.

we both pay $2.99 for a big mac.

a flat tax doesn't work like that at all.

using our prior income example, i pay 2.99 and you pay 4.49 for the same big mac.

that's what you are calling regressive.

i think you may need to reassess your definition.

a flat tax tax in dollars is flat.

a flat tax in %'s is progressive.

a graduated tax is massively progressive.

you don't pay for any other good or service you buy in % terms of income.

why do you feel government ought to be paid for that way?

you'd be rightly angry if big macs were priced that way.

it would destroy your incentive to work. why make extra money if all the prices just rise?

hell, just earn $5k a year and get them for 30 cents.

so what makes government so special?

by your definition essentially everyhting is "regressive" for the poor. they spend a greater % on food, housing, movies, and sneakers than i do too. shall we redress that too?

when you think about it that way such a definition is exposed as meaningless.

 
At 8/22/2011 11:35 AM, Blogger morganovich said...

larry-

that's a ridiculous argument.

auto insurance is paid based on actuarial loss assumptions and profit margins. there is no redistribution. you pay your own way and have your own account. you are not subsidizing anyone, nor they you.

social security does not work like that. you get a set payout. it's more like an annuity.

but the poor get a very different price than the rich.

they can get back 3+ times what they pay in. the high earners get back less than 1:1.

that is nothing at all like those other kinds of insurance.

 
At 8/22/2011 12:16 PM, Blogger Free2Choose said...

"you betray your ideological roots by talking about "slicing the pie" instead of making the pie."

Dead on! That's the most insightful rebuttal I have heard in a long time. Kudos!

 
At 8/22/2011 12:19 PM, Blogger Jon said...

Morganvich, I'm using the standard definition of regressive. It's about the rate of taxation as a % of income. If the rate is higher for the poor than the rich, even though the poor might pay less in total, then the tax is regressive. That's just what the word means and has always meant as far as I know.

http://en.wikipedia.org/wiki/Regressive_tax

 
At 8/22/2011 1:22 PM, Blogger Larry G said...

Morg - FICA/SS/DI/HI is BOTH - it's an annuity and insurance.

you can buy an annuity that will pay you as long as you live but if you die - you don't get anything unless you have paid an additional amount for a survivor annuity.

that kind of annuity is based on actuarials.

disability insurance works the same way - whether it's public or private.

health insurance - just like Medicare Part A - same deal.

there is no "pie" with insurance.

the primary aspect of SS/DI/HI is not that it' unusual in what it does - private annuities and insurance work very similarly.

what is different about FICA/SS is that it is mandatory but even that is not unique as auto insurance and even mortgage insurance is mandatory - auto a state requirement and mortgage a private contractual requirement.

 
At 8/22/2011 1:38 PM, Blogger juandos said...

"It is true that entitlements are going up faster than DOD but DOD itself is almost double what it was under Clinton"...

Larry G you of course of something credible to back up that statement, right?

Consider these two items:

From the Mercatus Center: Spending Under President George W. Bush

From CNN: Clinton wants biggest boost in defense spending since Reagan

 
At 8/22/2011 1:44 PM, Blogger Larry G said...

here's your chart:

http://www.usgovernmentspending.com/downchart_gs.php?year=2001_2021&view=1&expand=&units=b&log=linear&fy=fy12&chart=30-total&bar=1&stack=1&size=l&title=&state=US&color=c&local=s

and

http://www.usgovernmentspending.com/downchart_gs.php?year=2001_2021&view=1&expand=&units=b&log=linear&fy=fy12&chart=30-total&bar=1&stack=1&size=l&title=&state=US&color=c&local=s#copypaste

2001 = 366.64
2010 = 848.11

you could have verified this yourself, right?

 
At 8/22/2011 3:13 PM, Blogger morganovich said...

larry-

you are not describing this accurately.

with health insurance, i have my own policy. i pay in (by choice) and get out based on what i pay. if i pay more, i get more coverage.

social security and medicare are not like that at all.

they take all the money, toss it in a pile, and redistribute it.

my max benefit means that i will never even get back what i paid in unless i live to be 120 or some such.

the max benefit for someone who earns 35k is several multiples of their paying by 86.

if you can find me private insurance where the less i pay, the more coverage i get, please let me know. i'd love to buy some.

medicare is even worse. you don't need to pay squat into it to get what i get and we all get the option to buy the stupendously under-priced coverage.

if i pay FICA on 107k a year and someone else pays on 25k, i will pay more than 4X as much for the exact same thing.

that's nothing like how other insurance and annuities work.

they get the same slice of pie for 22% of the price.

i am subsidizing them.

 
At 8/22/2011 3:18 PM, Blogger morganovich said...

jon-

i understand that you are using the standard definition. my point is that the standard definition is doublespeak.

it's a meaningless metric.

the price of everyhting is more regressive for the poor.

my point is that this wild misdefinition has become common, but that does not make it accurate or meaningful.

it's just a false turn of phrase used to justify wealth redistribution.

think about this:

if you make 100k and i make 100k and you spend 90k and save 10 and i spend 60k and save 40, are sales taxes more regressive for you who paid 1.5X as much for them as i did?

it would be a laughable metric if some many people did not believe it. that shifts it from laughable to dangerous.

we can define a pit viper as a kitten too, but that doesn't make it somehting you'd want on your lap.

 
At 8/22/2011 3:25 PM, Blogger Larry G said...

Morg - retirees don't get the same SS annuity.

It's based on what they pay into it.

http://www.socialsecurity.gov/estimator/

BUT ... if you die early - you lose and if you live longer than expected - you win....

and if you become disabled, you get benefits that others who do not become disabled don't get.

but that's the way that many annuities and most insurance works.

You might pay for better coverage but at the end of the day - the guy who pays the same as you do - may well get 10 times the benefits that you got.

that's the way insurance works.

right?

you could pay 20 years worth of auto insurance premiums and not get a penny in benefits...

and a guy who pays what you pay or even less may collect the equivalent of all of his premiums ...times 10 or 20...

insurance......

it's a capitalistic concept.

 
At 8/22/2011 4:01 PM, Blogger Mike said...

Hydra,

"I am merely pointing out that the idea 51% are voting huge benefits for themselves does not carry much weight when, after voting these huge benefits they wind up with 4 to 6% of the wealth."

I think the big problem here is one that you refuse to believe/consider/admit: That 51% is not a stagnant collection of peasants who live their lives in poverty. Those social and wealth positions are transient...
The more they vote themselves goodies, the longer they lack incentive to do what they often do later anyway, move up the ladder. It also adds to the length of time that those who start at the bottom feel sympathy for those who have taken their old position when they move up.

There is a reason why the wealth distribution percentages seem to be carved in stone, but it's not because the folks who have prospered aren't paying enough.

 
At 8/23/2011 10:17 AM, Blogger morganovich said...

larry-

i realize that benefits for SS vary. my point is that at 107k, you will NEVER get your money back, whereas those paying $25k will.

that's a highly progressive outcome and precisely opposite to what you see in other annuities. (and SS is an annuity, not insurance) in most annuities, the more you pay (bigger purchase), the better the return.

you can die a year after buying an annuity too.

your point about not using what you buy is irrelevant.

you buy X coverage. that's what you have. you can use it or not, but you had X.

if we both join a gym and i go 250 days a year, and you go 50, i got 5X the use you did, but we had the exact same privileges. we bought the same thing at the same price. you could say the same about a bike or a frying pan.

for medicare, we get the same privileges, but i pay over 4X what someone making 25k pays.

that too is incredibly progressive.

whether or not your crash your car is irrelevant. you pay for X coverage. you get it. if you make me pay 400% what you do for the same coverage, you think that's fair?

you really do not seem to understand how this works at all.

 
At 8/23/2011 1:20 PM, Blogger Larry G said...

Morg - if you make 100K .. I'm betting that you'll get 3K a month under SS...

have you checked?

progressive?

you can argue it both ways. People at the lower end of the scale tend to have shorter lifespans...

the DI and HI part of SS is insurance.

In fact the formal name is SSI.

" In the United States, Social Security refers to the federal Old-Age, Survivors, and Disability Insurance (OASDI) program"

" Social Security is a social insurance program that is funded through dedicated payroll taxes called Federal Insurance Contributions Act tax (FICA). Tax deposits are formally entrusted to the Federal Old-Age and Survivors Insurance Trust Fund, the Federal Disability Insurance Trust Fund, the Federal Hospital Insurance Trust Fund, or the Federal Supplementary Medical Insurance Trust Fund:

notice the word "insurance"

 

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