Millionaire Tax

[crb]

By all means, make a new tax bracket for $1 million plus on ordinary income.

By all means, close the hedge fund carried interest loop hole.


Do NOT raise investment taxes.

When a corporation earns money which it shares with shareholders the tax bill is split. Currently the corporation pays (statutory) 40%. The shareholder 15%, making the total tax rate on corporate earnings 55%.

If you raise the rate on dividends to match ordinary income, lets say it is going to be 40% (really, I think obama is proposing 39.6%). Then that makes the total tax rate on distributed corporate earnings 80%.

Do you claim that I'm making this up, that the lower rate on dividends and capital gains is not to make up for it being taxed twice?

To point, there are two types of dividends. Qualified and nonqualified. Qualified dividends are taxed at 15%, unqualified dividends are taxed as ordinary income.

Why? Well, if you have held a stock less than a year it is assumed you are a trader, meaning your day to day job is trading stocks, this makes stock income ordinary income for you, not investment income for you, so dividends on assets held less than a year are nonqualified dividends, and you pay ordinary income tax on them.

However, there are certain special classes of entities, such as REITS. REIT stands for Real Estate Investment Trust. REITs are 100% exempt from paying corporate taxes, however, they must distribute 90% of income to shareholders every year, and those dividends are ALWAYS nonqualified, no matter how long you have held the stock.

So, the Federal Government, is saying that because the income is not being taxed twice, like other corporate income, it needs to be taxed at a higher rate than other dividends. This is an implicit admittance built right into our tax policy that corporate taxes and investment taxes are two halves of the same thing and need to be combined to do comparisons.

Additionally, many people who might make 1 million dollars in a year, do so maybe just once in their life, when they sell a single large asset. Imagine the family farmer, who takes home 40k a year for 3 decades. Then he sells his farm for 3 million dollars. Now suddenly he needs to pay a 1.2 million dollar tax bill to the federal government? This isn't a member of the elite. By selling the farm the farmer will hence forth have to rely fully on investment income to support his family, he will not be living rich. This is a situation a lot of a small business owners may find themselves in when they go to retire. We'll have a death tax, and a retirement tax.

Assuming you don't want to overtax the farmer, you need to put in exceptions. Assets held longer than 10 years for instance could still be taxed at the lower rate.

Of course, investing income is income on money you had already earned and been taxed on once. It is income on an activity that carries risk. In years where markets go down federal tax receipts on investment income pummet, so it is not a reliable method of funding government. An increase in investment taxes usually results in selling ahead of the increase, which could panic markets and thus hurt everyone with a pension or 401k. And the government never makes what they think they will because people will stop realizing investment gains to avoid the tax bite - the government can even make LESS revenue after raising investment tax rates. It will hurt our economy, our GDP growth, and employment levels.

But... if Obama's bill does pass (which we all know it won't, he couldn't even get higher taxes passed when Democrats controlled the house). Buy REITS. Currently reits have to yield more than comparable equities to make up for the fact that they're taxed at 20% higher rates for the investor. If that tax penalty disappears for the ultrarich, they will move into the REIT space to take advantage of the higher yields which will suddenly seem to be on sale. This should give REIT stocks a nice boost.

[Keller]

There is zero chance you scored in the top percentile on any standardized test.

[crb]

Whatever you say sport, you know last time I posted roughly that same thing you agreed with it.

[Bobmuhthol]

There is zero chance you scored in the top percentile on any standardized test.

Top half-percentile, actually.

[crb]

Damn right bitches.

[Bobmuhthol]

Imagine the family farmer, who takes home 40k a year for 3 decades. Then he sells his farm for 3 million dollars. Now suddenly he needs to pay a 1.2 million dollar tax bill to the federal government?

No, actually, that's not what he would pay in taxes at all.

[Keller]

Whatever you say sport, you know last time I posted roughly that same thing you agreed with it.

To be honest, I only read through the first 5 paragraphs.

If I'd have continued I'd have been the idiot for wasting my time.

[ClydeR]

When a corporation earns money which it shares with shareholders the tax bill is split. Currently the corporation pays (statutory) 40%. The shareholder 15%, making the total tax rate on corporate earnings 55%.

You can't add percentages like that because after the corporation pays tax, it has less money left to pay out, meaning that the two different tax rates are not multiplied by the same dollar amount. I'm not sure you have the corporate rate right anyway.


Do you claim that I'm making this up, that the lower rate on dividends and capital gains is not to make up for it being taxed twice?

There's different reasons for the two tax breaks. You correctly cited the primary reason for the dividend tax break.


Why? Well, if you have held a stock less than a year it is assumed you are a trader, meaning your day to day job is trading stocks, this makes stock income ordinary income for you, not investment income for you, so dividends on assets held less than a year are nonqualified dividends, and you pay ordinary income tax on them.

You may want to look that up. I think you're confusing the capital gains tax break with the dividend tax break.


However, there are certain special classes of entities, such as REITS. REIT stands for Real Estate Investment Trust. REITs are 100% exempt from paying corporate taxes, however, they must distribute 90% of income to shareholders every year, and those dividends are ALWAYS nonqualified, no matter how long you have held the stock.

I'm going to file that insight away for future research. I think you may be on to something. The question is whether or not the rest of the market is also aware and whether or not it is already factored into REIT prices.

[Buckwheet]

I think the better solution would be to just get rid of salary all together. You "invest" your time with me and I will pay you money from our profits.

[ClydeR]

No, actually, that's not what he would pay in taxes at all.

Why isn't it right? The only problem I see is that CRB applied the tax rate to the full sales price instead of just the profit. But if the farmer bought the farm 30 years ago, the probably didn't pay much for it anyway.

But now that I think back, I think agricultural real estate prices were at a bubble point around 30 years ago, meaning there might not be much profit at all. It the farmer had bought the land 50 years ago, there it would be just about all profit.

[Bobmuhthol]

Personal income tax isn't 40%, the initial cost of the land wasn't considered, and any intelligent farmer would negotiate installments instead of taking the $3 million in cash.

Edit: I didn't even pay attention to the rest of the original argument. The farmer now has to rely on investment income and therefore isn't rich??? Really??? If I had even $1 million in cash I would retire before my career starts and live very comfortably on investment income.

[Keller]

You can't add percentages like that because after the corporation pays tax, it has less money left to pay out, meaning that the two different tax rates are not multiplied by the same dollar amount. I'm not sure you have the corporate rate right anyway.

There's different reasons for the two tax breaks. You correctly cited the primary reason for the dividend tax break.

You may want to look that up. I think you're confusing the capital gains tax break with the dividend tax break.

I'm going to file that insight away for future research. I think you may be on to something. The question is whether or not the rest of the market is also aware and whether or not it is already factored into REIT prices.

crb is bested by a troll with a penis pond.

[AnticorRifling]

Is that who we still think it is?

[Keller]

Is that who we still think it is?

Clyde did stop posting for a while after the penis pond incident.

[Suppa Hobbit Mage]

I thought it was Latrine.

[Paradii]

Wait, there was a penis pond incident that I am not aware of?

[Suppa Hobbit Mage]

Wait, there was a penis pond incident that I am not aware of?

That is a question only the doctor can answer... you need a prescription for truth!

[Parkbandit]

Is that who we still think it is?

Who's "we"?

I've already stated it's not Tabor... he's no where near organized enough to pull this off.

[Tgo01]

Is that who we still think it is?

Well heck the only reason I started believing it was Mr. Penis Pond was because you said it was and I thought you were going by their IP addresses or something.

You disappoint :(

[Latrinsorm]

I thought it was Latrine.Pfft.

[crb]

No, actually, that's not what he would pay in taxes at all.

You want to quibble over exact numbers.

40% of 3 million is 1.2 million.

Now technically I'm rounding 39.6% up, and technically I'm not counting what he "paid" for the land since I said he was a family farmer so he paid nothing for it, it got it from his dad, who got it from his dad, and so on. Of course technically you get a stepped up cost basis when you inherit something, but who knows when he actually inherited and what land values are where he hypothetically lives - except for you of course, because you married his daughter, the poxy faced one.

Also, technically, there are deductions, how many kids does he have? I don't know, do you know? Maybe you married my hypothetical farmer's daughter and so you know more of his hypothetical family details than I do.

Then of course, for the first 250k ish of his income the tax rates will be lower, and it'll move the needle slightly, not that much though.

So if you technically wanted to be a douchebag, you could technically achieve that status by technically calculating the exact technical tax bill the farmer would have under Obama's proposal.

[crb]

Personal income tax isn't 40%, the initial cost of the land wasn't considered, and any intelligent farmer would negotiate installments instead of taking the $3 million in cash.

Edit: I didn't even pay attention to the rest of the original argument. The farmer now has to rely on investment income and therefore isn't rich??? Really??? If I had even $1 million in cash I would retire before my career starts and live very comfortably on investment income.

ROFL.

This shows the piss poor white trash trailer park you come from where you think you can live comfortably on a 1 million nest egg.

You'll be lucky to have $50,000 after taxes, and in bad times you'll be forced to dip into principle. Ohh... watch out, big spender.

Bob, seriously, aspire to something more than an apartment over a car wash.

[BriarFox]

... Unless you're living in a large city, $50k/year is a fairly reasonable income, at least if you're single.

[crb]

You can't add percentages like that because after the corporation pays tax, it has less money left to pay out, meaning that the two different tax rates are not multiplied by the same dollar amount. I'm not sure you have the corporate rate right anyway.


Yes I can. I'm not a CEO deciding how large of a dividend my corporation can pay. I'm adding the percentages, you're implying a multiplication of them, which isn't correct. It isn't a 15% dividend, it is a 15% tax on dividends and capital gains. You need to think harder on this if you're simply not trying to troll here, because you're way off.

Even if a corporation doesn't issue dividends earnings are still taxed at an implied 15% because excess cash is put on the balance sheet, which increases the company value, which gives you unrealized capital gains, which are taxed at 15% as soon as you sell. Or the company uses the cash to make an acquisition, or develop a new product, or initiate a share buyback.

The wealth of the corporation cannot be transfered to the shareholder through any method without being tagged by the 15% tax, therefor any activity which is accretive to the value of the corporation is inherently taxed at 15%, plus any direct tax levied upon it.



I'm going to file that insight away for future research. I think you may be on to something. The question is whether or not the rest of the market is also aware and whether or not it is already factored into REIT prices.

I doubt it would be factored in considering this "millionaire tax" idea by Obama leaked on what? Friday. Reits didn't go up friday, and they didn't go up today. Probably because this plan doesn't have a chance of passing, Obama couldn't even get a tax increase passed when Democrats controlled the house.

[Fallen]

... Unless you're living in a large city, $50k/year is a fairly reasonable income, at least if you're single.

It is...assuming your house/car are paid off, as is most of the case when you're retired.

[crb]

... Unless you're living in a large city, $50k/year is a fairly reasonable income, at least if you're single.

I guess it depends on our definition of comfortable. I cannot fathom the utter lack of motivation that would possess someone in their early 20s (which I believe Bob is), not yet learned in a profession, to sign out of the work force permanently to enjoy a non-inflation protected 50k a year (in good years) solidly middle class life.

[crb]

It is...assuming your house/car are paid off, as is most of the case when you're retired.

Right... but not if you do it when just starting out.

[DoctorUnne]

The wealth of the corporation cannot be transfered to the shareholder through any method without being tagged by the 15% tax, therefor any activity which is accretive to the value of the corporation is inherently taxed at 15%, plus any direct tax levied upon it.

That doesn't change the fact that Clyder is still right and it's multiplicative and not additive. A company's value is simply the present value of all future earnings. If a company that pays no taxes increases in value by $100, that same company with a 40% tax rate will increase in value by $60. The shareholders will pay 15% of that $60 and take home $51. The overall effective tax rate is therefore 49%, not 55%. In the 40% cap gains tax example the effective tax rate is 64%, not 80%.

[Androidpk]

I'll sign up for a $1 million nest egg.

[Back]

I feel really horrible that we have to ask millionaires to pay the same rate of tax as the average working man. I really really do.

[Androidpk]

I feel really horrible that we have to ask millionaires to pay the same rate of tax as the average working man. I really really do.

I'm scared. Now how are new jobs going to be created?!

[Back]

I'm scared. Now how are new jobs going to be created?!

Gee, wonder where all the jobs are from 10 years of tax breaks for the wealthiest 2%?

[Back]

John Fleming, GOP Congressman, Blasts Obama Over Buffett Rule: I Can't Afford A Tax Hike (http://www.huffingtonpost.com/2011/09/19/john-fleming-obama-millionaires-tax-buffett-rule_n_970084.html)



Rep. John Fleming (R-La.) appeared on MSNBC Monday morning to express opposition (http://thinkprogress.org/economy/2011/09/19/322405/gop-rep-whines-400k/) to President Barack Obama's deficit reduction plan, which includes a proposal to raise taxes on the wealthy (http://www.huffingtonpost.com/2011/09/19/obama-deficit-plan-buffet-rule-taxes-medicare_n_969403.html).


Fleming charged that the plan is a terrible idea which kills jobs provided by wealthy "job creators" who pay personal income taxes. When asked about his business ventures -- including his role in a number of Subway restaurants and UPS stores -- from which he earned $6.3 million last year, Fleming told MSNBC host Chris Jansing that his business expenses left him with little to tax "by the time I feed my family."


Fleming told Jansing that the $6.3 million is "before you pay 500 employees, you pay rent, you pay equipment and food."


"The actual net income of that was a mere fraction of that amount."
“By the time I feed my family, I have maybe $400,000 left over," Fleming said.


Jansing pointed out that to a person making $40,000 (http://www.ssa.gov/oact/cola/AWI.html) or $50,000 per year, making $400,000 annually is "not exactly a sympathetic position," but Fleming responded by calling his success a "virtue" and noting that “class warfare has never created a job."


"This is all about creating jobs," Fleming said. "This is not about attacking people who make certain incomes."


Only $400k? THATS AN OUTRAGE!

[Androidpk]

Gee, wonder where all the jobs are from 10 years of tax breaks for the wealthiest 2%?

India.

[Keller]

Yes I can. I'm not a CEO deciding how large of a dividend my corporation can pay. I'm adding the percentages, you're implying a multiplication of them, which isn't correct. It isn't a 15% dividend, it is a 15% tax on dividends and capital gains. You need to think harder on this if you're simply not trying to troll here, because you're way off.

http://images.encyclopediadramatica.ch/b/b8/Jags_fan.gif

Corporation has $100 of taxable income. 35% rate is applied. Corporation now has $65. Corporation distributes all $65. Shareholder is taxed at 15%. Shareholder now has 55.25%. Aggregate effective tax rate on the corporation's $100 of taxable income is 44.75%.

The same is true (assuming corporate earnings = taxable income, which is never true) if the corporation retains the $65 and SH sells the stock, which has appreciated by $65.

[Androidpk]

John Fleming, GOP Congressman, Blasts Obama Over Buffett Rule: I Can't Afford A Tax Hike (http://www.huffingtonpost.com/2011/09/19/john-fleming-obama-millionaires-tax-buffett-rule_n_970084.html)




Only $400k? THATS AN OUTRAGE!

I was reading that yesterday and just immediately face palmed.

[Suppa Hobbit Mage]

Some Op article in the NYT had this graph. I thought it was interesting but not enough for it's own thread.

http://si.wsj.net/public/resources/images/ED-AO203C_boski_G_20110907184052.jpg

http://si.wsj.net/public/resources/images/ED-AO203C_boski_G_20110907184052.jpg

[Androidpk]

Once you go black... Oh wait, not true.

[Warriorbird]

Some Op article in the NYT had this graph. I thought it was interesting but not enough for it's own thread.

http://si.wsj.net/public/resources/images/ED-AO203C_boski_G_20110907184052.jpg

http://si.wsj.net/public/resources/images/ED-AO203C_boski_G_20110907184052.jpg

I did too! It was like, wow, the Wall Street Journal really is owned by Rupert Murdoch!

[Suppa Hobbit Mage]

I did too! It was like, wow, the Wall Street Journal really is owned by Rupert Murdoch!

Are you refuting any of the points?

[Bobmuhthol]

ROFL.

This shows the piss poor white trash trailer park you come from where you think you can live comfortably on a 1 million nest egg.

You'll be lucky to have $50,000 after taxes, and in bad times you'll be forced to dip into principle. Ohh... watch out, big spender.

Bob, seriously, aspire to something more than an apartment over a car wash.

If you think I could only turn out $50,000 every year from $1,000,000, you're out of your fucking mind.

PS. Mean household income for white households in 2005 was $65,317. I'm only a fraction of a household and I can easily turn that out with $1,000,000 in cash. So, unless the average white American is from a "piss poor white trash trailer park" you really need a reality check.

[Warriorbird]

Are you refuting any of the points?

That it came from the NY Times Opinion page would be the first point I'd refute.

Then I'd question the notion of "Obama's Watch." You can have a lot of fun with statistics. It's the explanations that aren't quite so myopically (and Rupert Murdoch provided) simple.

[BriarFox]

Are you refuting any of the points?

Just the one where it implies that everything is Obama's fault, which could not be more retarded.

[Suppa Hobbit Mage]

That it came from the NY Times Opinion page would be the first point I'd refute.

Then I'd question the notion of "Obama's Watch." You can have a lot of fun with statistics. It's the explanations that aren't quite so myopically (and Rupert Murdoch provided) simple.

So remove on Obama's Watch from the title and the statistics are all true, no? Did you refute any of the bullets, with that caveate?


Just the one where it implies that everything is Obama's fault, which could not be more retarded.

That it happened during his presidency doesn't equate it to being his fault. It all happended on his watch though. Just as 9/11 happened on Bush's "watch". I wouldn't attribute it to being entirely Obama's fault, but he certainly played a major roll in it (as did Bush, Congress, and the Senate).

[crb]

If you think I could only turn out $50,000 every year from $1,000,000, you're out of your fucking mind.

PS. Mean household income for white households in 2005 was $65,317. I'm only a fraction of a household and I can easily turn that out with $1,000,000 in cash. So, unless the average white American is from a "piss poor white trash trailer park" you really need a reality check.

Then you're in the wrong industry. Hang up the spatula and go work on Wall Street.

Bernie madoff was able to guarantee those kind of returns year in and year out regardless of market movements. Are you starting a ponzi scheme?

Oh, and it isn't that you'd be poor if you did this. I said you'd be middle class.

Its that you must be from a trailer park because this is your pie in the sky dream. If you're dream is to be average, you must have started pretty low on the totem pole.

[crb]

I feel really horrible that we have to ask millionaires to pay the same rate of tax as the average working man. I really really do.

From the AP (that conservative bastion)

http://www.usatoday.com/money/perfi/taxes/story/2011-09-20/buffett-tax-millionaires/50480226/1



On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.





This year, households making more than $1 million will pay an average 29.1% of their income in federal taxes, including income taxes, payroll taxes and other taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay an average of 15% of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5% of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7%.


29.1 > 15 > 12.5 > 5.7

[BriarFox]

So remove on Obama's Watch from the title and the statistics are all true, no? Did you refute any of the bullets, with that caveate?



That it happened during his presidency doesn't equate it to being his fault. It all happended on his watch though. Just as 9/11 happened on Bush's "watch". I wouldn't attribute it to being entirely Obama's fault, but he certainly played a major roll in it (as did Bush, Congress, and the Senate).

You've clarified the difference between "fault" and "watch," but you don't want to acknowledge that the WSJ has conflated the two for rhetorical effect? They might as well have phrased it as "Reasons Obama Sucks."

[Keller]

I said you'd be middle class.

http://i417.photobucket.com/albums/pp256/bobberyt/nonono.gif

[Tgo01]

Now let's be fair, let's list all of the good things that have happened on Obamas watch.

Repeal of DADT.

...
...
...

Anything else? Anyone? Anyone?

[Bobmuhthol]

Then you're in the wrong industry. Hang up the spatula and go work on Wall Street.

... you know that I'm in college, so what exactly is the point of saying this?


Bernie madoff was able to guarantee those kind of returns year in and year out regardless of market movements. Are you starting a ponzi scheme?

6.5% return every year is a Ponzi scheme? I could just put my money in a broad index, walk away for 20 years, and have a guaranteed return above 5% annualized. Please don't try to educate me on investments when it's what I do. I'll be sure not to tell you about static accounting or owning a business in return.


Its that you must be from a trailer park because this is your pie in the sky dream. If you're dream is to be average, you must have started pretty low on the totem pole.

Why must a person dream to have something much greater than what they already have? Epicureanism. Learn it, love it.

[Androidpk]

Now let's be fair, let's list all of the good things that have happened on Obamas watch.

Repeal of DADT.

...
...
...

Anything else? Anyone? Anyone?

Nobel peace prize!

[ClydeR]

Now let's be fair, let's list all of the good things that have happened on Obamas watch.

Repeal of DADT.

...
...
...

Anything else? Anyone? Anyone?

The liberals have a website listing the stuff he's done that they think liberals would like. I'll give you part of the link, but I'm not putting up the whole thing since it has a profanity in it.

http://www.whattheXXXXhasobamadonesofar.com

[Paradii]

Thanks for protecting my sensitive eyes. Now where did I put all my scatporn...