Warren Buffett - "stop coddling the super-rich"

[OaklandA's]

A flat tax would be nice and I'd like one similar to what sheep proposed where maybe the first 20-30k is not taxed but I'd add another 1-2% for incomes over 1 mil, and maybe another 1-2% for incomes over 10 mil. So not exactly flat, but for most of us it is very close to.

Thanks for the reply.

When you say a flat tax, would you still include deductions for things like education, medical costs, mortgages, charity, etc.? What about capital gains, which are only taxed at 15% right now?

The reality is that any flat tax rate would have to be near 20% to be sustainable. So what this effectively means is that the tax rate for lower incomes will go up (from the current 15%), while those from the higher incomes (now 35%) will be reduced. This basically shifts more of the tax burden from the rich to the poor. And of course, the marginal value of a dollar is much greater for lower incomes, so they get hurt more that way too.

What is the goal of a flat tax? Is it just to simplify the tax collection process? Or is it to adjust the tax burden for different parts of society? I think it is clear that a flat tax would greatly shift the tax burden even further on those with lower income. Is that really your goal ?

[senorsheep]

Why would he assume he would have a 2nd term?

Have you read the GOP Candidates For 2012 thread?

[Moonlight J]

I think that, once he realized he wasn't getting single-payer, he should have just shelved it and focused on narrower prescriptions for reducing health care costs and expanding coverage. He was right to say that those issues needed attention; he could have gotten better political results with more surgical strikes.

Well, going back to the Clinton time, I think he saw what happens when you shelve the idea.

[Mithrandir]

Good point. Nonetheless the economy and job creation should have been priority #1.

Hell yea..Obama has been a total letdown from where i sit.

[Mithrandir]

Have you read the GOP Candidates For 2012 thread?

Well....you have a good point...

[Mithrandir]

Thanks for the reply.

When you say a flat tax, would you still include deductions for things like education, medical costs, mortgages, charity, etc.? What about capital gains, which are only taxed at 15% right now?

The reality is that any flat tax rate would have to be near 20% to be sustainable. So what this effectively means is that the tax rate for lower incomes will go up (from the current 15%), while those from the higher incomes (now 35%) will be reduced. This basically shifts more of the tax burden from the rich to the poor. And of course, the marginal value of a dollar is much greater for lower incomes, so they get hurt more that way too.

What is the goal of a flat tax? Is it just to simplify the tax collection process? Or is it to adjust the tax burden for different parts of society? I think it is clear that a flat tax would greatly shift the tax burden even further on those with lower income. Is that really your goal ?

Why are capital gains taxed at 15%? I really have no idea..is there a good reason for it?

[OaklandA's]

Why are capital gains taxed at 15%? I really have no idea..is there a good reason for it?

It is actually long-term (> 1 year) capital gains that are taxed at only 15%; short term gains are taxed as regular income. Why? It encourages investment, and it helps to reduce the effects of inflation over the long term.

[Lurker765]

It is actually long-term (> 1 year) capital gains that are taxed at only 15%; short term gains are taxed as regular income. Why? It encourages investment, and it helps to reduce the effects of inflation over the long term.

I thought it was mainly the principle that this money has already been taxed once.

[B-Fly]

I thought it was mainly the principle that this money has already been taxed once.

That doesn't make sense to me. To keep the numbers simple, let's say your income in 2009 was $100,000 gross, and your tax rate was 20%. You paid $20,000 to the US government and kept $80,000 net. You bought $10,000 of Walt Disney stock (100 shares at $100/share) in 2009 with your net income. In 2011, you sell those 100 shares at $200/share for $20,000. You have a capital gain of $10,000. That capital gain wasn't already taxed. It's gain. Yeah, if you were taxed on the amount of your initial capital investment plus the amount of your gain - $20,000 - then that would be a double dip. But how was your capital gain already taxed once?

[DMT]

That doesn't make sense to me. To keep the numbers simple, let's say your income in 2009 was $100,000 gross, and your tax rate was 20%. You paid $20,000 to the US government and kept $80,000 net. You bought $10,000 of Walt Disney stock (100 shares at $100/share) in 2009 with your net income. In 2011, you sell those 100 shares at $200/share for $20,000. You have a capital gain of $10,000. That capital gain wasn't already taxed. It's gain. Yeah, if you were taxed on the amount of your initial capital investment plus the amount of your gain - $20,000 - then that would be a double dip. But how was your capital gain already taxed once?

I mentioned this earlier. The money you invested has already been taxed so, by this argument, it should no longer be subjected to additional taxes. But you're right, only the additional gain is being taxed so it is not a good argument.

[Lurker765]

That doesn't make sense to me. To keep the numbers simple, let's say your income in 2009 was $100,000 gross, and your tax rate was 20%. You paid $20,000 to the US government and kept $80,000 net. You bought $10,000 of Walt Disney stock (100 shares at $100/share) in 2009 with your net income. In 2011, you sell those 100 shares at $200/share for $20,000. You have a capital gain of $10,000. That capital gain wasn't already taxed. It's gain. Yeah, if you were taxed on the amount of your initial capital investment plus the amount of your gain - $20,000 - then that would be a double dip. But how was your capital gain already taxed once?

My feeling is that you kept the $80,000 as the leftovers from what you paid in taxes. Your whole $100,000 has now been taxed and the money in your pocket has already been claimed by the government.

If you choose to then burn the dollars in your fireplace it isn't taxed. If you choose to instead invest it in Walt Disney stock then all that money has already been taxed once due to how you got it in the first place. Why should the government be taxing how you spend your money is some of the logic here.

But, as you say there is ample precedent for taxing money at points past where it was earned. Dividends or interest from your bank account are taxed at different rates (qualified vs non-qualified, etc). Sales taxes, etc.

I was just mentioning it as one of the reasons why the capital gains rate is lower than "first time taxed" income tax rates.

The tax laws and such are so convoluted. Capital gains and dividends are (mostly with a rare exception) not taxed at all in IRAs and treated as income when withdrawn. But, ROTH IRAs don't do capital gains or taxes on those gains when withdrawn at all (assuming it meets the usual criteria).

[GwynnInTheHall]

My feeling is that you kept the $80,000 as the leftovers from what you paid in taxes. Your whole $100,000 has now been taxed and the money in your pocket has already been claimed by the government.

If you choose to then burn the dollars in your fireplace it isn't taxed. If you choose to instead invest it in Walt Disney stock then all that money has already been taxed once due to how you got it in the first place. Why should the government be taxing how you spend your money is some of the logic here.

But, as you say there is ample precedent for taxing money at points past where it was earned. Dividends or interest from your bank account are taxed at different rates (qualified vs non-qualified, etc). Sales taxes, etc.

I was just mentioning it as one of the reasons why the capital gains rate is lower than "first time taxed" income tax rates.

The tax laws and such are so convoluted. Capital gains and dividends are (mostly with a rare exception) not taxed at all in IRAs and treated as income when withdrawn. But, ROTH IRAs don't do capital gains or taxes on those gains when withdrawn at all (assuming it meets the usual criteria).

I guess I'm confused-- you don't see the additional 10K as earned income?

[Lurker765]

I guess I'm confused-- you don't see the additional 10K as earned income?

Sort of. Yes it is earned, but then again so is the money that ballooned in the ROTH IRA and it isn't ever taxed.

If it is earned income why isn't it taxed at your usual tax rate and just treated as income like your salary?

I thought that was the question asked earlier in the thread and posted my response that I thought one of the reasons it was taxed at the 0 or 15 percent rate was because many think that this money has already been taxed and why should the government tax it again depending on what I do with it?

I believe if you asked a Tea Party member this would be their stance.

Me? I feel like it is an easy way for people like Warren Buffet to keep his tax rate below that of his secretary (which is how this thread started) and why Warren has said that the super-rich are coddled. I would imagine that the vast majority of the super-rich are not getting paid a large salary but instead make their money on stocks and long term capital gains which use a very low tax rate. Gaming the system.

[OaklandA's]

Sort of. Yes it is earned, but then again so is the money that ballooned in the ROTH IRA and it isn't ever taxed.

Contributions to a Roth IRA are NOT tax-deductible. You do pay taxes on them up front. Withdrawals can be taken out tax-free if the standard rules are met. This is different from a 401(k), where contributions are not-taxed, but all of the withdrawals are taxed.

[GwynnInTheHall]

Sort of. Yes it is earned, but then again so is the money that ballooned in the ROTH IRA and it isn't ever taxed.

If it is earned income why isn't it taxed at your usual tax rate and just treated as income like your salary?

I thought that was the question asked earlier in the thread and posted my response that I thought one of the reasons it was taxed at the 0 or 15 percent rate was because many think that this money has already been taxed and why should the government tax it again depending on what I do with it?

I believe if you asked a Tea Party member this would be their stance.

Me? I feel like it is an easy way for people like Warren Buffet to keep his tax rate below that of his secretary (which is how this thread started) and why Warren has said that the super-rich are coddled. I would imagine that the vast majority of the super-rich are not getting paid a large salary but instead make their money on stocks and long term capital gains which use a very low tax rate. Gaming the system.

I guess this is just an integral part of my world. In gaming (the Casino) I see people take their earned income (already taxed) and if the win (over $600) they are taxed on that money won. To continue--should they take THAT money and say, enter a poker tourney and win, they'll be taxed on it again.

I'd say that's pretty similar to the capital gains tax--If you make money, you pay the toll.

Just think of the abuse that would occur should they NOT tax these kinds of monies.

Thanks for the clarification.