OH NO!

So Forbes magazine has determined that Warren Buffet's secretary--whom Obama put on display at the State of the Union Address--makes a salary of somewhere between $200,000 and $500,000. The publication took her publicized tax rate of 35% and compared it to the IRS tax tables to make that determination. Well, while beginning to compile the information for my own 1040, I couldn't help but to worry about how that poor secretary is paying more than twice the rate of her multi-billionaire boss. How does she survive? Then...

to make matters worse--something dawned on me. If Obama gets his way and the tax rate for individuals making $200,000 is increased and Buffet continues to pay the 15% capital gains rate--the gap between Buffet and his secretary will be even greater. The secretary's rate will increase and the billionaire's will stay the same! I believe that's what we call an "Obama solution."

Your rating: None Average: 5 (1 vote)

Warren Buffet,is majority shareholder of the Burlington Northern Sante Fe Railroad.
This railroad is well established in the middle of the country.
It also has thousands of tanker cars that will haul the Canadians Bakken shale oil to U.S. refineries .
So, when OweBaMao Bin Lying, KILLED the Keystone Oil Pipeline Project.
Who will then benefit by BILLIONS of dollars from this job killing Law ?!

SURPRISE : Crony capitalist friend of OwebaMao's, billionaire Warren Buffet-Demonrat ?!

It has taken OweBaMao, 3 years to come up with a decision that is just another job killing Law .
WW II, took less than 2 years of American participation in Europe ?!

Sun bright brilliance from President Food Stamps....up 45% in three very short and torturous job killing years !

Actually, the capital gains tax is scheduled to go up as high as 25% by 2013.

Pink Slip

The real question for Mr Galt is do you believe the Romneys & Buffets of the world should keep paying 13%-15% in taxes, when the rest of us pay more higher rates?

Pink Slip

Why is the only answer from Democrats to any "problem" to raise taxes?

Why can't Congress stop spending money on Cowboy Poet Museums and the like then LOWER TAXES to the same percentage rate as Warren Buffett supposedly pays?

That is, if Warren Buffett were actually paying his taxes.

HEY WARREN! YOUR COMPANY STILL OWES AMERICA ABOUT $1 BILLION DOLLARS IN BACK TAXES.

Warren, you should shut the hell up until you pay your taxes that you have owed since 2002. Then maybe we would listen to you.

Don't blame me,
I didn't vote for a
socialist.

Ahh--Pink Slip--you've fallen into the deep, dark hole of "politician speak." ANYONE of us who is only getting income from investments (like Buffet), would pay 15%. If you have a job and are on a payroll, you will pay "income" tax. You can't (shouldn't) compare income tax rates with capital gains tax rates--they're two very different things. Thus, as is typical, Obama is counting on his perceived ignorant U.S. population not to figure out that it's all smoke and mirrors.

So I guess liberals are asking "Why is Warren Buffet's secretary paying so little?" After all people who make over $200K represent the top 3% of the country. http://www.lazymanandmoney.com/how-many-people-make-more-than-250000-per...

MikeyA

"You can't (shouldn't) compare income tax rates with capital gains tax rates--they're two very different things."

The incomes derive from two different sources, but why is preferential treatment bestowed upon income from investment rather than income from labor?

Pink Slip

"The incomes derive from two different sources, but why is preferential treatment bestowed upon income from investment rather than income from labor?"

I'm the farthest thing from an economist but this would be my guess. In order to invest income in the first place you would have to earn it. So wouldn't it have been taxed when you earned it already?

I believe we desperately need to simplify the tax code. I read that the U.S. tax code is like, 70,000 pages long. That's just stupid.

"We're all riding on the Hindenburg, no sense fighting over the window seats"-Richard Jenni

It is because of risk.

Income earned off of investments is earned off of risk, not work. Now we understand that the greater the risk the greater the reward. So by raising taxes on income earned from risk we limit the reward and less risk will be taken. This is not good in a capitalistic society that relies upon investment to drive expansion because less investors will put money into a young company for fear they will not receive enough reward.

MikeyA

Long term capital gains are taxed at a lower rate to incentivize investment. If risk were the determining factor of capital gains rates, day traders wouldn't pay their ordinary income rate on trades.

There's a city full of walls you can post complaints at

True capital gains are not determined by the amount of risk taken but it does on a macro level hence why we have a capital gains tax. If everything we made off of investments were treated as income at income rates the amount of investors would decline significantly since investing for income is a fool's game and there are enough bankrupt day traders to prove it.

MikeyA

Very good point, Slip.

Patience is a great virtue.

"So by raising taxes on income earned from risk we limit the reward and less risk will be taken. This is not good in a capitalistic society..."

Ever heard of the housing bubble? How about the dot com bubble? Lowering taxes on the wealthy in the name of investment creates greater inequality, which in turn leads to a bubble economy

Pink Slip

You're quite correct, but that's only part of the story. The housing bubble was caused in part by demand; low interest rates and bad credit mortgages had a lot to do with it as well. For your point, the dot com bubble is a better example.

The point is that if the government reduces the tax rate for investment income (coincidentally for the very wealthy as well) and fails to increase taxes on the upper 10% of the income bracket, extra money will become available to the citizens of the US, who will in turn invest that money in such a way so as to stimulate the economy by creating jobs. The income tax from those jobs will add to the tax base and increase the velocity of money, which will make up for the tax dollars the government could have had and doesn't.

It's that last part that doesn't happen. Yes, people will have more money but there is no guarantee how that money will be used. For instance, if I get an extra 20 grand in 2012, I'm likely to buy gold, platinum and petroleum with it rather than, say, GM stock. I'd also be likely to simply keep it in my mattress rather than invest it. Hell, I'd bet on FCO and pork bellies before I"d bet on GM.

That money could also go South of the border or across the pond and get invested over there, which would likely make for a little more unemployment over here.

You know Pink_Slip, you're starting to sound like a closet conservative. If you owned a gun or two I think I'd buy you a drink.

Mad Jack
Mad Jack's Shack

I fail to see how they are related. An "investment bubble" would mean the GDP grows at a large rate = good. When the bubble bursts the economy would recess.... but then... isn't that what always happens?

Besides the biggest capital gains people pay is on their retirement accounts. By in large they are not wealthy people, just people who saved for 20-30 years.

Now if you would call for raising of capital gains by no more than 5% and exempting IRA's and 401ks from capital gains tax then I would support that because that represents the bulk of the market.

I find it telling that you talk about the "wealthy" yet the Dems plans to raise taxes would raise Buffet's Secretary's tax rate to 36% a raise of about 3% and Romney's tax rate would raise from 15% to 20%.

So effectively even the Dems plan isn't "fair" by their own definition. So again, they need to define fair before we raise dime one.

MikeyA

"An "investment bubble" would mean the GDP grows at a large rate = good. When the bubble bursts the economy would recess.... but then... isn't that what always happens?"

It doesn't have to happen that way. If Greenspan was worth his salt, he would have recognized the housing bubble (for instance) and could have taken steps to slow it, like raise interest rates for example.

"Besides the biggest capital gains people pay is on their retirement accounts. By in large they are not wealthy people, just people who saved for 20-30 years."

This is just plain wrong. Most capital gains taxes are paid by the wealthy. This is common knowledge.

"I find it telling that you talk about the "wealthy" yet the Dems plans to raise taxes would raise Buffet's Secretary's tax rate to 36% a raise of about 3% and Romney's tax rate would raise from 15% to 20%."

You're comparing apples to oranges. If the Bush/Obama tax cuts expire as scheduled, Buffet's secretary's tax rate would indeed increase to 36%. But Romney's would increase to 39% and capital gains would increase to 25% by 2013.

Pink Slip

Well it seems we are arguing the same thing yet the problem is the definition of terms.

I am not arguing about Greenspan, totally agree.

Most retirees are "wealthy" common retiree owns their home, which they pay capital gains on when they sell it, most have investments that they will have to pay gains on, most have retirement accounts and or pensions plus they collect social security. As kids move out/on they lose their deductions and pay more in taxes.

Since Romney's "income" is derrived mainly from past long term investments how do you arrive at the 39% number. Please cite the 25% as my link cited 20%.

Now assuming I am correct with Romney's income and you are correct with the 25%, he still then would pay an effective tax rate less than Buffet's Secretary.

MikeyA

If the Bush tax cuts expire, the top rate on income will increase to 39%. This is what it was during the Clinton years. The capital gains tax is scheduled to increase to 25% in 2013:

http://www.washingtonpost.com/blogs/ezra-klein/post/capital-gains-tax-sc...

As you say, Romney would still be paying less than Buffet's secretary. And that's just crazy

Pink Slip

Well you are assuming that Romney's return on his investments will put him into the top earners category.

The problem with this is yeah let's say his investments make $1 million profit. Yet he only cashes in 150K for his living expenses. Then he is not in the top earners bracket. Your assumption is that Romney will withdraw enough from his investments AND would not have enough deductions to keep him below the top earners threshold. That's a big assumption because you're attempting to guess what someone's personal choice might be.

Therein lies the problem with the progressive tax system. In order for it to be effective there must be enough room for choice, when it doesn't it crumbles.

However you and I are both proponents of the progressive tax system because the other solutions have other inherent problems. I thought Cain's solution addressed many problems and could open paths to possibly a better system but it still was a progressive system because the progressive system is by far the best.

MikeyA

"Therein lies the problem with the progressive tax system. In order for it to be effective there must be enough room for choice, when it doesn't it crumbles."

I don't think this example serves as an indictment against a progressive tax system. Rather, I think it shows how ludicrous the tax code really is. Most Americans want capital gains to be taxed the same as income. If we can work on that, AND take out the loopholes that exist everywhere we'd be in much better shape.

Pink Slip

"If we can work on that, AND take out the loopholes that exist everywhere we'd be in much better shape."

Agreed, but we must be cautious to not cross the threshold where it costs too much to invest. If risk does not come with reward there less private capital in the economy and that is a bad thing. But you are right the tax code is crazy and needs to be simplified. I am way more in favor of this than any major change like the flat tax.

MikeyA

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.