Top 1%

[ziggy29]

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Originally Posted by donheff For what it is worth I haven't seen any proposals to tax wealth other than estate tax. All of the proposals for increased taxes on the rich focus on income including dividends and CGs.

And these are tough ones because they *feel* like "tax breaks for the rich" but if you dig deeper there are some good reasons for it.

Dividends? They are double taxed already -- a dollar of profits are taxed to the corporation, and then the fraction of a dollar they pay out with that "after tax" profit is taxed again to the shareholder. Dividends tend to stabilize equity markets -- note the relative price stability of "dividend stocks" relative to those that don't pay them -- and discouraging their payment with double taxation may not be the wisest public policy. (Note that REIT dividends are taxed as ordinary income because they can pass the dividends through to the shareholder before-tax, so there is no double taxation issue.)

Capital gains? If I hold an asset for 20 years and the nominal asset value doubles -- but inflation over that time has cut the purchasing power of a dollar in half -- then in a very real sense, there is NO "real" gain here -- all you've done is kept even with inflation. But half of the sale price is still taxed. In the long term, a huge chunk of the "gains" tend to be taken away from inflation, and then taxed as if it were a real gain anyway. And the longer the holding period, the more the "gain" above the cost basis isn't really a gain at all in any real sense.

If taxes are to be raised on the wealthy, better to just increase the marginal rate, IMO. There is a good reason why the tax code cuts a "break" for dividends and *long term* capital gains. And I think these reasons should be better articulated by policymakers.

[samclem]

Quote:

Originally Posted by ziggy29 There is a good reason why the tax code cuts a "break" for dividends and *long term* capital gains. And I think these reasons should be better articulated by policymakers.

I think everything would be a lot clearer if they just indexed LTCG for inflation, rather than trying to "kinda" make things right with a lower tax rate. Indexing cap gains for inflation is fairly easy to explain/understand, and if the LTCG rate (on real gains) were the same as the rate for income, there would be one less reason to gripe about the rich paying too little.

[kcowan]

Quote:

Originally Posted by Nords "Worth more alive than dead." Here's some calculation thoughts on estimating the present value of a defined-benefit pension: “Present value” estimate of a military pension | Military Retirement & Financial Independence

Wow $2 million for me originally. Since I have collected over half that so far, I guess I better start being more cautious! Add in all the investment holdings and I am starting to feel rich. Thanks Nords!

(Still cannot justify a trip to Hawaii for surfing lessons...)

[Alan]

Quote:

Originally Posted by ziggy29 There is a good reason why the tax code cuts a "break" for dividends and *long term* capital gains. And I think these reasons should be better articulated by policymakers.

That's a big assumption that policymakers actually understand these things.

Last month I started training to be a Volunteer Tax Advisor and before I started on the book of exercises, I needed to know where the answer sheets were. (All the training materials etc are provided by the IRS). The training book stated where to find them online at the irs.gov website but I could not find the answers. I e-mailed my site leader and an hour later he forwarded on an e-mail with attached spreadsheet from our area coordinator that he had just received. The spreadsheet had the correct answers and the IRS had removed the answer sheet from the website because some of the answers in the test were wrong. (the correct answer sheet is on the website now).

If the IRS can produce the wrong answers to the examples it creates, what hope do politicians have of understanding the tax code that they create?

[Animorph]

Quote:

Originally Posted by samclem I think everything would be a lot clearer if they just indexed LTCG for inflation, rather than trying to "kinda" make things right with a lower tax rate. Indexing cap gains for inflation is fairly easy to explain/understand, and if the LTCG rate (on real gains) were the same as the rate for income, there would be one less reason to gripe about the rich paying too little.

Seems like you'd need to have a table that listed every possible buy year/sell year combo and the resulting inflation correction. And we'd have to look up that number for each sale. While I like the idea, and it would be nice with Turbo Tax doing the work, no way would I want to add that task to a non-computerized return.

[ziggy29]

Quote:

Originally Posted by Animorph Seems like you'd need to have a table that listed every possible buy year/sell year combo and the resulting inflation correction. And we'd have to look up that number for each sale. While I like the idea, and it would be nice with Turbo Tax doing the work, no way would I want to add that task to a non-computerized return.

Yeah, that was pretty much my thought unless you assigned every year an "index value" without regard to the day of the year. Thus a holding period of 1/1/2008 to 12/31/2011 would be treated the same as 12/31/2008 to 1/1/2011, even though the latter was barely half as long.

[donheff]

Quote:

Originally Posted by ziggy29 Dividends? They are double taxed already -- a dollar of profits are taxed to the corporation, and then the fraction of a dollar they pay out with that "after tax" profit is taxed again to the shareholder. Capital gains? If I hold an asset for 20 years and the nominal asset value doubles -- but inflation over that time has cut the purchasing power of a dollar in half -- If taxes are to be raised on the wealthy, better to just increase the marginal rate, IMO. There is a good reason why the tax code cuts a "break" for dividends and *long term* capital gains. And I think these reasons should be better articulated by policymakers.

I don't actually care whether CGs and dividends go up.. I just believe the path forward requires cuts and taxes. We were doing fine before the 1981 cuts and don't appear to have improved with them. I think the wealth gap was rapidly widening with dividends and CGs were 20% - so double hits, drags, whatever the wealthy were doing just fine.

Bottom line, we can afford national health care and a modest social security safety net with the 1% continuing to thrive. It will admittedly involve some substantial health care reforms (which I don't see coming soon). It will also require some sacrifice by the "normal well off" within the 99% (e.g. my current level now that I am ERd) Something along the lines of letting all of the tax cuts expire when the economy stabilizes. Alas, I am not optimistic. I think we will break things worse than they are and nobody but the upper 5-10% will come out thriving.

[ziggy29]

Quote:

Originally Posted by donheff I don't actually care whether CGs and dividends go up.. I just believe the path forward requires cuts and taxes. We were doing fine before the 1981 cuts and don't appear to have improved with them. I think the wealth gap was rapidly widening with dividends and CGs were 20% - so double hits, drags, whatever the wealthy were doing just fine.

Before the 1986 tax reforms, of course, the highest brackets were often never seen by the wealthy because of the almost unlimited ability to shelter income. So one who supports higher taxes really can't talk about the "glory days" of 70-90% top tax brackets -- I believe it was JFK who pushed the reduction of the top bracket from 90% to 70% -- without also recalling all the shelters which led to some folks legally paying zero income tax on million dollar incomes.

But yeah, the bottom line is that almost everyone realizes shared sacrifices are necessary -- as long as it's only other people who are sharing in it. We're all so adamant about protecting our own interests that we fight any shared sacrifices that require that we do, in fact, share in it. We need to raise taxes on everyone making one dollar more than me. And we need to cut all spending except the spending I benefit most from.

[samclem]

Quote:

Originally Posted by Animorph Seems like you'd need to have a table that listed every possible buy year/sell year combo and the resulting inflation correction. And we'd have to look up that number for each sale. While I like the idea, and it would be nice with Turbo Tax doing the work, no way would I want to add that task to a non-computerized return.

If anyone is doing a lot of buying and selling they have to keep track of all those trades anyway (date bought/date sold, etc). I doubt there are many folks doing that manually anymore, and the set of people doing that manually who also do their taxes with pencil and on paper forms has got to be tiny. If they want to enjoy that pain, then they should be free to do so.
We make merchants figure out and collect the taxes when a stick of gum is sold, it seems little to ask to have people compute the inflation-adjusted gain on their sale of 2000 shares of XXX stock.

[Chuckanut]

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Originally Posted by REWahoo On a similar theme, the recent US Census revealed that three out of four people residing in the US make up 75% of the population.

Worse than that... 50% of the population have a below average income!!

[Chuckanut]

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Originally Posted by ziggy29 But yeah, the bottom line is that almost everyone realizes shared sacrifices are necessary -- as long as it's only other people who are sharing in it. We're all so adamant about protecting our own interests that we fight any shared sacrifices that require that we do, in fact, share in it. We need to raise taxes on everyone making one dollar more than me. And we need to cut all spending except the spending I benefit most from.

"No sacrifice is to great, especially when somebody else makes it!"...
spoken by Fiduciary Blurp, just before he sent Rocky and Bullwinkle on a dangerous mission to stop the wailing whale - Maybe Dick.

[donheff]

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Originally Posted by Chuckanut Worse than that... 50% of the population have a below average income!!

Not in Lake Wobegone.

[W2R]

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Originally Posted by Chuckanut Worse than that... 50% of the population have a below average income!!

Usually IME when people say "average", they are thinking of the mean. Some of us thought that 50% of the population have incomes below the median income. It could be both in some cases, for example if the income distribution fit a perfect Gaussian distribution (bell curve) so that the median and mean income were identical.


I just can't help being this way! Oh well, sorry.

[Independent]

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Originally Posted by thoreau Who is the top 1%? Any ideas? We have all these people wearing badges that say 99%. People who have defined benefit pensions might have to consider themselves part of the 1% if they compare how much their net worth would have to be to actually be able to receive the pension for 30 years. What do you think?

OTOH, if you're 30 and have a decent job, the pv of your likely income probably significantly exceeds the pv of most pensions.

If I were going to search for the top 1%, I'm sure that I would slice the numbers by age groups.

(I haven't seen any "I'm the 99% badges".)

[brewer12345]

I saw a parade of jackasses going down the road by an upscale mall nearby with their nonsense signs, slogans and whatnot. Tied up traffic for miles and there were more police than jackasses.

The more you use this stupid sloganeering term of percentages, the longer you prolong the doomed existence of this idiocy.

[justplainbll]

Quote:

Originally Posted by W2R Usually IME when people say "average", they are thinking of the mean. Some of us thought that 50% of the population have incomes below the median income. It could be both in some cases, for example if the income distribution fit a perfect Gaussian distribution (bell curve) so that the median and mean income were identical. I just can't help being this way! Oh well, sorry.

Don't forget the mode.

[Huston55]

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Originally Posted by justplainbll Don't forget the mode.

The Mode Squad; I really liked them.

Link was the most common popular. He Had the coolest car means of transportation, always spoke In a measured scale, was always in in phase with Julie and Peter, Gave us permission to access the characters and , I think he was from Shelby County, Illinois.

[txtrader]

Quote:

Originally Posted by donheff I don't actually care whether CGs and dividends go up.. I just believe the path forward requires cuts and taxes. We were doing fine before the 1981 cuts and don't appear to have improved with them. I think the wealth gap was rapidly widening with dividends and CGs were 20% - so double hits, drags, whatever the wealthy were doing just fine. Bottom line, we can afford national health care and a modest social security safety net with the 1% continuing to thrive. It will admittedly involve some substantial health care reforms (which I don't see coming soon). It will also require some sacrifice by the "normal well off" within the 99% (e.g. my current level now that I am ERd) Something along the lines of letting all of the tax cuts expire when the economy stabilizes. Alas, I am not optimistic. I think we will break things worse than they are and nobody but the upper 5-10% will come out thriving.

Agreed.

[ziggy29]

Quote:

Originally Posted by brewer12345 The more you use this stupid sloganeering term of percentages, the longer you prolong the doomed existence of this idiocy.

I wish you'd stop being shy about sharing your opinions, especially when they're caustic...

[Midpack]

Quote:

Originally Posted by brewer12345 The more you use this stupid sloganeering term of percentages, the longer you prolong the doomed existence of this idiocy.

I wouldn't count them out just yet, though they may well slide off into oblivion. It would not surprise me if objections to 'too big to fail' and/or campaign finance reform (far too much political influence bought by the .01%) aren't widely held even majority views. Whether OWS champions either or both is an open question.

What would mainstream politics be without "stupid sloganeering" anyway?