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Old 08-17-2011, 01:57 PM   #21
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CNN and other networks are focused on Warren's statement that the rich should be taxed more without also acknowledging that he realizes that won't be enough, that we must deal with spending and revenues (aside from the super-rich). He is only volunteering as a sincere means of starting the process.
Yep. I noticed that also. Main Stream Media is more interested in sensationalizing news rather than reporting news. But neither political party or Americans in general have any interest in cutting spending.

As US tax rates drop, government's reach grows / The Christian Science Monitor - CSMonitor.com

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Slightly over half of all Americans 52.6 percent now receive significant income from government programs, according to an analysis by Gary Shilling, an economist in Springfield, N.J. That's up from 49.4 percent in 2000 and far above the 28.3 percent of Americans in 1950.

Mr. Shilling's analysis found that about 1 in 5 Americans hold a government job or a job reliant on federal spending. A similar number receive Social Security or a government pension. About 19 million others get food stamps, 2 million get subsidized housing, and 5 million get education grants. For all these categories, Mr. Shilling counted dependents as well as the direct recipients of government income.
I'm afraid that US has reached the tipping point. Over 1/2 of population is currently receiving some sort federal gov't benefit with baby boomers rolling onto SS & medicare rolls at a rapid pace.
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Old 08-17-2011, 09:42 PM   #22
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Originally Posted by Midpack View Post
Evidently you can watch it here anytime Charlie Rose - Warren Buffett
Just watched the interview. Interesting to hear more than the soundbites of the last couple of days on this. Thanks for pointing this out.
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Old 08-18-2011, 08:59 AM   #23
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He said we can stand a deficit of 3% of GDP because growth will resume (and already has in his businesses not associated with home building), but not 10% like we are now. Interesting insight IMO...
I wrote a post about the math on this a little while back. Buffett is basically correct with the 3% figure. That's the approximate deficit we can run in perpetutity while maintaining a stable Debt / GDP ratio.

But I think he's wrong to suggest that we should target a structural deficit just because we think we can. Instead, we should target a balanced budget over the cycle - which means not freaking out about deficits in the midst of a giant slump and not freaking out about projected surpluses at full employment.

Having dry powder available to confront crises is something that's hard to put a value on. Just think how much better off we'd be today if we left the surpluses of the late 90's alone.
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Old 08-18-2011, 09:07 AM   #24
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Just think how much better off we'd be today if we left the surpluses of the late 90's alone.
Wouldn't the bursting of the dot-com bubble and the bursting of the housing bubble made that difficult?

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Old 08-18-2011, 09:13 AM   #25
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Wouldn't the bursting of the dot-com bubble and the bursting of the housing bubble made that difficult?

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My comment doesn't say those surpluses would persist.

The intended way to read the words "left the surpluses of the late 1990's alone" is that over the succeeding decade we would have passed balanced legislation that paid for itself.

Tax cuts paid for with spending cuts.

Spending increases paid for with tax increases.

We didn't do that. Tax cuts were said to be needed to eliminate unwanted government surpluses by none other than the Fed Chairman. Spending increases were a free lunch, even though the previous surplus had long become history.
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How they don't pay.
Old 08-18-2011, 11:33 AM   #26
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How they don't pay.

"Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as "carried interest", thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they'd been long-term investors."

I understand the "carried interest" bargain but not the second. Is there a tax avoidance by buying "stock index futures". How does that work? Don't get it.

Buffet's point is not that raising taxes on the rich will raise huge sums. That's not the point. The point is fairness. Fairness has always had a firm position in our whole legal/ social structure. Current tax law has thrown fairness out the window.
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Continuing the Tax Reform Discussion...
Old 08-18-2011, 12:06 PM   #27
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Continuing the Tax Reform Discussion...

Charlie Rose continued the tax reform discussion on the show last night (today at lunchtime for me). Hey, I'm retired - I get to watch TV during the day if I want.

Charlie Rose - The Debate over Tax Reform

The three member panel bring up several interesting points. One idea is to shed more light on the idea that tax breaks/incentives for corporations and individuals are actually government spending. For those on the side of the fence who want reduced spending - this is a good way to reduce spending. For those on the side of the fence who want to raise revenue -elimininating "tax expenditures" raises revenue. Per the B-S proposal these changes are included in the Zero Plan (maybe it's called the Zero Option). Regardless, it seems like conservatives and liberals both get what they want.

Lots of other good points to ponder. Consider watching the episode.
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Old 08-18-2011, 12:24 PM   #28
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Nvestysly, the show will air here in NY on PBS at 1:30 local time, in about 5 minutes. I look forward to watching it.

Gone4Good, good post above, your last one before mine. I read it the way you intended it.
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Old 08-18-2011, 12:37 PM   #29
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Regardless, it seems like conservatives and liberals both get what they want.
Econmists have long known that there is little practical difference between having the government send out a check to mortgage holders and giving those same folks a tax deduction.

In days where rationality ruled "common ground" (not compromise, of course, but common ground) could be found in this area. Cutting 'tax expenditures' seems to work equally well for those who want to cut spending and those who want to raise revenue. But rather than agree that everyone agrees, we've recently redefined 'raising revenue' through any mechinism (even one that looks identical to spending cuts) as a tax increase and signed pledges to never, ever do that. So there really isn't any common ground here after all.
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Playing Together in the Sandbox
Old 08-18-2011, 01:42 PM   #30
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Playing Together in the Sandbox

I like that phrase - common ground. President Obama has used that phrase several times in recent years (or a similar phrase). Other politicians have similarly sought out mutually beneficial efforts. Unfortunately, I think you're right about our current situation - seemingly nobody wants to play well together in the sandbox.

I'll be starting on a new letter-writing campaign soon - asking our recently appointed supercommittee to consider what I think are reasonable solutions to our economic troubles. Maybe Warren Buffett has started the conversation and we can make some progress.
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Old 08-18-2011, 02:04 PM   #31
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I understand the "carried interest" bargain but not the second. Is there a tax avoidance by buying "stock index futures". How does that work? Don't get it.
I won't comment on your political/moral views, but the taxation of gains on futures contracts has remained unchanged for many years. 60% of the gain is assigned to long term cgs, 40% to short term cgs, regardless of how long the position has been held. Typically, much less than one year.

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Old 08-18-2011, 03:43 PM   #32
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+1

Strongly agree with all three points.

Obama's speech writers would be doing him a favor if they'd stop putting in so many references to "Billionaires" and "corporate jets" when he's advocating for the tax increases to start at $200k single and $250k MFJ. Maybe the $200k/$250k is the best level to start jacking up the rates. But why keep trying to sell that as only impacting Billionaires and corporate jet owners? It's insulting that they think we're that dumb. I'm glad Buffet was clear that he was referring to the "Super Rich."
First off... I do not like Obama....

But, his speaches were about two different things... when they were extending the Bush tax cuts he did not want them to go to people who made over $250K... so that is what he talked about...


The last was with the debt ceiling increase where he wanted some more revenue, so he was trying to get some very specific tax breaks reduced which were aimed at billionaires and corporate jet owners...
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Old 08-18-2011, 03:50 PM   #33
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Originally Posted by nvestysly View Post
Charlie Rose continued the tax reform discussion on the show last night (today at lunchtime for me). Hey, I'm retired - I get to watch TV during the day if I want.

Charlie Rose - The Debate over Tax Reform

The three member panel bring up several interesting points. One idea is to shed more light on the idea that tax breaks/incentives for corporations and individuals are actually government spending. For those on the side of the fence who want reduced spending - this is a good way to reduce spending. For those on the side of the fence who want to raise revenue -elimininating "tax expenditures" raises revenue. Per the B-S proposal these changes are included in the Zero Plan (maybe it's called the Zero Option). Regardless, it seems like conservatives and liberals both get what they want.

Lots of other good points to ponder. Consider watching the episode.
I do tend to agree that a dollar tax credit is the same as a dollar check when you talk about spending.... I can not figure out why taking away the tax credit is considered a tax increase and taking away the check is lower spending.....


Deductions on the other hand are not quite the same when it comes to 'spending'.... as a dollar deduction for someone might only be worth 15 cents when it is worth up to 40 cents for someone else... (heck, for some it is not worth a penny if you do not itemize)...
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Old 08-18-2011, 03:54 PM   #34
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Econmists have long known that there is little practical difference between having the government send out a check to mortgage holders and giving those same folks a tax deduction.

In days where rationality ruled "common ground" (not compromise, of course, but common ground) could be found in this area. Cutting 'tax expenditures' seems to work equally well for those who want to cut spending and those who want to raise revenue. But rather than agree that everyone agrees, we've recently redefined 'raising revenue' through any mechinism (even one that looks identical to spending cuts) as a tax increase and signed pledges to never, ever do that. So there really isn't any common ground here after all.
As mentioned in my last post... there is a difference since the deduction is worth a different amount to different people...

My itemized deductions only go above the standard every two years... so taking away a deduction does not affect me that much (unless you change the standard deduction).... but taking away a credit hits me dollar for dollar in the pocketbook... IOW, the $1K per child tax credit IS like the gvmt sending me a check... the mortgage interest or charitable deduction is not...
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Old 08-18-2011, 04:17 PM   #35
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As mentioned in my last post... there is a difference since the deduction is worth a different amount to different people...
The government cuts different social security checks to everyone too. So what?

If, instead of the mortgage deduction, the government sent everyone a check determined by a formula using AGI and the amount of mortgage interest paid, it would be a spending program. Nobody would ever doubt that.

The only difference between that and the deduction is that many of the folks who gnash their teeth today and demand offseting tax cuts to eliminate the mortgage deduction would be willing to eliminate the checks without any needed offset.

P.S. It occurs to me that such a spending program would never pass appropriations; one that increase payments to people as mortgage size and individual income increases. "Hey, congratulations. I see you got a raise and borrowed more money against your house. That means the government is going to send you an even bigger check this year!" It is a pattently absurd way to spend money. But as part of the tax code, it's simply a mortgage interest deduction.
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Old 08-18-2011, 04:26 PM   #36
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I won't comment on your political/moral views, but the taxation of gains on futures contracts has remained unchanged for many years. 60% of the gain is assigned to long term cgs, 40% to short term cgs, regardless of how long the position has been held. Typically, much less than one year.

Ha

I am pretty sure you are correct they have been that way for many years but it is reasonable to ask why. Very few future contracts are held for a year as Buffett says most are probably only held for days or evens minutes. One of the rationales for long term cap gain rates was to encourage long term investments.

By and large future contracts are bought and sold by professional traders and few companies using them as hedges. I am pretty sophisticated investor, and the only time I bought futures contract was in stock market simulation class for business school that was all about derivatives. Why not raise revenue by treating them the same as any other asset, if you hold the position for a year you get a long-term gain less than a short-term gain or loss?
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Old 08-18-2011, 04:53 PM   #37
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I am pretty sure you are correct they have been that way for many years but it is reasonable to ask why.
I am not a why guy, but in this case I can tell you why. I remember when this change was contemplated, I think during Reagan's term but I am not certain of this. There was a less favorable proposal on the floor, and the futures industry screamed bloody murder, and this is what came out of it. It as an obscure element of the tax code, and I believe it just managed to fly under the radar, perhaps until Buffett started his campaign to make life harder for the rich.

Anyway, the rich aren't making any unreasonable requests, but like anyone else, they just...



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Old 08-18-2011, 09:53 PM   #38
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Capital

To call the greatest capitalist of our time a socialist, now that is funny.
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Old 08-18-2011, 10:01 PM   #39
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I always watch Buffett to see if he's losing his edge. In this interview, though, he seemed to be a bit hypercaffeinated.
I noticed that as well. (hyper reference...)

Still got the edge though, IMHO
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Old 08-18-2011, 10:20 PM   #40
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To call the greatest capitalist of our time a socialist, now that is funny.
I suppose it depends on how one defines "socialist". If we define it as "annoys Fox newsreaders," then I suppose he is...

But realistically, there's no need to tax the job creating billionaire class. Mr. Buffet's proposal would raise 'only' 750 billion in new revenue over ten years. We know that's just chump change. To raise some real revenue, we need to go where the headcount is. Yeah, that 50% of the population that doesn't pay federal income tax, and even picks up credits that cover some payroll tax.

It turns out that there are some 1.5 trillion in assets held by that bottom 50% that don't pay taxes. They can kick in half to help their country. That gets us 750 billion, so there's no need to raise on the billionaires. It's not like these people can't afford it. They're really well off compared to folks in rural Sierra Leone, for example. Heck, 90% have refrigerators, 25% even have dishwashers.

Tax the poor. It's the patriotic thing to do!
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