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Old 07-22-2013, 10:37 AM   #21
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Your landlord pays it for you, and passes that cost on to you, and there's no blood-from-stone scenario in the luxury home sector.
OK, that's essentially how property taxes work now.

But that gets tricky with making it progressive, no? Property taxes, at least AFAIK, are not progressive, so not an issue.

But if my landlord owns one house, or ten, his 'wealth' is different. House #1 might just push him into the start of the 'wealth tax', but the 10th one would presumably be totally into the bracket, and maybe in a higher bracket.

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Old 07-22-2013, 11:09 AM   #22
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But wealth (in the broad sense) is the only thing that can be taxed. Part of the unwritten social contract is that the taxes don't give some capitalists the edge over everyone else. That is where the 'get rid of tax breaks' argument comes in.
Where in heck do you get that wealth is the only thing that can be taxed? Income can just as easily be taxed.

Not sure what tax breaks you are referring to but if you are referring to the preferential rate for qualified dividends and capital gains, much of the reason for the preferential rate is because the income has already been tax at the corporate level and the same income would be taxed twice if not for the preferential rate.
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Old 07-22-2013, 11:29 AM   #23
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Where in heck do you get that wealth is the only thing that can be taxed? Income can just as easily be taxed.

Not sure what tax breaks you are referring to but if you are referring to the preferential rate for qualified dividends and capital gains, much of the reason for the preferential rate is because the income has already been tax at the corporate level and the same income would be taxed twice if not for the preferential rate.

Because in my own little world, not being caring to mimic economists, my definition of wealth is not limited to just financial wealth, but includes everything economist exclude from their wealth categories, like household wealth and income as soon as it is in your pocket.

regarding tax breaks, I specifically meant the breaks that promote favoritism in the marketplace.
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Old 07-22-2013, 11:40 AM   #24
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To be fair, I think it is very important to distinguish between wealth and income. By considering the latter part of the former, you're missing very important nuances that make all the difference between understanding what people are saying to each other and utter confusion. Economists are not excluding income from "wealth categories". Rather income is a different measurement of money from wealth, and in the end the money implied by income generally ends up also measured as wealth (if it still exists).In the extreme, a tax on wealth and a tax on income can tax the same exact dollar twice in the same year (but only one year). The reality is that taxing income and taxing wealth have radically different impact on behavior, so they need to be addressed separately to ensure the taxation doesn't actually accomplish the opposite of its intention.
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Old 07-22-2013, 11:43 AM   #25
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To be fair, I think it is very important to distinguish between wealth and income. By considering the latter part of the former, you're missing very important nuances that make all the difference between understanding what people are saying to each other and utter confusion. Economists are not excluding income from "wealth categories". Rather income is a different measurement of money from wealth, and in the end the money implied by income generally ends up also measured as wealth (if it still exists).In the extreme, a tax on wealth and a tax on income can tax the same exact dollar twice in the same year (but only one year). The reality is that taxing income and taxing wealth have radically different impact on behavior, so they need to be addressed separately to ensure the taxation doesn't actually accomplish the opposite of its intention.
Thanks, Point taken.
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Old 07-22-2013, 12:55 PM   #26
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....regarding tax breaks, I specifically meant the breaks that promote favoritism in the marketplace.
Still unclear what tax breaks you mean, and i'm not even sure if you really have an idea beyond generic tax breaks.

One example of a tax break that promotes favoritism in the marketplace that comes to mind would be tax credits for sustainable energy investments like wind and solar.
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Old 07-22-2013, 01:18 PM   #27
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One example of a tax break that promotes favoritism in the marketplace that comes to mind would be tax credits for sustainable energy investments like wind and solar.
That would be one, but all breaks for energy production should be deleted, including tax credits for one of my former employers, oil. Farm subsidies would be another area to stop preferential tax treatment There are lots more examples, and a lot of specific little loopholes for specific little industries. Sen. Coburn had a nice list a couple of years ago.
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Old 07-22-2013, 01:46 PM   #28
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I would be fine with phasing out all you mentioned and let the free market decide what is valuable or not. I've never understood the relevance of current day subsidies for oil given the profitability of oil companies. There certainly would be some initial shocks of ending any of these. For example, IIRC the price of milk would likely skyrocket if subsidies were removed.

That said, IIRC part of the reasoning behind some of the farm subsidies at one time was to ensure/expand food production in country so we don't ever get into a situation where an enemy can hold us hostage economically/gouge us for food which seems sensible.

But I suspect that many of these corporate welfare elements could be phased out in a way that would create minimal chaos/harm.
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Old 07-22-2013, 01:54 PM   #29
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Actually several states have wealth taxes, called intangibles taxes, including MI, IN and others. Several states also tax intagables as part of regular property taxes. The Mi tax only brings in a few million a year which suggests it may not apply to stock of a corp not incorporated in Mi. (There also is a tax of 25 basis points on bank accounts, that apparently many banks pay directly).
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Old 07-22-2013, 01:57 PM   #30
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Actually several states have wealth taxes, called intangibles taxes, including MI, IN and others. Several states also tax intagables as part of regular property taxes. The Mi tax only brings in a few million a year which suggests it may not apply to stock of a corp not incorporated in Mi. (There also is a tax of 25 basis points on bank accounts, that apparently many banks pay directly).
Note that MI apparently repealed the tax for individuals in 1998. Also it appears the tax was not cost effective.
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Old 07-22-2013, 02:00 PM   #31
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I am not commenting on the subsidies for oil companies, but just making a comment on the profit side. If you were to run an oil company and have oil in the ground, selling it means you must continue to replace it or you will be out of business once your pumps run dry.

Oil companies spend large sums of dollars trying to find replacement oil reserves. And that is just to find the oil in the ground. Getting it to market is another process altogether, and very costly.

Until the last 5 years or so, we were very dependent on foreign supplies of crude oil and some refined product. Now we have increased our domestic crude production thru horizontal drill techniques (and shale plays) so we are not so dependent on foreign oil (went from 70% to maybe 60% dependent). This dependency decrease will continue, but it is still very costly to find new oil. That is where most of the profits go.

It may be time to review the subsidies for domestic production, but that's a political task.
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Old 07-22-2013, 02:07 PM   #32
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Not sure what tax breaks you are referring to but if you are referring to the preferential rate for qualified dividends and capital gains, much of the reason for the preferential rate is because the income has already been tax at the corporate level and the same income would be taxed twice if not for the preferential rate.
Most of us know that the effective corporate tax rate in the US is quite low. The last figure I read was that in 2011 (by which time corporate profits had bounced back nicely), the effective corporate tax was only 12.2%. For an entire decade, GE paid an average of only 1.8%. Of course, GE pays a healthy dividend to its shareholders. We've all read stories of some highly profitable corporations avoiding US corporate taxes altogether.

Moreover, I've never bought the argument that taxing dividends is taxing twice. It's routine for every transaction to be subject to a tax in many financial circumstances. There is even less of an argument that can be made for capital gains having a preferential rate.

Having said that, I certainly attempt to take advantage of these skewed rates. OTOH, I'm getting pummeled by my property tax. One tax law giveth, the other taketh away.
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Old 07-22-2013, 02:15 PM   #33
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Most of us know that the effective corporate tax rate in the US is quite low.
We do? Care to provide some evidence to support your claims?

In May, the NYT reported an average of 29.1% overall for S&P 500 corporations from 2007-2012, with a lot of supporting detail... http://www.nytimes.com/interactive/2...axes.html?_r=0, including 16% for GE.

Don't get me wrong, I think we need simplification of our individual and corporate tax codes, though I am not holding my breath. But I'm very wary (and weary) of numbers reported seemingly from out of thin air...
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The last figure I read was that in 2011 (by which time corporate profits had bounced back nicely), the effective corporate tax was only 12.2%. For an entire decade, GE paid an average of only 1.8%. Of course, GE pays a healthy dividend to its shareholders. We've all read stories of some highly profitable corporations avoiding US corporate taxes altogether.

Moreover, I've never bought the argument that taxing dividends is taxing twice. It's routine for every transaction to be subject to a tax in many financial circumstances. There is even less of an argument that can be made for capital gains having a preferential rate.

Having said that, I certainly attempt to take advantage of these skewed rates. OTOH, I'm getting pummeled by my property tax. One tax law giveth, the other taketh away.
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Old 07-22-2013, 02:25 PM   #34
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I am not commenting on the subsidies for oil companies, but just making a comment on the profit side. If you were to run an oil company and have oil in the ground, selling it means you must continue to replace it or you will be out of business once your pumps run dry.

Oil companies spend large sums of dollars trying to find replacement oil reserves. And that is just to find the oil in the ground. Getting it to market is another process altogether, and very costly.

Until the last 5 years or so, we were very dependent on foreign supplies of crude oil and some refined product. Now we have increased our domestic crude production thru horizontal drill techniques (and shale plays) so we are not so dependent on foreign oil (went from 70% to maybe 60% dependent). This dependency decrease will continue, but it is still very costly to find new oil. That is where most of the profits go.

It may be time to review the subsidies for domestic production, but that's a political task.

Of course there are valid reasons for every single tax credit. All tax credits have some good reason at some time. The horse tracks in Kentucky have one, because they like those there. I got nice one for re-insulating my house a couple of years ago. But it never ends, no matter what party is in power. Government is always using the tax code to promote one objective or another. Instead of using the tax code for industrial and social policy, why not just pass the appropriate law instead? Then maybe we could have a tax code that made some sense.
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Old 07-22-2013, 02:29 PM   #35
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We do? Care to provide some evidence to support your claims?

In May, the NYT reported an average of 29.1% overall for S&P 500 corporations from 2007-2012, with a lot of supporting detail... http://www.nytimes.com/interactive/2...axes.html?_r=0, including 16% for GE.

Don't get me wrong, I think we need simplification of our individual and corporate tax codes, though I am not holding my breath. But I'm very wary (and weary) of numbers reported seemingly from out of thin air...
Here's one:

The Corporate Tax Rate Is Lowest in Decades; Is Business Paying Its Fair Share? | TIME.com

Here's a link for the GE claim:
Press Release: General Electric's Ten Year Tax Rate Only Two Percent | Tax Justice Blog
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Old 07-22-2013, 02:30 PM   #36
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Tax credits don't preclude the tax code from making sense. People object more to being told what to do by government than being rewarded by government for doing a good thing. For that matter, another way of handling the same things would be to tax doing a bad thing, but again, people object more to being punished by government for doing something instead of being rewarded by government for doing the opposite.
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Old 07-22-2013, 03:01 PM   #37
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Using the tax code to promote growth or change behaviors can be a good thing. But we are learning that it is too difficult politically to end tax cuts and credits and expenditures when the economy improves or spending needs increase. Even looking ahead and just having them expire is a political nightmare. So we are left with Fed actions to spur the economic engine or slow it down.
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Old 07-22-2013, 03:09 PM   #38
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Tax credits don't preclude the tax code from making sense.
Of course not. But I think it depends on where you're from and the local political culture. I'm from Chicago, Illinois. When I see tax credits rewarding special interest groups connected to the legislators that sponsored the tax credit, it makes perfect sense. That's how the world works. The folks in political power take care of the folks who keep them there. Everybody's back gets scratched. That's what a tax credit is.

Now to some country bumpkin holding some naïve idea that a tax credit is there to promote an activity beneficial to the overall public good (), seeing what's actually happening with tax credits and the tax code isn't going to make sense at all.

It's all in the eyes of the beholder.
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Old 07-22-2013, 03:11 PM   #39
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When I see tax credits rewarding special interest groups connected to the legislators that sponsored the tax credit....
How about fixing that?

And if such injustice literally cannot be remedied, or if doing so causes an even less tolerable consequence, then recite the serenity prayer.
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Old 07-22-2013, 03:13 PM   #40
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How about fixing that?

And if such injustice literally cannot be remedied, or if doing so causes an even less tolerable consequence, then recite the serenity prayer.
"Fixing that" would eliminate the grease that allows the wheels to turn. Politics in the good ole U S of A would stop. People would be confused. And their backs would itch horribly with no one to scratch them.
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