NYT Warren Buffet - A Minimum Tax for the Wealthy

http://www.nytimes.com/2012/11/26/opinion/buffett-a-minimum-tax-for-the-wealthy.html?smid=fb-share&_r=4&

SUPPOSE that an investor you admire and trust comes to you with an investment idea. “This is a good one,” he says enthusiastically. “I’m in it, and I think you should be, too.”

Would your reply possibly be this? “Well, it all depends on what my tax rate will be on the gain you’re saying we’re going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent.” Only in Grover Norquist’s imagination does such a response exist.

So let’s forget about the rich and ultrarich going on strike and stuffing their ample funds under their mattresses if — gasp — capital gains rates and ordinary income rates are increased. The ultrarich, including me, will forever pursue investment opportunities.

And, wow, do we have plenty to invest. The Forbes 400, the wealthiest individuals in America, hit a new group record for wealth this year: $1.7 trillion. That’s more than five times the $300 billion total in 1992. In recent years, my gang has been leaving the middle class in the dust.

In a recent thread I opined that the $250,000 mark was too low and that I would set it at around $500,000 instead. Many people made good arguments as to why I was wrong. Economics not being my strength I conceded that I could very well be wrong. However I find it interesting that Buffet agrees with me. Not that it makes me a genius or anything, but at least I can honestly say I'm not completely out in left field.

I agree with Buffet. This seems to make the most sense, but no way the GOP lets this happen.

Yeah I never understood merits of the argument that taxing profits at a slightly higher rate will get people to give up on investing for profit altogether.

Some people have claimed that certain small businesses and job creators are taxed on all revenues, and not net profit.

I have no idea what kind of business that is and why they would operate like that.

Just make it equal across the board with no exemptions and everybody pays the same percentage. It's fair.

I would tax everything as income but I'd end all taxes on businesses that met certain requirements.

Some people have claimed that certain small businesses and job creators are taxed on all revenues, and not net profit.

I have no idea what kind of business that is and why they would operate like that.

There aren't any.

Some people have claimed that certain small businesses and job creators are taxed on all revenues, and not net profit.

I have no idea what kind of business that is and why they would operate like that.

I don't believe that is the case on the federal level but I do know some jurisdictions charge taxes solely on revenue. Fairfax county is one of them.

Just make it equal across the board with no exemptions and everybody pays the same percentage. It's fair.

Yeah, quit allowing people to deduct state taxes

I don't believe that is the case on the federal level but I do know some jurisdictions charge taxes solely on revenue. Fairfax county is one of them.

I don't believe you. Not for an instant.

You honestly expect me to believe that when a business buys a widget for $950, and sells it for $1,000, that they pay taxes on $1,000?

I know that retail sales tax works that way.

But now we're bring in state/local sales taxes, into a thread about the federal income tax?

I bet families that earn $250,001 and live in NYC hate Buffet speaking for/about them.

In a recent thread I opined that the $250,000 mark was too low and that I would set it at around $500,000 instead. Many people made good arguments as to why I was wrong. Economics not being my strength I conceded that I could very well be wrong. However I find it interesting that Buffet agrees with me. Not that it makes me a genius or anything, but at least I can honestly say I'm not completely out in left field.

I agree with you that $250,000 is too small a cut-off to consider an individual or household "wealthy."

Probably the lowest cut-off I would ever support would be 500,000, but I would prefer 1 million...

1) In tax year '09 (most recent year for which numbers have been released), an income of $154K puts somebody in the top 5% of all tax returns. $354K puts one in the top 1%.

From this I estimate that $250K puts someone roughly in the top 2-3% of all tax returns.

These people probably don't own 150 foot yachts. But "top 3%" isn't exactly "middle", either.

2) I will also point out that at least what Obama is proposing, is an increase of 3% tax on the income above $250K.

The hypothetical "person who makes $250,001", under Obama, would pay 38 cents tax on that one dollar, instead of the 35 cents he's paying now. In short, Obama's 3% tax increase would cost that person 3 cents. (Not 3% of $250K)

Just make it equal across the board with no exemptions and everybody pays the same percentage. It's fair.

Who says taxes have to be fair?

:evilg:

Now, if it was up to me, I would push for all income from Capital Gains, Interest and Dividends to be counted and taxed at the same level as your "normal" income.

Maybe we could also return to the Reagan era tax rates of 1984, where the top earners paid a marginal tax rate of 50%

From this I estimate that $250K puts someone roughly in the top 2-3% of all tax returns.

These people probably don't own 150 foot yachts. But "top 3%" isn't exactly "middle", either.

I don't think too many people are claiming that those who make $250,000+ a year are middle class...

I don't think too many people are claiming that those who make $250,000+ a year are middle class...

Probably not. (Although some folks do seem to insist that calling them "rich" is somehow immoral or unfair or something.)

(And one Party does seem to have issued marching orders that "people who make more than $250K in profit a year" are "small businesses".)

This seems like it fits in this thread:

http://elsa.berkeley.edu/~saez/diamond-saezJEP11full.pdf

"With the Pareto parameter a = 1.5 if e = .25, a mid-range estimate from the

empirical literature, then τ * = 1/(1 + 1.5 × .25) = 73 percent, substantially higher

than the current 42.5 percent top U.S. marginal tax rate (combining all taxes)"

Essentially, their model leads them to believe the top marginal tax rate should be 73 and not about 42.5%.

This does go beyond income taxes.

Probably not. (Although some folks do seem to insist that calling them "rich" is somehow immoral or unfair or something.)

(And one Party does seem to have issued marching orders that "people who make more than $250K in profit a year" are "small businesses".)

I just don't feel that a 2-income family working/living in NYC/Chicago and making $250k, necessarily qualifies them as wealthy. We (all Americans) assume that high-income = wealth, when that most definitely is not necessarily true, especially if they are living in an extremely high COL area. Granted, the alternative is probably not desireable for them.

This seems like it fits in this thread:

http://elsa.berkeley.edu/~saez/diamond-saezJEP11full.pdf

"With the Pareto parameter a = 1.5 if e = .25, a mid-range estimate from the

empirical literature, then τ * = 1/(1 + 1.5 × .25) = 73 percent, substantially higher

than the current 42.5 percent top U.S. marginal tax rate (combining all taxes)"

Essentially, their model leads them to believe the top marginal tax rate should be 73 and not about 42.5%.

This does go beyond income taxes.

Admitting that I think the part you quoted went over my head. (And the paper you link to almost certainly does, too.) But the part I highlighted kind of jumps out at me, though.

I observe that I've seen claims where people try to come up with "the top total tax rate", where people take the top rates of several different taxes, and add the top rates together, and ignore the fact that those taxes don't apply to the same money.

For example, I'll point at the income tax, and the payroll tax.

Top income tax rate is 35%.

Payroll tax rate (for self employed) is 15.5% (Well, right now, it's 13.5%, but (IMO) it's almost certainly going to go back up to 15.5%, on Jan 1st.)

But this does not mean that the top income earners pay (35% + 15.5% = ) 50.5%.

The 35% applies only to income after the first $355K.

The 15.5% applies only to the first $110K.

There is not a single dollar that gets taxed at both of those rates.

----------

Now, I assume that the folks who wrote that paper at Berkeley knew that.

But still, I wonder how in the world they came up with a 42% top marginal tax rate. Are they including state taxes, as well? Property and sales taxes?

I'll freely admit, I don't know.

Just make it equal across the board with no exemptions and everybody pays the same percentage. It's fair.

Unfortunately its not. A flat tax hits poor people much harder than rich people. If I'm only making $20k a year the loss of $5k at a 25% tax rate will hit me much harder than someone who loses $5 million making $20 million a year. He still has $15 million left, I am now well below the poverty line.

Why should others subsidize your high COL thru tax ded?

I just don't feel that a 2-income family working/living in NYC/Chicago and making $250k, necessarily qualifies them as wealthy. We (all Americans) assume that high-income = wealth, when that most definitely is not necessarily true, especially if they are living in an extremely high COL area. Granted, the alternative is probably not desireable for them.

Well off, really well off, wealthy, spectacularly wealthy, etc... Who cares what we call them. Let's talk about tax rates and tax brackets. I'll support creating some more tax brackets, say $250k - $500k and $500k - $1000k. If we're doing that, great. If we are not doing that, then we're treating $250k+ as wealthy for tax purposes.

1) Remove the yearly cap on SS tax (capped at $110,100 for 2012)

2) Adjust taxes (only married numbers including):

$0 – $17,400 10% -> 8%

$17,400 – $70,700 15% -> 12%

$70,700 – $142,700 25% -> 25%

$142,700 – $217,450 28% ->30%

$217,450 – $388,350 33% -> 35%

Over $388,350 35% -> 40%

3) Minimum tax rate of 40% for last bracket (no deductions)

4) Eliminate tax deductions at $35K

5) Cut the corporate tax rate 5%

6) Eliminate SS for anyone in the highest tax bracket at retirement age

7) CUT FEDERAL SPENDING 10%

Probably not. (Although some folks do seem to insist that calling them "rich" is somehow immoral or unfair or something.)

(And one Party does seem to have issued marching orders that "people who make more than $250K in profit a year" are "small businesses".)

Again, most people who dislike the $250,000 cut-off don't insist that calling the $250,000 earners "rich" is "immoral"...

And yes, the Republicans have made it a major point to say tthe $250,000 threshold impacts many small businesses...which there are quite a few small businesses residing close-to or in that threshold. While their claims are likely exaggerated (as every single political claim is always exagerrated), I agree that there will be a segment of the economy (small businesses) that will be detrimentally impacted by the $250,000 cut-off.

I'm not a supporter of raising taxes on the "rich," but if it goes that way, which I'm sure it will based on Obama's insistence, I think the income threshold should be increased to AT LEAST $500,000.

I would also very much like to see Obama's administration talking about cutting and reforming some of the out-of-control entitlement programs, instead of continuing to feed into them.

I have a hard time feeling bad for the people whose income puts them safely within the top 5% of all wage earners.

As Larry has pointed out... if your family makes $250k+ a year, you are the top 2-3%.

How is that not the "rich"?