I remember there was alot of discussion about Capital Gains tax in the US and UK awhile ago. Even from people like Warren Buffett who thought it was wrong that he only paid 10% tax - when his receptionist paid more in tax.

At first sight it seems mad that business owners and investors should only pay 10% on their profits.

At least that is what I used to think.

But then I read somewhere that the issue is not been analysed properly.

Since the Capital Gains tax only applies to money which has already been earned. And which is now spent on investment as opposed to consumption.

So - why should somebody pay income tax. The be forced to pay income tax again - just because they chose to invest that money in creating jobs in the economy.

When instead they could just blow the money on frivolous consumption (ie spend money in the way alot of rich people do) - and do so without incurring any tax at all?

So - it is incorrect to look at Capital Gains as a tax instead of income tax. But should instead be looked at as a tax which is in addition to income tax.

I hope I have explained this well. Since I am curious as to what others think since I haven't heard this point addressed in any of the debates and coverage I have come across.

To put it simply. Why should a guy be taxed for investing his earned money on creating jobs and growing buinesses? When he wouldn't be taxed at all if he just blew the money on hookers, alcohol, champagne, drugs, holidays, cars and hotels?

Since that is basically what the Capital Gains tax represents.

Yes it's double taxation. Buffet is a liberal that likes to obscure things to promote the liberal agenda. He knows full well how the tax system works re capital gains. He also knows he could volunteer to pay more tax if he truly thought it was so unfair.

I wonder if the issue is confused by those who take 'payment' in the form of shares in the company. And then after a few years they sell the shares and only pay 10% in tax. As opposed to the usual 40% income tax.

Seems that would be an easy scam to arrange in terms of reducing your income tax? I wonder if it is common? Or maybe I have overlooked an important point.

Well at one point it was called an "incentive" to invest in the economy. Those shares aren't guaranteed to increase in value. An employee that opts of shares is taking a risk, which is another reason capital gains tax is horeshit.

Seems a very simple and logical case. Open and shut.

How has it become such a political football? Would be interested to hear what those who think otherwise have to say.

I am genuinely curious about both sides of the argument (assuming there is a reasonable alternative way of looking at this?)

I know this issue has been done to death in the past. But I just wanted some clarification since little points like this nag away at me long after other people have moved on to other issues.

You just have to know what you're getting yourself into if you intend to buy stocks.

The more active you are, the more you'll lose. You'll pay higher cap gains on top of brokerage fees.

I never buy with the intent of selling, period. I buy for the long haul. If you're intent on not paying any tax there's always a roth IRA or annuity.

Warret Buffet doesn't pay 10% by accident. His wealth comes from long term capital gains which are taxed half of what wage slaves pay. The key word in there is long term. Add to that his tax deferred retirement accounts and so-called charitable donations, and there you have it.

I think this might be solved simply (though this will not happen):

1) make corporate taxes zero
2) tax capital gains at the same progressive rates as regular income
3) the exception should be for true "investment" such as venture capital, initial offerings, funding startups, etcetera. Buying stock on the secondary market is not actually investing in a company.

#1 would be very unpopular with lobbyists and politicians because it would take away much of their raison d'être, that is, coming up with tax breaks for this or that industry/company.

The whole "trickle down" thing really has turned out to be a total lie. And while there is some large conspicuous consumption, wealth people stay wealthy by not blowing their money on stupid luxury expenditures. They have a budget and don't spend more then that. At least the smart ones do.

At the same time, I think what would be a better incentive is to 1.) reform charity laws so they're not yet another tax loophole for people to hide money in and 2.) encourage the wealthy to give their money away in philanthropy with better tax incentives. One billionaire could help out hundreds if not thousands of struggling people. They're not reinvesting in the community and that's the real problem.

capital gains isn't double taxation on your own money. The key word in there is gains. A person is only taxed on new money they earn on the capital they have invested. $100 invested and then sold for $100 results in no tax, you would only pay tax on a dividend of $10 or taxed on $10 if you sold the stock for $110.

The double taxation scam comes on the business's money. Lets take the same $100 invested with $10 dividend paid. That $10 that Buffet pays 10% tax on used to be $15.38 before the company had to pay tax on it. The company paid tax on it, which brought the after tax profit down to $10 and then it was given to Warren.

I think Buffet is a smart guy, advocatin for higher capital gains taxes but but I bet he would use zero corporate tax as the bargaining chip for it. That would be a help to businesses as they would pay no tax on profits they choose to keep in the company.

This is also why real estate investment is such a good option. There is no corporate tax at the front end of a real estate sale.

Buffet lowers his tax rate by donating his stocks to his own charity. He gets to write off the price of the stock while never paying taxes on those earnings. He still controls the charity and those donated stocks.

If it wasn't for that, he would have paid more in capital gains taxes since it was at 15% but now it is 20% with a surcharge of %4 for obamacare in his income bracket.

He just wants to put more barriers of entry for future competition. More taxes, less competition.

First, I am pretty sure he pays at least 15%, not 10%. Capital gains tax rate in the US has historically been 15%.

Secondly, yeah his whole political shtick about "I want to pay more taxes" is complete bullshit, a good family friend of mine was a very successful at PIMCO and has known Buffet personally since the early 80s, he said the Buffet has always tried very hard to cut as much tax liability as possible, has done that for as long as he has known him, but is only now playing the "I should pay more taxes" card because he is getting older, has accumulated more than enough money than necessary, and wants to leave behind a legacy.

I thought a billionaire whose money sits in the bank doing nothing is still of benefit to the economy. Since that money can be used by the bank to lend out to other businesses and help to indirectly grow the economy?

I used to be an ardent capitalist before, but now I strongly believe that wealth needs to be divided up more equitably in this country. However, Warren Buffet probably can't say the same thing; the man honestly has a reputation for being a vulture capitalist. Right after the whole financial meltdown, Buffet bought up Goldman Sachs shares for fire-sale prices, thanks to sweetheart deals made with his friends in Washington. The guy also has been known to be an infamous tax-dodger.

http://www.theblaze.com/stories/2012/03/...x-evasion/

Not to mention, he also hires scores of accountants to take his tax-liabilities off the books. Moreover, he also is antagonist of red pill politics, and he has supported several tres-chic left-wing causes like feminism.

http://www.nasdaq.com/article/feminist-w...n-cm244884

If you want my two cents, this country needs to return to an era of higher-taxes and less corporate subsidies -like we had in the 1950s. There is no way this country can continue with such a divide between the poor and rich; in the long-run, it will inevitably lead to chaos and social unrest.

Quote: (12-24-2013 07:00 PM)numanist Wrote:  

I used to be an ardent capitalist before, but now I strongly believe that wealth needs to be divided up more equitably in this country. However, Warren Buffet probably can't say the same thing; the man honestly has a reputation for being a vulture capitalist. Right after the whole financial meltdown, Buffet bought up Goldman Sachs shares for fire-sale prices, thanks to sweetheart deals made with his friends in Washington. The guy also has been known to be an infamous tax-dodger.

http://www.theblaze.com/stories/2012/03/...x-evasion/

Not to mention, he also hires scores of accountants to take his tax-liabilities off the books. Moreover, he also is antagonist of red pill politics, and he has supported several tres-chic left-wing causes like feminism.

http://www.nasdaq.com/article/feminist-w...n-cm244884

If you want my two cents, this country needs to return to an era of higher-taxes and less corporate subsidies -like we had in the 1950s. There is no way this country can continue with such a divide between the poor and rich; in the long-run, it will inevitably lead to chaos and social unrest.

Numanist:

I agreed with your overall point that a lot of the current problems that we are having in America stem from the fact that the very wealthy are NOT paying their fair share of taxes, and to bring this country back to some kind of tax burden similar to the 50s would likely bring us a long way towards solving a lot of ability to pay problems (b/c ultimately to have such disparity in wealth is unstable and ridiculously lopsided).

I have NO real knowledge about the various ways that Warren Buffet had earned his money, and several postings in this thread seem to be personal attacks on Buffet, rather than his message that the rich need to be taxed more. The fact that Buffet has benefited and gotten very rich from past tax breaks is besides the point, in my opinion. Ultimately he seems to be advocating for a systematic fix to the system that he has taken advantage of - AND really that is what seems to be needed.

I have NO problem with regular people (let's say people with incomes below $200,000) per year getting preferential tax treatment for passive income, as compared with income from work. But I do have problems when people with multiple millions of dollars of income are finding ways to NOT pay taxes on their income.... b/c they need to contribute into the infrastructure for the benefit of society as a whole b/c likely without that infrastructure, they would NOT have been able to get rich.

Right NOW we have a system of the very rich NOT paying their fair share of taxes, I doubt that too many guys participating in this forum fit into the category of the very rich.... I even doubt that many guys participating in this forum are earning more than $200,000 per year.

Quote: (12-24-2013 07:00 PM)numanist Wrote:  

Moreover, [Warren Buffett] also is antagonist of red pill politics, and he has supported several tres-chic left-wing causes like feminism.

You misunderstand his position. Buffett supports feminism to get more and more women into the workplace, increasing the labor supply, hence depressing wages and increasing corporate profits. He supports it solely because it makes him and his companies richer; the "red pill"/"blue bill" or "left-wing"/"right-wing" dichotomies don't apply here.

You can find good employees among all groups of people.

Some people seem to forget those simple thkng. If a lesbian makes more sales than a guy, I'll hire the lesbian as she makes me the most money. I could care less if the employee is blue pill, a woman or black..... As long as they make the most money it's all good.

Quote: (12-24-2013 02:36 PM)Tytalus Wrote:  

The whole "trickle down" thing really has turned out to be a total lie.

Nawwww, yer kidding me. Things aren't set up to favor keeping the rich rich? You must be a kookoo librul.

We all benefit greatly from a "free market" hahahhahahahah.
You are free to work for United Monoliths, pay rent to United Rental Monolith, and free to die in the defense of United Monolith.

You are free, and most of all you are free to love Big Brother.



I don't want to be totally one sided though. After seeing how the upper class steals in Ukraine, we have a much gentler class of thieves here. In the USA, they steal openly, legally, and as you can see from the posts on this thread, more or less with the consent of the population, who only hope to later be in a position to steal like crazy themselves. So it isn't as bad here as where they steal the money before it even exists...

Quote: (12-26-2013 12:38 AM)iknowexactly Wrote:  

Quote: (12-24-2013 02:36 PM)Tytalus Wrote:  

The whole "trickle down" thing really has turned out to be a total lie.

Nawwww, yer kidding me. Things aren't set up to favor keeping the rich rich? You must be a kookoo librul.

We all benefit greatly from a "free market" hahahhahahahah.
You are free to work for United Monoliths, pay rent to United Rental Monolith, and free to die in the defense of United Monolith.

You are free, and most of all you are free to love Big Brother.

Maybe there is some kind of misunderstanding, here, because Tytalus’s point about trickle down NOT working is valid.

Many of us should have realized by now, especially given the latest bailouts starting from 2007-2008 that trickle down is NOT taking place.

Trickle down has been advocated at least since the 1980’s with Reagan and in many ways, trickle down won the day and has been follow by both democrats and republicans with thoughts that if they are easy on the rich that somehow they are going to give back to society and invest in the creation of jobs. Surely, that trickle down does NOT work – and either the rich have to be forced into the creation of jobs or if they will NOT do it, then the Govt has to do it. Sad as it may be, but the Govt, seems to be the job provider of last resort when private industry is withholding their capital. They get all these tax breaks and benefits and even stimulus and free money, and they do NOT lend that money back out to small/medium businesses or to home owners and they just sit on it.. actually, they may be investing that money into china or Germany or somewhere in which they believe that they can get returns on their investment.

Quote: (12-26-2013 12:38 AM)iknowexactly Wrote:  

I don't want to be totally one sided though. After seeing how the upper class steals in Ukraine, we have a much gentler class of thieves here. In the USA, they steal openly, legally, and as you can see from the posts on this thread, more or less with the consent of the population, who only hope to later be in a position to steal like crazy themselves. So it isn't as bad here as where they steal the money before it even exists...

America should NOT be comparing itself to corrupt countries, but instead potentially aspire towards more balanced investments into long term infrastructure which will create more jobs for americans. Tax the rich more, and use that money to invest in the creation of jobs in America with a living wage. These various bullshit tactics of allowing companies to export more and more of the jobs overseas including the secretive terms of the Transpacific Partnership is just going to do more to screw the American people into greater poverty and to allow for the competition of American workers with workers in china, phillipines, Cambodia, which is really a race to the bottom for wages and allow companies to exploit workers… while unemployment and infrastructure in the united states continues to fall apart and the middle class (whatever is left of it) continues to fall into poverty. If we as a country think that we are advantaged by focusing on getting better prices and consumerism, then we are mistaken because countries are NOT going to keep producing goods to sell to americans for cheap prices when we cannot even afford to buy them anymore.. accordingly, wages and jobs need to be improved and created in America.

That comes from whatever means necessary by hook or by crook to get the wealthy to pay their fair share into the infrastructure and to create regulations that stop them from off shoring jobs. A BIG ASS project, that is for sure.. and no simple solution.

Quote: (12-24-2013 05:12 PM)cardguy Wrote:  

I thought a billionaire whose money sits in the bank doing nothing is still of benefit to the economy. Since that money can be used by the bank to lend out to other businesses and help to indirectly grow the economy?

This is correct. Money is put to use in the economy whether it is spent or saved. Most people fail to understand this simple mechanism. Sometimes this is due to a lack of knowledge of the economics, but more often it comes from their hatred of the rich and desire to redistribute wealth.

Just as feminists like to ignore basic realities to redistribute power to women, the Left tend to do the same to suit their political agenda (i.e. bigger government).

Quote: (12-26-2013 01:58 AM)JayJuanGee Wrote:  

Tax the rich more, and use that money to invest in the creation of jobs in America with a living wage.

More taxes = More jobs is a complete logical fail. It has never worked and never will.

A few points:

1. Historically, governments are the worst investors of capital known to mankind.

2. The private sector creates wealth. Rich people own companies but there are plenty of small businesses that create jobs too. Whether the owners are rich or not is neither here nor there.

3. When taxes are increased, you take money from the private sector (the producer of wealth) and give it to the public sector which by default is a consumer of wealth (or destroyer depending on your outlook lol). Governments tend to spend whatever money they have (see below) so you want to minimise how much they get their dirty paws on, not increase it.

4. Most tax money ends up going towards the creation of new government jobs in warm offices (usually for women incidentally but that's for another discussion). This does nothing for the real economy while hurting business everywhere.

5. The money that is actually "invested" goes to government cronies such as banks or big corporations. Another reason not to increase taxes.

6. Businesses don't invest to create jobs. They invest to get a return on capital. Jobs for The People are a happy side effect but this is never the goal and nor should it be.

I think what your post was referring to was cronyism in the capitalist system. Sure there are a lot of problems. The banks should have been left to burn, in my opinion. I also hate the way citizens are sold out in favour of interest groups and big corporations but that has more to do with the faults of the legal/political world than "the rich" per se. Your target should be the government, not the rich.

dreambig, I was nodding along until "The banks should have been left to burn..."

http://seekingalpha.com/article/188040-w...-necessary

Quote: (12-26-2013 02:45 AM)dreambig Wrote:  

Quote: (12-26-2013 01:58 AM)JayJuanGee Wrote:  

Tax the rich more, and use that money to invest in the creation of jobs in America with a living wage.

More taxes = More jobs is a complete logical fail. It has never worked and never will.

A few points:

1. Historically, governments are the worst investors of capital known to mankind.

2. The private sector creates wealth. Rich people own companies but there are plenty of small businesses that create jobs too. Whether the owners are rich or not is neither here nor there.

3. When taxes are increased, you take money from the private sector (the producer of wealth) and give it to the public sector which by default is a consumer of wealth (or destroyer depending on your outlook lol). Governments tend to spend whatever money they have (see below) so you want to minimise how much they get their dirty paws on, not increase it.

4. Most tax money ends up going towards the creation of new government jobs in warm offices (usually for women incidentally but that's for another discussion). This does nothing for the real economy while hurting business everywhere.

5. The money that is actually "invested" goes to government cronies such as banks or big corporations. Another reason not to increase taxes.

6. Businesses don't invest to create jobs. They invest to get a return on capital. Jobs for The People are a happy side effect but this is never the goal and nor should it be.

I think what your post was referring to was cronyism in the capitalist system. Sure there are a lot of problems. The banks should have been left to burn, in my opinion. I also hate the way citizens are sold out in favour of interest groups and big corporations but that has more to do with the faults of the legal/political world than "the rich" per se. Your target should be the government, not the rich.

I was arguing that trickle down does NOT work, and you seem to be suggesting that it does....

Probably, there are too many details, here to get into it b/c your starting point of the meaning of the role of taxes seems to be quite removed from mine. In that regard, we may NOT be able to come to an agreement.

I definitely do NOT think that people of modest means (of lets say less than $200,000 should be taxed any more than they currently are b/c in fact they are probably paying disproportionately b/c companies are failing to pay b/c they have been let off the hook, and for these people of modest means are likely they are overly taxed and overly burdened). I also do NOT believe in govt merely for the sake of it.

If we remove the govt, probably, we will be even more screwed by the rich. And, surely currently, the govt is being manipulated in too many ways by the rich.. too much money in politics. And, I do NOT want more of that. That is for sure.

I doubt that you are part of the rich, that I was referring to (even if we say those earning more than $200,000 a year), so I am unsure why you think that it is good to prevent the rich from paying their fair share of taxes with the money that, currently, they are NOT investing in America.... well mostly the ones guilty of this are earning multiple million a year, such as banks.. and those getting stimulus that does NOT seem to be invested.

I have NOTHING against people getting rich, so long as they pay their fair share.

And somehow you seem to think that govt is the problem.

Sounds to me as if you are arguing from an anti-govt ideology which is broad and conclusory and also NOT very specific about how we get from the point that we are IN to that ideological point of little to NO govt and will that new state benefit people?

And you are suggesting that the creation of jobs is NOT a goal of companies, and probably, we differ in that regard. I understand that companies can do whatever they want for the benefit of their shareholders; however, in my current thinking, if companies are NOT providing social good, such as jobs, then we as a society may consider that their licenses (charters) should be taken away. Devils in the details, here.

Again, if the private sector will NOT create jobs, then the govt should step in to accomplish such..... or at least to create the systems in which jobs can be created, and those are NOT govt bureaucrats... can be construction, driving all kinds of jobs can be created by public works projects... building roads, schools, future energy systems etc etc.

That seems to be the point that Buffet is making also that the rich should pay more taxes.


Govt is supposed to be the voice of the people and yes whether women should have a right to vote has already been established, so I am NOT sure how we are supposed to get rid of that. Currently, I believe in democracy rather than moneyocracy. Accordingly, people should be calling the shots, NOT money. Right NOW, the rich are calling too many of the shots in all sectors, including the influencing of the direction of govt.

Anyone else agree that Capital Gains tax is double taxation (as detailed in my original post)?

Or perhaps it isn't double taxation since it only applies to any profits you make from your investment?

There have been some good points on this thread - but I feel I am back to square one in terms of not being sure which side is correct.

Quote: (12-24-2013 01:32 PM)cardguy Wrote:  

To put it simply. Why should a guy be taxed for investing his earned money on creating jobs and growing buinesses? When he wouldn't be taxed at all if he just blew the money on hookers, alcohol, champagne, drugs, holidays, cars and hotels?

Unless he does it in New Hampshire he'd still be paying sales tax on the consumption (or should anyway - I don't know many hookers who bother to collect sales tax properly on their services).

Quote: (12-24-2013 01:32 PM)cardguy Wrote:  

To put it simply. Why should a guy be taxed for investing his earned money on creating jobs and growing buinesses? When he wouldn't be taxed at all if he just blew the money on hookers, alcohol, champagne, drugs, holidays, cars and hotels?

Since that is basically what the Capital Gains tax represents.

Yes it doesnt make any sense. If someone wants to build a business he has to deal with all kinds of regulations and business growth is slowed down by taxes. Meanwhile there is a whole shadow economy that makes criminal organizations rich ... completeley tax free.

Heres what Dan Kennedy has to say on the topic:

Quote:Quote:

Our income tax system is an indefensible mess. A criminal mess. Kept in place by politicians who use it for social engineering, idiots, tax lawyers and the IRS. If it were replaced with something that makes sense, a whole lot of these people would be out looking for honest work. Either a flat tax or a national sales tax, accompanied by a constitutional amendment requiring a 75% majority vote of both houses of Congress to raise taxes or enact any new taxes of any kind - that's what I would push for. Capital gains tax and estate tax should be eliminated altogether. The money was already taxed once. Once is enough. States should be forced to keep their income, sales and property taxes within a sane range or be denied federal aid. No one should pay combined taxes taking away more than 30% of what they earn.

You might ask how the nation could possibly afford such a radical change and reduction in taxes. Easily, that's how. First of all, Presidents John Kennedy, Ronald Reagan and George W. Bush ably demonstrated that income tax bracket reductions increase tax revenues. Second, the productivity and investment boom that would occur thanks to truly comprehensive tax simplification and relief would more than compensate. Third, I would put heavy surcharge taxes on vices. Fourth, I would take an axe to foreign aid and government waste. A big axe. You pay at least 400% more in taxes than you should, so everybody in the underground economy can enjoy tax-free income.

You pay excessive taxes so pimps and prostitutes, bookies, drug dealers, dealers in stolen merchandise, and layers and layers of organized crime and gang leaders can pay zero taxes. If you approve of that plan, you need to see a mental health professional. I actually think it could and arguably should be the other way around: you and I should pay zero income tax, and tax on those in vice businesses should support us. Essentially, Nevada operates that way. Zero income tax for its citizens. Taxes on the casino industry more than take care of the whole tab. Prohibition is a failure. The only segment of society that benefits in any way, shape or form from gambling, prostitution and marijuana being illegal is organized crime. It is asinine to continue these completely unsuccessful prohibitions, that suck up monstrous quantities of economic, law enforcement, judicial and penal resources. The entire mess is a gigantic cost to you and me, a gigantic opportunity for criminals. There has to be a better way, and we ought to find it.