patrick.net

Call it Crazy says

$50,000 a year times 12.8% = $6,400 paid in taxes
$21,000,000 a year times 13.9% = $2,919,000 paid in taxes
(Then multiply Romney's amount paid by 10 years)

I don't know if that's a correct interpretation:

Mitt Romney says

Romney defended his record Thursday, saying he has paid at least 13 percent of his income in federal taxes every year for the past decade.

It sounds like this might be a case of weasel wording, if he means that he paid 13% on his ordinary income (vs capital gains, which is most of what he makes). I have no idea if this is the case or not, of course, since we don't have any evidence to go on.

Call it Crazy says

Or is it sitting in some investment bank where it is being used to loan out for other purposes in the economy?

Except it isn't being loaned out because demand for loans is at an all time low. This is why interest rates remain low.

Bottom line, we can fund our government by taxing the guys with all the money or by borrowing from the guys with all the money.

Lower taxes promote profit taking and capital hoarding. Higher taxes promote investment. Why don't people understand this? I use this extreme example: If tax rates were 90% and you owned a business, would you take profit out of the business and pay 90% in taxes, giving no direct benefit to your business, or would you invest that money back into your business? If you reinvest it in your business (by hiring someone perhaps or increasing marketing) you don't pay the tax.

The funny thing is, there are literally years of data backing this up. Chart GDP growth and taxes rates. Chart unemployment and tax rates. But guys like you have been fed so much b-s from conservative talk radio you don't think for yourself anymore.

Why would anyone hire more people if their taxes were lowered??? That is ridiculous and no one that owns a business believes it to be true. They might say it is true but they only say it because they want their taxes lowered.

david1 says

Lower taxes promote profit taking and capital hoarding. Higher taxes promote investment. Why don't people understand this? I use this extreme example: If tax rates were 90% and you owned a business, would you take profit out of the business and pay 90% in taxes, giving no direct benefit to your business, or would you invest that money back into your business? If you reinvest it in your business (by hiring someone perhaps or increasing marketing) you don't pay the tax.

BINGO. Thanks David. When taxes are high, capitalists reinvest their profits to avoid taxation (spending more on advertising, expanding sales offices, upgrading techne, etc.) When taxes are low, capitalists take the money out and buy bonds and engage in non-productive rent-seeking behavior.

Call it Crazy says

Or, does the bank take a portion of YOUR money and loan it out to other people to use for car loans, home loans, personal loans, etc. so they can "spend" it on items in the economy??

It depends. What if nobody is applying for loans? Or nobody that qualifies is applying?

This tax rate discussion is ridiculous. Let me give you some real numbers. I am a hedge fund employee (this is true), working in NYC. My income is around 10-20 times the national average, and my expenses are also many times the national average: for example, in Connecticut where I live, the $250k national home price wouldn't buy half the land for a garage, let alone the garage itself. Preschool in my town costs me $25k a year and my monthly mortgage payment is around $9000. Even our electricity price is twice the national average.

My tax rate last year was about 38%. That is 28% Federal (would be 35% except for state tax deduction, which activates AMT), plus 10% for New York State. I also had some realized investment return taxed at an average of 17%, but not enough to noticeably affect my overall tax rate.

Since I work in NY, Connecticut receives virtually nothing from me though I do pay real estate tax to my town. If I made a bit more, and as a trader sometimes I do, sometimes I don't, then my taxes would go up to a max of 45%. This is the highest rate you will find in the USA unless you happen to live in New York City, which costs an extra 5% on top. Fortunately since I moved out of the city I don't have to pay that anymore.

I think my tax rate is pretty much where it should be. Of course I wish it were lower, everyone does. However I also understand that the government provides the services that make this a society instead of just a bunch of people competing with each other. If tax rates were much higher I would probably work less, but if they were lower it wouldn't stimulate me to work more. In other words I think its pretty much in the right ballpark for my income now.

What irritates me is that I am at the highest possible tax rate in the country while people like Mitt Romney, who "earned" twenty times more, pay far less than I do as a percentage of income. The reason for this is very simple: our asinine tax code favors passive investment income over employment income. I think this is really the only thing in our tax code that is horribly, horribly out of whack (other than its insane complexity) and yet it receives no discussion at all! People just focus on marginal rates, which have almost no effect whatsoever on the wealthy. The rich do not have significant income relative to their wealth--and when they do, they do whatever it takes to (quite legally) repackage the income and turn it into a capital asset. That's where the lawyers and offshore entities come in, but it can be done totally legit if the amount is worthwhile and you have access to some expensive expertise.

The effects of this system are pretty obvious: if you already have money you will be able to grow it forever and pay almost nothing in tax. But if you are trying to *earn* money by working you will pay ordinary tax rates, which are actually fairly steep already for high earners. This makes wealth an exclusive and hereditary club, especially since we have very, very low estate taxes. In other words, our tax system now creates and nurtures an aristocracy.

The simple fix: treat all income the same. Move dividends and unrealized gains into ordinary income. Rich people would pay as much as I do in percent terms and the deficit would shrink. I would recommend an estate tax in-line with global norms, too; this would be around 75% or so after some deductions. Dead people don't need money.

To anyone who says that raising investment tax rates would reduce capital investment I call total BS: If you have $100mm lying around (I'm talking to you, Mitt) you are going to invest it *somewhere*, or at least spend it, just so long as the tax rate is less than 100%. The only alternative is a guaranteed loss (i.e. opportunity cost) and a rational person would rather get, say, 50% of some return than 100% of no return. This is basic finance and basic common sense to everyone except Republicans.

The weirdest thing to me is that most Republicans don't even have enough investment income to benefit from the dumb system they have supported. Why would someone do that to himself?

krusty says

What irritates me is that I am at the highest possible tax rate in the country while people like Mitt Romney, who "earned" twenty times more, pay far less than I do as a percentage of income. The reason for this is very simple: our asinine tax code favors passive investment income over employment income.

Yes, there is a difference between the two. If your a Finance major it should be clear as the reason why taxes on investments are lower.

NYC, today is no different form 40+ years ago, regardless of wages/salaries earned. On the other coast, Santa Clara (Silicon Valley) was farmlands transformed by investment dollars, encouraged by favorable tax laws that spawned an industry, created jobs, and incomes. When tax laws as in the case of SV change, it discourages investment and R&D and you see contraction in jobs and investments.
I seen that too.

There is a difference!

Call it Crazy says

Another asinine comment... what does your statement have to do with the reference to "velocity" in my post???

Do you really not get it? There is no velocity of money if people aren't demanding (or qualified for) loans. The money just sits there. Interest rates at almost zero currently is a very good example of this.

Mitt Romney can kiss at least 13.6% of my ass. Or something like that.

bdrasin says

Mitt Romney can kiss at least 13.6% of my ass. Or something like that.

Which 13.6%? That can't be all anus.

thomaswong.1986 says

NYC, today is no different form 40+ years ago, regardless of wages/salaries earned. On the other coast, Santa Clara (Silicon Valley) was farmlands transformed by investment dollars, encouraged by favorable tax laws that spawned an industry, created jobs, and incomes. When tax laws as in the case of SV change, it discourages investment and R&D and you see contraction in jobs and investments.
I seen that too.

You need to travel more or study history more. NYC is a very different place than it was 40 years ago. As is the entire tri state area. I lived on 110th in the late 70's, I can personally attest it's an entirely different city today. The amount of investment made in the last 40 years is just stunning. Even former no go under any circumstances war zones like the South Bronx have gentrified.

Am I missing something about SV here? The huge growth in SV happened for the most part before 2001 when capital gains was reduced to it's current very low level. The first wave of really big expansion in SV, along with the invention and big initial big growth of venture capital, happened in the 70's when cap gains was as high as 39%. So what is your point?

I have $10M in the bank, I paid the taxes I owe on it, since I didn't really earn it without governments's direct involvement.

I hold that money in my account live large and wait to spend it or pass it on through living trusts or some other vehicle to minimize the additional blood letting that Uncle Sam will strive to do.

Or, Uncle Sam gives me incentive to invest that money back into the market where I take all the risks trying to pick a proper investment that will lead to growth of that investment. If that risk and gains on my investment of post tax money is treated as regular income, I'll keep my money on the sidelines. Sure those with $100s millions will invest some, those with 2, 5 or 10 million may not. How many have 100s millions?

No incentive....no investment. Forget it. My risk, not the governments. They are just a bystander trying to figure out how to take more of $$s that are sitting on the sidelines.

If someone inherited money and lives off of the cap gains, good for them. They paid taxes on the inheritance.
The government is trying to tax money at every exchange.

Lower everyone's taxes, cut spending, simplify the tax code, put freeloaders to work and do not covet thy neighbor's goods. Voila! It is that simple.

"Mitt Romney and Paul Ryan" is an anagram of "My ultimate Ayn Rand porn". Just sayin'.

Cloud says

I love it when I can have a discussion with 2 people calling themselves Crazy and Lost and Confused.

Can you people ever go one or two comments without invoking Fox News?
I don't watch it. I don't even watch tv much.

But I will say of course Fox News is right wing so what? Heres another deal Lost and Confused, I'll trade you Fox News for every major network and newspaper that makes up 90% of the news.

What cliche am I "spouting" from Fox News given I don't watch it? Use words.

LOL.. Perosnal insults-the usual. Since you claim you don't watch Fox Nerws, watch it a few days and compare your silly posts-then come back. Of course the only thing I can expect is a few more trollish comments without any substance-more screeching .

bdrasin says

"Mitt Romney and Paul Ryan" is an anagram of "My ultimate Ayn Rand porn". Just sayin'.

This is pure genious...

MB - they've got you in their cross-hairs, the libs here hate common sense. Get used to it.

The productive class is NOT going to resign itself to being tethered to a permanent millstone of egregious taxation in support of the consumption class of bureaucrats and those with a enlarged sense of entitlement. Game on.

Consumption class = Obama supporter

Productive class = Romney supporter

Call it Crazy says

Honest Abe says

Consumption class = Obama supporter

Productive class = Romney supporter

How about the Pissed Off class, who do THEY support??

LOl so true. On one hand Obama-who seems out of his depth with the economy. He does seem to have good intentions and does seem to care andseems to be following Japan's path .

Then we have Mittens-who is the modern day pirate-pillage, loot, destroy and take anything that is not bolted down. His VP wants to reduce Mittens taxes to zero-while ending Medicare.

Repubs rail about freedom and big govt and then use it for everything from gays, womens issues, anything they don't like

Dems are in bed with the feminists and make all sorts of anti male laws.

Both parties take away our freedoms and are just two sides of the same coin.

thomaswong.1986 says

Sensible ? but what happens when the risks are higher. Your not buying Sees Candy or Coke which has been around for a long time. Your no long talking about new capital equipment investment either

You demand higher expected returns. Did you skip finance class? With interest rates this low, there is no way an increase in the tax rate would kill any good pojects.

tatupu70 says

You demand higher expected returns. Did you skip finance class? With interest rates this low, there is no way an increase in the tax rate would kill any good pojects.

we are talking about government policies which encourage/discourage investments .. individual risk tolerance is a different matter. its the taxing policies which dictate how long your holding period must be .. the longer you hold any investment/asset, you can have a higher systemic risk.

thomaswong.1986 says

we are talking about government policies which encourage/discourage investments

Yes, and so am I. Government policies only influence investing on the very marginal projects. I'd even argue that most companies don't factor tax rate into the capital decisons at all.

thomaswong.1986 says

individual risk tolerance is a different matter. its the taxing policies which dictate how long your holding period must be

Who's talking about individuals? Where did that come from?

krusty says

The weirdest thing to me is that most Republicans don't even have enough investment income to benefit from the dumb system they have supported. Why would someone do that to himself?

Out of short-sighted hate for "liberals", gays, blacks, and pretty much everyone who can spell.

Poor Republicans are little hate machines with easily pushed buttons. If you're extremely rich and want save billions, just push their hate buttons and watch them pay your taxes for you!

They never question why every Congressman who votes to ban gay marriage also happens to vote for ultra-low taxes on unearned investment income.

Rich Republicans know exactly what they're doing, and they push those buttons well.

lostand confused says

LOl so true. On one hand Obama-who seems out of his depth with the economy. He does seem to have good intentions and does seem to care and seems to be following Japan's path .

We don't want to eat our peas, which means we go Japan, or try to at least

What happens late this year and next is going to be an interesting evolution.

Extending the Bush tax cuts on everyone is a bad idea, fiscally speaking, but coming to any agreement on their replacement is impossible in our ideologically-riven society.

The Republicans have thrown their marker on tax-cut Lafferism.

The Democrats have pussied around with incremental tax rises on the top 5%.

Neither are serious about instituting the tax rates and structures we need to pay for our $6T/yr government expense, nor about tangential issues like energy independence, manufacturing jobs, and the $600B/yr trade deficit that is linked to both of those issues.

Nobody I see even has a handle on what the problems actually are.

Japan actually has a less difficult situation to fix. Their baby boom is tiny compared to ours, they have much fewer economically helpless people, and their trade situation is mostly in balance, and they have the capital position of 30+ years of past trade surpluses -- $3T -- to fall back on.

Japan has a low tax-to-GDP burden like us so they can theoretically switch over their system from low-tax/high-savings to moderate-tax/moderate-savings.

We have a low-tax/zero-savings system (for the bottom 90% at least). We're boned this century.

Rich Republicans know exactly what they're doing, and they push those buttons well.

Yes sir. It's not just the US, but all over the world.

My favorite is the Sovereignity crap. We can't join the International Criminal Court, that would put our sovereignity at risk. But then, why are we in the World Bank, IMF, GATT/WTO, etc?

thunderlips11 says

My favorite is the Sovereignity crap. We can't join the International Criminal Court, that would put our sovereignity at risk. But then, why are we in the World Bank, IMF, GATT/WTO, etc?

So true. But if America did join the International Criminal Court it would have to answer for the genocide of Native Americans. That's the whole reason the U.S. hasn't supported the International Criminal Court and anti-genocide laws. Everyone knows our country is as guilty as Germany, Rwanda, Darfur, Armenia, and the Sudan.

Ruki says

Where's the body or proof otherwise?

Damn, you sound like Shrek. Oh wait, you are Shrek.

Do you really think that there are many Americans who don't believe that bin Laden was killed by Seal Team 6 under Obama's orders?

By the way, I'm not even saying Obama made the right call. I think he should have captured Osama alive and brought him to stand trial in New York City in an open, fair court. Then again, unlike Bush and Obama and the Tea Party, I believe in rule of law, although not necessarily those who carry it out.

Ruki says

Oh and, the voters don't care about Bin Laden anymore.

Tell that to anyone living in NYC. You're just saying that because Obama got the credit for killing Osama. Had a republican president like Bush done it, you and your colleagues would be reminding us of that every day.

The fact is that Obama has implemented the Republican agenda far more effectively than any Republican including Bush. That's why you hate him, and that's also why I hate him, although for different reasons.

Ruki says

Dan8267 says

Given that Obama killed bin Laden when Bush failed and Romney said he would not go into Pakistan to kill bin Laden, it seems really stupid to make the comparison the Tea Party just did. Killing bin Laden is going to be Obama's "Mission Accomplished" campaign point.

Where's the body or proof otherwise?

Whereas, when Bush nailed Saddam's sicko sons, he made sure photos of their bodies were freely distributed so there would be no doubt that they were dead.

no proof = another Obama lie.

I didn't make these rules, but that is how the world works.

Give HRHMedia access to patrick.net...and he'll masturbate with it.

How can you even compare the strategic significance of eliminating uday/qusay with OBL?

Ruki says

Whereas, when Bush nailed Saddam's sicko sons, he made sure photos of their bodies were freely distributed so there would be no doubt that they were dead.

How many Americans did Saddam's sons kill prior to the Invasion?

dublin hillz says

How can you even compare the strategic significance of eliminating uday/qusay with OBL?

Word.