Whats Fair When it Comes to Taxes?

[mlmpetert]

Good read about how screwed up the current code is:

At 102%, His Tax Rate Takes the Cake - Yahoo! Finance

Also a very short but good read i meant to post a while ago.

Hinkle: Should we knock down Romney's fence? | Richmond Times-Dispatch

Honestly the argument that Romney pays less in taxes is flawed and comes from ignorance to some extent. The money he gave to charity is no longer his money and taxes should never be paid on funds that go to nonprofits. But the people in his defense who try and add back the total amount he gave away are also wrong. Just the amount of taxes he would have otherwise paid on the money he gave away should be added back.

But most importantly the amount he paid out of pocket is low, only because cap gains appear low since the money is already taxed at corporate income rates. The value of the stock is reflective of the value of the company. If corporate taxes went away then the values of stock would suddenly become worth 35% more. In the meantime people have to pay that 35% (in the form of lost earnings) before paying the 15% on any gains they MIGHT get when the stock is sold IF held long term. So Romney has really payed 15% in addition to the 35%all ready payed. Obviously you have companies like GE that don’t pay taxes or gas companies that get subsidized to some extent, but that is at no fault of Mr. Romney.

Ive gone back and forth with tax treatment of capital gains and the more i think about it the more i think its unfair for them to be taxed as high as regular income. I think the only way to make things the most fair (equal, not social justice “fair”) is to have something that’s extremely simple so people can understand it, make everyone pay a little something and of course make evil rich people pay a bit more too:

- Allow income deductions for all things tax related except federal and state sales taxes. So just things like property taxes and state or city income tax
- Allow dollar for dollar deductions for charities, however, tighten up the definition of charities (caps on director’s income, what/who they benefit, and strict rules on political partisanship)
- No joint, single, head of household or married filling separate statuses. Everyone gets taxed the same on the amounts they make over 20k or so. My girlfriend is a teacher and we ran into 2 of her old students from a low income high school the other day. They were clearly in a relationship, she’s have twins, he is the dad, and there were no plans to get married. You either have to be rich, religious or retarded to get married with kids on the way. The taxman doesn’t pitty anyone, except for single moms. If everyone is looked at as an individual then people will be able to get married without losing benefits.
- Allow individual personal and depedent decutions the same as they are now

Simple tax rates:

- If you make less then 20k or so - something very low (1-2%) partly just for equable purposes
- Personal income, federal sales tax, and evil capital gains– all equal (kind of like 999)
- Corporate income – also the same as the 3 above but allow C corps to reduce their income by allowing them to deduct distributions to shareholders (who are then taxed just like now). Don’t worry guys like Mr. Romney will still get double taxed, just not as doubled taxed. The public may think that Romney is only being taxed the same amount as them but in reality he will be taxed more. People may not understand it but I think most will feel like that he is at a minimum being taxed the same as them

The only reason why taxes are so unfair is because theyre so complex and inefficient. Taxes need to be simple and transparent before they will be considered fair.

[saden1]

Originally Posted by mlmpetert

Good read about how screwed up the current code is:

At 102%, His Tax Rate Takes the Cake - Yahoo! Finance

Also a very short but good read i meant to post a while ago.

Hinkle: Should we knock down Romney's fence? | Richmond Times-Dispatch

Honestly the argument that Romney pays less in taxes is flawed and comes from ignorance to some extent. The money he gave to charity is no longer his money and taxes should never be paid on funds that go to nonprofits. But the people in his defense who try and add back the total amount he gave away are also wrong. Just the amount of taxes he would have otherwise paid on the money he gave away should be added back.

But most importantly the amount he paid out of pocket is low, only because cap gains appear low since the money is already taxed at corporate income rates. The value of the stock is reflective of the value of the company. If corporate taxes went away then the values of stock would suddenly become worth 35% more. In the meantime people have to pay that 35% (in the form of lost earnings) before paying the 15% on any gains they MIGHT get when the stock is sold IF held long term. So Romney has really payed 15% in addition to the 35%all ready payed. Obviously you have companies like GE that don’t pay taxes or gas companies that get subsidized to some extent, but that is at no fault of Mr. Romney.

Ive gone back and forth with tax treatment of capital gains and the more i think about it the more i think its unfair for them to be taxed as high as regular income. I think the only way to make things the most fair (equal, not social justice “fair”) is to have something that’s extremely simple so people can understand it, make everyone pay a little something and of course make evil rich people pay a bit more too:

- Allow income deductions for all things tax related except federal and state sales taxes. So just things like property taxes and state or city income tax
- Allow dollar for dollar deductions for charities, however, tighten up the definition of charities (caps on director’s income, what/who they benefit, and strict rules on political partisanship)
- No joint, single, head of household or married filling separate statuses. Everyone gets taxed the same on the amounts they make over 20k or so. My girlfriend is a teacher and we ran into 2 of her old students from a low income high school the other day. They were clearly in a relationship, she’s have twins, he is the dad, and there were no plans to get married. You either have to be rich, religious or retarded to get married with kids on the way. The taxman doesn’t pitty anyone, except for single moms. If everyone is looked at as an individual then people will be able to get married without losing benefits.
- Allow individual personal and depedent decutions the same as they are now

Simple tax rates:

- If you make less then 20k or so - something very low (1-2%) partly just for equable purposes
- Personal income, federal sales tax, and evil capital gains– all equal (kind of like 999)
- Corporate income – also the same as the 3 above but allow C corps to reduce their income by allowing them to deduct distributions to shareholders (who are then taxed just like now). Don’t worry guys like Mr. Romney will still get double taxed, just not as doubled taxed. The public may think that Romney is only being taxed the same amount as them but in reality he will be taxed more. People may not understand it but I think most will feel like that he is at a minimum being taxed the same as them

The only reason why taxes are so unfair is because theyre so complex and inefficient. Taxes need to be simple and transparent before they will be considered fair.

But most importantly the amount he paid out of pocket is low, only because cap gains appear low since the money is already taxed at corporate income rates. The value of the stock is reflective of the value of the company. If corporate taxes went away then the values of stock would suddenly become worth 35% more. In the meantime people have to pay that 35% (in the form of lost earnings) before paying the 15% on any gains they MIGHT get when the stock is sold IF held long term. So Romney has really payed 15% in addition to the 35%all ready payed.

This guy is a fcking dumbshit or purposefully misleading. He already paid 35% huh? When exactly did he do that? When did the company do that? Does he know what an equity firm is? What carried interest, which discussed not to long ago, is?

GTFOH

[mlmpetert]

Originally Posted by saden1

This guy is a fcking dumbshit or purposefully misleading. He already paid 35% huh? When exactly did he do that? When did the company do that? Does he know what an equity firm is? What carried interest, which discussed not to long ago, is?

GTFOH

Im honestly not trying to be a dick, but i dont understand your comment. Forget carried interest for a minute thats a different issue, the author is speaking from a boarded view on long term capital gains in general.

Ive read before the reason Capital Gains are taxed at a lower rate is because they have effectively already been taxed. Non-speculative long term equity ownership can/should be thought of as ownership on a firms future profits. Long term increases in the price of a stock are primarily driven by earnings. Speculative or short term equity ownership is not thought as an ownership of future profits and that is why its taxed at higher ordinary income rates.

Since the firm is already taxed at the corporate rate taxing profits made from capital gains is effectively double taxation. This is from the taxman himself:

The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. This creates a double tax. The corporation does not get a tax deduction when it distributes dividends to shareholders. Shareholders cannot deduct any loss of the corporation.

Corporations

[GMScud]

Originally Posted by mlmpetert

Im honestly not trying to be a dick, but i dont understand your comment. Forget carried interest for a minute thats a different issue, the author is speaking from a boarded view on long term capital gains in general.

Ive read before the reason Capital Gains are taxed at a lower rate is because they have effectively already been taxed. Non-speculative long term equity ownership can/should be thought of as ownership on a firms future profits. Long term increases in the price of a stock are primarily driven by earnings. Speculative or short term equity ownership is not thought as an ownership of future profits and that is why its taxed at higher ordinary income rates.

Since the firm is already taxed at the corporate rate taxing profits made from capital gains is effectively double taxation. This is from the taxman himself:



Corporations

In 2008, Obama was asked if he would still support a raise in the capital gains tax rate, even if it meant a decrease in government revenues. He said "yes," in the name of "fairness." Well that's just spreading it around for the hell of it. And isn't the intended effect of the Buffet Rule to raise the capital gains tax rate?

I think Mitch Daniels explained it pretty well in his State of The Union rebuttal. To get the rich to contribute more, you don't raise taxes- slowing economic growth. Gotta have tax reform. Close those loopholes from which the rich benefit so much, and means-test entitlements so the benefits of which are going to those who need it most. Makes sense I think.

[saden1]

Originally Posted by GMScud

In 2008, Obama was asked if he would still support a raise in the capital gains tax rate, even if it meant a decrease in government revenues. He said "yes," in the name of "fairness." Well that's just spreading it around for the hell of it. And isn't the intended effect of the Buffet Rule to raise the capital gains tax rate?

I think Mitch Daniels explained it pretty well in his State of The Union rebuttal. To get the rich to contribute more, you don't raise taxes- slowing economic growth. Gotta have tax reform. Close those loopholes from which the rich benefit so much, and means-test entitlements so the benefits of which are going to those who need it most. Makes sense I think.

Call it fairness or class warfare but no matter how you slice it it is a travesty that Buffet has a better effective tax rate than his secretary.

[mlmpetert]

^^ Sorry im just getting back to this. Okay so it sounds like your only beef with capital gain treatment is when it comes to the carried interest rule. I get both sides of carried interest rule but the thing to remember is that there are 2 sides to this complicated rule.

When you have partners of a private equity firm only taking income via selling long term capital gains of shares of the private companies they became vested during the course of their ownership, in the holding company their owners of, its important to remember that corporate income taxes have been, are being, or will be paid on the shares of those private companies they own. Its still a 15% tax on top of actual earnings and future earning valuations. And theres still risk in private equity, i think most would say private equity has more inherent risk then public companies, as the market is much less efficient and illiquid.

^ Warren Buffet's secretary needs to release her tax return if they want to keep this up. What they claim makes no sense.

How Rich Is Warren Buffett's Secretary? - Megan McArdle - Business - The Atlantic

[saden1]

Originally Posted by mlmpetert

Im honestly not trying to be a dick, but i dont understand your comment. Forget carried interest for a minute thats a different issue, the author is speaking from a boarded view on long term capital gains in general.

Ive read before the reason Capital Gains are taxed at a lower rate is because they have effectively already been taxed. Non-speculative long term equity ownership can/should be thought of as ownership on a firms future profits. Long term increases in the price of a stock are primarily driven by earnings. Speculative or short term equity ownership is not thought as an ownership of future profits and that is why its taxed at higher ordinary income rates.

Since the firm is already taxed at the corporate rate taxing profits made from capital gains is effectively double taxation. This is from the taxman himself:



Corporations

I'm sure you're not trying to be a dick but the business structure of a private equity firm is not that of a Corporation. Typically they are structured as limited liability partnership which means the company (note I didn't say Corporation) doesn't take sole proprietorship of the income/profits and thus avoids the tax liability of a corporation. In an equity firm there is no 35% tax rate to pay much less 1%,

That is to say all income is passed on to the partners and if they don't hold the assets long term (more than a year) then each partner's take home cut of the profits would be counted as ordinary income (taxable at 35% personal income tax bracket). Of course fat cats like Romeny hold their profits for more than a year so they only end up paying the capital gains rate of 15%.

You think these a-holes would be in the game if they were paying 35% plus an additional 15% in addition to the prospect of failed investments? If it don't make a dolla' it don't make sense but neither is having Romney only pay 15% while the rest of us are look at paying a much higher rate.

[firstdown]

Originally Posted by mlmpetert

Im honestly not trying to be a dick, but i dont understand your comment. Forget carried interest for a minute thats a different issue, the author is speaking from a boarded view on long term capital gains in general.

Ive read before the reason Capital Gains are taxed at a lower rate is because they have effectively already been taxed. Non-speculative long term equity ownership can/should be thought of as ownership on a firms future profits. Long term increases in the price of a stock are primarily driven by earnings. Speculative or short term equity ownership is not thought as an ownership of future profits and that is why its taxed at higher ordinary income rates.

Since the firm is already taxed at the corporate rate taxing profits made from capital gains is effectively double taxation. This is from the taxman himself:



Corporations

Capital Gaissn is the amount you make over your investment. So if I paid $100,000 for a rental property and then sold it for $150,000 then my capital gain would be $50,000. I then only pay the reduced tax rate on the $50,000 not the $150,000. The resaon I have heard for the lower tax rate was to incourage people to invest their money.

[GMScud]

This isn't fair:

Review & Outlook: Obama's Dividend Assault - WSJ.com

This also isn't right:

Chart: Nearly Half of All Americans Don't Pay Income Taxes