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Old 01-19-2012, 03:02 PM   #101
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Numbers are still wrong by 7.65% on the lower end of that list.

Bob
You can't just add 7.65% across the board, because a significant portion of the lower tax brackets are being refunded tax credits not only in excess of the employee's half of FICA, but in excess of the full FICA total (employee + employer).

http://www.taxfoundation.org/blog/show/26433.html
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Old 01-19-2012, 04:06 PM   #102
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From this link in that article:
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This has me scratching my head now...

As we have discussed previously regarding the "top 40 tax filers," most of those in the very top of the income ladder on any given year were not likely to have been there consistently. Those people do typically earn most of their income from LTCG via the sale of a business, property, inherited assets, etc.

However, other than investment managers who get paid via carried interest (most financial types do not get paid that way)... I am scratching my head coming up with a plausible scenario in which a retired CEO or business magnate earns most of their annual income via LTCG. Via dividends? Sure. [Edit: Taxable dividends for those above the 15% marginal bracket are taxed at ordinary income rates.]

But to get taxed at the 15% LTCG rate, you would have to be selling something with a profit after having held it for at least 12 months. That seems like a less plausible way for the "mega rich" to receive their income.


Can someone think of an example where someone at the top of the income list would consistently receive their annual income via long-term capital gains (not carried interest)?

Last edited by Scrappy Jack; 01-19-2012 at 04:13 PM. Reason: Added info on taxation of dividends
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Old 01-19-2012, 05:29 PM   #103
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This has me scratching my head now...

As we have discussed previously regarding the "top 40 tax filers," most of those in the very top of the income ladder on any given year were not likely to have been there consistently. Those people do typically earn most of their income from LTCG via the sale of a business, property, inherited assets, etc.

However, other than investment managers who get paid via carried interest (most financial types do not get paid that way)... I am scratching my head coming up with a plausible scenario in which a retired CEO or business magnate earns most of their annual income via LTCG. Via dividends? Sure. [Edit: Taxable dividends for those above the 15% marginal bracket are taxed at ordinary income rates.]

But to get taxed at the 15% LTCG rate, you would have to be selling something with a profit after having held it for at least 12 months. That seems like a less plausible way for the "mega rich" to receive their income.


Can someone think of an example where someone at the top of the income list would consistently receive their annual income via long-term capital gains (not carried interest)?
Warren buffet claims his low tax rate is because the bulk of his income is from long term capital gains taxed at 15%. He also has other deductions. 2008 he paid 11.08% on an adjusted gross income of just under 63 million.

http://news.yahoo.com/warren-buffets...205931812.html

I think I calculated my tax burden at 28% in 2008. 28 to 30% Seems to be about what it runs. Dual income no kids around the FICA cutoff. My Capital gains income doesn’t qualify for the special rate because it is from company stock pre tax investments in 401k.

It will be interesting to see Romney’s tax return. He said he paid 15%. His economic recovery plan I think calls for making his personal tax rate much closer to 0%. Same with Newt same with Paul. Most everybody else’s taxes would not change much but most would go up.
Bob
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Old 01-19-2012, 05:34 PM   #104
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he's also a lier...
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Old 01-19-2012, 05:38 PM   #105
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I don't think anyone on here doubts that I'm a huge fan of Ron Paul, so...take this with a dose of salt.

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I am afraid of Paul because I think only the most damaging of his Ideas will ever get implemented, Only those Ideas with immediate benefit to large corporations. In other words he won’t ever go far enough for it to work. The libertarian Ideal society is a pipe dream fantasy based on some theory’s that have serious issues. His initial plans don’t actually call for getting rid of Income tax. Just corporate and capital gains for those that make their income off the backs of working people.
The more I research, the more I think Bbundy is right about this. I strongly believe in Ron Paul's ideals and what he says, but I do not think what he wants to implement will be implemented. I think that it is going to be corrupted, and as Bbundy says, only what benefits the corporations most will get passed....

At significant detriment to Paul's overall plan. I don't think that Paul's plan will survive the corporatists in our government, and will instead be gutted, twisted, and manipulated to be something entirely different then what Paul wants. Remember, bills -have- to go through the House and the Senate before they can be passed, and there are just not enough people who aren't corporate -----s to allow Paul's ideas to be implemented while remaining true to Paul's ideals.

Which means I don't know where I am anymore with political candidates. Except for Paul, Obama is substantially better than all of the Republican candidates. Paul blows everyone's socks off - but can he successfully win against the corporatists?

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Old 01-19-2012, 05:49 PM   #106
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Warren buffet claims his low tax rate is because the bulk of his income is from long term capital gains taxed at 15%. He also has other deductions. 2008 he paid 11.08% on an adjusted gross income of just under 63 million.
You do understand that that's 15% on top of a, what, 35% corporate tax rate? That money was already taxed before it ever showed up on his tax return.

That's why trying to compare nominal tax rates instead of comparing effective tax rates makes a mess of the numbers.

For what it's worth, I agree with you that the payroll tax is regressive. I just don't think that the payroll tax is [i]so[i/] regressive that it cancels out the otherwise generally progressive structure of our tax code.
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Old 01-19-2012, 06:24 PM   #107
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You do understand that that's 15% on top of a, what, 35% corporate tax rate? That money was already taxed before it ever showed up on his tax return.

That's why trying to compare nominal tax rates instead of comparing effective tax rates makes a mess of the numbers.

For what it's worth, I agree with you that the payroll tax is regressive. I just don't think that the payroll tax is [i]so[i/] regressive that it cancels out the otherwise generally progressive structure of our tax code.
If corporate tax is so high why is it now down to ~8% of federal revenue. ~40% is personal income tax and 40% is payroll tax. Corporations are paying less tax as a percentage of GDP now than they have in the last 60 years or more.

Bob
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Old 01-19-2012, 06:28 PM   #108
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I work for a company that, up until a few months ago, was employee owned. We had a stock ownership plan, where they gave us anywhere from 2-6% of our base pay in stock every year, called "safe harbor". I was also allowed to buy shares, up to a maximum of 10% of base pay. Once I became eligible, I bought the max every year.

Last September, the company was sold to a private firm. Naturally, we had to sell our stocks to do so. They gave us a helluva deal. So, here I am, sitting on a bunch of shares that I was banking as retirement, and they have to be sold. Stocks given to us as safe harbor had to be rolled into a 401k plan. No biggie, I was planning on doing that anyway.

But, here's the kicker. Stocks bought outside the plan had to be sold, and the money was then capital gains. So, I have a one time only windfall, that was actually more than a single year's gross salary. Now those pols are talking about changing the rules, because all those evil capitalists are making big bucks and not paying their fair share.

Am I to be penalized for making a sound financial decision? It isn't like I'll ever get this deal again, and having been a contractor (temp) for many years, this kinda makes up for my lack of any retirement/pension plan. I plan on cheating my *** off on my taxes every chance I get from now on if they stick it to me this year.
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Old 01-19-2012, 06:31 PM   #109
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If corporate tax is so high why is it now down to ~8% of federal revenue.

sure gave me laffer about this one.
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Old 01-19-2012, 06:32 PM   #110
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If corporate tax is so high why is it now down to ~8% of federal revenue. ~40% is personal income tax and 40% is payroll tax. Corporations are paying less tax as a percentage of GDP now than they have in the last 60 years or more.

Bob
Interesting question.

After a bit of research, I have found that just a few decades ago, Corporate taxes made up as much as 80% of federal revenue.

It, and I hope Scrappy will correct me, appears that the tax burden has shifted from corporations to citizens.
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Old 01-19-2012, 06:35 PM   #111
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The tax burden was never actually on corporations...they might write the checks, but they're not the ones paying the cost.

bbundy himself noted this when he pointed out that it doesn't matter if we say that an employer has to pay their "half" of FICA, that cost is still coming out of your paycheck.
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Old 01-19-2012, 06:38 PM   #112
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The tax burden was never actually on corporations...they might write the checks, but they're not the ones paying the cost.

bbundy himself noted this when he pointed out that it doesn't matter if we say that an employer has to pay their "half" of FICA, that cost is still coming out of your paycheck.
Let's assume for a moment this argument is 1:1.

Then why does the argument that "corporations just move to other countries for better taxes" hold water? In theory, the taxes paid would be the same, and the cost of doing business would be the same if this is true.
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Old 01-19-2012, 06:42 PM   #113
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Let's assume for a moment this argument is 1:1.

Then why does the argument that "corporations just move to other countries for better taxes" hold water? In theory, the taxes paid would be the same, and the cost of doing business would be the same if this is true.
For one thing, because companies are not restricted to selling only the citizens of the same country in which the company is headquartered.
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Old 01-19-2012, 06:46 PM   #114
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For one thing, because companies are not restricted to selling only the citizens of the same country in which the company is headquartered.
Actually, I was going somewhere with that and you unintentionally hit on it.

So, you agree that companies place shell headquarters in other countries to help avoid the cost of doing business? (See: GE's 10billion US income, but 5 billion back in various tax refunds due to shifting a great deal of income over to their shell HQ. They would be paying taxes instead of leeching if this wasn't possible to shuffle profits around with like that.)
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Old 01-19-2012, 06:46 PM   #115
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At significant detriment to Paul's overall plan. I don't think that Paul's plan will survive the corporatists in our government, and will instead be gutted, twisted, and manipulated to be something entirely different then what Paul wants. Remember, bills -have- to go through the House and the Senate before they can be passed, and there are just not enough people who aren't corporate -----s to allow Paul's ideas to be implemented while remaining true to Paul's ideals.
if you SERIOUSLY think that Ron Paul would sign a bs bill
then you SERIOUSLY know very little of Ron Paul
you really think that RP would be afraid to veto?
just skip to the 4:10 mark
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Old 01-19-2012, 06:48 PM   #116
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What is the alternative, Jared? The Republicans have demonstrated they'd rather shut down the country rather than compromise and work with other people.
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Old 01-19-2012, 06:51 PM   #117
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Actually, I was going somewhere with that and you unintentionally hit on it.

So, you agree that companies place shell headquarters in other countries to help avoid the cost of doing business? (See: GE's 10billion US income, but 5 billion back in various tax refunds due to shifting a great deal of income over to their shell HQ. They would be paying taxes instead of leeching if this wasn't possible to shuffle profits around with like that.)
Sure. If you can hire workers in a country where the business is not required to send in their 7.6% FICA checks, and compete for customers against businesses that are required to send in 7.6% FICA checks, that's a competitive advantage. No one is denying that.

What is meant when it's said that corporations don't bear the tax burden is that the burden is simply bundled into other decisions: whether to hire, whether to invest, how to set prices, how to set wages, how much to pay in dividends, etc. Those decisions might put a company at a competitive disadvantage (for example, hiring fewer workers, or lowering wages, would lower a company's competitiveness), but that's exactly the point -- the cost is being passed onto someone else -- the workers, the customers, or the investors. Or some combination of all three.
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Old 01-19-2012, 06:55 PM   #118
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Sure. If you can hire workers in a country where the business is not required to send in their 7.6% FICA checks, and compete for customers against businesses that are required to send in 7.6% FICA checks, that's a competitive advantage. No one is denying that.

What is meant when it's said that corporations don't bear the tax burden is that the burden is simply bundled into other decisions: whether to hire, whether to invest, how to set prices, how to set wages, how much to pay in dividends, etc. Those decisions might put a company at a competitive disadvantage (for example, hiring fewer workers, or lowering wages, would lower a company's competitiveness), but that's exactly the point -- the cost is being passed onto someone else -- the workers, the customers, or the investors. Or some combination of all three.
So, here's the issue I have with that.

It's theoretically possible to place your corporate HQ in a place with zero tax (Say, Somalia). Why don't they? I cannot recall a single major corporation that does not re-quarter their shell HQ in a non-first world country. They always place shell HQs in a first world country, which means I have trouble believing that argument to the extent that it is advocated.
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Old 01-19-2012, 06:59 PM   #119
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So, here's the issue I have with that.

It's theoretically possible to place your corporate HQ in a place with zero tax (Say, Somalia). Why don't they? I cannot recall a single major corporation that does not re-quarter their shell HQ in a non-first world country. They always place shell HQs in a first world country, which means I have trouble believing that argument to the extent that it is advocated.
Seriously?

Most nations attempt to tax corporations that do business with them, regardless of what the return address says on the invoice. Just because you buy a building in Somalia and stick a sign out front doesn't mean that other nations don't tax and tariff you to death when you do business with its citizens.
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Old 01-19-2012, 07:01 PM   #120
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Seriously?

Most nations attempt to tax corporations that do business with them, regardless of what the return address says on the invoice. Just because you buy a building in Somalia and stick a sign out front doesn't mean that other nations don't tax and tariff you to death when you do business with its citizens.
So, what you are saying is that corporations get some value from the taxes they pay, correct?
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