Buffett Tax: Class Warfare Myth or Reality?

Black Swan

Today Obama announced his plan to tax those citizens earning $1 million or more at the same rate as the average middle class salary/wage earner.

Advocates (mostly Obama Democrats) claim that the rich should pay the same percentage of tax as all other earners in America, closing the tax loopholes that effectively reduce the taxes for them to roughly 15 to 18 percent, while the middle class citizens generally pay from the mid-20s to the mid-30 percentile range.

Those opposed to the Buffett Tax (mostly Republicans) claim that the rich will be discouraged from making domestic investments, with problematic “Reaganomics trickle-down” sounding negative consequences for increasing unemployment; and further, that small business owners who are sole proprietorships or partnerships will be hurt, because their business income is filed as personal income for tax purposes (and they would lose their cost of doing business tax write-offs).

Does it appear that the Obama Administration is looking to paint the Republicans into the corner of supporting the rich, at a cost to the middle class taxpayer? Approximately 450,000 rich would be affected, a tiny percentage of the US population of tax payers, most of whom probably voted for McCain-Palin in the 2008 presidential election.

It is highly unlikely that such a Buffett Tax would pass the Republican controlled US House of Representatives, so this looks more like a political stunt than a real measure to reduce the growing federal deficit.

Rather than “Class Warfare,” this appears to be once again the typical political spin that has been coming from both the Democrats and Republicans in their war with each other, all at the expense of the American citizen: Win seats in Congress and the Presidency, no matter the cost to America.

Does this exemplify the current state of the American political system: Children playing "King of the Mountain," while they trash the playground for everyone else?

Do you have alternative explanations for the Buffett Tax?

Two opposing positions:

Joseph Stiglitz, Nobel prize winner in economics and professor at Columbia University, said (as told to ABC News): "It's not class warfare to ask everyone in the country to pay their fair share. To say the wealthy have taken advantage of their political position and have not paid their share of taxes is not class warfare. It's a statement of fact.”

Rep. Paul Ryan said on FOX News Sunday. "Class warfare may make for really good politics, but it makes for rotten economics."

Buffett Tax Sources:

http://www.ibtimes.com/articles/215805/20110918/tax-millionaire-s-tax-buffett-buffett-rule-buffett-tax-tax-obama-republicans-budget-deficit-super-co.htm

http://abcnews.go.com/Business/nobel-prize-winner-joseph-stiglitz-raising-taxes-class/story?id=14554508

http://www.bloomberg.com/news/2011-09-18/obama-said-to-adopt-buffett-idea-for-new-tax-on-mega-rich-.html

http://am.blogs.cnn.com/2011/09/19/how-much-money-will-obamas-buffett-tax-generate-and-will-it-make-a-real-difference-to-the-deficit/

A Primal Nut

I don't understand why people think taxing the rich is so bad for the economy. I'm not talking about corporations or shareholders, but salaried employees and certain kinds of investors (ones not investing in jobs). I think taxing the rich is better for the economy than taxing the middle-class or poor. The reason is that rich people's money is more likely to be left unspent. Whereas any tax cuts given to the middle-class and poor are likely to be put back into the economy, tax cuts to the rich are likely to be left unspent - taken out of the economy. Tax them and put the money back into supporting the economy.

I am talking about salaried employees, CEO's, lawyers, etc. I agree with low corporation taxes and any other tax related to running a business, as that leads to more jobs and lower cost of goods.

Overheal

The reason is that rich people's money is more likely to be left unspent. Whereas any tax cuts given to the middle-class and poor are likely to be put back into the economy, tax cuts to the rich are likely to be left unspent - taken out of the economy.

Mmmmmmmmmmmmmm.............. hard one to say. The rich do happen to perform a lot of reinvesting, usually in Portfolios. Having said that though, their portfolios are much larger than the average persons - so for instance, they would have way more in cash reserves, pensions, etc. that perhaps some people make in an entire year, or at least exceed the size of a middle class portfolio by themselves.

Matt Holck

A Primal Nut wrote: »

I don't understand why people think taxing the rich is so bad for the economy. I'm not talking about corporations or shareholders, but salaried employees and certain kinds of investors (ones not investing in jobs). I think taxing the rich is better for the economy than taxing the middle-class or poor. The reason is that rich people's money is more likely to be left unspent. Whereas any tax cuts given to the middle-class and poor are likely to be put back into the economy, tax cuts to the rich are likely to be left unspent - taken out of the economy. Tax them and put the money back into supporting the economy.

I shall call the "spit up" theory

Amerika

Hmmm... The top 10% of earners pay nearly 70% of all income taxes according to the I.R.S. People in the richest 1% category pay 31% of their income to the federal government, while the average worker pays less than 14% according to the Congressional Budget Office.

Let’s cut through the crap... Obama wants to raise taxes on rich people come hell or high water! Nothing more than politics as usual.

http://www.nytimes.com/2011/09/20/opinion/brooks-obama-rejects-obamaism.html?partner=rssnyt&emc=rss

FatherTed

I don't see what the problem is. There is no flat tax in the US so I have no problem with this. It's the same all over the world.

31% of your income is getting off lightly I think. I calculated I pay around that myself and I don't earn one meeeeeelion dollars. Well not yet anyway

Matt Holck

I pay 31% of incoming going to the rent or the house loan would less than many people pay in san diego

Overheal

Amerika wrote: »

Hmmm... The top 10% of earners pay nearly 70% of all income taxes according to the I.R.S. People in the richest 1% category pay 31% of their income to the federal government, while the average worker pays less than 14% according to the Congressional Budget Office.

Let’s cut through the crap... Obama wants to raise taxes on rich people come hell or high water! Nothing more than politics as usual.

http://www.nytimes.com/2011/09/20/opinion/brooks-obama-rejects-obamaism.html?partner=rssnyt&emc=rss

If they pay the same rate as those in the middle income bracket(s), I don't see the problem. There's certainly no argument that it disincentivises people to get rich: we know for instance under a certain bracket you pay 0 tax, but above that, if we tax everyone at the same rate, whats the problem? I have nothing wrong with fair/flat tax, but if this is the compromise, I don't see an issue. Whats the alternative, start taxing the poor @ 25% and make rich folk pay 12%? Because we'd be incentivising them to get rich? Pfft.

Amerika

Overheal wrote: »

If they pay the same rate as those in the middle income bracket(s), I don't see the problem. There's certainly no argument that it disincentivises people to get rich: we know for instance under a certain bracket you pay 0 tax, but above that, if we tax everyone at the same rate, whats the problem? I have nothing wrong with fair/flat tax, but if this is the compromise, I don't see an issue. Whats the alternative, start taxing the poor @ 25% and make rich folk pay 12%? Because we'd be incentivising them to get rich? Pfft.

In all seriousness, I can’t for the life of me figure out why President Obama didn’t push his own commission’s (Simpson-Bowles) plan. His party even had control of both the House and Senate at the time. He created the commission, and then refused to endorse its deficit reducing proposals. With a few tweaks and a little compromise, it would have gotten bipartisan support, and we would be sitting in a far better position. Go figure!
http://www.fiscalcommission.gov/sites/fiscalcommission.gov/files/documents/TheMomentofTruth12_1_2010.pdf

Overheal

thats either a very large PDF or the college net is slow. I'll read it later.

Hayte

Its not surprising that the top 10% of earners in 2008 paid 70% of all income tax receipts. These are all people earning more than $110,000 which means the poorest of the lot is paying a top marginal rate of 28% on their income over $78,850 (single filing status).

Here are the rest of tax brackets in 2008:

10% on income between $0 and $8,025
15% on the income between $8,025 and $32,550; plus $802.50
25% on the income between $32,550 and $78,850; plus $4,481.25
28% on the income between $78,850 and $164,550; plus $16,056.25
33% on the income between $164,550 and $357,700; plus $40,052.25
35% on the income over $357,700; plus $103,791.75

Lets do a little thought exercise. You are in the top 10% club earning $150,000 a year liable to federal income tax.

This is your tax burden for the year:

10% on the first $8,025 = $802.50
15% on the next $24,525 = $3,678.75
25% on the next $46,300 = $11,575
28% on the next $71,150 = $19,992

Total tax burden = $36,048.25 which represents 24% of your taxable income. After federal income tax you take home $113,951.75.

Two things should be self evident at this stage:

1) You are paying more in federal income tax than 50% of the entire country earn in an entire year (below $33,000).

2) After federal income tax, you still earn over 3 times what 50% of country earns in the same year and thus have a much much higher standard of living and have much easier access to credit.

Now if you do these thought exercises using incomes well over the top marginal rate, a few more things become self evident. The first is that the US tax code is progressive up to a certain point where it flattens quite dramatically.

Secondly, this is federal income tax only. We are not taking into account state and local tax, payroll tax, medicare etc.

Third, its unlikely for people to be earning several hundreds of thousands of dollars on a salary. Above a certain point, you will receive remuneration in the form of stock options and/or benefits packages which are US tax code exempt. Above a certain point, its better to receive remuneration as a "supplemental wage" i.e. a bonus so it is subject to a flat 28% rate.

Fourth, a person earning $150,000 a year is nowhere near the guys at the higher end of that top 10%. Things like the estate tax (mischaracterised as the "death" tax) really only applies to the people who are so obscenely wealthy, they aren't on a payroll, whose bonus is several thousand times larger than their salary and who has vast wealth in property that is measured in the tens of millions.

So to say the top 10% of earners pay 70% of federal income tax receipts is true but it doesn't mean anything unless you know what these people earn. These lines are used by politicians alot because its simple, doesn't require primary school level math and doesn't require you to think. It can be used to look like an inequity for top earners when no such thing exists. If anything, the greatest inequity is how totally incapable the bottom 90% of the country is at paying the tax burden of the top 10%. Most Americans are essentially wage slaves as Adam Smith would say. They do not have the wealth to buy political or social influence and it shows when rhetoric like this is used as a weapon against the hardest done by.

Matt Holck

I don't think anyone is choosing not to be rich because of higher taxes

Hayte

Good, because nobody is saying that people are choosing not to be rich because of higher taxes.

Denerick

Americans are lightly taxed by western standards, the rich especially so. Considering that the US has essentially become a plutocracy over the past 30 years, with more and more wealth concentrated in the top 1% of the country, with declining real wages for the middle classes (Which covers a bigger income spectrum than in the UK or Ireland) the sickening, unchristian and immoral inequality within American society, the spiralling budget deficit caused by collective cognitive dissonance (LESS TAXES! MORE SPENDING!) and general American stupidity... Yes, considering this whole fiasco of a declining Empire, a small little tax on millionaires would not be out of order.

The fact that this is even remotely controversial given the scale of the budget deficit and the disgusting inequality in the USA leads me to think that Americans were never fit nor proper people to lead a great Empire and deserve to be cast off into the oblivion of history.

Where's Franklin D. Roosevelt when you need him.

CrystalLettuce

The idea that the Rich create all the wealth is a fallacy.

This explains why:

http://blogs.wsj.com/source/2011/08/07/five-false-premises-about-economic-recovery/

Amerika

Looks like the Buffet Rule is little more than President Obama waging class warfare in order to score political points for his election hopes. At various increasing tax rates (even up to 100%) on the rich (earning more than $1 million), it does little to make a dent in our deficit.

Damn the credos, full mislead ahead!



http://www.theatlantic.com/business/archive/2011/09/chart-of-the-day-buffett-rule-wouldnt-bring-in-much-revenue/245404/

Politics First! Let them eat cake!

Denerick

Amerika wrote: »

Looks like the Buffet Rule is little more than President Obama waging class warfare in order to score political points for his election hopes. At various increasing tax rates (even up to 100%) on the rich (earning more than $1 million), it does little to make a dent in our deficit.

Don't dare accuse Obama of populism, given the cynical manipulation of the most idiotic and moronic American that the Republican party indulges in as a national policy. No American politician failed to get re-elected for underestimating the intelligence of his constituents... Your political system needs wrenching, painful and drastic reforms, and your people need a good slap on the backside.

Thats what I think, at any rate. I've never been accused of sitting on the fence.

Amerika

Denerick wrote: »

Don't dare accuse Obama of populism, given the cynical manipulation of the most idiotic and moronic American that the Republican party indulges in as a national policy. No American politician failed to get re-elected for underestimating the intelligence of his constituents... Your political system needs wrenching, painful and drastic reforms, and your people need a good slap on the backside.

Thats what I think, at any rate. I've never been accused of sitting on the fence.

Ahhhh, how sad is it that those awful republicans have forced Obama into shameless political ploys.

And with the European banking system on the verge of an epic collapse in a few months if not weeks... with China saying no... Germany saying no more... what do you expect us insipid Americans to do when the EU comes knocking on our door begging us to save them?

(But I will help you out with a bit of advice... hurry up and buy gold NOW! Can you say $2,500 dollars (US) an ounce?)

Denerick

Yes, buy gold! Buy lots of it!

Just look at the damn charts. Its going up and up and up in value. There is no way its value will ever decrease! This time its different.

Permabear

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Overheal

Amerika wrote: »

Looks like the Buffet Rule is little more than President Obama waging class warfare in order to score political points for his election hopes.

From what I'm hearing however, the change in the tax rate will mean the wealthy pay the same rates in the upper brackets as many of the lower brackets. How would that be considered class warfare and not a iteration toward fair tax?

Amerika

Overheal wrote: »

From what I'm hearing however, the change in the tax rate will mean the wealthy pay the same rates in the upper brackets as many of the lower brackets. How would that be considered class warfare and not a iteration toward fair tax?

"Many"? Would that be before or after eliminating the 47% of households who pay no federal income tax?

matthew8

Denerick wrote: »

Yes, buy gold! Buy lots of it!

Just look at the damn charts. Its going up and up and up in value. There is no way its value will ever decrease! This time its different.

At least we put our money where our mouth is.

Denerick wrote: »

Don't dare accuse Obama of populism

Then what was that "hope" and "change" rubbish?

Guys, if America is a declining empire, then it will bring down the rest of the world with it. We can't talk either, Europe is in a far worse state than America is.

Overheal

Amerika wrote: »

"Many"? Would that be before or after eliminating the 47% of households who pay no federal income tax?

47% of households which own 2% of the entire nation's wealth - including all income, investments, and capital assets:

http://www.thedailyshow.com/watch/thu-august-18-2011/world-of-class-warfare---the-poor-s-free-ride-is-over

Amerika

Overheal... Fifteen yard penalty for attempting to move the goalposts!

Hayte

Permabear wrote: »

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It amazes me that anyone can argue this point in good faith. That 47% is composed almost entirely of low income households whose federal income tax liability is cancelled out by deductions and tax credits introduced by two stimulus packages, the first of which was passed under Bush in 2008 and the second one by Obama in 2011.

These families are also on payroll/medicare tax as well as state and local taxes. That statistic is really misleading when looked at in isolation. This 47% are now the recipients of stimulus money that was paid out to soften the blow of a full blown recession on low income families. A recession caused by wild and unchecked property speculation which none of these households were a part of, because they never had the wealth to play the property market to begin with.

A Primal Nut

Matt Holck wrote: »

I don't think anyone is choosing not to be rich because of higher taxes

There is a risk they might take their wealth elsewhere or have less of it to employ people; while also potentially increasing the cost of goods.

In my opinion this only applies to corporations and investors, not employees. I don't see that taxing a lawyer who earns 200,000 a year as bad for the economy. Whether it's fair or not is another matter of course.

As someone said, most of the wealth is in the form of stocks, assets, shares, etc; so taxing salaries won't make much of a difference to the deficit.

Overheal

Amerika wrote: »

Overheal... Fifteen yard penalty for attempting to move the goalposts!

I don't view our economic situation as a game :cool:

Victor

Amerika wrote: »

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And if you use other tax measure like removing improper tax breaks?

And if you add the $100,000-$1m group?

And other measures?

Permabear wrote: »

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Is "federal" the operative word in that sentence? They still pay tax.

Then there is that matter that you can't get blood from a stone - if someone is earning $5,000/year (remember there is a recession on), just who much tax do you expect them to be able to pay.

Of course, if there was a working minimum wage, people could be taxed more.

A Primal Nut wrote: »

There is a risk they might take their wealth elsewhere

Possible, but not really likely, they would have done it already. In any case, American citizens are taxed on worldwide income.

or have less of it to employ people;

Do you mean house servants and stuff? How about employing people in the real economy, providing goods and services that people want to buy?

while also potentially increasing the cost of goods.

How does taxing income increase the cost of goods? Logic says that less income reduces demand for goods, thereby making goods (yachts, golf clubs, expensive Champagne) cheaper.

As someone said, most of the wealth is in the form of stocks, assets, shares, etc; so taxing salaries won't make much of a difference to the deficit.

You do realise there is a difference between wealth and income?

Now that you mention wealth, how about a federal wealth tax? It would work excellently in reducing borrowings.

Permabear

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Matt Holck

whoever has the money is calling all the shots
how many hours we work
what jobs to do

A Primal Nut wrote: »

As someone said, most of the wealth is in the form of stocks, assets, shares, etc; so taxing salaries won't make much of a difference to the deficit.

and property

Victor

Permabear wrote: »

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So "tax and spend" doesn't exist? :pac: Sorry, I've been awake too long and I'm not sure if that makes sense.

Permabear wrote: »

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You can however have balance.

Instead of profligate spending by the rich, you can have those people pay somewhat more tax, pay off some debt (much of which will be recycled as income / repayment for the wealthy) and have some people employed to do this that are socio-economically more constructive.

Can't you see that eveyone wants now and nobody is willing to give now, even though it will hurt them all collectively down the line. Notably some can take the pain much more easily than others. The rich are benefitting from the system, but don't want to give back to the system.

Hayte

Permabear wrote: »

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Yeah, I know where you got that source from. $50,000 for a family of four is not alot. I mean jeez, I know its the median income for a family of four in 2010 or 2011 but that just shows how concentrated wealth is in the higher half of the population, particularly at the extreme.

Er ... I'm presuming you've heard of the subprime mortgage crisis?

I'm very familiar with it and I've posted numerous times about it in /Politics.

Many low-income families did get sucked into property speculation because governments forced banks to make loans to homebuyers with less than stellar credit. What happened next, while utterly predictable, will go down in history.

Low income households did not get suckered into property speculation. Low income households do not have the financial means to speculate on property. A good test for this is: how many houses do you own and how many do you live in? If its more than 1 then the rest are for investment purposes or at the very least, you are wealthy enough to own more property than you have practical uses for.

Low income families got suckered into buying a house (the one house they want to live in) at a grossly inflated price. You can blame HOEPA, the legislature, Fannie Mae and Freddie Mac and their government mandate (which I've also posted about at length), but you would have to be mad to think the buck stops at Government. For decades, there has been private financial sector pressure plus lobbying to dismantle financial regulation and lift leveraging limits. Subprime loans were risky but lucrative. Fannie Mae and Freddie Mac's government mandate enabled them to borrow at very low rates. They were still under immense pressure from shareholders to maintain their profit margin.

"Federal" and "income" are the operative words — yes, they still pay tax, in the sense that someone on the dole in Ireland still pays tax (VAT, motor tax, etc.). But this debate is specifically about the federal income tax, yes?

Sales tax, VAT and motor tax weren't even mentioned above. None of these are even remotely comparable to payroll tax and state income tax.

The bottom 40 percent of earners actually profit from the federal income tax, meaning that their tax credits are worth more than they would otherwise have to pay in taxes. You might legitimately argue that someone earning $5,000 a year should be exempt from tax; but it's absurd that for 40 percent of workers, "paying taxes" is actually code for "receiving handouts from the government."

Of course you come to that conclusion when you ignore all other forms of tax and focus exclusively on federal income tax, deductions and Stimulus tax credits. When you take it out of context like that, then yeah it does look like half the country is on the dole. Its just a shame that the reality is completely different. In the same way, you can still make an argument for the earth being flat. You just ignore all development in astronomy from Pythagorus onwards and focus in on the one observable and (apparently) self evident truth - the ground you are standing on is flat. It doesn't make you right though.

And herein lies the problem. Obama wants more spending to stimulate a sluggish economy. At the same time, he wants to impose more taxes on the demographic that spends the most. You can't have higher taxes and higher spending.

What? Yes you can. Increased government spending must be counterbalanced in some way and the most obvious one is through taxation. This done to a much greater degree in Europe, like in Germany where the tax burden at all levels of society is much higher than in the United States, United Kingdom and Ireland. Their economy is growing too. What you can't have is higher taxes and lower spending because that means the money from tax receipts is disappearing into a black hole (i.e. it is being used to enrich members of government).

A Primal Nut

Victor wrote: »

Possible, but not really likely, they would have done it already. In any case, American citizens are taxed on worldwide income.

Well as I said in the original thread there is a difference between rich corporations and rich individuals. Rich corporations regularly take their wealth elsewhere in the form of job creation.

Do you mean house servants and stuff? How about employing people in the real economy, providing goods and services that people want to buy?

Again, I'm talking about the disctinction between corporations and individuals. There is an idea that all rich people and invaluable to the economy. In reality its the corporations, and small and medium-size businesses which are invaluable to the economy, while rich individuals aren't - as you said apart from house servants; rich individuals don't employ many people.

How does taxing income increase the cost of goods? Logic says that less income reduces demand for goods, thereby making goods (yachts, golf clubs, expensive Champagne) cheaper.

Some higher-calibre employees (which the rich usually are) might demand higher salaries to compensate for their tax increase, thus increasing the cost of goods and services they provide In theory anyway; might not happen in practice.

You do realise there is a difference between wealth and income?

Now that you mention wealth, how about a federal wealth tax? It would work excellently in reducing borrowings.

I know there is a difference between wealth and income, and I made the distinction in that post. Taxing rich people's income won't make a big difference to their overall wealth or how much they stimulate the economy.

Matt Holck

I don't run these corporations
I didn't vote for the decisions they make that effect my livelihood

Overheal

http://www.thedailyshow.com/watch/wed-september-21-2011/moneybrawl---the-extinction-of-subway--bill-o-reilly---the-super-rich

So much truth in here, about capital re-investment, and a tax hike of almost 4% on millionaires.

The full episode here: http://www.thedailyshow.com/full-episodes/wed-september-21-2011-mitch-daniels the rest is an interview with Governor Mitch Daniels.

"you really think lowering the income tax rate to 20% will mean Apple starts making iPhone parts in the US and not in Taiwan? How much wealth do these job creators have to absorb before they make it rain? Capital is fluid; People are not. Corporations are 'people', but they aren't Americans."

edit: as a sidenote, I typically try not to recommend a Daily Show link unless I find it really profound, and usually on a bipartisan level. The interview in particular, I would hope everybody could take a look at and appreciate something out of it.

A Primal Nut

That video is blocked outside of America. Is it this one?

http://www.youtube.com/watch?v=-rPzlnVnLGo

Very funny, although they clearly took the Subway owner's comments out of context - he said feeding his family was one of the things he spent that 200,000 on along with some things for his business.

The funniest thing was Bill O'Reilly calling himself an achiever and possibly packing it in.

Overheal

A Primal Nut wrote: »

Very funny, although they clearly took the Subway owner's comments out of context - he said feeding his family was one of the things he spent that 200,000 on along with some things for his business.

Interesting you say that, because in the Youtube video you link it's made even clearer with on-screen text: He claims to have $600,000 in income. He then claims that after feeding his family, that leaves him about $400,000 to invest in his business and do other things.

And as Jon also points out, he isn't being taxed on money he reinvests in his business.

A Primal Nut

Overheal wrote: »

And as Jon also points out, he isn't being taxed on money he reinvests in his business.

Well I agree with that and it's the point I made in the second post of this thread.

Permabear

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BluePlanet

Permabear wrote: »

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This ol canard?
You are referring to the Community ReInvestment Act, a Carter-era piece of legislation. One might think that 20 years of Republican presidency since then would have provided an opportunity to over-turn it at some point?
Do you actually believe that this subprime bubble has been growing since the 1970's?

No banks were forced to give unsafe loans to poor folks. Not one.

What actually happened, was that financial institutions created complex financial products that made it highly "profitable" to sell mortages to the subprime market (poor folks). If they couldn't pay, it was someone else's problem. Securitization occured with zero regulation.

Hayte

Permabear wrote: »

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Fannie Mae and Freddie Mac buy and guarantee mortgage debt on the secondary mortgage market. The mortgages they buy and guarantee are originated by banks who lend directly to home buyers.

Fannie Mae and Freddie Mac had a government mandate to buy up a certain proportion of sub prime mortgage debt which in itself is not a problem if the debt is properly underwritten by the bank. The purpose of this is to give mortgage originators (i.e. banks) quick and easy access to cash which they can then readily lend to low and middle income homebuyers at low interest rates. Well, things didn't turn out that way because the secondary mortgage market is an unregulated financial wild west with many noteworthy players that put short term profit above everything, including underwriting standards. See New Century and the vast number of stated income mortgages it originated. New Century was a rather hot topic in the FCIC hearings which you can watch in CSPAN's video archives. They get mentioned (with shock and incredulity) in basically every panel.

Technically I own two houses, but I inherited one of them and don't live in it. I offloaded most of the property I owned back in 2007, because property was obviously not a good investment at that point.

So you have 2 properties currently, one of which you don't live in and as late as 2007 you owned even more property? Is this correct? If so, it explains a good deal of your views on this forum. Most people don't get to own more than one house and alot of people are still struggling to pay for one at the moment.

This reeks of "The government made me buy a house!"-type statements that we hear so often in Ireland. In reality, nobody got "suckered." Nobody had to buy. A lot of people bought because they thought house prices would continue to go up forever (as a friend proudly said to me during the boom, "My house makes more every year than I do"), but that's different. That's speculation.

See BluePlanet's response and the Fannie Mae/Freddie Mac stuff above regarding the idea that the government makes you buy a house.

I agree with you that nobody has to buy a house when you can rent. I also agree that there was a commonly held belief that your home was one of the few things that you own that is likely to appreciate over time and that renting was tantamount to "throwing away money". Perhaps a case for better public understanding of how buying a house works. Most people don't really understand the legal and financial workings of buying a house which is why they seek advice from their bank and have a solicitor handle the paperwork.

As for speculation? That is a real market activity (to be differentiated from investment). Poor people don't speculate. Hell have you seen the capital requirements to even get a day trading account online?

I'm focusing on the federal income tax because that's what Buffett is focusing on, and that's what the OP is about. Buffett wants the wealthy specifically to pay more federal income tax. Naturally, I'm aware that there are other forms of taxes, too — but those are not the taxes that this thread is about.

Buffet focuses on federal income tax because it is supposed to be progressive. In reality it is progressive up to a point where it essentially becomes a flat tax and where you earn so much money as supplemental income that it is taxed at a flat and lower rate that the top marginal rate.

If you factor in flat taxes like sales tax etc. and then payroll tax, you realise that it is absurd to think that low income households are dole cheating the state. To not factor in all the other taxes that low income households are liable for is like making a bad argument for the earth being flat. The earth IS flat if you ignore everything except what your eyes on the ground tell you.

If you've been reading the financial news, you'll see that German growth is slowing dramatically — seasonally adjusted German GDP expanded just 0.1 percent in the second quarter of 2011. This means that the German economy (and the eurozone as a whole) is now growing at a significantly slower rate that that of the USA. Indeed, most of the deeply indebted, high-tax nations of the Western world are going to see anemic to stagnant growth for the foreseeable future, a direct consequence of their borrow, tax, and spend policies.

Yeah well, the Eurozone has its own problems. Germany however has consistently fared better than everyone else but I'm not saying they are a shining utopian beacon of fiscal policy or anything. Their financial sector has its fair share of cowboys riding into the sunset too.

Matt Holck

I would guess when one borrows the money to buy the house

the interest rates would have them pay double by the end to the payments

why do the banks need that money ?

BluePlanet

Permabear wrote: »

This post had been deleted.

This reminds me very strongly of those smug FF politicians bragging about "double digit" growth rates just a few years back.
Later we learned it was all "monopoly money".

Why should anyone express confidence in reported "growth rates" now?

Is it sustainable?
Where is the growth coming from?
Is it just a fair wind?

Matt Holck

Matt Holck wrote: »

I would guess when one borrows the money to buy the house

the interest rates would have them pay double by the end to the payments

why do the banks need that money ?

They're not a charity.

Matt Holck

Originally Posted by Matt Holck View Post
I would guess when one borrows the money to buy the house

the interest rates would have them pay double by the end to the payments

why do the banks need that money ?

bluewolf wrote: »

They're not a charity.

it seems like an excessive amount of return for controlling the numbers that represent money

When houses were $50,000.
that would have been a $50,000 return.

For the same percentages and work in collections and distribution.
a house of $500,000 would result in a $500,000 return

matthew8

Matt Holck wrote: »

Originally Posted by Matt Holck View Post
I would guess when one borrows the money to buy the house

the interest rates would have them pay double by the end to the payments

why do the banks need that money ?



it seems like an excessive amount of return for controlling the numbers that represent money

when house were $50,000

that would have been a $50,000 return

for the same percentages and work in collections and distribution

a house of $500,000 would result in a $500,000 return

Have you heard of inflation? If I give you 50,000 now and get it back 20 years later, I will have lost most of that money through inflation.

Matt Holck

yes indeed

food rose about x4 since the 70's
while houses rose about x10
minimum wage rose about x3

now granted no one wants to sell their house for less than they bought it for

they still have loans they own on it to the banks

amacachi

Permabear wrote: »

This post had been deleted.

Those poor, defenceless financial institutions. Oh wait...

This reeks of "The government made me buy a house!"-type statements that we hear so often in Ireland. In reality, nobody got "suckered." Nobody had to buy. A lot of people bought because they thought house prices would continue to go up forever (as a friend proudly said to me during the boom, "My house makes more every year than I do"), but that's different. That's speculation.

Matt Holck

whoever owns the property or in the bank's case owns the loan to the property collects from the residents


do rent payments from property count as income for the owner who taxed the income from the renters ?

matthew8

The only class warfare going on right now is the war between the productive and unproductive classes. The banks (those that are bailed out), the QUANGOS, the unions, the spongers are all in the unproductive classes while the workers and the big bosses of successful independent businesses are in the productive classes. And right now, the productive classes are being thrashed by having their money confiscated.