However I definitely see things differently than Hiram does.
"It's the president who proposed middle class tax cuts over the opposition of Republicans in Congress, and it's the president who is arguing now that they should be saved against the opposition of Republicans in Congress who are trying to hold those middle class tax cuts hostage in their effort to prevent tax increases on the wealthiest Americans." --Hiram
I see Obama as holding the extension of our current low rates hostage because he wants to Tax the Rich at even a more Progressive rate than they are today. To me this seems very unwise and I hope the House can stop the foolishness.
Here is my rationale: I want those that support big government and increased governmental spending to bear the burden of that choice. Therefore if low and middle income people want government run and paid for schools, healthcare, social services, regulations, retirement, insurance, etc, it is critical that they also pay more to support these choices. To vote for increased government and lower personal taxes is hypocritical, self serving and shows a lack of character that bodes poorly for our country's future.
At work, when we develop requirements for a new machine, it is critical that we do a cost trade off analysis for all options and features. If instead we just asked customers what they want without explaining what it will cost them, they would almost always say yes. Then we end up with a machine that costs too much, and the Customers have a machine they can not justify paying for. A lose/lose situation to say the least.
Just think of the monster we can create if the people that design our governement, features and options only receive the benefits and don't have to pay the costs !!!
So I hope the cuts stay in force for all of us or are allowed to elapse for all of us. Relieving the folks that vote for big government from the natural consequences of their choices is a BAD idea.
28 comments:
"I want those that support big government and increased governmental spending to bear the burden of that choice."
I don't think people who benefit from what government provides should be able to let themselves off the hook by claiming they don't support the measures that provide them. Part of the deal of living in American or in any country is that we are bound by the decisions of government whether we agree with them or not. I know I have paid for lots of decisions made by elected politicians I have disagreed with, and I fully expect others to do the same same when the folks I favor are elected.
I thought the Bush tax cut policies were a disaster for the country. But does that mean I don't have to pay my share of the debt they created? Oh, would that were so.
--Hiram
The thing about cost benefit analysis as a tool for decision making is that the outcome is entirely dependent on what is included as a cost, and what is included as a benefit. And my suspicion is that what is included as a cost and what is included as a benefit is often determined by the outcome the decision maker wishes to bring about.
--Hiram
We all benefited from the tax cuts that were implemented, since they were across all income ranges.
Hopefully we will all have to chip in and pay more for this bigger and more expensive government that the folks currently seem to be supporting. If you all want it then get out your wallet.
Questions for all:
Imagine yourself going out to dinner with 10 other couples:
Would you expect the wealthiest couple to pick up most of the bill because they were the wealthiest?
Would you try to peer pressure the wealthiest couple into paying the most because they should?
If you knew the wealthy couple was paying the bill and you were grateful for their generousity, would you order Conseratively or would order the expensive stuff?
If you knew the wealthy couple was paying the bill and you thought they owed it to you, would you order Conseratively or would order the expensive stuff?
What do you think of the couple that is trying to get the "rich" couple to cover the dinner cost because they are "Rich"?
In my personal experience, the wealthy do generally do pick up the check. I tend to be conservatively, generally ordering something in the same price range as the person picking up the check.
--hiram
And you would let them pick up the check on a recurring basis?
Sure. It's almost always in a quasi business context, and it's certainly well known to all those concerned that I can't afford to live that lifestyle. I'm not paid enough.
--Hiram
"Would you expect the wealthiest couple to pick up most of the bill because they were the wealthiest?"
No, but because they could afford it. Is there a difference?
"Would you try to peer pressure the wealthiest couple into paying the most because they should?"
No.
"If you knew the wealthy couple was paying the bill and you were grateful for their generousity, would you order Conseratively or would order the expensive stuff?"
As I said, I tend to order conservatively.
"What do you think of the couple that is trying to get the "rich" couple to cover the dinner cost because they are "Rich"?"
I would say "good luck with that". One problem is that the wealthy usually set the terms, choosing an often expensive restaurant, I couldn't ordinarily afford, or wouldn't choose to afford. That's OK, because they will pick up the check.
So here's my question.
Is it rude for wealthy individuals to pick expensive restaurants, restaurants they know the people they are inviting to dinner can't afford, and not pick up the check? Bear in mind for me, that the dinners often have a business purpose for the wealthy person.
--Hiram
When Peyton Manning goes out to dinner with his offensive linemen, who do you think picks up the check?
--Hiram
Well in this case it is the guests (Liberal voters) that are picking out the restaurant (govt size, benefits, etc) and insisting the wealthy pay the majority of the bill.
Equivalent to the 6 of my 10 hypothetical couples choosing the most expensive restaurant in town and then sticking the 1 or 2 wealthiest couples with the tab.
Manning or the Linesman? I think that will depend a lot on the Linesman. If they do lunch ofter and the Linesman is like me, they will split the bill or take turns paying.
Pursue the flawed analogy if you wish, but the problem is that your restaurant example is a VOLUNTARY arrangement, regardless of who pays or what is ordered. Unless there is agreement beforehand, for example, somebody ordering the Kobi filet might prompt the rich guy to suggest going Dutch, or at least splitting the check evenly. I have no problem with raising taxes on the rich, so long as the higher rates are made voluntary. "Willing to pay more for a better Minnesota"? Have at it.
J.
I am not sure where the analogy goes, or how it illuminates the discussion.
We tax the rich because they have the money. There is little point in taxing the poor. The reason why 47 percent of Americans don't pay taxes is that they are paid too little. If the wealthy want to pay less of the total share in taxes, they should raise the wages of their employees, and employ more of them.
--Hira
If the wealthy want to pay more in taxes, they are perfectly free to do so. So too those making less than $250,000/yr. All of us should expect to pay something for the benefits we expect to come to us. NONE of us should expect to get a benefit for us that those who pay for it do not get. That is, we are bound together for the GENERAL welfare, not welfare for one at the expense of another.
I'm OK with a tax system that fairly and equally taxes DISPOSABLE income, meaning that the rich pay more dollars in tax than those not so rich and the poor escape entirely. I am unalterably opposed to a system in which the rich pay an arbitrarily higher PERCENTAGE of that income.
J. Ewing
If the wealthy want to pay more in taxes, they are perfectly free to do so.
Sure, but that's not what the tax debate is about.
--Hiram
NONE of us should expect to get a benefit for us that those who pay for it do not get.
I don't know why not. Mitt Romney got tax breaks that the rest of us didn't get. I am not sure that's what's wrong with those particular tax breaks.
--Hiram
Please tell us which tax breaks those were.
The carried interest treatment. Mitt was able to draw income from Bain at capital gains rates.
--Hiram
It looks like this policy can be applied to anyone that wants to start a business.
National Review Carried Interest
And if they are investing the partners money and earning long term gains, how else would you tax it?
"It looks like this policy can be applied to anyone that wants to start a business."
No, it's pretty much limited to businesses that trade securities. They are in that business, and the income should be treated as ordinary income.
"And if they are investing the partners money and earning long term gains, how else would you tax it?"
As ordinary income.
--Hiram
Here is a quote from a Paul Krugman blog post from today:
"Every time you read someone extolling the dynamism of the modern economy, the virtues of risk-taking, declaring that everyone has to expect to have multiple jobs in his or her life and that you can never stop learning, etc,, etc., bear in mind that this is a portrait of an economy with no stability, no guarantees that hard work will provide a consistent living, and a constant possibility of being thrown aside simply because you happen to be in the wrong place at the wrong time.
And nothing people can do in their personal lives or behavior can change this. Your church and your traditional marriage won’t guarantee the value of your 401(k), or make insurance affordable on the individual market.
So here’s the question: isn’t this exactly the kind of economy that should have a strong welfare state? Isn’t it much better to have guaranteed health care and a basic pension from Social Security rather than simply hanker for the corporate safety net that no longer exists? Might one not even argue that a bit of basic economic security would make our dynamic economy work better, by reducing the fear factor?"
--Hiram
That's funny, the article says it applies to many partnerships.
No way. The fear and personal responsibility factors are powerful motivators for those who lack intrinsic self motivation.
I know some folks who wouldn't get off the couch if food, housing, healthcare, retirement, etc were provided for them. They are nice people, but they have almost no drive or desire fore continuous improvement.
the article says it applies to many partnerships.
Was Bain Capital a partnership? In any event, the problem is that Bain was in the business of reorganizing companies and trading their securities. They bought and sold companies in the way Target buys and sells toothpaste. The piece merely says that this is disputable, which it is, I suppose, and the that Bain has done nothing wrong in claiming this favorable tax treatment, which may be correct, but is also irrelevant.
In any event, this tax treatment doesn't seem to be available to ordinary taxpayers. You can't declare yourself and your spouse, for example to be a partnership or a corporation and then characterize the money you earn as wages, to be capital gains, effectively what people who claim the carried interest deduction are allowed to do.
--
"The way the fund pays its managers can’t change the total amount of capital gains and dividends or the total amount of ordinary income the fund has earned."
Sure it does. That's not the way we decide how capital gains should be treated for tax purpose. The managers of the fund were in the business of buying and selling these property interests. Therefore, the profits generated should be treated as ordinary income, just as profits generated by anyone in the business of buying and selling things, should pay ordinary income tax rates on the transactions.
They aren't investors, they are traders.
--Hiram
By the way, whether something should be treated as a capital gain or not, shouldn't be determined by the legal form the entity conducting the transaction has taken. In other words, if the thing is engaging in it's ordinary business, whether that thing is a partnership, corporation, LLC, or sole proprietorship, or something else, shouldn't be relevant to how the transaction is characterized for tax purposes.
--Hiram
There is no such thing as a tax loophole. Every jog and tittle of the tax code was inserted by the Congress to encourage or discourage some specific behavior. When someone complies with Congress's wishes as to where they put there money, Congress should not be complaining. And of course treating every dollar differently for tax purposes cannot possibly be fair.
J. Ewing
"There is no such thing as a tax loophole."
That's kind of a semantic issue. A tax loophole can be understood as a tax benefit the one considering it doesn't happen to enjoy. In any event, how you characterize something doesn't necessarily address whether or not it's good or consistent policy.
"Every jog and tittle of the tax code was inserted by the Congress to encourage or discourage some specific behavior."
Congress just isn't that smart. In any event, the issue with carried interest isn't whether it's legal, rather it's whether it's good policy. I am not disputing here the legality of carried interest.
"When someone complies with Congress's wishes as to where they put there money, Congress should not be complaining. And of course treating every dollar differently for tax purposes cannot possibly be fair."
To begin with, I don't know the origins of the carried interest treatment. It may have originated in some specific statutory provision, or it may be the result of a revenue ruling. But in policy terms, that doesn't matter. What does matter is whether it's sound tax policy now. And if it isn't, Congress shouldn't complain about it, it should think about changing the tax policy.
I think a basic problem Republicans have is that they persistently believe things and have attitudes toward things that are demonstrably untrue. This goes a long way towards explaining in why they have such difficulty in governing, and lately, in winning elections.
One of the absurd things Republicans believe is that we can have a complete understanding of complex legislation before we enact it, and that therefore, once enacted, such legislation isn't ever in need of change. That's why they were able to disparage Nancy Pelosi's statement that you have to pass a bill to know what's in it, which seems to me to be obviously true, but which sends Republicans into conniption fits.
Anyway, the notion that Congress made some firm and settled judgment that cannot be disputed or even questioned about carried interest fits within that category. Congress isn't anywhere near that smart.
--Hiram
"You can't declare yourself and your spouse, for example to be a partnership or a corporation and then characterize the money you earn as wages, to be capital gains,"
Actually you can if you think there would be enough gain in it to make it worth the expense and headaches.
But why would we, our family investment gains are already treated as what they are... Investment gains on the money we invested into a company.
Now I won't disagree that the "employees" of these organizations should have their incomes taxed as normal income. However it does not make much sense to me to treat pooled investment funds and their returns as income just because they are pooled.
I can't wait to see how or if the politicians address this.
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