Is it fair?

[OneOfTheseDays]

There are numerous reasons that can cited.

As has been noted already, the laborer has no risk. Those who invest capital could, and often do, lose all or a substantial amount of capital invested.

When the investor makes a profit it is taxed. When he loses all his money it is not deductible (losses can be offset against gains, otherwise the deduction limit on cap losses is $3,000 per year no matter if you lost $1 million. I have personally see an investor who lost his fortune and will not live long enough to take the total losses at only $3,000 per year even thought he was a relatively young man.)

Double tax may or may not be relevant, it depends upon the vehicle. An investor in a C corp certainly faces double tax and dividends that enjoy the 15% certainly come from C corps. 'Dividends from any other source are taxed at regular rates.

Unlike wages paid to an employee, a C corp cannot deduct dividends paid for tax purposes. Thus the 'dividend' amount has been taxed once at the corporate level, then taxed again when distributed to shareholder. the effective rate of tax on that income is therefore 35% + (15% x 65%) = 44.75%

LTCG, depending upon the length of the holding period, carry an element of inflation. Inflation is not income, therefore it should not be hit with a tax, at least not under an income taxation scheme.

Fern

I agree with you. And you've made my point beautifully.

The income tax laws need to be revised to reflect those who garner their income almost exclusively from investments. A whole swath of people, who are almost exclusively mega-rich, are avoiding paying their fair share of taxes. The best way to solve this is to impose a minimum tax law based on total income.

The Democrats plan to target those making more than a million a year is a good starting point.

 

[PeshakJang]

A whole swath of people, who are almost exclusively mega-rich, are avoiding paying their fair share of taxes.

Is anybody ever going to define what fair share is?

It's just a little bit more... right?

 

[halik]

How can you claim to face no risk in buying partnership equity?

I do not see how you can preclude the possibility of some unfortunate future event wiping out, or at least diminishing, the equity in the firm.

Edit: E.g., Arthur Anderson. Partners who all purchased their equity had a total loss. I realize that was an accounting firm and they had no carried interest, but it serves to illustrate that equity can be lost. There was perhaps a more on point example (if carried interest need be involved) with the rogue British traders who wiped out his firm some years ago.

Fern

The partnership gives me an unsecured loan with no recourse that is used to buy into the equity - if the firm folds, I am under no liability to pay it back.

I was under the impression that's the whole point of the "carried" interest partnership - the standing equity owners essentially float or "carry" the new partner.

 

[CADsortaGUY]

And craigs solution is to concentrate wealth within govt.

Who then hand it over to their buddies and donors...

 

[OneOfTheseDays]

Is anybody ever going to define what fair share is?

It's just a little bit more... right?

The highest tax bracket is 35%. Democrats want to start at 30%, and have it only apply to those that make a million a year or more in total income. I say that's fair. The tax code needs to be updated such that we make no distinction on the source of one's said income for the purpose of income tax calculations.

It shouldn't matter how you make your money, as long as it's legal. If you're making a million a year, you better be paying at or near the same rate as all millionaires. It's fair and the right thing to do.

This isn't class warfare. It's about closing loopholes that only the mega rich can take advantage of.

 

[CADsortaGUY]

The highest tax bracket is 35%. Democrats want to start at 30%, and have it only apply to those that make a million a year or more in total income. I say that's fair. The tax code needs to be updated such that we make no distinction on the source of one's said income for the purpose of income tax calculations.

It shouldn't matter how you make your money, as long as it's legal. If you're making a million a year, you better be paying at or near the same rate as all millionaires. It's fair and the right thing to do.

This isn't class warfare. It's about closing loopholes that only the mega rich can take advantage of.

A "progressive" cap gains? lol. leftists are funny.

 

[spittledip]

All types of income should be taxed at the same rate- only the amount of income should be taxed at different rates.

There should be no tax breaks for anyone, no loopholes at all. No hiding your money from the IRS in some secret account somewhere.

There should be tax brackets for every level of income.
For example:
The first 20,000 you make is tax free.
You get taxed 20% on all money made from 20,000 to 100,000.
You get taxed 25% on all money made from 100,000 to 500,000.
You get taxed 30% on all money made from 500,000 to 1,000,000.

To continue the example, let's say you made 800,000 in one year from all your sources of income.

20,000 of that amount would not get taxed at all.
80,000 of that amount would get taxed at 20%.
400,000 of that amount would get taxed at 25%.
The remaining 300,000 would get taxed at 30%.

All nice and fair. This way people who don't make as much get to keep a little bit more, and those who make a lot get to keep a little bit less.

I am not actually suggesting those numbers, I am just suggesting an idea. This is not my idea originally obviously as some countries have this type of system in place already.

 

[cybrsage]

Is anybody ever going to define what fair share is?

Fair Share is whatever is needed to pay for an expanding government...

 

[cybrsage]

http://online.wsj.com/article/SB10001424052970203750404577171300032471184.html

http://www.washingtonpost.com/polit...onomic-plans/2011/10/25/gIQAxsVyGM_story.html

I have seen a lot of support in the GOP for flat tax systems and consumption tax plans. Which benefit the wealthiest.

Flat tax rates treat everyone the same. The All Men Are Created Equal bit of our culture.

Consumption taxes actually tax the rich more...they pay more because they buy more expensive things.

But The Fair Tax is more than just a flat consumption tax, it actually taxes poverty into account.

 

[Patranus]

For someone who makes their money primarily from investments (e.g. capital gains) to pay an effective 15% tax rate vs. someone who works a steady job for a living and has to pay at a much higher rate (25-35%)?

I ask all of you. Is this fair? Especially if said person is making over a million dollars a year in income from these investments.

And what tax rate did that investor pay on the money before they invested it?

 

[OneOfTheseDays]

And what tax rate did that investor pay on the money before they invested it?

A red herring and misnomer. You know it. Stop.

 

[OneOfTheseDays]

The bottom line is the more loopholes like LTCG we have, the more the megarich are going to weasel their way out of paying their fair share of taxes. This isn't fair to the hardworking Americans that bust their ass every day and pay a higher rate of taxes. It's not fair no matter how you slice it and there is no way to defend this. Conservatives will lose on this issue every time.

I'm in favor of a simple progressive tax based solely on one's yearly income. You make $100,000 you get taxed a certain percentage. You make $1,000,000, you get taxed at a certain rate. Doesn't matter how you accumulated that money, your income tax is exactly the same.

What this will do is discourage those that do nothing but play with other's peoples money and add absolutely nothing of value to humanity. Our society will be better off for it.

 

[Craig234]

The bottom line is the more loopholes like LTCG we have, the more the megarich are going to weasel their way out of paying their fair share of taxes. This isn't fair to the hardworking Americans that bust their ass every day and pay a higher rate of taxes. It's not fair no matter how you slice it and there is no way to defend this. Conservatives will lose on this issue every time.

I'm in favor of a simple progressive tax based solely on one's yearly income. You make $100,000 you get taxed a certain percentage. You make $1,000,000, you get taxed at a certain rate. Doesn't matter how you accumulated that money, your income tax is exactly the same.

What this will do is discourage those that do nothing but play with other's peoples money and add absolutely nothing of value to humanity. Our society will be better off for it.

It's funny, we have a great economic system with capitalism, where some do have a lot more and use the capital for productive things - and the rich pay high taxes.

But the right represents the greed that can't bear to pay the higher rates and so they cause great harm by preventing the rates.

When the rates are high the rich do just fine and society is much better off, but this is the abuse of power that comes from too much wealth in too few hands.

With high tax rates, the rich can cheer the well being of the rest of the people, because they profit from it - but with low rates it makes the rich the enemy of the people.

They have to try to have low labor costs, prevent the people from having power, etc.

 

[lothar]

So many inaccuracies from what the reality is. Business don't pay 35%. More than half of the Fortune 500 paid under 20% 2008-2010. 30 had negative effective rates. They averaged an effective tax rate of -6.7%. Over $10B paid out to those 30.

Companies don't pay 100% dividend payout ratio. Not even close. In the 80's it was an average of 38.6%. In the 90's it dropped to 23.2%.

Might need to rework those numbers.

Your post contains the most inaccuracies of any in this thread.
You have lost all credibility you've ever had regarding business accounting and taxes(not that you ever had it to begin with).

Do us all a favor and go learn more about corporate taxes and GAAP vs. non-GAAP earnings.

 

[halik]

Flat tax rates treat everyone the same. The All Men Are Created Equal bit of our culture.

Consumption taxes actually tax the rich more...they pay more because they buy more expensive things.

But The Fair Tax is more than just a flat consumption tax, it actually taxes poverty into account.

Wrong on the first two,
money has declining marginal utility, taxing at the same percentage is regressive in terms of income.

Savings rate goes up with income so you'd taxing much higher part of disposable income of the poor than for the rich.