Warren Buffet's Secretary

[thegreekdog]

It does not create an incentive to not invest in stocks. It creates a disincentive to trade stocks (i.e. sell them).

Usually, people invest in stocks with the expectation to gain after exchanging them for cash-money. Sure, there's stocks that pay dividends, but eventually it's exchanged.


Since stocks must ultimately be traded, how does an increased tax on capital gains not create a disincentive to invest in stocks?

So, the correct disincentive is "It disincentivizes people from purchasing stock" and not "investing" of it's own accord.

[BigBallinStalin]

It does not create an incentive to not invest in stocks. It creates a disincentive to trade stocks (i.e. sell them).

Usually, people invest in stocks with the expectation to gain after exchanging them for cash-money. Sure, there's stocks that pay dividends, but eventually it's exchanged.


Since stocks must ultimately be traded, how does an increased tax on capital gains not create a disincentive to invest in stocks?

So, the correct disincentive is "It disincentivizes people from purchasing stock" and not "investing" of it's own accord.

???

Purchasing stocks is a form of investment. You put your money into a good with the expectation of being able to exchange it for a higher amount of money.

It's similar to dumping money in a checking deposit with an interest rate of 5%. The risks differ...

Are we talking past each other?

[thegreekdog]

It does not create an incentive to not invest in stocks. It creates a disincentive to trade stocks (i.e. sell them).

Usually, people invest in stocks with the expectation to gain after exchanging them for cash-money. Sure, there's stocks that pay dividends, but eventually it's exchanged.


Since stocks must ultimately be traded, how does an increased tax on capital gains not create a disincentive to invest in stocks?

So, the correct disincentive is "It disincentivizes people from purchasing stock" and not "investing" of it's own accord.

???

Purchasing stocks is a form of investment. You put your money into a good with the expectation of being able to exchange it for a higher amount of money.

It's similar to dumping money in a checking deposit with an interest rate of 5%. The risks differ...

Are we talking past each other?

Probably. I don't even really know what I'm talking about anymore relative to this. On the one hand, I don't like that there is discussion about raising the earned income tax rate without also or alternatively raising the tax rate on investments. On the other hand, I understand that increasing the tax rate on investments will not result in more revenue to the federal government, based upon past history.

Really, as I've said elsewhere, the first order of business should be to cut spending, before we raise and/or lower taxes.

[BigBallinStalin]

"On the other hand, I understand that increasing the tax rate on investments will not result in more revenue to the federal government, based upon past history. "


Why is that? Do people simply use alternative forms of investment that aren't taxed (as much)?

[thegreekdog]

"On the other hand, I understand that increasing the tax rate on investments will not result in more revenue to the federal government, based upon past history. "


Why is that? Do people simply use alternative forms of investment that aren't taxed (as much)?

I honestly don't know. I saw a chart that compared tax rates by year with revenue generated for said taxes by year.

From the CBO:

Revenue estimators are often faulted for the way they project tax receipts and prepare legislative cost estimates related to capital gains taxes. But the relationship of realizations and receipts to gains tax rates is neither predictable nor obvious. And while reductions in the overall taxation of capital income can measurably increase economic growth, a cut in capital gains rates alone is likely to produce much small macroeconomic effects. Inaccuracies in projecting revenue and disagreements about the effects of tax changes stem not from a failure to incorporate the behavioral responses of asset holders but from the complexities inherent in the nature of gains and gains realizations.

http://www.cbo.gov/doc.cfm?index=3856&type=0

[PLAYER57832]

It simply creates an incentive to not invest in stocks (I think bonds as well, if they're counted as capital gains). Since saving/investment leads to the accumulation of wealth (thus future production, employment, goods, etc.), a tax that discourages this doesn't seem like a good idea.
.

This is the whole problem. It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy.

How is that stuff created? I.e., how do businesses raise money?

LOL... I can point to plenty of companies who did not need huge stock offerings and the like to get started. In fact, there is this little place by the name of Microsoft that did just that. Of course later they did do the stock thing, but did they require tax breaks to encourage investment?

Also, the point isn't that people should be prohibited from contributing. The point is that if it requires a TAX break to encourage the investment, then the investment is not that great... and taxpayers should not be so supporting unworthwhile businesses.

Plus, a LOT of investment, in fact most, nowadays is not about starting up and growing companies, its about shifting wealth into the pockets of a very few.. regardless of any products, service or production capability.

[Night Strike]

It simply creates an incentive to not invest in stocks (I think bonds as well, if they're counted as capital gains). Since saving/investment leads to the accumulation of wealth (thus future production, employment, goods, etc.), a tax that discourages this doesn't seem like a good idea.
.

This is the whole problem. It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy.

How is that stuff created? I.e., how do businesses raise money?

LOL... I can point to plenty of companies who did not need huge stock offerings and the like to get started. In fact, there is this little place by the name of Microsoft that did just that. Of course later they did do the stock thing, but did they require tax breaks to encourage investment?

Also, the point isn't that people should be prohibited from contributing. The point is that if it requires a TAX break to encourage the investment, then the investment is not that great... and taxpayers should not be so supporting unworthwhile businesses.

Plus, a LOT of investment, in fact most, nowadays is not about starting up and growing companies, its about shifting wealth into the pockets of a very few.. regardless of any products, service or production capability.

There is no tax break for capital gains. It is a completely separate tax rate.

And this feigned outrage of capital gains taxes is why we need either a flat tax or a fair tax: then it won't matter how individuals earn their money as they will be guaranteed to be paying the same rate as everybody else.

[BigBallinStalin]

It simply creates an incentive to not invest in stocks (I think bonds as well, if they're counted as capital gains). Since saving/investment leads to the accumulation of wealth (thus future production, employment, goods, etc.), a tax that discourages this doesn't seem like a good idea.
.

This is the whole problem. It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy.

How is that stuff created? I.e., how do businesses raise money?

LOL... I can point to plenty of companies who did not need huge stock offerings and the like to get started. In fact, there is this little place by the name of Microsoft that did just that. Of course later they did do the stock thing, but did they require tax breaks to encourage investment?

Okay, PLAYER. So you acknowledge that some firms raise funds by selling stocks? I hope you do.

Tangent to your tangent: Even if Microsoft never sold stock for awhile (or if ever), it doesn't justify that stocks are unnecessary. Debt ratios differ across industries and firms; the option of selling stocks, bonds, keep money in the bank, acquiring capital, etc. varies.[/tangent]

Let's look at what you said:

" It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy."

Getting back to the point, the accumulation of wealth which leads to greater output and employment isn't just from "average people buying stuff." How does all that stuff come into fruition?

[Aradhus]

It does not create an incentive to not invest in stocks. It creates a disincentive to trade stocks (i.e. sell them).

Usually, people invest in stocks with the expectation to gain after exchanging them for cash-money. Sure, there's stocks that pay dividends, but eventually it's exchanged.


Since stocks must ultimately be traded, how does an increased tax on capital gains not create a disincentive to invest in stocks?

Unless there's a viable alternative for these people to make the same money with the same amount of effort then the "disincentive" is irrelevant. They're still going to invest.

[PLAYER57832]

It simply creates an incentive to not invest in stocks (I think bonds as well, if they're counted as capital gains). Since saving/investment leads to the accumulation of wealth (thus future production, employment, goods, etc.), a tax that discourages this doesn't seem like a good idea.
.

This is the whole problem. It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy.

How is that stuff created? I.e., how do businesses raise money?

LOL... I can point to plenty of companies who did not need huge stock offerings and the like to get started. In fact, there is this little place by the name of Microsoft that did just that. Of course later they did do the stock thing, but did they require tax breaks to encourage investment?

Okay, PLAYER. So you acknowledge that some firms raise funds by selling stocks? I hope you do.

Of course.

Tangent to your tangent: Even if Microsoft never sold stock for awhile (or if ever), it doesn't justify that stocks are unnecessary. Debt ratios differ across industries and firms; the option of selling stocks, bonds, keep money in the bank, acquiring capital, etc. varies.[/tangent]

Now you are twisting what I said. I never said that we should not have stocks, not at all. I said that using low taxes to encourage that investment is inappropriate.

Let's look at what you said:

" It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy."

Getting back to the point, the accumulation of wealth which leads to greater output and employment isn't just from "average people buying stuff." How does all that stuff come into fruition?

[/quote]
People who are creative, who have the education to do things and who are able to convince enough people their idea is sound to attract some investors who see gain.

The problem is this idea that the government is supposed to treat these investments differently from other earnings under the guise that it will somehow help investments.

BUT, truly before that you have to have resources. NATURAL resources. Without a good agricultural base, a country is at serious risk. A smaller country can survive by specializing without much agriculture, but a large country like ours cannot. we also need minerals, woods, etc. However, they don't have to be new minerals. Recycled products, manufacturing processes that use less materials.. all of those help. Using fewer employees, however is not one of those. That only helps the economy when there is a labor surplus. Beyond that, it helps those at the top. Cutting workers to make a larger profit (note.. I did not say just to make a profit, I specifically said LARGER profit) hurts us all, particularly when the product resulting is poorer.

A lot of the current tax policies reward companies that do just that over companies who provide increases in employment. They do that because the system artificially supports creation /accumulation of money as opposed to any real goods or service production.

The truth is that such tax differences only really matter for someone investing LOTS of money. It encourages people to invest solely for tax benefits. But, you cannot just look at the tax policy in isolation. There are plenty of other rules that heavily favor folks wanting to plop down huge amounts of money on some company without ANY requirement that that company turn about and really make money, create jobs or truly do any of the other things you argue we need investment to do. Our system punishes people who work, but rewards those who have large amounts of money to invest.

[BigBallinStalin]

It does not create an incentive to not invest in stocks. It creates a disincentive to trade stocks (i.e. sell them).

Usually, people invest in stocks with the expectation to gain after exchanging them for cash-money. Sure, there's stocks that pay dividends, but eventually it's exchanged.


Since stocks must ultimately be traded, how does an increased tax on capital gains not create a disincentive to invest in stocks?

Unless there's a viable alternative for these people to make the same money with the same amount of effort then the "disincentive" is irrelevant. They're still going to invest.

It's relevant. There's reasons why certain firms leverage debt by using stocks or by using bonds. Specifically punishing one form (i.e. creating a higher tax on capital gains) can cause disruptions in the market place later down the line. We can't foresee these problems, but if we assume that it's irrelevant, then sure, the pretense of knowledge sounds like a great idea!

I just don't see why it's a good idea for the federal government to continue intervening in the economy. They've already wreaked enough havoc from the fiscal stimulus and expansionary monetary policies during the 1990s, 2002-2003, and 2008- and onward.

[BigBallinStalin]

Well, if you can agree with me that the government shouldn't be subsidizing certain forms of investment (e.g. capital gains), and they shouldn't be subsidizing certain loans for firms, then wouldn't the most preferable tax be a flat tax on for X amount of real income? (not just form wages, but from any source of income).

Granted, there is the problem of the bottom 20% paying some "unfair" amount, so why not make the first $20,000 of one's income tax-free?

[PLAYER57832]

It simply creates an incentive to not invest in stocks (I think bonds as well, if they're counted as capital gains). Since saving/investment leads to the accumulation of wealth (thus future production, employment, goods, etc.), a tax that discourages this doesn't seem like a good idea.
.

This is the whole problem. It is NOT accumulation of wealth in stocks that assures production and employment. It is, instead, average people buying stuff and moving the economy forward through their purchases that really build our economy.

How is that stuff created? I.e., how do businesses raise money?

LOL... I can point to plenty of companies who did not need huge stock offerings and the like to get started. In fact, there is this little place by the name of Microsoft that did just that. Of course later they did do the stock thing, but did they require tax breaks to encourage investment?

Also, the point isn't that people should be prohibited from contributing. The point is that if it requires a TAX break to encourage the investment, then the investment is not that great... and taxpayers should not be so supporting unworthwhile businesses.

Plus, a LOT of investment, in fact most, nowadays is not about starting up and growing companies, its about shifting wealth into the pockets of a very few.. regardless of any products, service or production capability.

There is no tax break for capital gains. It is a completely separate tax rate.

Yes, that is the problem.

And this feigned outrage of capital gains taxes is why we need either a flat tax or a fair tax: then it won't matter how individuals earn their money as they will be guaranteed to be paying the same rate as everybody else.

These are absolutely NOT the answer.

[Phatscotty]

All I will say about the topic, the comparison in rates of Buffet and his secretary is the most dishonest comparison ever, and designed specifically/only to work on dumbshits hatred of the rich.

Class warfare at it's sleaziest.

[PLAYER57832]

All I will say about the topic, the comparison in rates of Buffet and his secretary is the most dishonest comparison ever, and designed specifically/only to work on dumbshits hatred of the rich.

Class warfare at it's sleaziest.

yeah.. as opposed to your wonderful non-classist idea that anybody who is NOT wealthy is pretty much "just lazy" or "incompetent".

But no, its about whether investments should be given a more favorable tax rate than other types of earned money.

[rockfist]

The tax code is overly complex. I do not have a problem with people paying 15% tax...its just that a Warren Buffet or John Kerry can afford 6-10 tax accountants or tax lawyers in full time employ. Even a person making $500M per year (who is not hurting) can in no way contemplate hiring that staff and thus can't take advantage of all the loop holes that a super rich person can.

The tax code needs to be simplified, both for fairness, and because it would force the legions of people who are paid to be "tax experts" to do something of real use to society for a living. I would support a VAT - IF and only IF it was accompanied with a constitutional amendment banning all forms of income and asset tax at the federal level.

[Night Strike]

These are absolutely NOT the answer.

We know. In your book, the ONLY answer is to tax the crap out of "the rich" since they owe you everything they've made.

[Phatscotty]

All I will say about the topic, the comparison in rates of Buffet and his secretary is the most dishonest comparison ever, and designed specifically/only to work on dumbshits hatred of the rich.

Class warfare at it's sleaziest.

yeah.. as opposed to your wonderful non-classist idea that anybody who is NOT wealthy is pretty much "just lazy" or "incompetent".

But no, its about whether investments should be given a more favorable tax rate than other types of earned money.

great, except that doesn't have anything to do with my comment about the dishonesty of the comparison

[Aradhus]

All I will say about the topic, the comparison in rates of Buffet and his secretary is the most dishonest comparison ever, and designed specifically/only to work on dumbshits hatred of the rich.

Class warfare at it's sleaziest.

Wasn't it Buffet who made the comparison? How is that class warfare? What does he gain from manipulating "dumbshits" to hate him?

[thegreekdog]

All I will say about the topic, the comparison in rates of Buffet and his secretary is the most dishonest comparison ever, and designed specifically/only to work on dumbshits hatred of the rich.

Class warfare at it's sleaziest.

Wasn't it Buffet who made the comparison? How is that class warfare? What does he gain from manipulating "dumbshits" to hate him?

This is also my perspective. There are a number of the super rich who have indicated publicly that they want to pay more tax. Ignoring the fact that they are welcome to pay more taxes (e.g. the president can voluntarily pay more taxes or could not take deductions and pay more taxes that way) is really irrelevant. What is relevant is that the people that would be most affected by an increase in the capital gains rate are the people who are not speaking out against this.

That being said, if there is an increase in the capital gains rates, I'm sure there are plenty of non-wealthy people who have investments who will pay a higher tax. Is that a good trade off if there is a reduction in the earned income tax rate? I say yes.

[PLAYER57832]

Well, if you can agree with me that the government shouldn't be subsidizing certain forms of investment (e.g. capital gains), and they shouldn't be subsidizing certain loans for firms, then wouldn't the most preferable tax be a flat tax on for X amount of real income? (not just form wages, but from any source of income).

Granted, there is the problem of the bottom 20% paying some "unfair" amount, so why not make the first $20,000 of one's income tax-free?

I agree with this, but we do need a scaled rating. Right now, 20K is below the poverty line even for a 2 person family.
Also, the benefits that workers provide to society in many ways exceeds the benefits provided by someone who simply looks at numbers, makes a few phone calls (does a bit of research.. though often they hire others to do that) and then gets some checks. By favoring that type of investment, the impacts of these companies' decisions is even more removed than it is from the CEOs and the like, who are themselves removed.

Put it another way... if you are just looking at remote numbers, then it might not matter that much, you might not even really think about or notice that a particular chemical is possibly listed as dangerous when used long-term. You have no idea that this marshy area is the nesting ground to 100 ducks, unless someone takes the time to tell you. If you LIVE on the land, all of that is very apparent or at least matters much more.

The more layers you put between people on the ground and the profit impetus, the more of these "details" get ignored. Its hard enough to tell your boss "no"... its even harder when you have to go through a whole level of educating your boss to educate his boss, to educate his boss... etc. Make that "nearly impossible". In fact, it basically just happens when environmental impact reports are required. Yet.. those are some of the things I have heard you rail against repeatedly.

[thegreekdog]

I guess the question (posed by BBS and Player) is - what do CEOs do to justify a high salary? I'll speak for both of them.

BBS - "CEOs get high salaries because the markets sets those high salaries."

Player - "CEOs look at numbers, make a few phone calls, and tell other people to do research."

So, I looked up what the job responsibilties of a CEO are. From wiki:

The responsibilities of an organization's CEO are set by the organization's board of directors or other authority, depending on the organization's legal strucutre. They can be far-reaching or quite limited and are typically enshrined in a formal delegation of authority.

Typically, the CEO has responsibilities as a communicator, decision maker, leader, and manager. The communicator role can involve the press and the rest of the outside world, as well as the organization's management and employees; the decision-making role involves high-level decisions about policy and strategy. As a leader, the CEO advises the board of directors, motivates employees, and drives change within the organization. As a manager, the CEO presides over the organization's day-to-day, month-to-month, and year-to-year operations.

[jimboston]

Well, if you can agree with me that the government shouldn't be subsidizing certain forms of investment (e.g. capital gains), and they shouldn't be subsidizing certain loans for firms, then wouldn't the most preferable tax be a flat tax on for X amount of real income? (not just form wages, but from any source of income).

Granted, there is the problem of the bottom 20% paying some "unfair" amount, so why not make the first $20,000 of one's income tax-free?

I agree with this, but we do need a scaled rating. Right now, 20K is below the poverty line even for a 2 person family.
Also, the benefits that workers provide to society in many ways exceeds the benefits provided by someone who simply looks at numbers, makes a few phone calls (does a bit of research.. though often they hire others to do that) and then gets some checks. By favoring that type of investment, the impacts of these companies' decisions is even more removed than it is from the CEOs and the like, who are themselves removed.

Put it another way... if you are just looking at remote numbers, then it might not matter that much, you might not even really think about or notice that a particular chemical is possibly listed as dangerous when used long-term. You have no idea that this marshy area is the nesting ground to 100 ducks, unless someone takes the time to tell you. If you LIVE on the land, all of that is very apparent or at least matters much more.

The more layers you put between people on the ground and the profit impetus, the more of these "details" get ignored. Its hard enough to tell your boss "no"... its even harder when you have to go through a whole level of educating your boss to educate his boss, to educate his boss... etc. Make that "nearly impossible". In fact, it basically just happens when environmental impact reports are required. Yet.. those are some of the things I have heard you rail against repeatedly.

I'm pretty sure that people earning $20K or less already don't pay income taxes. Maybe a single person, non-head-of-household... but not most people. (Medicare and SS yes... Income Tax no).

[PLAYER57832]

All I will say about the topic, the comparison in rates of Buffet and his secretary is the most dishonest comparison ever, and designed specifically/only to work on dumbshits hatred of the rich.

Class warfare at it's sleaziest.

yeah.. as opposed to your wonderful non-classist idea that anybody who is NOT wealthy is pretty much "just lazy" or "incompetent".

But no, its about whether investments should be given a more favorable tax rate than other types of earned money.

great, except that doesn't have anything to do with my comment about the dishonesty of the comparison

Really? I would say that comment is itself pretty dishonest.

[PLAYER57832]

Well, if you can agree with me that the government shouldn't be subsidizing certain forms of investment (e.g. capital gains), and they shouldn't be subsidizing certain loans for firms, then wouldn't the most preferable tax be a flat tax on for X amount of real income? (not just form wages, but from any source of income).

Granted, there is the problem of the bottom 20% paying some "unfair" amount, so why not make the first $20,000 of one's income tax-free?

I agree with this, but we do need a scaled rating. Right now, 20K is below the poverty line even for a 2 person family.
Also, the benefits that workers provide to society in many ways exceeds the benefits provided by someone who simply looks at numbers, makes a few phone calls (does a bit of research.. though often they hire others to do that) and then gets some checks. By favoring that type of investment, the impacts of these companies' decisions is even more removed than it is from the CEOs and the like, who are themselves removed.

Put it another way... if you are just looking at remote numbers, then it might not matter that much, you might not even really think about or notice that a particular chemical is possibly listed as dangerous when used long-term. You have no idea that this marshy area is the nesting ground to 100 ducks, unless someone takes the time to tell you. If you LIVE on the land, all of that is very apparent or at least matters much more.

The more layers you put between people on the ground and the profit impetus, the more of these "details" get ignored. Its hard enough to tell your boss "no"... its even harder when you have to go through a whole level of educating your boss to educate his boss, to educate his boss... etc. Make that "nearly impossible". In fact, it basically just happens when environmental impact reports are required. Yet.. those are some of the things I have heard you rail against repeatedly.

I'm pretty sure that people earning $20K or less already don't pay income taxes. Maybe a single person, non-head-of-household... but not most people. (Medicare and SS yes... Income Tax no).

Yes, I was just addressing the figures presented. My point is that the line would be well above 20K. Also, there needs to be some graduation of rate.. not just a "boom, you pay". That last just leads to more cheating at the margins.