Debate:Class Warfare - perfect response

From RationalWiki
Jump to: navigation, search
Debate.png This is a Debate page.
Feel free to add your own spin on the story. Please keep it civil!
Information icon.svg This debate was created by signed users.
This discussion was moved here from RationalWiki:Saloon bar.

From Elizabeth Warren:

I hear all this, you know, “Well, this is class warfare, this is whatever.”—No!
There is nobody in this country who got rich on his own. Nobody.
You built a factory out there—good for you! But I want to be clear.
You moved your goods to market on the roads the rest of us paid for.
You hired workers the rest of us paid to educate.
You were safe in your factory because of police forces and fire forces that the rest of us paid for.
You didn’t have to worry that maurauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.
Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it.
But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.

Brilliant. –SuspectedReplicant Support democracy - Ace is the REAL moderator 21:22, 21 September 2011 (UTC)

If it were only true! The facts are, there is a very large segment of people who work, as well as people who don't work, who pay no taxes at all. Then there's a large group who pay taxes, but receive more in government benefits (student loans, mortgage guarantees, subsidized interest rates, etc etc etc) then they ever pay inn taxes. So the claim, "the rest of us" is an exaggeration, at best. nobsabandon hope all ye who enter here. 22:09, 21 September 2011 (UTC)
Ah, RobS.
You honestly must have some sort of mental retardation, and the rest of the Western world would agree. Here's your facts right in one simple video. How are people supposed to pay tax when they barely earn enough to pay rent? If you simply listened to Warren your country would be out of this hole in less than 5 years. But no, my Almighty Job Creator! Shower us with some of your aristocratic golden seed! Osaka Sun (talk) 22:39, 21 September 2011 (UTC)
Well, thanks for giving the lie to the idea that you're a business owner, Rob. No, there is nobody in the USA who works who doesn't pay any taxes. Nobody. --JeevesMkII The gentleman's gentleman at the other site 22:58, 21 September 2011 (UTC)
This is a fairly common myth, Rob, but I think a cursory examination will reveal the ways in which that's not true. It might be true about federal income tax - many of the poorest Americans don't pay that. But it's not true for the payroll tax, or the gas tax, or state sales taxes, or "sin taxes" (alcohol, tobacco, sugar, etc.), or property taxes (assuming they own a home), or any local taxes, or estate tax (assuming they inherit anything), or the wide variety of tariffs or import taxes that add to the cost of goods. That's a big tax burden, especially since all consumption taxes are highly regressive. And I'm sure I'm even forgetting some, as well as not counting a lot of the hidden taxes.--ADtalkModerator 23:44, 21 September 2011 (UTC)
@AD: It's called "lucky duckies." I love the "class warfare" line, considering it was ripped off from the REDSREDSREDSREDSREDSREDS!!!!!! Nebuchadnezzar (talk) 23:50, 21 September 2011 (UTC)
Let's not forget the Earned Income Tax Credit. And FDR and New Dealers always always always swore the payroll tax was not a tax, it was Insurance (F.I.C.A.). You've been brainwashed by Republicans if you think the Social Security payroll tax is a tax. nobsabandon hope all ye who enter here. 01:38, 22 September 2011 (UTC)
As I'm sure you know, the EITC applies, again, only to federal income tax. It does not apply to state tax, excise tax, local tax, gas tax, sin tax, sales tax, property tax, estate tax, the payroll tax, or hidden tariff taxes. Those are regressive taxes that everyone pays - although some only apply to those lucky enough to have a house or inheritance to be taxed.
I'm not sure what your argument about the payroll tax is... I mean, it's money being taken away from people by the government to be spent/redistributed on a service, so I think it's a tax. I guess you're saying other people say it's not, but even you seem to agree that it is - so why is that relevant?--ADtalkModerator 01:59, 22 September 2011 (UTC)
You're giving up what generation you are from here; since 1936, only conservative Republicans insisted Social Security withholding was a tax -- and suffered extreme derision and abuse from loyal Democrats and New Dealers who insisted it was not a tax. Only about 10 years ago, after members of Congress heard constituents complain, they began referring to FICA as a "tax". But many many times in the `1960s, 70s, and 80s was I upbraided -- by employers, co-workers, and others I debated -- for calling the FIC tax a "tax". nobsabandon hope all ye who enter here. 02:06, 22 September 2011 (UTC)
Sure, Rob, I understand you. I'm in my late twenties, it's not a secret. I just don't understand why this is relevant. You said that many people pay no tax. I pointed out the many taxes they pay. Now all you want to do is discuss the labeling of one of those taxes. You're not arguing it's not a tax, are you? It seems like you agree with me that it is. So why is this in any way relevant to the discussion?
I like to assume good faith, but it does seem like a pretty blatant attempt to avoid admitting that you were wrong.--ADtalkModerator 02:14, 22 September 2011 (UTC)
Bull. I can discuss it all, but I would like to focus on the so-called "payroll tax" momentarily. FDR said, "We must not allow this type of insurance to become a dole through the mingling of insurance and relief. It is not charity. It must be financed by contributions, not taxes." That's why die-hard Democrats denied for decades that FICA contributions were taxes, because the dear fuhrer instructed them so. Now the old messiah is replaced by a new one, the old lies and talking points forgotten replaced with fresh bullshit. But the conservative GOP criticism was on the mark in those days, and we have widespread acceptance of that fact today. Calling it a payroll tax is a tacit admission that those who sold us the program in 1936, sold us a bunch of lies. nobsabandon hope all ye who enter here. 02:29, 22 September 2011 (UTC)
I agree that politicians often use all kinds of misleading rhetoric, especially in regards to taxes. It's pretty unfortunate. That's why I call it the payroll tax. That's why you call it the payroll tax. Finis.

edit break[edit]

Now if we can get back to the actual topic. How do you defend your earlier claim, in light of my point?--ADtalkModerator 02:33, 22 September 2011 (UTC)
He can't. Republican arguments consist of twisting a topic into something else entirely, and calling FDR a Nazi for instituting a tax. Osaka Sun (talk) 02:56, 22 September 2011 (UTC)
Well something pressing drew him away. Perhaps he will return, but more likely not. Unless maybe I can embarrass him into replying and pretending he was planning to do so all along? We'll see.--ADtalkModerator 10:36, 22 September 2011 (UTC)

──────────────────────────────────────────────────────────────────────────────────────────────────── Rob, I'm impressed. Even Andy, the inventor of the Schlafly Reversal would be proud of this one. In order to condemn Obama's policies as class warfare, you target people too poor t o pay tax? Brilliant! –SuspectedReplicant Support democracy - Ace is the REAL moderator 10:49, 22 September 2011 (UTC)

Experiment: The only way to make Rob drop his McCarthyite position would be to strip him of all his possessions and dump him on the street. Similarly, the only way to make me drop my socialist position would be to put $1,000,000 in my account. As the latter is less cruel, I think this option should be tried forthwith. Thematic (talk) 10:59, 22 September 2011 (UTC)

────────────────────────────────────────────────────────────────────────────────────────────────────*the rest of us paid for This seems to be the phrase in dispute, which Elizabeth Warren uses 6 times. Where to begin....

Now, the AP Fact Check two days ago reported, "10 percent of households with the highest incomes pay more than half of all federal taxes." So, half of nearly 130 million workers pay no taxes, yet drive on roads and enjoy police protection from the 10% of the rich who pay more than half of all taxes. Both Obama and Elizabeth Warren don't have a clue what their are talking about (to put it mildly; I could have said, "deceptive lying pieces of shit"." The last thing the poor, oppressed, and downtrodden need are leaders who lie to them. It's just another form of oppression). nobsabandon hope all ye who enter here. 22:24, 22 September 2011 (UTC)

You really need to read the articles instead of just plugging it into Google because a number of them are arguments for why this is BS -- the NY Times article is a particularly good explanation. Nebuchadnezzar (talk) 22:27, 22 September 2011 (UTC)

Addendum: 50% of filers is more than 50% of the workforce. The workforce is some 130,000,000 people, so that's in the neighborhood of 65,000,000 workers who pay no income tax. With the number of filers, that number expands. Next objection will be about state taxes paid (income, sales taxes, etc), but I'm ready with a response to that, as well. nobsabandon hope all ye who enter here. 22:30, 22 September 2011 (UTC)

Yeah you could have said deceptive lying pieces of shit but that would make you a hypocrite right? Aceace 22:32, 22 September 2011 (UTC)
Rob has just proved that even ex-CP Sysops don't bother reading articles before writing their stories. –TeenageCumSlut Condemns electoral fraud at RationalWiki 22:33, 22 September 2011 (UTC)
Nope, still BS. Take a look at Leonhardt's linked article to the CBO data. Nebuchadnezzar (talk) 22:35, 22 September 2011 (UTC)

────────────────────────────────────────────────────────────────────────────────────────────────────USA Today reports, federal wp:Grant-in-aid "has supplanted sales, property and income taxes as the biggest source of revenue for state and local governments." So even states are dependent on federal taxpayers (i.e., "the rich", cause half of all filers pay no tax), or the money the feds borrow. What Elizabeth Warren says, "paid for by the rest of us" is simply pure bullshit. nobsabandon hope all ye who enter here. 22:44, 22 September 2011 (UTC)

Nope, still BS. Read Leonhardt again instead of robotically spitting out a talking point to an argument you anticipated would be made rather than the argument that was actually made. Nebuchadnezzar (talk) 22:48, 22 September 2011 (UTC)
Again, payroll taxes (see above). It also includes excise taxes -- booze & tobacco mostly, for the "poorest 20 percent" (assuming they have little invest tax). We can revisit the discussion above about whether or not FICA is a tax, but let's consider two other factors first: the bottom 20 percent most likely receive foodstamps and other federal entitlements, which more than offset any sort of tax payments made; secondly, "No matter how much you pay into the (Social Security) system...you get back substantially more than you pay in." So you are not really "paying taxes" if the amount of your Social Security benefits exceeds your payroll tax withholding over a lifetime. nobsabandon hope all ye who enter here. 23:02, 22 September 2011 (UTC)
Well, if you want to bring benefits v. taxes, that's a whole different issue. And how about all the CEOs avoiding taxes through tax havens, armies of lobbyists, and corporate subsidies/welfare? So, it's really just more rhetorical BS about how the looters are stealing all the money from the Galts. Nebuchadnezzar (talk) 23:09, 22 September 2011 (UTC)
An apple =/= an orange. Just address the specific facts as presented. nobsabandon hope all ye who enter here. 23:14, 22 September 2011 (UTC)
Your claim is that 50% of the population pays no taxes. You are wrong. Now you want me to address total tax v. benefits. These facts are irrelevant. Nebuchadnezzar (talk) 23:19, 22 September 2011 (UTC)
"An apple =/= an orange. Just address the specific facts as presented. - nobs" holy fucking shit I think I just laughed a lung out through my face. I'm sending you the goddamn bill, Rob. X Stickman (talk) 23:32, 22 September 2011 (UTC)
I didn't make the claim, CBS News, MSNBC, CNN, Yahoo Finance, New York Times, and Huffington Post did. Here's the CBO data, which the Tax Policy Center offset by benefits received to arrive at the conclusion that some of the most respected mainstream news organizations ran with the headline, "Half of Americans pay no tax." No one has addressed both the Grant-in-aid subsidies or the SS benefits vs payroll tax. Based on a preponderance of the evidence, Elizabeth Warren's claim is false. nobsabandon hope all ye who enter here. 23:45, 22 September 2011 (UTC)
I'm not even talking about that, I just found the idea of you demanding that someone else stay on topic and address the points you've made to be just... it is amazing. I don't even follow most conversations on this site, but whenever I see one where you join in, it usually goes something like "User 1: Have you noticed this thing?" "User 2: Yes I did notice that thing" "User 1: Isn't this thing interesting?" "Rob: Yeah but did you know a democrat 40 years ago did something dumb" Hell that's basically what you did here. Anyway I'm out, I'm not getting tied down into something serious. X Stickman (talk) 23:50, 22 September 2011 (UTC)

Hard to know where to go with this now. Rob, your argument now appears to hinge on an interesting principle: the idea that if someone receives more benefit from the state than they pay in taxes, then they are essentially untaxed. You extend this principle to a federal domain, as well, arguing that since federal grants constitute a very large proportion of local and state budgets in some areas, then the local and state taxes don't count. And finally, you also have this queer argument about the payroll tax, which hinges for some bizarre reason on political rhetoric from seventy years ago to imply it's not a tax, even though neither you nor I believe that. I guess I'll take these from the overall principle:

  • Your new principle relies on the curious idea that volume of money is the important thing, rather than volume of burden. I will illustrate with an example. In a town called Twoton, there are only two residents. One is well-off, with an income of $1 million per annum. The other is quite poor, with an income of $30,000 per annum. Because Twoton is somewhat progressive and magically simplified, there is a single tax that applies to the residents. Under this moderately progressive tax, the wealthy man pays 20% of his income, and the poor man pays 10%. This is not a pure income tax; that raw number represents the aggregate effect of sales/gas/income and so on - these are the results of all the ways the taxes are collected. Now this taxation means that the total town budget is $203,000, and from that fund they build roads, schools, etc. It is absolutely unarguable that the poor man benefits from more than $3,000 worth of investment on his behalf - the rich man's contributions are paying for almost everything. But for a man with a million-dollar income, 200k is simply not much of a burden. While that amount does cause some hurt, it will not mean that he can't buy food or a house. He will, at worst, have to defer one of his luxuries or forestall further investment in his company - although statistics even now show that, generally, it just stops him from putting it into bonds rather than a useful pursuit. But a man making 30k a year is going to be hard-pressed to feed and house his family no matter what, and taking three grand out of his pocket might be the difference between car insurance or not. While the volume of money might be less, the volume of burden is actually more. But are you going to tell me that the poor man is not "paying taxes," because the returned value of services from the government is more than he is paying by volume of money? I would be hard-pressed to look at that man as he fills up his gas tank and tell him that, because he gets food stamps, the extra $30 added to his gas bill isn't really "paying taxes." I think he would rightly scoff at such a view.--ADtalkModerator 02:25, 23 September 2011 (UTC)

We've already made an article about this nut, right? This has been debunked 3 years ago. Osaka Sun (talk) 03:11, 23 September 2011 (UTC)

As a non-American I don't really give a shit about what percentage of the population pay taxes. But following up on AD's post above surely the fact that a large number of people escape the income tax net because their wages are too low should be s source of national shame that there is such a large income disparity. Because one of the reasons that the rich manage to accumulate so much wealth is at the expense of the labour of the low-waged. When I hear the howls of outrage over the minimum wage from those who are comfortably off it does get my hackles up. It's not communism to ensure that people are able to earn a basic living wage without having to work 80 hours a week nor have access to basic health care. If people are unable to provide for themselves and their families by honest means is it any wonder that they turn to crime? And once the have-nots turn criminal then it imperils the security of the haves. Why so many of the (mainly US) upper-middle and higher income brackets cannot grasp this aspect of enlightened self-interest has always been a puzzle for me. Redchuck.gif ГенгисevolvingModerator 05:22, 23 September 2011 (UTC)
None of this is new; the Earned Income Credit originally was called the "negative income tax". In the example you use, referring to "money volume", we should also look at the case of government workers. Government sole source of income is from taxes collected from non-government workers. Technically, government workers pay no tax since their entire source of income is the pool of taxes collected from others; government workers merely render back a portion of their time which is represented by money. Of course, over-compensating them for the work they do, relative to similar employments in the private sector, also helps dilute the public relations crisis that the reality economic facts produces once people understand these basic principles.
We can discuss the example you use further, but ask any legislator of whatever ideology, who is tasked with appropriations and finding ways to pay for them, and they will tell you, someone who pays $10,000 in taxes and receives $50,000 in governments benefits (from educating their children, driving on roads, police protection and national defense, mortgage interest rate subsidies, food stamps, student loans, or whatever), pays no tax and is burden to the government (or other taxpayers, which is the same thing) to the tune of $40,000.
As to Genghis point, when 50% of the population (including able bodied workers) pay no tax (and their virtual subsistence is dependent on government programs), while 10% pays 50% of all taxes (we'll discuss what portion is paid by corporations shortly), it's hard to argue "the rich" are not carrying their fair share of the burden. "The poor" in America own two cars, three color TV's, have multiple flush toilets and live in air conditioning. By world standards, even by European standards, they are filthy-stinking-rich. nobsabandon hope all ye who enter here. 17:36, 23 September 2011 (UTC)
Some of the poor in America need food banks and soup kitchens, some/all can't afford health insurance need Obamacare which the Republicans plan to scrap. Many American poor really are poor by world standards. Proxima Centauri (talk) 19:25, 23 September 2011 (UTC)
Let's take food prices, for example. American agriculture is heavily subsidized with price supports, set asides, and other programs. Americans pay maybe 6% of their income on food, whereas much of the world pays as much as 25-40%. So even without direct aid (foodstamps) the poor still are beneficiaries of government programs. Numerous other examples could be cited. nobsabandon hope all ye who enter here. 22:15, 23 September 2011 (UTC)
USDA Grade A beef is incredibly cheap, it's virtually given away to whoever wants it. No American starves for lack of good beef. nobsabandon hope all ye who enter here. 22:18, 23 September 2011 (UTC)

BTW, Elizabeth Warren appears to be the leak for the rampant sexism in the Obama White House. nobsabandon hope all ye who enter here. 16:27, 25 September 2011 (UTC)

"by European standards, they are filthy-stinking-rich" - No. Just in case anyone other than nobs is under the delusion that such people wouldn't be considered poor in Europe, this is roughly how the underclass lived in the council estate when I was a kid, nobody mistook them for rich. I particularly enjoyed seeing "televisions" listed as an imaginary luxury of the rich. Someone who is "filthy stinking rich" usually doesn't even own a television. Hell, the only reason I have one is because I can't be bothered to schlep it to an authorised WEEE site for disposal (of course they'd do it for me if I bought another one but that doesn't actually help). 82.69.171.94 (talk) 08:01, 26 September 2011 (UTC)

────────────────────────────────────────────────────────────────────────────────────────────────────

  • Forty-three percent of all poor households in America own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio.
  • Eighty percent of poor households have air conditioning.
  • The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)
  • Nearly three-quarters of poor households own a car; 31 percent own two or more cars.
  • Ninety-seven percent of poor households have a color television; over half own two or more color televisions.
  • Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception.
  • Eighty-nine percent own microwave ovens, more than half have a stereo, and more than a third have an automatic dishwasher. (Source: Heritage.org).

Now, the subject to address is Poverty and obesity in the United States. nobsEmpty Recycle Bin 17:02, 26 September 2011 (UTC) Oh, and remember, they pay no taxes for the roads the drive on or the police protection and national defense they receive. nobsEmpty Recycle Bin 17:04, 26 September 2011 (UTC)

tl;dr, but I saw Rob went off on all those horrible people not paying income tax. Oh, if only we had a fraction of a fraction of their fractured fraction of wealth, everything would be okay. Whatever you do, Rob, just don't do the math. Your tiny little world will collapse around you. Occasionaluse (talk) 17:18, 26 September 2011 (UTC)
"more living space than the average individual living in Paris, London, Vienna, Athens". I'm sure in Rob's head the average individual living in London lives in Notting Hill, in a Victorian town house with maybe one other adult. Whereas in reality London is crammed with multi-story rabbit hutches, so much so that the Mayor (the elected one, not the Lord Mayor) has said planning permission will in future be withheld unless each individual home meets a standard for living space. They're tiny. Even the actual house my CTO friend owns in central London (which cost an eye-watering amount) is smaller than most places I've ever lived. 82.69.171.94 (talk) 22:43, 26 September 2011 (UTC)
It's been said the incidence of 16 year olds in America owning automobiles is greater than Brits who have worked their entire life (which is another way of saying 16 year old Americans living at home with their parents have a greater net worth than Brits who've slaved their whole lives to pay for free healthcare). nobsEmpty Recycle Bin 00:07, 27 September 2011 (UTC)
Because the rich outnumber the poor? --145.94.77.43 (talk) 03:18, 27 September 2011 (UTC)
It's a trade-off; a 16 year old in America can have greater net worth and material possessions than a man who's worked his entire life in Great Britain because somehow welfare entitlements like free healthcare and a life of impoverishment is worth trading your freedom for. nobsEmpty Recycle Bin 03:27, 27 September 2011 (UTC)
Speaking of healthcare my wife recently had an accident and stayed for 3 days in hospital, had an operation and received 6 weeks of medication. Total cost: $15. COMMIE ROT! Aceace 03:35, 27 September 2011 (UTC)
You monster! Don't you know how many Stephen Hawkings were euthanized to pay for that? Nebuchadnezzar (talk) 03:38, 27 September 2011 (UTC)
Whazzamatter Ace, you don't have the balls to take care of your own wife? We should've known. Dumping your responsibilities to care for your own family on society? Robbing the food out of starving children's mouths cause you're to lazy or stupid to stand up to your own responsibility? and being goddamn proud of your insolence and imbecility at the same time? Not surprising. nobsEmpty Recycle Bin 03:49, 27 September 2011 (UTC)
It was a little bit hard for me as I am neither a doctor, surgeon, nurse or pharmacist so i didn't really have much of a choice. Aceace 03:54, 27 September 2011 (UTC)
So you enslave helpless medical professionals to do your bidding? Typical Commie bastard. Nebuchadnezzar (talk) 03:57, 27 September 2011 (UTC)
We're talking about paying for it, geez. You, a white middle trash male, have to steal the bread of the needy, to pay for your own moral and legal responsibilities? Sickening. nobsEmpty Recycle Bin 04:07, 27 September 2011 (UTC)
I do pay for it - I pay taxes and my ACC levies. Aceace 04:11, 27 September 2011 (UTC)
And I do too. Happy to, and if/when I have my accident, Ace helps pay for my care. It's called living in a civilised, humane society. --DamoHi 05:55, 27 September 2011 (UTC)

Edit break[edit]

Rob, you appear to view tax payment as only occurring when there is a net loss of value to the government, if I see this rightly? In other words, if someone (a) gets a greater or equal amount of services/benefits from the government, or (b) has a government job, they are (in your view) untaxed? Is that a fair statement of the your operative principle?
To me, this falls victim to the same fallacy I mentioned before - measuring tax burden by volume of money rather than volume of burden. You don't seem to actually address this at all, instead simply restating it - you say, " someone who pays $10,000 in taxes and receives $50,000 in governments benefits ... pays no tax and is burden to the government." This is an assessment from the standpoint of input/output by volume of money - again, it is not an assessment by burden. To you, it may seem like they're "not pay[ing] any tax," but I assure you that it's quite different from their position. Yes, they get roads and schools. But that $10k they're paying is a serious burden, especially with regressive taxes like sales taxes. It's curious to hear your rhetoric, though, especially considering how you're a conservative... it's like you want them to be happy that their money is being taken away from them and spent on services in their name via taxation -as if it's not really being taken away from them if government officials deign to spend it on road maintenance rather than, say, billions of dollars of bail-outs for corporations owned by the wealthy.
I was interested to see you cite that Heritage Foundation report. Let's run down the points. But first, let's pause to note that "poor" here is a ridiculously terrible measurement. The government is currently revising the standard by which it defines poor, which here is defined as those using the cheapest meal plan from the USDA (discussion here). Remember, this "household in poverty" statistic does not take into account the size of a household - a household that makes $x and spend $y on food is poor, no matter if they have no kids or four kids. Ridiculously terrible metric. But there are also flaws with each sort of criticism.
  • "Forty-three percent of all poor households in America own their own homes. The average home owned by persons classified as poor by the Census Bureau is a three-bedroom house with one-and-a-half baths, a garage, and a porch or patio."
True, and an artifact of the hugely subsidized level of home ownership in America. It should also be noted that 2007 was the height of the housing bubble caused by that subsidy and by predatory lending, right before it burst. Plus, is it supposed to be bad that the poor are building equity rather than renting? It makes good financial sense, and at that time credit was deceptively easy to get. I'd be interesting to see the change in it today.
  • "Eighty percent of poor households have air conditioning.
A wall-unit air conditioner costs less than $150 - and it's even cheaper if you buy it used. This is the first of "golly they have appliances they can't be poor" fallacies in this list, which I'll address more thoroughly momentarily.
  • "The average poor American has more living space than the average individual living in Paris, London, Vienna, Athens, and other cities throughout Europe. (These comparisons are to the average citizens in foreign countries, not to those classified as poor.)"
Yes, the average poor American living anywhere has more living space than people living in extremely densely populated cities. That is not very surprising. Space is rather less at a premium in rural Texas when compared to Paris.
  • "Nearly three-quarters of poor households own a car; 31 percent own two or more cars."
Yes. They work. It's frequently an opportunity-cost scenario... I don't know if you've ever ridden the bus, but in the vast majority of America the service is infrequent and slow. Only a few sections of the country are fortunate enough to have sufficient public transport. When I rode the bus to and from work, it added two hours (!) onto my travel time every day. It quickly became apparent that only a few weeks of actually working those two hours would pay for the car itself. Again, another practical financial decision.
  • "Ninety-seven percent of poor households have a color television; over half own two or more color televisions. Seventy-eight percent have a VCR or DVD player; 62 percent have cable or satellite TV reception. Eighty-nine percent own microwave ovens, more than half have a stereo, and more than a third have an automatic dishwasher."
Even Eponine had a canary, until she began to starve. The condemnation of the fact that poor people dare to spend money occasionally on things other than food is staggering to me - even the poor have to occasionally be able to sink down into the couch and do something other than work, and pretending that this makes them somehow privileged is the worst kind of ignorance.
The appliance thing is a different order. To some degree, this is another practical financial decision. If you don't want to spent an hour and a half going to the grocery store every few days, then you have to buy a fridge, for example. But the other is simple ignorance of how much things actually cost, which is perhaps a result of Robert Rector's disconnect on the matter. To buy a cheap or used television, DVD player, microwave, stereo, and dishwasher would cost - what, maybe $1,000? Let's say it's $1,500, instead. Simply put, that stuff is now just plain cheap. That's maybe two months rent/mortgage for a set of devices that have been accumulated over years. But at the same time, record numbers of people have had trouble just putting food on the table recently. This is because stuff is cheap - made in China, automated, chain-store-provided crap - while needs are expensive. The price of televisions has dropped like a goddamn rock, but food and education keep getting more expensive!
What does this argument amount to, really? That the poor aren't poor, right? They're a bunch of whiners who don't pay any taxes, but live like kings. Isn't that what you're really saying, when you decode it?--ADtalkModerator 05:36, 27 September 2011 (UTC)
Nice analysis there AD. Aceace 05:44, 27 September 2011 (UTC)
You're not poor until you're starving, and even then you won't stay poor for long. Capitalism wins! Röstigraben (talk) 06:06, 27 September 2011 (UTC)
Oh, enough faux sympathy for the looters and welfare queens. Break free of your chains and go Galt already! Nebuchadnezzar (talk) 06:26, 27 September 2011 (UTC)
Having only had time to scan this but noting that nobody can escape purchase tax - am I right in my assumption that Nobs is trying to redefine what "tax" is in order to save his point?--BobSpring is sprung! 07:49, 27 September 2011 (UTC)
Yes. And "poverty" as well. Röstigraben (talk) 08:02, 27 September 2011 (UTC)

────────────────────────────────────────────────────────────────────────────────────────────────────

  • subsidized homeownership. The result of the collectivization and communization of American politics and society -- a failure of socialism, not capitalism.
  • air conditioning. The point is not American exploitation of cheap foreign labor and manufactured goods, but rather the standard of living of Americans defined as in poverty. I doubt the workers who build $150 air conditioners can afford one.
  • living space. Space afforded adds to quality of life, I think is indisputable. What needs to be analyzed (and it would be a big task) is the dollar value per sq ft of America vs Europe, irrespective of rural or urban. But the point again is, the American poor have twice the living space of Europe's average and/or middle class.
  • automobiles. It's nice to see the American poor are responsible for polluting and destroying the planet, but that's beside the point. This again, is the result of employment opportunities irrespective of class which may not exist in full-fledged European social welfare states.
  • luxury items. Cable & satellite TV is a definite necessity, I imagine, for someone who qualifies for foodstamps. Why don't they spend the cost of monthly cable TV service on medical insurance premiums for their families? oh wait...I know the answer to that....
  • 'What does this argument amount to? The American poor, who live in luxury, got little to bitch about when, as Elizabeth Warren herself rightly pointed out, they don't have to "worry that maurauding bands would come and seize everything" because the rich factory owner paid for police, fire, national defense protection, as well as the roads they drive on, and (trying to) educate their children.

America could eliminate it's 9% unemployment problem (everyone knows the figure is really more like 15%) tomorrow if it repealed it's $7.25 minimum wage to say, maybe $4.50 per hour; hell, a convenience store clerk who makes $7.25 per hour has no more job skills, nor does a better job, than an immigrant from Indonesia willing to work for $2.00 a day (let's say $2.00 an hour, cause that is about what the labor they do is worth; with experience, maybe $2.50-3.50 per hour). But the communist psychology and mindset has taken root. So for now and the foreseeable future, 10% of Americans with a high school diploma will experience the real minimum wage, zero dollars per hour. nobsEmpty Recycle Bin 22:29, 27 September 2011 (UTC)

I tell you what, Nobbykins. You agree to live for a year on a wage of $4.50 an hour, and after that year we can have a conversation about that proposition. You cannot seriously propose that any American could support themselves on a wage of less than 10K a year. --JeevesMkII The gentleman's gentleman at the other site 22:46, 27 September 2011 (UTC)
If you have the vast majority of the population earning $4.50 an hour how on earth will businesses that sell products to these people make a profit? No-one will have any money to buy anything. DamoHi 22:54, 27 September 2011 (UTC)
Jeeves, how many Americans have lived on zero dollars per hour for the past three years? nobsEmpty Recycle Bin 23:06, 27 September 2011 (UTC)
So, you want businesses to be able to pay people too little to live on, and have the government make up the difference in income support, is that it? --JeevesMkII The gentleman's gentleman at the other site 23:18, 27 September 2011 (UTC)
Nope. I want people to be given the opportunity to work and support themselves. And given back their personal dignity. And the government to not interfere with a person's fundamental human right of free association. We're not all children. If two individuals make an agreement, "I will employ you at $X per hour," and the other free person makes a consider choice, "I accept," that is nobody elses business. We don't need government to make personal decisions for us (like having an abortion, or a rate of pay). We don't need the government making the employer the Boogeyman, sowing divisions in society (like cp:class warfare), to try and make themselves look good as protectors. They created the unemployment problem -- with the minimum wage -- inflated far beyond the value of the same labor by world standards. nobsEmpty Recycle Bin 23:40, 27 September 2011 (UTC)
You're delusional. There's nothing more to say. A minimum wage is a requirement in any country with a functional welfare state, the requirement to pay employees a living wage is the only way to prevent a welfare state acting as a stealth subsidy to businesses unscrupulous enough to pay their employees under the cost of living. There is no reasonable argument to be made that a worker, working full time, should not be paid a living wage.
I suppose you could go the full 19th century and say that we ought to abolish the welfare state too. We know exactly what sort of society that produces, and nobody in their right mind wants to go back to that. Not unless they're already obscenely rich, and incredibly immoral to boot anyway. I've spent a long time living in India. I know what a non-functional state looks like. I had a pretty big culture shock on perhaps my second day of work there, when I came to appreciate that my fellow software engineers weren't paid a wage that allowed them to purchase a computer for their own use at home. Of course this pretty much meant they were all terrible at their jobs and had no prospect of improving themselves, but I'm sure they were cheap. I like living in a country where I don't have to step over at least one corpse on my way to work. I like living in a country where the cops stop you to enforce the law, not to solicit a bribe so they can actually eat today. I like living in a country where public works are completed in less than a decade after their planned completion date. I like living in a country where I'm reasonably sure my house won't collapse and kill me. I don't want to live in the 19th century libertarian "paradise" you want. For someone who has spent so much time trying to root out "commies", I would have expected a little more economic common sense from you. --JeevesMkII The gentleman's gentleman at the other site 01:01, 28 September 2011 (UTC)
I also like living in a society where my wife can get top notch health care (including hospital stay, surgery and drugs) for $15.00. Aceace 01:05, 28 September 2011 (UTC)
  • I like living in a country where the cops stop you to enforce the law, not to solicit a bribe so they can actually eat today.
You should move to New Mexico, public officials don't need money to eat, they need money to buy hookers, booze, and drugs. [1][2][3][4]. Ah, yes, the price of progress and living in modern society. nobsEmpty Recycle Bin 19:57, 29 September 2011 (UTC)
First, Rob, note that you have sort of abandoned the real topic of this argument in your latest reply. If I could draw your attention back to your defense of the assertion that half of the country pays "no tax"? You have defended this by arguing that, if equal or greater benefits are received, then the taxes paid don't count as "taxes." I rebutted this by pointing out that taxation is not measured by raw volume of money, but by the impact of the burden - a poor family might seem to receive more benefits in your view, but the taxes they pay in sales and whatnot are still a serious hit to their quality of life. They are very much taxes.
But I'll also keep addressing this Heritage report, too.
  • "subsidized homeownership. The result of the collectivization and communization of American politics and society -- a failure of socialism, not capitalism."
Interesting and wildly beside the point. We're talking about an assessment of reality, not about some ideological greater argument over the reasons for that reality. Aliens might have come in and forced subsidization of ownership, and it would be besides my point, which is that the level of home ownership is NOT reflective of the level of wealth of the poor! You're just agreeing with me, but attempting to salvage something for yourself out of the point with that red herring. It's like arguing that people in North Carolina are wealthier and better off than Alaskans because they spend less on heating oil!
  • "air conditioning. The point is not American exploitation of cheap foreign labor and manufactured goods, but rather the standard of living of Americans defined as in poverty. I doubt the workers who build $150 air conditioners can afford one."
Standard of living is relative. I would have thought this would be obvious. We don't compare Americans, who live in the wealthiest and most advanced country in the world, with Ethiopians. We compare them to other Americans - or else we compare the relative levels of wealth with the relative levels of wealth in other countries. That's why I'm not considered as wealthy as an emperor of Rome, even though I have the outrageous luxury of citrus fruit and daily hot showers. I guess I can go into more detail on this, but it just seems to be of a part with the attitude that the poor aren't "really" poor unless they're out digging turnips to stay alive.
  • "living space. Space afforded adds to quality of life, I think is indisputable. What needs to be analyzed (and it would be a big task) is the dollar value per sq ft of America vs Europe, irrespective of rural or urban. But the point again is, the American poor have twice the living space of Europe's average and/or middle class."
No. The American "poor," including both urban and rural, have twice the living space of Europe's average resident in a highly urbanized area. It's not even close to being a valid comparison - it's like saying that the average American
It seems pretty likely that Americans on average enjoy more space, although you have not actually proven that. But that's because space is cheap - again, it's a factor of massive home ownership subsidization. The poor aren't wealthy because they have homes, it's just that that government has artificially inflated their level of space with subsidies. Red herring, again, and not a measurement. See the above point about NC vs. AK.
  • "automobiles. It's nice to see the American poor are responsible for polluting and destroying the planet, but that's beside the point. This again, is the result of employment opportunities irrespective of class which may not exist in full-fledged European social welfare states."
Really? Take a bus and tell me that again (assuming you don't live in NYC or similar limited area). Tell me again how lucky the poor are that public transportation sucks.
  • "luxury items. Cable & satellite TV is a definite necessity, I imagine, for someone who qualifies for foodstamps. Why don't they spend the cost of monthly cable TV service on medical insurance premiums for their families? oh wait...I know the answer to that...."
What is the answer? I'd like you to spell it out. Is it perhaps "the poor are lazy?"
I know the real answer. It's because basic cable is perhaps $30 a month, whereas health insurance for a healthy family of four is $250-500 a month. I guess forgoing all entertainment for a year will buy a month of health insurance. It's of course entirely reasonable to demand that the poor work and sleep without respite until they die. They want to watch television!? Outrageous lazy fools! Back to your turnips, serfs!
  • "The American poor, who live in luxury, got little to bitch about when, as Elizabeth Warren herself rightly pointed out, they don't have to "worry that maurauding bands would come and seize everything" because the rich factory owner paid for police, fire, national defense protection, as well as the roads they drive on, and (trying to) educate their children."
The American rich, who have enjoyed skyrocketing levels of wealth and a gap between their level of attainment and that of the rest of the country which has grown by enormous leaps, got little to bitch about. The American poor, whose wages have been steadily eroding in the fact of the cost of the necessities of life (not cheap plastic crap), and who have been bailing out the wealthy repeatedly by piling debt on the backs of their children, have a lot to bitch about. Maybe if the wealthy actually were paying for those things, they'd have something to complain about. Instead, those things are paid for with debt and the wages of the middle class, while the income of the rich escapes the taxman thanks to low capital gains and other loopholes only accessible to the wealthy.
Stripped of your rhetoric, your view seems again to amount to, "the poor are lazy and stupid whiners." Isn't that right?--ADtalkModerator 02:50, 28 September 2011 (UTC)
Well done again AD. Aceace 19:44, 28 September 2011 (UTC)

The widow's mite[edit]

all they did cast in of their abundance; but she of her want did cast in all that she had --Mark 12:44

@AD: This is the short answer to a very good question. And there's other arguments to be examined as well. But let's realize for a system of taxation to work it must be voluntary. Coercion only meets resistance. You can't legislate morality. nobsEmpty Recycle Bin 20:10, 25 October 2011 (UTC)

To a certain extent, you can and should legislate morality - or rather, applied ethics. Murder is discouraged through penalties, for example. You can't make people consider it wrong inside, but because free murder is incompatible with an orderly society, we make it illegal. It's not just possible, it's necessary.
And of course taxation will meet resistance. Some people don't want to pay for social services, they just want them for free - no matter their own wealth. If you run the government on voluntary contributions, you have no government. Again, this is why no one tries to do it that way.--ADtalkModerator 20:33, 25 October 2011 (UTC)
The Dispensation of Human Government was inaugurated to deal with this particular problem: murder. And government of course needs some system of taxation to support it. By voluntary I mean, a level a taxation people consent to. People agree to live in an organized, civil society by voluntary consent. "Socrates' agreement to live as a citizen was voluntary...". nobsEmpty Recycle Bin 17:45, 28 October 2011 (UTC)

Serious Question for Rob[edit]

Serious question Rob (not an attempted needle). Do you have any sympathy for someone in your own country who is unable to find shelter and so dies of exposure? What about someone who starves to death? Do you think such people should simply be allowed to die? DamoHi 00:02, 28 September 2011 (UTC)

[5]--ADtalkModerator 20:30, 24 October 2011 (UTC)
Been following the Occupy Wall Street riots? The "professional revolutionaries" (“productive” members) have no use for the cp:Lumpenproletariat;
The "dangerous class", the social scum, that passively rotting mass thrown off by the lowest layers of the old society, may, here and there, be swept into the movement by a proletarian revolution; its conditions of life, however, prepare it far more for the part of a bribed tool of reactionary intrigue. -- Karl Marx
In this case, bribed with a gallon of vodka. nobsEmpty Recycle Bin 20:10, 25 October 2011 (UTC)
That quote and concept seems to have almost nothing to do with OWS, which is strikingly non-Marxist.--ADtalkModerator 20:34, 25 October 2011 (UTC)

Some other information[edit]

I believe I have very clearly debunked the idea that the poor pay no taxes. But there's a lot of intricacy around this, so it's worth looking at some other tidbits.
It's true that the top 1 percent pay almost 40% of all federal income tax. They have very high incomes, so even though the slope of graduated income tax fades to almost flat for them, they still pay out a lot. But income tax is less than half of all federal tax income, and only 20% of all taxes when you combined state and local taxes in (varying somewhat depending on where you are, of course). When you look at the other half of federal taxes, you find that they come in the form of the Social Security tax, Medicare tax, and payroll tax. And those are paid mostly by the bottom ranks, because (for one) you only pay Social Security taxes on your first $100k. Make $100k, a million, or a billion: you pay the same amount of Social Security tax.
And then consider that payroll tax. How do the wealthy earn their money? If they have any sense at all, it's not through a payroll. They make their money through investments, which has only two brackets, the top one being at 15%. Or if you're really rich, you can pay almost nothing. Hedge fund managers usually pay almost no taxes, because they are exempted from them as long as they roll any earnings back into their fund (they "make money" by taking out loans with those funds as security, at almost invisible interest rates). The owners of the Dodgers pay no taxes, as another example, because they don't pay themselves anything (they "make money" by taking out loans against future ticket sales, at almost invisible interest rates). These are obviously not options available to anyone but the wealthy.
One argument, expressed at length above, is that the poor have nothing to complain about in America. They have it much better than other countries, and they're not "really" poor. I've debunked specific items, like the idea that owning a fridge is a luxury or that the poor shouldn't be allowed to have cable. But it's interesting to think about a medieval analogy. Imagine the amusement of the Merovingian Pepin the Short of the Franks and his feudal lords in 760.
"These serfs! Who do they think they're kidding, whining about the way things are? Yes, the nobility owns 95% of the country, but we also pay a huge amount of the taxes! Last week one of my tenants paid the fee for the land I let him use in turnips - maybe a guilder's worth - and complained about the amount! Whereas I paid more than a thousand guilders last year on my trade mission to Portugal! They think they have it badly - I think we've all heard about the Russian peasant, who really has it tough. Or think about a generation ago, when these peasants didn't have moldboard plows! But now, half of them have iron plowshares! Fewer than one in ten of them are using scratch plows - these serfs have to plow only eight hours a day! Just lazy, is what I call it."
The difference is purely a question of degree. Wealth is relative, and the wealth of the richest and that of corporations has been skyrocketing, while everyone else has been standing still or declining. Elizabeth Warren was absolutely right, and the Occupy movement is awakening to that fact.--ADtalkModerator 04:49, 1 November 2011 (UTC)

The fallacy of the Buffet Rule[edit]

  • Right now, because of loopholes and shelters in the tax code, a quarter of all millionaires pay lower tax rates than millions of middle-class households. Right now, Warren Buffett pays a lower tax rate than his secretary. -- Barack Obama, State of the Union speech 2012
The fallacy of this argument states, because A has X properties and B has Y properties, A = B. It is a classic apples and oranges argument. The underlying assumption is voters do not understand the difference between wp:ordinary income and capital gains. Without getting into why a distinction in type of income was created [6], we shall endeavor to explain the difference and the inherent unfairness in Obama's proposal.
In the United States, most homeowners (67%) largest investment other than stocks in their 401(k)'s, is a home. A capital gain, unlike ordinary income from wages, is subject to a capital gain holding period, currently at 12 months. When Warren Buffet or Mitt Romney purchase a stock in July, they cannot sell it til the following July to qualify for the capital gains rate. Both 401(k)s and homes require a much longer holding period - 401(k)s until retirement age, and homes can take up a 30 year mortgage and beyond. So a typical American's exposure to the cap gains tax takes place when they draw on their 401(k), or sell a home. The only way to avoid cap gains on a home is to repurchase another home[1] at a higher price than the one just sold.
Here's an example just brought to my attention: a woman purchased a home several years ago at $225,000 and afterwards did $100,000 in improvements. The mortgage payment (wp:PITI) was $1600. She refinanced to extend the term and lower the payments, however a current appraisal assessed its value at $225,000. No homes in the neighborhood have sold for $300,000+ in recent years and are unlikely to anytime soon. If she were to sell she would have a $100,000 capital loss, (or exemption from the next $100,000 in future income, assuming she can work, etc.), and in a forced sale now the home may not bring $225,000 under current conditions. To ever realize any gain, she may have to wait 10, 20, or 30 years to recoup her current $325,000 investment plus whatever it sells for over that price. Then, after waiting that long, under Obama's proposal, she may have to pay top corporate or fat tax rate of 30%.
The same analysis can be made for the 49 million Americans with 401(k)s.
The underlying assumption here is Americans are too stupid to recognize a cp:class warfare argument that really is directed at raping them of their homes, their lives, and their savings.
Next up: Analysis of why the cap gains holding period is at 12 months, its relation to the stock market and the affect on job creation. nobsModerated 21:19, 9 February 2012 (UTC)
I guess you've decided to drop your earlier claim that the poor pay no taxes. Fair enough.
I've read this new argument several times, and just don't understand the point. I may be stupid on this one - what are you trying to say? You give an explanation of parts of the capital gains tax, but you don't ever make any point. You give one example of a woman who bought a $250k house and made $100k improvements, only to discover that the house is still worth $250k under appraisal (suggesting she overpaid or was the victim of some sort of remarkably bad luck) - but why is that relevant? And would she have to pay 30%? Assuming current law isn't extended (under which she would pay 15%) she'd only have to pay 20% (10% if she's low-income). And really, unless there's something funny going on, she should pay almost nothing if she sells soon like she wants, because there's an exclusion for primary residences for just this sort of instance ($250k is exempt). The same goes for those 49 million with 401(k)s, who now pay either 15% or 0% and who will be paying either 20% or 10% (for retirees, almost certainly the latter). What is your point here, considering how you don't seem to actually know the ins and outs of the subject?
Anyway, the relevant point is that the very rich pay very little, because they roll as much of their income as they can into capital gains, which is taxed at a lower rate. You do not at any point address why it is fair for the rich to pay a lower rate than the poor - which would seem like the most salient thing to speak about.--ADtalkModerator 22:35, 9 February 2012 (UTC)
1) No, the poor render back in taxes only a portion of the benefits they receive from government tax revenues.
2) The point: income is defined by type. One type is taxed as ordinary income, the other capital gains. And comparison of the rate between the two is fallacious.
3) Most Americans, that is homeowners and retirees with 401(k)s, will experience the capital gains tax at some point in their life. The capital gains tax is income or gain from the sale of a tangible asset over and above its basis cost. This gain may take 30 years to realize, or represent 30 years labor. The gain can be quite sizable over its basis cost, given inflation over 30 years. The lower cap gains rate is just one of the incentives for deferring instant reward, making personal sacrifices, and a longterm commitment. The boon to the economy for this is providing a pool of capital for job creation.
4) Many, many, 10s of millions of Americans are now "underwater" in their mortgage commitments, given their home now appraises for, or sells for, less then what they paid. The market forecast is quite bleak; (for example, at the current rate foreclosed homes are being re-sold, it will take 9 years to get rid of all of them. This is not good for the future of the new home construction -- where nearly all the job loss from the 2008 recession occurred).
5) So, given 50 to 75 million (at least) homeowners & retirees (the largest voter participant block) who made serious longtermn commitments in mortgages and 401(k)s, knowing full well the longtermn tax consequences, now are threatened with being treated as super rich fat cats and a tax rate commensurate with that, they won't be fooled. They see Obama's bullshit for what it is -- an appeal to class envy and hate for the young and naive as an election year gimmick with potentially catastrophic results for everything they've worked for.
But now we can look closer at these alleged "millionaires and billionaires" who make or are worth $250,000. And the consequences of tampering with the capital gains holding period which would either make no difference between cap gains & ordinary income, or extending it farther to make a lesser gain over a longer period. nobsModerated 00:07, 10 February 2012 (UTC)
  1. Of course. But then, that's a very different claim to make.
  2. If it's fallacious, then why did you response to Obama's criticism of the lower income tax rate for the wealthy with a diatribe about capital gains tax? Unless you are - implicitly and accidentally - admitting that the wealthy generally pay the latter and not the former?
  3. In theory, that's the case with trickle-down economics: the rich get to pay less because they use the wealth to create jobs. I am not aware of empirical data on the subject that shows it to actually be the case, though. Incidentally, I already pointed out that homeowners are exempted from the tax and retirees will pay a vastly reduced rate (assuming their 401k is pre-tax, like most folks). That's by design: the capital gains tax is intended to collect money from the wealthy who avoid the income tax partially or in whole.
  4. Yes, the economy is bad right now, housing in particular, although it's improving.
  5. You don't seem willing to acknowledge any of your basic errors of fact. Homeowners are excluded.[2] Capital gains taxes are graduated taxes, so retirees with 401(k)s are not treated as "fat cats."[3] That is because the capital gains tax is designed to tax those "fat cats" who are rolling all their income into capital investments. A good recent example is Mitt Romney, whose returns[4] show that he pays almost no income tax, but instead almost purely capital gains tax (i.e. 15%). This is probably a lower tax rate than his secretary.
For serious, read up on this stuff. You don't seem to grasp even the basics about it, which might explain why you hold the opinions you do.--ADtalkModerator 00:51, 10 February 2012 (UTC)
  • The capital gains tax is not a "lower rate for the wealthy". It is lower rate for anyone as a way of discouraging current consumption in favor of providing working capital to employ people. Putting (other) People First (before your own consumption). The AMT is the tax "for the wealthy".
  • Homeowners are not excluded; they may take a one time exclusion after age 55, the theory being (1) the home is paid for; (2) the kids are grown; (3) they don't need a large home anymore to raise kids; (4) they are approaching retirement and need the lifetime investment in the appreciated value of the home as as a pool of cash savings to provide for retirement, being that Social Security was never intended to provide subsistence. If a home is sold prior to age 55, they must either (a) buy a more expensive home, meaning higher mortgage payment, more debt, longer term, etc., or (b) buy a cheaper home than the sales price of the old home & pay cap gains on the difference; or (c) pay cap gains on the entire realized gain over the original basis cost.
  • Capital gains tax is not intended to collect money from the wealthy, it is meant as an encouragement to save and invest. Even New Dealers recognized the absolute necessity of encouraging investment to trickle down for jobs by tinkering and shortening the holding period so an investor could realize a gain, (i.e. take a profit) in a shorter period of time, and reduced the holding period[5] even further to 6 months as an incentive to provide jobs during WWII. By the 1970s however, this was recognized as a factor leading to stock market volatility and disruptions to the business cycle which inconvenienced serious longterm investors. So generally speaking, when the stock market has an up day, serious investors are saying they believe the stocks they bought today will be higher one year and one day than what they paid for them today (at least greater than what other investments are paying right now, plus the 15% to cover the capital gains tax). By capping incentives to pool capital and job creation, you cap job creation. nobsModerated 02:24, 10 February 2012 (UTC)
The capital gains tax is indeed for the wealthy, as Romney concretely and usefully demonstrates. But whatever, that's just a subjective distinction anyway, and not pertinent.
I see you realized your own mistake about the house exemption.
Yes, you've made it abundantly clear you believe in trickle-down economics. Tell me, what happened in a recent real-life application: what happened to the funds from the corporate tax holiday?
I note that you aren't actually addressing the justice of someone like Romney or Buffet paying a much lower tax rate by virtue of being wealthy enough to roll their income into capital gains. Romney paid 15%, a far lower percentage than I did. I think that's terribly unjust, since I believe in graduated taxes that equalize the burden. Even you, who appears to believe in the sacredness of a particular number rate (be it 20% or whatever) must agree that it's unfair that a rich person pays a lower percentage than you.--ADtalkModerator 09:23, 10 February 2012 (UTC)

Capital gains vs ordinary income compared.[edit]

  • The employee is mandated by law to be compensated (i.e. reimbursed) twice monthly (every 14-15 days), regardless whether or not the value of his labor has been sold to reimburse the owner of the business for his/her costs.
  • In most cases, the employee furnishes nothing for the materials of production or overhead costs. By contrast, the owner of the business supplies everything, including current payroll, whether or not the employee's labor has been converted to reimburse costs, maintenance, and profit. In some instances (agriculture for example) this can take months; in others (some manufactures and construction), years.
  • To meet current payroll and other mandated expenses (payroll tax, work comp, UC, benefits, etc) the owner may have to go into debt to comply with law that requires a twice monthly paycheck.
  • All these expenses are paid out of the capital employed by the business owner. Yet their is no guarantee the business owner will ever be reimbursed. 80% of all new businesses, for example, fail in two years. By contrast, the employee risks little or nothing, and just has to show up for work over a 14 day period.

Ultimately, in the American system, one must learn how to convert ordinary income into longterm capital gains. In the interest of full disclosure, everything I learned about tax law and the legal theories behind it, including how to convert ordinary income to capital gains, was learned from William J. Casey's now outdated books, long before Casey became Reagan's campaign manager or CIA chief. Wikipedia credits Casey with coining the term "tax shelter" [7]; and it may very well be possible he did. nobsWe Are the 91.6% (still employed)!!! 02:05, 14 February 2012 (UTC)

You seem to be arguing - unbelievably enough - that employees have a systemic advantage. As a response to the discussion, you must then be trying to argue that it's just for the rich to pay a lower share because they are crippled by their status as employers rather than employees, generally speaking. That is, frankly, an astonishing argument to make, and belied by the truth. If it's not your argument, then that entire response seems unrelated and superfluous.
You point to several things that are against employers. Several of these disadvantages are real, although I would argue that they are fairly minor. Yes, employers are expected to pay salaries regardless of liquidity (you mention this twice), although it'd be a short-lived businessman who wasn't running the numbers in a smart enough way to stay at least three months ahead. And yes, employers must furnish location and materials for their employees with their investment, even if they can't immediately recoup that investment. And of course, they are taking on risk as the business owner.
But you forget that the employer has several enormous advantages, as well. First of all, the wealthy seldom actually take on serious risk. Most rich business-people are smart enough to hide their liability with incorporation and take on debt-financed capital, rather than exposing themselves to bankruptcy or the loss of personal wealth. Small-business owners may not have or be aware of this luxury, but then they're not the super-rich earning their money from capital gains, since most small business owners subsist on self-administered salaries - so they're not who we're talking about. Employers also have the substantial benefit of leverage: they are in charge, so they may hire and fire and order their employees about, limited only by an increasingly weak union sector. In addition to the obvious material benefits, this comprises even greater leverage: generally speaking, large businesses have little to fear from an employee quitting, whereas most employees would suffer dire consequences from being fired, and so employees will willingly endure unfortunate conditions or odious tasks that may entail the reduction of what leverage they do have. Further, while an employee's investment ("just has to show up") may be minor, their potential rewards are equally minor - especially since they will be taxed on them. The wealthy business owner, on the other hand, has the prospect of enormous gain (indeed, staggering in some sectors) and a lower tax rate.
I could list many, many other benefits of being a wealthy business-owner, but it seems silly to go on. Clearly, the wealthy employer is at a significant advantage, and doesn't need a substantially lower tax rate to help him out even further. Your argument is tantamount to looking at a wooden rowboat and a gleaming yacht and concluding that the occupant of the rowboat is in a better position, because he doesn't have to worry about engine maintenance, hiring a crew, or paying for gas. At the end of the day, he still has a goddamn yacht!--ADtalkModerator 03:56, 14 February 2012 (UTC)
That's just a restatement of the "they're wealthy, they can afford it" argument. You are simply stating that an employer with enough liquidity to carry a payroll three months to two years is "wealthy" when in reality having a large enough cash flow may simply be necessary for survival in that particular business. What virtue exists in working for a business that is hanging by its fingernails, living hand to mouth, with the wolf constantly at the door?
And again, the capital gain (assuming there is one after all adjustments) would only be taken after the business is sold. The owner of the capital has to part with the capital completely, i.e. wash his hands of the asset, in order to take gain. At that point, he's no longer the boss. The case of Buffet and his secretary is a very poor comparison because few people depend on capital gains as their sole source of income, year after year, and have staff to help manage. I'm sure Buffet takes a salary, as Bill Gates and that kid who owns Facebook does, too. All things being equal, Buffet would also pay ordinary income tax at the maximum ordinary income tax rate. In the years he has substantial capital gains, his overall average tax rate would be much lower. But few people depend upon capital gains as their sole source of income, unless your regular trade is buying and selling assets. The Alternative Minimum Tax is what you're talking about. nobsWe Are the 91.6% (still employed)!!! 08:07, 14 February 2012 (UTC)
I'd be willing to bet Buffet doesn't take a salary except a very low nominal one, because he'd be stupid to do so. Why pay in a higher tax bracket when he can pay 15%, lower than his secretary? Romney is the same way, which you can actually see from his return: he doesn't pay himself a real salary or income to live on, because that would cost him a lot more.
Most wealthy people are the same way - or at least all the ones with an accountant are, i.e. damn near all of them, because why voluntarily pay more money in taxes? If I had the capital you can damn well bet I'd be paying that sweet low rate of 15%! Just like the wealthy, I'd put my money into investments, deduct my losses, and roll it into financial institutions that allow me to treat further proceeds as carried interest - keep as much from ordinary dividends as possible. Romney's unusually good at this under the current wealth-friendly environment, keeping it below the 15% capital gains tax (what'd he pay - 14%?), but most all the super-wealthy are smart enough to do this. We don't have a lot of public returns from the last decade, but (for example) John Kerry paid 13% and George W. Bush paid 20%.
Anyway, where was I...
No, I'm not arguing that we should soak the rich because they can afford it. I was carefully countering the specific points you had just made in your argument that employers have it hard.
And you seem to have a very simple idea of capital gains. If I owned a big business with a big enough cash flow, I'd put profits out of the business into further investment, paying myself from debt borrowed against it or borrowed against my stock (standard arrangement), or roll my dividends into a long-term investment before the FY end, and again work under capital gains. I'm not sure if you're naive or deliberately pretending that this all works in a vanilla way, but it would take a curiously foolish businessman to pay himself a salary that scales upward much past $150k, penalizing himself with high taxes, never paying capital gains until he sells his business in his dotage. This is why, functionally, the very wealthy pay a much lower rate than they are supposed to pay, and often pay at a lower rate than the middle class.
The wealthy benefit from the system, and should pay into it a fair amount. The burden should be equal among the classes - the rich shouldn't pay less.
But of course, all of this is completely beside your indefensible first statement that you have been obfuscating for this whole time, when you said "[t]he facts are, there is a very large segment of people who work, as well as people who don't work, who pay no taxes at all." Everyone pays taxes of some kind, even if there's a sector that (in your opinion) receives more value from the government than they pay for. Perhaps you can just admit that and we can move on with our lives?--ADtalkModerator 08:42, 14 February 2012 (UTC)
In a way you are arguing my point: the income to a business (business income minus business expense) would be taxed in the year received as business income, either corporate, LLC, or sole proprietorship. In the cases of corporate or LLC, it then would have to be distributed or taken out of the business, then taxed as either (a) compensation to an owner who is on the payroll as (W-2) ordinary income, or dividends to a shareholder (1099 income), which also is ordinary income. The only way for the business to avoid a large corporate or business income tax would be to expand the business by purchasing some business related asset. And the business would still have to wait one year for a capital gain (or loss). And there are rules & regs governing these actions whether or not they are abusive shelters done strictly to avoid paying business taxes.
For a business owner trying to avoid ordinary income tax rates, he still is faced with the problem of taking the income out of the business (other than sole proprietorship). Berkshire-Hathaway is not a sole proprietorship, but rather a publicly held company. So any personal income Warren Buffett receives as a capital gain trading on behalf of his own investor account while acting in the capacity of CEO of a publicly traded company, and sticking the shareholders with the cost of maintaining his secretary's salary, is may be a conflict of interest if not done properly. nobsWe Are the 91.6% (still employed)!!! 13:01, 14 February 2012 (UTC)
IOW, Warren Buffet would first have to hire himself as an investment adviser at Fair Market Value with authority to make decisions and trade on his behalf. As Warren Buffet's investment account realizes capital gains after a 12 month period, it would be incorrect to refer to the investment adviser's secretary as "his" secretary, she is Warren Buffet's investment adviser's secretary. She works for Berkshire-Hathaway, not Warren Buffet the individual income tax filer. Now, it is possible Warren Buffet has two entities, (1) a large share of Berkshire -Hathaway stock, and (2) Warren Buffet sole proprietorship which carries a payroll and receives income from an investment account managed by Berkshire-Hathaway. But I personally would consider this a deceptive business practice if Buffet used the New York Times to pitch some odd investment scheme or harebrained publicity stunt for public policy advocacy without disclosing the real nature of two separate entities. nobsWe Are the 91.6% (still employed)!!! 13:29, 14 February 2012 (UTC)
I'm arguing your point? What is your point? You keep reciting halfway accurate things about finance and taxes, growing increasingly more byzantine as I challenge you and you're forced to go look things up, but never actually arrive at an argument. Rather than getting into the bushes on this again, arguing minutiae as you educate yourself, could you just tell me flat-out what your argument might be? Are you saying that the tax system is just? Are you saying it's too progressive? And for whatever your argument is, provide some evidence as to why you think that's so - that's when you could shoehorn in some of the stuff above if necessary.--ADtalkModerator 21:38, 14 February 2012 (UTC)
I'm saying the cap gains vs ordinary income is an apples and oranges argument. There is no comparison. Bill Gates, who pals around with Buffet, never ASFAIK took more than a $250,000 salary at ordinary income tax rates. Unlike Buffet (or Romney), Gates and Mark Zuckerberg are not in the business buying and selling assets. And you've never produced an argument more than "they're rich, they can afford it". nobsWe Are the 91.6% (still employed)!!! 23:52, 14 February 2012 (UTC)
Yes, capital gains and income taxes are different taxes, so in a weird way it's "apples and oranges." But because the ultra-rich of all stripes hide their funds in assets rather than taking a simple income, they usually pay only the former, not the latter. You choose Bill Gates as an example. Okay, let's do him.
When Gates was last a CEO, he was paid a million dollars per year. But almost all of his compensation was actually in the form of stock, to the tune of 580 million shares, and in the form of 80 million shares he sold, taxed as capital gains. All told, the ratio of income that's taxed as income versus what's taxed as capital gains is 1 to 2,371.
In other words, one of the people you picked as an example paid almost no income tax at the height of his earning power, and his functional tax rate was certainly less than 16%.
You don't know what you're talking about, and are just clearly, obviously, certainly wrong on the facts.
My argument, which I have repeatedly and clearly made, is twofold:
  • Your initial statement, that a group of people pay no taxes, is blatantly and demonstrably false.
  • The burden of taxation should be equal on everyone, and because of the way money works in people's real lives, that means income and capital gains taxes should be graduated in a manner similar to the current one, but with higher rates for the wealthy. This is not "because they can afford it" - something I have never said - but because currently their tax burden is far too low, as illustrated by every offered actual example.--ADtalkModerator 00:33, 15 February 2012 (UTC)
So, Gates compensation in shares escaped the ordinary income tax rate (what you refer to as a "simple income"). Look at the definition here, it asks "What is Capital?", and gives an example,
In 1975, when Bill Gates decided to form a computer software company and then brought MS-DOS to market, he created capital.
Microsoft was incorporated with X amount of shares, a handful of investors, and it's best capital asset was Bill Gates idea. Over the years, other investors came in, the company went public, shares were split (that is to say, fractionalized), bidding for the fractionalized shares increased their value, and Gates deferred current income (that is to say, not taking ordinary cash income, in favor of the appreciated value of his own idea). Gates, like Buffet's secretary, paid ordinary income tax rates on his salary & bonuses as an employee of the company he founded throughout his career. At various times over the years Gates sold a portion of the appreciated value of his own idea to the tune of 80 million shares, however as a CEO and insider, his liquidation of the stock is strictly regulated (for example, Ken Ley & Jeff Skilling's dumping of Enron at appreciated values kicked off SEC, FBI, and Congressional investigations).
The point here is Gates was not compensated in cash, but in the appreciated value of his own idea. And he could not realize that gain until he parted with it. This took damn near the better part of an adult lifetime, and even then SEC regulations don't allow him to realize it fully. There simply is no comparison whatsoever between ordinary income and capital gains. And Buffet & Obama simply spew bullshit when they say "Buffet's secretary"; she is not "Buffet's secretary", she's an employee of the stockholders of Berkshire-Hathaway. And she gets paid first, well before her bosses, the investors of the capital ever get paid, assuming they ever make any money. nobsWe Are the 91.6% (still employed)!!! 03:12, 15 February 2012 (UTC)
Basically you can replace "appreciated value of his own idea" (where the hell did you get that term? Atlas Shrugged?) with "incredibly valuable stocks" and you can see why your "argument" is nonsense. So he has to sit on a mountain of stock for a while before he can sell it off, and somehow that makes up for the substantially lower tax rates? You make no sense. Cow...Hammertime! 17:56, 15 February 2012 (UTC)
What is the value of one share of Microsoft? In 1995, when Windows '95 first appeared at Wal-Mart, it sold for $100. What was the liquidating value of 8 ozs. of cardboard, plastic, and cellophane? yet one unit sold for $100 per copy. nobsWe Are the 91.6% (still employed)!!! 20:24, 15 February 2012 (UTC)

Stock options[edit]

What is your point, here? I already pointed out that, yes, he payed income tax throughout his career on his salary. When he wasn't very rich, that salary constituted the vast majority of his income, like with almost all people. But when he was very rich, that salary was a tiny fraction of his income. The rest of his income came from those shares, taxed as capital gains. Nor did he actually have to wait his whole lifetime - he was able to sell shares immediately as they were issued, or he could have sold equity in his company, etc.
See, you're appealing to the specifics of Gates' case now to make an argument for the unusual virtue of capital gains earnings; with your florid descriptions of how long he waited and how hard he worked and the limits on sales, you seem to be saying that capital gains money is just better in some ineffable way, and so it should be taxed less. This seems to go hand-in-hand with your bizarre arguments about how employees must be paid before profits (or dividends, etc.) can be realized and so employees have it so very good, except until you realize that employers can cut salaries between terms (almost universally annual affairs), fire their employees, intimidate them, etc. As I said before, your argument is tantamount to looking at a wooden rowboat and a gleaming yacht and concluding that the occupant of the rowboat is in a better position, because he doesn't have to worry about engine maintenance, hiring a crew, or paying for gas. At the end of the day, he still has a goddamn yacht!
Look at another real example, like James Dimon, CEO of J.P Morgan and Chase.[6] Salary: $1m. Bonus: $5m. Value of stock options awarded: $31m! Right from the start - without any legerdemain - 84% of his income is going to be taxed at a lower rate than 100% of mine or (presumably) yours! And considering how his bonus is probably going into a tax shelter in toto, because he's wealthy enough not to require serious liquidity, his overall tax rate is probably going to be something like 16%. His work doesn't have any explicitly greater moral worth than most people's. He certainly hasn't worked there a lifetime (seven years) or achieved the, um, appreciated interest of his own idea. That's the problem with your florid paean to Ayn Rand: once the example changes to a more typical individual, then it goes right to hell. Because as hard as the poor, pitiful wealthy have it, they still somehow manage to be getting insanely goddamn more rich.--ADtalkModerator 21:05, 15 February 2012 (UTC)

──────────────────────────────────────────────────────────────────────────────────────────────────── Your missing some of the points; James Dimon will not pay cap gains tax on $31m until the shares are sold, and his ability to sell them are strictly regulated by insider trading rules. In the year $31m in stock options is received, he will report the fair market value ($31m) as income and pay ordinary income tax rates on that amount; $31m then becomes then the basis of his asset, which will be subtracted from the selling price to calculate his gain.

So the bottomline is, he pays ordinary income tax rates on his compensation (stock options) at the maximum rate, then when he sells the appreciated value sometime after a one year holding period, he pays a lower cap gains rate only on the portion of gain over $31m. nobsWe Are the 91.6% (still employed)!!! 21:34, 15 February 2012 (UTC)

You are flat-out wrong.
When you get stock options, you get income at one of three times: at that time, when you exercise the option, or when you sell the option. You may need to pay AMT on the actual amount you spend to purchase stock (i.e. a fraction of the optioned shares) if you do it immediately, and you'd have to report them as ordinary income if you exercised them then sold the stock immediately (never done). But you do not report options as ordinary income or pay taxes on them as at income tax rates. That's because these are statutory stock options because they are ISO (incentive stock options).
I beg of you, do not give anyone tax advice because you will cost them money.--ADtalkModerator 21:57, 15 February 2012 (UTC)
  • When an NSO is exercised, the employee recognizes compensation (ordinary) income in an amount equal to the spread at exercise. [8]
and there's still a one year holding period after exercise of the option to realize a gain, i.e. the difference in sale price over cost (basis). And ISO's have even a longer holding period:
  • ISOs must be held for at least two years from the date of grant and at least one year from the date of exercise to qualify for favorable capital gain tax rates.
This is a far cry from what you alluded to: that Dimon's $31m option grant all received favorable cap gain treatment. The basis cost must first be deducted, and the tax is on the increase, or gain. nobsWe Are the 91.6% (still employed)!!! 00:51, 16 February 2012 (UTC)

──────────────────────────────────────────────────────────────────────────────────────────────────── So, let's clarify some of things we are talking about:

  • The Alternative Minimum Tax is an ordinary income tax for high earners (over $75,000) that simply disallows all deductions. There is no requirement to buy and hold an asset, calculation of basis, etc. etc.
  • The argument propounded here is that high income earners take capital gains annually, which simply is not the case. Warren Buffet, and Mitt Romney, whose regular trade or business is the buying and selling of capital assets, do take cap gains annually in addition to a modest salary. Bill Gates, James Dimon, Mark Zuckerberg, and Dick Cheney do not take capital gains annually, but only at times the sale price and other circumstances make ot warranted.
  • To penalize all asset holders, large & small, mom n' pop and multinational, because one big fat slob (Warren Buffet) in his senile old age feels guilty for not paying his secretary enough, seems a little unfair. nobsWe Are the 91.6% (still employed)!!! 01:16, 16 February 2012 (UTC)
"When an NSO is exercised, the employee recognizes compensation (ordinary) income in an amount equal to the spread at exercise."
That's a NONSTATUTORY stock option! ISOs are not NSOs!
And yes, ISOs must be held for a couple of years before sale to evade income tax rates - which is hardly a problem for those in a position to collect millions of dollars' worth of ISOs.
Someone like Dimon pays ATM on the cost of purchasing the options, which is tiny. We're talking perhaps 5-10% of the cost of the stock - if that. And none of this quibbling - even if it wasn't wrong - deflects from the fact that Dimon pays a much lower tax rate than you or I. Do you deny that basic fact?
I guess that high income earners probably don't take capital gains annually, since they need a relatively small amount of their actual funds. They'd be stupid to do so, of course: capital losses can be deducted, even further reducing their tax rate (thanks for the reminder!). It is absolutely and completely moot whether or not they do take such earnings annually. I don't care, and it is beside the point. The point is that the vast, vast majority of compensation for a majority of the people you listed (I have no specific knowledge about Cheney's assets, but would be surprised if he was stupid with taxes) is taxed at the level of capital gains.
Your modus operandi here seems to be to evade the central points here. Let us leave aside your abysmal efforts to look up tax policy and then repeat it to me and see if we agree on two salient facts:
  • Because the wealthy acquire most of their compensation in the form of capital gains, whatever the relevant limitations or caveats, the overall tax rate on their income is generally lower than 20%.
  • You think this is appropriate and virtuous, because they risked their money in investments or whatever in the first place.
If this is incorrect, that's fine, but it seems to be the way of it.--ADtalkModerator 01:41, 16 February 2012 (UTC)
Let's not talk past each other, now. We are getting somewhere.
AMT is an ordinary income tax rate for the super rich (over $75,000). In order for Dimon, or whoever, to exercise an NSO option, they must pay the AMT on the amount of shares purchased. Let's look at your wording:
  • You may need to pay AMT on the actual amount you spend to purchase stock
So, if Dimon or whoever has $100,000 in his pocket, in cash, money he already paid taxes on to acquire, he than must pay the highest ordinary income tax rate available (greater than the ordinary rate Warren Buffet's secretary pays) in order to spend his own money. Read that again: the whole purchase price of exercising the option, not a portion, is considered income taxed at the maximum rate. If the same employee were to take the same $100,000 to Las Vegas, and gamble it away, it would not be considered compensation. IOW he has to purchase his compensation at the maximum rate. This amount becomes his cost as basis for qualifying for the capital gains tax, which is then deducted from the gross sales price, at the time of final disposition of the asset.
But I know I know, life is so unfair for the rich....nobsWe Are the 91.6% (still employed)!!! 01:55, 16 February 2012 (UTC)
Yes. At this level, a stock option is essentially a heavily discounted price on an illiquid asset, i.e. a quality of stock. For a stock market valued at $10 a share, the option may provide for purchase at $1 a share. The value of the option comes from calculation of not just available volume of stock, but predominantly from the difference between the purchase price (exercise price) and actual market valuation. ISOs are tax-advantaged compared to most employee stock options, and very tax-advantaged compared to salary. That is why most executive are paid predominantly in stock options.
Yes, there is a tax on the purchase of stock, even through ISOs. We generally tax purchases in the United States. Did you know, in fact, that someone with $5 in his pocket has to pay tax when he buys milk - paying taxes to spend his own money.
You don't seem to understand the tax implications, though. That fellow who is buying $100,000 worth of stock is gaining some variable, but much greater value of stock: let's call it $900,000 worth, which is a fairly typical structure. Yet he only pays tax on that $100,000 of actual expenditure, rather than the bulk of the amount ($800,000) of value he is receiving. Even though the rate he might be paying on this $100,000 might seem punitive to you (26-31%, since it's the higher of either ATM or income tax) it's actually very small, since it's being paid on a fraction of the value received. $31,000 (to take the highest) is a tax rate of 3.4%! Add in the tax on selling the stock (again, assuming the highest and with no capital losses and so on, $135,000) and we see that the worse-case scenario is a total tax rate of 18.4% on that compensation!--ADtalkModerator 00:04, 17 February 2012 (UTC)
An ISO is granted at fair market value on the grant date, usually that days current stock price.[7] An ISO requires a two year holding period before it can be exercised. Longterm stock indexes have appreciated at about a 12% rate.[8] It is not unreasonable to expect a typical $10 stock to sell for $12.50 twenty-four months later. In the case of an NSO, the purchaser in some instances may have to pay AMT to exercise his/her option, in addition to ordinary income tax rates already paid.[9]
There are wide variances to individual circumstances, so it may be distorted or unfair to cherry-pick a few high earners of Fortune 500 companies.
So, the original basis price of the asset[10] still must be paid for with income which has already been subject to ordinary income tax rates (Buffet's secretary's rate) and in some instances the AMT tacked on.
Let's assume an NSO is exercised for a top income earner (35%) 12 months after the grant at a guaranteed price of $10. The purchasee has already paid $3.50 top ordinary income tax rate on the 10 bucks on last years tax return.[11] He must hold the share minimum 12 more months (or risk paying ordinary income tax rates). On average, the stock now has appreciated 25% over the original basis price. $2.50 = his capital gain over basis cost. nobsWe Are the 91.6% (still employed)!!! 02:24, 17 February 2012 (UTC)
An ISO is statutory, i.e. not an NSO (nonqualified stock option). Accordingly, almost your entire reply is beside the point.
Needless to say, the few pertinent bits of information are only partially accurate. Yes, you usually cannot exercise an ISO immediately, but rather it must wait a variable amount of time (two years is pretty standard, I guess? I'm not sure on that one. I do know it's not always two years, though). But as part of executive compensation they are very rarely offered at current market price, but instead at a steep discount, which will likely get even better as time goes on. That's the point: someone like Dimon is paying much lower tax on the actual total of his income, a fact you refuse to acknowledge.
The reason I picked Dimon was just because he was in the news lately, but I feel that he is perfectly representative of the field. Unfortunately, the people whose compensation numbers are available are only those in publicly traded companies (by and large), so that's where we can look for examples - which is only going to tend to provide more and more evidence that these ultrawealthy folks are paying tax rates below 20%. The tax rates on those no longer employed or who inherited their money are going to be much, much lower - but that's hard for me to prove to you, since we don't have their numbers.--ADtalkModerator 23:31, 17 February 2012 (UTC)
There are only two differences between an ISO & NSO that I see: (1) the ISO escapes the AMT (for high earners subject to AMT) and (2) the extended holding period for exercise. This presumably, is why it's called "incentive".
A publicly traded stock cannot, to the best of my understanding, be offered to anyone below market. It would be a little unfair to everyone else, wouldn't it?
So, what are the advantages of an extended holding period before exercise? In 12 months (NSOs) or 24 months (ISOs) a prospective investor (the grant recipient) can see the rising value of the stock, whether or not it's a good investment. After exercise, the recipient still must wait another 12 months to realize capital gains. This is not without risk, either at the time of exercise, or the time of realization (sale of the stock), the gain can be miniscule or negative. He may not make anything at all, or lose money. And recall, this is part of the employees compensation package.
But herein we see some of the difference between ordinary income and cap gains; the cost, or basis, of the asset is paid with cash that ordinary income tax has already been paid on. A $100,000 block of stock has already cost the worker $135,000, in the fair market value of his labor + taxes paid. How much of a return is necessary to incentivize him to defer current consumption, and purchase the stock which then has the twofold effect of (1) providing capital to the company to expand operations, employ more people, service the public with whatever they sell or produce, and (2) sustain and provide a rising value of the stock for other investors (often retirees or pension funds) for the same stock? nobsWe Are the 91.6% (still employed)!!! 00:06, 18 February 2012 (UTC)
Let's see some numbers, then. I've done this a couple of times, so let's see your results and see you defend them as fair. Pick an executive who gets ISOs and calculate his tax rate, and tell me how just it is.--ADtalkModerator 02:18, 18 February 2012 (UTC)
Okay, now I'll admit to something you've alluded to -- the potential for a high return several times over the basis price. This can occur in the case of Initial Public Offerings (IPOs). It's not uncommon for a mature company to spin-off some new business idea with a rapid potential for success into a new, and separate company. Being there's no guarantee of success, and the parent company possesses or is willing to hire the best minds available to make it a success, the company is faced with the simple problem of paying employees for a product or service that has yet to be brought to market. This is were stock options, in lieu of cash, have come into prominence.
This is all governed by an extremely intrusive regulatory structure. In the best of circumstances, it takes years for a worker to be compensated for an employment contract executed years earlier. In recent years, attention has been drawn to members of congress and congressional staffers. While others are subject to insider trading rules, members of congress and their staff for decades have profited by buying IPOs after some company asked for regulatory relief. Instead of a company paying an out-and-out bribe, the member simply uses his own money to buy an IPO that rises in value very quickly. And here, we're not even talking about various holding periods. So yes, while IPOs are necessary to provide growth and improvement, there are various aspects with a potential for abuse. nobsWe Are the 91.6% (still employed)!!! 18:51, 18 February 2012 (UTC)

Observations[edit]

  • So we see the 35% top ordinary income tax rate, and the three year requisite holding time to realize cap gains on an ISO (two years from grant to exercise, one year to sale & realization) are not arbitrary figures. Since the Dow Jones from 1929 to the present has only averaged 12% per anum, in three years an average stock would appreciate 36%. Wonderful, especially if you have to pay a 35% top tax rate to cash out the investment. nobsWe Are the 91.6% (still employed)!!! 03:13, 20 February 2012 (UTC)

Correction[edit]

I stand corrected on the $500,000 homeowner exclusion; I don 't always keep up with all recent changes outside areas I'm involved in. Here's a 6 page CRS report (2007) which seems, simple, concise, and informative. nobsModerated 03:26, 10 February 2012 (UTC)

Footnotes[edit]

  1. Outside the onetime age 55 and over exclusion rule.
  2. http://www.irs.gov/publications/p523/ar02.html#en_US_2010_publink1000200711M
  3. http://www.irs.gov/publications/p550/ch04.html#en_US_2011_publink100010737
  4. http://mittromney.com/learn/mitt/tax-return/main
  5. The gain on an asset prior to expiration of the holding period is taxed at ordinary income tax rates, or the same rate Warren Buffet's secretary pays.
  6. http://investing.businessweek.com/research/stocks/people/person.asp?personId=170444&ticker=JPM:US
  7. Other ways can be agreed upon beforehand to value the option price, for example a yearly average price. But even that could be calculated two different ways to arrive at two different results. One is an average of the closing price divided by the number of trading days. A more accurate valuation would produce an average based upon how many shares traded at what price at what volume over the course of a year.
  8. random chart.
  9. It is possible some option holders may have to borrow to exercise their options; I would assume that the AMT tax still would be due on an amount equal to the amount of options exercised.
  10. The selling prices of an option guaranteed 12 or 24 months earlier as part of a compensation package.
  11. His real cost already is $13.50 per share.

Why rich versus poor?[edit]

It is the Democrats that pay all the taxes anyway. I notice that Rob is from New Mexico, the biggest fucking leeches in the country. The Union should have told the South to fuck off, then they could afford lower taxes. - π 01:00, 15 February 2012 (UTC)

Yep'n that's true; if you take federal spending out of NM -- military bases, national labs, military retirees, foodstamps and other aid, you might as well give NM back to Old Mexico. Per capita really would be more in line with Juarez & Chihuahua. nobsWe Are the 91.6% (still employed)!!! 04:58, 15 February 2012 (UTC)
Yeah cos California doesn't have any military spending being done there. State of 2,000,000, smaller GDP than New Zealand, major industry is the feds come around and do shit here. Sounds like a winner rob. Pi 3:14 (talk) 14:21, 15 February 2012 (UTC)
That's what William Tecumseh Sherman said, the US should declare war on Mexico make them take New Mexico back. [9] nobsWe Are the 91.6% (still employed)!!! 17:29, 15 February 2012 (UTC)
Please no! Give us California, give us Nevada, hell at least half of Puerto Rico, but please don't give that cesspool to us! Zexcoiler Kingbolt (talk) 03:52, 22 August 2015 (UTC)Zexcoiler Kingbolt

Elizabeth Warren update[edit]

George Will reports Elizabeth Warren already supports repeal of key Obamacare measures. nobsCorporations are people, too. 04:02, 11 May 2012 (UTC)

This is why we have these debates[edit]

so we can vet the information. Seems Obama recycled Elizabeth Warren's stale talking points verbatim. Both are preaching to a demoralized choir and making little headway with the public. nobsCorporations are people, too 23:09, 16 July 2012 (UTC)

I think he'll probably win, regardless of whether or not his talking points resonate with you.--ADtalkModerator 11:46, 17 July 2012 (UTC)
Not with these talking points. Mainstream America doesn't buy into the argument that the path to prosperity lies in destroying job creators. nobsCorporations are people, too 11:49, 17 July 2012 (UTC)
Of course no one believes that. But that's because that's a grossly hyperbolic way of phrasing the issue. But Americans are sympathetic to the idea that the rich should bear an equal burden to the rest of us. And Obama is more and more successfully framing this election as a contest between himself and Romney, rather than a simple referendum on himself. Thankfully, Romney is a staggeringly bad candidate, so even Obama (who is only okay) looks terrific against him. That's why Obama is more likely than not to win (barring a major event outside of his control, like a European collapse).--ADtalkModerator 11:57, 17 July 2012 (UTC)