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Does raising taxes on "rich" result in more tax revenue?

Posted on 2011-09-19
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Does raising taxes on the "rich" result in more  tax revenue or is it just about fairness, as Obama stated to Charlie Gibson (see exchange or video)?



GIBSON: And in each instance, when the rate dropped, revenues from the tax increased; the government took in more money. And in the 1980s, when the tax was increased to 28 percent, the revenues went down.

So why raise it at all, especially given the fact that 100 million people in this country own stock and would be affected?

OBAMA: Well, Charlie, what I've said is that I would look at raising the capital gains tax for purposes of fairness
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Question by:carsRST
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leonstryker earned 13 total points
ID: 36560751
The answer is based on human behavior. If people continue to behave post tax increase as they did pre tax increase, then yes it would raise more revenue. If, on the other hand people change their behavior as a result of the tax increase, than it may or may not.

When dealing with Economic predictions, one should add a disclaimer similar to the one used on prospectus of Mutual Funds: "Past performance is not an indication of future results."
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by:Neil Russell
Neil Russell earned 13 total points
ID: 36560930
The same argument is being had with Beer prices in the UK. There are certain other EU countries that found that reducing the Duty on beer and hence a lower price per pint led to an increase in a) Tax revenue and b) Drunks!!
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by:bergertime
bergertime earned 12 total points
ID: 36561050
In that case I'm all for government subsidies on beer.  :)

But it's not fair that someone has more than me, regardless of how hard either one of works.  
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by:carsRST
ID: 36562436
According to Obama back in 2009...

"You Don't Raise Taxes In A Recession."

http://www.youtube.com/watch?v=aufAtuTwKlE&feature=player_embedded
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by:bergertime
ID: 36562608
Wow.....is this guy for real.  Maybe the tax thingie is above his pay grade.  He sure looks like he wants to vote present there.  Oh I know, maybe he was thinking about that chess game all the dems keep saying he's playing.  Besides remember summer 2010 was the summer of recovery......we're NOT in a recession, why else would they call it the summer of recovery.  
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by:carsRST
ID: 36563062
>> He sure looks like he wants to vote present there


His goal here is to play class warfare, proposing ideas to win over his liberal base.  To do that, you have --absolutely have-- to use words like "millionaires and billionaires and corporate jets."  

Two things....

1.  He knows this will not get passed.  He doesn't care.  What he's going to do is blame the Republicans for not passing his job creation bill.  Basically passing the buck.

2.  According to an AP story, it would also be the following who will pay:

Air travelers, federal workers, military retirees, wealthier Medicare beneficiaries and people taking out new mortgages are among those who would pay  


And since when is someone who runs a small business with income of $250K consider a millionaire?

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by:bergertime
ID: 36563317
cars.....I think you missed his goal.  It is simplie to get re-elected.
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by:carsRST
ID: 36568502
Apparently Buffet got his math wrong.  He actually paid closer to 45% on his earnings.



Billionaire investor Warren Buffett isn’t as undertaxed as he and President Obama seem to think.

First, Buffett had to make the money he invested. Those earnings were taxed as corporate income, at about a 35-percent rate.

Then, Uncle Sam took another cut when Buffett invested the money and earned a profit. That’s when Buffett paid the 15 percent capital-gains tax rate.

All told, after combining corporate taxes and capital gains taxes, Buffett forked over about 45 percent of his earnings.



http://www.nypost.com/p/news/national/buffett_math_is_bit_off_7mGzoYiwPfsJcnWaIoptFJ
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by:bergertime
ID: 36568949
I don't understand why if Buffet wants to pay more in taxes, he doesn't just do it.  Is there a rule you can only pay so much?
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by:carsRST
ID: 36569726
>>Is there a rule you can only pay so much?


He's more than welcome to put his money where his idiotic mouth is and send in more money, not take deductions, etc...

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by:beetos
beetos earned 12 total points
ID: 36571796
Was it Buffett, or the NY Post that got the math wrong?

First we'll just assume his corporations paid the full 35%, which they most likely didn't eg. GE.  
And for simplicity, we'll say he earns $100.

$100 - $35 = $65.00

Next, you invest the income and make a profit, you're only taxed on the profit, not re-taxed on the initial investment.  Warren's a pretty good investor, so let's say he makes a 20% profit:

$65  + $13  = $78

And next he pays the 15% tax on the profit ($13 x .15 = $1.95)

$78.00 - $1.95 = $76.05

His total income was $113, less his total tax of  $36.95 for an effective tax rate of 32%.

Now, the more income he gets in capital gains vs. regular income, the lower the rate goes.  Running the same numbers above but with a $100 profit gives a rate of 25%.   As he invests more - more of his income comes in the form of capital gains, which continually brings the rate closer to %15.

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by:carsRST
ID: 36573561
Beetos, what do you think of Leon's statement below?

If, on the other hand people change their behavior as a result of the tax increase, than it may or may not
l
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by:bergertime
ID: 36573582
To me that's the point, if he doesn't want to pay 15% and would rather pay, say 40%, then why doesn't he?  I like to have a beer now and then, but I don't think everyone should be forced to.  He could even has his accountants change his tax structure so he could pay more.  I just don't understand the mentality of what I think is right for me should be forced on everyone else.
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by:carsRST
ID: 36573610
Beetos, what says you to bergertime's last comment?
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by:beetos
ID: 36574630
I'll tell you what SHOULD be taxed - campaign donations!    Also, any candidate or politician that uses the phrase "the American People" for whatever reason should have to pay a small licensing fee, maybe $10.   They should also be fined $25 for likening their opponents or their opponents policies to the Nazi regime.  $50 if they go directly to Hitler.

Cars, what do you think  about my post about your post from the Post?
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by:beetos
ID: 36574738
Elizabeth Warren makes some interesting points on this issue:

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.
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by:carsRST
ID: 36574768
>>Cars, what do you think  about my post about your post from the Post?



I'll quote Eddie Murphy talking about James Brown:

I don't know what the f*ck
James is talkin' about !
                   
I don't understand sh*t James says !

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by:bergertime
ID: 36574825
"Now look, you built a factory and it turned into something terrific, or a great idea—God bless. Keep a big hunk of it."

Man I couldn't agree more.  Glad we were able to sway you.  Do we have a progressive tax system?  What is a progressive tax system?
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by:bergertime
ID: 36574832
BVeetos, I also agree with you on the hitler thing.  I wonder who was the first prez to be called hilter?
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by:leonstryker
ID: 36575338
>What is a progressive tax system?

It is a system of taxation where those who earn more, pay more as a percentage of their income. On the other hand a regressive system forces people who earn less to pay a greater portion of their income.

As examples: Income taxes in the US are progressive, while sales taxes are regressive.
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by:carsRST
ID: 36575453
What's funny is Buffet's dad was a hardcore conservative.


Warren Buffett may be a committed liberal Democrat, but his father, Howard Buffett, was a four-term Republican member of Congress (1943-49 and 51-53), a John Bircher who fought FDR and warned that the expansion of government was eroding individual liberty.

http://campaign2012.washingtonexaminer.com/blogs/beltway-confidential/buffett-vs-buffett


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by:beetos
ID: 36581094
How can you argue complex financial issues like the effect of tax rates on revenues if you can't understand simple math?
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by:carsRST
ID: 36581559
Beetos,

I hate to tell you this but your scenario is flawed.



$100 corporate profit x .35 = $35 tax/$65 leftover

$65 distributed to Buffet and taxed at 15% = $9.75 in tax/$55.25 left over.

A profit of $100 was taxed twice, with $55.25 left when all is said and done.

Effective rate of 45%



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by:beetos
ID: 36581875
No, the COMPANY made $100, $65 after taxes.

Buffett as an individual who receives a salary, in this case all of it,  only needs to pay 15% on his share of the profits, for an effective tax rate of 15%!

Despite what your Republican overloards tell you, corporations ARE NOT people!
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by:carsRST
ID: 36581920
Beetos,

Corporations make a profit that gets taxed.  The remaining amount can remain with the corporation or distributed as a dividend.

In your scenario, Buffet's share of the profit was $100, to which that was taxed at 35%.  He gets his dividend and then pays 15% on that return.  Effective interest rate of 45%.

Sorry to burst your bubble.



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by:carsRST
ID: 36581938
Not to mention....IRS data shows that millionaires pay a higher rate than the middle class.



Data compiled by the nonpartisan Tax Policy Center show households pulling in more than $1 million pay about 29.1 percent of their income in federal taxes. By contrast, households making between $50,000 and $75,000 pay about 15 percent.


Beetos, come towards the light and away from the evil.  I refuse to give up on you.
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by:beetos
ID: 36581956
Warren Buffett is NOT the corporation.   He is an investor IN the corporation.  He paid X dollars for a share, or owns it completely.  The corporation has operating expenses, such as material and labor costs, and pays taxes on profits it makes.   The rest is the profit.   Investors get dividends from that profit. Our example is overly simplified, but still works.  

WARREN BUFFETT WOULD ONLY PAY 15% ON HIS SHARE OF THE PROFIT OF $65.

Let's say I buy stock in the company - the company pays it's taxes, NOT ME.  If they do well,  my stock becomes worth more, and I pay NOTHING.   0$.    But, I can sell that stock at the higher rate.   What do I have to pay for this income?  15%.   NOT ON THE WHOLE INVESTMENT, ONLY ON THE PROFIT.

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IT, Stop Being Called Into Every Meeting

Highfive is so simple that setting up every meeting room takes just minutes and every employee will be able to start or join a call from any room with ease. Never be called into a meeting just to get it started again. This is how video conferencing should work!

 
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by:carsRST
ID: 36581971
>>Let's say I buy stock in the company - the company pays it's taxes, NOT ME.

If you buy stock then you are part owner of the company and you own part of the profit.  Therefore, as part owner, your share of the profit is taxed.




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by:carsRST
ID: 36581979
And see my other post on IRS data showing millionaires already pay a higher rate than the average, workin' sumb*tch.

36581938
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by:beetos
ID: 36582006
The profit comes AFTER taxes.   The company builds capital, and thereby increases it's worth.  YOU DON'T PAY ANYTHING, NOT ONE DOLLAR, UNTIL YOU TRANSER THAT MONEY OUT OF THE BUSINESS INTO YOUR POCKET!

Businesses pay taxes as part of doing business in this country - see Elizabeth Warren's comments above.

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by:carsRST
ID: 36582053
>>The profit comes AFTER taxes.   The company builds capital, and thereby increases it's worth.  YOU DON'T PAY ANYTHING, NOT ONE DOLLAR, UNTIL YOU TRANSER THAT MONEY OUT OF THE BUSINESS INTO YOUR POCKET!

Wow!  Come on Beetos...only so many ways I can say this.  

1.  Buffett buys stock and is part OWNER in the corporation.
2.  Corporation makes a profit and that amount is taxed at 35%.  
3.  So, as part owner, Buffett's share of the profit has been hit at 35%.
4.  Buffett receives a dividend and that is taxed at 15%,

Effective rate of 45%.

And, if we look back at your example, it does not account for Buffett's dividend being taxed at all.  You just go straight to investment of that dividend.

Checkmate!

PS--see post on IRS data showing millionaires paying a higher rate than middle class.
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by:beetos
ID: 36582075
Where's that wall when I need it?
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by:carsRST
ID: 36582092
Beetos, even in your example, you show the corporation paying taxes and account for that in your flawed effective rate.

Why the change now?
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by:beetos
ID: 36582116
My example is not flawed - you're using twisted logic whereby Warren Buffet IS the corporation.  They are SEPARATE ENTITIES.
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by:carsRST
ID: 36582132
>>My example is not flawed - you're using twisted logic whereby Warren Buffet IS the corporation.  They are SEPARATE ENTITIES.

No, what I did is assume he owns part of the corporation and his share is taxed at 35%.

And this is EXACTLY what you did in your example.

The ONLY difference between my example and what you originally posted is that I taxed the dividend and you didn't.  Other than that, we are on the exact same page.
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by:beetos
ID: 36582413
You're still mistaking OWNING the corporation with BEING the corporation.

The profit that the corporation makes comes AFTER taxes, and goes to the corporation.  If dividends are paid out - they are paid out to INDIVIDUALS.   If the owner of the corporation want to take the profits for himself, he does so in the form of a SALARY.  

CORPORATIONS ARE NOT PEOPLE DAMMIT!  
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by:carsRST
ID: 36582426
>>If the owner of the corporation want to take the profits for himself, he does so in the form of a SALARY.

Salary is an expense of the corporation and is deducted before profit.  Profits are distributed via dividends.

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by:beetos
ID: 36582447
Salary is an expense of the corporation and is deducted before profit.  Profits are distributed via dividends.

Exactly!  Now you've got it.  Except they come AFTER taxes as that's the cost of doing business in America.  

Warren Buffett didn't earn the money, the corporation did.   They paid him a DIVIDEND on their PROFIT which gets taxed at the low interest rate of 15%.

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by:carsRST
ID: 36582475
>>Warren Buffett didn't earn the money, the corporation did.   They paid him a DIVIDEND on their PROFIT which gets taxed at the low interest rate of 15%.

I give up, Beetos.

Effective rate, per my example, and your original one is 45%.  Only thing you didn't do was tax the dividend.
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by:beetos
ID: 36582522
I did  - the dividend is $65, NOT $100.

Effective rate of my original example is still 32%.

Don't give up, you'll get it eventually.
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by:leonstryker
ID: 36584854
Dividends are taxed at the 15% rate based on the theory that:  "it's fair to tax a company's profits, it's not fair to double-tax by taxing the shareholder on the same profits." as was argued by President Bush.

Taking that as a basis for the reduced tax rate on said dividends, then carsRST's example is correct.

Also note that only certain dividends, qualified dividends, are taxed at the lower rate. In Warren Buffett, they are most likely qualified dividends.
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by:beetos
ID: 36588550
We're in danger of attack from Iraq, as was argued by President Bush.

The tax cuts will pay for themselves, as was argued by President Bush.

Deficits are good, as was argued by President Bush.
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by:carsRST
ID: 36588706
So you don't agree with Bill Clinton, who just 2 days ago, said this?

“I personally don’t believe we ought to be raising taxes...until we get this economy off the ground..."

http://www.politico.com/news/stories/0911/64024.html
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by:leonstryker
ID: 36589120
>as was argued by President Bush

Whatever, the point is that this money is being taxed twice.
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by:Mujtaba_Alam_Khan
ID: 36595997
>> Does raising taxes on the "rich" result in more  tax revenue or is it just about fairness <<

IMO it does both. These are tough times and the rich seem to be getting off well. Everyone has to pull their weight or else the economy is heading back into recession.

Taxes alone will not save the economy but it will help never the less.
Jobs need to be created and Banks need to lend out money.
In reality of course there is no easy fix but something needs to be done.

-Muj ;-|
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by:carsRST
ID: 36598570
>>These are tough times and the rich seem to be getting off well.

Muj, can you explain?

The "rich" already pay most of the taxes, and, as the AP points out below, they also pay a higher tax rate.



Households making between $50,000 and $75,000 will pay an average of 15% of their income in federal taxes.

This year, households making more than $1 million will pay an average 29.1% of their income in federal taxes

http://www.usatoday.com/money/perfi/taxes/story/2011-09-20/buffett-tax-millionaires/50480226/1
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by:beetos
ID: 36600386
# 22,000 millionaires -- making more than $1 million annually -- paid less than 15 percent of their income in taxes in 2009.

# And the top 400 richest Americans, all making over $110 million per year and making an average of $271 million per year, paid only 18 percent of their income in income taxes in 2008. In fact, since the mid-1990s, the share of income paid by the wealthiest 400 Americans has fallen by nearly 40 percent, from 29.9% in 1995, even as their average incomes roughly quadrupled.

# Too many middle class Americans pay more than this -- especially when payroll taxes are taken into account.

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by:carsRST
ID: 36600659
Sorry, Beetos...

In 2009, taxpayers who made $1 million or more paid on average 24.4% of their income in federal income taxes, according to the IRS.

The Tax Policy Center estimates that 46% of households, mostly low- and medium-income households, will pay no federal income taxes this year


On average, the wealthiest people in America pay a lot more taxes than the middle class or the poor, according to private and government data. They pay at a higher rate, and as a group, they contribute a much larger share of the overall taxes collected by the federal government.

http://www.usatoday.com/money/perfi/taxes/story/2011-09-20/buffett-tax-millionaires/50480226/1
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by:carsRST
ID: 36600689
And yet, B Hussein O'Carter is going around saying the wealthy don't pay their fair share.

How is that when they pay most of the bill?


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by:beetos
ID: 36600704
Sorry Cars, none of what you just posted refutes what I posted.

I know you conservative types like to ballyhoo about the households which pay no federal income taxes, but don't forget that include the elderly who don't work, and the poor who make less than $20,000.   Low income families with kids also don't make enough to outweigh their deductions, as do middle class workers who own houses and deduct the mortgage interest.

Oh, and don't forget, GE is in the "pay no taxes" group.  As are about 1400 millionaires.
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by:carsRST
ID: 36600793
>>Oh, and don't forget, GE is in the "pay no taxes" group.

That's Obama's buddy.  

Obama jobs chief -- the CEO of GE -- pays no corporate taxes
http://content.usatoday.com/communities/theoval/post/2011/03/obama-jobs-chief----the-ceo-of-ge----pays-no-corporate-taxes/1
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by:carsRST
ID: 36600891
So let me get this right, Beetos.

Obama's jobs chief is sending jobs over to China.  Is that why Obama can't produce jobs here?


GE moving X-ray leadership team from US to China
http://news.yahoo.com/ge-moving-x-ray-leadership-team-us-china-085549888.html
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by:bergertime
ID: 36600942
No Obama can't produce jobs here because he hasn't a clue.  Sad part is people will follow him regardless.  
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by:carsRST
ID: 36600968
>>Sad part is people will follow him regardless.

But I still like Beetos.


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