People Invest To Make Money

Back in the 1980s and 1990s, tax rates for the rich were far higher, and my percentage rate was in the middle of the pack. According to a theory I sometimes hear, I should have thrown a fit and refused to invest because of the elevated tax rates on capital gains and dividends.

I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.

We hear a lot of garbage from the right about how higher taxes will lead to lack of investment and job losses. These same people lapse into their ridiculous hubris and assume that anyone left of center doesn't know anything about how business works. They do, of course, despite all evidence to the contrary. The above quote is from someone who knows business a great deal more than most and has the wealth to prove it. Before I get to who it is, let's take a look at some more facts from his recent piece.

Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.

So, their taxes have gone down and their wealth has gone up.Why they are bitching is a complete mystery. Why people who make 40K a year are proxy bitching for them is borderline insanity.

Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot.

Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.

The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains.

Hmm...Nikto and I have been saying the same thing.

So who is the author who has clearly and factually related this information? It's Warren Buffett, one of the three richest men in the world.  Now, given that he is a shining example of success in the world of investments and business as well as knowing a thing or two about jobs, it follows logically that we should heed his advice: let's stop coddling the super rich....as in right fucking now.

If we are going to make spending cuts, we have to follow with an overhaul of how we collect revenue. That means no more subsidies, tax shelters for the wealthy, and the end of the Bush tax cuts for the wealthy. In short, a complete overhaul of the tax system. This is what has to be done to seriously address the issue of our debt and prop up the overall health of our economy.

The time for make believe and managing fantasies is over. We need to destroy the bizarre myths that the right have created regarding taxes. They must be exposed as the catechisms of true believers that they are and have no place in reality. They are holding us back from fixing our country and propelling us in a positive direction towards the future.