Contributors

Showing posts with label Taxes. Show all posts
Showing posts with label Taxes. Show all posts

Saturday, December 01, 2012


Thursday, November 29, 2012

Let Warren Unburden Them

Warren Buffett's recent opinion piece seen in many papers and online over the last few days is a fine example of how completely ridiculous the Right is in regards to federal government tax policy. He begins with an anecdote.

Suppose that an investor you admire and trust comes to you with an investment idea. "This is a good one," he says enthusiastically. "I'm in it, and I think you should be, too." Would your reply possibly be this? "Well, it all depends on what my tax rate will be on the gain you're saying we're going to make. If the taxes are too high, I would rather leave the money in my savings account, earning a quarter of 1 percent." Only in Grover Norquist's imagination does such a response exist. 

Only in all their imaginations does such a response exist. I can say with near certainty that anyone on the Right that says they do this or has known people to act in this fashion is lying. As Mr. Buffett has said many times previously, people invest to make money. Government tax policy doesn't enter into it.

And facts are facts...

Between 1951 and 1954, when the capital gains rate was 25 percent and marginal rates on dividends reached 91 percent in extreme cases, I sold securities and did pretty well. In the years from 1956 to 1969, the top marginal rate fell modestly, but was still a lofty 70 percent -- and the tax rate on capital gains inched up to 27.5 percent. I was managing funds for investors then. 

Never did anyone mention taxes as a reason to forgo an investment opportunity I offered. Under those burdensome rates, moreover, both employment and the gross domestic product (a measure of the nation's economic output) increased at a rapid clip. The middle class and the rich alike gained ground. 

They both gained ground because there was less inequality. The money that was used from the higher tax revenues paid for investments in infrastructure and education (the GI Bill, for example). This, in turn, led to a higher skilled labor force and an economy that was robust and innovative. This is not the case today.

The group's average income in 2009 was $202 million -- which works out to a "wage" of $97,000 per hour, based on a 40-hour workweek. (I'm assuming they're paid during lunch hours.) Yet more than a quarter of these ultrawealthy paid less than 15 percent of their take in combined federal income and payroll taxes. Half of this crew paid less than 20 percent. And -- brace yourself -- a few actually paid nothing. 

This is how money has been transferred upwards as Stiglitz mentions in "The Price of Inequality."

So what does Warren think should be done about this?

We need Congress, right now, to enact a minimum tax on high incomes. I would suggest 30 percent of taxable income between $1 million and $10 million, and 35 percent on amounts above that. A plain and simple rule like that will block the efforts of lobbyists, lawyers and contribution-hungry legislators to keep the ultrarich paying rates well below those incurred by people with income just a tiny fraction of ours. Only a minimum tax on very high incomes will prevent the stated tax rate from being eviscerated by these warriors for the wealthy. 

And what will the result be?

Our government's goal should be to bring in revenues of 18.5 percent of GDP and spend about 21 percent of GDP -- levels that have been attained over extended periods in the past and can clearly be reached again. As the math makes clear, this won't stem our budget deficits; in fact, it will continue them. But assuming even conservative projections about inflation and economic growth, this ratio of revenue to spending will keep America's debt stable in relation to the country's economic output. 

I agree and, as Warren notes, this will involve major concessions by the Right and the Left. All sides in this debate have signaled a willingness to bend so I do have some hope.

And what about that figment of the Right's imagination who is overly obsessed with "uncertainty?"

In the meantime, maybe you'll run into someone with a terrific investment idea, who won't go forward with it because of the tax he would owe when it succeeds. Send him my way. Let me unburden him. 

 Maybe I should send ol' DJ from TSM to Mr. Buffett...hee hee...:)

Monday, November 26, 2012

I Guess The Answer Is Yes

The other say I asked if we were seeing the beginning of the end of Grover Norquist. I think it's safe to say now that the answer is yes.

Elections have consequences and the main one that we seem to be seeing so far is a return to sanity. While there has not been any sort of deal yet on avoiding the so called "fiscal cliff," the signals from many Republican leaders say that they are willing to be flexible. That's a good thing.

Right up until the election, I was pretty pessimistic at the thought of there possibly being a day when we no longer had to manage the fantasies of the Right. Now, there is indeed a glimmer of light. Sure, there will still be people like Bill Whittle running around and making money off of his merry band of followers but they won't have any effect on elections.

And that is a very, very good thing!

Saturday, November 24, 2012

Uh Oh

Is this the beginning of the end for Grover?

Tuesday, November 20, 2012

I Guess That Settles That

Analysis: Tax Cuts Don't Lead to Economic Growth, a New 65-Year Study Finds


The paper is a good reminder to be humble about taxes as a tool for growing the economy. They remain, above all, a tool for collecting revenue and tweaking incentives for specific economic behavior. Congress has cut tax rates repeatedly over the last 60 years, while the country and the global economy have undergone considerable changes that probably had a greater effect on growth.

Yep, pretty much. And what did the GOP do when they saw this?


Nonpartisan Tax Report Withdrawn After G.O.P. Protest


Stomped their feet and stormed down the hallway...yelling at dad the whole way!!!

Wednesday, August 29, 2012

If Karl Rove is Saying it...

...then Mitt Romney has a problem.

This is an issue that has hurt Romney because again it’s fed up people who already have an instinct and a suspicion about him [that] he’s a rich guy, [and] must be hiding something. But I’ve also been a little bit mystified about Romney’s response.

We all are as well, Karl.

Monday, August 27, 2012



Friday, August 24, 2012

A Perfect Summation

Andy over at ElectoralVote has a great paragraph up about Mitt Romney's taxes.

Gawker.com has published 950 pages of internal Bain Capital documents involving Mitt Romney's finances and investments. The information is extremely complex but shows that one of Romney's driving forces was (legal) tax avoidance at all costs through the use of exceedingly complex financial instruments (often in the Cayman Islands), use of the carried interest provision in the Internal Revenue Code, and other similar maneuvers. 

Even if all these things are legal, one can ask the question of whether a person who has apparently devoted much of his life to paying the absolute minimum tax possible by using every trick in the book is setting a good example for everyone else. The document dump also exposes the lengths to which the very wealthy will go to avoid paying taxes by using methods available only to the very wealthiest Americans. It also raises the question of whether the laws should be changed to prevent this kind of tax avoidance.

I couldn't have said it better myself!

Friday, August 17, 2012


Thursday, August 09, 2012

Shouldn't Romney Be Ahead By Now?

The question above is the exact question that Roger Simon asks in a new post over at Politco. 

But what do the Great Gods of Politics, the opinion polls, show? They show a country that still likes Obama more than it likes Romney. And by quite a bit. As I have written for years, I have a simple — OK, simple-minded — way of determining who is going to win the presidency: The more likable candidate wins. Not always, but almost always. On Aug. 2, a survey published by the well-respected Pew Research Center for the People and the Press found Obama was leading Romney by 51-41 percent for the presidency, the eighth time in a row since January that Obama has led Romney by between 4 and 12 percentage points.

But more importantly by my Simple Simon standard of likability, Romney’s favorable/unfavorable rating was 37/52 compared with Obama’s 50/45. Which means Romney had a net unfavorable rating of 15 points while Obama had a net favorable of 5 points. 

Very true and nicely illustrated at our year end tennis party this summer. Two of my co-workers, both of whom voted for John McCain in 2008 (and one who is my supervisor and life long Republican), were completely confounded by Romney's statements on his recent trip abroad.

"That was just rude...what he said about London," my supervisor remarked. "What was he thinking? You don't do that. And he wants to be president?"

"Yeah," my other co-worker said, "Obama is going to wipe the floor with him in the debates. Romney's a complete idiot and I don't really like him. I am voting for Obama."

"I may actually as well," my supervisor said. "He's not as bad as everyone makes him out to be. He's done a good job. I like him."

The conversation completely torpedoed the notion that your average Joe doesn't pay attention to politics until after Labor Day. People are paying attention to what Romney is doing and they don't really like what they see. Will they ever?

Oh, and why is John McCain, who has seen all 23 years of Romney's tax returns, not calling Harry Reid  a "dirty liar?" I wonder why he hasn't really said much on the subject.

Thursday, August 02, 2012

A Bad Week (Or How I Learned To Stop Worrying and Love Harry Reid)

I've been pretty critical when it comes to the subject of Harry Reid. In the past, I've referred to him as several limp noodles on two slices of milk dunked toast.

But his recent indictment of Mitt Romney is a stark contrast to his previous persona. I think the thing I like about it the most is how much in common it has with statements made by the right on a daily basis. In other words, it's about fucking time a Democrat started saying things that may or not may not have any basis in fact but have absolutely everything being pissed off and pulling shit out of one's ass (sort of like how the government forced banks to loan to black people and Hispanics and that's why the economy collapsed).

We really don't know if Romney paid taxes or not but what's great about Reid's statement is how fucked Romney is right now. If he does not release his taxes, the "lie" is out there and people will doubt him. If he does release his taxes and they show that he did pay them over a ten year period, Reid has manipulated Romney (just as the right manipulates the left all the time) into doing something he doesn't want to do: release his taxes...which will undoubtedly show that Romney made a shit ton of money, has hid some of it offshore, was more involved at Bain during their layoffs and outsourcing, and paid less than Warren Buffet's secretary. Heck, even the National Review is calling for Romney to release his returns now. 

Of course, Romney's own tax plan doesn't help him at all. 

But what does the TPC analysis actually tell us–meaning us people who aren’t campaigning to be president–about the Romney tax plan? It’s well summarized by Figure 2 from the paper, above, which decomposes the bottom line conclusion that a revenue-neutral Romney plan would give generous tax cuts to the rich paid for with net tax increases on everyone else, into two parts: (i) how much the tax cuts from the tax rate reductions are skewed toward the rich; and (ii) how much the revenue offsets from (Romney-limited) base broadening are skewed toward lower- and middle-income households. Combined, we would end up with a revenue-neutral (relative to a business-as-usual, policy-extended baseline) and highly “regressive” tax reform, with relative and absolute tax burdens falling for “the rich” (defined here as households with incomes above $200,000–about the top 5%) and increasing for everyone else.

Seriously, are you fucking kidding me? What a massively stupid idea given the current perception of government and the economy. Yes, let's give the wealthy more breaks...that's going to go over well with the middle class, non college educated whites voting in the coming election.

Add all of this in with his stumbles on his recent trip abroad and it's understandable why Romney has lost ground in Ohio, Pennsylvania, and Florida.  With less than 100 days to go before the election, Governor Romney is going to have a very difficult time making up that ground. The Obama team has already pulled their ads in Pennsylvania to focus on other key swing states. In short, it's not been a good week for Mitt Romney.

And all of this just before he picks his VP...




Monday, July 30, 2012

Indeed

Mark Zandi, chief economist at Moody Analytics, once and for all has settled (with the help of the CBO) the 500+ comments thread from a while back over at TSM.

Some supporters thought the lower tax rates would spur much stronger economic growth, and a few even hoped there would be so many new, high-paying jobs that tax revenues would actually increase, despite the lower rates. There is no evidence that this happened, however. 

The nonpartisan Congressional Budget Office recently estimated that the Bush-era tax cuts cost the U.S. Treasury $1.6 trillion during the 2000s. Combined with the $1.2 trillion spent on the Iraq and Afghanistan wars and the $1.8 trillion needed to fight the Great Recession, this put the federal government deeply into the red. The nation's debt load today is as heavy as it has been since the 1940s and getting heavier.

To put it simply, they didn't generate growth nor revenue. Now that that is settled (although I'm nearly certain that the financial wizards at TSM, with their vast experience and day to day work with economics, will disagree:)), how do we solve the problem of the deficit? Well, exactly like I have been saying...one third tax cuts, two thirds spending cuts.

Extend the tax cuts for everyone except high-income taxpayers. The economy isn't great, but it is strong enough to handle higher tax rates on the wealthy. And we need the extra revenue, which under reasonable assumptions would reduce the federal deficit by nearly $1 trillion over the next decade.

Raising tax rates on wealthier households is necessary, but so, too, are more cuts in government spending. Washington last summer agreed to cut $1 trillion over 10 years as part of the deal to raise the Treasury's debt ceiling. Even with $1 trillion in additional tax revenues from affluent households, it will take an additional $2 trillion in cuts, under reasonable assumptions, to get our fiscal house in order. Given how politically difficult this will be, any agreement to raise taxes on the wealthy should also include more cuts in government spending.

And what will the result of all this be?

If policymakers follow this script, federal tax revenues will eventually rise to equal just over 19 percent of the nation's GDP, and government spending will fall to the equivalent of 21.5 percent of GDP. These are roughly the average ratios seen since 1980. In other words, government's role in our economy and our lives will be about what it has been for the last three decades. The deficit will still equal 2.5 percent of GDP (21.5 percent minus 19 percent); while more than ideal, this will be manageable, given the economy's expected growth.

That's right, folks, it's just that simple. Anyone think it will happen?

Saturday, July 21, 2012

Saturday, July 14, 2012


Thursday, May 24, 2012

Monday, April 30, 2012

Fucking. Brilliant.

What charitable 1 percenters can’t do is assume responsibility—America’s national responsibilities: the care of its sick and its poor, the education of its young, the repair of its failing infrastructure, the repayment of its staggering war debts. Charity from the rich can’t fix global warming or lower the price of gasoline by one single red penny. That kind of salvation does not come from Mark Zuckerberg or Steve Ballmer saying, “OK, I’ll write a $2 million bonus check to the IRS.” That annoying responsibility stuff comes from three words that are anathema to the Tea Partiers: United American citizenry.

With this amazing volley, Stephen King, one of my favorite authors of all time, has entered into the Election of 2012 with an absolute corker of a piece in The Daily Beast. 

Here’s another crock of fresh bullshit delivered by the right wing of the Republican Party (which has become, so far as I can see, the only wing of the Republican Party): the richer rich people get, the more jobs they create. Really? I have a total payroll of about 60 people, most of them working for the two radio stations I own in Bangor, Maine. If I hit the movie jackpot—as I have, from time to time—and own a piece of a film that grosses $200 million, what am I going to do with it? Buy another radio station? I don’t think so, since I’m losing my shirt on the ones I own already. But suppose I did, and hired on an additional dozen folks. Good for them. Whoopee-ding for the rest of the economy.

That makes him a small business owner, right? Hee Hee...

Oh, and about that whole envy thing...

The U.S. senators and representatives who refuse even to consider raising taxes on the rich—they squall like scalded babies (usually on Fox News) every time the subject comes up—are not, by and large, superrich themselves, although many are millionaires and all have had the equivalent of Obamacare for years. They simply idolize the rich. Don’t ask me why; I don’t get it either, since most rich people are as boring as old, dead dog shit. The Mitch McConnells and John Boehners and Eric Cantors just can’t seem to help themselves. These guys and their right-wing supporters regard deep pockets like Christy Walton and Sheldon Adelson the way little girls regard Justin Bieber … which is to say, with wide eyes, slack jaws, and the drool of adoration dripping from their chins.

This would be why they think that folks like me and other Democrats are secretly envious of rich people...BECAUSE THEY ARE. And that's the only sort of perception they seemingly understand.

In a perfect little verbal nutshell, he sums up exactly how I feel.

What some of us want—those who aren’t blinded by a lot of bullshit persiflage thrown up to mask the idea that rich folks want to keep their damn money—is for you to acknowledge that you couldn’t have made it in America without America. That you were fortunate enough to be born in a country where upward mobility is possible (a subject upon which Barack Obama can speak with the authority of experience), but where the channels making such upward mobility possible are being increasingly clogged. That it’s not fair to ask the middle class to assume a disproportionate amount of the tax burden. Not fair? It’s un-fucking-American is what it is. I don’t want you to apologize for being rich; I want you to acknowledge that in America, we all should have to pay our fair share. That our civics classes never taught us that being American means that—sorry, kiddies—you’re on your own. That those who have received much must be obligated to pay—not to give, not to “cut a check and shut up,” in Governor Christie’s words, but to pay—in the same proportion. That’s called stepping up and not whining about it. That’s called patriotism, a word the Tea Partiers love to throw around as long as it doesn’t cost their beloved rich folks any money.

Good Lord, I think I actually have an erection from reading.

The next time someone says to you, "Well, if rich people want to pay more in taxes, they should just write a check to the Treasury" show them this brilliant piece by a man much eloquent than I!

Tuesday, April 24, 2012

My Oh My

As I perused the Wall Street Journal this morning, I was positively stunned to see this headline.

High Tax Rates Won't Slow Growth

Holy fucking balls on a Popsicle stick!!

Well, it is the opinion page so I suppose they can be forgiven for such heresy.

But they sure do make a convincing argument with (ahem) numbers, facts and stuff. Let's start with a few basic ones.

The share of pre-tax income accruing to the top 1% of earners in the U.S. has more than doubled to about 20% in 2010 from less than 10% in the 1970s. At the same time, the average federal income tax rate on top earners has declined significantly.

Of course, this begs a key question.

Will taxable incomes of the top 1% respond to a tax increase by declining so much that revenue rises very little or even drops? In other words, are we already near or beyond the peak of the famous Laffer Curve, the revenue-maximizing tax rate?

What is that Laffer Curve thing again?

The Laffer Curve is used to illustrate the concept of taxable income "elasticity,"—i.e., that taxable income will change in response to a change in the rate of taxation. Top earners can, of course, move taxable income between years to subject them to lower tax rates, for example, by changing the timing of charitable donations and realized capital gains. And some can convert earned income into capital gains, and avoid higher taxes in other ways. But existing studies do not show much change in actual work being done.

So what would that rate be on the top earners before we would see a decline in revenue?

According to our analysis of current tax rates and their elasticity, the revenue-maximizing top federal marginal income tax rate would be in or near the range of 50%-70% (taking into account that individuals face additional taxes from Medicare and state and local taxes). Thus we conclude that raising the top tax rate is very likely to result in revenue increases at least until we reach the 50% rate that held during the first Reagan administration, and possibly until the 70% rate of the 1970s. To reduce tax avoidance opportunities, tax rates on capital gains and dividends should increase along with the basic rate. Closing loopholes and stepping up enforcement would further limit tax avoidance and evasion.

Holy SHEEEIT! That's a higher rate than even I have considered!!! So, what does it say that the fucking Wall Street Journal is recommending it? I've been told several times that they are a reputable source, after all.

Assuming the revenue problem is solved, how about the issue of economic growth. After all, we've been told time and again that high taxes mean less growth.

Will raising top tax rates significantly lower economic growth? In the postwar U.S., higher top tax rates tend to go with higher economic growth—not lower. Indeed, according to the U.S. Department of Commerce's Bureau of Economic Analysis, GDP annual growth per capita (to adjust for population growth) averaged 1.68% between 1980 and 2010 when top tax rates were relatively low, while growth averaged 2.23% between 1950 and 1980 when top tax rates were at or above 70%.

Good grief, that can't be true, can it? Well, let's get back to revenue.

One cannot evaluate the ultimate growth effects of raising more revenue without identifying what is done with the revenue. If part of the revenue is used to reduce the federal debt, more of savings go into capital investment, enhancing growth. The fact that those paying higher taxes will reduce their savings somewhat does not fully offset this effect as some of their higher taxes would come out of consumption.

If some of the additional revenue is used for public investments with a high return, such as education, infrastructure and research, it raises growth further. The neglect of public investment over the last few decades suggests that the returns could be quite high.

Which is exactly what the president has been saying for his entire term. So why are the Republicans and others on the right against this given these facts?

Wednesday, December 07, 2011

And It Continues...

The last few days have seen some remarkable statements and calls to action by the so called 1 percent. James Theckston, a regional vice president for Chase Home Finance in southern Florida, recently detailed exactly how the financial industry led us into such a disaster.

“You’ve got somebody making $20,000 buying a $500,000 home, thinking that she’d flip it,” he said. “That was crazy, but the banks put programs together to make those kinds of loans.”

Theckston, who has a shelf full of awards that he won from Chase, such as “sales manager of the year,” showed me his 2006 performance review. It indicates that 60 percent of his evaluation depended on him increasing high-risk loans.

“The bigwigs of the corporations knew this, but they figured we’re going to make billions out of it, so who cares? The government is going to bail us out. And the problem loans will be out of here, maybe even overseas.”

Kristoff also does a great job of explaining why the Occupy movement is resonating so much with the American public and, as a result, the tide continues to turn in some very interesting places.

Ruth Porat, executive vice president and chief financial officer at Morgan Stanley, had this to say at the Economist's World in 2012 summit.

"The wealthiest can afford to pay more in taxes. That's a part of the deal. That makes sense. I don't know anyone that doesn't agree with that," Porat said. "The wealth disparity between the lowest and the highest continues to expand, and that's inappropriate."

"We cannot cut our way to greatness,
" she added.

Right. People need to sit back, breathe, and think about what government spending less will do to our economy. Even though it does need to happen, they really aren't thinking right now.

Perhaps the best illustration of the turning tide can be read in Nick Hanauer's recent article for Bloomberg titled, "Raise Taxes on Rich to Reward True Job Creators." Folks, this is the best piece I have read since Jim Manzi's "Keeping America's Edge." He starts off by introducing himself.

I’m a very rich person. As an entrepreneur and venture capitalist, I’ve started or helped get off the ground dozens of companies in industries including manufacturing, retail, medical services, the Internet and software. I founded the Internet media company aQuantive Inc., which was acquired by Microsoft Corp. (MSFT) in 2007 for $6.4 billion. I was also the first non-family investor in Amazon.com Inc. (AMZN)

So, he is one of these "job creators," right? Nope.

Even so, I’ve never been a “job creator.” I can start a business based on a great idea, and initially hire dozens or hundreds of people. But if no one can afford to buy what I have to sell, my business will soon fail and all those jobs will evaporate.

That’s why I can say with confidence that rich people don’t create jobs, nor do businesses, large or small. What does lead to more employment is the feedback loop between customers and businesses. And only consumers can set in motion a virtuous cycle that allows companies to survive and thrive and business owners to hire. An ordinary middle-class consumer is far more of a job creator than I ever have been or ever will be.

No shit. This is exactly what I have been saying all along. The simple fact that Hanauer and others like him are now saying this means we can finally obliterate this ridiculous myth and start working on our problems. The first thing that needs to be fixed?

When the American middle class defends a tax system in which the lion’s share of benefits accrues to the richest, all in the name of job creation, all that happens is that the rich get richer.And that’s what has been happening in the U.S. for the last 30 years.

Since 1980, the share of the nation’s income for fat cats like me in the top 0.1 percent has increased a shocking 400 percent, while the share for the bottom 50 percent of Americans has declined 33 percent. At the same time, effective tax rates on the superwealthy fell to 16.6 percent in 2007, from 42 percent at the peak of U.S. productivity in the early 1960s, and about 30 percent during the expansion of the 1990s. In my case, that means that this year, I paid an 11 percent rate on an eight-figure income.

And why exactly is this a problem?

One reason this policy is so wrong-headed is that there can never be enough superrich Americans to power a great economy. The annual earnings of people like me are hundreds, if not thousands, of times greater than those of the average American, but we don’t buy hundreds or thousands of times more stuff. My family owns three cars, not 3,000. I buy a few pairs of pants and a few shirts a year, just like most American men. Like everyone else, I go out to eat with friends and family only occasionally.

I can’t buy enough of anything to make up for the fact that millions of unemployed and underemployed Americans can’t buy any new clothes or enjoy any meals out. Or to make up for the decreasing consumption of the tens of millions of middle-class families that are barely squeaking by, buried by spiraling costs and trapped by stagnant or declining wages.

So, it's simply a matter of numbers. When you have an economy that is 70 percent based on consumer spending and consumers that aren't spending, you...have what we have now. So what does Hanauer recommend we do?

Significant tax increases on the about $1.5 trillion in collective income of those of us in the top 1 percent could create hundreds of billions of dollars to invest in our economy, rather than letting it pile up in a few bank accounts like a huge clot in our nation’s economic circulatory system.

Finally, someone actually admits it. They don't really invest in anything.

Consider, for example, that a puny 3 percent surtax on incomes above $1 million would be enough to maintain and expand the current payroll tax cut beyond December, preventing a $1,000 increase on the average worker’s taxes at the worst possible time for the economy. With a few more pennies on the dollar, we could invest in rebuilding schools and infrastructure. And even if we imposed a millionaires’ surtax and rolled back the Bush- era tax cuts for those at the top, the taxes on the richest Americans would still be historically low, and their incomes would still be astronomically high.

Why some folks can't understand this is completely beyond me. Obviously it has a lot to do with hubris and admission of error but perhaps it's more than that. When the central purpose of your life is being threatened with change, what meaning does your existence have?

Friday, December 02, 2011

Friday Funnies

These two caught my eye today.