Taxes

[Warfish]

Two Questions:

1. Why not allow the Bush/Obama Tax Cuts to expire for the Top 2%? If it's bad for the economy, as (R) claims, that should make itself rather clear, shouldn't it?

2. Why shouldn't investments be taxed at a higher rate that labor/wages? Doesn't it make sense that money earned through ones own labor should be taxed less than momney earned withotu any labor? The argument that "investors will stop investing" makes me wonder.....what else will they do with that money? Put it under the mattress?

If it's all as bad as (R) claims, if they let both these items occur, the economy will clearly suffer in the short term, and drive voters to fix it in the next mid-terms and next Presidential election. If it's not as bad as (R) claims, or turns out not bad at all, then that means it's good for us as a Country.

Sounds like a win/win.

How many here would pull all their money back and sit on it if investment income (i.e. Capital gains) was taxed at 35% instead of the current rate, and labor income was taxed less than it is now?

[chiefst2000]

Originally Posted by Warfish

Two Questions:

1. Why not allow the Bush/Obama Tax Cuts to expire for the Top 2%? If it's bad for the economy, as (R) claims, that should make itself rather clear, shouldn't it?

2. Why shouldn't investments be taxed at a higher rate that labor/wages? Doesn't it make sense that money earned through ones own labor should be taxed less than momney earned withotu any labor? The argument that "investors will stop investing" makes me wonder.....what else will they do with that money? Put it under the mattress?

If it's all as bad as (R) claims, if they let both these items occur, the economy will clearly suffer in the short term, and drive voters to fix it in the next mid-terms and next Presidential election. If it's not as bad as (R) claims, or turns out not bad at all, then that means it's good for us as a Country.

Sounds like a win/win.

How many here would pull all their money back and sit on it if investment income (i.e. Capital gains) was taxed at 35% instead of the current rate, and labor income was taxed less than it is now?

As a person that makes investments you look at all sorts of factors when making the choice to put your money at risk. You talk about mattresses but in reality the decision to invest money in a business venture includes a comparison of the end result versus an riskless investment like say government insured tax free products. If I can get 6% from government secured CMO's and I have the potential to make a 12% ROE on say building and operating a restaurant or hotel which I could potentially lose all my money that is a choice investors have to make. The higher the tax rate the lower the after tax ROE. If the numbers get too close together investors will always choose the riskless investment.

[chiefst2000]

Furthermore based on Obama's opening salvo at the debt ceiling negotiation in which he proposed close to 2 trillion in new taxes and virtually no spending cuts other then items that were already set to come off the books IE 1 billion in savings from ending the Iraq war it seems exceedingly likely that nothing will come of the fiscal cliff negotiations.

The one glimmer of hope is that it seems in statements made in interviews with congress members on both sides that they are open to compromise.

[Warfish]

Originally Posted by chiefst2000

As a person that makes investments you look at all sorts of factors when making the choice to put your money at risk. You talk about mattresses but in reality the decision to invest money in a business venture includes a comparison of the end result versus an riskless investment like say government insured tax free products. If I can get 6% from government secured CMO's and I have the potential to make a 12% ROE on say building and operating a restaurant or hotel which I could potentially lose all my money that is a choice investors have to make. The higher the tax rate the lower the after tax ROE. If the numbers get too close together investors will always choose the riskless investment.

And?

So Investmenr Income is now taxed at say 35% (similar to labor income).

What are you going to do that is going to "hurt the economy" other than choose not to invest, and thus rob yourself of 65% of the return you could have seen? You're simply not going to sit on it, you're going to save it (so it's in a banks posession to loan), spend it (thus moving it into the economy) or invest it anyway (the most likely, as 65% return is still better than 0% return less inflation).

And of course, the Government will have all that much more to spend into the economy as well.

I'm honestly curious. If you are investing it, you're clearly not in need of it for living expenses, so is the 65% return instead of a 85% return going to kill you? And shoudl your work-free investment be taxed less than the labor-derived income of your paycheck?

[southparkcpa]

Originally Posted by Warfish

And?

So Investmenr Income is now taxed at say 35% (similar to labor income).

What are you going to do that is going to "hurt the economy" other than choose not to invest, and thus rob yourself of 65% of the return you could have seen? You're simply not going to sit on it, you're going to save it (so it's in a banks posession to loan), spend it (thus moving it into the economy) or invest it anyway (the most likely, as 65% return is still better than 0% return less inflation).

And of course, the Government will have all that much more to spend into the economy as well.

I'm honestly curious. If you are investing it, you're clearly not in need of it for living expenses, so is the 65% return instead of a 85% return going to kill you? And shoudl your work-free investment be taxed less than the labor-derived income of your paycheck?

I am in the top 1 percent so this affects me... realistically, I will invest in more tax efficient investments, annuities and will probably work MUCH less as the additional tax makes it less worth it.

BUT... I will not make major changes and I will be left with a higher tax bill.

The 250K limit, IMO, is set too low. It should be somewhere around 350 to 500K.

[Warfish]

Originally Posted by southparkcpa

I am in the top 1 percent so this affects me... realistically, I will invest in more tax efficient investments, annuities and will probably work MUCH less as the additional tax makes it less worth it.

BUT... I will not make major changes and I will be left with a higher tax bill.

The 250K limit, IMO, is set too low. It should be somewhere around 350 to 500K.

And what if, we lower the % of taxation for labor and production (i.e. lower the labor tax rate and the Business Tax rate) alongside the increase in Capital gains taxes?

Incentive work and business profit, and shift the burden of taxation away from working, and towards investing income.

I can see a good argument that income that does not involve work and is generally done by those who are not in any fiscal need, should face a higher rate of taxation than income due to personal labor.

[chiefst2000]

Originally Posted by Warfish

And?

So Investmenr Income is now taxed at say 35% (similar to labor income).

What are you going to do that is going to "hurt the economy" other than choose not to invest, and thus rob yourself of 65% of the return you could have seen? You're simply not going to sit on it, you're going to save it (so it's in a banks posession to loan), spend it (thus moving it into the economy) or invest it anyway (the most likely, as 65% return is still better than 0% return less inflation).

And of course, the Government will have all that much more to spend into the economy as well.

I'm honestly curious. If you are investing it, you're clearly not in need of it for living expenses, so is the 65% return instead of a 85% return going to kill you? And shoudl your work-free investment be taxed less than the labor-derived income of your paycheck?

Either you didn't understand my response or I didn't write it clearly enough. If I were to choose not to invest in a business the economy would be robbed of the labor income from the workers I would employ at said business as well as a nice share of the profits from said business. I will give you a real world scenario. Imagine a hotel property. It costs 25 million in upfront capital and loans to build and open. When this hotel generates a profit of say 1 million dollars that profit is taxed at the corporate rate of 35%. Then an investor recieve their share of the after tax profits of say $650,000. You example has the government now taking 35% of that 650K leaving the investors with $422,000 to split up.

In this scenario the government has taken approximately 60% of the total profits and kindly left the investors to scrap over approximately 40%. Here is the problem. If we look back at that investment and simply took the 25 Million and invested it in insured tax free munis at say 4% interest the investor would net $800,000 with no risk. That hotel would never be built, its employees would not be employed and the government would lose out on the 35% + 15% of the profit they currently take.

Now some investments have an ROE so large that they would be made regardless of the tax rates. The problem is that the majority of projects, certainly the ones I've been involved with over the years, operate at the margins. They just squeak by that level where it is worth doing. I'm not sure where the perfect balance lies but the idea of first taxing corporate income then taxing the after tax profits at a high rate will undoubtedly stifle some investment. In the end the lost revenues from the stifled investment will cancel out or exceed the additional revenues from the higher rates.

[chiefst2000]

Originally Posted by southparkcpa

I am in the top 1 percent so this affects me... realistically, I will invest in more tax efficient investments, annuities and will probably work MUCH less as the additional tax makes it less worth it.

BUT... I will not make major changes and I will be left with a higher tax bill.

The 250K limit, IMO, is set too low. It should be somewhere around 350 to 500K.

On the plus side I am currently in talks to purchase a building in which the current owners have a nice capital gain and are rushing to get it sold before year end when they expect that cap gains rates will shoot up tremendously. Also I suspect as I have said all year that the current crumbling of the stock market is directly related to coming changes in the cap gains rates. This sort of forced selling can sometimes result in buying opportunities.

[Warfish]

Originally Posted by chiefst2000

Either you didn't understand my response or I didn't write it clearly enough. If I were to choose not to invest

Again, are you saying you're going to choose to not invest because your return is 65% instead of 85%, so instead you'll take 0%? Obviously not, you'll simply invest elsewhere, 35% rate or not. As you admit below.

...in a business the economy would be robbed of the labor income from the workers I would employ

Unless it's your business, they're not your workers, and your investment should not be the primary driver of workforce, increased profitabillity vs. increased cost should be.

I will give you a real world scenario. Imagine a hotel property. It costs 25 million in upfront capital and loans to build and open. When this hotel generates a profit of say 1 million dollars that profit is taxed at the corporate rate of 35%. Then an investor recieve their share of the after tax profits of say $650,000. You example has the government now taking 35% of that 650K leaving the investors with $422,000 to split up.

In this scenario the government has taken approximately 60% of the total profits and kindly left the investors to scrap over approximately 40%. Here is the problem. If we look back at that investment and simply took the 25 Million and invested it in insured tax free munis at say 4% interest the investor would net $800,000 with no risk. That hotel would never be built, its employees would not be employed and the government would lose out on the 35% + 15% of the profit they currently take.

Except in your own scenario, the money IS invested, in Municipal Bonds, is thus spent by the municiapallity in question, thus employing other workers, building public infrastruture or other public assets, and having the same effect economicly, with a potentially more universally valuble end result.

So anther borderline profitable Hotel doesn't get build. But a Hospital or Road or Railway or Park does.

And in the real world, the Hotel still gets built, because the vast majority of Hotels are chain operations of the huge Hotel Industry, and their build not based on your small investment, but on profitabillity of location and ongoing operations, as it should be.

The fact you bought ten shares of Marriott did not make that Hotel happen. The fact that you'd pay 35% instead of 15% on your dividend would not stop that hotel from happening either.

Now some investments have an ROE so large that they would be made regardless of the tax rates. The problem is that the majority of projects, certainly the ones I've been involved with over the years, operate at the margins. They just squeak by that level where it is worth doing.

Then perhaps they're not really worth doing. again, perhaps the problem is that such projects are being viewed through a prism of RoI of short-term shareholders, and not long-term profitabillity/dividends.

In the end the lost revenues from the stifled investment will cancel out or exceed the additional revenues from the higher rates.

It's hard for that not to sound like a self-serving argument made only by investors or paid-for-economist, because you (an investor) obviously want to pay less taxes for no work, while the workers in that hypothetical hotel pay the 35% taxes.

How about income be taxed at the very least evenly, labor or investment. What is the moral argument that a wealthy investor owes a lower rate than a maid, waiter or taxi driver?

[chirorob]

Originally Posted by Warfish

And?

So Investmenr Income is now taxed at say 35% (similar to labor income).

What are you going to do that is going to "hurt the economy" other than choose not to invest, and thus rob yourself of 65% of the return you could have seen? You're simply not going to sit on it, you're going to save it (so it's in a banks posession to loan), spend it (thus moving it into the economy) or invest it anyway (the most likely, as 65% return is still better than 0% return less inflation).

And of course, the Government will have all that much more to spend into the economy as well.

I'm honestly curious. If you are investing it, you're clearly not in need of it for living expenses, so is the 65% return instead of a 85% return going to kill you? And shoudl your work-free investment be taxed less than the labor-derived income of your paycheck?

It's not a 65% return.

It's numbers. With any investment there is some risk. It is a balancing act of risk/reward. If the risk does not decrease, and the reward is diminished, I am less likely to invest money. Therefore, yes, I will sit on it or move it out of the country.

Being a very logical person, you already knew this and are baiting people.

My counter point is, if I have already paid tax on the money I earn, then I invest it and have to pay tax on whatever I make that way, then die, and my estate pays tax on whatever I want to give to my children, am I not being triple taxed?

[southparkcpa]

Originally Posted by Warfish

And what if, we lower the % of taxation for labor and production (i.e. lower the labor tax rate and the Business Tax rate) alongside the increase in Capital gains taxes?

Incentive work and business profit, and shift the burden of taxation away from working, and towards investing income.

I can see a good argument that income that does not involve work and is generally done by those who are not in any fiscal need, should face a higher rate of taxation than income due to personal labor.

We could hypothetical all day..... I think ALL Americans should pay something.

We could triple rates and it would run the country for a week or two. We pay way too much on entitlements, labor etc. Spending is the problem, tax rates are a mirage solution.

[southparkcpa]

Originally Posted by chiefst2000

On the plus side I am currently in talks to purchase a building in which the current owners have a nice capital gain and are rushing to get it sold before year end when they expect that cap gains rates will shoot up tremendously. Also I suspect as I have said all year that the current crumbling of the stock market is directly related to coming changes in the cap gains rates. This sort of forced selling can sometimes result in buying opportunities.

Yes agreed. wait until they find out about the depreciation recapture.

[Warfish]

Originally Posted by chirorob

My counter point is, if I have already paid tax on the money I earn, then I invest it and have to pay tax on whatever I make that way, then die, and my estate pays tax on whatever I want to give to my children, am I not being triple taxed?

No, you're not.

You are taxed when you work and earn income.

When you take that income, invest it, and recieve MORE than you invested, you are taxed on that new income. It has not been taxed before.

When you die, and leave money to family, that is income to your family members. It is taxed (for them) for the first time when they recieve it. You're dead, you cannot be taxed after you're dead.

I've yet to hear an argument as to why work should be taxed 35%, but non-work investment profit should be taxed at 15%. Investment already has provisions for losses (tax credits), so thats not it.

So why does osmeone who works 12 hours one day pay 35% of that to the State, and a person who slept all day but had money to invest should pay only 15% of his profit to the State?

[Axil]

Originally Posted by Warfish

Two Questions:

1. Why not allow the Bush/Obama Tax Cuts to expire for the Top 2%? If it's bad for the economy, as (R) claims, that should make itself rather clear, shouldn't it?

2. Why shouldn't investments be taxed at a higher rate that labor/wages? Doesn't it make sense that money earned through ones own labor should be taxed less than momney earned withotu any labor? The argument that "investors will stop investing" makes me wonder.....what else will they do with that money? Put it under the mattress?

If it's all as bad as (R) claims, if they let both these items occur, the economy will clearly suffer in the short term, and drive voters to fix it in the next mid-terms and next Presidential election. If it's not as bad as (R) claims, or turns out not bad at all, then that means it's good for us as a Country.

Sounds like a win/win.

How many here would pull all their money back and sit on it if investment income (i.e. Capital gains) was taxed at 35% instead of the current rate, and labor income was taxed less than it is now?

Investment income is fundamentally different than income earned from employment.

When you are employed, you receive a paycheck, you know what it will be. Once you've completed the work, your payment cannot be taken away from you.

Investing is always a gamble. Your odds are better than at the blackjack table, but even the best investors are constantly at risk. I would argue on principle that investment income shouldn't be taxed at all for those reasons, regardless of whether or not it hurt the economy.

But it does. Higher taxation skews investment towards lower risk ventures. High risk ventures drive innovation and help the economy grow, and evolve. Surely you don't think that money being diverted into bonds, will provide the same economic advantage?

Also why are you expecting that in the invent raising investment income taxes hurts the economy the American voter to logically identify the problem , and vote based upon that?

Incidentally i don't believe you're correct in regards to most hotels being owned by the parent chain. I believe that most hotel's are franchised, or at least most low to mid-range hotels are. I could not find data to back up my opinion though, so if you have the data to prove me wrong please share.


*Edit* for the record i'm opposed to any income tax of any kind, and prefer the consumption tax model.

[Axil]

Originally Posted by southparkcpa

Yes agreed. wait until they find out about the depreciation recapture.

Somebody i know got caught by this (at least i believe it's what you were referring to) Lost 4+ million in expected profits. Accountant essentially said "Whups!"

[chiefst2000]

Originally Posted by Warfish

Again, are you saying you're going to choose to not invest because your return is 65% instead of 85%, so instead you'll take 0%? Obviously not, you'll simply invest elsewhere, 35% rate or not. As you admit below.



Unless it's your business, they're not your workers, and your investment should not be the primary driver of workforce, increased profitabillity vs. increased cost should be.



Except in your own scenario, the money IS invested, in Municipal Bonds, is thus spent by the municiapallity in question, thus employing other workers, building public infrastruture or other public assets, and having the same effect economicly, with a potentially more universally valuble end result.

So anther borderline profitable Hotel doesn't get build. But a Hospital or Road or Railway or Park does.

And in the real world, the Hotel still gets built, because the vast majority of Hotels are chain operations of the huge Hotel Industry, and their build not based on your small investment, but on profitabillity of location and ongoing operations, as it should be.

The fact you bought ten shares of Marriott did not make that Hotel happen. The fact that you'd pay 35% instead of 15% on your dividend would not stop that hotel from happening either.



Then perhaps they're not really worth doing. again, perhaps the problem is that such projects are being viewed through a prism of RoI of short-term shareholders, and not long-term profitabillity/dividends.



It's hard for that not to sound like a self-serving argument made only by investors or paid-for-economist, because you (an investor) obviously want to pay less taxes for no work, while the workers in that hypothetical hotel pay the 35% taxes.

How about income be taxed at the very least evenly, labor or investment. What is the moral argument that a wealthy investor owes a lower rate than a maid, waiter or taxi driver?

Most hotels are privately owned. I know this because I am part of an investment group that built two of them in Florida. One is a Marriott and one is a Hilton. We purchased the land, partnered with a management company, jumped through years of hoops with local governments, the EPA and the like. Ran it to cost overruns that would make your skin crawl. Even still the investment teeters on the brink of loss at every moment. Even now the management company is making moves to account for the new Obamacare laws by reducing employee hours to get under the 50 full time employee threshold. Your reading of the numbers is wrong.

That said, if the whole point of your baiting argument is to say that we should simply have a flat tax on all income and get rid of the distinctions between payroll and investment income I would support that type of tax system. Right now the government uses the tax code to encourage certain behaviors from the citizenry. Be it home ownership or marriage or having children or saving for retirement. They would lose that capability with a flat tax stystem for better or worse.

[southparkcpa]

Originally Posted by chiefst2000

Most hotels are privately owned. I know this because I am part of an investment group that built two of them in Florida. One is a Marriott and one is a Hilton. We purchased the land, partnered with a management company, jumped through years of hoops with local governments, the EPA and the like. Ran it to cost overruns that would make your skin crawl. Even still the investment teeters on the brink of loss at every moment. Even now the management company is making moves to account for the new Obamacare laws by reducing employee hours to get under the 50 full time employee threshold. Your reading of the numbers is wrong.

That said, if the whole point of your baiting argument is to say that we should simply have a flat tax on all income and get rid of the distinctions between payroll and investment income I would support that type of tax system. Right now the government uses the tax code to encourage certain behaviors from the citizenry. Be it home ownership or marriage or having children or saving for retirement. They would lose that capability with a flat tax stystem for better or worse.

I did some work for a resort golf course hotel VERY famous, you would know the place if I said.

Investors lost millions. Changed ownership in 2006 or so and the knew owners paid FMV and when 2008 came and corporate travel was frowned upon...they lost it in bankruptcy.

[JetsfanfromtheBURGH]

'Pirates of manhattan' . Read it

[DDNYjets]

We need to promote investing, not deter it. Smart investing is labor.

Raise taxes and/or close loopholes for the rich. And when I mean rich I mean those that earn like $500k-$1MM/yr. A husband and wife earning $250k combined is not rich IMO.

[PlumberKhan]

Originally Posted by southparkcpa

I am in the top 1 percent so this affects me... realistically, I will invest in more tax efficient investments, annuities and will probably work MUCH less as the additional tax makes it less worth it.

BUT... I will not make major changes and I will be left with a higher tax bill.

The 250K limit, IMO, is set too low. It should be somewhere around 350 to 500K.

250k is the top 2%.

Any a**hole who can't live on 120 bucks an hour should really kill themselves and their family. They bring nothing to the table.


Sent from my 8.6 acre property with 4 bedroom house with waterfront views and low utility costs because of the gas well on my property using fireworks...