This is also an important distinction though. If you buy a house but you buy it just on the absolute edge of affordability then perhaps that purchase was unwise.
Taxes are a fact of life, if you're making a major life changing purchase and the affordability measure basically stipulates that you just cant handle any additional expense of any kind, let alone taxes then you're probably not financially ready for that house.
What happens when property taxes increase?
I agree with Buffet personally, but there has to be more to it. Taxing the rich more reasonably is something thats been thrown around for a long time. Most people just assume that everytime its even thought of thousands of highly paid lobbyists swarm DC and kill the very notion.
Like was said before, increased taxes on the rich would run the country for two days. Well, maybe the Government has to have a serious look at trimming some of the fat.
If suddenly income was reduced by a large percentage (10-17%?), I don't think not being able to afford your home any further means that it bought on the "absolute edge of affordability". Keep in mind I am not talking about people being instantly tossed on the street here but putting them into a situation where they are pretty much house poor and might need to sell their homes (at a sizable cost) to maintain their normal buying power - which is what the economy needs, not a drastically decreased buying power.
The property tax claim is just plain ridiculous. When would property taxes ever go up $3000 in a single year (a 10% increase on 30k, because I don't know where the line for 'no tax' is).
I do agree that more needs to be done, across the board increases perhaps, but singling out low income people will do more harm than good in the long run.
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I'm for phasing out all of the Bush tax cuts, but I also think that the people who are making over a million a year should pay more on top of that. Poor people need the money and the US economy needs the poor people to keep their money so they can spend it in the economy. The rich will be as well off if they are taxed some more on their income over a million as they were before.
I disagree with the patent unfairness of that. Is some trailer park trash more "deserving" of that money than a wealthy person? I would say "no" - in all likelihood, the wealthier person has done a whole lot more to get where he/she is than Bubba... Whether the poor or the rich have the money, "it goes into the economy" - unless the money is in a cookie jar, it's "in the economy", whether it's being spent on hot dogs at Wal-Mart or invested in a real estate development in Palm Springs...
If suddenly income was reduced by a large percentage (10-17%?), I don't think not being able to afford your home any further means that it bought on the "absolute edge of affordability". Keep in mind I am not talking about people being instantly tossed on the street here but putting them into a situation where they are pretty much house poor and might need to sell their homes (at a sizable cost) to maintain their normal buying power - which is what the economy needs, not a drastically decreased buying power.
The property tax claim is just plain ridiculous. When would property taxes ever go up $3000 in a single year (a 10% increase on 30k, because I don't know where the line for 'no tax' is)
I get that, but you're not going to go from paying 0% taxes to 10-17% instantly. Its all marginal as taxable income increases. Much like small increases in Property Taxes.
The only way a person's tax rate would jump by that much is by a large increase in income. So if you're talking about slow and steady increases then the taxes will do the same.
Purchasing a house on the assumption that you're never going to have to pay income taxes is fairly shortsighted.
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I get that, but you're not going to go from paying 0% taxes to 10-17% instantly. Its all marginal as taxable income increases. Much like small increases in Property Taxes.
The only way a person's tax rate would jump by that much is by a large increase in income. So if you're talking about slow and steady increases then the taxes will do the same.
Purchasing a house on the assumption that you're never going to have to pay income taxes is fairly shortsighted.
So is purchasing a home with a sub prime mortgage with balloon payments, but that would never happen in large enough numbers to hurt the economy, would it?
And if the increase was more involved that just dropping the lowest income bracket down $10k or so, then it probably would be a lot more palatable than what I am sssuming.
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I disagree with the patent unfairness of that. Is some trailer park trash more "deserving" of that money than a wealthy person? I would say "no" - in all likelihood, the wealthier person has done a whole lot more to get where he/she is than Bubba... Whether the poor or the rich have the money, "it goes into the economy" - unless the money is in a cookie jar, it's "in the economy", whether it's being spent on hot dogs at Wal-Mart or invested in a real estate development in Palm Springs...
I disagree.
I would contend that one's wealth at age 50 has far more to do with when, where and to whom one was born than whether or not they had "Done a whole lot more".
The fallacy of 'meritocracy' is harmful to both the rich and the poor.
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I get that, but you're not going to go from paying 0% taxes to 10-17% instantly.
Nobody pays 0% taxes. Even the lowest 20% of Americans pay, on average, 16% of their annual income to various taxes as per this site from the University of California, Santa Cruz.
There's actually lots of really fascinating data at that link. For example, the bottom two quintiles of Americans (40% of the population) control just 0.3% of the nation's accumulated wealth. Is raising taxes on them really going to have a noticeable effect on reducing the deficit?
"We need to increase taxes on the poor" is, quite frankly, the most non-nonsensical solution to the deficit crisis I've ever heard.
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Warren Buffett and many of those ultra rich supported Obama's first bid for the White House. It suprised me at first because everything about Obama pointed to a more socialist government. That would mean much more regulation and more taxation which one would think would hurt their business. So far Obama has just gotten the regulation part although he has tried to increase taxation and I suppose has to a degree through his health care bill.
The question then becomes: Why would a guy like Warren Buffett sign up for more taxes and more repressive regulations? The answer is simple; In such a system only the biggest dogs will survive. Warren Buffett isn't going to go broke through more taxes and more regulation. All those things are going to do is knock out the competition. It will also eliminate any possibility of some up-start building a better mouse trap and rising to compete against Warren Buffett.
Europe is full of old money and old businesses. If you want to hire a painter chances are the guy you phone up will have inherited that business from his father and it may have been owned by the family for generations. That is equally true with real estate. Manufacturing is almost all old money because the regulations and the employee conditions are mandated by the government to the extent where a new company can't cover the expenses imposed upon them. If that utopia comes to the USA Warren Buffett won't have to worry about his empire in the new future. There will be no one left in the market place to threaten it.
Warren Buffett and many of those ultra rich supported Obama's first bid for the White House. It suprised me at first because everything about Obama pointed to a more socialist government. That would mean much more regulation and more taxation which one would think would hurt their business. So far Obama has just gotten the regulation part although he has tried to increase taxation and I suppose has to a degree through his health care bill.
The question then becomes: Why would a guy like Warren Buffett sign up for more taxes and more repressive regulations? The answer is simple; In such a system only the biggest dogs will survive. Warren Buffett isn't going to go broke through more taxes and more regulation. All those things are going to do is knock out the competition. It will also eliminate any possibility of some up-start building a better mouse trap and rising to compete against Warren Buffett.
Europe is full of old money and old businesses. If you want to hire a painter chances are the guy you phone up will have inherited that business from his father and it may have been owned by the family for generations. That is equally true with real estate. Manufacturing is almost all old money because the regulations and the employee conditions are mandated by the government to the extent where a new company can't cover the expenses imposed upon them. If that utopia comes to the USA Warren Buffett won't have to worry about his empire in the new future. There will be no one left in the market place to threaten it.
Yeah. I'm sure this is all part of his evil plan to continue his dark empire after he passes. When he said he was going to give 95%+ of his money to charity when he dies, it was all a scam! Evil genius he is.
Wealth disparity in the US is the critical problem. A capitalist economy and a democracy can't possibly survive the top 1% of society owning 80%+ of the wealth.
The question then becomes: Why would a guy like Warren Buffett sign up for more taxes and more repressive regulations? The answer is simple; In such a system only the biggest dogs will survive. Warren Buffett isn't going to go broke through more taxes and more regulation. All those things are going to do is knock out the competition. It will also eliminate any possibility of some up-start building a better mouse trap and rising to compete against Warren Buffett.
Calgaryborn: your postulate is innately flawed by the simple fact that Buffett himself accumulated his vast fortune during a period when taxes were much higher. If it is impossible for a young upstart to succeed against entrenched competition in an environment where taxes are higher, how then did Buffett achieve his success decades ago?
I would contend that ones wealth at age 50 has far more to do with when, where and to whom one was born than "Doing a whole lot more".
The fallacy of 'meritocracy' is harmful to both the rich and the poor.
Yes, being born into wealth/education increases the odds - US is trending toward that more and more, as attested to at the highest level by the Bush and Clinton families. That said, I have done "a whole lot more" than Bubba, so why should I subsidize Bubba?
This is far more complex than "tax the rich to give to the poor". The whole system is rotten, and you won't fix it with more welfare. The US is too big, too populous, too diverse (in every sense of the term) to be subject to "easy" solutions that might work for smaller societies, such as Sweden and Norway. This almost requires a re-invention of the whole system. Who knows? Perhaps we are witnessing a replay of the fall of the Roman Empire... I don't know - frankly, I don't have enough economic knowledge to come up with a "good" answer...
The question then becomes: Why would a guy like Warren Buffett sign up for more taxes and more repressive regulations? The answer is simple; In such a system only the biggest dogs will survive. Warren Buffett isn't going to go broke through more taxes and more regulation. All those things are going to do is knock out the competition. It will also eliminate any possibility of some up-start building a better mouse trap and rising to compete against Warren Buffett.
Europe is full of old money and old businesses. If you want to hire a painter chances are the guy you phone up will have inherited that business from his father and it may have been owned by the family for generations. That is equally true with real estate. Manufacturing is almost all old money because the regulations and the employee conditions are mandated by the government to the extent where a new company can't cover the expenses imposed upon them. If that utopia comes to the USA Warren Buffett won't have to worry about his empire in the new future. There will be no one left in the market place to threaten it.
You clearly have a very limtied understanding of Buffett, the man is not concerned about his "empire" in fact he's giving nearly all of it away to charity.
The question then becomes: Why would a guy like Warren Buffett sign up for more taxes and more repressive regulations? The answer is simple; In such a system only the biggest dogs will survive.
Companies make most of their money off of sales. If there is nobody to buy, then there are no sales and there is no profit. It is in Buffett's best interest to make sure that the majority of the consumers have money to spend.
Nobody pays 0% taxes. Even the lowest 20% of Americans pay, on average, 16% of their annual income to various taxes as per this site from the University of California, Santa Cruz.
There's actually lots of really fascinating data at that link. For example, the bottom two quintiles of Americans (40% of the population) control just 0.3% of the nation's accumulated wealth. Is raising taxes on them really going to have a noticeable effect on reducing the deficit?
"We need to increase taxes on the poor" is, quite frankly, the most non-nonsensical solution to the deficit crisis I've ever heard.
Interesting site but, it does appear to concentrate on accumulated wealth. This can be deceptive because assets like property might have increased your worth without increasing your working income. I know more than a few hay farmers in Idaho who became millionares in this last decade only because of the worth of their land. They still sell hay for a living.
Wealthy Americans certainly make more than a hay farmer and rightly pay more taxes. If too much of that income is hidden in tax loop holes then those should be closed. But surely a good chunk of that accumulated wealth is just through the appreciation of assets.
If you owned a house in Calgary 15 years ago worth 200 thousand dollars you were a lot better off than a guy who rented in the city and owned a 15 thousand dollar car. Today your house might be worth a million dollars and that same guy might own a 30 thousand dollar car. You have more accumulated wealth but, actually live in a 15 year older house with much higher taxes. The other guy has a more expensive car but, only because they cost more now. He has basically treaded water. He isn't any poorer and he isn't any richer.
This holds true unless you compare your net worth to his. All of the sudden the rich has gotten richer and the poor poorer by a lot. Is this because you havn't paid your fair share? Has your accumulation of wealth been on the back of this poor guy? Should you be paying more taxes because of the disparity?
I don't believe that there is a finite amount of wealth in the world. It isn't neccessary to take from the rich to make the poor wealthy. The poor like the rich can produce wealth through productivity. The best a government can do is make sure there is opportunity by allowing for a vibrant moving economy.
The ironic part is that Buffet and his 'friends' are the reason the rich seem to pay a low tax rate.
Their influence on Capital Hill through the lobbyists that they pay millions too helped secure things like the Bush tax cuts.
So first they screwed over the US from $5 trillion in additional revenue during 'wartime'....and now they're saying they should have been taxed more. Funny how that works.
Now that I disagree. I'm not even sure if the rate is the problem, but instead all the loopholes that Buffet and the other rich people exploit to get away from paying taxes.
I also find it funny how nobody mentions that Buffet also told the Super Committee to find more than the $1.5 trillion in savings that they were supposed to find. Obviously Buffet sees that you can't just tax your way out of this problem.
You clearly have a very limtied understanding of Buffett, the man is not concerned about his "empire" in fact he's giving nearly all of it away to charity.
So if he kept his wealth for his heirs it would be taxable at what 50% ? That would neccessitate the break up of his empire.
Instead he leaves it to a couple foundations who will keep his empire together and use the profits for charity work. These profits along with his assets no longer provide tax revenue. He gets a legacy that will out live his grandchildren, the preservation of the empire he built, and dodges the tax man. What a great guy.
Maybe America would be better off if they didn't raise his taxes now and instead he let the government tax his estate later.
Nobody pays 0% taxes. Even the lowest 20% of Americans pay, on average, 16% of their annual income to various taxes as per this site from the University of California, Santa Cruz.
There's actually lots of really fascinating data at that link. For example, the bottom two quintiles of Americans (40% of the population) control just 0.3% of the nation's accumulated wealth. Is raising taxes on them really going to have a noticeable effect on reducing the deficit?
"We need to increase taxes on the poor" is, quite frankly, the most non-nonsensical solution to the deficit crisis I've ever heard.
Interesting, but yes, there are people who pay 0% net income taxes. Hell, if you count refundable Government social programs then that could be a negative number.
I briefly perused that site, but I dont really have the time to get into any depth with it.
Suffice to say, when Bush implemented policies that allowed for NINJA mortgages and the acceptable use of Welfare as a source of income on mortgage applications, the people in that position are probably not paying much, if any, taxes by the time it all shakes out.
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I also find it very interesting that Buffet talks about increasing the tax rate on income for people that are 'rich.' Mr. Buffet in his piece in the Times indicates that he paid $6,938,744 in taxes an effective rate of 17.4% on his taxable income. I won’t insult Mr. Murf by explaining why that makes me think that Mr. Buffett’s taxable income was $39,877,839. Mr. Buffett seems to be saying that he wouldn’t mind paying at a higher rate. If you don’t mind me shifting to round numbers at 40% he would have paid $16,000,000.
I just can’t help thinking that buried in that analysis is a subtle assumption that it is that favorable rate that is getting Mr. Buffett ahead and I think that subtle assumption is mistaken. According to Forbes, Mr. Buffett’s net worth went up by $3,000,000,000 over the last year. If he had to realize those gains, even at 17.4%, he would have had to pay $522,000,000.
Quote:
Still, Mr. Buffett is not sharing the real reason that he doesn’t pay much in the way of income tax relative to his great fortune. The secret is hidden in plain sight. Mr. Worstall alludes to it when he mentions that Berkshire Hathaway does not in fact pay dividends. Mr. Buffett’s secret which you can find blasted all over the Internet is one of his famous quotations:
Our favorite holding period is forever
You only pay income taxes at any rate on realized appreciation. An investment with a holding period of forever incurs a capital gains tax of 0%, while all along the holder can be getting wealthy from appreciation. That’s the real reason Mr. Buffett does not pay a lot of income taxes.
Buffet makes almost all of his money from capital gains, which IIRC, are taxed lower than income. Which is screwed up to begin with. I'm sure Buffet and his buddies helped orchestrate that law on Capital Hill by paying their lobbyists only $10 million.
The tax rate for long term capital gains is 15%, and if the Bush tax cuts expire, they would jump to 20%. Which is fine, except for low-income earners, the rate would jump from 0-20%. None of the proposals for tax reform include anything about increasing the capital gains tax.
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Companies make most of their money off of sales. If there is nobody to buy, then there are no sales and there is no profit. It is in Buffett's best interest to make sure that the majority of the consumers have money to spend.
True but, if they end up being the only company left selling toasters they will get all the profits from toaster sales. Buffett isn't calling for more taxes on consumers. He wants to make it more difficult for others to compete against him. At his age it probably has more to do with his desire to leave something that will last after he is gone. He wants to hold on to his market share.
To add, I also don't see Buffet get down to details and talk about increasing the long term capital gains tax rate. Or any of the other 'rates' that allow him to get away with actually paying less.
Otherwise known as the 'loopholes.'
I admire the man for his obvious brilliance, but he's not being forthright at all here. In fact he's intentionally misleading the public with generic statements like 'the government shouldn't coddle the rich.' True, but he's also not suggesting that the government should fix the REAL reason he pays $6 million/year in taxes. Nor does the government have it in their plans.
When your net worth increases by $3 billion in one year, and you pay absolutely nothing in capital gains taxes because of some loophole that you probably helped make, then you ought not to talk about marginal rates, and how your secretary pays more taxes than you. She does, but only because YOU helped ensure that you will pay less. Your secretary doesn't have the millions to lobby Congress to implement the loopholes so that you can add $3 billion to your net worth, and still get away with just paying $6 million in taxes. What is that, like .002% of what you 'made.' What a load of crap.
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