CAPITAL GAINS VERSUS POLITICAL GAINS
During the last week we saw the politicians fighting for the votes of the Republican Party and attacking each other with everything, although it was obvious that Romney did not want to go with all force against the others, receiving big punches because he did not want to release his tax return… yet.
Gingrich insisted that Romney should show his taxes, knowing that no matter what this tactic will provide ammunition for him against the former MA governor. If Romney rejected the idea he will be accused of hiding something, and if he accepted, they will say that he is taking advantage of the poor of this country since they knew that Romney had acknowledged that his taxes rate was around 15% because his earnings came mainly from investing, therefore from capital gains. Romney did not release his tax return, and the voters went after him and he came second in South Carolina and looked bad for Florida.
Sure enough as soon as he released his tax returns (a little bit too late) all the stupid people of this country (some are not stupid they are only wolves) began to pound him with the same old stupid logic (this is stupid no matter who is using it) that he is one of the 1% and that the rest of us who are not millionaires are meanwhile paying taxes at a rate by far higher than the governor’s.
This logic is so stupid that I cannot understand those using it. Are we living in a different country I am thinking I live in? Or is it that we already have gone all the way to the situation I have feared this country was headed to? What is wrong with investing my own money in my country’s economy? What is wrong with the Free market Economy? What is wrong to use the stupid tax code we have in our own advantage? What is wrong is that we are taxed too much. Romney should be paying even less than what he paid, and the rest of us should be paying also less than what we are paying. What is wrong is that those wolves in Washington are spending way too much of the revenue they are collecting from Romney et al. (at al. means YOU AND ME).
The Corporate tax at 35% is very high and many American Corporations already went out of the Country to other places where that stupid tax is lower or does not exist (if the tax here is 35% and in Switzerland is none, only idiots remain here). Now these stupid people (and wolves) want the capitals to go abroad, and hide them (do you see even if you take your money elsewhere and have capital gains you have to pay capital gains tax here). Honest people like Romney, are not hiding it and are paying what the tax code asks for, therefore despite of the stupidity of the wolves and followers, honest people in this country might take their money elsewhere and pay taxes here, but, the companies they are going to support are going to be foreign companies not the American ones.
Gingrich at al. (at al. are those who voted for him) are sounding like Obama et al (you know who these et al. are), who are against FREE MARKET ECONOMY/USA REPUBLIC, which for POLITICAL GAINS are against CAPITAL GAINS, disregarding the fact that the only true system that help the masses is the FREE MARKET ECONOMY (called by the wolves, Capitalism with negative connotations). The masses are unfortunately carried away by the political rhetoric of the times (yes, also the New York Times and Los Angeles Times) thinking that the politicians offering them to fight the “vultures capitalists” are the good guys and the investors are the parasites as Karl Marx described the entrepreneurs in the past. If we follow these kinds of politicians (Obama, Gingrich et al.) we are going to end in the USSA or at least in a European like Economy.
For those who are thinking that I am a Republican defending Romney, I am telling you, I am not a Republican, I am a concerned citizen of this great Country defending YOU from the politicians who want more and more of your taxes to spend them recklessly. I don’t think Romney needs anybody to defend him, although he should say the things the way they are and go for those who consistently are attacking the Free Market Economy, and for sure I believe that we need in the White House someone who knows how this system works and try to bring it back and stop so much interference of the government in the people’s affairs.
I don’t understand the people scolding Romney because of the 15% tax rate he is paying. Do they want him to give more than the tax code calls for? Are they (if they pay taxes) sending to the IRS more than the IRS is asking for? Mr. Warren Buffett (again) came to say that for sure Mr. Romney did not earn his money with the use of his muscles. Of course not but neither I nor those who are leading in any position, who should use their brains to create better conditions for those who for any reasons are unable to show the way we should go. Does Mr. Buffett want a janitor in charge of the Treasury Department? (Oops this is not a good example at least the janitor pays taxes), or does he want an illegal alien picking strawberries in California as Commander in Chief? (Oops another bad example, aliens cannot be USA presidents). We want people using their brains instead of their muscles being in charge, this does not mean that is right that the “brain” guys pay taxes at a lower rate than “muscle” guys, but we should reduce the rate of the “muscle guys” to the level of the others not the other way around as it has been proposed. Are Mr. Buffett and the “rich” guys using the tax code loops to pay lower taxes? Good for them. You don’t like this? Reform the tax code (or better abolish it), but don’t ask Romney or you or me to (stupidly) to not use them or to send more money to the IRS than we are required by the stupid code.
If you are going to reform it, go the second mile, and make ALL the politicians (Congress, and the other two branches of the government) to be subjected to same laws and benefits that they have enacted for us, among others, Social Security, Obamacare, etc. Stop them to mess around with Capital Gains tax for their Political gains.
I agree with your entry but there are other factors to consider.
ReplyDeleteWhat rubs people the wrong way is that a guy as rich as Romney pays 15% while a "normal" tax paying person pays 35%.
The 15% is because it is the tax rate for investments as opposed to wages. Now the "normal" guy has the same tax rate as Romney when/if he invests. For example, say the "normal" guy gets enough money to buy a house and then sells it for a profit within a month. He has to pay 15% of his gains.
My guess is he probably complains about having to pay about that 15% and so he'll try to hang on to the property for 2 years and go live in it so he doesn't have to pay taxes on it at all--but if if he bought it only as an investment then he pays the 15%.
So there is no inequality other than to say that people who are able to INVEST in the first place have "a lot of money" and so they should be taxed higher.
The catch is that the "normal guy" is still getting taxed 35% or more on his wages and then an additional 15% on his investments.
Bottom line Uncle Sam wants a cut of all your income no matter where it comes from. Now they want to make the 15% be at 35% just like the tax on wages, etc.
I can see why people will feel its not fair for a guy like Romney to only pay 15% while they pay 35% the problem is that that is not the whole story as shown above.
This begging success and business and wealthy people is only going to make all people poor. Like I heard on a clip the other day:
Instead of seeing a rich guy drive by in his fact car and going to my son and saying to him "son, if you work hard and if you are smart about how you handle your money, someday you can be like mr x there and own a beautiful car like that"
People are saying: That SOB mr. x Look at him driving on that Bently while we have to take the bus! Why does his think he is better than us?! Lets go slash his tires and teach him a lesson!
The tail is wagging the dog and unfortunately our way of living is in decline. I'm honestly not sure any of these cats can reverse it. I don't see anyone changing the tax code to be a flat tax where EVERYONE contributes or a consumption tax where if you consume more (rich) you pay more....
To much influence peddling, to much greed and not enough country first self second.
"I can see why people will feel its not fair for a guy like Romney to only pay 15% while they pay 35% the problem is that that is not the whole story as shown above."
ReplyDeleteWRONG, WRONG, WRONG! Romney already paid his 35% when he got the money to invest in the first place, where do you think that money he used to invest came from? He worked for it and got taxed for it already just like the "working guy"
If Romney was a "normal guy" and was working at a job, he would also get taxed the 35%, there is no unfairness here.
I did not say that 15% was too much or too little. What I said (or at least what I meant to say) was that people look at his tax return and think its unfair. They see he paid 15 and they pay 35. It LOOKS like he pays less and is rich.
DeleteI agree, he was already a "normal" guy and this investment stuff was already taxed at the 35% but people don't see that--ESPECIALLY when the guy did NOT get any income from working like the normal guy, his only income came from money working not people working so to the ignorant it looks like his taxes are lower than your and my taxes.
I get it that YOU understand, my beef with your comment is "I can see why people feel it is not fair". I can't see why they think that way, if they think that way it is because they do not understand how things work. If by "I can see why people feel it is not fair" you mean, you understand that they are not getting it, then we are ok. If instead you mean that you somewhat empathize with them, then I think you are wrong.
DeleteI understand that they don't get it. And they don't get it because you have a bunch of talking heads on the news channels who say "look! Romney only pays 15% and his secretary pays 30%"
DeleteIf you don't take the time to figure it out then you'll say, "hey that's not fair, he can afford to pay more than I, why am I paying more?"
MY DEAR SON: did you read the picture at the beginning? When you invest money, you are investing in the FREE MARKET ECONOMY, maybe you will get profits, if that happens, you will pay 15%, if not you loose your money; this a good reason either for a low rate or NO RATE AT ALL. But there is more, if there are profits, the money already produced wealth for a lot of people among others, many of the 99%, because THEY HAVE JOBS. Envy is one of the seven capital sins, with good reason, because it doesn't produce anything but more envy. Also read Matthew 25:14-30.
ReplyDeleteThere is nothing wrong to wait 2 years to sell the house and not pay taxes, the tax code allows this as it allows the 15% in Capital gains, no "normal" guy has to be scolded because he waits two years and no "rich" person for taking advantage of the tax code. Those who have a lot of money have the options to invest or to spend. We should have an incentive for them to invest (low tax rate or NO TAX at all), because the investment has the potential to create jobs, while just spending is by far less productive for the 99% (and the government). So those who invest SHOULD NOT BE TAXED HIGHER, BUT LOWER OR NOTHING. The "normal" guy many times is not taxed at al (47%), but very few are taxed at 35% (fortunately) most of the 99% are taxed at an average of less than 15%, only those between the 48 and 98% are the ones taxed and only those close to the 98% are taxed 35%. But all this is irrelevant, the important thing is to invest in the FREE MARKET TO produce wealth for the government to redistribute it for those 47%, but better, if we do not tax those who invest, those 47% are going to pay taxes because they may have jobs (if they look for them), and if more people pay taxes, the rates are going to be lower for everybody. FREE MARKET FREE MARKET FREE MARKET FOREVER.
You ended your comments with a good note. I agree that it is very difficult that these guys in Washington (either Party) are going to fix anything, they like the status quo.
I agree there is nothing wrong with the guy waiting 2 years to sell his house. You are talking as if I'm the ones that don't get it.
DeleteHere is what I see..... you've done that a bunch of times (buy a house at a low price, live in it for two years and then sell it for more and have no capital gain taxes). you are just greedy and should give you your money instead of trying to make more! Look at all beautiful house you live in and I have to live in the park bench--Greedy capitalist!!!!!!
What this comes down to is that most people don't understand the how taxes work or they wouldn't be all bent out of shape about the amount Romney pays.
ReplyDeleteMy dear pupils, you have much to learn.
ReplyDeleteIncome: a gain or recurrent benefit usually measured in money that derives from CAPITAL OR LABOR; also: the amount of such gain received in a period of time
That is the definition of income, it doesn’t matter if comes from capital or labour. Income is income. Let’s be honest it IS NOT equitable that Mitt pays 15% whilst others, how earn less pay a higher rate. I don’t care how you rationalize it is by definition inequitable, i.e. not equal. Period there is no real argument here.
Also, capital gains for investments of less than 1 year are taxed at 30%, greater than 1 year 15% - just for the record, because that pisses me off as well.
As to the argument that he is being taxed twice?? I really don’t understand this, if you can explain I am open minded.
If I take $100k and invest it in XYZ and after 6 months I take it out and have $200k, I have made a profit of $100k. I ONLY pay taxes on the $100k profit, so how is that being double taxed?? On the original investment I get taxed 0%. If this is the case, do you apply the same logic to tithing? And not pay tithing on investments because that money has already been tithed? That would be logically consistent at least. I don’t see it that way, I see that he has gained an income of 100K (by investing 100K). I don’t understand why that is treated differently that ‘normal’ income, well I do but not for the reasons you might think.
So here you have a guy like Mitt, how makes $30MM dollars a year on INCOME, but due to the fact that his income was a result of CAPITAL instead of LABOUR he gets a very substantial tax break. I find that wholly inequitable. I understand that the risk difference (or at least perceived) between the two, but so too are the rewards. It is a matter of personal choice, one that should not be treated differently under the tax code. This is the cause of the unhappiness currently, the inherit unjust tax code that we have, where group X gets special breaks or treatment than group Y. It is the government once again picking winners and losers and they have deemed from their ivory towers those that apply capital (probably because that includes themselves and friends) are the winners and get preferential treatment; whereas, people that choose to use their LABOUR to create income are LOSERS and are penalized.
This, in my opinion is ONE reason why you get stock bubbles, this system is designed to artificially move people into stock and capital investments above and beyond what the market might dictate due to the artificial benefit created by government. This results in a larger amount of people, than otherwise would, flooding these markets thus driving prices higher creating a bubble. The same applies to the Housing market. If the government was wise, which it is not. It would set a flat tax rate for everyone (including companies) and then make that as low as possible. This would then allow market forces to drive capital into different areas without distortion.
For example: Say I have $1 Million. I can choose to start a business – Corporate tax is Mid 30’s / invest in real estate – Tax from 0% -15% / Invest it – 15%
The best market choice might be to start that company; however, it is very difficult overcome that imbalance in the profit margins. A company would have to be 25% more profitable than investments just to break even; thus diverting capital away from where it should go. The government then double downs with its manipulation of interest rates where I can now leverage my money and turn 1MM into 2MM or more (real estate) amplifying the distortion. Yet we wonder why we have a business cycle of boom and bust.
IDaniel to be continued....
I agree with Daniel and echo the sentiments that all taxing should be a FLAT or COMSUPTION based tax. Preferably consumption. That way if you consume more you are taxed more.
DeleteIt is true, if the government stopped all of its machinations we would not have such rapid growth, but we also would not have such big bust.
ReplyDeleteSo back to Mitt, as you can see MY issue is with the government and its tax code ... NOT with MITT personally paying 15%. I would do / DO exactly that same, pay what I legally required to and not one penny more ( I even refuse to donate $1? To that election board or whatever it is that it asks on your 1040) that way freeing up my money to do what I think is right. In Romney’s case he gave 15% to charity. How much lower would that have been if he was paying 35% tax? Where people get this wrong is they blame the effect not the cause. Now, he is running for president; one of my problems with Mitt is not his tax rate; rather, that he seems to be ok with the current tax structure. I don’t recall him saying .
“Look, I understand how some people might be upset that I pay a lower tax rate than others. I agree with you it is not fair, as president I will work to re-do the system where it is more equitable to all people. I will try and bring the top marginal rate down to 15% for individuals as wells as business. I will work to close all loop holes and special breaks the government hands out. So that is a level playing field for all people, and all capital.”
No, he doesn’t say this, I think he has said that tax code is to complicated and needs revamping, but I have never heard him address the inherit unjustness of it. He seems all to content with the progressive income tax and the distinction between capital income and labour income and personal and business and frankly I do have a problem with that.
Is Mitt better than Barack? Yes of course he is. Is Mitt the guy who will bring the change that we desperately need, I doubt it; but, I think with Mitt the public could drive him in the way the country needs to go.
Is Newtt better than Barak? I am not into splitting hairs, I could care less at that stage.
This is why Ron is so important. If I am honest, he probably should not be president. However, we HAVE GOT to adopt ALL of his views on the fiscal system and the nature of government and SOME of his foreign policy. I would love to hear one of this guys (Mitt) say. Look Ron, I agree with you on domestic fiscal issues. In fact if I am elected president I will appoint you as Treasury Secretary, and together we will get spending under control and overhaul our tax and fiscal system. I don’t understand why they ridicule him instead. HE IS the tea party. The Tea Party started as a Money Bomb for Ron Paul, and grew from there into pro-Ron gatherings and then into what it is today. I remember. If these guys were smart they would embrace him and his fiscal policy’s.
AND BTW, don’t talk to me about unfair, I pay my full tax bill even though I don’t even live in the country. I could completely turn my back on the USA and leave forever and I would still have to pay my taxes. We really are subjects to the US government, so much for freedom
Oh well
Daniel
My dear professore: Nobody has said that it is equitable that one person pays 15% and another one pays 35% or 90%. Actually LIFE IS NOT EQUITABLE. Men are not equitable, as a matter of fact man and woman are not equitable (but that's the subject of another writing, see MARRIAGE). Many people think that capital gain tax means that the earned money is taxed double. This is arguable, and the argument is very weak, since although for many people the money invested is what remains after taxes, first it is not taxed again, since the tax in capital gains is only on the profits not in the money invested, and many times it is not the taxed money the one invested. No more on that, and I never said it was.
ReplyDeleteYour argument that government is treating people differently is right, but at least the government is doing something right, because as I said in my answer to Boan, we need to have an incentive for the people with money to spare, to INVEST instead of SPEND, because this is for the common good, meaning the investment has the potential to create wealth in a greater degree that just consuming goods (which is good but not as good), since it may create not also wealth that can be "redistributed" by the government among ALL kind of people, but has greater potential to create JOBS that can benefit everybody. This is a very good reason to rate capital gains differently than just income coming from labor. You want to make it equitable? reduce the income tax rate to 15%, DO NOT tax the capital gains higher. In the Free market there are risks and not everybody is willing to take them. Most of the "normal" people prefer to use their money in goods (spend) and that's fine, but those who dare to risk their money instead of spending it, are the ones creating wealth with the hope that their money will increase even to obscene amounts (anything above certain figures is obscene for me) and THAT IS FINE because it is the ONLY way the masses are going to be pull up from poverty and are going to be able to pay taxes.
The bubbles, you are right are created by interference of the government in the Free market Economy, because without its interference, the vices of the Free market are eventually corrected by the system.
Professore, I can see that you agree with what I wrote, and I agree with you that Romney is NOT DEFENDING the Free market the way He should, however, I will vote for him, hoping he is the one who understand better how the free market works, and I am going to write him a letter asking him to appoint Ron Paul as Secretary of the Treasury.