Warren Buffet: RAISE MY TAXES!!!

I'm absolutely amazed at the hate and animosity that seems to be directed towards a man that from all accounts is very honorable and patriotic.

Of course this is the forum where someone once told me that liberals can't be patriotic and so if Buffet is a liberal then I guess that he can't really be patriotic.

 

The approach to the argument to raise taxes on the rich has nothing to do with lowering the public debt. It has to do with moving money around.

When you raise taxes on the rich, they don't end up paying more taxes. They end up investing more of their money in assets that can better shelter them against taxation. They invest in long term maturity funds, they invest in commodities and most importantly, they invest in businesses such that they can defer their taxes and operate within corporate taxation.

So when having a discussion about where the money is going, it ends up going back into the things that everyone is taking money out of right now. If you don't tax the people with 42% of the assets at least 42% of their assets then there's no reason for them to do anything with their cash but sit on it, creating a long term liquidity issue for economies in general, and requiring an increase in debt spending.

This is not the conventional wisdom or the conventional discussion but it is from my point of view accurate and the reason why the rich should be taxed heavily. It'll create a stimulus environment with existing funds. How effective it would be, who knows but I could look back at the 20s through the 50s when taxation was in the 60% range (with corp taxes at 35%) to draw some conclusions.

ITJD

 

Why would one consider a hypocrite as honorable?

 

Sometimes good advice, comes at the expense of personal integrity and a lot of the time the general public will draw unfair associations to draw fire towards people that exemplify a lot of what they wish they had most in times of duress.

I don't see the hypocrisy though.

1. He's calling for higher taxes on himself.
2. He knows full well that his taxes are a drop in the bucket of needs.
3. He also knows that tax avoidance on a large scale stimulates the economy which..
4. Will improve the outcomes for his own company.

When self interest happens to align with common sense it's not hypocrisy.

The catch with tax avoidance is that you can't avoid taxes if you keep your income liquid, therefore it's got to be invested somewhere doing some firm or some investment good other than himself. We're not talking about illegal tax avoidance or tax avoidance that turns into another house for Warren.

 

This is a myth. First off, shares in a corporation are personal assets. If you own all of the shares of a corporation worth a billion dollars, you have a billion dollars in personal assets. Second, everyone only pays taxes on profits. If you earn $100K in wages, but lose $200K in the stock market (realized loss, meaning you sold shares, not a "paper" loss), not only will you not pay any income taxes this year, you will carry forward a $100K tax deduction into next year.

People don't form corporations to avoid taxation, they do it to shelter their personal assets from liability should the business be sued or be unable to pay its debts. A corporation is a legal person, distinct and separate from its shareholders. If a corporation runs onto the rocks, its creditors can come after the assets of the corporation, but not the assets of the individual shareholders.

The federal tax treatments for corporate income and personal income are somewhat different, but when we are talking about a multi-billionaire's income, the distinction is largely academic. Both corporate and personal income are taxed at a top rate of 35%, and when corporations distribute income to their shareholders in the form of dividends, the income is taxed again at the long-term capital gains rate (currently 15%).

When people talk about the tax benefits of a corporation, they are usually talking about one of three things:

1. Flagrant abuse of depreciation rules. The IRS has begun to crack down hard on people who form corporations to "own" assets like cars or other equipment used largely for personal benefit.
2. Forming a corporation in a state with "business friendly" rules. This is why it's popular to form corporations in Delaware - its courts are extremely business friendly, and it has no state corporate income tax (of course, if income is earned in other states, there is usually a tax on income earned by "foreign corporations").
3. Forming an "offshore" corporation in a tax haven country to shelter income earned overseas from US taxation. The IRS comes down hard on people who use this practice fraudulently (when it catches them). When offshore income earned legitimately is eventually brought into the US, it is subject to taxation.

If one's income were derived from the earnings of a "C" corporation that does business only in the USA and distributes its earnings in the form of dividends, then the owner of that corporation is actually paying an effective top marginal tax rate of almost 45%. However, if in the course of doing business, the corporation kills someone, then the owner's personal assets are not in any danger, even if the corporation itself is wiped out by the resulting lawsuit. That's the primary benefit of incorporation.

 

Second, everyone only pays taxes on profits.

Yes - I agree, but the fundamental difference here is that what a corporation can consider as a business expense and therefore a reduction of profits is not the same as what I can consider a business expense as a citizen. The typical citizen cannot deduct the average eveyday expenses of running a household, but these are business expenses of a corp.

I understand shares in a corporation are personal assets. However, if I am the principle shareholder in a corporation and a corporate officer, instead of paying myself a market salary I pay a lower rate.
I pay myself dividends as you noted and pay capital gains rather than the higher taxes on personal income.

Then I provide myself with a corporate-owned vehicle(s) for my personal use. My house is provided by the corporation as an employment perk. My attorneys, accountants, household staff are all employees of the corp. I go to the gym at the country club on a corporate provided membership. I host elaborate dinners out of the corporate expense account. I employ my children in some menial capacity and send them through an Ivy-league school on a corporate-sponsored "management development" program. I buy real estate, commodities, etc. under ther corporation using corporate profits and paying taxes on the difference. I buy life insurance for family members (shareholders), retirement plans, medical insurance, etc. on money that I am not personally taxed on and reducing the profits of my corporation. If something happens and my corp. goes under, I am only exposed to the liability to limit of what I have personally contributed to the corp.

 

Are you saying that this is out of the question?

 

As fun as this little exercise is, the fact remains that you could take the combined fortunes of the billionaires listed below ($120billion) from the list of 13 listed earlier in the thread and fund the current level of deficit spending of the U.S. government for 30 days:

*Warren Buffet – 47 billion
*Mark Zukenberg – 13.5 billion
*Bill Gates - 53 billion
*Ted Turner - 2.1 billion
*Tom Steyer - 1.2 billion
*Michael Steinhardt - 1.2 billion

Source - Information for the World's Business Leaders - Forbes.com

At $4 billion per day of current U.S. deficit spending, $120 billion does not go very far. Then what is the solution?

I wholeheartedly agree that loopholes should be closed in some areas. How could GE be worth over $42 billion in 2010 and owe the Federal Government absolutely nothing in taxes for the same year? Even closing these loopholes will not change the fact that the Federal government has a dangerously reckless spending problem that cannot be addressed solely with revenue increases.

 

I am not sure what you are really talking about here - what does being patriotic have to do with anything mentioned in this thread? Has anyone questioned Buffet's patriotism?

I am glad you managed to re-focus the discussion with the value-added GW reference . Why can't anyone disagree with a liberal point of view without the hate label coming out or mentioning GW Bush who was far from Conservative?

 

I was responding to Bill, not you. If you don't like it, don't respond. Hate label, you gotta be kidding me.

Of course, you were not a member until 2006 I believe, so you may not know what Bill and I are talking about.

Abner :smile:

 

@ Fortunato -

I think everyone involved in this discussion has at least one MBA. We do however thank you for the rehash of Business and its Environment though.

@ Truckie -

Exactly right in terms of corporate deduction advantages. At least 16 U.S states have additional corporate tax rules that can bring overall corporate taxation above 35% and into the 45% range. The trade off is that corporations can write off a lot more than an individual can (which calls into question the basic premise of corporations being separate and equal individuals).

 

Hate label applied earlier in thread by Bill.

Sorry, you are right I was not here until 2006. Is that all you got - the "I have been wasting my time on an Internet bulletin board for longer than you" merit badge? You got me - but then again I was off earning Regionally Accredited degrees at the time.

 

Sweet!

 

I will respect your request.

Abner

 

Sure thing - I made no claim about the superiority of my education. Since you mentioned it though, I firmly believe and will not be convinced otherwise by arguments presented here or elsewhere that RA is superior to NA. I was responding to the statement that since I had not been here prior to 2006 my opinion was not valid and I was just merely indicating what I was doing with my time prior to becoming involved in this forum. Apparently date of membership in this forum is some benchmark of distinction and can substitute for logic and reason. Have a nice day all.

 

Sorry all - I was just responding to a condescending and snarky comment directed at me with one of my own. This is, after all, the Internet.