Jon Stewart on ‘Class Warfare’
August 19, 2011, 11:28 am
Posted by Matthew Boudway
As Jim Pauwels says, everyone should see it. (Warning: There are a few lewd jokes, and the segment is divided into two clips.)
Sean? Jeff? MarK?
et al ?
FTP
Stewart leaves out that the super rich pay @ the 15% capital gains tax rate. And all the GOP candidates want the capital gains rate to go to zero. No tax at all on the super rich..Why would the GOP want to benefit the super rich with no capital gains tax. Because the well off business class could then get their compensation not in taxed wages but in stock options and they too would not have to pay any taxes.. .of course they would have a system to wait a year but they are expert at delayed gratification unlike the undeserving poor.
I’m applying for a commission in the non-violent class war army. We are taking a leaf from the TP skirmishes last year. No violence, just yelling at the GOP appearances until they go away.
I really do think that Stewart uses humor to deadly effect. I don’t think there are many other humorists in our history who have been as adept as he is at making important critiques via humor.
A couple of years ago I saw an interview with Stewart where he talked about the daily process of creating The Daily Show. Basically, he and his staff get together, look at all the stuff that’s going on that infuriates them and/or makes them feel sick to their stomach—and then work at turning that into humor.
Some community organizers, when they think and talk about the qualities they look for in leaders start with those two elements: anger and humor. Anger demonstrates a sense of loss and grief, a sense that things are not as they should be. Humor demonstrates a groundedness, an ability to reflect and look at oneself and the world from a different perspective. Together they can be extraordinarily powerful.
I had this thought today. How neat it would be if the Abp. of New York betook himself a couple of blocks west to 6th Ave to have a chat about poverty and values with those great Catholics, O’Reilly and ex-sem hannity.
I don’t think it wil happen because I think much of episcopal leadership make me think of Oscar Levant’s old line about Zsa Zsa Gabor: ‘she does good social work among the rich.’
Or maybe I’m just angry as poor working guys see there IRAs decline again to day with no skin of the Wall streeters of big money folks – not to mention those with families of four making less tha 22.
What a disgrace!
http://www.freakonomics.com/2008/05/01/taxes-warren-buffett-and-paying-my-fair-share/
I am by no means knowledgeable, but I believe Buffett already made the news on the subject several years ago. The above link gives a summary of sorts. The writer asks why, and several people respond in the comment section (examples below). Again, I don’t know enough and mean only to pass on information.
—
Buffet’s case is skewed by the fact that he derives a large portion of his income not from a payroll, but from capital gains which are taxed differently.
Warren’s taxes are so low because all but 100k of his income comes from dividends and long-term capital gains. I believe he is arguing that dividends should be taxed at the ordinary income rate.
I believe most of Buffet’s income is in the form of stock dividends – taxed at 15%.
historyman ==
Wages are money paid for work. Dividends are portions of the profits a company earns. Capital gains are the monies you get from buying something (e.g., a house, shares in a company, a whole company, land, valuable artwork) which you bought at a low price and sold at a higher one.
It’s all money. Why should capital gains be taxed differently?
By the way, it’s not just the rich who get capital gains. Everyone who plays the market and everyone who has a retirement account gains and also loses capital at times — when they and their funds buy and sell shares, gold, whatever.
Bob–
Yes? BTW, what is FTP?
I think that the US should be on the BOTTOM of the “Countries by Income Equality” chart. That would prove the Horatio Alger myth of this country. That would mean that the folks who really lucky and exceed are rewarded extravagently. The rest of us, well, we need to pull outselves up by our bootstraps, keep our noses to the grindstone, burn the midnight oil, etc.
Yes indeedy.
Comes the revolution, folks —-
Ann (8/19 6:28 pm):
Inflation.
David S. –
Even when the increase of inflation is less than the increase of the value of the object sold?
It’s all money. Why should capital gains be taxed differently?
___________
Of course, the premise of the question is backwards. It is not a matter of whether “the rich” should pay more, it is a question of why should the government be allowed to take more?
Government does not have a natural and divine right to anyone’s property.
If you buy a house for $200,000 and then sell it ten years later for $300,000, why is the government entitled to take a cut of the $100,000 capital gain that you realized?
Why should the government — which did NOTHING to bring about the increase in price — automatically get to leech off the transaction to the tune of $15,000 (15 percent) or more? Especially when you have already had to pay property taxes of several thousand dollars per year, not to mention paying income taxes on the money that you used to buy the house in the first place? How many times does government get to wet its beak, taxing the same dollar over and over and over merely because it passes from one hand to another?
I have gotten a certain amount of flack in the past on other blogs when I refer to Libertarianism as less a political philosophy than an Infantile Disorder, but I’m afraid that I have to do this here.
What right do people have not to pay taxes if they can afford to? Why should one form of making money (through capital) get a better tax treatment than another form (wages)?
You can go through life pretending that “the government” is some kind of well armed guy that lives in DC and arbitrarily takes your money from you. You can forget that our tax dollars support the world’s most massive military establishment and complex regulatory system that keeps all kinds of people from using their economic power to eliminate all your choices to anything. You can fantasize that America is some sort of mailing address for people who just want to make money and that American civilization would exist just fine if it were every man for himself here like some hell in Afghanistan. Civilization isn’t something that is built on people’s superior attitudes about themselves. It takes an immense amount of expensive social organization and also takes constant vigilance. Five thousand years of human history teaches us that it is far more fragile than one might think. And the most common form of civilization breaking down is when powerful groups within society start doing things against society for their own personal benefit. We have already seen capital holders through their outrageous unregulated speculation cause one and maybe two great recessions and seriously erode the assets of all kinds of people who were not part of their greedy little circle, perhaps including you. The people who were responsible for this were the first to recover, because they got everyone else (once again) to cover their losses. One would think that Libertarianism, just like any other No Government, No Regulation fantasy would have died the death that it so richly deserves at this point under the weight of reality. But no, it’s stronger than ever, fed by people who look at the world through the eyes of what they think benefits themselves personally at a given moment while everything else is taken as a violation of their basic human rights. The idea that one can have a political philosophy where one simply gets to check out of society and live in one’s own personal greedy little playpen is not an adult position at all. It’s one thing for adults to argue about how to take responsibility for that which they are obliged to take responsibility. But people who think that they should not have to take responsibility for society and civilization in the first place don’t have an argument and in these discussions should be relegated to the corner with their lollipops where they can do the less harm.
“Why should the government — which did NOTHING to bring about the increase in price — automatically get to leech off the transaction to the tune of $15,000 (15 percent) or more?”
Are you high?
The appreciation on real estate was fueled in large part by Freddie and Fannie, which were/are government guaranteed loan companies and, as such, encouraged reckless speculation.
However, that’s not an argument against your central issue–whether the government has a right to take your dough; I’d say it IS an argument against the government using tax money to create entities that are too big to fail and unwisely spending our money on such ventures.
I weary of people speaking of “the government” as if it were some sort of commie terrorist squad who comes into our country illegally to terrorize rich people. The government is made up of elected officials put there by all of us to determine what the prevailing values and priorities of our citizens are and to do their will.
Is it just that simple. No, of course not. Elected officials are often seduced by campaign contributions or a line of thinking from some fringe bunch.
Certainly, some hard questions ought to be asked about our spending priorities, the ripple effect of various programs, and whether we ought to be taking money from people to fund same. But name calling (“mooch class”) or pointing out that someone below the poverty line has a dishwasher (which may actually be broken and which he can’t afford to fix) seems designed to make the poor look like a bunch of lazy-ass freeloaders while doing nothing to help people understand whether various program have merit.
Yes, the principle that Money Is Money seems logical. I would just ask that please, PLEASE, in advocating schemes for rewriting the tax code, consider the consequences.
Suppose that capital gains were taxed, not at 15%, but at 39%. What would be the consequences? I am not an expert at these things, but bear with me while I exercise my powers of reasoning, such as they are, on this problem.
Bender gave a real-life example of the capital gains tax: it is assessed when certain properties are sold. I predict that one consequence of sharply increasing the capital gains tax would be to depress the real estate market and new home construction, because suddenly there would be less financial incentive to buy and sell real estate than before. Is that a consequence we’d be willing to live with? I think that’s questionable – given that real estate and construction are already among the most depressed sectors of our bumbling, stumbling economy. Construction workers, I believe, are already among the categories of workers suffering the highest rates of unemployment. The excess stock of housing, office space and other real estate is already measured in years.
I believe capital gains taxes are also assessed when an investor profits from the sale of a stock. Therefore, buying and selling stock will become less profitable than other investments whose earning aren’t subject to the capital gains tax (the classic example would be tax-exempt government bonds, but in today’s wild-west investment environment, I’m sure there are many other choices – no doubt including investments outside of the US where tax treatment may be more favorable). I predict that another consequence of nearly trebling the capital gains tax would be to cause large investors to flee the stock markets and move their money elsewhere. Note that “flee the stock market” is a handy phrase that means, “sell their stocks, thereby causing stock prices to tumble, depressing the value of stocks held by everyone else, including millions of middle-class and working-class workers whose retirement funds are in 401(k)-style investments.” Again, is this a consequence we’d be willing to live with? And politically, would this fly? In this environment, which seems to be perpetually about to tip into fear, loathing and panic?
Taxes are a tool of public policy. Governments raise and lower taxes in order to bring about certain outcomes. Interest payments on mortgages for primary homes are tax-deductible because the people, through their government, have traditionally thought that it is good for society to open up the benefits of home ownership – stability, self-reliance, and wealth accumulation – to as many people as possible. I think those are good values, too. They are, in fact, among the primary engines of social mobility that seems to be universally praised on this blog. Ending the mortgage-interest deduction will decrease stability and self-reliance among our people – especially the poor – and make it much harder for them to accumulate wealth. That huge chunk of their paycheck that would otherwise go to mortgage payments will instead line the pockets of landlords. Is that the kind of wealth redistribution that progressives advocate?
If we go on the assumption that every asset in the United States is a speculative “investment” asset, then Libertarianism might make sense since the only reasonable thing to do with assets is to increase their value.
So let’s look at Bender’s example. His house appreciates 50 percent. The government may not have had anything to do with it (or maybe it did, but let’s leave that aside for a moment) but neither did Bender. What did have something to do with it was an unregulated market where large low taxed financial institutions were able to pass on risk to everyone in the country that was holding real estate, whether they were playing in the real estate market or not. Some people who were speculating got burned, but more who were not speculating also got burned. If one’s assets are always part of the speculative market, which is the social theory of Libertarianism and the thing that binds all of us babies together in one big American playpen, then everyone who got burned deserved it (and that means everyone who lost their jobs, their houses, who took massive 401K hits, etc.) because hey, free market.
What we should have had instead is some serious regulation that would have done no more and no less than insure that the players were kept apart from everyone else; that financial risks accrued to those who wanted to take the risks and not to those who were not even aware of them.
In current case, I see the rich as having made their pile under tax regulations that benefited them and that they themselves do not have to cover (unless they are rolled back) AND I note that it is the same people who are doing well in the current economy. Pure equity, and even pure libertarian equity, says that it is now time for these people to pay some of it back.
This business that the holders of capital are these tender little hot house flowers that need to be coddled lest they run screaming away is nonsense. Buffet shows us (since he is rich enough it is no skin off his nose) that what we are really seeing is a cyclical event where capital has had its own way for a decade and it is now time for the pendulum to swing back, and not just for the good of the general public, who are the real victims here. Capital needs the nation too, in the long run.
I think this piece yesterday in The Atlantic, should be required reading for every American
http://www.theatlantic.com/magazine/archive/2011/09/can-the-middle-class-be-saved/8600/
“I weary of people speaking of “the government” as if it were some sort of commie terrorist squad who comes into our country illegally to terrorize rich people. The government is made up of elected officials put there by all of us to determine what the prevailing values and priorities of our citizens are and to do their will.”
Yay, Jean! The libertarians seem to think of “the government” as a real ontological entity separate from the politicians and workers who actually comprise it. For them it seems to be a greedy, grasping Somebody solely bent on stealing their money, or maybe as a squad, as you colorfully put it, complete with AK 47s, extorting checks from them made out to the IRS. Or maybe for other libertarians its just a swarm of busy little bees in offices transferring money electronically from the bank accounts of the rich to the gigantic coffers of the bees some mysterious place in Washington where the electronic money miraculously turns into a mountain of gold bars upon which the White House sits. Oh, that Gubment someone is such a greedy tyrant!!!
But I do seriously wonder just what images libertarians do use to think about their hated but ontologically impossible construct.
“get to leech”, “get to wet its beak”
Bender –
Is your image of the Gubment that of a blood sucker extracting the very life out of helpless you? Or is it a gigantic vulture feeding on your body=carrion? Ugly either way, that’s for sure.
Jim P. –
You are assuming that if capital gains were taxed more highly more the people who have that sort of money could not invest it in jobs producing entities. Yes, you’re right. But look at what’s happening with the low capital gains rate: the cash-rich Americans (like the cash-rich Chinese) are investing overseas where they can get even greater returns on their investments. But they (individuals and corporations0 have retained some money from the last boom — about 2trillion $, which they == patriots that they are = don’t dare risk in this economic environment.
“Why should one form of making money (through capital) get a better tax treatment than another form (wages)?”
Think of it this way. Over a period of time, both Bender and Unagidon each make $200k in wages, pay taxes of $100k, so are left with $100k, after tax. Bender invests the money in real estate. Unagidon spends it all to buy from Krispy Kreme the right to all you can eat donuts for the next 10 years. 10 years later, Bender’s house has appreciated to $200k. Why should Bender have to pay tax on the increase, if Unagidon doesn’t have to pay tax on the psychic satisfaction he received from all those donuts? Further, with inflation, now the price of the Krispy Kreme option has risen to $200k. If Bender has to pay tax, he won’t be able to afford the same donut stream that Unagidon could afford, even though they both originally earned the same wages. Doesn’t seem fair.
Bender has accumulated another $100K by not doing anything other than staying in his house yet while he has not argued that his wages should not be taxed he is arguing that this income should either not be taxed or should be taxed at a lower rate than wages. You talk like Bender’s house is some kind of investment that he made in order to get a return (i.e. he was speculating) and that he deserves some kind of return on it because he what… risked something? And what would that something be? Why are capital gains supposed to be privileged in Bender’s specific case? Are you suggesting that taxing Bender’s capital gains makes it more likely that he will spend all his money on donuts too? Or are you suggesting that Bender deserves some kind of special reward for defering his lust for donuts by suffering through 10 years of living in a house?
“Bender has accumulated another $100K by not doing anything other than staying in his house…”
Not true, relative to Unagidon, he has foregone the opportunity cost of eating all those donuts, he has taken the risk that his investment could decrease in value.
“…are you suggesting that Bender deserves some kind of special reward for defering his lust for donuts by suffering through 10 years of living in a house?”
Precisely not. He is not due a special reward, he’s only due his donuts, 10 years later. With the additional tax, he can’t get what Unagidon got. All he wants is his donuts. He’s waited 10 years for them, so he should actually get more than 10 years worth. The value of Unagidon’s donuts he’s eaten has risen to $200k–shouldn’t he pay tax on that increase?
That most Wall Street stock trades are held and sold in micro seconds makes the house and donut capital gains tales seem like medieval craftsman talking about how the lance market can be tapped.
Oh dear. I think we need more economists commenting here.
Again, I am far (very far) from being an economist, but even I can see we’re going off track here with the “houses-to-donuts” example.
1 – If unagidon buys donuts, in most localities in the US he’ll be paying sales tax. Different from capital gains tax or income tax, but tax nonetheless.
2 – Last I checked, donuts cost about $6.00 a dozen, tax included. In the example under discussion, unagidon would buy approximately 16,667 dozen donuts over the decade that he spends his $100,000. That’s over 4 dozen donuts a day. I doubt even someone with unagidon’s formidable constitution would last a decade on that diet.
3 – One way economists talk about houses is that they have both “use value” and “exchange value”. So by owning the house Bender has gotten 10 years of “use value” out of it. If Bender made no repairs, all other factors being equal, the house would then be worth less than the $100,000 Bender paid for it. If Bender maintained the house in relatively stable condition, all other factors being equal, the house would be worth about $100,000. If Bender did a gut rehab, installed granite kitchen counters, built a deck with a jacuzzi, and added a two story living room with skylights, then, all other factors being equal, the house would be worth more than $100,000.
4 – But houses also have “exchange value” which is highly dependent on the local real estate market. If Bender bought the house in, say, Riverside County CA at the height of the real estate boom and then sold it ten years later, all other factors being equal, the house would be worth less than $100,000. If Bender bought the house in, say, Las Vegas NV in 2010, chances are that, all other factors being equal, the house will sell for much more than $100,000 in 2020.
5 – There’s a tension between “exchange value” and “use value”. For a realtor, a real estate lawyer, a mortgage lender, the more times a house is bought and sold, the better. That’s how they make money. Those who primarily see housing as an asset for its “use value”, often find themselves in conflict with those who benefit primarily from its “exchange value”.
6 – Presumably in the example under discussion unagidon has had living quarters, most likely an apartment rental, throughout the decade. Whatever taxes affect the landlord’s bottom line would be paid indirectly by unagidon and the other renters. (Please don’t bring up NYC’s real estate laws and regulations; they don’t apply anywhere else and would just serve as a distraction.)
7 – The US has had a variety of tax structures over the past 200+ years. Throughout all of that time we have been a relatively wealthy country. Throughout that time we’ve had widely varied ways of dividing up that wealth. There’s nothing sacred or immutable about a particular tax rate or tax structure—including the 15% capital gains tax in place since 2003. Over the past eight years the US had seen some of the weakest job creation during a time of economic growth, one of the worst recessions, and one of the widest wealth gaps in our history. None of which are supporting arguments for those who want to keep the 15% capital gains tax (or lower it).
8 – Bender asserts (8/20, 3:04 am) that the government did NOTHING to bring about the increase in price. Since we’re discussing a hypothetical, that may be true in the abstract example Bender has in mind.
Here are some of the things government has done in my city over the past two decades that have helped increase the value of property:
*effective community policing has made the city a much safer place to live, with significantly lower rates of almost all major crimes;
*the quality of public education has increased which has helped stabilize the city’s population and reduce the flight to the suburbs that characterized the 1950s to 1980s;
*state regulators have required utility companies to replace aging (and increasingly dangerous) gas and electric pipelines, thereby making the city safer and cleaner;
*the regional transit authority runs 9 bus routes, 1 subway line and a commuter rail line through our neighborhood—thereby making it a cheaper and more desirable place to live;
*the city government has vigorously championed a “Main Streets” initiative in every neighborhood of the city which has helped revitalize neighborhood shopping districts (being able to walk to the market, bank, beauty parlor, barber shop, bakery, butcher shop, fish market, stationery store, etc. is a net plus for real estate values here).
I could go on, but I’ve gone on too long already. I hope it’s clear that, at least in my own real world experience, government has a lot to do with real estate values. Assuming that’s true more generally, then it seems entirely reasonable to me that those who benefit from those governmental services by seeing their property values increase should pay for a share of those services.
I’m sorry, I must be dense -I thought the thread was about poverty and Catholic values.
Stupid me.
Instead the usual suspects arrive and do apologetics for the gospel of their ideology.
I want to add to my last post (way back) that beside the Abp, of New York, maybe the Cardinal Abp, of Washington, Wuerl, quick enough to condemn sr. Johnson, if he were man enough, could betake himself over to the Capitol and explain to some politicians that the poor black Catholics he’s supposed to leads and the other poor blacks of DC are not”animals.”
I’ll let the uspects rant on about their beloved tax views, but the FOX and political pitches we’ve seen are indefensible, even if sugar coated by the comfortably porcine guy from Cato Institute.
I’m done with this and the continuous get nowhere arguments here; but, as to values, I think our Catholic friends on the right are disgraceful on this!
BTW, to Mark: FTP imn come circles nicely means”Screw The Poor.”
“I believe most of Buffet’s income is in the form of stock dividends – taxed at 15%.”
It was my understanding that neither the A or B class of stock of Berkshire Hathaway Inc. has ever paid a dividend at least since 1964 when the current management team took over according to a few books I have read on the company . Did you read somewhere that they actually have been paying dividends? Anyway, 15% sounds like a really good deal. How much does the government give back to people who have net capital losses? Do they send those people money back for 15% of the losses or some other amount?
Who on earth speculates on stock to get dividends?
U –
If you buy StartUpOne at $2 when it pays 1%, and it it zooms to $200 and pays 3%, the dividends would be worth many times your initial investment, very tidy profit. Of course, you have to recognize which among the penny stocks are going to zoom.
Analogously, if you bought depressed stocks with real value and fine prospects, then waited for their appreciation and de factor larger dividends you’d also make money. Again you have to know how to pick the depressed stocks. Buffett does seem to know how.
“If you buy StartUpOne at $2 when it pays 1%, and it it zooms to $200 and pays 3%, the dividends would be worth many times your initial investment, very tidy profit. Of course, you have to recognize which among the penny stocks are going to zoom.”
I know, but to get the dividends one must hold the stock. We wouldn’t be turning over billions of shares a day if people were in fact doing this.
MAT… “How much does the government give back to people who have net capital losses?’
GE, who is ‘people’ according to the scriptures by Romney, paid no tax in 2009, gets money back on fictitious losses from previous years too. They had a 22,000 page tax filing so don’t ask me what are the details. Ask Romney..
“They had a 22,000 page tax filing so don’t ask me what are the details.”
Ok. I will not ask you.
“Ask Romney..”
That was funny. You have a good sense of humor.
U –
Yes, you have to hold. Buffett’s criticism of most investors is that they don’t — they try to get rich quick. Hence his advice, “Don’t be greedy”. What a remarkable person he is.
To me Buffett is a great example of someone who is not really in business primarily for the money, but for the gamesmanship. Money is a way of keeping score, and therefore a necessary part of competition.
Competition. Now there’s a topic for theologians to explore.
Bob–
Thanks, don’t think I’ll have occasion to use the term myself but at least now when I run into people who are familiar with the term and in the habit of using it, I’ll know what they mean.
Unagidon.. dividends??? since this thread is about Buffet…Warren Buffet invested 3 billion [shored up] in GE 2 years ago and gets 10% dividend.. that’s a lot better than your and my bank giving us 1%. Let’s see, that is a $300 million a year dividend on that deal.. Buffet has a bigger Goldman deal too.. . FOX News called him a socialist! Way above minimum wage and a hellofa lot of donuts for a socialist!.
maybe that’s why he is embarrassed about his taxes.. If I could get a guaranteed 10% I would smile not blush .. maybe I’m greedy . The 2012 question is why does the TP/GOP want to give the super rich a continuing and even improving tax break. Why can’t these TP defenders understand that super rich do not commute to jobs for wages? The help they hire is servants.
I get the impression that a lot of people think that the super rich are just folks who worked hard and saved all those quarters in a coffee can and invested them wisely and made a billion well earned dollars doing so. And if they can do it, anyone can do it, as long as they forgo skim lattes at Starbucks and focus a little more on business. People who want to tax the rich are picking on them and worse, picking on them to get tax dollars to give to people who don’t deserve them because they refuse to become billionaires themselves.
unagidon (8/20 5:26 pm):
People who think differently from you aren’t necessarily blockheads, U. Going in more or less that direction, though, maybe some of them think that it’s nice to know that there are no government-mandated limits to material achievement in this country.
The super-wealthy are celebrities, like rock stars. Imagine a country in which rock stars were forbidden to earn more than $X thousand dollars every year and limited to a net worth of no more than $Y million. Could happen. And if it happened to rock stars and other celebrities, people know there’s nothing to stop it from happening to them, however little money they make and have now.
People make logical connections where you may not be inclined to see them. And they may be right and you may be wrong :O)
Buffett is talking about modest tax increases on the ultra-rich to eliminate the special treatment that they are getting and you are talking about some kind of science fiction world where the government caps all incomes. Yeah, they may be right.
I think David S. has a point, or at least a possible explanation for why so many people, quite irrationally, choose to support an unfair tax system. It’s the old “If they can do it to them, they can do it to us” line, and it does make sense with respect to some other matters.
I continue to wonder if the press is just giving too much attention to the extreme right wing presidential candidates and their platforms. Grantedl wannabees like Paul, Perry and Bachmann have some startling things to say which are bound to get them some press. But how much to the American people really like them?
There does seem to be another moderate Republican in the race now — Ron Huntsman. He hasn’t gotten much attention from the press, but he just joined the pack. Here’s a profile of him in Vogue –
http://www.vogue.com/magazine/article/jon-huntsman-the-outsider/
At least he believes in political compromise, and he does have some planks that would appeal to the middle ground. e.g. selective raising of taxes, some ecological stands.
Thanks, Ann, for the Vogue link. He’s certainly photogenic. Would look great in the National Portrait Gallery. Is that the New Republic Weisberg?
David S. –
I don’t know. If it is, that’s interesting. The profile is positive. Might show that Huntsman could appeal to moderate liberals if they were dissatisfied enough with Obama. Then there’s 2016.
Huntsman? ???? gets zero delegates in Utah and will have to get a scalp ticket to the GOP national convention.
Ann, I just read the Vogue piece. Has to be the same Jacob Weisberg. That is one impressive candidate. The problem is the party. Maybe by 2016 the sour apples will have died off. Or, if Huntsman’s up this time around, maybe he can help ease them out.
Interesting contrast between the Mormanism of Romney and that of Huntsman. Either one would be refreshing, but Huntsman’s looks a better fit for the average voter.
David S ==
Yes, the problem is the party, or, rather, the lack of party leadership. He certainly is showing a willingness to challenge the irrationals in his own party, a sign of real leadership. Can’t see myself voting for him, but I admire his willingness to compromise, reform the tax system (including reducing the sales tax (which hurts the poor the most), and his ecological cocnerns. Also, the Pew Foundation, which I trust, says his record on jobs is one of the best, unlike Perry. On paper, at any rate, I would expect him to be way more appealing to the average voter than Paul, Palin, Bachmann, or Perry do. But it might be too late for him this round.
Going back to the capital gains issue, here’s a recent post by Kevin Drum that builds on work by Jared Bernstein. http://motherjones.com/kevin-drum/2011/08/great-capital-gains-charade
The larger point (which I think Bob Nunz was trying to get us back to in an earlier comment) is that any tax code under which Warren Buffett pays taxes at a lower rate than his secretary does is a tax code that has serious problems—morally (at least as the Catholic Church understands morals) and pragmatically (it’s unsustainable over time).
“The larger point…is that any tax code under which Warren Buffett pays taxes at a lower rate than his secretary does is a tax code that has serious problems…”
Are you sure the federal tax rate of the payroll income of Warren Buffett’s secretary is above the federal C-Corp rate? That would be inconsistent with generally accepted readings of the Code and case law. What documents are you basing that on? Are you saying that that is statutory or just based on personal knowledge of this person’s tax filings?
@MAT (8/21, 10:07 am) Thanks for your response, and your questions. I based my statement on the words of Mr. Buffett. He’s spoken and written about this issue many times over the years, most recently, to my knowledge, in his New York Times opinion column last Sunday.
http://www.nytimes.com/2011/08/15/opinion/stop-coddling-the-super-rich.html
Here’s the key paragraph: “Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent. ”
So, to answer your last question directly, it’s based on Mr. Buffett’s personal knowledge of (and claims based on that knowledge of) his, and his staff’s, tax filings.
And if anyone wants to get back to discussing the larger point (see 8/21, 9:34 am), that would be fine with me….
The basic question is: why should anyone pay taxes?
Answer: for services rendered. The rich profit more from government services than the non-rich (they need more protection for their larger amounts of property (see especially military spending to protect their interests), use the courts more, etc., etc.) so they owe more for those services.
Luke Hill (8/21 4:16 pm):
Fairness? That’s so vague – everyone’s got his or her own definition of what’s fair. That’s a swamp.
David.. the 2012 election will turn on votes of those who think and vote what they think is fair….. is there any other way??..
“Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. ”
That’s what I suspected. I figured he was referring to effective tax rates and not statutory rates. It’s too bad he uses the terms interchangeably without notifying the reader. It almost gives the impression that his ordinary income is somehow taxed differently than the ordinary income of others. And I wonder why he excluded the $1.3 billion of income taxes BRK.A/B paid on his behalf in 2010 on his $4.4 billion of EBT in BRK. Given that his 50,063,363 shares of BRK.B and 350,000 shares of BRA.A are his primary source of undistributed income, I wonder why he excluded it and chose instead to only mention an insignificant portion of his income and the taxes he paid on it. It is almost curious enough to make one think he is being self-serving by recommending legislation which would serve to increase the value of his primary income producing asset and at the same time reduce the value of his dividend-paying competitors. Must be a happy coincidence for him I reckon.
@David Smith (8/21, 5:22 pm) Well, if fairness is too vague a notion, perhaps we could talk about the current US tax code in terms of *justice*—using the commonly agreed definitions of our Catholic heritage.
@MAT (8/21, 11:56 pm) I’m glad I was able to help clarify Buffett’s views for you by quoting from his column. Here are some more quotations from the column that may help clarify for you what Buffett’s intentions are:
“…for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.”
“To understand why, you need to examine the sources of government revenue. Last year about 80 percent of these revenues came from personal income taxes and payroll taxes. The mega-rich pay income taxes at a rate of 15 percent on most of their earnings but pay practically nothing in payroll taxes. It’s a different story for the middle class: typically, they fall into the 15 percent and 25 percent income tax brackets, and then are hit with heavy payroll taxes to boot. ”
“I have worked with investors for 60 years and I have yet to see anyone — not even when capital gains rates were 39.9 percent in 1976-77 — shy away from a sensible investment because of the tax rate on the potential gain. People invest to make money, and potential taxes have never scared them off. And to those who argue that higher rates hurt job creation, I would note that a net of nearly 40 million jobs were added between 1980 and 2000. You know what’s happened since then: lower tax rates and far lower job creation.”
“Since 1992, the I.R.S. has compiled data from the returns of the 400 Americans reporting the largest income. In 1992, the top 400 had aggregate taxable income of $16.9 billion and paid federal taxes of 29.2 percent on that sum. In 2008, the aggregate income of the highest 400 had soared to $90.9 billion — a staggering $227.4 million on average — but the rate paid had fallen to 21.5 percent.
The taxes I refer to here include only federal income tax, but you can be sure that any payroll tax for the 400 was inconsequential compared to income. In fact, 88 of the 400 in 2008 reported no wages at all, though every one of them reported capital gains. Some of my brethren may shun work but they all like to invest. (I can relate to that.) ”
Or you could just read the entire column and, if you’re interested, other statements Mr. Buffett has made on this issue over the years.
Speaking just for myself, I find it refreshing that some of the superwealthy have a definition of self-interest that is expansive enough to include the well-being of the country and their fellow citizens.
“I’m glad I was able to help clarify Buffett’s views for you by quoting from his column. Here are some more quotations from the column that may help clarify for you what Buffett’s intentions are…”
That does help clarify things. These excerpts show he is intentionally omitting the income taxes of these individuals’ portfolio companies, where applicable, in an effort to mislead non-technical readers into thinking tax rates for the categories of people he is referring to, including himself, are lower than they actually are.
“Speaking just for myself, I find it refreshing that some of the superwealthy have a definition of self-interest that is expansive enough to include the well-being of the country and their fellow citizens.”
If one held that view, I could see how that could potentially be refreshing.
Kevin Drum makes the point that it is a myth that capital should be taxed differently from wages because capital formation should be especially encouraged in order to promote capital investment.
http://motherjones.com/kevin-drum/2011/08/great-capital-gains-charade
He presents a chart that shows that the rate of capital investment is not affected in any particular way by capital gains taxes being higher or lower. Capital formation, in other words, is not stymied by (historical) taxation levels and therefore in terms of taxation and accumulation does not represent a different sort of asset from wages. This supports the idea that there is nothing intrinsic to capital gains that would mean they should be taxed at a different level from wages; if wages can be taxed at x percent, so can capital gains, since they are in effect a form of wage.
But I think there is a different reason why capital should be taxed and perhaps taxed at a higher level than wages. It has to do with risk.
We seem to believe that the holder of capital, when they invest (or speculate) is risking their capital and that they should therefore reap the rewards of profit from their risk. But I will argue that capitalism turns all kinds of thing into capital that many of their holders do not look at as capital assets and thrusts them into the speculative market. We have seen this most recently in the housing market, where collapsed housing speculations caused the value of all real estate to collapse. The main speculators lost assets in this crash (although it seems that in some cases the very largest speculators were bailed out by the government; a good reason why their capital assest should be highly taxed), but the crash affected everyone who bought a house including millions of people who were buying houses not to speculate but just to have a house to live in.
Housing, jobs, education, retirement income; all of these have been thrown more and more into the speculative stew. Speculators of capital are not only risking their own capital, they are risking all of the capital of the class they are investing in. In other words, there is more risk to the investment than the individual capitalist is assuming himself. Economic equity and justice demands nothing more than that the capitalist assume this risk as well.
,” there is more risk to the investment than the individual capitalist is assuming himself. ”
U -
So maybe derivatives should be completely outlawe? But if they were then banks might be loathe to lend money for building houses. Neighbrohood banks in this country seem totally risk-averse.
We can’t stop speculation in this society. We can regulate it so that risk stays within explicit parameters. And I am talking about taxes on capital gains that (at first) at least equal the taxes on wages. I would argue that a tax on capital gains is what is needed to provide a safety net for assets that can be eroded or destroyed by capitalist speculation, i.e. housing, education, employment, etc.
We can also educate consumers about risk. Having one’s retirement savings invested in stock securities like mutual funds or other investment funds means that one is taking on the risk that their savings will decline when the market goes down. If you’re relatively young and have a long time horizon before retirement, that might be okay. If your retirement is impending, a market decline can be a personal financial disaster.
If interest rates were higher, more consumers might move their retirement savings to vehicles that have a steady, positive, guaranteed interest rate. Through the magic of compound interest, that can also turn into real money, given a long enough time horizon.
Btw, I’m a dinosaur. We bought our house 20 years ago, to live in. Moving is too much of a hassle.
If Bender (8/20, 3:04 AM- Does he stay up all night thinking up these scenarios) were to realize the $100k gain on his residence, he would pay no tax, because of the generous $250k capital gains exemption on sale of principal residence. (Married owners get a $500k exemption) By current law, Bender could roll over the proceeds into a more promising residence- investment, live in it for 2 years and repeat the 2 year rollover procedure until he reached the $500k max. (I assume that he is smart enough to marry . .) Finding finally that he has overshot the mark by a few thou, he goes into his records of the expensive renovations, repairs, fees etc. that are exclusions, and finds that a few “adjustments” put him back in the no tax category. (Darn ! That overlooked $100 will cost him $15! ) Half a mill and he lived in his yearly improved home until retirement!
@MAT (8/22, 10:05 am) “…in an effort to mislead non-technical readers into thinking tax rates for the categories of people he is referring to, including himself, are lower than they actually are.”
I think Buffett’s writing is pretty clear—at least by the standards of contemporary op-ed columns. He’s saying that the effective federal tax rate for the superwealthy is lower than the effective federal tax rate for many (and likely, most) of their employees.
If you have evidence that contradicts his, by all means share it with the rest of us.
Back to the house purchase- Maybe it was not a principal residence! Complexities! (Is that plagiarism?) Now Mr. Bender deposits only $40k taking a mortgage for the rest. He rents it for 10 years. What with the mortgage payments , taxes, maintenance, renovations, etc. – all deductible business expenses–oh! and a depreciation deduction allowed over the ten years- he nets only an average of $6000/yr in taxable income during that time. We’re talking rough averages here.-He pays an average of $1500 of that in income taxes, netting only $45k in 10 years. Oh wait- He also now owns outright a $250K house! ( The renovations previously mentioned have added $50k to the base value) He sells for $300k . He pays $ 7500 tax on the $50k gain. Sale proceeds less tax:$292,500. plus $45k net income, Not bad for a$40k investment.
Our government discourages investment. (Not!)
OFFTOPIC, BUT RELATED
RSN offers an article from Bloomberg (“Wall Street Aristocracy Secretly got $1.2 Trillion From Fed”) which is a short history of the 2008 bank bailout during the meltdown. The good news is that it worked. The bad news is that people with mortgages weren’t as fortunate — they weren’t offered such loans. We really should talk about the banking industry sometimes, not just the stock market.
http://readersupportednews.org/news-section2/320-80/7133-focus-wall-street-aristocracy-secretly-got-12-trillion-from-fed
“I assume that he is smart enough to marry …”
A bit surpised to read those words on this site.
I want Isabelle to do my taxes.
Oh, for heaven’s sake, Mr. Proska. I was speaking in generalities. I myself was smart enough, 59
years ago, to marry a wonderful, warm-hearted, witty guy. No wonder I think that marriage is a sign of intelligence!
Luke Hill (8/22 5:12 pm):
“Effective” is the fly in the ointment there. It could be interpreted variously – to mean that he’s undertaxed, overtaxed, or fairly taxed. And the very idea of “fairly taxed” is a values one – purely subjective. I suppose some people think billionaires ought to be taken to the cleaners and sent home wearing a barrel – that would be fair. Of course, if the government did that, there’d soon be no more billionaires – and that would no longer be a a pond in which the government could fish for money. Hmm – could that be part of the agenda? Taxing the wealthy out of existence as one step in bringing about the perfect society? If so, it seems pretty underhanded, Luke :O)
@David Smith (8/22, 10:45pm) In case it’s not clear, I used “effective” to mean something like “actual-in-reality”. Thus Buffett is making the argument that a tax code that in real life results in billionaires paying taxes at a lower rate than their secretaries is a tax code in need of revision—particularly given the nation’s current circumstances.
Here are the tax policy/revenue recommendations Buffett made:
“I would leave rates for 99.7 percent of taxpayers unchanged and continue the current 2-percentage-point reduction in the employee contribution to the payroll tax. This cut helps the poor and the middle class, who need every break they can get.
But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.”
That’s a long way from your hypothetical about “taxing the wealthy out of existence”. Your statement that “if so, it seems pretty underhanded” reminds me of the man who said, “If I had some ham, I’d make a ham sandwich…if I had some bread”. If Warren Buffet was Karl Marx, he’d tax the wealthy out of existence…if he wasn’t a billionaire.
P.S. I can’t help but notice that comments like yours (and there have been several in this thread) have the effect of diverting our collective discussion away from the topic of “class warfare” raised in the original post, i.e., the “warfare” successfully waged by the superwealthy in recent decades.
We could be having a thoughtful, reflective, even prayerful conversation about the meaning of that “warfare” for our society, our church and our faith. Again, if anyone wants to have that kind of conversation, I’m up for it.
“We could be having a thoughtful, reflective, even prayerful conversation about the meaning of that “warfare” for our society, our church and our faith. Again, if anyone wants to have that kind of conversation, I’m up for it.”
While there are social classes and while the very rich are knowingly trying to accumulate economic and political power over everyone else, “class warfare” seems to me to be a loaded term since because of its history it contains within it its own “solution”. If the rich are waging war on everyone else, then everyone else should wage warfare on the rich. These days I see it used by the Right as a conscious attempt to cast the Left as neo-Marxist. The rank and file on the Right are under the sway of Libertarian (An Infantile Disorder) ideas within which the rich are just folks are like everyone else except that they were smart enough or lucky enough to make a lot more money. Attacking them as a class is a form of sour grapes from the envious.
I think that a true Libertarianism, ironically, needs to focus on the class structure of society, because a massive shifting of economic power to the rich (such as we have seen these past 30 years) is as denigrating to individual rights as a massive shifting of power to the government. If government needs curbs on its power, so too do the rich need curbs on their power. Taxation is a way to curb their power without actually redesigning the economy to eliminate them as a class. I have to ask myself why Buffett would propose the tax structure that he does, given that he himself would have to pay more taxes. And aside from the fact that I think he believes that he himself, given what he does for a living, could continue to thrive in an environment with higher taxation for the very rich, I believe that he also sees that the transfer of economic and political power to the very rich is bad for everyone, including the very rich. At the very least this transfer of power could mean a more structural political backlash against the rich later. But we have also seen that huge concentrations of unregulated capital in the hands of a few people and institutions has left the entire economy weaker.
As I have written elsewhere, I think that people in society in general underestimate the sheer economic risks of having most capital concentrated in a few hands. One thing that we seem to be blind to is how “commoditized” our lives have become. Most important decisions like buying a house, getting an education, choosing a job field, choosing a town to live in, etc. have an element of pure speculation in markets that we hardly control, much less see. All of these kinds of decisions become “investments” in a “playing the market” sense as we try to look down the road to see what the actual speculators might do with our property and livelihoods some time in the future. It is no longer about hard work any more. For this purely structural reason (above and beyond a desire for Christian social justice) I believe because risks are not shared proportionately in society, the rich (who have a much smaller proportion of risk than everyone else) should fund through taxation a safety net for everyone else. The safety net should include all of those things that I have mentioned above that have become so commoditized and speculative in our age.
Don’t worry. When TX governor Perry wins the white house next year, Stewart and his ilk will have better material.
“If you have evidence that contradicts his, by all means share it with the rest of us.”
I have no knowledge of his personal income taxes so I will take him at his word. He is misleading the non-technical reader by implying that a material portion of his taxes are filed on Form 1040 when as you know the taxable income of $39M reflected there represents only 0.9% of his total taxable income of $4,479M with $4,439M of it being filed primarily, although not exclusively, through his Form 1120. When including that taxable income Mr. Buffet had an income tax expense of $1.3 billion for CY10 on his $4.4 billion of EBT which is an effective rate of 30%. As you know, the statutory rate on those earnings are 35%. In the material you reproduced he gave his tax rate as 17.4%, which is only true if you exclude virtually all of his taxable income. You can find the data here:
http://www.sec.gov/cgi-bin/browse-edgar?company=berkshire+hathaway&match=&CIK=&filenum=&State=&Country=&SIC=&owner=exclude&Find=Find+Companies&action=getcompany
and here:
http://www.law.cornell.edu/uscode/html/uscode26/usc_sup_01_26.html
Here is another rich guy replying to Buffett. I confess I rather enjoyed its sheer cantankerousness.
http://online.wsj.com/article/SB10001424053111903639404576516724218259688.html?mod=WSJ_Opinion_LEADTop
Luke (6:20 am), you’re misreading what I wrote, taking literally what was tongue in cheek.
You sound irritated. How come? I assure you I wasn’t trying to divert the topic away from class warfare. To reply to an accusation of class warfare isn’t a diversion away from the topic – it’s simply looking at the topic from a different angle. You seem to want to insist that the rich are attacking the rest of us; I’m merely saying that your evidence seems murky to me. You’re using the personal opinion of one wealthy man as though – it seems to me – it were incontrovertible proof that your position is correct. It’s not proof of anything except that he chooses to see things through that filter. Fine. Let’s add that to the data pile and keep talking.
Isabelle–
No worries, my comment was tongue-in-cheek, but it’s hard to convey that sometimes. Congratulations on such a long and happy marriage!
Isabelle, I suspect the comment was aimed not at you but at the blog at large, which, as we all know, is full of heretics, doubters, pope revilers, would-be women priests, and, above all, marriage haters.
Mark, now that you mention it, I realize that ours has been a long marriage, even tho it is true that I’ve been widowed for 35 years. increasingly I await the end of our long separation.
It is hard to say “the best Jon Stewart ever”, but I am awfully tempted on this one. Thanks for putting this up. I had missed it and it is one for the ages.