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-   -   Peter Schiff takes on Tax "rates" (WSJ) (http://forum.e46fanatics.com/showthread.php?t=959721)

Act of God 12-07-2012 07:28 PM

Peter Schiff takes on Tax "rates" (WSJ)
 
http://online.wsj.com/article/SB1000...554982808.html

Quote:

Democratic Party leaders, President Obama in particular, are forever telling the country that wealthy Americans are taxed at too low a rate and pay too little in taxes. The need to correct this seeming injustice is framed not simply in terms of fairness. Higher tax rates on the wealthy, we're told, would help balance the budget, allow for more "investment" in America's future and foster better economic growth for all. In support of this claim, like-minded liberal pundits point out that in the 1950s, when America's economic might was at its zenith, the rich faced tax rates as high as 91%.

True enough, the top marginal income-tax rate in the 1950s was much higher than today's top rate of 35%—but the share of income paid by the wealthiest Americans has essentially remained flat since then.

In 1958, the top 3% of taxpayers earned 14.7% of all adjusted gross income and paid 29.2% of all federal income taxes. In 2010, the top 3% earned 27.2% of adjusted gross income and their share of all federal taxes rose proportionally, to 51%.

So if the top marginal tax rate has fallen to 35% from 91%, how in the world has the tax burden on the wealthy remained roughly the same? Two factors are responsible. Lower- and middle-income workers now bear a significantly lighter burden than in the past. And the confiscatory top marginal rates of the 1950s were essentially symbolic—very few actually paid them. In reality the vast majority of top earners faced lower effective rates than they do today.

In 1958, an 81% marginal tax rate applied to incomes above $1.08 million, and the 91% rate kicked in at $3.08 million. These figures are in unadjusted 1958 dollars and correspond today to nominal income levels that are at least 10 times higher. That year, according to Internal Revenue Service records, just 236 of the nation's 45.6 million tax filers had any income that was taxed at 81% or higher. (The published IRS data do not reveal how many of these were subject to the 91% rate.)

In 1958, approximately 28,600 filers (0.06% of all taxpayers) earned the $93,168 or more needed to face marginal rates as high as 30%. These Americans—genuinely wealthy by the standards of the day—paid 5.9% of all income taxes. And now? In 2010, 3.9 million taxpayers (2.75% of all taxpayers) were subjected to rates that were 33% or higher. These Americans—many of whom would hardly call themselves wealthy—reported an adjusted gross income of $209,000 or higher, and they paid 49.7% of all income taxes.

In contrast, the share of taxes paid by the bottom two-thirds of taxpayers has fallen dramatically over the same period. In 1958, these Americans accounted for 41.3% of adjusted gross income and paid 29% of all federal taxes. By 2010, their share of adjusted gross income had fallen to 22.5%. But their share of taxes paid fell far more dramatically—to 6.7%. The 77% decline represents the single biggest difference in the way the tax burden is shared in this country since the late 1950s.

The changes came about not so much by movements in rates but by the addition of tax credits for the poor and the elimination of exemptions for the wealthy. In 1958, even the lowest-tier filers, which included everyone making up to $5,000 annually, were subjected to an effective 20% rate. Today, almost half of all tax filers have no income-tax liability whatsoever, and many "taxpayers" actually get a net refund from the government. Those nostalgic for 1950s-era "tax fairness" should bear this in mind.

The tax code of the 1950s allowed upper-income Americans to take exemptions and deductions that are unheard of today. Tax shelters were widespread, and not just for the superrich. The working wealthy—including doctors, lawyers, business owners and executives—were versed in the art of creating losses to lower their tax exposure.

For instance, a doctor who earned $50,000 through his medical practice could reduce his taxable income to zero with $50,000 in paper losses or depreciation from property he owned through a real-estate investment partnership. Huge numbers of professionals signed up for all kinds of money-losing schemes. Today, a corresponding doctor earning $500,000 can deduct a maximum of $3,000 from his taxable income, no matter how large the loss.

Those 1950s gambits lowered tax liabilities but dissuaded individuals from engaging in the more beneficial activities of increasing their incomes and expanding their businesses. As a result, they were a net drag on the economy. When Ronald Reagan finally lowered rates in the 1980s, he did so in exchange for scrapping uneconomical deductions. When business owners stopped trying to figure out how to lose money, the economy boomed.

It's hard to determine how much otherwise taxable income disappeared through tax shelters in the 1950s. As a result, direct comparisons between the 1950s and now are difficult. However, it is worth noting that from 1958 to 2010, the taxes paid by the top 3% of earners, as a percentage of total personal income (which can't be reduced by shelters), increased to 3.96% from 2.72%, while the percentage paid by the bottom two-thirds of filers fell to 0.51% in 2010 from 2.7%. This starker division of relative tax burdens can be explained by the inability of upper-income groups to shelter income.

It is a testament to the shallow nature of the national economic conversation that higher tax rates can be justified by reference to a fantasy—a 91% marginal rate that hardly any top earners paid.

In reality, tax policies that diminish the incentives and capacities of innovators, business owners and investors will not spur economic improvement. Such policies will, however, satisfy the instincts of those who want to "stick it to the rich." Never mind that the rich have already been stuck fairly well.
I always wondered how much the 91% crowd actually paid, glad someone took the time to figure it out. Additionally, if anyone is paying attention that top bracket keeps sliding lower, and lower and lower...you might be next.

NFRs2000nyc 12-07-2012 07:40 PM

Quote:

Originally Posted by Act of God (Post 14960719)
http://online.wsj.com/article/SB1000...554982808.html



I always wondered how much the 91% crowd actually paid, glad someone took the time to figure it out. Additionally, if anyone is paying attention that top bracket keeps sliding lower, and lower and lower...you might be next.

Blah blah blah. Take the rich people's moneys.:lmao:

evolved 12-07-2012 08:15 PM

I don't particularly agree with raising JUST the taxes on the rich, but I do agree that taxes need to go up across the board. Now, in my mind, the timing of these increases is what matters most. Obviously, raising taxes across the board, ala going over the fiscal cliff, would not be a good move at this point in our recovery....I think most would agree to that. However, targeted increases on higher earners in the near term and increases on the middle and low earners in the mid to long term wouldn't be a terrible idea. Of course, this operates under the presumption that we cut spending to go along with the increased revenue goals.

Act of God 12-07-2012 08:20 PM

Quote:

Originally Posted by evolved (Post 14960800)
I don't particularly agree with raising JUST the taxes on the rich, but I do agree that taxes need to go up across the board. Now, in my mind, the timing of these increases is what matters most. Obviously, raising taxes across the board, ala going over the fiscal cliff, would not be a good move at this point in our recovery....I think most would agree to that. However, targeted increases on higher earners in the near term and increases on the middle and low earners in the mid to long term wouldn't be a terrible idea. Of course, this operates under the presumption that we cut spending to go along with the increased revenue goals.

You're probably not wrong, but what are the odds that a "we do X now and Y later" deal ever actually is followed through on? Slim or none?

evolved 12-07-2012 08:22 PM

Quote:

Originally Posted by Act of God (Post 14960809)
You're probably not wrong, but what are the odds that a "we do X now and Y later" deal ever actually is followed through on? Slim or none?

lol

True, I should have added the stipulation that my comment assumes that politicians act rationally.....which is not the case these days.

Lair 12-07-2012 10:38 PM

The Wall Street Journal - A News Corp subsidiary.

NFRs2000nyc 12-07-2012 11:33 PM

Quote:

Originally Posted by evolved (Post 14960800)
I don't particularly agree with raising JUST the taxes on the rich, but I do agree that taxes need to go up across the board. Now, in my mind, the timing of these increases is what matters most. Obviously, raising taxes across the board, ala going over the fiscal cliff, would not be a good move at this point in our recovery....I think most would agree to that. However, targeted increases on higher earners in the near term and increases on the middle and low earners in the mid to long term wouldn't be a terrible idea. Of course, this operates under the presumption that we cut spending to go along with the increased revenue goals.

You seem to be a practical man. Do you honestly think the people Obama is targeting are going to pay this money? You really think that they won't move their money around, hide it, etc etc? C'mon man, you're not Lair. All that will happen is a ton of people are going to lose their jobs and the rich will just buy a few private islands, invest in shell companies, and enjoy banging their golddigging wh0res in their mansion in St. Barths.

Lair 12-07-2012 11:41 PM

Fvck the rich.

Wealth isn't finite.

Xcelratr 12-08-2012 01:51 AM

Quote:

Originally Posted by evolved (Post 14960811)
lol

True, I should have added the stipulation that my comment assumes that politicians act rationally.....which is not the case these days.

Politicians do act rationally, if we keep in mind the environment we've created for them to act within.

Politicians want to get elected and then want to get re-elected. In sheer numbers, the voting power lies with LMI and middle-class voters. Even in the best of economic times, it's rare that a politician can get elected or re-elected championing lower tax rates for the highest earners and static or higher tax rates for everyone else. And these are hardly the best of times. So most voters will jump at the chance to vote for someone that claims they'll help them individually, and skewer anyone that suggests anything else.

When it comes to macroeconomic issues, there are so many opinions, so many spin doctors, so much uncertainty about cause/effect. Add that together with the politicians' desire to get votes and the difficulty in holding individual politicians accountable for their claims, subsequent actions and the effects thereof, and you end up with a mess.

In addition, there are two sides to the equation. Revenue is the current hot button topic, but the same phenomenon happens on the expense side, too.

I'll be a lot more excited about politicians raising taxes on rich guys, poor guys, me, or anyone else, when they show they're serious about getting rid of their pet pork projects, they cut their own salaries and benefits, they stop shipping billions of dollars to other countries, and they just generally spend the money they already get in a more responsible fashion.

/rant

Act of God 12-08-2012 09:25 AM

Quote:

Originally Posted by Lair (Post 14961124)
Fvck the rich.

Wealth isn't finite.

You're so stupid, you just agreed with conservatives without even knowing it.

finite, look it up.

Lair 12-08-2012 09:45 AM

:rofl:

You're the expert on stupidity.

Act of God 12-08-2012 11:16 AM

Quote:

Originally Posted by Lair (Post 14961794)
:rofl:

You're the expert on stupidity.

Do you get it yet, do you see how retarded what you said was given your political leanings? Seriously, it would be hilarious if it weren't so sad.

tock172 12-08-2012 11:19 AM

Quote:

Originally Posted by Lair (Post 14961124)
Fvck the rich.

Wealth isn't finite.

The amount of money in the universe is not conserved. Wealth can be destroyed in a split second or created out of thin air.

Lair 12-08-2012 11:28 AM

Quote:

Originally Posted by tock172 (Post 14961958)
The amount of money in the universe is not conserved. Wealth can be destroyed in a split second or created out of thin air.

That's my point.

The rich can take their money and their wh0res and shove it.

Someone else will be happy to fill that void.

tock172 12-08-2012 11:32 AM

Quote:

Originally Posted by Lair (Post 14961971)
That's my point.

The rich can take their money and their wh0res and shove it.

Someone else will be happy to fill that void.

You missed my point. If you are truly desiring of wealth and you have the intellectual or physical ability to attain it, then the only thing possible of preventing you from attaining it is your own attitude and mental motivation.

evolved 12-08-2012 11:34 AM

Quote:

Originally Posted by NFRs2000nyc (Post 14961101)
You seem to be a practical man. Do you honestly think the people Obama is targeting are going to pay this money? You really think that they won't move their money around, hide it, etc etc? C'mon man, you're not Lair. All that will happen is a ton of people are going to lose their jobs and the rich will just buy a few private islands, invest in shell companies, and enjoy banging their golddigging wh0res in their mansion in St. Barths.

I think your scenario is an extreme example of what could happen. Without a doubt it will be the case for some, but I would venture to say definitely NOT the majority.

If they hide it, they'll be found and will have to deal with the consequences (as they should).

If they move it to offshore accounts, they still have to pay taxes on it.

The ones that have the wealth to go out and buy a few islands are the extreme minority of the rich.

The bottom line, for me at least, is that revenues need to go up and spending needs to go down.

tock172 12-08-2012 11:39 AM

Quote:

Originally Posted by evolved (Post 14961987)
I think your scenario is an extreme example of what could happen. Without a doubt it will be the case for some, but I would venture to say definitely NOT the majority.

If they hide it, they'll be found and will have to deal with the consequences (as they should).

If they move it to offshore accounts, they still have to pay taxes on it.

The ones that have the wealth to go out and buy a few islands are the extreme minority of the rich.

The bottom line, for me at least, is that revenues need to go up and spending needs to go down.

I'm not going to disagree that we need to make some changes with our tax system and reduce our spending.

However, you should never underestimate the lengths and individual is willing to go to to protect their private property, in this case their personal wealth.

Act of God 12-08-2012 11:42 AM

Quote:

Originally Posted by tock172 (Post 14961983)
You missed my point. If you are truly desiring of wealth and you have the intellectual or physical ability to attain it, then the only thing possible of preventing you from attaining it is your own attitude and mental motivation.

I think he meant to say that wealth IS finite, which is why he supports confiscation of wealth since ALL the wealth is hoarded by evil white people. If he thought wealth WASN'T finite he would have no problem with people holding their wealth since everyone is free to get theirs as well.

There is no fixed pie, hence it doesn't matter who has what. They aren't holding you from getting some yourself.

evolved 12-08-2012 11:43 AM

Quote:

Originally Posted by tock172 (Post 14961999)
I'm not going to disagree that we need to make some changes with our tax system and reduce our spending.

However, you should never underestimate the lengths and individual is willing to go to to protect their private property, in this case their personal wealth.

Were they doing this in the 90's when tax rates were much higher? People still paid capital gains taxes. I'm not talking about meteoric rises in rates....I'm talking about limiting deductions, slight increases in rates, etc.

Trust me, I don't doubt what you're saying. I work with these very people on a daily basis ($1mm+ in investable assets) and most of them expect their rates to go up at some point as they are quite low currently.

Lair 12-08-2012 11:51 AM

Quote:

Originally Posted by Act of God (Post 14962008)
I think he meant to say that wealth IS finite

Maybe you should stop thinking. ;)


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