0.1% of tax payers pay over half of the capital gains tax

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Aero
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0.1% of tax payers pay over half of the capital gains tax

Post by Aero »

I came across an article while surfing the web last night that said that over half of the capital gains taxes paid in the US are paid by one tenth of one percent of the tax payers. I can't easily find the article this morning. If you run across it, please post a link. (As I will of course)

One tenth of 1% is about 300,000 tax returns. This statistic is a strong indicator as to why some millionaires would accept increases in their income taxes. They reconognize that taxes at their level are not as painful as they are beneficial because taxes recycle the wealth at these high income levels. After all, the government never keeps the money, they spend it, recycle it. Recycled wealth means there is a chance for these millionaires to get more but if the money stays in the pockets of the top 0.1 %, the common millionaire will never have a chance to get any of it. If it is taxed and spent it fuels growth hence the common millionaire can accumulate more, at least until they reach the top 0.1%, which is a happy place to be.

I know many here will object but frankly, you should look out for your own interests because no one else will. No one here reading this is in the top 0.1 % capital gains tax payer group and you never will be, not even if you win the lottery. The wealth of the nation should not be closely held in the pockets of a few, neither should it be distributed indiscriminately. Don't scrap the capitalist system, it works when money flows. Use taxes to recycle wealth to fuel growth and so give an opportunity for those who can, to do, and to accumulate some wealth.
Aero

kcdodd
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Post by kcdodd »

I am not convinced it is even possible to "recycle wealth" in that manner. Do you have a specific example of how that would work? Putting the ethical issues aside.
Carter

DeltaV
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Re: 0.1% of tax payers pay over half of the capital gains ta

Post by DeltaV »

Aero wrote:One tenth of 1% is about 300,000 tax returns.
The number of federal income tax payers is only about a third of that,
http://www.usdebtclock.org
so 0.1% would be about 112,500 tax returns.

Aero
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Re: 0.1% of tax payers pay over half of the capital gains ta

Post by Aero »

DeltaV wrote:
Aero wrote:One tenth of 1% is about 300,000 tax returns.
The number of federal income tax payers is only about a third of that,
http://www.usdebtclock.org
so 0.1% would be about 112,500 tax returns.
Yes, I really need to find that paper.

Found it, or one of them. Google works! There are several articles reporting the same topic.

http://news.yahoo.com/top-0-1-nation-ea ... 47859.html
Aero

choff
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Post by choff »

In my province we just had a referendum on a sales tax change. All the economists claimed the new tax would be good for the GDP, yet when they poled people how they would vote, most said they were against it, their personal situations would suffer.

What the economists discovered was that while GDP was increasing over the last 10 years, the only people who had benefited were in the top .01% of households, everyone else had lost ground.

The new tax was defeated in the referendum. If there was something learned, its that it's not even the top 1% versus the rest. It might not even be the top .01% versus the rest. It may be the top .001% vs everybody else.
CHoff

Aero
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Post by Aero »

kcdodd wrote:I am not convinced it is even possible to "recycle wealth" in that manner. Do you have a specific example of how that would work? Putting the ethical issues aside.
"Recycle Wealth" in my view is - "Move a portion of money, or wealth, that is stagnant into a cash stream to increase the GDP."

It is generally accepted that when the government spends money, it is multiplied in its flow through the GDP. The problem in this is that the multiplier varies widely depending on the government program objective. Sometimes it is true that the government dollar spent adds a dollar to the GDP, sometimes more than a dollar but more often it seems, less.

A point will be made by the 0.1% that their money is not stagnant, rather it is earning dividends, interest and funding risk ventures. I point out that in the past, the recent past, we have had both higher capital gains tax rates and simultaneously, much higher GDP growth. This fact argues counter to the claim of the 0.1%.

As for ethics, it is unconscionable that we sit back and allow the 0.1% to control over half of the capital gains in the US. Neither is it ethical for the 0.1% to do so - they should either take much higher risk with the money or have it taxed away. JMO
Aero

choff
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Post by choff »

It may explain the resistance to new taxes by the top 10%, if its only the top .1% or higher who have made any gains over the last 10 years. They may feel they're being unfairly targeted for the actions of a very few.
CHoff

kcdodd
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Post by kcdodd »

My take is that if your assessment is true, that the money is "stagnant", that is not doing anything, then the effect of taking that money and giving it away would be the same as if the government simply fabricated money and gave it away. The latter is not considered good practice, in general causes inflation, and puts the "increase GDP" argument on shaky ground. So you must answer how it would then be "better" for the government to do the former if the theoretical effect is the same. That is, simply treating wealthy people as a black box of money.

Now, I do think most would agree that taking money from one person and giving it to another IS different then simply fabricating money. However, that would require abandoning your "stagnant money" analogy for it to be true. However, now the argument must be that supporting one segment of the economy at the expense of another segment of the economy will increase GDP, which seems on equally shaky ground because your just changing which part is contributing to GDP.
Carter

Tom Ligon
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Post by Tom Ligon »

I suppose statistics say I'm in the 99%, and always will be. So I suppose I should be outraged by the Very Rich. I'm not.

I have no problem at all with the rich getting richer, providing they do it fair and square. When they cheat I'd like to see public floggings. Made-off I'd hang, draw, and quarter.

I do have a problem with the poor getting poorer. However, I never bought that 60's rock argument, "tax the rich, feed the poor, til there ain't no rich no more." This is easily achieved ... it is amazingly simple to set up a system where everyone is desperately poor. At least the rich offer a form of competition with the most amazingly bloated concentration of cash-flow on the planet, the US Government. I don't say "concentration of wealth" in the case of the government because it is more like a concentration of debt ... we're paying interest in mind-numbing amounts. Balancing the budget would do more to help the economy, and thus the poor, than any pitance we could squeeze from the very rich.

So I am for imposing restrictions on the biggest glutton in the economy.

I do find it amusing when some pundit points out that the rich would like to see a flat tax, maybe a 9-9-9 scheme or something like it, because it would reduce the taxes they pay. These are usually the same pundits who try to convince us that the very rich pay a lower tax rate than their secretaries. In fact, while there are some loopholes, by and large they pay a higher tax rate. And they are free to donate their ill-gotten gains to various charities, which many do (in part for the tax breaks). Among other things, they fund many universities, providing scholarship funds the poor can take advantage of.

Aero
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Post by Aero »

kcdodd wrote:My take is that if your assessment is true, that the money is "stagnant", that is not doing anything, then the effect of taking that money and giving it away would be the same as if the government simply fabricated money and gave it away. The latter is not considered good practice, in general causes inflation, and puts the "increase GDP" argument on shaky ground. So you must answer how it would then be "better" for the government to do the former if the theoretical effect is the same. That is, simply treating wealthy people as a black box of money.
No, not the same. Printing money is inflationary, taxing money is not. Printing money increases the national debt, taxing money does not. I can't argue the "increase GDP" point because to me it seems that the GDP multiplier from the government spending the money would be the same, irrespective of the source of said money. Normally I would argue that the private sector would spend the money more wisely than government but in this case, the 0.1% have accrued vast sums of wealth by benefiting from the American system and seem to be sitting on it. The sums are so vast that America really can't affort for them to sit on it waiting for a growth opportunity. Some of it needs to be spent or invested to drive the growth.
Now, I do think most would agree that taking money from one person and giving it to another IS different then simply fabricating money. However, that would require abandoning your "stagnant money" analogy for it to be true.
Yes, taxing is different than printing money. How does that reflect on the "Stagnant Money" analogy? I don't see that at all.
However, now the argument must be that supporting one segment of the economy at the expense of another segment of the economy will increase GDP, which seems on equally shaky ground because your just changing which part is contributing to GDP.
Taking money from one person and giving it to another is called "redistribution." It has its uses, for example, forcing all car owners to give money to the insurance company for liability insurance does protect all drivers and it redistributes money. It does not recycle wealth. President Obama's proposed "Jobs Bill" is an example of creating wealth (using printed money, not recycled wealth) by distributing funds to responsible contractors to build infrastructure. Value is gained from the money spent, construction workers are employed who spend most of their income and GDP was estimated to increase by 0.7%. That is a large multiplier on about half a billion dollars. Give that same sum of money to the 0.1% and only their accountants would notice. The construction workers spend their income driving GDP, the truely wealthy 0.1% watch their money like a hawk, and pinch their pennys until a quarter pops out. That's how they got so rich. But money sitting earning interest has no GDP multiplier, it's stagnant. The truly wealthy do not spend even a fraction of the percentage of their income that the construction worker spends. That is solid, no shakey ground. Earning the money does not contribute to the GDP, spending the money contributes to the GDP. You can not benefit from the money your neighbor earns, only from the money your neighbor spends. If he pays your kid mow his lawn or if he improves his house increasing the value of the neighborhood, for examples.
Aero

Aero
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Post by Aero »

Tom Ligon wrote:I suppose statistics say I'm in the 99%, and always will be. So I suppose I should be outraged by the Very Rich. I'm not.
Tom, thanks for that, I didn't realize that writers earned that kind of income.

I have no problem at all with the rich getting richer, providing they do it fair and square. When they cheat I'd like to see public floggings. Made-off I'd hang, draw, and quarter.
I had a business partner some years ago who took our capital to Los Vegas and spent it. I WOULD have enjoyed watching him being drawn and quartered at the time.

I do have a problem with the poor getting poorer. However, I never bought that 60's rock argument, "tax the rich, feed the poor, til there ain't no rich no more." This is easily achieved ... it is amazingly simple to set up a system where everyone is desperately poor. At least the rich offer a form of competition with the most amazingly bloated concentration of cash-flow on the planet, the US Government. I don't say "concentration of wealth" in the case of the government because it is more like a concentration of debt ... we're paying interest in mind-numbing amounts. Balancing the budget would do more to help the economy, and thus the poor, than any pitance we could squeeze from the very rich.

So I am for imposing restrictions on the biggest glutton in the economy.
A balanced budget is the objective, but balancing it by fiot would drive our economy into depression because the money spent beyond income has a GDP multiplier, too. The economy, right now, can't withstand the elimination of the excess government spending and the multiplier from the GDP. I disagree that very rich could be squeezed for only a pitance. I believe that when I was a kid, the top capital gains rate was 50%. Just doubling the current rate from 15% to 30% would be feasible for the very rich to pay, (the very rich who garner over half of the capital gain income). The politics of such a move is impossible right now, though.

I do find it amusing when some pundit points out that the rich would like to see a flat tax, maybe a 9-9-9 scheme or something like it, because it would reduce the taxes they pay. These are usually the same pundits who try to convince us that the very rich pay a lower tax rate than their secretaries. In fact, while there are some loopholes, by and large they pay a higher tax rate. And they are free to donate their ill-gotten gains to various charities, which many do (in part for the tax breaks). Among other things, they fund many universities, providing scholarship funds the poor can take advantage of.
I don't believe that the gains of the 0.1% are ill-gotten. Risk capital should be rewarded. But wealth should not stagnate either. That is risk-averse capital and does nothing for our economy, contrary to all the arguments for lowering the capital gains tax rates. That wealth should be put to work and if the wealthy won't put it to work, then perhaps it's time for the government to do so, much as I dislike the idea of politicans spending money.
Aero

hanelyp
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Post by hanelyp »

Suppose there was a real life Scrooge McDuck with $gazillion sitting idle in a money bin. Many on the left would claim that's bad for the economy. I say that every dollar static in the bin increases the value of the remaining dollars in circulation. If money was then taken out of the bin and distributed quickly, whether by Mr. McDuck going on a spending spree or the government taking and spreading it around, you'd have a bout of inflation.

Similarly, the "hording" of cash by businesses as a hedge against uncertainty is not harming the economy as some claim.

Try not to confuse dollars in circulation with economic activity. The value of a dollar is dynamic, and government driven dollar circulation my be unproductive.

kcdodd
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Post by kcdodd »

Thanks hanelyp, thats part of the point I was trying to make.
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mdeminico
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Post by mdeminico »

Those who are already wealthy actually favor higher taxes at all levels.

It's counter-intuitive, but listen...

They can afford to pay the additional tax. The biggest threat to their wealth isn't taxes, it's new competition. Higher taxes are simply a "barrier to entry" into their field. Less people rising to the top because they can't handle the confiscatory tax rates.

It's the same reason Philip Morris actually supports new taxes on cigarettes. They can handle the burden. Joe Blow's new cigarette company can't. Philip Morris stays around, Joe Blow goes out of business after 10 years.

choff
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Post by choff »

It could be a case that people in the .1% like Warren Buffet favour being taxed, because they've made huge gains they know they can never spend. But the top 10% minus the .1% are resistive because they've also seen no actual gains in 10 years, just like everybody else, but get hit with the same rate as the .1%.
CHoff

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