NSFW Episode 32: Eat the Rich
Midas and I have stayed pretty quiet on the whole Warren Buffett "the rich should pay more taxes" thing, so we thought we'd lay it out there in this week's show. Let us know if you think we're way off base here.
PREVIOUS EPISODES:
NSFW Episode 31: DOWNgrayedd
NSFW Episode 30: Oslo Bombing, Amy Winehouse
NSFW Episode 29: Phone Hacking, Debt Ceiling
NSFW Episode 28: DSK for President, Lagarde Rocks
NSFW Episode 27: How To Ruin Your Life
NSFW Episode 26: Groupon, Bilderbergs, #Weinergate
NSFW Episode 25: Crapture, LinkedIn Lunacy, Gunning for Goldman
NSFW Episode 24: DSK, Coffee, Near-Term Euro
NSFW Episode 23: bin Laden, Silver, Dunkin Donuts
NSFW Episode 22: Welcome to Man Week
NSFW Episode 21: The Drinking Episode
NSFW Episode 20: Government Spending, SEIU vs. JP Morgan, Legerdemath
NSFW Episode 19: Dirty Sex, JPY/USD, Peer to Peer Lending
NSFW Episode 18: Japanese Earthquake & Tsunami, Tax Policy with Bill Gross, NFL Lockout
NSFW Episode 17: #Winning, Strategic Default, Cyber Security
NSFW Episode 16: Libya, Wisconsin, Wealth Gap
NSFW Episode 15: The Donald, Goat Poo, Interview Swagger
NSFW Episode 14: Atlas Shrugged, Bonus Hedging, Skipping College
NSFW Episode 13: Egypt, Internet Kill Switch, NASDAQ Hacked
NSFW Episode 12: The Energy Rodeo
NSFW Episode 11: Groupon, Google, State Bankruptcies
NSFW Episode 10: Barclays Layoffs, Arizona Shootings, $100 Crude Oil
NSFW Episode 9: Bonuses, Facebook, National Debt
NSFW Episode 8: The Christmas Special
NSFW Episode 7: All-Nighters, Bush Tax Cuts, Crash JP Morgan
NSFW Episode 6: Burnout, Bailing Out Europe, Wikileaks
NSFW Episode 5: Lehman Bankruptcy, TSA, Black Friday
NSFW Episode 4: Silver, Welfare Reform, Winter Inflation
NSFW Episode 3: Day Trading, Estate Taxes, Prop 19
NSFW Episode 2: The Euro, Prop Trading, Technology
NSFW Episode 1: QE2, Housing, Commodities
Comments
I'm siding with Eddie on this
I'm siding with Eddie on this one. Superb point on skin in the game and our armed services. All the ideological stuff we hear about taxes being unfair, blablabla... happiness is based on relative wealth, not absolute. Who cares if you're paying higher taxes, you're making more money than the guy paying less and you can afford more. Poor people don't want to raise taxes because they hope that someday they will be in those brackets. The fact of the matter is people who are religiously opposed to higher taxes on the rich are pussies. They're afraid they won't be able to hold on to what they made. Guys like John Paulson don't worry about how much taxes they'll have to pay at the end of the year, they just aim for the highest performance possible. The guys who worry are like Phil Falcone, they're one trick ponies who can't perform consistently enough to cover their tax bill.
Corporate welfare isn't paying for anything. If it was, our roads and bridges wouldn't be crumbling. The billions lost in loopholes aren't benefiting anybody.
IMO, what would make sense would be:
1. Restructuring Medicare, Medicaid and Social Security. The fact of the matter is, the current system is a slowly unfolding disaster. There's trillions in unfunded obligations creeping up on us and we have to find a way to make it sustainable. I'm not a policy expert so I can't say exactly what a restructuring would look like, but it has to be done.
2. Raise taxes. You can't pretend you support a balanced budget and a reduction of debt if you won't raise revenue. Solely cutting spending depresses GDP and makes it impossible to make any headway as far as debt reduction goes. I'm not talking about the 70%-90% rates we once had, just tossing the Bush tax cuts.
3. Overhaul the tax code. We can't have GE paying $0 in taxes. An overhaul closing loopholes and significantly reducing the rate (is it any wonder corporations spend so much trying no to pay taxes?) would likely increase revenue significantly.
4. Pour that revenue into infrastructure projects. These projects are too costly and long-term for the private sector to invest in. Do it for them and you've got more consumers and a greatly improved infrastructure for companies to use. Not bad for firing a few tax specialists and paying a low rate of corporate taxes.
In sum, I think this idea of "class warfare" is stupid. Nobody's asking for a punitive increase in taxes. Just a rise in revenue that will make debt reduction possible and some reforms that will help the lower half in the long-run. After all, the people who get hurt by Medicare, Medicaid and Social Security being unfunded are the poor, not the rich.
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Edmundo: 10/10 Midas:
Edmundo: 10/10
Midas: 4/10
paraphrase: Corporate Welfare for Multi Billion Dollar Companies ends with them paying more in taxes, hiring more
people and paying for bridge and tolls.
Sorry, I disagree with all three:
1) consumer products company GE paid nearly 0% in taxes last year, oil and gas companies routinely get tax breaks on the subsidies (welfare) they already get, heavy manufacurting company Boeing had 5-year avg. of 0.7%, financial companies have tax havens that rival the rates of our poorest.
2) find me a single economic research report from a *university or government economist* (not biased Cato or Heritage Foundation press releases) that shows the link between corporate welfare and hirings. This is as bad as the fallacy Edmundo pointed out (corporate welfare to banks did not lead them to lending more to consumers). TAKEAWAY: Corporations are rational profit-maximizing agents- they are not government policy agents. They will hire people when it is economically viable- not just because they have cash to burn (as evidenced by the huge amount of stockpiles of cash companies like Apple are holding onto right now).
3) private companies paying for bridges and tolls is just silly. No, they get municipal funds to pay for that. When a company builds an office on the side of the city, then the city/county may pay to build a road for them. When someone wants to build a sports arena, the county/city/state will pay a portion of the development costs (often the vast majority acutally as evidenced by Rick Perry's history).
My own analysis:
I think the central issue that everyone is avoiding is unemployment. That should be issue #1 and yet people still talk about revenue/debt/taxes/class warfare. The US economy is powered by consumer spending. We aren't going to change the dynamics of that. As long as unemplyment is high, consumer spending won't bounce back. As long as consumer spending doesn't bounce back, companies won't hire, innovate or produce (you can give them all the tax breaks and subsisides you can- unless they know they can make more money by hiring and producing- they'll just pocket it instead). It's typical of having only a tiny piece of cake left and everyone is fighting over it and arguing whether someone is getting more than their fair share without working for it -- instead we should be talking about how to increase the size of the cake.
First one of these I've
First one of these I've actually watched. Definitely with Midas on a lot of this, but Eddie hit it home, too. Now i'm going back to watch the old ones...
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All this talk about people
All this talk about people paying their fair share of the tax burden, as though giving the government money served some kind of legitimate purpose. The deficit itself is not the only, or even the biggest, problem. The deficit only becomes a problem when it interferes with other government spending via large interest payments. In the meantime, the biggest problem is what the government spends the money on. To suggest that a dollar spent by the government is better for the economy, the rich, the poor, and people not even in America than a dollar spent by Warren Buffet is completely absurd. Take a simple example, many of the poor today are out of work, but it is a simple fact that the government cannot create jobs. So why are you trying to take more money away from ambitious, risk taking investors and giving it to the one entity on earth who by definition can't actually help?
Also, all this talk about the different classes does not have much basis in reality. For instance, most of the people counted as low income in census data are the early twenties children of every class in America, they simply haven't had time to gain experience that leads to higher pay. But the do eventually. The reality is that there is a great deal of movement between the various income levels, so all this talk about class warfare and rich versus poor is really baseless.
Finally, I find Eddie's rant about rich people not being in the military bizarre. It's not as if most or even a tiny fraction of the poor or the American people in general work for the armed forces. There is no basis in reality for the idea that the rich live the good life while the poor get shot to protect it.
I just don't think increasing
I just don't think increasing tax will ever solve the debt problem.
The government is overextended. Yes, maybe taxing the top 100 richest might help the government out for a few years but then what. US needs a permanent solution, not a one-time-get-reelected-promotion
I don't think it's the
I don't think it's the ultimate solution to our deficit issues, but there's a couple of things we could change (on top of closing all loopholes for both individual income and corporate taxes):
1) Add a couple of brackets. It's ridiculous that the highest is $380k+. We could probably do with another at $1mm, and a second at $5-10mm.
2) Lower corporate taxes to a globally-competitive 28% (again, with all loopholes closed) for companies that operate/produce/manufacture domestically. For those that produce abroad, 45%. Job creation, anyone?
ThaVanBurenBoyz wrote: I
I don't think it's the ultimate solution to our deficit issues, but there's a couple of things we could change (on top of closing all loopholes for both individual income and corporate taxes):
1) Add a couple of brackets. It's ridiculous that the highest is $380k+. We could probably do with another at $1mm, and a second at $5-10mm.
2) Lower corporate taxes to a globally-competitive 28% (again, with all loopholes closed) for companies that operate/produce/manufacture domestically. For those that produce abroad, 45%. Job creation, anyone?
+1 For both theses. But I'd still opt for a move to a consumption based tax system (only truly equitable way to do it).
Edmundo, I'd just clarify that there is a big difference between; A) placing more of a burden on the poor by asking for that 50% to pay some sort of taxes and B) overhauling entitlement programs, decreasing the length of unemployment benefits, and aligning incentives to give this less off group more responsibility for their well being.
Watch the Daily Show? Jon
Watch the Daily Show? Jon Stewart made very similar points.
http://www.hulu.com/watch/269537/the-daily-show-wi...
I would argue that we don't necessarily want to raise taxes, particularly not on the ultra-rich. Both Jon Stewart and Eddie are talking about wealth, not taxable income. In truth, the bottom 50% earn around 13% of income in this country.
The US has become steadily less attractive as a business environment. High taxes (both corporate and individual), regulatory burdens, etc. all contribute to this issue. For people that use Europe as a counter-point, do we *really* want to be Europe right now?
The low-hanging fruit for increasing tax revenues is getting our unemployment back to historic levels. Having a massive percentage of the population unproductive is definitely impacting our tax revenues.
We cannot begin to increase tax revenues enough to cover our current spending, let alone pay down the debt.
This is admittedly a flawed article, but its point stands: tax revenues as a % of gdp have stayed relatively constant. While I doubt we are on the Laffer curve, this historical data says something about our ability to raise the top line on our federal government's budget.
http://blogs.marketwatch.com/fundmastery/2010/07/0...
Massive spending cuts are needed. We might be able to get a little more revenue from taxes, but that will not be what gets us out of this hole. Defense, entitlements, stimulus, and nation building all need to be on the chopping block. Somehow we need to lure jobs into this country at the same time...
There is no easy solution. I just hope Obama's job plan doesn't add to the deficit, and consists of more than handouts to Dem pet projects that have little hope of becoming engines for growth (green jobs and high speed rail, for instance).
Double post, sorry.
Double post, sorry.
Quote: 2) Lower corporate
2) Lower corporate taxes to a globally-competitive 28% (again, with all loopholes closed) for companies that operate/produce/manufacture domestically. For those that produce abroad, 45%. Job creation, anyone?
Good point. Did you know currently about 1/3 of the cost of moving a US job overseas is a business expense that is tax deductible? How perverse is that. Couple that with tax holidays for income earned overseas and the end result are VERY strong incentives to not hire Americans.
100% Agreed. The first step is increasing corporate taxes- at 0-10%, we have no leverage to incentivise companies. The H.I.R.E. Act of 2010 promises tax breaks for hiring certain kinds of unemployed workers- but too many corporations have maxed out their tax breaks already.
Glad to get in before ANT
Glad to get in before ANT discovers your point of view, Eddie! It's gonna get dangerous in here. :)
I respectfully disagree, Eddie. It's definitely true that a disproportionate share of our military comes from poor and disadvantaged backgrounds. However, I think that says more about the lack of legitimate opportunity in those areas than it does on any effort by the military to necessarily exploit or take advantage of them. If it's the only way out, then it's the only way out. I could be wrong.
Although it's true that a majority of our military comes from poor backgrounds, it also doesn't mean that most of the poor are military families. What about those poor that don't serve in the military?
Here's the thing: the harder you try to turn the screws on the rich, the more the rich end up turning the screws on you. They can afford the best tax advice to help them get around any punitive rise in taxes. If everyone pays a flat tax of no more than 10% and close all loopholes (except the ones on charitable donations), the incentive to cheat will be removed, everybody's paying the same rate, and everybody's happy.
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I don't think Eddie's
I don't think Eddie's equating all the poor with the military. The fact of the matter is, the wars of this past decade really turned the screws on the poor. All of the sudden, the best way out of poverty became incredibly dangerous and had a high potential for causing lasting damages. Thanks to the wars and the Bush tax cuts which blew up our debt-to-GDP, cutting these people's benefits is becoming increasingly politically acceptable.
Furthermore, the Greenspan/Bernanke put is killing the elderly, another big part of the people on the lower end of the income distribution. The 10s are hovering at 2% for goodness' sake. Factor in the latest CPI and you'd almost wonder when we'll start putting people should they reach the age of 65.
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I'll watch when I get home,
I'll watch when I get home, but I'll keep my rants to other battle grounds. God bless you if you think the government spends the money you work hard for wisely. There is so much waste in Washington right now it makes me sick. Regardless, it is always politically favorable to demonize the rich and I don't see that changing.
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These arguments about "taxing
These arguments about "taxing the rich" have so many moral and economic problems with them that they boggle the mind. I will simply refer you to Bastiat's "The Law" - and ask whether this country is about plundering other classes or not. I work for my paycheck- it is not "distributed" and no one is entitled to a single drop of sweat from my brow (figuratively speaking- I work indoors in a climate-controlled environment)- I am not rich, but I'm trying to get there, and the additional weight of a higher tax burden, in addition to funding welfare programs (Medicaid, Medicare, and Social Security- and, yes, they are welfare programs- I would be happy to go over the numbers and legal arguments in a post, if challenged) I will never benefit commensurate to my contribution, are making a difficult task, herculean. And all of this is, fallaciously, given some 'authority' by certain billionaires who, although publicly advocated for increasingly progressive tax policies, privately pursue tax and income shelters. And I am not hypocritical enough to suggest that this lessens the logic (or rather, illogic) of their arguments. Good for them- I think it is not only natural but good for each person to attempt to keep justly acquired property. I would suggest, however, they should be more honest about their conduct. This "laws for thee, but not for me" is really off-putting. And for those, including unnamed billionaires, whose consciences are so agonized over the thought that they are not nearly taxed enough- feel encouraged to write a check to:
Gifts to the United States
U.S. Department of the Treasury
Credit Accounting Branch
3700 East-West Highway
Hyattsville, MD 20782
Website: http://www.fms.treas.gov/faq/moretopics_gifts.html
By the way, it is not tax-deductible, although that would defeat the point...And don't give me the "I won't do it because it won't make a dent" argument. The "goodness" or "morality" of an action is not defined by the number of people who follow a "moral" path.
Bene qui latuit, bene vixit- Ovid
I think it's time to raise
I think it's time to raise taxes.
If you are taking home more than $30K/year, you have a pretty comfortable existence. We need to raise the 25% tax bracket to 26%, 28% to 30%, 33% to 36%, 36% to 40%, and create a new tax bracket for earners north of $2 million at 42%. This is much better for the average rich man than the 1981-1986 Reagan tax schedule, and with additional spending cuts, allows us to balance the budget.
Cutting tax loopholes is also important. Hedge fund managers and Private Equity folks need to be taxed at the rate of ordinary income on carried interest. Everyone else who works for a living pays 35%; I am all for rewarding the rich for the fruits of their labors, but they should pay taxes on the same terms as everyone else.
We also need to have a simple 7% tax on corporate foreign income. Want to enjoy the trade and sovereign risk advantages of being a US company? Fine, but we are going to charge you up to 7% on foreign income taxed at less than 35%. While the US has a fairly high nominal corporate tax rate, our effective corporate tax rate is much lower than most of the G-20. If you don't like it, I guess you can move to China, but it's going to suck when the Libyan rebels sieze your assets. Or you can live in the US and pay a fairly modest premium to help support the world's most capable Navy and Air Force.
Have a family of 4 and earn $250K/year as a whiney Chicago professor? Worried that you won't be able to afford private school for your kids? We won't be able to afford K-12 public school soon unless we start raising some tax revenue. I spent 16 years in public school and things worked out fine.
Bottom line is that the fiscally conservative pendulum is at its far swing- at least on tax policy. Yes, we do need further government belt tightening on top of the $1.9 Trillion in cuts- particularly by reforming Medicare (we will probably have to end up with the Ryan plan by the time we are done), but part of the solution also includes hiking revenues.
Work hard, play hard.
rls wrote: These arguments
Work hard, play hard.
great episode. will have to
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IlliniProgrammer wrote: rls
Bene qui latuit, bene vixit- Ovid
@ Eddie- I thought it was 25.
Work hard, play hard.
rls wrote: Well, well- I
Work hard, play hard.
Very good show. If someone
"History doesn't repeat itself, but it does rhyme."
Quote: It is my understanding
Work hard, play hard.
I find the moral relativism
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Ant nailed it.
ANT wrote: I find the moral
Work hard, play hard.
Q for ANT. We have thousands
Work hard, play hard.
Let's put it this way: Govt
This is what you do. You cut
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You hit on something there
ANT wrote: I find the moral
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Eddie, or anybody, can you
"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan
For those who are for raising
goodbread fucking owns this
Making money is art and working is art and good business is the best art - Andy Warhol
@cph With just a cursory
Here's the thing though,
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Scott Irish wrote: Long time
"History doesn't repeat itself, but it does rhyme."
The fact that Buffet pays
Edmundo Braverman wrote: @cph
"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan
Cardinal wrote: The fact that
"The trouble with our liberal friends is not that they're ignorant, it's just that they know so much that isn't so."
- Ronald Reagan
cphbravo96 wrote: I think the
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