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The · Psychohistorian


Regressive taxes

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Warren Buffett is 180 times as rich as Mitt Romney, but only pays 2 times as much taxes.
Warren Buffett is 2000 times as rich as Newt Gingrich, but only pays 6 times as much taxes.

Yet, when Buffett and Obama talk about raising taxes, they suggest raising the kind of taxes Gingrich pays, not the kind that Buffett pays. Meanwhile, Gingrich wants to cut Buffett's taxes to zero, but not his own.

Is it any wonder the rich get richer? Come on, folks, the problem is the billionaires, not the millionaires.

Here are the numbers:

Warren Buffett's approximate wealth: $39,000,000,000 (39 billion, 39,000 million)
Warren Buffett's 2010 taxes: $6,938,744 - 0.02% of wealth (0.06% of real income)

Mitt Romney's approximate wealth: $220,000,000 (250 million)
Mitt Romney's 2010 taxes: $3,000,000 - 1% of wealth (14% of income)

Newt Gingrich's approximate wealth: $19,000,000 (19 million)
Newt Gingrich's 2010 taxes: $994,708 - 5% of wealth (31% of income)

Sources:
http://www.therichest.org/business/warren-buffett-net-worth/
http://online.wsj.com/article/SB10001424052970203462304577138961587258988.html?mod=WSJ_Opinion_LEADTop
http://www.washingtonpost.com/politics/2012/01/23/gIQAj5bUMQ_story.html
http://money.cnn.com/2012/01/19/news/economy/Gingrich_tax_returns/index.htm
http://www.ronpaul2012.com/2011/12/02/in-case-you-missed-it-cs-monitor-being-a-washington-insider-has-made-newt-gingrich-a-wealthy-man/
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[User Picture]
On January 24th, 2012 04:53 pm (UTC), mjperson commented:
Something seems odd here:

Warren Buffett's approximate wealth: $39,000,000,000 (39 billion, 39,000 million)
Warren Buffett's 2010 taxes: $6,938,744 - 0.02% of wealth (0.06% of real income)

That last number seems to indicate that his real income in 2010 was about a third of his net wealth. No? Does that seem right?
[User Picture]
On January 24th, 2012 05:10 pm (UTC), psychohist replied:
His 2010 real income is laid out in the WSJ article. Based on other articles not linked to here, I think his income was about 25% of his wealth. He also transferred soem into his kids' nonprofit trusts so it didn't show up as his any more.

A 25% return is not that unusual for the super rich, who can negotiate sweetheart deals since they don't have to cooperate with others to raise the capital.
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On January 24th, 2012 06:30 pm (UTC), mjperson replied:
"Real" Income
Ah, OK. I see that now. But still, while you can call (delta net worth) "real income", I really don't think we should be taxing Unrealized gains at all. I mean, when the housing market rises in Albany, I don't think my parents should be paying taxes on the rising value of their home, even though their "net worth" has clearly gone up due to the increased value of their house. Same with stock in my opinion.

Now when these gains are realized by selling the stock, then yes, capital gains taxes are foolishly low in my opinion.
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On January 24th, 2012 09:02 pm (UTC), psychohist replied:
Re: "Real" Income
Capital gains taxes will never be paid on most of Buffett's net worth, because he'll keep them until he dies, at which point they will be revaluated to their current market value without taxes. He'll avoid estate taxes by using tax exempt trusts. The 0.06% effective rate he's currently paying is all the government will ever see.
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On January 24th, 2012 09:13 pm (UTC), mjperson replied:
Re: "Real" Income
Well, yes, chances are he won't sell most of that stock until he dies. So he won't ever pay taxes on the gain. On the other hand, he was never able to use it for anything either. Never realizing the gain lets you avoid tax on it, but it also means you can't do anything with it.

When such a person does die, all that money will go somewhere: either to some tax exempt charity (which is Buffet's plan), or to heirs who should be giving the government a fairly large chunk of it in estate taxes. (Unless the "death tax" gets killed again.)
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On January 25th, 2012 12:23 am (UTC), psychohist replied:
Re: "Real" Income
So how is it reasonable that Buffett can shelter all of his taxes through charitable giving while the rest of us are limited to 30-50%? The only possible justification for the current limits on charitable giving is that we think the government ought to be able to tax some of our income anyway - a reasonable approach since the government helps provide the societal stability that allows that income to be generated - so why doesn't that reasoning apply to Buffett?

The answer is that we have special rules that are basically limited to use by billionaires. That's the problem, and that's why we're seeing excessive levels of concentration of wealth.

Edited at 2012-01-25 12:26 am (UTC)
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On May 21st, 2012 12:16 am (UTC), psychohist commented:
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