Obama's Capital Gains Tax

[Patroklos]

Look at CEOs?

What percentage of the weathly do you think CEOs are compared to say lawyers?

but the rich get a far larger boost to their incomes due to functioning civil society - roads, schools, police, etc. than the poor.

Yeah, all those rich people riding the bus. Do their kids even go to public schools? The masses are by far the greatest beneficiaries of public monies.

But it's ultimately about increasing government revenues.

To you maybe, its not for Obama. Economics or monitary policy have nothing do do with his position here, he said so himself.

The idea that increasing the CGT wouldn't raise considerable revenues in the long term is a totally marginal one.

I think you meant fact, and if you didn't it doesn't change the fact that it is one. It is a fact that there is a rate that CGT will engouage long term economic growth AND thus overall tax revenues and it isn't 28% (or 20%). You support for Obama's raise is misguided if increased revenues is what you want. This shouldn't suprise you since Obama's CGT has nothing to do with tax revenues.

Again, there is a CGT rate that makes sense and there are real economic reasons to have it there, Your candidate doesn't care about that.

Aeson was talking about the "super rich." So yes, I backed up what I was referring to.

Then get a room. Your graph does nothing to refute my point.

If we were talking about a less wealthy subset of the rich, I would make a slightly different statement.

Or simply not have one, because they are not primarily suppored by CG.

"And yeah, he will be taking a lot more money from the average rich person than the average middle class person dollar wise, but those dollars matter a lot more to the middle class. Aren't you a progressive tax proponent? I don't like trust fund babies either, but I am not so spiteful that I am willing screw myself over royal to provide them with a minor inconvenience."

Exactly what it very clearly says, that the middle class will be the only ones harmed by this, and that apparently it is OK with Obama for us to shoulder the pain so he can barely pinprick the rich.

Note that income taxes are not mentioned once

[quote]Again, I don't know what this is supposed to mean. It's a bunch of words thrown together to form complete nonsense.[quote]

This is simple Ramo. The CGT increase is blanket, everyone no matter how rich or poor pays it. Now while a small subset of the rich might pay out more money in dollars, the VAST majority of individual stock investors are not rich but rather middle class or even lower. Being the progressive tax supporting bleeding heart liberal that you are, it should be obvious and distressing to you that that small overall dollar amount taxed out of the multiple millions of middle class investors is far more of a burden to them than the higher dollar value taxed from a handful of rich people is to them.

[Imran Siddiqui]

Originally posted by Zkribbler
Ramo --
Your chart doesn't appear to reflect the $1,000 tax credit which Obama is proposing for a stimulous package. So, instead of being an average of $160, it should be $1,160.

To be fair, that's just one year.

[Ramo]

Yeah, all those rich people riding the bus. Do their kids even go to public schools? The masses are by far the greatest beneficiaries of public monies.

I didn't say that. But their workers do. Their customers do. The same applies to the firms that they do business with. The vast accumulations of wealth that occur simply would not exist without a functioning civil society. As a percentage of their income, the rich gain far from government.

I think you meant fact, and if you didn't it doesn't change the fact that it is one.

Fact? Please show me a cite in the peer-reviewed literature.

Your farcical right wing dogma ain't "fact."

Again, there is a CGT rate that makes sense and there are real economic reasons to have it there, Your candidate doesn't care about that.

I already had this inane argument in another thread. I don't care to repeat it. For the record, no I don't agree with your ridiculous interpretation of Obama's words.

Then get a room. Your graph does nothing to refute my point.

I was addressing Aeson. I don't know why my graph was supposed to "refute" your point (not that your point is the least bit coherent).

Or simply not have one, because they are not primarily suppored by CG.

They are disproportionately supported by capital gains. Do I really have to show you a pretty graph for you to understand this?

This is simple Ramo. The CGT increase is blanket, everyone no matter how rich or poor pays it.

Yes, this is simple. The poor don't get capital gains, and the middle class can shelter it. Capital gains are a tiny portion of middle class income. That's not the case for the rich, who predominantly pay the tax.

Once more, the CGT is more progressive than the income tax.

[Ramo]

Exactly what it very clearly says, that the middle class will be the only ones harmed by this, and that apparently it is .

That is completely false. You have totally bizarre ideas about the economy.

[Ramo]

See the bottom graph. The top 0.01% gets the majority of their income from capital gains (even excluding dividend income). Needless to say, for the middle class, it's a far smaller portion.

[Patroklos]

I didn't say that. But their workers do. Their customers do. The same applies to the firms that they do business with. The vast accumulations of wealth that occur simply would not exist without a functioning civil society. As a percentage of their income, the rich gain far from government.

And all the jobs that are made possible because of vast accumulation and application of wealth. The general benefit of an active economy thing is a wash, all citizens benefit from that. The breakout is in phyiscal usage.

Fact? Please show me a cite in the peer-reviewed literature.

Your farcical right wing dogma ain't "fact."

You know Ramo, I find that you seem to have stopped reading threads as of late and every time you do so you trip like this. RTFT, all your answers are contained within.

Oh all right, I will placate you yet again...

But Dan Clifton over at Strategas Research thinks the Dems may be disappointed by the ROT—return on taxes—from higher cap-gains rates. After reviewing the connections between changing cap-gains rates and government revenue during the past five decades, he concludes that higher cap gains could well be a revenue loser for Uncle Sam.

http://www.usnews.com/blogs/capital-commerce/2007/9/19/obama-pushes-for-higher-investment-taxes.html

I already had this inane argument in another thread. I don't care to repeat it. For the record, no I don't agree with your ridiculous interpretation of Obama's words.

Apparently you don't agree with his words period. Seems to be a habit with you and "I am no proponent of nuclear power" Obama.

Perhaps you should try listening to what Obama actually says vice imagining what you want to hear.

They are disproportionately supported by capital gains. Do I really have to show you a pretty graph for you to understand this?

No, you just have to provide some sort of proof of this. Again, do you know anyone who supports themselves from CG? Observed reality biting you in the ass, yet again.

Yes, this is simple. The poor don't get capital gains, and the middle class can shelter it. Capital gains are a tiny portion of middle class income. That's not the case for the rich, who predominantly pay the tax.

1.) You made up the bolded part.
2.) The italics part is ridiculously false.

Once more, the CGT is more progressive than the income tax.

Only if you include people who the tax don't applyt to, which is stupid. The income tax applies to everyone, not so for the CGT. Everyone who pays the CGT is taxed at the same rate.

See the bottom graph. The top 0.01% gets the majority of their income from capital gains (even excluding dividend income). Needless to say, for the middle class, it's a far smaller portion.

1.) The amount of tax paid is irrelevant to my point, it is the impact of that tax on the people paying it that matters.

2.) As has been explained to you before, the "rich" are not the top .01 percent of the country. I know you picked that number so you can pretend that the "rich" get the majority of their income form CG, but your goal post moving is irrelvant and thus so is your position.

[Ramo]

More obfuscation.

And all the jobs that are made possible because of vast accumulation and application of wealth. The general benefit of an active economy thing is a wash, all citizens benefit from that. The breakout is in phyiscal usage.

I'm not talking about the general benefit of an active economy, I'm talking about civil society created by government. As a percentage of their income, the rich gain much more from government than anyone else. Consider the great sums of money involved. Bill Gates wouldn't be possible without the government.

Oh all right, I will placate you yet again...

That isn't a cite from peer-reviewed literature. That's one dude's opinion. Do you understand the difference?

Again, do you know anyone who supports themselves from CG? Observed reality biting you in the ass, yet again.

Observed reality making the point for me, yet again. Consider the implications here. Yes, I don't know anyone like this because I don't know any extremely rich people. Only the very rich gets a large portion of their income from CG. That means that CG disproportionately burdens the rich, i.e. is progressive.

Only if you include people who the tax don't applyt to, which is stupid.

No, it's not. The words "progressive" and "regressive" refer to whether or not the rich pay a larger portion of their income than the poor. If the poor don't pay the tax, and the middle class pay a little bit, it is more progressive. By definition. If you want to use a different word, that's fine. But it's more progressive.

I know you picked that number so you can pretend that the "rich" get the majority of their income form CG, but your goal post moving is irrelvant and thus so is your position.

I never claimed that in the first place. Please tell me where I wrote that the rich get the majority of their income from CG. As I said, multiple times in fact, the rich get a disproportionate amount of their income from CG.

I put up that graph, because it was convenient and made my point quite nicely. Just apply a little bit of critical thinking here. The rich clearly disproportionately derive income from capital gains.

[Ramo]

1.) You made up the bolded part.

http://www.cbpp.org/1-30-06tax2.pdf

And who here surprised that this distribution is far more progressive than the income tax rate distribution? Anyone (I mean besides Patty)?

[Ramo]

2.) The italics part is ridiculously false.

Those making >$1 million are responsible for 60.6% of capital gains. How's that for "ridiculously false."

http://www.taxpolicycenter.org/UploadedPDF/1001201_Capital_gains_tax.pdf

Geez, between the past few threads, you've almost become as bad as Ben...

[Patroklos]

More obfuscation.vvvvv

Your inability to comprehend basic logic is not the same as obfuscation.

That isn't a cite from peer-reviewed literature. That's one dude's opinion. Do you understand the difference?

No, it is just from a professional researcher from a reputable research body being published in a reputable publication. Then again, you haven't provided anything to back you position up at all besides graphs that don't help you.

Observed reality making the point for me, yet again. Consider the implications here. Yes, I don't know anyone like this because I don't know any extremely rich people. Only the very rich gets a large portion of their income from CG. That means that CG disproportionately burdens the rich, i.e. is progressive.

There you go again with your .01% You don't get to narrow this to the "extremely" to prove your point (which doesn't do it anyway). Again, the point of Obama's tax is to penalize the trust fund babies living off their CGs without doing any work.

The fact is that very few of the rich live off their CGs, but rather the bulk of their income comes from salary like anyone else. Your graph above proves just that. So...

1.) You just beat yourself up by proving the rich don't live off their CGs. A minority of the wealthy have CG as 30% of there income while the majoirty of the wealthy it is only 11%. This is more to silence others in this thread who claimed the rich live off their CG vice income and thus dodge taxes. This is false, there simply isn't a relevant number of Paris Hilton tust fund babies to punish to warrant taxing a hundred million other Americans who are mostly middle class.

2. The fact that you have to resort to narrowing the scope proves my point. There are 100 million people with stock investments in America, so unless you think that .01% of the population you so despise comprises 100 million people then the bulk of the people affected by this tax are not the uber rich, and in reality not even the rich.

No, it's not. The words "progressive" and "regressive" refer to whether or not the rich pay a larger portion of their income than the poor. If the poor don't pay the tax, and the middle class pay a little bit, it is more progressive. By definition. If you want to use a different word, that's fine. But it's more progressive.

Again, when deciding whether a tax is progressive or regressive you use who is paying the tax. In the case of income tax EVERYONE is included. IR you have any income at all you have to report it. Even if your deductions and bracket status that means you pay nothing you are still coverd in the tax. So amoungst those who are coverd by the tax some pay a smaller percentage and some higher, that is what makes it progressive.

CG is only applied to those with CG, period. If you don't have CGs then you are a nonentity as far as the tax is concerned. Everyone who pays CG is taxed at the same rate whether you are a 40K a year mechanic or a 500K a year lawyer, it is a flat tax, and thus regressive for all the reasons you love to argue a flat income tax is regressive.

I never claimed that in the first place. Please tell me where I wrote that the rich get the majority of their income from CG. As I said, multiple times in fact, the rich get a disproportionate amount of their income from CG.

You damn well did say the rich live off their CGs. How can you honestly say they live off their capital gaines when they have a greater income source? Obviously they are living off that source.

And dispproportiante is irrelevant, at least to anything I said. I am talking about who pays and how that effects them, not how much they pay.

And who here surprised that this distribution is far more progressive than the income tax rate distribution? Anyone (I mean besides Patty

God, you are argueing with yourself apparently

Ramo, of the five income brackets listed in that graph, what percentage CGT does each pay? THE SAME! Of the dollars taxes, which ones are more valuable to the person they are being taken from, the <50K or the >1000K? Exactly, regressive.

Those making >$1 million are responsible for 60.6% of capital gains. How's that for "ridiculously false."

Unfortunetly for you that is now what you said. Lets examine it

"That's not the case for the rich, who predominantly pay the tax."

Again, your inability to read has made you the fool. I have repeatedly stated the precentage of the CGT the .01 pay or even all the rich pay is irrelevant. There are 100 million Americans with stock in America and if you think 1/3 of the nation is "rich" then getting boot stomped in this thread is the least of your worries.

Of those 100 million the vast majority are not rich, but middle class (or lower). That means this tax affects the middle class more than the upper class, especially since the middle class worker's dollars are worth more to them than the rich as any progressive tax proponent will tell you.

Geez, between the past few threads, you've almost become as bad as Ben...

"I am not a proponet of nuclear power" -Barrack Obama

KNEEL NOWN AND PRAY TO YOUR LORD RAMO worship:

[snoopy369]

Ramo, of the five income brackets listed in that graph, what percentage CGT does each pay? THE SAME! Of the dollars taxes, which ones are more valuable to the person they are being taken from, the <50K or the >1000K? Exactly, regressive.

Patroklos, this is a severe misunderstanding of the term regressive tax (in addition to incorrect). Money is ALWAYS 'worth more', in one sense, to someone making less money. 'Regressive' refers exclusively to the actual dollar value of the tax (as a percent of total income), not to the 'utility' of said money.

In addition, as Ramo correctly states earlier, the rich do indeed pay a higher net percentage of their CGs than the rest. Because of IRAs and other tax shelters available to the middle class (those with small CG's), the net percentage paid in CGT's goes up as your net CG goes up. I don't know exactly what level that is generally true between (what amount of CG is shelterable legally), but it certainly is true to some extent. (I'm not talking about illegal shelters, of course... that can only be avoided by closing the loopholes, of course, or sending the IRS after people ...)

Finally, it is 'progressive' because quite simply the rich have a higher amount of CGs to be taxed than the poor. Similarly to the above (but in reverse), as you increase the CGT rate, you increase the tax burden on the rich as a percent of their income by more than you increase the tax burden on the middle class and poor as a percentage of their income. Thus, progressive.

Sales tax is a 'regressive' tax, because the poor pay a disproportionate amount of the tax (not because the percent is higher for them, which it isn't). Sales tax is a tax on what you spend on goods and services, which the poor and middle class spend nearly 100% of their income on, while the rich spend a smaller percentage on. Thus, the poor pay, say, 5% net taxes due to a 7% sales tax, because everything except rent is taxed; the rich pay 2%, say, because only 30% of their total earnings are spent on goods and services.

[snoopy369]

FWIW, a flat income tax based on salary income (and not CG) is regressive not because money is 'worth more' to the poor, but because, again, the poor and middle class make nearly all of their 'income' (total money received) as salary. Thus, if you set a flat (salary) income tax rate at 15%, a person who is making $100k will pay around $15,000 (less any individual deduction or whatnot), or 15% (or nearly so). A person who is making $500k in salary and $5m in CG income, will pay 15%*500k or 75k, which is only 2% of his total 'real' income.

If the flat tax includes money from all sources, then it is neither regressive nor progressive to a significant degree.

[Patroklos]

Sales tax is a 'regressive' tax, because the poor pay a disproportionate amount of the tax (not because the percent is higher for them, which it isn't).

Which is the same with taxes on stock sales or dividends (which traditionaly match CGT). I haven't been talking about retirement funds for a few pages now, but straight income.

JohnT and I talked about having brackets inside the CGT, but it doesn't seem to be the case. You can shelter some (which the rich can do to, and that sheltering has its own strings), but eventually you have to pay and that rate is flat.

[Aeson]

Originally posted by Ramo
Again, the highest marginal income tax rate is 35%. CGTs certainly aren't going that high.

As I said, if the rates were different. It's been as high as 50% in the past. The rates aren't comparable anyways, since CGs have an inherent risk involved of losing the investment, and you also pay income taxes on the money you initially invest (or on the money you take out with a traditional IRA). It's not just having to pay taxes on the gains. Where the balance point is would differ from investor to investor based on the risk they are willing to take.

As for a raise in CGT now, it would reduce economic activity, or enhance selloff (followed by reduced economic activity) depending on whether the market viewed it as "temporary" or the "first step". I don't think it's a cure for what ails us either way.

Any taxation is going to have negative side-effects on the economy. But we need to fund government...

I'd prefer we cut spending. We have a better chance to fund our necessary spending with a healthy economy. It's hurting enough already without undermining it more.

We have it backwards (at best). We reduced capital gains while the economy was booming (bubblicious), then want to increase it while the economy is hurting?

[snoopy369]

Patroklos, I'm glad you read one sentence of my post, but that is not particularly relevant when compared to the rest of it. Maybe this example will help you understand what is a progressive tax and what is a regressive one ...

Income and spending distribution, tax burden, and approximate effect of 5% tax increase (numbers estimates and probably not fully accurate, but for illustrative purposes. For convenience, tax is assumed to be paid out of next year's income, so numbers are easier to work with):

---

Poor person:
Income:
$25k: Salary, taxed at (0-8k: 0, 8-25k: 15% or $2550)
Expenses:
$5k: Rent (taxed = 0)
$1k: Healthcare (taxed=0)
$19k: Goods and Services (taxed: 7% or $1330)

Total tax: $3880, or around 15% of total income
Income tax: 2550/25000 or about 10.2%; net effect of 5% increase in tax: 3.4% in income proportion
Sales tax: 1330/25000 or about 5.3%; net effect of 5% increase: 3.8% increase in income proportion
CG Tax: 0 (no increase due to tax increase, no CG tax paid)

---

Middle class person:
Income:
$80,000 salary, taxed at (0-8k: 0 8-25k: 15% 25-45k: 20% 45-80k: 25%, or $15,300)
$10,000 capital gains (incl dividends and interest), taxed at (0-2k IRA, 0%; 2-10k, 15%, or $1,200)
Expenses:
$10k rent/mortgage, 0 tax
$3k healthcare, 0 tax
$55k goods+services (7% tax, or $3,850)
$2k savings, 0 tax
$20k investments, 0 tax

Total tax (not incl property tax): 20350, or 22.6% of total income
Income tax: 17% of total income; net effect of 5% increase to nonexempt income (>8k): 4% increase to proportion of income
CGT: 1.3% of total income; net effect of 5% increase: 0.4% increase to proportion of income
Sales tax: 4.3% of total income; net effect of 5% increase: 3% increase in proportion of income

---

Rich person:
Income:
$500,000 salary (taxed at about 35%, or $175k, simplified, no AMT or deductions assumed)
$2,000,000 CG incl div/interest (taxed at 15% above 2k, or about $300,000)

Expenses:
$50k rent/mortgage/property (0 tax)
$10k healthcare (0 tax)
$200k goods+services (7% tax, or $14k)
$2.25m investments/etc., 0 tax

Total tax: 490k, or 19.6% of income
Income tax: 7% of income, 5% increase in tax: 1% increase in proportion of income
CG Tax: 12% of income; 5% increase in tax: 4% increase in proportion of income
Sales tax: 0.56% of income; 5% increase in tax: 0.4% increase

---

So, the final numbers:

Tax Source
 Poor, % income 
 Middle, % income
 Rich, % income 

 Poor, % increase/prop
 Middle, % increase/prop
 Rich, % increase/prop


 Income Tax 
 10%
 17%
 7% 
 
 3.4% 
 4% 
 1% 


Sales Tax
 5.3% 
 4.3% 
 0.56%

 3.8%
 3% 
 0.4% 


 Capital Gains Tax
0 
1.3%
12%

0
0.4%
4%

Hence, Sales tax is regressive (highest effect is on the poor and middle class, and increase disproportionately affects poor and middle class), Income tax is somewhat progressive (but not that progressive!), and CGT is progressive (effects rich disproportionately to poor, and an increase in the CGT increasingly effects the rich).

The actual percent is irrelevant in the progressive/regressive debate, and to a large extent, the breakout of those percents is irrelevant - income tax is not truly progressive so long as it is only on salary, for example, because an increase in the tax on salaries would affect the middle class far more than the upper class (although it would have less effect on the poor, so it is a mixed bag of sorts). CGT is progressive solely because of who earns CG's, regardless of the actual percent of tax charged.