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Taxation of Carried Interest

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Re: Taxation of Carried Interest

#231

Post by evanpw »

harryh wrote: post #229
evanpw wrote: post #224

Earlier quoted context omitted.

FWIW, the common rebuttal scenario goes like this: You and I earn $200k in wages, and each pay $100k in taxes. You spend your remaining $100k on a boat. I invest my $100k, and 5 years later it's worth $200k. Suppose that $100k gain is taxed like ordinary income at 50%. After taxes I have $150k, which I also spend on a boat. Without taxes, you would have had $200k to consume in year 0, but you actually got $100k; your…

My comment was providing a defense of preferential tax treatment for carried interest. You provided an argument for a 0% tax rate on capital gains. I'm not sure how your comment is a rebuttal to mine? Perhaps you responded to the wrong comment by accident?

Your example seems to have nothing to do with carried interest. There's a single investor; no investment manager. The question around carried interest is whether certain types of income earned by investment managers should be classified as labor or capital income, whereas you have one person with labor income and one person with capital income, and are asking who should be taxed more heavily.

Re: Taxation of Carried Interest

#232

Post by harryh »

evanpw wrote: post #231
harryh wrote: post #229

Earlier quoted context omitted.

My comment was providing a defense of preferential tax treatment for carried interest. You provided an argument for a 0% tax rate on capital gains. I'm not sure how your comment is a rebuttal to mine? Perhaps you responded to the wrong comment by accident?

Your example seems to have nothing to do with carried interest. There's a single investor; no investment manager. The question around carried interest is whether certain types of income earned by investment managers should be classified as labor or capital income, whereas you have one person with labor income and one person with capital income, and are asking who should be taxed more heavily.

In my comment "I" am the investor and "you" are the investment manager.

I'm sorry if that was unclear.

Re: Taxation of Carried Interest

#233

Post by infinite8s »

lisper wrote: post #211
greedo wrote: post #210

Earlier quoted context omitted.

It's not like munis are a gift; they are repaid through taxes on the citizens of the city/county/state. TANSTAAFL.

Right, but those citizens are paying less than they otherwise would if the lenders were taxes on the proceeds. That discount could be considered a "gift" from the federal government to both local governments and lenders, whose taxes are lower than they would be if muni income were taxed.

Yes, and that 'gift' comes in the form of higher nominal taxes for everyone else.

Re: Taxation of Carried Interest

#234

Post by [deleted] »

bluecalm wrote: post #228
rpedela wrote: post #199

Earlier quoted context omitted.

If we are going to massively simplify taxes, then it needs to be done on the richest rather than the poor like a consumption tax does. By rich, I don't necessarily mean rich individuals. The richest entities in society are businesses and they benefit the most when you or I have money in our pockets. If you think about it, the most common federal tax on individuals or families, income wage taxes, is in fact a revenue…

Tax consumption, land, pollution and using natural resources. Allow people to get some amount of consumption tax back every month to make the system progressive. Get rid of all income taxes. Make sure there is inflantion as a form of tax on stashed cash as well. Consumption tax is much harder to gain than income taxes. Corporations pay in the country they sell to so that closed all tax heaven loopholes instantly. Mak…

[deleted]

Re: Taxation of Carried Interest

#235

Post by WalterBright »

Frondo wrote: post #193
WalterBright wrote: post #120

Earlier quoted context omitted.

> What evidence have we ever seen that allowing wealthy individuals to make more money results in increased utility? SpaceX is a modern example. Historically, people of great wealth have been able to invest in great projects. Scientists historically have been wealthy people. The guy who won WW2 was a wealthy man who invested his fortune into developing radar. Many historians believe that radar shortened the war consi…

"Rich people fund research universities after getting rich" seems like a far less efficient way to fund research universities than not letting them get so rich in the first place. I'd prefer the direct route of funding them from the public coffers than waiting on the largess of rich people to fund them decades after their fortunes have been made.

Wealthy people have often funded very valuable research that the government had no interest in:

1. rockets

2. radar

3. jet engines

Government research is directed by politics, which usually means safe, non-controversial topics, and money directed at politically connected scientists. There's nothing "efficient" about that.

Re: Taxation of Carried Interest

#236

Post by WalterBright »

notahacker wrote: post #143
WalterBright wrote: post #139

Earlier quoted context omitted.

SpaceX shows that people with great wealth can embark on successful space programs. > charitable donations are generally tax deductible I find it ironic the complaint that wealthy don't use their money to help social causes and yet complain that such help is tax deductible.

SpaceX took enormous amounts of funding from the government, which also happens to be its only customer for most of its services. Virtually all the technological advances which made it feasible for Elon Musk to found a rocket company were based on enormously expensive state funded programmes which private companies would neither have had the fundraising ability nor the realistic expectation of returns to embark upon.…

SpaceX could not have been started by your or I, because we are not mega wealthy. It never would have happened without the ability for Musk to accumulate great wealth.

If you want only government funded research, take a look at the old USSR. They produced a few notable advances, but nothing like the quantity produced in the US.

Re: Taxation of Carried Interest

#237

Post by conanbatt »

zimablue wrote: post #147
beat wrote: post #54

The correct solution to this problem is to abolish the distinction between capital gains and ordinary income (ie wages), and abolish the corporate income tax that justifies the "double taxation" argument that justifies the capital gains rate. Capital gains is why Mitt Romney can make 200 times as much as I do in a year, and pay half my effective tax rate. This is broad across the economy. It's a fundamentally immoral…

Abolishing corporation tax has always seemed to me like something that makes sense only in a quite naive view of the world. The idea is always just to tax methods of getting income out of a corporation instead, (income, dividends) but there's a problem with this idea. There are infinite ways to get your money out of a corporation. If you start off with: power is power all forms of power can be transferred into money…

Corporate taxes suck because they are a bad method of levying taxes, and also because its hard to know who is actually paying them. The taxes can fall on investores, on the workers or consumers, and that changes based on the market the company operates in.

I dont think I understood your proposed schemes: all those individuals you mention pay income taxes. Income taxes always have the shortcomings you mention, particularly because there are different rates to different types of income. If you made income tax a flat rate it would be infinitely smaller.

Re: Taxation of Carried Interest

#238

Post by conanbatt »

rpedela wrote: post #199
bingoboingo33 wrote: post #197

Earlier quoted context omitted.

The correct solution is to eliminate income-based taxes altogether, be they corporate, individual, derived from regular wages or derived from capital gains, etc ... and stick to a flat consumption based tax. But we're so deep down the rabbit-hole of our current system, we can't even imagine doing that. Without going to that level of simplicity, it's worth noting that some countries have done away with capital gains a…

If we are going to massively simplify taxes, then it needs to be done on the richest rather than the poor like a consumption tax does. By rich, I don't necessarily mean rich individuals. The richest entities in society are businesses and they benefit the most when you or I have money in our pockets. If you think about it, the most common federal tax on individuals or families, income wage taxes, is in fact a revenue…

> The richest entities in society are businesses

I can never get this narrative. A business is an organization of people, of investors workers and consumers. You cant offload taxes to an abstract business, you are putting it on one of the groups of people above.

Re: Taxation of Carried Interest

#239

Post by merinowool »

colanderman wrote: post #221
merinowool wrote: post #169

Earlier quoted context omitted.

I would argue that income tax is immoral - the more you care and provide for the society - the more you are punished for it. Only fair tax I can think of is a poll tax, where everyone pays the same amount regardless of their income. With this model you could think of giving 100% discount to those who can't afford it.

> the more you care and provide for the society - the more you are punished for it If marginal tax rates exceeded 100% you might have a point. Not to mention the implicit bizarre self-righteous assertion that income correlates directly with "caring for society". Tell that to fire fighters, EMTs, teachers, and disaster aid workers. But I guess "marginally, the more you convince others to part from their money, the les…

In the free society those people would have been paid as much as society thinks they deserve. In socialist society specialists must be paid much more than they deserve to offset progressive taxation and that is at the cost for less skilled workers. This increases inequality as people are not capable of getting wealthy.

Re: Taxation of Carried Interest

#240

Post by conanbatt »

blackguardx wrote: post #175
merinowool wrote: post #169

Earlier quoted context omitted.

I would argue that income tax is immoral - the more you care and provide for the society - the more you are punished for it. Only fair tax I can think of is a poll tax, where everyone pays the same amount regardless of their income. With this model you could think of giving 100% discount to those who can't afford it.

People at the top are usually getting more benefits from society, so they should pay more. Jeff Bezos's riches from Amazon couldn't exist without a vast highway network, regulated airspace, stable government, etc. A person digging ditches or picking strawberries in the central valley can do that without many of the previous benefits.

But all the workers at amazon pay income tax that go into that infrastructure.
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