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Taxation of Carried Interest

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Re: Taxation of Carried Interest

#201

Post by beguiledfoil »

lisper wrote: post #196
treis wrote: post #182

Earlier quoted context omitted.

Seems like a wealth transfer from municipalities that don't borrow heavily to those that do.

That's true, but you seem to imply that this is a bad thing. It's not. A municipality that does not borrow must either tax its current citizens to raise the money to pay for capital expenditures, or stop investing in infrastructure. Neither option produces vibrant economies, particularly in a country where people are relatively free to move.

Or rely on transfers from the federal government.. As most already do..

Munis are a timebomb, imho.

Re: Taxation of Carried Interest

#203

Post by lisper »

beguiledfoil wrote: post #201
lisper wrote: post #196

Earlier quoted context omitted.

That's true, but you seem to imply that this is a bad thing. It's not. A municipality that does not borrow must either tax its current citizens to raise the money to pay for capital expenditures, or stop investing in infrastructure. Neither option produces vibrant economies, particularly in a country where people are relatively free to move.

Or rely on transfers from the federal government.. As most already do.. Munis are a timebomb, imho.

The entire economy of the world is a time bomb since it is predicated on exponential growth continuing indefinitely into the future. That cannot happen, so sooner or later we need to radically shift gears or we're in for a world of hurt. It's a question of when, not if. But since the current regime has been working for several millennia now, it is hard to make the case that The End is Near. It may or may not be.

Re: Taxation of Carried Interest

#204

Post by zacharycohn »

bingoboingo33 wrote: post #200
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…

"If we are going to massively simplify taxes, then it needs to be done on the richest" Why? This is a built-in assumption most people seem to be operating with and I've never understood the rationale that the rich should pay more. Does a rich person wear roads out more than a poor one? And if they do, wouldn't it be better if they paid for how much they wear the road down? As in: a percentages of miles driven on it?…

If you pay 10% on $100,000 a year, you have 90,000 left over. Plenty of money to live comfortably and have your needs met.

If you pay 10% on $20,000, you have $18,000. It was already hard to live on 20k, living on 18k and having your needs met is even harder.

Your examples reveal your bias. Most people don't make $100,000. And it's the "most people" that you would impact hardest with the flat tax scheme.

Re: Taxation of Carried Interest

#205

Post by test6554 »

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…

I don't think there is anything wrong with someone hiring people as a favor or someone selecting a specific vendor as a favor. As long as the company's owner knows what's going on and is ok with it. And as far as kickbacks go or repaying those favors, if it's money, that's taxable. If it's more favors, well that's merely bartering.

When it comes to stock manipulation, I think that's a crime. But if not, I can't see it being profitable. It would most likely result in a net loss unless there was some inside information being shared.

Re: Taxation of Carried Interest

#206

Post by rpedela »

bingoboingo33 wrote: post #200
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…

"If we are going to massively simplify taxes, then it needs to be done on the richest" Why? This is a built-in assumption most people seem to be operating with and I've never understood the rationale that the rich should pay more. Does a rich person wear roads out more than a poor one? And if they do, wouldn't it be better if they paid for how much they wear the road down? As in: a percentages of miles driven on it?…

If we are talking about fairness, what I described is more fair. 10% of income for a poor person can mean the difference between buying prescription drugs or going without as one example. However a rich person is going to have enough money to buy prescription drugs whether they pay 10% or not. In other words, the poor person is already at a significant financial disadvantage. So not asking them to pay taxes helps level the playing field some.

Re: Taxation of Carried Interest

#207

Post by zimablue »

bingoboingo33 wrote: post #200
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…

"If we are going to massively simplify taxes, then it needs to be done on the richest" Why? This is a built-in assumption most people seem to be operating with and I've never understood the rationale that the rich should pay more. Does a rich person wear roads out more than a poor one? And if they do, wouldn't it be better if they paid for how much they wear the road down? As in: a percentages of miles driven on it?…

It's fundamentally because:

a) most people are along for the ride that it's a moral imperative to keep all of the population happy b) the more money you have, the easier it is to make money. If you don't even that out at all you end up in a feudal society where some dude owns all the land, air, water and you're effectively his slave. Which is broadly the direction America has been going to for the last (30?) years

Fairness is very motivating for people but I don't think it's how you should base your society, I don't really think there's such a thing as fairness as a useful concept.

The real fix is a wealth tax but that is hated by both the old and the rich (look at how mansion tax policy was received in the UK). It's also kind of harder to measure than income.

Re: Taxation of Carried Interest

#208

Post by savanaly »

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…

I think what we're really upset about when it comes to rich people making a lot of money through investments is not that interest isn't taxed more, but rather that they had such a high (non-investment) income in the first place. In fact, I think there should be zero investment taxes. My reasoning goes like this:

If I would rather have two coconuts seven years from now than one coconut today, and I'm willing to find someone to sign a contract to make that trade with me, why do I deserve to be penalized more than someone who would rather have just one coconut today? This is in effect what capital gains taxes are. Penalizing future consumption in preference to current consumption. But there's no reason we as a society should prefer one over the other.

Re: Taxation of Carried Interest

#209

Post by phkahler »

chii wrote: post #171
phkahler wrote: post #158

Earlier quoted context omitted.

A hundred times this. If your plan is make money by selling at a higher price, you're playing the greater-fool game. If you make your return via dividends, it is a direct reflection of the value of the company.

but how does that system allow for a company that re-invest all profits into growing, if doing so is a tax disadvantage? selling at a higher price is how investors "get out" of the game, but allow other investors to "take over the reigns", all without the company having had to pay out dividends at inopportune times.

>> selling at a higher price is how investors "get out" of the game, but allow other investors to "take over the reigns", all without the company having had to pay out dividends at inopportune times.

No. Selling is how investors get out. No need for a higher price because they presumably got a return via dividends. If there's no increase in stock price, there will be no capital gains on the sale price either.

Reinvesting all the profits into growing is a phenomenon that became popular due to tax law. A dividend paying company can still make the choice to reinvest profits rather than pay them out. That will just mean a lower dividend than if they paid out all the profit to shareholders.

Re: Taxation of Carried Interest

#210

Post by greedo »

lisper wrote: post #196
treis wrote: post #182

Earlier quoted context omitted.

Seems like a wealth transfer from municipalities that don't borrow heavily to those that do.

That's true, but you seem to imply that this is a bad thing. It's not. A municipality that does not borrow must either tax its current citizens to raise the money to pay for capital expenditures, or stop investing in infrastructure. Neither option produces vibrant economies, particularly in a country where people are relatively free to move.

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