2012 Presidential Race

[Gregor-y]

What's an Opel Insignia?

Sold here as the Buick Regal.

Capital gains are the main reason the rich get richer in this country as the rate has been held very low compared to wages received for work. The argument it is an incentive for investment is a bit thin since there's still no better place to invest if you have the money, and people like Mitt making millions end up paying a lower percentage to taxes, which as far as I know is not considered a fair burden. But there are any number of studies predicting the world will end if the rate is increased to even the level or other income, plus the political will's not there to fight the well funded wonks that perpetuate that philosophy.

[Lousada]

I wasn't trying to create an entire economy, just looking to see what people felt about the subject of just exactly what is a "fair" tax.

This could be an interesting subject for a new topic.

Also a good point. The theory behind a lower capital gains rate (interest, except for some government bonds, is taxed at the regular rate) is to provide incentive for people to invest in businesses that create jobs and more wealth. The rate is lower so people will invest in the riskier stock market rather than in bonds or other vehicles. Given that the theory is mostly, but not always, true, how would you get people to do that investing sans a bigger potential reward against the bigger risk?

One look at wikipedia and you could have discovered that your theory is wrong:


Or if you don't like wikipedia as a source, check this out:
Capital gains tax reductions are often proposed as a policy that will increase saving and
investment, provide a short-term economic stimulus, and boost long-term economic growth.
Capital gains tax rate reductions appear to decrease public saving and may have little or no effect
on private saving. Consequently, many analysts note that capital gains tax reductions likely have a
negative overall impact on national saving. Furthermore, capital gains tax rate reductions, they
observe, are unlikely to have much effect on the long-term level of output or the path to the longrun
level of output (i.e., economic growth). A tax reduction on capital gains would mostly benefit
very high income taxpayers who are likely to save most of any tax reduction. A temporary capital
gains tax reduction possibly could have a negative impact on short-term economic growth.
http://www.fas.org/sgp/crs/misc/R40411.pdf

[Mark]

Starter. You didn't say that you were just talking about income. That's a different situation indeed. In fact Captial Gains tax is not the same as Income Tax. IIRC 18% instead of 20%/40%/50%

[Starter]

Starter. You didn't say that you were just talking about income. That's a different situation indeed. In fact Captial Gains tax is not the same as Income Tax. IIRC 18% instead of 20%/40%/50%

Capital gain is income. Monetary gain from any source is income, wages, interest, prize money, return on investment, etc. In some places gain from different sources may be taxed differently, but it is still income.

[Rollo]

Also a good point. The theory behind a lower capital gains rate (interest, except for some government bonds, is taxed at the regular rate) is to provide incentive for people to invest in businesses that create jobs and more wealth. The rate is lower so people will invest in the riskier stock market rather than in bonds or other vehicles. Given that the theory is mostly, but not always, true, how would you get people to do that investing sans a bigger potential reward against the bigger risk?

If I've just mentioned "deriving his entire income from wages" then the capital gains tax on wages is nil. Capital Gains and Wages are treated different in some taxation codes... but they needn't be.

In Australia there actually is no such separate thing as Capital Gains Tax. Capital Gains are assessed at the same marginal rates as other income in the hands of the individual, company, or other entity. The thing is that capital in any economy almost always flows by itself to the instruments that derive the best outcome for the investor (people are motivated by self-interest), so the bigger potential reward for certain investment strategies be they shares, bonds, options, convertible notes etc etc etc, is of itself enough to attract investors.
And yes, the potential rewards are enough, for the ASX (Australian Securities Exchange) would be easily in the top ten of the world's borse despite Australia not even being in the top 10 of the world's largest economies.
The Capital Gains system in Australia works well; largely because there are no loopholes in it. By subsuming it into the rest of taxation legislation, it doesn't provide a chance for people to game the system in that particular way*

Depends on what you're insured against. For personal injury you shouldn't pay more. For replacement or repair value of the car, then obviously you should pay the equivalent premium for the cost of the repair.

Your specific question was "Define what "fair share" means in the context of a discussion on taxes."

Since we are talking about taxation here, I asked the question of taxation as an insurance question. The thing which we're insuring for here is the future stability of the economy. Since we charge the Government with the defence of the realm, certain infrastructure duties, and to encourage economic growth and promote the stability of the financial system generally, then the people who derive the most benefit from the stability of the financial system should be the ones to pay for it.


*The thing to remember about any economics question isn't that people are trying to game the system, but that everyone is always trying to game the system without exceptions. That's the reason why people hire lawyers and accountants to look at legislation to design new strategies and investment products.

[Starter]

Double post

[Starter]

If I've just mentioned "deriving his entire income from wages" then the capital gains tax on wages is nil. Capital Gains and Wages are treated different in some taxation codes... but they needn't be.

I agree with that.

And yes, the potential rewards are enough, for the ASX (Australian Securities Exchange) would be easily in the top ten of the world's borse despite Australia not even being in the top 10 of the world's largest economies.
The Capital Gains system in Australia works well; largely because there are no loopholes in it. By subsuming it into the rest of taxation legislation, it doesn't provide a chance for people to game the system in that particular way*

If you've kept loopholes out, then you're a better man than us Gunga Din.

Since we are talking about taxation here, I asked the question of taxation as an insurance question. The thing which we're insuring for here is the future stability of the economy. Since we charge the Government with the defence of the realm, certain infrastructure duties, and to encourage economic growth and promote the stability of the financial system generally, then the people who derive the most benefit from the stability of the financial system should be the ones to pay for it.

A very good argument can be made that those on the bottom of the ladder gain the most benefit from the stability of the system.

*The thing to remember about any economics question isn't that people are trying to game the system, but that everyone is always trying to game the system without exceptions. That's the reason why people hire lawyers and accountants to look at legislation to design new strategies and investment products.

We are on the same page here. I agree completely that ALL people try and game the taxation system. You would almost be foolish not to. That's the best argument for eliminating opportunities to do said gaming.

[Rollo]

A very good argument can be made that those on the bottom of the ladder gain the most benefit from the stability of the system.

Benefit, n:
1. something helpful, favourable or profitable
2. an allowance of money etc. to which someone is entitled

An empirical and statistical argument can be made otherwise, even from the example which you gave.

I'll start with an example:
Romney at an income of, oh say, ten million a year and rate of 14% 10,000,000 x 14% = $1,400,000.
Joe Blow at income of, lets say, 50,000 a year and tax rate of 20%. 50,000 x 20% = $10,000.
In this case, Romney would pay 28 times in taxes what Joe MAKES in a year.

Someone on 10,000,000 a year is deriving a monetary benefit of... 10,000,000 a year. Likewise, someone on 50,000 a year is deriving a monetary benefit of 50,000 a year.
The person on 10,000,000 a year derives a benefit precisely 200 times that of someone on 50,000 a year.

Money is not just a medium of exchange, it is also the standard of relative worth and benefit.

[chuck34]

An interesting question for everyone. Define what "fair share" means in the context of a discussion on taxes.

I'll start with an example:
Romney at an income of, oh say, ten million a year and rate of 14% 10,000,000 x 14% = $1,400,000.
Joe Blow at income of, lets say, 50,000 a year and tax rate of 20%. 50,000 x 20% = $10,000.
In this case, Romney would pay 28 times in taxes what Joe MAKES in a year.

Who exactly is paying their fair share?

Flawed example. Statistically speaking Joe Blow pays no where near 20%. It's more like 14.3% for total Federal tax, and 3.3% for Individual Income tax that's assuming that Joe making $50,000 is in the Middle Quintile, which I think is safe to assume.

Historical Effective Federal Tax Rates for All Households

Another interesting read.
Washington Post Errors on Romney's Average Tax Rate | Tax Foundation

But let's not let facts get in the way of a good argument. ;-)

[D-Type]

Some people appear to be overlooking indirect taxation - sales tax, VAT, duty on tobacco and alcohol, import duties etc. No matter what your income, when you spend it you pay tax at the same rate.