FROM THE MODERATORS:

This thread is drifting away from financial planning and will be
closed unless future comments deal with the financial planning aspects
of the subject.

Thank you.


-HW "Skip" Weldon
Columbia, SC

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On May 23, 8:08 pm, Mark Bole <ma...[at]pacbell.net> wrote:

- quote -

The above wiki excerpts are "supported" by the SAME three articles.
The two statements are nearly reciprocals of each other. As a result,
the author draws sketchy conclusions to support the first statement,
and then uses those same conclusions to "prove" the second statement.
I think he falls short on both accounts.

The most substantiative source that directly addresses the statements
above is taken from a random poll of 1000 economists (Klein, D. B.;
Stern, C. 2004-12-06. Economists' policy views and voting. Public
Choice Journal.) Of which, only 264 even responded! I'm not sure I
consider 264 people a respresentative sample.

The second source (Klein, G. P. 2006-11-15. Why Intellectuals Still
Support Socialism. Ludwig Von Mises Institute.) never actually
supports the authors claim. The article address a study of whether
most ecenomist are liberal (in the socialist sense) or conservative.
He finds that 70% polled are in fact liberal. He then asserts that ALL
liberals support progressive taxation. Therefore, he concludes, that
most economist believe in progressive taxation. All assumptions
involved are a stretch. I, for one, do not embrace EVERY belief of my
"political party". In addition, the study used is also almost 20 years
old.

Side note: the Ludwig Von Mises Institute is an Austrian Economics/
libertarian/free-market advocacy group. It's actually less than 5
miles from my house and I am a member. The article was not written to
provide the conclusions that the wiki author draws.

The author also cites Adam Smith's "Wealth of Nations" and Karl Marx's
"Communist Manifesto" as respected sources in favor of progressive
taxation. It's arguable, but I wouldn't use either one of them unless
I had to. Adam Smith might be famous, but "the invisible hand of
economics" is possibly the only thing he got right in that entire
book. Wealth of Nations is more valuable for what it started than what
it actually said.

Barring the authors own, unsubstantiated, conclusions about majorities
and minorities the rest of the article is a fairly equal listing of
the pros and cons of progressive taxation. As to which side had more
"mass" is a matter of personal opinion.

- quote -

I was simply saying that if we tax too severely, people will leave.
- quote -

"brain drain" of high-earners to America in the 1960s, and is
considered an important influence on modern "economic migration." Can
the opposite not happen?

- quote -

Fair enough. Many systems work as intended. It's the end I question
more so than the means. I will likely never support a system that
transfers wealth from those that earn it to those that do not.

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On May 25, 11:51 am, Douglas Johnson <p...[at]classtech.com> wrote:
- quote -

The correlation is actually to the stock market performance, not so
much the tax rate.

The true question is whether we will live better as a nation paying
more taxes or less. History shows that governments are big wasters
and more revenue always leads to more bureaucracy and to a more
expensive one, with less of each tax dollar ending up in quality
services.

In the end, more taxes just fund more special interests, be them
through farm-bills or through contracts, but not we the people, at
least in any substantial way.


======================================= MODERATOR'S COMMENT:
Posters to this thread should relate comments to general financial planning.

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Will Trice <wtrice[at]notmonitored.com> wrote:

- quote -

That will teach me to post without facts in front of me. I get accused of
listening to Republicans. The next time I do it, I'll probably get accused of
listening to Democrats. Since this is not a political newsgroup, I'll do an
anti-politics thing and introduce some facts. They are not 100% on point, but
they are in the ballpark.

Here is a table showing individual Net capital gains (gains less losses) in
millions of current year dollars. It doesn't show long vs. short term, nor does
it include businesses. The income data is from:
http://www.irs.gov/pub/irs-soi/16-05intax.pdf

The table also shows the maximum cap gains rate for that year. The data is from
http://www.ctj.org/pdf/regcg.pdf. There are some years where there are some
complexities in the rate that I can't really reflect in a simple table. So I
arbitrarily selected what seemed like the "typical" rate.

The tax paid column is simply my spread sheet calculating the product of the
gains times the tax rate to show (roughly) what the government actually
collected.

If we look at declared net cap gains income, it tends to bounce around a lot,
presumably reflecting the state of the economy and markets.

The cap gains rate was lowered in 1978, 1981, 1982, 1997, and 2003. In 1982,
1997, and 2003 the tax collected was lower than the previous year, but the
second year is higher than the year before the reduction and all subsequent
years are higher. This tends to support the "republican" view.

While the revenue collected after the 1979 and 1981 reductions declined, net cap
gains income increased, so the revenue "loss" was less than would be indicated
by simply assuming people do not change their behavior.

There was one cap gains increase in 1987. Revenue immediately increased and
continued to be higher than the year before the increase. This tends to support
the "democratic" view.


Year Net Capital Gains Tax Rate Tax Paid
1977 $20,777 39.9% $8,290
1978 $23,231 39.9% $9,269
1979 $28,448 28.0% $7,965
1980 $29,660 28.0% $8,305
1981 $30,819 23.7% $7,304
1982 $34,404 20.0% $6,881
1983 $49,408 20.0% $9,882
1984 $54,519 20.0% $10,904
1985 $68,278 20.0% $13,656
1986 $132,842 20.0% $26,568
1987 $137,399 28.0% $38,472
1988 $152,841 28.0% $42,795
1989 $145,631 28.0% $40,777
1990 $113,159 28.0% $31,685
1991 $102,776 28.0% $28,777
1992 $118,230 28.0% $33,104
1993 $144,172 28.0% $40,368
1994 $142,288 28.0% $39,841
1995 $170,415 28.0% $47,716
1996 $251,817 28.0% $70,509
1997 $356,083 20.0% $71,217
1998 $446,084 20.0% $89,217
1999 $542,758 20.0% $108,552
2000 $630,542 20.0% $126,108
2001 $326,527 20.0% $65,305
2002 $238,789 20.0% $47,758
2003 $294,354 15.0% $44,153
2004 $473,662 15.0% $71,049
2005 $668,015 15.0% $100,202


Gee, wasn't that fun.

-- Doug

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- quote -

tax bills, "solve" the problem of the other 95% is not my idea of a
solution.

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Douglas Johnson wrote:

- quote -

I think you've been listening to sound bites from a particular political
party...

-Will

william dot trice at ngc dot com

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"Dave Dodson" <dave_and_darla[at]juno.com> wrote
- quote -

Google {CEO income worker} for hits like

http://www.pbs.org/now/politics/executivepay06.html (click
on "Facts and Figures, Executive Pay and Worker Pay
Worldwide")

http://www.epi.org/content.cfm/webfe...shots_20060621

A ratio of a few hundred to one has been popular for the
media to throw around for I'd say a couple decades now.

Please address further queries or comments to me by email. I
am OT.

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joetaxpayer <joetaxpayer[at]nospam.com> wrote:

- quote -

I would suggest that tax changes *always* have unintended consequences. Most
tax revenue projections assume that people do not change their behavior because
of the change. Nonsense. I do, you do, why does no one else?

It is particularly true for the upper income brackets where people have much
more control on the timing and nature of their income. The most obvious example
is the capital gains tax. To the extent you can control the sale of an asset,
you can control the payment of the tax.

I don't have the figures at hand, but it is my understanding that lowering the
gains tax percentage almost always increases the revenue collected by the tax.
People are more inclined to move money around if the tax is lower. This is also
more efficient economically as capital can seek it's best use.

-- Doug

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Dave Dodson wrote:
- quote -

Google is your friend "The chief executive of a Standard & Poor's 500
company made, on average, $14.2 million in total compensation in 2007,
according to preliminary data from The Corporate Library." from the
first hit on CEO PAY.

Further down that article, "The chief executive officers of large U.S.
companies averaged $10.8 million in total compensation in 2006, more
than 364 times the pay of the average U.S. worker, according to the
latest survey by the United for a Fair Economy."

Elle was trying to make a point, and did. The only clarification I'd add
would be 'large US company'. Of course the title CEO can apply to much
smaller companies that can't pay so much. So that would answer your
objection, Dave, the remark didn't apply to the smaller companies. Still
for the S&P 500, that's $700B/yr.
Joe

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"rick++" <rick303[at]hotmail.com> wrote
- quote -

http://www.ssa.gov/OACT/COLA/cbbdet.html says the cutoff
each year is:

($60,600, the cutoff in 1994) * (average wage for two years
ago)/(average wage for 1992)

The wages referenced are per individual, not per household.

- quote -

worst case I am figuring the Obama plan sans donut will
affect around 5% of wage earners. With the donut, it appears
under 2% will be affected.

Thanks, Rick, for elaborating in your other post on how you
see your personal taxes potentially changing.

kastnna, sure. But the "don't bite the hand that feeds you"
guide goes both ways: Workers need executives and vice
versa. The repercussions from workers could be just as
severe as those from executives. Workers haven't the bucks
but they do constitute many more bodies.

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Elizabeth Richardson wrote:

- quote -

I'm well in favor of staying on-topic. IMHO this thread has stayed
mostly on topic. I'm surprised no one has pointed out that Congress,
not any party's presumptive presidential nominee, makes the tax laws. If
the OP had simply said, "what about SS taxes increasing next year", it
would have been spot-on.

The following m.i.f-p. topics have been touched on in this thread:

1) shifting income from one year to the next in anticipation of tax law
changes (*that* topic has certainly been fodder here before).

2) evaluation of SS taxes and benefits as if they were a pension instead
of social insurance

3) impacts of progressive taxation on wealthier individuals, how does it
potentially change their behavior?

And probably more that I've missed.

-Mark Bole

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kastnna wrote:

- quote -

Funny you should mention that, they are specifically mentioned in the
group of those inclined to oppose progressive taxation.

The Wikipedia article I previously referenced has multiple footnotes
with the cites you are looking for. Of course, by its very nature, the
majority of taxpayers will favor a progressive system, because it seems
more "fair" to the majority.

They have three references for this: "In most western European countries
and the United States, advocates of progressive taxation tend to be
found among the majority of economists and social scientists."

And they have three cites for this: "Arguments against progressive
taxation tend to be found among libertarians and some conservatives.
Among economists and social scientists, and to a lesser extent the
general population, opponents of progressive taxation tend to be in the
minority."

- quote -

Like Europe doesn't have a progressive tax system... what's your point?

I'm just trying to counter-balance the impression that is always given
when someone mentions "oh, the top 1% of the income earners pay 30% of
the taxes" as if that means something is broken. No, it's not broken,
that's exactly what it's intended to be. You may not like the
intention, but the system largely does what it's designed to do.

- quote -

Except for your European client, of course, but I suppose he'll get the
month of August off instead! ;-)

-Mark Bole

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On May 23, 5:45*pm, Mark Bole <ma...[at]pacbell.net> wrote:
- quote -

Well, if "they can afford it" perhaps we should take all 40 members of
Forbes 40 Riches individuals and "tax" them out of everything except a
million or two. That should be more than enough for them to get by.

- quote -

I would like to see the site for that. My primary undergrad degree was
Economics. My professors must have been the "exception to the rule".
Even the Chicago School of Economics (perhaps one of the finest econ
schools in the country) is predominantly libertarians that don't at
all support that statement.

- quote -

That only works in a vacuum devoid of any non-fiscal motivation. I've
met plenty of people that detest "freeloaders living off of the hard
work of others" (their words, not mine). I've seen those same people
act out of spite, find ways to circumvent the system, and generally
act as they would not have otherwise.

- quote -

Global enterprise is constantly making it easier to live elsewhere.
There is a point where people will "vote with their feet". As an
anecdote, I have one client in particular that now lives in Europe
solely because he believes the USA has become "mismanaged". Taxes
weren't the only concern, but they were a factor. Whether he's right
or wrong in his opinion is irrelevant.

Well, to each his own... Enjoy Memorial Day Weekend everyone!

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<beliavsky[at]aol.com> wrote in message
news:c9f372e2-9f90-4d3a-87f2-2a98fe1edcfe[at]s21g2000prm.googlegroups.com...
- quote -

Politics. Any talk of Obama, Clinton, McCain is clearly politics. Added to
that is the fact that this isn't law and isn't likely to become law as it is
proposed. Politics isn't usually allowed on MIFP.

Elizabeth Richardson

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Mark Bole <makbo[at]pacbell.net> writes:
- quote -

The survey in question (which they update yearly) is, specifically,
from the Fortune 500 CEOs (and even then, in '07, they only got
numbers for 386 of the F500 companies).

And those numbers include not just salary, but lots of other
things (many of which, even I think are absurd). Pension
contributions, option grants (not sure how they value them
for the sake of the survey), perks (personal use of company
jets, etc.)

- quote -

They do:

http://www.faireconomy.org/issues/ceo_pay

In particular:

http://www.faireconomy.org/files/pdf...Excess2007.pdf

So these numbers apply to 386 executives. I don't disagree
that some of the executives are getting paid way too much
(of *my* money - I'm a shareholder in lots of these companies!).
But I don't think the sound-bite numbers used here make much
of a useful argument against it.


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Dave Dodson wrote:
- quote -


http://money.cnn.com/2005/08/26/news/economy/ceo_pay/

They don't come right out and say so, but they are most likely referring
to CEO's of Fortune 500 companies or something like that.

-Mark Bole

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On May 23, 12:31*pm, "Elle" <honda.lion...[at]spamnocox.net> wrote:
- quote -

I suppose the average worker makes $30K to $40K per year. 300 times
that is $9million to $12million. Considering how many small businesses
are incorporated, I don't think it is possible that the average CEO
makes that much. Do you have any source to back up your statement, or
is it just a WAG?

Dave

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beliavsky[at]aol.com writes:

- quote -

As far as this being a "fix" for the problem, what's missing
is the other side of the equation:

Benefits *paid* later on are affected by the amount of income
that was subject to SS taxes previously. If they lift the
cap on income subject to taxes, unless they tinker with a whole
lot more of the system, they'll get more tax money coming in
now in exchange for a lot more payments going out later.

That said, SS is always subject to change in the future and
planners need to always be ready to come up with proposals
for their clients to best protect themselves. But I think
it's very early to be speculating on what Obama may or may
not do and how folks should plan to work with it.

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kastnna wrote:
- quote -

And they also controlled roughly the same percentage of personal wealth.
Looks like taxation hasn't hurt them too much, after all.

- quote -

That's just how it's supposed to be, it's a progressive tax system and
is favored by the vast majority of economists. Please check out the
article at

http://en.wikipedia.org/wiki/Progressive_tax

for more information on all the reasons why progressive taxation is good
(and for balance, reasons why some oppose it). But to put it at its
most basic, "As long as after-tax income is a strictly increasing
function of gross income, there is a monetary incentive to increase
compensation received."

- quote -

The IRS has a lot of ways to go after individuals who don't pay their
legal tax obligations, thank goodness they don't just "ask".

-Mark Bole

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joetaxpayer wrote:
[...]
- quote -

Please, please, let's remember that the reason self-employed people pay
both halves of FICA is to *eliminate* an unfair break they would
otherwise enjoy.

It's pure nonsense or worse to portray self-employed persons as somehow
paying a bigger share of FICA than employees. The employer doesn't care
if he gives his 6.2% share to the government on the employee's record or
directly to the employee, it's all the same as far as his business is
concerned.

-Mark Bole

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