Aces High Bulletin Board
General Forums => The O' Club => Topic started by: JBA on July 22, 2003, 10:46:16 PM
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About the Rich.
Here is a compelling statement, Congressman Patrick Kennedy, D-RI (Rhode Island for those of you in public schools) recently declared to fellow members at a Washington nightspot, “I don’t need Bush’s tax cut, I’ve never worked a F***king day in my life”
A number of other rich people, i.e. Warren Buffet, have at various times likewise declared that they do not need what are called “tax cuts for the rich”. But whatever political points such rhetoric may score, it confuses issues that are long overdue to be clarified.
One of the most basic confusions is between income and wealth. You can have high income and low wealth or vice versa. We have all heard of athletes and entertainers who have earned millions, that ended up broke.
There are also people of relatively modest incomes who have saved and invested enough over the years to leave surprisingly large amounts of wealth to their heirs.
Income tax cuts apply to income, not wealth. So the fact that some rich people say they don’t need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway.
Looked at differently, high tax rates hit people who are currently earning high incomes- usually late in life, after having worked their way up in their professions over a period of decades. Such as myself.
Genuinely rich people who have never had to work a day in their lives –people like Kennedy- are unaffected by income taxes except on what they are currently earning, which may be a tiny fraction of what they own.
In other words, soak-the-rich tax rates do not, in fact, soak the rich.
Someone who eventually works his way up to $100,000 a year will qualify as “rich” in liberal rhetoric, but by the time you reach that level you may have a few kids, college tuition, mortgage etc. You’re not exactly buying yachts.
Another fundamental confusion over tax rates with reduction in tax revenues collected by the government.
One of the enduring political myths of our generation has been the claim that the rise in deficits during the 1980s resulted from President Reagan’s “tax cuts for the rich.”
Tax rates were cut. Tax revenues were not.
More tax revenues were collected during every year of the two Reagan administrations than had ever been collected in any previous year in the history of the country. Nor was this experience unique.
When President Kennedy cut tax rates during the 1960s, tax revenues went up. The whole point was –and is- to encourage more economic activity and more activity generates more tax revenues, even at lower rates.
The same thing happened back in the 1920s.
Why, then, were there federal deficits during the Reagan administration? Because Congress spent even more money the then rising tax revenues brought in.
There is no amount of money that congress cannot out spend.
Although these were christened “the Reagan deficits,” all spending bills originate in the House of Representatives- and Reagan was never a member of congress. Indeed, the Republicans never controlled the House of Representatives during the Reagan Years.
Only after the Republican party gained control of the house in 1994 were there budget surpluses-for which president Clinton took credit, even though he too, had never been a member of Congress.
It is fascinating to see congressional Democrats, who have for decades been spending the country into growing deficits, suddenly expressing shock at the current deficits that have occurred while President Bush is in the White House- and the country is at war.
How serious are these deficits? As with all debts the burden depends on what your income is. As a percentage of national income, today’s deficits and national debts are far below what they were when Democrats were spending.
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Interesting read JBA.
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Mark, can I put my lawnchair next to yours? I'll put the cooler between us, OK?
:)
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Originally posted by JBA
Income tax cuts apply to income, not wealth. So the fact that some rich people say they don’t need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway.
The original author of this tripe - whoever he is - forgot about capital gains, estate, and dividend taxes.
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You mean JBA did not write this stuff? You're kidding me!!
JBA - it's good form to clearly mark lifted text with the author's details.
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The original author of this tripe - whoever he is - forgot about capital gains, estate, and dividend taxes.
I beg to differ. the rich don't pay taxes on capital gains through Real Estate, it's called a 1031 Tax-Deferred Exchange.
But I bet you knew that huh?
CB
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"dividends whats that?that shouldnt be taxed its a made up word."
said the rich kid to the working man.
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Originally posted by Cherlie
I beg to differ. the rich don't pay taxes on capital gains through Real Estate, it's called a 1031 Tax-Deferred Exchange.
But I bet you knew that huh?
CB
That is a British tax rule I'm assuming..please elaborate.
I think you will find that this deferral, or whatever it is, is along the same lines as the Principal Residence exemption in the Canadian Tax Act. Basically you can elect to have the sale of a property designated as the home you live in (if it meets certain criteria) and part, or all of the gain on the sale is free of tax.
BUT...very rich people normally have investment properties, or second and third homes. In Canada they will pay tax on any capital gain on those properties.
Capital gains also result from the gain on sale of stock or on assets sold, such as yachts, cars, art-work, etc etc.
QUOTED BY MONTEZUMA - The original author of this tripe - whoever he is - forgot about capital gains, estate, and dividend taxes.
Amen...amen.
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There's still a good point there.
The accumulated wealth of guys like Buffett and Kennedy is treated much differently than "normal income".
Yeah, they pay real estate taxes every year. In the States, that's usually a pittance compared to income tax on an income of a few million bucks. Real Estate taxes in my area of Kansas are ~1% of valuation.
So I'm thinking their gazillion dollar estates are appreciating at a much faster rate than taxes are eroding their value.
Now their miserly multi-million dollar incomes are annually getting whacked up near the 40% range, right?
I could go on, but "wealth" is different from income in terms of how it is taxed.
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Estate taxes are paid on a person's death. The rate is about 48% currently. Realty taxes are not what we are talking about here.
After Jacky Kennedy died the Kennedy's had a massive sale of memorabilia. They did so because the estate didn't have the cash to pay out on the estate tax owed.
There is no doubt that income and wealth are taxed "differently"...not arguing that. But to suggest that they avoid taxes on their wealth is silly...unless of course they opt to accumulate their wealth offshore. ;)
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Well, why hasn't the Kennedy clan been impoverished over the years then?
Did Joe just amass such a huge pile that the continual estate taxes have failed to make much of a dent?
Or are there enough loopholes and dodges that the core wealth continues on relatively unabated so that young Patrick needs not soil his hands?
Enquiring minds want to know. ;)
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Originally posted by Curval
unless of course they opt to accumulate their wealth offshore. ;)
They don't put all their eggs in one country's basket Toad.:D They learned the lesson from Scarlett O'Hara in Gone With The Wind. She ended up broke while Rhett (who had the bulk of his wealth offshore) was in fine shape.
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Estate Tax is not assessed until a person dies.(inheritance tax) If it is placed in a trust with a trust manager who is not the primary wealth holder then he/she is not taxed. The tax code allows for (I think) $50,000 a year to be paid out with out tax. This can be given to any family member.
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So no wonder Kennedy and Buffett don't worry about income or wealth taxes at all then.
Seems the initial post has a point then, eh?
Sort of the height of hipocracy for Warren and Pat to be downplaying tax cuts then, isn't it?
As F. Scott said, "Let me tell you about the very rich. They are different from you and me."
In fact Warren and Frank remind me of the old "let them eat cake" comment so popular in Revolutionary France.........
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Pat Kennedy's income as a congressman is around $140,000. His wealth is estimated at $500 MILLION.
John Kerry (married to Mrs Heinz of Heinz 57) is estimated at $650 million.
Ted Kennedy. see above for he's nephew
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Originally posted by Montezuma
The original author of this tripe - whoever he is - forgot about capital gains, estate, and dividend taxes.
I'm in my 30's I have been paying Cap gains tax for 15 years. I have been an investor for that long. Cap gains is only paid when it is not in a tax free IRA, ROTH IRA, 401k, 403B etc. and only when a gain is relaized. I have been claming cap. loses for the last 3 years. Same is true for dividens tax
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JBA...capital gains taxes are paid on deemed distributions or disposals as well as realised.
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But they still have to be in an account that is taxable. Put them all in a tax free account, as mentioned and POOF no taxes.
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Well, not really.
Let's assume for example that you formed a company in order to conduct a specific type of business. You then transfer personal assets into that business. So that you do not do this at below market value in order to avoid personal capital gains tax the IRS will "deem" the sale to have occured at market value and capital gains tax will be due on the transfer. The assets will then have a tax "cost" at the deemed market value.
Stuff like that has nothing to do with stocks in a brokerage account.
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Originally posted by JBA
Pat Kennedy's income as a congressman is around $140,000. His wealth is estimated at $500 MILLION.
Let me try to explain to you why that un-attributed essay you posted is a piece of crap.
The income tax argument is a red herring, and has nothing to do with what Pat said. Pat, Warren, and the rest of the American aristocracy will earn extra millions from Bush's tax cuts that are totally unrelated to the income tax.
Other than that, the rest of the essay is a poorly organized partisan screed filled with unsubstantiated claims. It would only be persuasive to the ignorant.
Who wrote it? Was it Ann Coulter?
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I didn't finish reading past the first paragraph, but I think it had something to do with being anti-rich or something. A couple of sentences caught my eye:
One of the most basic confusions is between income and wealth. You can have high income and low wealth or vice versa. We have all heard of athletes and entertainers who have earned millions, that ended up broke.
Actually, they were wealthy when they had income. MC Hammer went bust when he couldn't earn enough money to support his posse. Tony Dorsett went bust after football when his oil investments didn't find any oil. As long as you make more than you spend, the amount of wealth will equal the difference between what's coming and what's going out.
Income tax cuts apply to income, not wealth. So the fact that some rich people say they don’t need a tax cut means nothing because they are not getting a tax cut on their wealth, since their wealth is not being taxed anyway.
Property taxes come to mind. So does Leona Helmsley.
Anyway, I fully support whatever position Montezuma takes.