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Proposed Buffett Rule and How It Would Apply to Some Lottery Winners Who Invest

Topic closed. 122 replies. Last post 3 years ago by haymaker.

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Should there be a minimum of 30% tax on long term capital gains?

Yes, the wealthy should pay their fair share. [ 15 ]  [28.85%]
No, things are just fine the way they are. [ 9 ]  [17.31%]
Neither, put in a flat tax for all types of income [ 18 ]  [34.62%]
Neither, I will explain below. [ 10 ]  [19.23%]
Total Valid Votes [ 52 ]  
Discarded Votes [ 5 ]  
haymaker's avatar - Lottery-012.jpg
egg harbor twp.south jersey shore
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Posted: February 17, 2012, 7:55 pm - IP Logged

i chose neither,long term should get a break.

it will help pensions and retirement plans,

and help stabilize the economy.

Extraordinary Popular Delusions & the Madness of Crowds    -- Charles Mackay  LL.D.

    JAP69's avatar - Lottery-053.jpg
    South Carolina
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    Posted: February 17, 2012, 8:17 pm - IP Logged

    Some of the wealthiest Americans are just only at around 14% of their annual income due to long term capital gains. While others in the Middle class and Upper Middle Class pay up to 35% in taxes. What are your thoughts about the proposed Buffett Rule?

    One thing with taxes is if I won 50 million dollars I do not get to deduct the cost of living increase from my income. If you get 1 1/2 % interest and pay taxes on that and the cost of living increase for the year is 1 1/2% I would be losing money after paying taxes.

    Stats hunting: Type


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      Posted: February 17, 2012, 8:21 pm - IP Logged

      One thing with taxes is if I won 50 million dollars I do not get to deduct the cost of living increase from my income. If you get 1 1/2 % interest and pay taxes on that and the cost of living increase for the year is 1 1/2% I would be losing money after paying taxes.

      I Agree!

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        Fantasy Land
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        Posted: February 18, 2012, 4:39 pm - IP Logged

        Not necessarily.  IMO, we shouldn't encourage or discourage any behavior with the tax code, or any other legislation.  Most investments don't have a much higher EV than a few percent.  Most people just want to ignore the potential of loss, and/or don't do the math necessary to determine a proper amount to invest.  Every investment has risk, even treasury bonds.

        An expected value of 101-105% per year, is probably the norm for most good investments, because you have to figure, then CAN lose money.  If you can't understand that, then you're the one whose using fuzzy math.  (Which admitadly, any sort of math for this would have to be based on opinions, as you'd have to approximate the EV.)

        This can be seen much more mathemetically when you count cards in Blackjack, but the same principles can be applied to investments.  And if you're figuring that your EV is higher than a couple percent, I can almost garuntee you're wrong and will probably end up losing money in the long run.  That's because EV is an approximation (since we can't run the math like in a game of BJ) of how much all of the possibilities of gain and loss added together, as a percent of the total investment.

        We're just gonna have to agree to disagree on what a good investment is because to me 1-5% is chump change. Anything under 3.5% or so means your worth is going down due to inflation. The kind of people that would be impacted by the Buffett Rule are not interested in gains under the rate of inflation. Warren Buffett's lifetime yearly average is 19%. Historically the average annual return of the S&P 500 is over 10%. Mitt Romney earned $43.6 million total over the last 2 years on a net worth of $150-250 million. For a more recent example look at Michael Burry, he ran a hedge fund that started in November 2000 and went until June 2008. He was up 55% in the first year when the S&P 500 was down 11.88%. In year 2 he was up "only" 16% while the S&P fell 22.1%. In year 3 the .com bubble was ending and the S&P was up 28.69% but Burry's fund was up 50% that year. Over the 8 years his fund was operating he returned 489% for his investors. After June 2008 he closed up shop to focus on his personal investment portfolio because his net worth had gone from somewhere around $1 million to $100 million and he was tired of being second guessed and having to defend his choices to his investors.

        Do I fancy myself the next Buffett or Burry? No. But I believe with a nice fat bankroll in the form of a jackpot win, some time to educate myself, and time to very carefully pick select investments I could do quite well. The opportunities are out there, you just gotta find them. Heck Burry trained as a medical doctor, he got into investment analysis just as something interesting to do on the side before he decided to do it full time. Yes every investment is a risk, and yes with the possibility of big returns come the chance of big losses, that's why you don't put all your money into 1 or 2 or 3 things.

          Boney526's avatar - NjlpLogo
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          Posted: February 18, 2012, 10:36 pm - IP Logged

          Like I said, though, you can only figure these things after the fact.  I'd also rather underestimate the EV of an investment than overestimate it, b/c when using the Kelly Criterion, betting under Kelly reduces Risk faster than it reduces expected bankroll growth.  Betting over Kelly actually raises risk and lowers bankroll growth, (not to mention Risk or Ruin shoots way up), because the huge banroll fluctuations will end up making your bankroll far too inconsistent.

           

          Most good investments have an EV less than a few percent, but that's just because you have to figure in the small risk of the investment losing all of its value, or most of it.  If you want to be very successful longterm, then, like you said, you don't put all of your money into just a few things.  The most effecient way to invest is to (if you can) approximate the EV, then bet the EV as a percentage times bankroll divided by volatility.  I wouldn't consider putting more than a few percent of my bankroll on something unless it had both a high EV and low volatility.  (Std. Deviation squared)

           

          If you don't figure in that small risk, then you'll probably grow your bankroll faster, but you'll be living with a small risk of losing a whole lot.

            Boney526's avatar - NjlpLogo
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            Posted: February 19, 2012, 5:13 pm - IP Logged

            I'd also like to point out that you probably know more about what some good investments are, I've done little (I've made like 4 predictions over my life, all turned out to be true, but they were mostly fairly obvious and I had no money to invest with anyway.  Specifically that AIG would be bailed out, that Gold and Silver would go up long term, and two specific instances of what Silver would rise and fall to).  I'd just like to share a little piece of math from learning to count cards -

             

            What I'm referring to as EV incoporates the possibility of complete failure.  So say that you have a Stock worth 10000 dollars.  You estimate that it has...

            1 in 5 million: Lose all

            1 in 10000: Lose half

            1 in 100: Lose 25%

            1 in 10: Lose 10%

            1 in 5: Gain 20%

            1 in 2: Gain 50%

            1 in 5.266: Gain 400%.

            This would give you an EV of 103.7049% and would be, from what I could tell pretty volatile, because of the possibility of large losses.  I'm not going to re-open a stats back to find out how to caculate variance here, but the idea is, to achieve a 2/3 probability of doubling your bankroll before you lose half, you want to bet the advantage in EV (in this case 3/7049%) divided by volatility, which I haven't caculated based on this hypothetical.

             

            So what I'm trying to explain, is that sometimes a lower EV can be a better bet to an invester, if it's less volatile.  An easy example, that can have pure math would be the comparison of a baised roulette wheel and a biased blackjack deck.

            The formula is:  EV/Variance (Variance is an approximation, there is a more precise measure used by the Kelly Criterion)

            For the wheel, let's say that their are two numbers that have a combined odds of 17.5 to 1 of coming out.  This gives the player an edge of 2.857%, and a variance around 18.  The optimal bet is (0.0015873*bankroll.)  That's about 15 dollar per 10000 dollar in bank.  You will win 42.855 cents per 10000 dollars, on average, over time if you continue to take this bet.

            For a bias blackjack deck, let's say that their are enough low cards removed to present an advantage of 1% and a Continuous shuffling machine to keep keep all those cards in the deck.  The Volatility in a game of blackjack is about 1.3, so let's just overestimate the variance to 1.3333, so that it's easy to calculate.  You should bet .75 percent of you bankroll per hand, which works out to 75 dollars per 10000 in your bankroll.  You will win .75 cents per 10000 dollars in the bank, on average every time you take this bet.

             

            As you can see, the second situation is preferable, even with a lower EV.  Like you said, you do have to take inflation to account during investments, and maybe that makes it preferable to ignore low volatility investments.  I was just trying to explain what I meant when I said that there probably is a lower EV than you think, due to the small chances of you being catastrophically wrong, and that that would add to variance, as well.

             

            If you're not a Kelly Investor, this is of less significant to you, but I'd advise at least some sort of investing that's proportional to you bankroll.  A lot of people do question the validity of Kelly betting or investing, especially since investing is based off of people's approximations and sometimes, emotions.

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              Kentucky
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              Posted: February 26, 2012, 10:27 pm - IP Logged

              I find it ironic that "pay their fair share" doesn't apply when members complain when PB and MM jackpots are won in states that contributed more to the jackpots.

              http://www.lotterypost.com/thread/242934

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                Ga
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                Posted: March 2, 2012, 8:58 pm - IP Logged

                This thread got way off track for a while. I'm glad I'm not the only one who thinks that way.

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                  NEW YORK
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                  Posted: March 4, 2012, 10:14 am - IP Logged

                  Some of the wealthiest Americans are just only at around 14% of their annual income due to long term capital gains. While others in the Middle class and Upper Middle Class pay up to 35% in taxes. What are your thoughts about the proposed Buffett Rule?

                  THE PROPOSED BUFFET RULE IS A CALL TO CHANGE THE CURRENT TAX CODE TO A FLAT TAX FOR EVERYBODY LIKE THEY DID IN RUSSIA.

                  "A simpler, more streamlined tax code adopted in 2001 reduced the tax burden on people and dramatically increased state revenue.Russia has a flat tax rate of 13 percent. This ranks it as the country with the second most attractive personal tax system for single managers in the world after the United Arab Emirates.According to Bloomberg, Russia is considered well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry.The country has more higher education graduates than Eurasia.

                    rdgrnr's avatar - walt
                    Way back up in them dadgum hills, son!
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                    Posted: March 4, 2012, 10:30 am - IP Logged

                    Warren Buffet is really getting to be annoying. Who cares what he says or what he wants?

                    Somebody should hang a drool cup under his mouth and sit him in the corner.

                    He keeps whining that he wants to pay more taxes.

                    Who the hell is stopping him?


                                                                 
                                         
                                                             

                     

                     

                     

                     

                                                                                                                       

                    "The only thing necessary for evil to triumph is for good men to do nothing"

                                                                                                                --Edmund Burke

                     

                     

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                      Posted: March 4, 2012, 10:46 am - IP Logged

                      Warren Buffet is really getting to be annoying. Who cares what he says or what he wants?

                      Somebody should hang a drool cup under his mouth and sit him in the corner.

                      He keeps whining that he wants to pay more taxes.

                      Who the hell is stopping him?

                      The USA President Barack Hussein Obama II and Warren Buffet want to change the US Tax Code to a Flat Tax Rate like Russia did.

                      "A simpler, more streamlined tax code adopted in 2001 reduced the tax burden on people and dramatically increased state revenue.Russia has a flat tax rate of 13 percent. This ranks it as the country with the second most attractive personal tax system for single managers in the world after the United Arab Emirates.According to Bloomberg, Russia is considered well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry.The country has more higher education graduates than Eurasia."

                      Ridge do not be afraid of change. The USA President Barack Hussein Obama II promised change and he is delivering slow and steady.

                      The proposed Warren Buffet Rule demands change for a Flat Tax.

                        rdgrnr's avatar - walt
                        Way back up in them dadgum hills, son!
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                        Posted: March 4, 2012, 11:03 am - IP Logged

                        The USA President Barack Hussein Obama II and Warren Buffet want to change the US Tax Code to a Flat Tax Rate like Russia did.

                        "A simpler, more streamlined tax code adopted in 2001 reduced the tax burden on people and dramatically increased state revenue.Russia has a flat tax rate of 13 percent. This ranks it as the country with the second most attractive personal tax system for single managers in the world after the United Arab Emirates.According to Bloomberg, Russia is considered well ahead of most other resource-rich countries in its economic development, with a long tradition of education, science, and industry.The country has more higher education graduates than Eurasia."

                        Ridge do not be afraid of change. The USA President Barack Hussein Obama II promised change and he is delivering slow and steady.

                        The proposed Warren Buffet Rule demands change for a Flat Tax.

                        I'm all for change when it's for the better.

                        Obama's change is all for the worst. He doesn't know what the hell he's doing. He wants to follow Russia's lead? Uh... no thanks.

                        And he's gonna be gone in January anyway.

                        I just wish we could get Buffet to go away now.

                        Or maybe you could call him and let him know that he can give all the money he wants to the government without having a press conference about it or demanding that everybody else do what he wants to do.


                                                                     
                                             
                                                                 

                         

                         

                         

                         

                                                                                                                           

                        "The only thing necessary for evil to triumph is for good men to do nothing"

                                                                                                                    --Edmund Burke

                         

                         

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                          Posted: March 4, 2012, 11:09 am - IP Logged

                          I'm all for change when it's for the better.

                          Obama's change is all for the worst. He doesn't know what the hell he's doing. He wants to follow Russia's lead? Uh... no thanks.

                          And he's gonna be gone in January anyway.

                          I just wish we could get Buffet to go away now.

                          Or maybe you could call him and let him know that he can give all the money he wants to the government without having a press conference about it or demanding that everybody else do what he wants to do.

                          This country is more communist than Russia and China my friend. We do not own anything here.  The Federal Reserve owns the world through debt.

                          President Andrew Jackson has been the only US president that was able to pay the national debt by printing his own money and distributing it to the central banks.  Abraham Lincoln did the same thing to carry the civil war.  They were both murdered by the money changers ( The federal Reserve ).

                          You can't bring change without offering everybody a fair share.

                            TheGameGrl's avatar - necros
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                            Posted: March 4, 2012, 1:01 pm - IP Logged

                            This country is more communist than Russia and China my friend. We do not own anything here.  The Federal Reserve owns the world through debt.

                            President Andrew Jackson has been the only US president that was able to pay the national debt by printing his own money and distributing it to the central banks.  Abraham Lincoln did the same thing to carry the civil war.  They were both murdered by the money changers ( The federal Reserve ).

                            You can't bring change without offering everybody a fair share.

                            THe last line sums up the entire theory behind a socialist/commune society. Funny how one actually agrees with something when trying to refute the very concept.

                            True fact: Buffet is a natural leader for financials. Unlike Donald Trump who uses Bankruptcy to his advantage.

                            True fact: The Rich remain such because of the tax system.

                            Argue politics all you want...I for one tire of the ignorance spewed based solely on "look what they did to us".

                            Picking the  lesser of two evils to argue a point...still leaves evil intent.

                            to the Lottery winners who invest: God Bless ya....I have zero faith in the stocks /real estate...So to invest will be towards causes that aide folks...education...medical...community.

                            ________________________________

                            Signature quote-If I'd agree with you , we'd both be wrong.

                              time*treat's avatar - radar

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                              Posted: March 4, 2012, 1:13 pm - IP Logged

                              This country is more communist than Russia and China my friend. We do not own anything here.  The Federal Reserve owns the world through debt.

                              President Andrew Jackson has been the only US president that was able to pay the national debt by printing his own money and distributing it to the central banks.  Abraham Lincoln did the same thing to carry the civil war.  They were both murdered by the money changers ( The federal Reserve ).

                              You can't bring change without offering everybody a fair share.

                              What's your source on the claim that Andrew Jackson was murdered? Poke

                              In neo-conned Amerika, bank robs you.
                              Alcohol, Tobacco, and Firearms should be the name of a convenience store, not a govnoment agency.