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

Topic closed. 122 replies. Last post 5 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 ]  
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Fantasy Land
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Posted: February 17, 2012, 1:24 pm - IP Logged

Bah, that was in reply to NightStalker.

    Boney526's avatar - NjlpLogo
    New Jersey
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    Posted: February 17, 2012, 4:41 pm - IP Logged

    Uh, no. You get people to invest their money by approaching people that have money to invest with a good investment. Investment didn't crater when Reagan tied cap gains to the ordinary income tax rate and it didn't soar when Clinton put the special tax rate on long term gains back. Everyone wants the lowest taxes possible, investors and working stiffs alike, people would also like to loose weight by eating ice cream.

    A good investment remains a good investment, regardless of the tax rate, and capital gains applies to just about everything you could do to put your money to work. I suppose not tax free bonds, but those are only going to return what, 2-5%? A decent investment can return 10 or 15 or even 20%+. Even at the current top tax rate of 35% an investment returning 10% is going to bring in 6.5% after taxes, much better then the tax free bond rate of return. An investor that says, "Bah don't bother me with that 6.5% after taxes, I hate taxes, I'm going to stick with this 3% muni," is a foolish investor indeed.

    That's not true, some investments that would be good investments become bad investments with high enough taxes.  It's only a good investment if you expect it to return more than 100 percent of your money.  So say that with no taxes, you expect an investment to return 101% of what you put in, per year with a standard deviation of 2.5%.  The Kelly Criterion (for optimal growth) will tell you to invest (1% of your bankroll divided by 2.5 squared) With a high enough tax rate, this investment is a bad one, because the risk is too high given for the small expected return to be worth it.

    If you have to pay capital gains during years where you are ahead, but not years where you are behind, then your expected return plummets and the Standard Deviation rises, therefore making the optimal investment much smaller.  It may make it small enough that you ought to just overlook it and not make the investment.

     

    Obviously you can look after the fact and say that an investment would have made money regardless of capital gains, but it's too bad people don't invest AFTER they know for a fact it went up.  Assuming that people will keep their behavior the same regardless of the tax rate is just ludcirous, and is quite foolish.

      Boney526's avatar - NjlpLogo
      New Jersey
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      Posted: February 17, 2012, 4:46 pm - IP Logged

      Although I think the unequal rate is "unfair", as well.  It'd be better to simply not tax income at all.

        time*treat's avatar - radar

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        Posted: February 17, 2012, 4:52 pm - IP Logged

        Honestly, Global Warming is (according to almost all of scientists) is a real threat.  The question, IMO, is whether we want to pu the government in charge of preventing it.  Of course we don't, they screw everything up.

         

        Best option - get the government out of oil subsidies, along with (stopping) Green Energy subsidies.  If they stop subsidizing both sides, then Green Companies will have to compete by making better products instead of competing for Tax Payers money, and maybe we'd have some good clean energy - that costs nothing to tax payers.

        40 years ago, they were screaming about a coming Ice Age, on the cover of Time Magazine. Roll Eyes

        The've mostly stopped calling it "Global Warming" because the massive snowstorms that happen every year were dampening the credibility of that brand name.

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

          Boney526's avatar - NjlpLogo
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          Posted: February 17, 2012, 4:59 pm - IP Logged

          That doesn't prove or disprove anything, except that they were wrong 40 years ago.  The Koch brothers funded a study to disprove global warming/climate change, and couldn't.  They ended up reconfirming what has been said.  Now, don't get me wrong, these hyper-environmentalists are just nutjobs hell bent on controlling the economy through "environmental protection".

           

          Global temperatures have risen, though.  That doesn't mean all the snow stopped.  We may have seen bad snow storms, but we've also seen record heat in certain parts of the world.  The point is, the average has moved up, so has the average CO2. It's still questionable whether human use of fossil fuels is a giant, or very small, impact.  (Leaning towards very small, b/c our cutting down of trees is probably way more significant, not to mention that most of the CO2 comes from volcanoes.)

            time*treat's avatar - radar

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            Posted: February 17, 2012, 5:13 pm - IP Logged

            A single volcanic eruption can easily unto a decade worth of CO2 & CH4 reduction, but if I win tonight's jackpot I'll plant a tree or two somewhere. Wink

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

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              Fantasy Land
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              Posted: February 17, 2012, 5:52 pm - IP Logged

              That's not true, some investments that would be good investments become bad investments with high enough taxes.  It's only a good investment if you expect it to return more than 100 percent of your money.  So say that with no taxes, you expect an investment to return 101% of what you put in, per year with a standard deviation of 2.5%.  The Kelly Criterion (for optimal growth) will tell you to invest (1% of your bankroll divided by 2.5 squared) With a high enough tax rate, this investment is a bad one, because the risk is too high given for the small expected return to be worth it.

              If you have to pay capital gains during years where you are ahead, but not years where you are behind, then your expected return plummets and the Standard Deviation rises, therefore making the optimal investment much smaller.  It may make it small enough that you ought to just overlook it and not make the investment.

               

              Obviously you can look after the fact and say that an investment would have made money regardless of capital gains, but it's too bad people don't invest AFTER they know for a fact it went up.  Assuming that people will keep their behavior the same regardless of the tax rate is just ludcirous, and is quite foolish.

              I'm not sure I'd clasify a 1% expected return and any chance at all of capital loss to be a good investment. Heck you could put the money into treasuries, get a better return, and have essentially no risk on your capital. The scenario you propose wouldn't even keep up with the historic rate of inflation. I suppose I'll agree that a marginal investment might not be worth it due to taxes but do we want to incentivise marginal investing through the tax code?

                Boney526's avatar - NjlpLogo
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                Posted: February 17, 2012, 6:00 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.

                  Boney526's avatar - NjlpLogo
                  New Jersey
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                  Posted: February 17, 2012, 6:03 pm - IP Logged

                  Also, like I said, a good investment turned into a bad one (b/c of Risk) as a result of Taxation.

                   

                  I would consider an EV of 1 percent to be good, espeically if it has a low Standard Deviation.  I could take an even money bet that has a 1% advantage, and turn myself into a millionaire, with little Risk of Ruin.

                  You should never assume that you, or anybody else, knows which investments are better, and which types of investments we should encourage people to take.

                    Bigheadnick's avatar - badluck
                    Taunton, Ma
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                    Posted: February 17, 2012, 6:22 pm - IP Logged

                    That doesn't prove or disprove anything, except that they were wrong 40 years ago.  The Koch brothers funded a study to disprove global warming/climate change, and couldn't.  They ended up reconfirming what has been said.  Now, don't get me wrong, these hyper-environmentalists are just nutjobs hell bent on controlling the economy through "environmental protection".

                     

                    Global temperatures have risen, though.  That doesn't mean all the snow stopped.  We may have seen bad snow storms, but we've also seen record heat in certain parts of the world.  The point is, the average has moved up, so has the average CO2. It's still questionable whether human use of fossil fuels is a giant, or very small, impact.  (Leaning towards very small, b/c our cutting down of trees is probably way more significant, not to mention that most of the CO2 comes from volcanoes.)

                    I tried to get away from this subject and back into the original discussion but you guys are forcing my hand. Human activity dwarfs volcanic activity in terms of co2. But I can't link any sources due to new member policy. Humans produce more co2 in 3 days than all volcanic activity produces in one year. Combine that with deforestation and Ozone depletion and we have a very big problem. If you want google "co2 released by volcanoes compared to humans." all the sources you need. But i'm sure you guys will scream lefty conspiracy lol. Sorry guys but the libs have this one right.

                      Boney526's avatar - NjlpLogo
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                      Posted: February 17, 2012, 6:46 pm - IP Logged

                      I tried to get away from this subject and back into the original discussion but you guys are forcing my hand. Human activity dwarfs volcanic activity in terms of co2. But I can't link any sources due to new member policy. Humans produce more co2 in 3 days than all volcanic activity produces in one year. Combine that with deforestation and Ozone depletion and we have a very big problem. If you want google "co2 released by volcanoes compared to humans." all the sources you need. But i'm sure you guys will scream lefty conspiracy lol. Sorry guys but the libs have this one right.

                      You may very well be right.  I don't really know much about it, all I know is that IF it is a problem, like most scientists say, I still don't want government involvement, because that would slow down progress.

                        time*treat's avatar - radar

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                        Posted: February 17, 2012, 7:00 pm - IP Logged

                        I tried to get away from this subject and back into the original discussion but you guys are forcing my hand. Human activity dwarfs volcanic activity in terms of co2. But I can't link any sources due to new member policy. Humans produce more co2 in 3 days than all volcanic activity produces in one year. Combine that with deforestation and Ozone depletion and we have a very big problem. If you want google "co2 released by volcanoes compared to humans." all the sources you need. But i'm sure you guys will scream lefty conspiracy lol. Sorry guys but the libs have this one right.

                        Well, I won't scream. You seem to be right.

                        I'll just point out that for all our greenhouse gas productionScared, it didn't do any good to the 600+ people who have frozen to death so far this year, in Europe. Lots of good the average global temperature rise did for them. Roll Eyes

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

                          Bigheadnick's avatar - badluck
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                          Posted: February 17, 2012, 7:09 pm - IP Logged

                          I'm well aware government ineptitude when it comes to many things, but in this case there has to be an authority to implement a plan. Whether they screw that up too is anyones guess. The thing is, who else is has the authority regulate emissions? Who else has the authority to protect forest's? Who else has the resourses to fund alternative technologies? no 1. Leaving environmental responsibility and solutions in the hands of the private sector is foolish. The private sector's only goal is to make money not protect humankind from potential disaster. Humans by nature, want instant gratifacation. Most aren't thinking about the affects they're particular business is having on the environment and what that could mean for future generations.

                            Bigheadnick's avatar - badluck
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                            Posted: February 17, 2012, 7:29 pm - IP Logged

                            Well, I won't scream. You seem to be right.

                            I'll just point out that for all our greenhouse gas productionScared, it didn't do any good to the 600+ people who have frozen to death so far this year, in Europe. Lots of good the average global temperature rise did for them. Roll Eyes

                            And just like the freak nor easter we had here in Oct or the 65 degree day we had in dec. Freak whether systems and patterns will always occur but the simple fact is the surface temp of the planet as a whole has been rising. The past 2 years are the warmest on record. co2 is an insulator and you just admitted I'm right about humans producing great quantities of it and these amounts are increasing. By the time this problem gets to the point of no argument, it will be too late for us to do anything about it. Unless NASA comes up with some miracle chemicle to spray into the atmosphere to fix everything.

                              JAP69's avatar - alas
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                              Posted: February 17, 2012, 7:43 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?

                              http://www.uwgb.edu/dutchs/PSEUDOSC/FairTax.HTM

                              An excerpt;

                              We have 181,000 returns with over a million dollars in AGI for a total of 535 billion dollars. That's an average of just under $3 million each. So millionaires earn about 100 times as much as people in the $30,000 range but pay 300 times as much tax, or three times higher taxes in proportion to their income.

                              WHATT