Odds and Ends on Taxes and the Wealthy

UPDATE: I want to add to this post as I get new information and statistics. If you come across something that’s worth adding, please email me (JLP – at – AllFinancialMatters.com) with a link to the source and I’ll post it along with a link to your blog (if you’re a blogger).

I want to share with you a couple of things I read in the WSJ over the last two days. The first is a quote from yesterday’s article (September 19, 2011):

The average tax rate for the top 400 earners in the U.S. fell to as low as 16.62% in 2007 from a recent peak of 29.9% in 1995. It ticked up again in 2008 to 18.11%, according to the latest annual Internal Revenue Service analysis of returns. Capital gains represented a very high proportion of the top earners’ incomes—about 56.7% on average.

Despite this decline, the share of taxes paid by wealthier Americans has been rising, in part because of soaring incomes and also tax breaks for the working poor and the middle class. The top 1% of the taxpayers—those with income above $353,000—got 19.4% of all income in 2007 and paid 28.1% of all federal taxes. In 1987, by contrast, the top 1% got 11.2% of all income and paid 16.2% of all federal taxes.

The second is a graphic from The Buffett Alternative Tax in today’s (September 20, 2011) Review & Outlook section of the WSJ. The point of the opinion piece was that the alternative minimum tax was started in an effort to make sure millionaires paid their fair share. Forty plus years later and look at what we have. Anyway, there is the graphic I wanted to share:

Question of the Day: Netflix

Haven’t done a Question of the Day in a few weeks so I thought I’d ask this:

Did Netflix’s latest price increase cause you to leave the company?

I can’t say that the price increase caused me to leave but I did cancel our membership. Why? Mostly because it seemed like I would scroll through the instant offerings and RARELY find anything I wanted to watch. Maybe I’m just particular. I don’t know. We were on the plan that sent us one DVD at a time. Guess what? The DVD would sit by our TV for weeks (or months) without us ever watching it. So, I canceled the service. Don’t really miss it either.

What about you?

Oh, and if you’re interested, Netflix’s CEO offered up an apology (thanks, Lindsay) for the company’s latest moves.

A Snippet from an Interview Between Chris Wallace and Paul Ryan on Taxes

I thought this was an interesting exchange between Fox News’ Chris Wallace and Paul Ryan:

Chris Wallace: “…This is being called the Buffett Rule because it comes after Warren Buffett, the multi-billionaire owner of Berkshire Hathaway…said, ‘I end up—because I get so much of my money from capital gains—I end up paying a lower effective tax rate than my secretary who gets her money in salary.’ What about the question of fairness?”

Paul Ryan: “So what he’s saying…what he forgets to mention on that is that’s a double tax. Capital gains and dividends [taxes] are taxes on money that has already been taxed once before, based on income. So, a person who’s paying an income tax is paying the first level of tax on that money. Then when you pay a capital gains and dividends tax, you’re paying that tax again on that money that had earned this.”

That might read a little confusing but what Ryan is trying to say is that capital gains and dividends are taxed at the corporate level. So, to tax them again at the individual level is to double tax them. That’s the justification for the lower rates at the individual level.

My solution to this (in the interest of fairness) is to NOT TAX CAPITAL GAINS AND DIVIDENDS AT THE CORPORATE LEVEL and tax them as regular income at the individual level.

Obama to Announce New Tax Rate for the “Wealthy”

From the Associated Press:

President Barack Obama is expected to seek a new base tax rate for the wealthy to ensure that millionaires pay at least at the same percentage as middle income taxpayers.

A White House official said the proposal would be included in the president’s proposal for long term deficit reduction that he will announce Monday. The official spoke anonymously because the plan has not been officially announced.

Obama is going to call it the “Buffett Rule” for Warren Buffett, the billionaire investor who has complained that rich people like him pay a smaller share of their income in federal taxes than middle-class taxpayers.

Buffett wrote in a New York Times op-ed piece last month that he and his rich friends “have been coddled long enough by a billionaire-friendly Congress.”

Source: Obama to Seek a New Tax Rate for Wealthy

What a great legacy Mr. Buffett is leaving behind. I’m seriously losing respect for Buffett with each passing day. He’s a hypocrite. Why? Because if he felt it was that important for “his kind” to pay more in income taxes, he wouldn’t be using deductions and such to lower his tax burden. Besides, he could always send more money to the IRS if he wanted to.

Finally, I’m a little tired of liberals wanting higher taxes when they don’t even pay their taxes under the current tax code. How many Democrats have been in trouble lately because of their taxes? Several.

Anyway, I don’t see this helping the economy.

Student Loan Sob Story (Part 2)

I see my “friend,” Robert Applebaum is still trying to get out of paying his student loans. I posted about this two years ago (read the comments too). Yesterday, a facebook friend of mine sent me a link to a deal where people can sign a petition to have President Obama magically make student loan debt disappear. Wow! I clicked on the link and noticed that it was by Robert Applebaum.

I’m not telling you the address of the website because I don’t want to promote this bs but here is the message on the petition page:

Forgiving the student loan debt of all Americans will have an immediate stimulative effect on our economy. With the stroke of the President’s pen, millions of Americans would suddenly have hundreds, or in some cases, thousands of extra dollars in their pockets each and every month with which to spend on ailing sectors of the economy. As consumer spending increases, businesses will begin to hire, jobs will be created and a new era of innovation, entrepreneurship and prosperity will be ushered in for all. A rising tide does, in fact, lift all boats – forgiving student loan debt, rather than tax cuts for corporations, millionaires and billionaires, has a MUCH greater chance of helping to rise that tide in a MUCH shorter time-frame. The future economic success of this country is wholly dependent upon a well-educated, prosperous middle class. Instead of saddling entire generations with debt from which there is no escape, let’s empower the American people to grow this economy on their own!

Therefore, we, the undersigned, strongly encourage Congress and the President to support H. Res 365, introduced by Rep. Hansen Clarke (D-MI), seeking student loan forgiveness as a means of economic stimulus.

Clearly, this is being pursued by people who have absolutely no understanding of basic economics. They’re ONLY looking out for themselves (and yet they accuse the rest of the world as being “greedy.”) Please.

Here’s the deal…

If you magically wipe out student loan debt, where does the money come from? Your fellow taxpayers—many of whom took out student loans and PAID THEM BACK. So, that raises another question: do we pay back those who took out student loans and paid them back since it’s not really fair for current student debt holders to weasel out of their obligations?

What happens to the loans that were made through private sources like banks? Do we stiff the banks or do we pay the banks off with taxpayer money?

Finally, how “with the stroke of the President’s pen” can the president just wipe out debt? I’m not sure he has that authority (at least I pray he doesn’t).