Romney pays 15% tax rate

[WildCat]

It was caused by an over abundance of money looking for investments. Hence very easy credit.

That is so far off base it's not even wrong.

So I would need to be convinced that there is now a lack of investment capital after the recent glut.

Do you think investment should be discouraged?

 

[a_unique_person]

Yes, we need to discourage investments, clearly too much investment is ruining the country!

Ben, you too can pay the low, low capital gains rate, all you need to do is quit whatever job(s) you have and live off investments.

The Bush tax cuts worked a treat. All that happens is that in times like these, the rich hold on to their money rather than risk it. Giving them more just ties up more money that won't be invested.

 

[WildCat]

I think he's refering to the theory that too much money in the financial sector helped fuel the mortgage bubble. Short version: At the start of the century, there were a lot of people with more money than sense.

Long version: At the beginning of the century, there was more money floating around the financial sector looking to be invested than there were actually worthwhile things to invest in. It was like a hundred millionaires all trying to buy the same fifty shares of a company. No matter how much people are willing to invest, there are not enough shares to go around. Mortgages were historically profitable, but buying and selling individual mortgages was way too much paperwork to justify getting into the business directly.

Then someone came up with the mortgage backed security, where they would take a bunch of mortgages, bundle them together into a security (a Colatoralized Debt Obligation, or CDO for short), and then sell that. This solved a lot of problems for investors, who only had to own one thing, and since there were many mortgages in the CDO, it had diversifiction built in.

Mortgage brokers took all the mortgages they had made to responsible lenders, bundled them together into CDOs, and sold them off. The securities were a big hit, and investment firms went to the brokers to buy more, since they still had lots and lots of money to invest.

But the brokers had a problem. They had already bundled and sold off the mortgages that they had, and everyone who was a good credit risk who wanted a mortgage already had one. So the brokers lowered standards a little bit, sold some more mortgages, bundled those together into securites, bought some good ratings from a ratings agency, and sold off the securities.

Investment groups went back to the brokers again, and well, we all know how the story ended...

Even then, the mortgage crash probably wouldn't have been nearly so bad if someone hadn't invented the "Synthetic CDO". Basically, several people were looking at declining mortgage standards and saw how it was going to play out, and decided to short the market by buying insurance on the mortgage backed securities. They found some suckers who were willing to sell them insurance at stupidly low rates, this was called a "Credit Default Swap".

The Credit Default Swap consisted of the smart people at one end, who paid insurance premiums against mortgage backed securites failing, and the people at the dumb end, who cheerfully counted the money they were getting in insurance premiums, blissfully unaware that the housing market was going to implode and that they were going to have to pay out.

This probably would have stopped at some point when the people at the dumb end wondered why people were so eager to buy insurance from them and thought about raising their rates at least, but then some genius had the greatest idea of all. Why not take the dumb end of these insurance bets and bundle them together like they did for the mortgage backed securities, and sell them off to investors with too much money on their hands? Thus, the "Synthetic CDO" was born.

It created a similar feedback loop as we saw in the mortgage backed securites. People bought insurance against CDOs failing, the insurers bundled the bad end of the bets into Synthetic CDOs, bought AAA ratings from rating agencies, and sold it off to suckers.

But the Synthetic CDO was different from the mortgage backed securites in one important aspect. A mortgage backed security was backed by mortgages, and there are only so many mortgages you can sell, no matter how far you lower standards. A Synthetic CDO is backed by insurance policies, and there is no physical limit to the amount of insurance you can sell. All you needed was someone willing to bet that the housing market would tank, and there were plenty of those floating around especially when the insurers were selling bets at 80:1 odds. And thus, a trillion dollars of loss could be created out of thin air.

When the market collapsed, the smart money people called up the people holding the insurance policies and asked for their money (as one caller is claimed to have said, "Dude, you owe us one point two billion dollars."), and everything went to hell.

You missed the elephant in the room: why were mortgage lenders so eager to get rid of the motgages they originated? Why did lending standards decline?

 

[WildCat]

The Bush tax cuts worked a treat. All that happens is that in times like these, the rich hold on to their money rather than risk it. Giving them more just ties up more money that won't be invested.

80% of the Bush cuts went to the middle class, not the rich.

 

[BenBurch]

80% of the Bush cuts went to the middle class, not the rich.

No, the Bush tax cuts HURT the Middle Class by burdening them with a huge future debt.

A responsible tax plan would have been to return to 1970 tax rates for the duration of the wars and until the bonds from them were retired. Everybody would have paid more and the rich would have been taking a lot more of the burden.

But you Republicans love spending but hate paying for that spending, so you got the chance to spend like drunken sailors with a credit card, and took it.

 

[ZirconBlue]

WildCat is a Republican?

 

[Aoidoi]

You missed the elephant in the room: why were mortgage lenders so eager to get rid of the motgages they originated? Why did lending standards decline?

Not that I know what really happened, but isn't that directly covered by:

Mortgage brokers took all the mortgages they had made to responsible lenders, bundled them together into CDOs, and sold them off. The securities were a big hit, and investment firms went to the brokers to buy more, since they still had lots and lots of money to invest.

But the brokers had a problem. They had already bundled and sold off the mortgages that they had, and everyone who was a good credit risk who wanted a mortgage already had one. So the brokers lowered standards a little bit, sold some more mortgages, bundled those together into securites, bought some good ratings from a ratings agency, and sold off the securities.

 

[A Laughing Baby]

You missed the elephant in the room: why were mortgage lenders so eager to get rid of the motgages they originated? Why did lending standards decline?

1) Because of the changes in the securitization market which allowed speculation on risk. It became more profitable to securitize and ship off a loan package to another lender than to keep it on your own books. This was exacerbated due to the asymmetric information present in the deals.

2) A period of deregulation beginning in the mid-90s and moving into the present. This allowed consumer lenders, insurance companies, and trading investment firms to merge and perform the same actions. Further, speculation on retail risk, largely due to the mathematical innovation of application of copula functions to credit risk, allowed banks to speculate on the performance of customers themselves. This created a moral hazard problem, which I touched briefly on in my first answer.

ETA: Of course, there's lots to say about the role of loan brokers, ratings agencies, and other parties in this entire thing, but I tried to focus mainly on why someone would want to get rid of a loan they had originated (which isn't necessarily quite true, but is close enough to the truth for this thread's purposes).

 

[JoeTheJuggler]

Yes, we need to discourage investments, clearly too much investment is ruining the country!

I think too much "encouraging" of investments is ruining the country.

At the very least, shifting of the tax burden downward off the "job creators" should be recognized as a failed experiment.

ETA: But nice try in attempting to spin complaints about decreased taxes on the wealthy as attempts to "discourage investments".

 

[Mikemcc]

Why is he a scum? Is following the tax code considered sliming? I do agree that 15% is too low but 50% is too high in my opinion.


Puppy Cow


I wonder when tax day actually comes for the average American. Since as has been discussed here numerous times close to half pay no federal income tax. I suspect for close to half of Americans tax freedom day comes before late January/early February.

It is when the cash that he has, and other lobbying organisations, that allow them to define the laws that allow them to avoid paying the same taxes as Joe Bloggs.

 

[JoeTheJuggler]

80% of the Bush cuts went to the middle class, not the rich.

Depending on how you define "middle class". Remember, median personal income is somewhere around $24K, and median household income is around $40K.

I think trying to talk about "class" rather than income in order to stretch the "middle" to cover people with 6-figure incomes is dishonest.

 

[ponderingturtle]

You missed the elephant in the room: why were mortgage lenders so eager to get rid of the motgages they originated? Why did lending standards decline?

Because of the demand of the securities market for more mortgage backed securities. Why shouldn't they relax standards when there is such insatiable demand?

 

[JoeTheJuggler]

Are millionaires in America overtaxed?

According to a conservative group that thinks taxes are too high, Tax Freedom Day in 2011 came on April 12. That's the day when the average American has earned enough to pay his taxes for the year. For Mitt Romney however, Tax Freedom Day came on February 24th, 47 days earlier than the average American taxpayer.

Romney says his effective tax rate is 15%

No wonder he was reluctant to disclose his tax returns!

 

[TheL8Elvis]

Heard on the TV today someone mention (can't recall who) that maybe his tax return reluctance could also have to do with the church finding out if he has been a good mormon and tithing his 10% ? IDK if that is a reasonable/realistic concern for him or not. Probably much smaller consequence than the potential outrage at his effective tax rate may bring.

 

[leftysergeant]

Do you think investment should be discouraged?

Investing in another country's infrastructure and building factories there to exploit slave-wage workers to produce goods for sale here shopuld be discouraged, perhaps even punished.

The republicons say that we have to tax the "job creators" at a lower rate than we do the working schlubs who create their wealth.

I think, though, that cutting capitalist swag less than working people's pay checks is the wrong way to go. Tax the bejeebus out of the imports and repatriated capital and use the take to subsidize investment in physical plant that produces goods here.

The Walton larvae have the capital to anything they want to now, but refuse to do what will actually bring us back as a manufacturing nation.

Then the useless drongos expect us to subsidize them to come into our neighborhoods and smother small businesses.

Screw 'em.

 

[Tricky]

Since as has been discussed here numerous times close to half pay no federal income tax. I suspect for close to half of Americans tax freedom day comes before late January/early February.

Yes, and the day that those millionaires are willing to trade places with those low-income people who pay no income tax is the day I will stop considering this argument a complete non-sequitur.

It ain't today.

 

[ponderingturtle]

Not that I know what really happened, but isn't that directly covered by:

Don't you see he blames the mortgage creators it is like he blames the fast food industry for the obesity epidemic.

 

[The Nimble Pianist]

Heard on the TV today someone mention (can't recall who) that maybe his tax return reluctance could also have to do with the church finding out if he has been a good mormon and tithing his 10% ? IDK if that is a reasonable/realistic concern for him or not. Probably much smaller consequence than the potential outrage at his effective tax rate may bring.

Not likely. If Romney has been shirking on his tithing the church would find out during his "Tithing Settlement", which is a meeting all temple recommend holders in the LDS Church have once a year with their Bishop. You bring in your tax forms and show that you are, indeed, paying a full tithe.

 

[Unabogie]

He's been offshoring his money in the Caymans.

http://www.washingtonpost.com/blogs...12/01/18/gIQAf9Gz8P_blog.html?wprss=plum-line

As one of the wealthiest candidates to run for president in recent times, Romney has used a variety of techniques to help minimize the taxes on his estimated $250 million fortune. In addition to paying the lower tax rate on his investment income, Romney has as much as $8 million invested in at least 12 funds listed on a Cayman Islands registry. Another investment, which Romney reports as being worth between $5 million and $25 million, shows up on securities records as having been domiciled in the Caymans.​

Official documents reviewed by ABC News show that Bain Capital, the private equity partnership Romney once ran, has set up some 138 secretive offshore funds in the Caymans.​

 

[BenBurch]

He's been offshoring his money in the Caymans.

http://www.washingtonpost.com/blogs...12/01/18/gIQAf9Gz8P_blog.html?wprss=plum-line

We should just invade the Caymans and dump every dime of everybody's deposit into the federal treasury. Then we can eliminate the income tax completely for a decade or so.