Romney pays 15% tax rate

[Francesca R]

It's very simple, paying for the social services that promote the general welfare is actually good for everyone including business.

I agree. Also, payment for those services should be (and generally is) charged against ability to pay. Thus, it is progressive. I don't think anyone is arguing against that.

 

[Francesca R]

In the U.S. profits from gambling are taxed.

At what rate? Are gambling losses deductible? If so, that would imply that gambling overall is a drain on tax revenue, which seems not to be a good thing.

 

[A Laughing Baby]

At what rate? Are gambling losses deductible? If so, that would imply that gambling overall is a drain on tax revenue, which seems not to be a good thing.

Gambling winnings can be deducted if you can prove that you lost it all again. That's why you'll see big winners from the slot machines searching the ground at a horse racetrack for losing betting slips.

 

[Francesca R]

If you exclude the idea of a utility value of entertainment, gambling is socially wasteful overall, as is most long/short investment activity. So applying symmetrical tax treatment to gains and losses, when the expected overall result is losses, seems to mean that the taxpayer directly funds wasteful activity.

 

[BenBurch]

Gambling winnings can be deducted if you can prove that you lost it all again. That's why you'll see big winners from the slot machines searching the ground at a horse racetrack for losing betting slips.

Indeed a I knew a guy who was an expert handicapper. He would sit at a table in my family's tavern for hours with the racing forms and thick black notebook he would make notes in. Some days he would sigh and go home as there was nothing to bet on, and other days he would be out of there like a shot to place his bets.

It was all he did for a living. (And it looked like as much work as a real job.)

And he absolutely paid taxes on it, and COULD have deducted his losses, if he had any.

 

[Neally]

It's good to be in America. Businesses here benefit from the things their taxes pay for.

Indeed it is and indeed they do. I was taking issue with the argument that the wealthy somehow consume proportionally more resources that what they pay for as compared to other income brackets and provided examples disputing this.

You may argue in favor of progressive taxes for other reasons, but the idea that they should pay more because they use more than what they pay for can easily be disputed with counter examples of just the opposite.

 

[RandFan]

Indeed it is and indeed they do. I was taking issue with the argument that the wealthy somehow consume proportionally more resources that what they pay for as compared to other income brackets and provided examples disputing this.

You may argue in favor of progressive taxes for other reasons, but the idea that they should pay more because they use more than what they pay for can easily be disputed with counter examples of just the opposite.

I will concede your point.

 

[RandFan]

I agree. Also, payment for those services should be (and generally is) charged against ability to pay. Thus, it is progressive. I don't think anyone is arguing against that.

It seems to me that the point was obscured in your response to Tricky. I think you have a valid argument but it left, IMO, a faulty impression. Just making it clear. Thanks.

 

[Bri]

I can't think of any carried-interest situations in which the principals/partners have not risked or do not risk their own capital.

Carried interest specifically refers to fees (usually something like 20% of returns) paid to managers of an investment. The carried interest allocation is in addition to any investment that the manager may have in the private equity fund or hedge fund. So whether or not the manager is also personally invested is irrelevant (that income would not be considered carried interest).

Again you seem to suppose that, in cases where it has paid off to do so, the ongoing profits should be treated as "money for nothing".

No, I didn't say that ongoing profits should be treated as money for nothing. It's money for performing a service. The statement to which you originally responded was specifically in response to the argument that the lower tax rate is an incentive to increase "risky" investments, and that such investors risk losing 100% of the money invested. Carried interest is not the return on your own money that is at risk. It is a fee for managing an investment of other people's money.

-Bri

 

[Francesca R]

It seems to me that the point was obscured in your response to Tricky. I think you have a valid argument but it left, IMO, a faulty impression. Just making it clear. Thanks.

That response was that the argument about lower tax of capital income because it "creates jobs" is one I've only seen as a right-wing defence of the policy that is supposedly meant to appeal to the centre as well. The drier economic agrument I've seen more widely is the "discouraging saving" one.

 

[eeyore1954]

At what rate? Are gambling losses deductible? If so, that would imply that gambling overall is a drain on tax revenue, which seems not to be a good thing.

Gambling winnings are taxed as ordinary income and losses can be deducted to the extent of your winning (it is taken as an itemized deduction so in order to claim first you have to itemize). There are special rules for professional gamblers.


Just as an aside.
One way capital gains taxes are unfair is when you have income from capital gains it is all report as income but if you have net losses you can only deduct 3,000. I am very close to someone who had a seven digit capital gain one year (I think the rate was 28% at the time). A few years later they lost most everything and now no longer hold investments. At 3,000 loss allowed per year they will have to live to be a over hundred years old to claim all the losses.

 

[RandFan]

That response was that the argument about lower tax of capital income because it "creates jobs" is one I've only seen as a right-wing defence of the policy that is supposedly meant to appeal to the centre as well. The drier economic agrument I've seen more widely is the "discouraging saving" one.

I understand the argument. As it is it leaves, IMO, a false impression. Perhaps the fault lies with Tricky for pitting the reasons for taxation against the reasons for lower capital gains rates. My response to you was to clarify the former. Even if we grant your premises about how roads and education are funded there is still reason for a progressive tax. That's all.

BTW: Accepting the premise for lower rates on capital gains, I've yet to see justification for any specific amount. Why not 16%? 17%? 14%? Is 15% arbitrary?

 

[RandFan]

Just as an aside.
One way capital gains taxes are unfair is when you have income from capital gains it is all report as income but if you have net losses you can only deduct 3,000. I am very close to someone who had a seven digit capital gain one year (I think the rate was 28% at the time). A few years later they lost most everything and now no longer hold investments. At 3,000 loss allowed per year they will have to live to be a over hundred years old to claim all the losses.

It's a fair point.

 

[Francesca R]

Carried interest specifically refers to fees (usually something like 20% of returns) paid to managers of an investment. The carried interest allocation is in addition to any investment that the manager may have in the private equity fund or hedge fund. So whether or not the manager is also personally invested is irrelevant (that income would not be considered carried interest).

I agree about hedge fund managers' personal holding of their fund not being carried interest, but hedge funds are not the only scheme where this arises; it is also very common in new real estate developments for example, which usually take years before they reach profitability which is highly uncertain in the years before they do, during which period the PE partners capital is at risk.

With hedge funds specifically, it is usually non-credible for a limited partnership to launch one unless they have a significant chunk of personal capital at risk in the fund at its inception (I did this myself starting three years ago) so it is not easy to get to the position of earning performance fees without taking a lot of personal risk (I also had to finance the operating expenses of the partnership itself of course--salaries, premises, professional fees, equipment--which are much larger than client fee revenue to begin with unless one has a large seed investor; who would probably want a large equity stake themself anyway)

Carried interest is not the return on your own money that is at risk. It is a fee for managing an investment of other people's money.

I disagree, as per above.

 

[Bri]

I agree about hedge fund managers' personal holding of their fund not being carried interest, but hedge funds are not the only scheme where this arises; it is also very common in new real estate developments for example, which usually take years before they reach profitability which is highly uncertain in the years before they do, during which period the PE partners capital is at risk.

I believe that the return on at-risk capital is not carried interest. I'm talking specifically about the fees from managing the funds. It's true that the fund manager might also be an investor, but that's irrelevant since I'm only talking about the fees for managing the funds and not returns on the investment.

It's also true that these fees may not be realized until [much] later, but the fees are not the same as returns on at-risk capital. You might argue that in these cases the management fees should be taxed at a lower interest because they're not realized until [much] later, but that's a different argument than the one to which I was responding.

-Bri

 

[Francesca R]

I am explaining that the fees do not involve "no personal risk" in that I know of no case where they are earned in the absence of large personal capital risk (which may be all "historic" in some cases, but I doubt it in the large majority of cases)

 

[Cain]

The government wisely discourages working and encourages investing. Elect the Greedy One Percent and we will all become job creators who won't have to work!

 

[WildCat]

And you still aren't addressing the question. You aren't addressing my posts or the subject at hand at all. You've left the discussion. I've already acknowledge each and every point here but these points do NOT answer my question. Let me ask you another you won't answer, why did Germany raise taxes on capital gains?

Probably because they needed more money. They didn't make them anywhere close to the tax rate for ordinary income, did they?

A.) Aside from pratteling on with trite economic theory you aren't even involved with the discussion in any substantive way so what do you care? B.) It's not a straw man as I'm following your logic to it's conclusion given the simple fact that you will not respond substantively. Just answer the questions.

It's a strawman because nobody has said investment would drop to zero if there was a capital gains tax. What we do know is that the higher the capital gains tax the less investment there will be, particularly in riskier enterprises.

ETA: I could put up with your patronizing attitude if you would just honestly have a discussion with me. Is that really too much to ask?

I'm fine with that, but you need to tone it down yourself and stop with the ridiculous strawmen.

 

[RandFan]

It's a strawman because nobody has said investment would drop to zero...

Okay, so you agree it won't drop to zero. We are on the same page. How much will it drop to? What is our basis for deciding rates? It's a legitimate question that I can't get an answer to. An honest "I don't know" would have ended this from the start.

 

[Bri]

I am explaining that the fees do not involve "no personal risk" in that I know of no case where they are earned in the absence of large personal capital risk (which may be all "historic" in some cases, but I doubt it in the large majority of cases)

It seems like you're parsing words, kind of like saying that because the fund manager might get hit by a car on his way to work, he is taking on "personal risk" associated with carried interest.

The fees themselves (the carried interest to which I was referring) don't involve capital risk for the fund manager. Any capital risk that the fund manager takes on in addition isn't relevant, and any returns on that risk isn't considered carried interest.

-Bri