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What is meant here?

#1 User is online   kenberg 

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Posted 2015-January-21, 12:38

I looked up the written version of the State of the Union speech to be sure that I heard this right. I did. But I am not sure if I understand it correctly.



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And let's close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth.


As I use language, this means that he is suggesting we tax accumulated wealth. We would tax him/her on the three billion dollars that s/he already has. Presumably this would be in addition to income tax on the money that was made in the current year. It would be on the money s/he made previously and has accumulated.

Except for estate taxes, where really the tax is on money being transferred from one person to another, have we ever done this? Do other countries do this? I am nowhere near the one percent of anything, so excuse my ignorance, but just as I was comfortably dozing off this really woke me up.
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#2 User is offline   ArtK78 

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Posted 2015-January-21, 12:44

We (meaning the United States) do not and never have done that, with the exception of the estate tax, as you mentioned.

I am sure it has been done in the past, as there have always been taxes, and those taxes must have been imposed on weallth rather than income, since there was no easy way to measure income in ancient times.

Any imposition of a wealth tax would be a major philsophical change in our taxing system. I suspect that what is actually meant would be increasing taxes that overwhelmingly affect the wealthy, such as the capital gains tax, while decreasing taxes that overwhelmingly affect the poor, such as wage taxes and sales taxes. Offering free community college education to everyone would be another way of improving the lot of the poor with no real benefit to the rich.

There are a number of provisions in the tax laws of the United States that favor the wealthy, such as depreciation and depletion, to name a couple. These provisions are looked at as a way of stimulating the economy or as a loophole favoring the rich, depending on your point of view.

By the way, the estate tax is intended to be a tax on the right to transfer assets from one generation to the next. It is a descendant of the pre-Magna Carta philosophy that everything belonged to the King, and that there was no right whatsoever to transfer assets from one generation to the next. So, strictly speaking, it is not a tax on wealth.
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#3 User is offline   helene_t 

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Posted 2015-January-21, 12:54

I don't know if many countries tax wealth in general. It was done until a few decades ago in Denmark and the Netherlands. As Art says, it used to be the main tax and income tax is a more recent invention.

But probably Obama didn't mean tax on wealth.
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#4 User is offline   blackshoe 

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Posted 2015-January-21, 13:05

 helene_t, on 2015-January-21, 12:54, said:

But probably Obama didn't mean tax on wealth.

Maybe. But government is insatiable, and OPM (other people's money) is its main source of sustenance.
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#5 User is online   kenberg 

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Posted 2015-January-21, 13:27

I posted this thinking "Does this mean what I think it means?". Someone did read the speech before it was given, yes? I am torn between "Obviously he did not mean this as I took it" and "What else can it mean?".
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#6 User is offline   helene_t 

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Posted 2015-January-21, 13:36

Well it could easily mean capital gain tax. Maybe not optimal wording but we have all seen worse.
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#7 User is offline   wank 

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Posted 2015-January-21, 13:36

rich people exploit the loopholes to avoid paying tax on their investment income is his (accurate) point i think.
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#8 User is offline   aguahombre 

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Posted 2015-January-21, 13:39

 kenberg, on 2015-January-21, 13:27, said:

I posted this thinking "Does this mean what I think it means?". Someone did read the speech before it was given, yes? I am torn between "Obviously he did not mean this as I took it" and "What else can it mean?".

I have no doubt Obama meant what he said..whether he intended to say it or not.
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#9 User is online   kenberg 

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Posted 2015-January-21, 13:45

 wank, on 2015-January-21, 13:36, said:

rich people exploit the loopholes to avoid paying tax on their investment income is his (accurate) point i think.


I am also guessing this is what he meant.. Which again brings to mind the question "Doesn't someone read this stuff first?". I think it is safe to say that if he meant what said and said what he meant, it was a waste of words. We are not going to be doing that.

Added: I mean I assume he is speaking of taxes on current income from investments. But that's a lot of assuming. for "paying taxes on their accumulated wealth" Possibly he actually meant taxes on accumulated wealth. He is a lawyer? He appreciates the meaning of words?
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#10 User is online   mikeh 

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Posted 2015-January-21, 13:54

 blackshoe, on 2015-January-21, 13:05, said:

Maybe. But government is insatiable, and OPM (other people's money) is its main source of sustenance.

It really, really annoys me that people spout this nonsense, as if 'government' is some kind of alien parasitical entity that does nothing but take from the deserving (i.e. the wealthy) and give to the undeserving (i.e. the poor, the disabled, foreigners, etc)

Government is us! Humans organize, deliberately or not, into groups. One of the major ways in which we do this is territorial, although there are many others, and indeed often problems that arise within a group arise because members of that group see themselves at least in part as members of other groups as well. Thus tribal conflict will arise when many in the population see themselves as members of a tribe rather than as citizens of a country...Rwanda is but one clear instance of this.

Those societies that have arranged themselves based on territory will need some sort of organization to maintain coherency in the society. Societies need rules to preserve internal relationships, and to maintain integrity in the face of other societies, including those that do not organize primarily on territorial lines. Thus 'internationalist' movements, such as the early days of communism, attempted, in pre-WWI days, to create an international society of workers, where solidarity with class was supposed to transcend nationalism, and (it was hoped) render war impossible.

That organization has to be made up of people. Those people, especially those who do the actual work, need to be paid. When you take farmers away from the land and make them into an army, that army (unless it is the Chinese army, lol) will not likely own or operate factories or other means of wealth creation. Diplomats are similar.

As societies become ever larger and ever more complex, the complexity and size, in absolute terms, of the non-wealth-creating aspects of government grow.

When we as a society decide that it is a bad idea to let unscrupulous citizens poison our foods, or peddle sham medications, or take shortcuts on airplane maintenance and so on, we need to train and pay people to protect us. Those people can't produce wealth and still do their job, so we need to find the money to pay for them, just as we do for soldiers, Judges, diplomats and so on.

When we look at how to pay, it is fair to conclude that those who benefit the most from the maintenance of order, and from the creation of circumstances permitting the accumulation of great wealth, ought to pay proportionally more than those who, for whatever reason (often related to their choice of parent....anyone who chooses to be born to an inner city parent is unlikely to end up with as much money as the far smarter child who chooses to be born into a large trust fund) end up with fewer of the 'benefits' of membership in that society.

Thus the notion of progressive taxation.

When people assert that 'government' is inherently 'bad' they are ignoring the fact that government is how we, as humans, organize ourselves. Almost without exception those who argue that government is bad ignore the (usually substantial) benefits they gain from having that government.

Are there dangers that governments can become organizations which focus more on the survival and growth of government for the sake of government, rather than for the sake of the society it is intended to conserve and benefit? Well, government is made up of humans, and humans do have a tendency to be selfish, both personally and on behalf of their tribe...and bureaucrats can come to see the bureaucracy as their main 'tribe'.

Thus having elected representatives oversee government is a good safety mechanism. Unfortunately, in the US in particular, the electorate seems especially ignorant of basic concepts of societal organization, and the republicans, and other right wing individuals, have created this myth that 'government' is 'other' and thus to be feared and hated.

The results of this are easy to see. Look at the consequences of de-regulation of the financial industry starting in the early 2000's.

Note that the American electorate has an incredibly short memory, because they have now elected a Congress that is determined to undo the regulatory changes brought in after 2008.

If we could all see that government is us, then I'd expect that voting rates would go up, as people realized that both they as individuals and government as a concept are part of a civilized society.

It is no surprise to see that in the US we have both the greatest level of dislike for government and the lowest voter participation in the western world. It is equally no surprise to see that in the US, we see the greatest growth in wealth inequality as well.

The Koch brothers and their ilk seem to know very well that the best way to preserve and enhance their wealth is to dumb down the electorate and to make them see government as an evil force. No society can regulate the egregious acts of the most powerful without a strong government that looks to the majority of the people, rather than to those who fund their election campaigns. When the voters are alienated from government, the rich and powerful call the shots.

Libertarians play right into the hands of such people, by fostering a fantastical view of the nature of the human animal.

At least, that's the way I see it :P
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#11 User is online   mikeh 

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Posted 2015-January-21, 13:55

 wank, on 2015-January-21, 13:36, said:

rich people exploit create the loopholes to avoid paying tax on their investment income is his (accurate) point i think.



FYP

Who do you think pays the lobbyists who ensure that the loopholes exist?
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#12 User is offline   mgoetze 

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Posted 2015-January-21, 14:04

 blackshoe, on 2015-January-21, 13:05, said:

Maybe. But government is insatiable, and OPM (other people's money) is its main source of sustenance.

Yeah, those poor top 1%, they will be starving soon.

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#13 User is offline   billw55 

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Posted 2015-January-21, 14:11

 mikeh, on 2015-January-21, 13:55, said:

FYP

Who do you think pays the lobbyists who ensure that the loopholes exist?

Agree. Tax codes are written by the rich, and "loopholes" are working as intended.
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#14 User is offline   mike777 

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Posted 2015-January-21, 14:31

As I have mentioned before one huge loophole is the "gift tax" Gift tax loopholes include among other things, gifts to family members, to charities and foundations, to trusts, estate taxes and life insurance.

Closing these loopholes and increasing the rate to say 70% may be one step in reducing the top 1% of their global wealth.

Note this can be done on a more local, county and state level as a first step. We need not wait on Congress. As has been pointed out before a wealth tax on the local level is one more step.
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#15 User is offline   billw55 

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Posted 2015-January-21, 15:11

 mike777, on 2015-January-21, 14:31, said:

As has been pointed out before a wealth tax on the local level is one more step.

Already in place. It's called property tax.
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#16 User is offline   mike777 

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Posted 2015-January-21, 15:12

 billw55, on 2015-January-21, 15:11, said:

Already in place. It's called property tax.


One step but they can make it broader and cover total global wealth.
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#17 User is online   mikeh 

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Posted 2015-January-21, 16:01

 mike777, on 2015-January-21, 14:31, said:

As I have mentioned before one huge loophole is the "gift tax" Gift tax loopholes include among other things, gifts to family members,

Many years ago I was playing as a fill-in on a pro team, with Grant Baze as the main pro. His client was, I gather, the child of a very wealthy family, and he certainly seemed to be both wealthy and very, very tight-fisted. As an example, he owned a luxury condo in Victoria, expensively furnished, that he used only two weeks every other year, when our Regional was held. As far as I know, he didn't rent it out: it just sat vacant 102 weeks out of every 104. Grant was still recovering from a bout of cancer, and had no feeling in his fingers, and was even thinner than he was usually. His client wouldn't spring for a cab for the trip back the apartment from the playing site.

Anyway, I recall the client complaining about a gift his mother had given him. She wrote him a check for, if memory serves, some $300,000 and his complaint was that he had to pay tax on it.

My point is that if this was a true complaint, then while mom might have been able to make the gift without consequences, the recipient may have had to pay tax.

I think the more common way to pass wealth on is to create trusts. They would be difficult, if not impossible, to tax effectively without massive conceptual changes in tax law, as I understand it. Art is a tax lawyer, so maybe he can comment.

btw, the client died a few years back, so I am not causing him any grief, even if anyone works out who it was.
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#18 User is online   mikeh 

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Posted 2015-January-21, 16:06

 mike777, on 2015-January-21, 15:12, said:

One step but they can make it broader and cover total global wealth.

Well, since a study carried out, in part I think, by the LSE estimates that the wealth stashed in tax-havens amounts to $21,000,000,000, then it wouldn't take much of a rate.

I love the hypocrisy of the wealthy who complain about the unfairness of the tax system, written largely by people they have bought and paid for, while at the same time so many of them sneak money out of the country in which they live. Well, 'love' may be the wrong word.

Good luck getting any tax haven to cooperate. Some of them owe much of their financial existence to the industries that have developed to further global tax evasion. None will dare be the first to do anything, lest 99.99% of the money disappear overnight, causing an economic collapse when the banks fail.
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#19 User is offline   mike777 

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Posted 2015-January-21, 16:07

Yes to change the loopholes and increase the tax rate in the "gift tax" would mean changing the laws. Trusts really rely on the gift tax loopholes stuff to work. YOu need to move the assets somehow into the trust. It is the transfer of ownership of the assets or the cash flows that you need to tax.

Yes if you change local or state tax laws they may try and smuggle money out. As I said a first step. Again this will simply increase inequality to wherever they move the money and decrease inequality or at least slow the increase in the old local.
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sidenote, many of these so called tax havens are tiny very tiny countries. If they grow bigger they will be A tempting target for criminals or a revolution of the people to take the banks as inequality grows.
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#20 User is offline   barmar 

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Posted 2015-January-21, 16:51

 mike777, on 2015-January-21, 14:31, said:

As I have mentioned before one huge loophole is the "gift tax" Gift tax loopholes include among other things, gifts to family members, to charities and foundations, to trusts, estate taxes and life insurance.

Donations to charities are not included in the gift tax loophole. They're covered by the charitable contributions deduction on schedule A.

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