The ONE & ONLY 2012 Politics/Election Thread

[rsj0714]

Anyone seen Obamas new job growth chart?


Is it going at a sufficient rate to recover?

I heard an economist mention that we have to create 250K jobs every month for 66 months just to get back to pre-recession levels.

[Egilbe]

Anyone seen Obamas new job growth chart?


Is it going at a sufficient rate to recover?

I heard an economist mention that we have to create 250K jobs every month for 66 months just to get back to pre-recession levels.

I don't think it works in a straight line. As jobs are created and people have spending money, that demand for consumer goods drives growth in jobs in other areas. The problem is that they will probably be low paying, entry level jobs. We need to build and make things in this country, for this country to be more efficient and competitive on the global stage. Our infrastructure needs a huge boost. Private companies aren't going to finance it, so it has to be the government.

[zhenya00]

would you apply this to dividends also??

as far as Romney's income now, yes they are coming from capital gains and dividends which have been taxed already, so you're saying that it should be taxed twice? that will never happen!
elected officials would loose out big time on this if a new law was passed.
and if it was, the country would go into a deeper recession that what it's going through now.

it's not black and white like you try to portray it.

I apologize if I came off too harsh in the last post - sometimes it's not clear who we are responding to if the writing isn't very clear.

Read what I wrote again. The biggest beneficiaries of low capital gains taxes are the already wealthy. You've probably heard the saying 'it takes money to make money.' Well, this is pretty much exactly the kind of thing that saying is referring to.

I see your argument that they are the ones 'risking' the capital, but that argument has two flaws. First, as I noted above, the carried interest loophole where many people like Romney 'earn' their money in the first place. Second, there are any number of other financial instruments that have been devised that are, for all intents and purposes, 'safe' investments that earn the wealthy the meat of their dividends, while still being subject only to this low tax rate. Make no mistake, this is not your small local business man, pumping a hundred grand into a local business. These are specially devised laws to protect the wealth of those who have it.

[Mike!]

Further, the type of capital investment that is actually a component of the economy is distinct from secondary market investments, such as buying 10 shares of Chipotle (NYSE:CMG) off of someone who is looking to sell 10 shares of Chipotle. None of the capital you're putting in is going to the company, and thus not working through the economy. Yet if that Chipotle climbs to $400/share after two years and you cash out, you're getting taxed on the profit at the same rate (or even less, there is a 5% CG bracket) as someone who funded start-up capital for a new manufacturing company and is taking the profit from his share of that.

[demonmk2]

I'm not sure you understand the concept of capital gains. If you invest 1 million, you're not being taxed year over year on that same 1 million. Now, if your 1 million turns into 2 million, you're taxed on the difference. How has this money "been taxed already"? Are you referring to the income tax a corporation paid prior to issuing dividends? You aren't paying tax on your original capital, you're paying tax on the profit (income) your capital makes.

oh yeah, I understand how it works. It would seem fair if an individual who was making millions of dollars of capital gains as income only to pay more than 15%, IMO it should be the regular income rate if they had a salary at 36-40%.
But if an individual is getting actual income from a job and getting capital gains also I don't think it should change from 15%. If both were getting taxed at 36-40% in those circumstances I think it would drive down investments because that would mean they're paying 70-80% of there gross income.

[demonmk2]

I apologize if I came off too harsh in the last post - sometimes it's not clear who we are responding to if the writing isn't very clear.

.

it's all good. My wife saw your initial response and agreed with you
My typing skills are atrocious which domino into other flaws as it shows in my posts.
but my intentions are good!

[Mike!]

oh yeah, I understand how it works. It would seem fair if an individual who was making millions of dollars of capital gains as income only to pay more than 15%, IMO it should be the regular income rate if they had a salary at 36-40%.
But if an individual is getting actual income from a job and getting capital gains also I don't think it should change from 15%. If both were getting taxed at 36-40% in those circumstances I think it would drive down investments because that would mean they're paying 70-80% of there gross income.

No, that's not how it works. If your tax rate was 40% (marginal), and Capital Gains were treated as ordinary income, you would still be paying 40%, not 80%. Further, say you sold $100k of investments a year to supplement $100k of employment income. You'd not be paying tax on $200k. You'd pay tax on $100k + ($100k - cost base), which could work out to $101k, $199k, or anything in between.

Scenario: You purchased 100 shares of AAPL for $180ea in 2009. You sell these shares in 2012 for $430ea. You invested $18k, you sold them for cash (income) of $43k. Your marginal income tax rate is the highest federal bracket (33%). Because you bought on the secondary market and not an IPO, your investment didn't generate anything into the economy, but hopefully what you spend from your winnings will. Under the current system, you'd pay 15% on your capital gain: $43k-$18k= $25k * 15% = $3,750. If capital gains were treated as ordinary income, you'd pay 33% on your capital gain: $43k-$18k= $25k * 33% = $8,333.

Now let's isolate the transactions. You were only taxed on the capital gain, not the full $43k you cashed out. So on your marginal cash of $43k, you're only taxed 8.7% under the current system. Under a system where capital gains were ordinary income, you'd still have only been taxed at 19.4%. This is because you were (theoretically) already taxed on the $18k that you pumped into the stock in the first place.

[demonmk2]

ok. I see know, your right.
and this is why I do not do my own taxes.

[StormChaser]

I agree, taxes have to change. But it should be a FLAT tax on spending, not income...as long as it is on everything, no exceptions/deductions for either people or corporations. And keep in mind that you are BUYING shares when you buy stocks, bonds, or mutual funds, so that PURCHASE should be taxed at the same sales tax rate. I still think a flat tax based on income would be the most fair...but compromise would clearly be needed to make it happen and I'd be willing to compromise and make it a national sales tax. That places the burden of how much an individual is taxed on the individual and not the government.

[westsideseal]

I agree, taxes have to change. But it should be a FLAT tax on spending, not income...as long as it is on everything, no exceptions/deductions for either people or corporations. And keep in mind that you are BUYING shares when you buy stocks, bonds, or mutual funds, so that PURCHASE should be taxed at the same sales tax rate. I still think a flat tax based on income would be the most fair...but compromise would clearly be needed to make it happen and I'd be willing to compromise and make it a national sales tax. That places the burden of how much an individual is taxed on the individual and not the government.

I think a national sales tax in place of income tax would be a disaster, especially for net borrowers, i.e. low-mid level earners. It would be extremely regressive, since the wealthy generally don't spend anywhere near as much of their income (percentage-wise) as those who need to spend every dollar just to survive.

[Mike!]

I agree, taxes have to change. But it should be a FLAT tax on spending, not income...as long as it is on everything, no exceptions/deductions for either people or corporations. And keep in mind that you are BUYING shares when you buy stocks, bonds, or mutual funds, so that PURCHASE should be taxed at the same sales tax rate. I still think a flat tax based on income would be the most fair...but compromise would clearly be needed to make it happen and I'd be willing to compromise and make it a national sales tax. That places the burden of how much an individual is taxed on the individual and not the government.

That's just not feasible. It would amount to a giant tax increase on the poor and middle class, and a giant tax cut for the wealthy. It would incentivize vacationing in Mexico and the Caribbean over vacationing in the US.

On the plus side, it would kill day trading and hopefully encourage stock market stability. It would also bring in tax revenue from tourism dollars flowing into the US from foreigners (though maybe reducing overall tourism due to the effective price increase). On the downside, it would probably foster an underground economy (why pay 20%-25% tax on the plumber coming to your house when you can slip him cash under the table?).

[rsj0714]

On the downside, it would probably foster an underground economy (why pay 20%-25% tax on the plumber coming to your house when you can slip him cash under the table?).

That already exists in a big way. I don't think a 20-25% tax across the board would be impossible, but maybe having just 2 tax codes could work. Say 20-30% for everyone who makes above 25K a year, and 15-20% for all incomes under 25K a year.

Either way the taxes need to be simplified.

[barry2952]

On the downside, it would probably foster an underground economy (why pay 20%-25% tax on the plumber coming to your house when you can slip him cash under the table?).

Like that doesn't happen now, hilarious. There is no tax on labor, at least in Michigan. That plumber has already paid the sales tax on the material, so there's no big savings.

Actually, you're wrong. A flat tax would eliminate the underground economy completely as it wouldn't tax income, it would only tax expenditures. Check out FairTax. It offers a PREBATE of all sales taxes up to the poverty line, for everybody, roughly $5,600 a year.

With a flat tax it wouldn't matter if you're a prostitute, electrician, drug dealer, doctor or lawyer. It wouldn't care where you got your money from, only where you spent it. It gives back to the people the ability to control their fate, monetarily. There will always be complaints that the rich don't spend all their money, so it's not all taxed. So what. If a poor person spends all their money they will get $5,600 a year. If a rich person spends 50% of their money that will contribute one hell of a lot more than they do now, as evidenced by Mitt Romney's tax return at 13.7% of his income. If someone buys a car for $5,000 they would pay 20% of that, or $1,000 in sales tax. If a rich guy buys a car for $100,000 he pays 20 times as much as the poor person in sales tax. How is that unfair to the poor?

Just my $ .02.

[Tornado2dr]

Like that doesn't happen now, hilarious.

What, are you claiming that when I ask "Can I get a break for cash, 1/2 now, 1/2 when you're done", that the cash price I ask for might be lower from a tradesperson because they won't report the income?

That's just silly talk!

[barry2952]

I know a guy that got his start working for me. He went on and got a Master's and Contractor's license. He does 50% of his work for commercial companies and reports all that income and expense. The other 50% is cash work for residential customers that have no obligation to report what they pay him. He charges off the material to those jobs as if it went to the commercial jobs and pockets 50% of the business proceeds in untraceable cash. The materials paid for by the commercial side makes his books like he makes no profit, so his business doesn't contribute, either. He pays himself a salary that's low enough to pay very little in taxes while pulling in a quarter-million a year.

If he were to pay 20% on the material he picks up and 20% on what he spends on a bigger boat every couple of years and bigger tow vehicles and such, why would it matter how bad he cheated before. FairTax not only pulls in enough money, it drags tax evaders into the fold and turns them into legal taxpayers, like the rest of us.

I see the size of the underground economy, and it's enormous. Check out the line at the scrap dealers. Anybody think they're paying any taxes on what they get. How about the guy that parts out cars in his back yard or the hair stylist that has a chair in their basement. If they all paid their fair share we'd have no debt.

The biggest problem I have with FairTax is that they want to tax labor. That will cause a whole now class of criminal to emerge. On that we can agree. The huge machine to collect and enforce sales tax is already in place. The ability to cut prebate checks is already in place. With a small buffer the coffers will fill quickly if everyone that's part of the system gets $5,600 annually.

[Tornado2dr]

I know a guy

That's scary, what I just read (as far as worry about 'the man').

Everyone knows a guy - a couple of the smartest ones I know have let on very little - but one fellow who does quite well makes sure that any cash job is ALL cash. Period. No mixing, no deposits, receipts, nothing. I don't know where he buries it, but i've never seen him use a credit card when we are out for drinks or dinner.

[rsj0714]

That's scary, what I just read (as far as worry about 'the man').

Everyone knows a guy - a couple of the smartest ones I know have let on very little - but one fellow who does quite well makes sure that any cash job is ALL cash. Period. No mixing, no deposits, receipts, nothing. I don't know where he buries it, but i've never seen him use a credit card when we are out for drinks or dinner.

There are full blown restaurants around my area that only take in cash. I can almost guarantee there is little to no taxes being paid at those locations.

[Tornado2dr]

There are full blown restaurants around my area that only take in cash. I can almost guarantee there is little to no taxes being paid at those locations.

That's silly. cash only operations that only report what they want are in far greater danger than anyone else of being audited....and by audited I mean screwed.

[barry2952]

There are full blown restaurants around my area that only take in cash. I can almost guarantee there is little to no taxes being paid at those locations.

Doesn't that piss you off that you're picking up their slack? Politicians have had to resort to making the middle bear the weight because there is not enough revenue, directly related to the scumbags that don't contribute. They come from all walks of life. We, with legitimate withholdings from our paychecks, get it up the ass because others are not doing their fair share.

Everybody cheats, to some extent. I don't claim to be perfect, but I pay 99.9% of my share. Everyone, even the cheaters, would pay 100% if it didn't matter where the money came from.

[rsj0714]

That's silly. cash only operations that only report what they want are in far greater danger than anyone else of being audited....and by audited I mean screwed.

Believe it or not I know of one wildly successful barbeque joint that has stayed under the radar since it's conception.

[barry2952]

That's silly. cash only operations that only report what they want are in far greater danger than anyone else of being audited....and by audited I mean screwed.

BFD. The chances of getting audited in any business are incredibly smaller than anyone thinks. No agent from any level of government has ever, in 40 years of business, ever asked me what percentage of my business is cash, never.

Food is not the only thing that gets cooked at restaurants.

[rsj0714]

Doesn't that piss you off that you're picking up their slack?

To put it simply, yes. I think it is important for everyone to pay something. Even the lower class shouldn't be able to get out of paying say at least 10%.

Businesses should all be paying no matter what the situation. Not to the point of draining their bank accounts, but at least something.

[barry2952]

To put it simply, yes. I think it is important for everyone to pay something. Even the lower class shouldn't be able to get out of paying say at least 10%.

Businesses should all be paying no matter what the situation. Not to the point of draining their bank accounts, but at least something.

By all rights, businesses were never supposed to pay taxes. People are supposed to pay taxes. Business only got taxed when things got out of balance. Businesses really don't pay taxes, anyway, as they simply pass them along to their customers, us. Most people don't get that.

[rsj0714]

By all rights, businesses were never supposed to pay taxes. People are supposed to pay taxes. Business only got taxed when things got out of balance. Businesses really don't pay taxes, anyway, as they simply pass them along to their customers, us. Most people don't get that.

I thought businesses were still required to pay excise taxes?

If the sales tax from customers was actually being executed properly I think it would be a huge kick to revenue. The amount of times I have seen things being sold without sales tax is ridiculous. I am talking items that range from a 5 dollar burger to upwards of 2000 dollars, which I can only assume happens all around the country.

[Tornado2dr]

BFD. The chances of getting audited in any business are incredibly smaller than anyone thinks. No agent from any level of government has ever, in 40 years of business, ever asked me what percentage of my business is cash, never.

Food is not the only thing that gets cooked at restaurants.

I'd say food gets cooked second.

Barry - it doesn't surprise me that you'd never get asked that. You do mostly large scale commercial work/maintenance contracts, right? Same here. I don't build or work for joe homeowner. I work for other large municipal and private entities that have a paper trail for everything. We have had two audits since I have been with this firm. Maybe we hit the pita lottery or something.

restaurants, title insurers, mortgage brokers = license to print money.

[barry2952]

I thought businesses were still required to pay excise taxes?

How do you actually tax a business? It becomes an operating expense that goes in a column. It just gets factored into what consumers pay.

Maybe I don't understand what you mean by "excise tax".

[Mike!]

Labour is taxed with VATs, at least in Canada, where the rate is 5% federally, or 12%-15% in provinces that have harmonized their provincial sales taxes with the federal GST. Don't get me wrong, I know there's an underground economy now. The problem is to produce anything close to the government revenue the US needs to function while eliminating income tax, the rate would have to be European or more, 20%-25%. It's the steepness of this rate that would increase the underground economy.

With that FairTax setup, the plumber being a vendor would still have to remit the tax collected to the government. If a $200 job would result in $50 tax to the government and a $250 total bill to the customer, the plumber would personally profit more by offering the job at $225 cash and not reporting the transaction to the government. The sheer steepness of a 20%-25% rate even gives them more cushion to work with. Your argument seems to think they'd be paying in more than before by paying tax on the materials they purchase, but that would run contrary to a VAT model. Either the tax is a VAT, and the plumber would be credited by the government for the business-related tax inputs he's made, or the tax isn't a VAT, and all of a sudden the material costs for the plumbing job have gone up by 20%-25% and increased what he's having to charge his customers.

Plumbing costs are labor heavy, so this might not seem so bad in this case. But say you're contracting a hardwood installer to redo a room at $1,000 retail for the hardwood and $500 for install. In a VAT setup, if it was a supply and install job, the contractor would pay $1,250 for the hardwood, but get a $250 input tax credit, so the net cost of the material is $1,000. The total bill to the customer would be $1500+ 25% tax, or $1,875. The contracter would remit $375 to the government, less the $250 he already paid in for the hardwood. If it wasn't VAT, the contractor would be paying $1,250 for the hardwood, plus his $500 labor charge to the customer, so the bill to the customer would be $1,750+ 25% tax, or $2,187.50. The customer would save money by supplying the hardwood themselves, and just paying $500+ 25% so they're not getting double-taxed. This double taxation exists now with non-VAT state sales taxes, but 8% doesn't sting like 25% would.

If the FairTax is a VAT, then the double taxation wouldn't be an issue, but then if that's the case, the contractor isn't effectively paying in any tax when they buy materials (as they claim it as a credit). I can't come up with a scenario where it doesn't further grow the underground economy that already exists.

The prebate does something to satisfy the regressivity of it though. It's probably more effective than the current progressive tax code for those at or below the poverty level.

[rsj0714]

Maybe I don't understand what you mean by "excise tax".

Forget about the excise tax, I think it only applies to certain industries. It does make a lot more sense that a company pays it's taxes on purchases from distributors and again from sales.

[Mike!]

Forget about the excise tax, I think it only applies to certain industries. It does make a lot more sense that a company pays it's taxes on purchases from distributors and again from sales.

Reading more, FairTax seems to not charge tax on B2B transactions. If it did, it would ridiculously increase consumer prices and squeeze out things like independent warehouse/distribution centers. An alternative setup would be as a Value Added Tax, where the businesses pay the tax to each other, but receive a credit for what they pay in.

[barry2952]

Forget about the excise tax, I think it only applies to certain industries. It does make a lot more sense that a company pays it's taxes on purchases from distributors and again from sales.

In Michigan we have a really fair system. All contractors, like me, have to pay our sales tax at the point of material pick-up, whether that be at Lowe's or HD or the electrical supply house. There are no exceptions without state authorization in the form of waiver for certain of my hospital and church customers. Labor is not taxed. I don't really pay the sales tax as I just pass it along to my customer, in this case, a hotel or apartment complex or a shopping center. They, in turn, pass it along to their customer, the shop owners. the shop owners, in turn, collect it from you and me. That's how businesses don't pay taxes, but, most businesses make a great piece of the machinery of tax collection. With fixed places of doing their work they become positioned for vigorous enforcement. I don't have a problem with making people pay their fair share.

We pay a fortune for the IRS. They are our employees, but do a lousy job of enforcement because you damn near have to be a CPA to do the audits, they are that complicated. How about we repurpose the IRS into the IRC making them the Internal Revenue Collectors. Spend money on enforcement at ground level and the expense will pay for itself in short order, unlike the current lack of collections recently reported at $330 BILLION ****ing dollars in uncollected or underreported income. There's your underground economy. What could you do with $338 BILLION EVERY YEAR?

[barry2952]

Reading more, FairTax seems to not charge tax on B2B transactions. If it did, it would ridiculously increase consumer prices and squeeze out things like independent warehouse/distribution centers. An alternative setup would be as a Value Added Tax, where the businesses pay the tax to each other, but receive a credit for what they pay in.

You have to understand that the NST would replace all other taxes other than local property taxes for local funding of services. No income, no inheritance tax, no taxes on anything other than what you spend.

I'll say it again. The real world is that a profitable business doesn't pay taxes, anyway. It's always passed to the consumer. Overall, a 20% sales tax is are lower than a lot of people in the middle class pay now. It's more than the wealthy pay now. It doesn't matter how much you pay as long as you've paid your fair share.

Like I've said before. The only failing I see in the FairTax movement is that they feel they need to tax labor. To me, that's what would create a whole bunch of new tax cheats. It's also unfair to ask a hair stylist to suddenly become a tax expert or CPA. It would be so expensive to comply with reporting regs that people would justify cheating, like they do now.

[1.8TRabbit]

[pentaxshooter]

[Mike!]

You have to understand that the NST would replace all other taxes other than local property taxes for local funding of services. No income, no inheritance tax, no taxes on anything other than what you spend.

I'll say it again. The real world is that a profitable business doesn't pay taxes, anyway. It's always passed to the consumer. Overall, a 20% sales tax is are lower than a lot of people in the middle class pay now. It's more than the wealthy pay now. It doesn't matter how much you pay as long as you've paid your fair share.

Like I've said before. The only failing I see in the FairTax movement is that they feel they need to tax labor. To me, that's what would create a whole bunch of new tax cheats. It's also unfair to ask a hair stylist to suddenly become a tax expert or CPA. It would be so expensive to comply with reporting regs that people would justify cheating, like they do now.

Speaking from a jurisdiction where labor is taxed, it is true that it does create a lot of under the table work. There is an exemption for small businesses making up to $30,000, which covers stay-at-home moms with hair salons in their basements (or people who report just under $30k in cash work). Above that, remittance really isn't that complicated. Most business owners at that level usually use some sort of freelance bookkeeper, and you'd have to be a pretty pathetic bookkeeper to have trouble with the taxes.

[1.8TRabbit]

^^^ Peter Schiff Report



From 1:15 - 1:19 gave me frightening chills.