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Mitt Romney 2012

Races for the Senate, U.S. House, etc. and other issues of national importance.

Re: Mitt Romney 2012

Postby johnfajardohenry » Tue Aug 14, 2012 5:50 pm

BTW: If anyone wants to know how smart I am, perhaps not very.

I first learned about Buffett in the mid 70s when I was in school. Not many people had heard of him then but one of the business books I read had a chapter on him and his investment strategy. I was very impressed, had a few extra dollars and thought about buying a few shares.

At the time they were $300 each. I thought and thought and decided that they were already too high and could not go up much more. I forgot what I bought instead.

I thought about buying shares from time to time since but I always thought they couldn't go higher.

Had I bought 10 shares, I'd have had a profit, over 35 years, of about $1,247,000.

So perhaps I am not all that smart, at least about investments.

John Henry
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Re: Mitt Romney 2012

Postby johnfajardohenry » Tue Aug 14, 2012 5:56 pm

jman111 wrote:Why is that? Perhaps because businesses don't actually pay the supposedly high rates?


Anyone who thinks businesses pay income taxes is a fool.

Businesses are not tax payers, they are tax collectors they collect the taxes that go to govt from customers, employees and customers.

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Re: Mitt Romney 2012

Postby HawkHead » Tue Aug 14, 2012 6:10 pm

This is what you wrote.

johnfajardohenry wrote: I don't see why that would necessarily be embarrassing. First, if she is deducting expenses on the horse, it is because it is a business and generates income. She can only deduct expenses against the income and will then pay taxes on what is left.
Same as if you have an Amazon reseller account. You can deduct expenses related to that account from any income you receive from it. You cannot deduct expenses for it beyond what it brings in income. Though I think in both cases the income and expenses can be averaged over 5 years.


You state it is a business. Your next statement is pure BS and I called you on it. Now it's a hobby. Way to change the rules of the game once you lost.
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Re: Mitt Romney 2012

Postby HawkHead » Tue Aug 14, 2012 6:17 pm

johnfajardohenry wrote:Only thing I am wrong on is the 5 years. Hobby farms are 5 years, I figured horses would be the same. Horses are 7. Other than that, and other than simplifying a bit, I think I was right on.



Once again you are wrong, you mentioned income and expense averaging over 5 years. Depreciation is not the averaging of income and expenses plain and simple. It is a way of expensing the cost of fixed assets used in the production of income.

With IRS Code Sec 179 and 168 the price of most fixed assets can be written off the year of purchase and not over 3, 5, 7 or how many ever years the tax code calls for depending on the asset classification.

Why don't you just admit you are wrong instead of grasping at straws. The forums opinion of you would go up if you would just admit the truth rather than surfing for no quite on point materials.
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Re: Mitt Romney 2012

Postby snoqueen » Tue Aug 14, 2012 7:14 pm

johnfajardohenry wrote:I suspect that in Wisconsin you have lots of multimillionaires who make less than $50-75,000/year. They are often called "farmers".


OK, let's evaluate this statement next. Regarding Wisconsin,
Average sales prices for large agricultural land parcels were strong in 2010. The state-wide average
price per acre for large parcels of agricultural land increased from $3,187 in 2009 to $3,254 in 2010....
The same was not true for smaller bare land parcels (10-35 acres). The average small
parcel price per acre was $3,194 (a decrease of $154).

from:
Wisconsin Agricultural Land Prices
2005-2010
A.J. Brannstrom
University of Wisconsin Center for Dairy Profitability
February 2011

The author acknowledges land under development pressure sells higher than land intended to be used for continued agricultural purposes; the numbers given are statewide averages. He notes changes in land valuations make little difference to a farmer until the land is sold.

How big is the average Wisconsin farm?

The number of farms in Wisconsin in 2011 was 77,000. This
was down 500 farms from the previous year. Total land in
farms decreased slightly from 2010 to 15.0 million acres.
Average farm size remained at 195 acres.


from
http://www.nass.usda.gov/Statistics_by_State/Wisconsin/
search for Wisconsin -- Farm Numbers

OK, using the valuation for large parcels since the small parcel numbers (<35 acres) are not applicable:

195 acres x $3254 = $634,530

The average Wisconsin farmer is not a multimillionaire in land value, as shown using these recent statistics. This is not to say a few farms don't cross the $2 mil valuation threshold ("multimillion" minimum level) but it's far from commonplace and to say we have "lots" of multimillion dollar agricultural landholders is completely unsupportable.

Note that we are omitting any consideration of liens and mortgages on the land in this discussion, so only if a farmer owns the land free and clear would the above calculation mean anything. Not a lot of farmers are in that position, if any.

.
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Re: Mitt Romney 2012

Postby DCB » Tue Aug 14, 2012 8:39 pm

johnfajardohenry wrote:
DCB wrote:Rich people, people who currently have a lot of money, generally pay a lower tax rate that the everyone else.


I think you are confusing wealth and income again.

I'm not confused.
johnfajardohenry wrote:Look at Warren Buffett, for example. He has been the richest man in America for many of the past 30 years, certainly in the top 3-4 in all of them.
Yet until fairly recently, he earned very little income.


Buffett said he paid an effective tax rate of 17.4 percent, while people who worked in his office made much less but paid higher effective tax rates of between 33 percent and 41 percent, averaging 36 percent.

http://www.politifact.com/truth-o-meter ... taxes-oth/
So, here we have a very rich person (one of the richest!) who pays a lower tax rate than people who are less wealthy.
QED

see also: Mitt Romney.
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Re: Mitt Romney 2012

Postby pjbogart » Tue Aug 14, 2012 10:35 pm

johnfajardohenry wrote:I suspect that in Wisconsin you have lots of multimillionaires who make less than $50-75,000/year. They are often called "farmers".


And small business owners who often have the bulk of their wealth tied up in their business. Aren't Republicans always trotting out the ridiculous myth that ending the Bush tax cuts for the very wealthy will hurt small business owners and farmers? In reality, few of these folks find themselves in the top tax bracket, and with all of the business deductions they're allowed, if they do find themselves in the top tax bracket then they're doing very well for themselves and should probably pay more.

But we aren't talking about people earning $150k/year. We're talking about fabulously wealthy capitalists who create nothing. One could argue that the bulk of their money is made through destruction. Hedge fund managers, oil and other commodity speculators, even ordinary investors who use their wealth to work out sweetheart deals for themselves and their clients. Warren Buffett isn't out there amassing common stock... he gets a percentage from preferred stock and bonds that you couldn't negotiate. And you know who pays for that? The people who own the common stock. The consumers who shop at Walgreens or Target. Do you know who pays oil speculators hundreds of millions of dollars? You do. Every time you fill up your car with gas, you send a check to people who did nothing but use their obscene wealth as leverage.

We need to get over this idea that wealth is good and how you get wealth doesn't matter. It does matter, and if your method of gaining wealth is simply using your considerable fortune as leverage, then the rest of us pay for it. It's kind of like paying taxes except you don't get to vote for the jackasses that are running up oil prices.

It's strange that you would have so much animosity for a government that takes taxes by "putting a gun to your head" but you praise individuals who take money out of your wallet in the same way.
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Re: Mitt Romney 2012

Postby johnfajardohenry » Wed Aug 15, 2012 12:55 pm

DCB wrote:So, here we have a very rich person (one of the richest!) who pays a lower tax rate than people who are less wealthy.
QED

see also: Mitt Romney.


You say that you are not confused but then go on to sound like you are still confusing wealth and income. "pays a lower tax rate than people who are less wealthy"

Buffett pays income taxes on his income. He didn't have a lot of income (relatively speaking) though he does have a lot of wealth.

I would bet that he paid about the same tax rate as anyone else with similar salary income. His wealth has nothing to do with his tax rate.

Let's say that he made $1 billion/yr from 1980-2000 as measured by increase in net worth. Let's also say his only income was $150,000/yr (Salary as Prez of BH)

Let us say that he paid 30% of the $150,000 in taxes or $45,000 each year.

So I guess you could say that his effective tax rate was about 0.005%

You could say that and work yourself up into a lather about the unfairness of it all.

You would be 100% wrong, though.

His effective tax rate was 30%, same as anyone else making $150,000/yr in wages or salary.

After about 2000 he started selling a few shares of B-H. Since those shares had already paid taxes, he was taxed at cap gains rates. I would guess that is how the 17% is arrived at.

Of course you and anyone else had the same opportunity to buy B-H stock and pay cap gains when you sold them. So why are you saying that his wealth gets him any special benefits on taxes that you yourself don't have?

We don't generally tax wealth in the US. Only income. (A few minor exceptions like death tax)

Unless you recognize that, this discussion seems fruitless.

John Henry
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Re: Mitt Romney 2012

Postby pjbogart » Wed Aug 15, 2012 1:39 pm

johnfajardohenry wrote:After about 2000 he started selling a few shares of B-H. Since those shares had already paid taxes, he was taxed at cap gains rates. I would guess that is how the 17% is arrived at.

Of course you and anyone else had the same opportunity to buy B-H stock and pay cap gains when you sold them. So why are you saying that his wealth gets him any special benefits on taxes that you yourself don't have?

We don't generally tax wealth in the US. Only income. (A few minor exceptions like death tax)


I would say that the matter-of-fact explanation of capital gains taxes is a huge part of the problem. The notion that "since those shares had already paid taxes" gives you some logical defense against paying any further income taxes is absurd. People aren't paying taxes twice when they pay capital gains (and I'm not accusing you of suggesting it) but there are plenty of people who seem genuinely confused about this notion.

Interest earned is income. We pay taxes on all of our income, regardless of its source. To claim that someone working as a mechanic needs to pay a higher percentage than someone who's sitting on their duff sipping martinis on a golf course is the fundamental problem. Why? Why is your interest income taxed at a lower rate than my "clock-punching" income? To encourage investment? What would rich people do with their money otherwise?

The reason we tax capital gains at a lesser rate than wages is because the people who write the tax code have a lot of capital gains. Period.
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Re: Mitt Romney 2012

Postby HawkHead » Wed Aug 15, 2012 3:53 pm

johnfajardohenry wrote:You say that you are not confused but then go on to sound like you are still confusing wealth and income. "pays a lower tax rate than people who are less wealthy"

Buffett pays income taxes on his income. He didn't have a lot of income (relatively speaking) though he does have a lot of wealth.

I would bet that he paid about the same tax rate as anyone else with similar salary income. His wealth has nothing to do with his tax rate.


Let me give the actual amounts and not what you state.

If I make $150,000 in W-2 wages, with a family of 4 and no itemized deuctions my federal income tax is: $22,785

If I make $150,000 in qualified dividends off of my investments, family of 4 no deductions my federal income tax is: $7,830

Of course this also doesn't allow for the social security and medicare taxes of approximately $6.800.

Taxpayer one 19.7% effective tax rate. Taxpayer two 5.22% effective tax rate.

Guess what they would pay to the state of Wisconsin? $9,250 each. Wisconsin doesn't give a prefernce for qualified dividends like the fed does. Wisconsin does give a break for regular capital gains.
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Re: Mitt Romney 2012

Postby johnfajardohenry » Wed Aug 15, 2012 4:25 pm

HawkHead wrote:If I make $150,000 in W-2 wages, with a family of 4 and no itemized deuctions my federal income tax is: $22,785


Exactly the same as Buffett would pay (assuming he had no deductions, family of 4 and so on)

HawkHead wrote:If I make $150,000 in qualified dividends off of my investments, family of 4 no deductions my federal income tax is: $7,830


True but your point is?

How much dividend income do you think Buffet gets? Very likely less than you get, in absolute terms. Certainly not more.

As I have mentioned several times before, he got zero dollars in dividend income. One of the founding principles of B-H is that it will never pay a dividend. Buffet had no investments other than B-H common stock. (At least to 2000 or so when I think he may have diversified a bit)

The $150,000 or so he paid taxes on each year? All W-2 wages/salary taxed at regular earned income rate.

He also maxed out the full 15% social Security tax. So he is entitled to his monthly SS check as well. Right? Or is he wealthy enough that he should not get to collect SS?

John Henry
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Re: Mitt Romney 2012

Postby johnfajardohenry » Wed Aug 15, 2012 4:48 pm

snoqueen wrote:The average Wisconsin farmer is not a multimillionaire in land value, as shown using these recent statistics.


Nope, and I never said the "average farmer" was a multi-millionaire. I said that there were lots of multi-millionaire farmers in WI and I stand by that. I guess we could argue about how many "lots" is but going to the link you gave I find a table with breakdown of farms by sales. In the 2 largest categories there are 5500 with an average size of 473 acres or, using your average value per acre, a value of about $1.5mm

There are also 4,300 farms with an average size of 1,047 acres or a value of $3.3mm each.

So nearly 10,000 farms worth $1.5mm or more in land alone.

Sounds like "lots" to me.

I don't think the $3200 includes the value of the farmhouse, barns, equipment, livestock and so on. Some of it offset by loans of various kinds.

Still seems like a fair statement that "lots" of WI farmers are multi-millionaires.

It would be interesting to know what their average taxable income is. I'd be willing to bet that for many of them it is less than $100,000/yr (not counting other non-farm income such as a working spouse or part time/seasonal job)

Those millionaires don't see so rich to me. What about you?

http://www.nass.usda.gov/Statistics_by_ ... nouswi.pdf

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Re: Mitt Romney 2012

Postby johnfajardohenry » Wed Aug 15, 2012 5:05 pm

pjbogart wrote:I would say that the matter-of-fact explanation of capital gains taxes is a huge part of the problem.


We may be in agreement on capital gains taxes. I have mixed feelings about them. In the first place, I feel pretty strongly that the holding period should be substantial. Say 10-15 years. (Buffet's share sales would still qualify as all his B-H shares go back to the 70s)

I could even live with doing away with them entirely and taxing all income at the same rate providing there was some way to index capital gains for inflation. If you bought a house in 1970 for $20,000 and sell it now for $300,000, should you really have to pay income tax on $280,000? Some, yes, but a lot of that was inflation. Ditto any other asset. There needs to be some way of adjusting out inflation effects.

The other problem is that capital gains income is lumpy. If you sell that house, even if it is adjusted to $100m, you are still going to take a big hit since it comes all at once. This might be handled via some kind of income averaging.

But assuming we can handle these and a few other issues, I would have no problem taxing capital gains at the same rate as dividends, honoraria, wages and salaries, in-kind benefits, or any other income.

pjbogart wrote:The reason we tax capital gains at a lesser rate than wages is because the people who write the tax code have a lot of capital gains. Period.


The reason our tax code is so complex is because the people who write it or pay the people who write it, get a lot of tax breaks from it.

That is one reason why I favor scrapping it and going to a flat tax.

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Re: Mitt Romney 2012

Postby johnfajardohenry » Wed Aug 15, 2012 5:10 pm

johnfajardohenry wrote:It would be interesting to know what their average taxable income is. I'd be willing to bet that for many of them it is less than $100,000/yr (not counting other non-farm income such as a working spouse or part time/seasonal job)


One more quick point:

The money that they do make is not the same as someone collecting dividends or clipping bond coupons.

If you factor their actual labor and count it as the equivalent of wages (what would the owner have to pay to hire someone to do what they do?) I suspect that their return on investment is very very low.

John Henry
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Re: Mitt Romney 2012

Postby jman111 » Wed Aug 15, 2012 5:33 pm

johnfajardohenry wrote:Anyone who thinks businesses pay income taxes is a fool.
John Henry

Corporate tax in the US
Corporate tax is imposed in the United States at the Federal, most state, and some local levels on the income of entities treated for tax purposes as corporations. Federal tax rates on corporate taxable income vary from 15% to 35%.
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