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Calls for a 4% buyback tax and Ordinary income tax rates on capital gains and dividends.

Won’t happen unless one party control occurs

Wonder what Warren would say about this

I think we all can imagine what he’d say, behind closed doors. Grabbing hands of Big govt are shameless and getting far worse. Call me an old fart, but I miss the days of Reaganomics, Milton Friedman and at least some attempts at a smaller government.

From Wikipedia:

“During the Reagan administration, fiscal year federal receipts grew from $599 billion to $991 billion (an increase of 65%) while fiscal year federal outlays grew from $678 billion to $1144 billion (an increase of 69%”

Small government?

We don't need to imagine what Buffett would say, as he's said it many times before, for example:

"The question is what is fair when you have to raise multi-trillions to fund the United States of America," said Buffett. "[Raising taxes] will not change my behavior. I have paid all different kinds of rates and I've always been interested in making money. I believe this should be a defining issue. Debbie works just as hard as I do and she pays twice the rate I do." -- https://abcnews.go.com/blogs/business/2012/01/warr...

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And for myself, I see no reason why my investment gains, which I spend maybe a couple of hours/year on, should be taxed at lower rates than the money I *actually put in work* to earn. Taxes buy civilization. At least, when you have a government which can agree that it *wants* civilization and is willing to fund it.

“During the Reagan administration, fiscal year federal receipts grew from $599 billion to $991 billion (an increase of 65%) while fiscal year federal outlays grew from $678 billion to $1144 billion (an increase of 69%”

Small government?

Government spending as fraction of GDP in 2023 was identical to Reagan's first term: https://fred.stlouisfed.org/series/FYONGDA188S . Lowest fraction in the intervening years was during the term of that noted Republican, Bill Clinton.

And good grief (and he caused plenty), how many poor, unsuspecting countries did that soulless monster Friedman destabilize?

This is a good book on how bad Friedman really was:

https://en.wikipedia.org/wiki/The_Shock_Doctrine

The reason the deficit went up so dramatically during the Reagan years was because he implemented tax cuts with the promise to lower government spending proportionally. The second part of that promise never materialized and in fact went higher because of increased defense spending. Tada! Huge run up in the twin deficits. So not exactly small government. Just the public message of one sold to people who wanted to believe that was the plan as executed based on the plan that was messaged.

I am not a fan of government overreach but it drives me up the wall when Reagon is held up as the hero of something he didn’t actually deliver.

Calls for a 4% buyback tax and Ordinary income tax rates on capital gains and dividends.

Won’t happen unless one party control occurs

Wonder what Warren would say about this

It is pretty clear he'd be in favor, don't you think? In his famous op-ed "Stop Coddling the Super Rich" he pointed out that he paid the lowest tax rate in his office and called for higher taxes on the rich.

https://www.nytimes.com/2011/08/15/opinion/stop-co...

No politics, please.

Sir, we are discussing economics.

“We are five days away from fundamentally transforming the United States of America.”

Sorry, I know politics are not generally welcomed here. I won't do it again. Please resume normal programming....

m

"And for myself, I see no reason why my investment gains, which I spend maybe a couple of hours/year on, should be taxed at lower rates than the money I *actually put in work* to earn. '


If you feel this way, just make a donation annually to the IRS to top up your capital gains and dividends taxes to the ordinary income rates.

I don't think this is a political issue. It is strictly business.

in other words, Will Berkshire buyback less stock with a 4% tax? I think so

Will many people with very large capitals gains sell before an increase in tax rates

would become effective? 100%

If you feel this way, just make a donation annually to the IRS to top up your capital gains and dividends taxes to the ordinary income rates.

This sort of of reply always surfaces in these discussions. The best, most non-confrontational, and most sensible rebuttal I've seen was written by WEB himself. I can't find it, but he basically points out that this is an economic issue as to how we structure our society, and that uniform policies are the most constructive. There will always be greedy people, generous people, people with different needs, but a consistent and uniform set of rules works out best.

<The best, most non-confrontational, and most sensible rebuttal I've seen was written by WEB himself. I can't find it,>

Buffett has responded to this silliness on multiple occasions...

"It's sort of a touching response to a $1.3 trillion dollar deficit. The first person to come up with that was Senator McConnell (R-KY).
It's sort of astounding to me that somebody that has the responsibility of being the minority leader in the Senate would think that you attack a $1.3 trillion deficit
by asking for voluntary contributions. Since he did, I offered to triple his. That's a side show. The real problem we have is we're taking in too little money and we're spending too much.
That's not going to be solved by voluntary contributions. What we need is a policy, a real tax policy." ~Warren Buffett

Buffett also emphasized that his commitment to matching all Republican donations to Treasury coffers is a "firm offer."

https://www.businessinsider.com/warren-buffett-res...

Buffett also emphasized that his commitment to matching all Republican donations to Treasury coffers is a "firm offer."

My recollection is that there has been one senate-or-house member that took him up on the offer so far. That was perhaps a decade ago or more. Maybe someone has more recent info.

John

And for myself, I see no reason why my investment gains, which I spend maybe a couple of hours/year on, should be taxed at lower rates than the money I *actually put in work* to earn.

There's a reason that most developed countries including Canada, Australia, Sweden and France (Sweden and France!) tax CG at lower rates to wage income and some such as NZ, Switzerland, Belgium and the Netherlands don't tax them at all. There are also some countries like Denmark that tax at the same high rates but this is for political reasons of social cohesion than for economics - some societies have chosen to weigh one over the other and perhaps this choice is right for them. With higher rates asset holders are deterred from selling at all resulting in the paradox of overall lower tax revenue. There's also a economic efficiency argument against keeping funds in less productive assets that would still trigger heavy taxes if sold.

This why there are attempts in the US to tax unrealized gains - including in Biden's budget - but the complications of this will I think defeat it for the moment.

"This why there are attempts in the US to tax unrealized gains - including in Biden's budget - but the complications of this will I think defeat it for the moment."

I am all for tax equality but taxing unrealised gains has to be the dumbest political idea ever. All it would do is not only encourage more Robinhood like short term trading but it would essentially wipe out any incentive to be a long term investor. I can't see this going through either the house or senate but if it does then I would have to seriously reconsider long term investments in the market.

And how would this even work? Say one year you have gains and you get taxed on it. What happens the next year if the same investment goes down by roughly the same percentage? If it's just a write off then your likely losing money. For the life of me I can't see how anyone thinks this is a good idea!

Can someone please provide a link to an explanation of how they would tax billionaires 25 percent? What would be the process? Thank you.

Can someone please provide a link to an explanation of how they would tax billionaires 25 percent? What would be the process? Thank you.


Its a simple asset tax. Sum up the market value of all your assets, then tax the amount over $1B at a rate of 25%. We already have asset taxes on property, this just extends it.

tecmo
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"Sum up the market value of all your assets, then tax the amount over $1B at a rate of 25%"

so Warren would pay 25% of $130 billion under this construct?

ballpark

$32.5 billion

"" Its a simple asset tax. Sum up the market value of all your assets, then tax the amount over $1B at a rate of 25%. We already have asset taxes on property, this just extends it."" Good morning thanks for your reply. "" Key Facts:
On April 9, 2023, Robert Reich tweeted that "728 billionaires now hold more wealth than half of American households." A representative of Reich cited Inequality.org, Forbes, and the Federal Reserve as the sources of his data.
Similarly, Snopes found that as of the fourth quarter of 2022, 735 billionaires collectively held more wealth (with a total of $4.5 trillion) than the bottom 50% of American households (with a total of $4.1 trillion). (Sources: St. Louis Federal Reserve Bank and Forbes.)
Snopes also found that the wealth owned by the top 1% of Americans, as of the fourth quarter of 2022, totaled $43.45 trillion, as compared to $4.16 trillion owned by the bottom 50% of Americans during the same period. (Source: Federal Reserve.)"" So, financial geniuses advising Biden are suggesting that super rich Americans SELL 4 TRILLION dollar's worth of assets and pay 25 % of the proceeds in tax. Any idea WHO can buy 4 TRILLION in assets over say ten years without disrupting markets? Thank you.

With higher rates asset holders are deterred from selling at all resulting in the paradox of overall lower tax revenue. There's also a economic efficiency argument against keeping funds in less productive assets that would still trigger heavy taxes if sold.

https://taxfoundation.org/data/all/federal/federal... is a relevant dataset in this regard. I would not cite any of the analysis on this site, which is a mouthpiece for business interests - but the dataset itself appears directly drawn from Treasury resources so is likely reliable. Historically, apparently the avg. effective tax rate on capital gains was right around 14-16% for much of the 1954-2018 span covered in the dataset, going up a bit in response to changes in the maximum capital gains rate.

There are a lot of ways to slice the dataset to support whatever interpretation suits one's interests, but trying to be objective, I don't see a strong relationship between increased maximum CG rates and decreased CG tax revenue as a fraction of GDP (which is all that's present in the numbers here), or evidence that higher CG taxes deter people from selling "at all". Trying to tease out the effects of market levels / "exuberance" from tax rates would be a project. Also the peak contribution of CG taxes has almost always been ca. 2-3% of the federal budget, largely independently of rates.

BTW while I can't speak to the other countries you list, NZ does not have a CG tax on NZ/AUS shares but does have an "FIF" tax on other foreign shares. Perhaps most NZ investors confine themselves to the local options, though.

" There are a lot of ways to slice the dataset to support whatever interpretation suits one's interests, but trying to be objective, I don't see a strong relationship between increased maximum CG rates and decreased CG tax revenue as a fraction of GDP (which is all that's present in the numbers here), or evidence that higher CG taxes deter people from selling "at all" Good morning, for those of us who raised venture capital in the real world in America, WHO would have offered the seed capital for crazy longs shots like amzn, tsla, msft etc, if LT cap gains didn't get preferential tax treatment ? Smart guys like Buffett didn't invest in these long shots with the tax incentive, would others have IF the potential gains were taxed as ordinary income ? Academics belong in the classroom, they shouldn't be proposing tax policy. They haven't got a clue. I'm still waiting for someone to share a coherent article on how these tax proposals would actually work in the real world ?

tax rates in the 80s, 90s, etc. https://taxfoundation.org/data/all/federal/top-1-p...

I am all for tax equality but taxing unrealised gains has to be the dumbest political idea ever.

In the US, property tax is based on current value of property (cost plus or minus unrealized gains). So taxing unrealized gains in the US is not a new idea.

Aussi

From Reuters, it appears that it is 25% on income, not on assets.

Biden renewed his call for a "billionaire tax" that would impose a 25% minimum tax on income for those Americans with wealth of more than $100 million, saying it would raise $500 billion over 10 years to help fund benefits such as child care and paid family leave.
The average American worker paid about a 25% tax rate in 2022, the OECD reported, opens new tab. Biden said the average tax rate for some 1,000 billionaires was 8.2%, adding: "No billionaire should pay a lower tax rate than a teacher, a sanitation worker, a nurse."

Aussi

This is a summary of a bill that was introduced in 2022 but not voted on.



Summary: H.R.8558 — 117th Congress (2021-2022)

Introduced in House (07/28/2022)
Billionaire Minimum Income Tax Act

This bill imposes a minimum tax on individual taxpayers whose net worth for the taxable year exceeds $100 million. The tax is equal to 20% of the sum of a taxpayer's taxable income, plus net unrealized gains for the taxable year. The tax may not exceed 40% of the amount by which the taxpayer's net worth exceeds $100 million.



Aussi who is not sure how unrealized gains on non liquid assets such as housing and private businesses would be evaluated.

There's a reason that most developed countries including Canada, Australia, Sweden and France (Sweden and France!) tax CG at lower rates to wage income and some such as NZ, Switzerland, Belgium and the Netherlands don't tax them at all.


Yes, there's a perfectly plausible reason, which is that rationally governments seek to tax income once and not multiple times. Companies pay a lower tax rate on earnings than most individuals, so paying SOME tax on dividends (distributed earnings) or on capital gains (which are related to retained earnings) does make sense, but paying FULL tax on these earnings without accounting for taxes already paid at the corporate level means that you are paying double taxes on earnings.

If one want governments to increase taxes, it would make more sense to increase the overall rates, but still attempt to only apply them once.

dtb

In the US, property tax is based on current value of property (cost plus or minus unrealized gains). So taxing unrealized gains in the US is not a new idea.


There are some exceptions - California being the most notable. Property is taxed on the purchase price; which of course has created all sorts of challenges for local governments.

tecmo
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"In the US, property tax is based on current value of property (cost plus or minus unrealized gains). So taxing unrealized gains in the US is not a new idea."

I just don't view it as being the same. Property taxes generally go towards funding local community issues- schools, roads, local initiatives etc. It is not so much a tax on unrealised gains as it is a fee for general upkeep of the community.

Taxing market equities (which fluctuate way more than housing prices) is just a general income tax. There's a reason why we don't tax unrealised gains- because they can change wildly from one year to the next. Again, I'm all for closing loopholes, raising tax rates on realised income and trying to come up with a more equitable solution where the uber rich are paying their fair share but this is not the way to do it. Part of the collateral damage is that the small investor gets hurt particularly if there is no exemptions. I would think that there would be exemptions but where does it start? $1M? $5M? $10M?

"From Reuters, it appears that it is 25% on income, not on assets."

Ah ok I see. That makes more sense.

Trying to tease out the effects of market levels / "exuberance" from tax rates would be a project.

I completely agree so instead of looking for patterns in such noisy US data I prefer to look at the many natural experiments run by various governments all round the world seeking to maximize revenue that have independently come to the conclusion that higher CG rates are self-defeating. The revenue maximizing rate usually settles somewhere around 20-30% (the US is already toward the higher end of this range: 23.8 plus state tax). Now the optimal rate for the economy as a whole might be lower than this as all taxes have distortion effects but it's certainly no higher.

A more rational way to tax the wealthy would be a Swiss style wealth tax at low rates around a half of one per cent set at a local level to foster competition. Few would object to that and it would bring in a lot of revenue from currently lightly taxed sources like a lot of California RE (owned for decades by rich families).

Its a simple asset tax. Sum up the market value of all your assets, then tax the amount over $1B at a rate of 25%.

So in 4 years the government would have taken the whole thing.

I heard a story (probably apocryphal) of a Senator asking the Congressional Budget Office how much a 100% income tax on incomes above $XXXX would bring in in each of the next 5 years.
And they gave him numbers in the billions for each year.
In the real world, of course, the number for every year after the first year would be $0.

I just don't view it as being the same. Property taxes generally go towards funding local community issues- schools, roads, local initiatives etc. It is not so much a tax on unrealised gains as it is a fee for general upkeep of the community.

And Federal Taxes presumably go to areas that need to be funded as well - general upkeep of the country (Roads, Military, etc...)



Taxing market equities (which fluctuate way more than housing prices) is just a general income tax.

Actually its the exact opposite of taxing income. The income the investments generate is already taxed, this is taxing the asset itself (much like the property is an asset). There is a strong argument that the tax base relies too heavily on income based taxes and not enough on other forms such as consumption taxes and asset taxes. Reducing income taxes could be a nice boost to productivity and global competitiveness and bring back jobs that have been outsourced to lower cost areas.



tecmo
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Its a simple asset tax. Sum up the market value of all your assets, then tax the amount over $1B at a rate of 25%.

So in 4 years the government would have taken the whole thing.

I heard a story (probably apocryphal) of a Senator asking the Congressional Budget Office how much a 100% income tax on incomes above $XXXX would bring in in each of the next 5 years.
And they gave him numbers in the billions for each year.
In the real world, of course, the number for every year after the first year would be $0.



You didn't read it carefully. Only the amount OVER $1B would be taxed. So the Billionaires can remain billionaires. Imagine you had $5B, the taxes due would be

$5B - $1B = $4B x 25% = $1B

So the Billionaire is left with $4B, assuming that the market value didn't fluxate the next year would be

$4B - $1B = $3B x 25% = $750M

I will let you do the math and show that everyone is going to be just fine.

PS: I don't think the rate would be 25%, my guess it would be closer to 3% - 5%. Ideally this would be coupled with a national sales tax (5%) and a significant reduction income taxes.

tecmo
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Because multi-billionaires are just fine handing $1B over to the government every year. Not only do they not mind, they also have no ability to shift around to avoid that tax.

Right?


Funny how people think that everyone ELSE will be just fine with paying a boatload of tax. Maybe somebody will think that YOU will be just fine with paying a huge tax?

Manlobbi

This thread on Biden Budget has, indeed, generated some good discussion.

But I don't come to the Berkshire board for this. There's plenty elsewhere.

We don't have an "Ignore Thread" option.

So, is it possible to transfer this thread to a more appropriate board?

I see the incentive of some to generate such a thread. This is a collection of intelligent, well informed, folks. So the temptation to engage them in strong. But I've seen such - be it politics or stock trading - ruin other other boards. Particularly the grandfather AOL board.

Let's don't let that happen here.


Tex

"Because multi-billionaires are just fine handing $1B over to the government every year. Not only do they not mind, they also have no ability to shift around to avoid that tax.

Right?


Funny how people think that everyone ELSE will be just fine with paying a boatload of tax. Maybe somebody will think that YOU will be just fine with paying a huge tax?"

You are right. We shouldn't make the billionaires pay taxes.

We should get the people who only make poverty level wages and have no assets to pay $1 billion a year in taxes.

I am sure that will be easy.

Yes, that was sarcasm.

Yes, there's a perfectly plausible reason, which is that rationally governments seek to tax income once and not multiple times. Companies pay a lower tax rate on earnings than most individuals, so paying SOME tax on dividends (distributed earnings) or on capital gains (which are related to retained earnings) does make sense, but paying FULL tax on these earnings without accounting for taxes already paid at the corporate level means that you are paying double taxes on earnings.

You can interpret it as double taxation, but you don't have to and there is reason not to.

All corporations benefit from "limited liability". If Armstrong had been a partnership, those who owned a share in it would have OWED MONEY when Armstrong went bankrupt because of asbestos, its debt would have been doled out equally to the shareholders. Instead, all corporations are allowed to sell you the upside (above zero) without requiring you to also own the downside, their ability to lose more value than they gained.

That has to be worth something. Do we have any evidence it is worth something?

Well, despite the "double" taxation, the largest, shall we say this means the most successful, businesses in the world are publicly traded companies. Despite the "double" taxation, these structures consistently attract the most investment, well beyond that of partnerships which do not have limited liability and do not suffer from double taxation.

So in a world where EVERYBODY has known about the double taxation for a long long time, and so can be said to have VOLUNTEERED to participate in this double taxation for the benefit of participating in the ownership of limited liability joint stock corporations, I think we'd have to admit that it will be hard to support much dudgeon in complaining about the unfairness of it all.

And well we can see why EVERYBODY is willing to participate. These are the biggest mooney makers in the world. The publicly traded limited liability corporation as a structure is apparently worth every cent put into it, without having to "correct" for the double taxation.

R:

There are some exceptions - California being the most notable. Property is taxed on the purchase price; which of course has created all sorts of challenges for local governments.

THis is not quite true. California property is taxed on its current value, but the "taxable value" of property is only allowed to be raised by 2% each year unless the property is either sold or significantly invested in. So if you add a $100,000 addition to your $200,000 house, your property value can go up by more than 2% that year.

Of course since property values rise by much more than 2% a year historically in california, there is a significant advantage in lower taxes for people who have lived in their homes many years vs their neighbors who have bought homes recently.

Put more politely, we have a tax allocation problem here in the U.S.

The very poor do not pay much in taxes because, well, they can't afford it. Taxing people who have no money is getting blood from a stone.

The ultra rich do not pay much in taxes. As you point out, they find ways of shaping their wealth increases so they can avoid paying taxes. As a result, most of the increase in their wealth gets taxed at miniscule rates, if at all.

So most of the tax burden in this country falls on the group that runs from lower working-class to the fairly (but not ultra) wealthy.

It is unfair that the poorest do not pay their share of taxes, but again. We cannot get blood from a stone. It is even more unfair that the ultra-rich do not pay their share of the taxes. They have the money so there is no blood from stone argument. They just have the resources to avoid taxes.

So the solution would be to design a tax system that makes it harder for the ultra wealthy to avoid taxes on their increase in wealth.

This is a proposal to do that. Make it harder for the ultra wealthy to avoid paying a percentage of increase in wealth similar to the working class.

"Funny how people think that everyone ELSE will be just fine with paying a boatload of tax. Maybe somebody will think that YOU will be just fine with paying a huge tax?

Also, this is a terrible take. Dumb.

You realize that the whole purpose of this is to make it so the ultra wealthy pay a similar percentage as everyone else?

This is a collection of intelligent, well informed, folks. So the temptation to engage them in strong.

Proof that Texirish is 100% right with that: The extremely high number of rec's in this thread: 26, 37, 23 etc. etc. Have we ever seen that other than on the "Political Asylum" board? I suggest everybody who can't resist participating in this discussion (and, oh, it's very difficult to resist!) is having a serious look at the posts on that board.

Said wrote:
"Political Asylum" board? I suggest everybody who can't resist participating in this discussion (and, oh, it's very difficult to resist!) is having a serious look at the posts on that board.

And he wrote nonsense as there never was a "Political Asylum" board here. Only the "Atheist" board which he actually meant, which in his (my) mind because of the character of the posts was a purely Political board. Mental confusion supporting the need for what Manlobbi did. Thank you, Texirish & Manlobbi!

"In the US, property tax is based on current value of property (cost plus or minus unrealized gains)."

This isn't true in every state. For example, it isn't true in California.

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