Warning - Bush Tax Cuts

[veritas]

What do wealthy people

do with their money?

I am seeing private money being offered to small busibess for loans. One of my clients borrowed 500k another is looking to borrow 1million.

The banks are not loaning money so private money is stepping up to the plate.

[ChEAr$]

What differences does the tax rate make on that, really? If we tax them 20% instead of 15% they're going to take their money and start buying mattresses to stick it in instead of investing it? I've never understood the argument. If you can invest money and make income off it, why wouldn't you? Unless we're talking about > 100% tax rates, in which case, yeah, obviously the mattress is a good idea.

You'll have more fun if you invest it in a mistress rather than a mattress.

[BHoffman]

Inflation is a hidden tax

do with their money?

I am seeing private money being offered to small busibess for loans. One of my clients borrowed 500k another is looking to borrow 1million.

The banks are not loaning money so private money is stepping up to the plate.

In times of impending inflation, it is better to be a borrower than a lender. The Bernank's brilliant idea of inflating the money supply while also keeping the interest rates low make it a bad bet for banks (hmmm...and China) to lend. I don't think private lenders are going to be any happier unless it's a short term loan or a very high rate of interest.

http://en.wikipedia.org/wiki/Inflation_tax

Inflation is a hidden tax. Gold and silver have typically been used as hedges against inflation. Based on the prices, I think this is where a lot of the rich people are parking an increasing portion of their cash. Makes for a pretty uncomfortable mattress but a good night's sleep if you're expecting to see the purchasing power of your US dollar drop.

http://futures.tradingcharts.com/chart/GD/M

The Central Banks certainly seem to believe it:

http://seekingalpha.com/article/233838-central-banks-buying-gold-a-look-at-the-effects

I think the upper income (not quite rich) people are sitting on their (saved) dollars right now in near-zero interest bank savings accounts - just like putting them in the mattress. Until some uncertainties are resolved one way or the other, I think the movement of money is going to remain pretty static. That movement - buying and selling - triggers income and leads to income taxes. Since that isn't happening, inflation is a way to tax assets. Inflation is an equal opportunity predator and is a particularly cruel tax on the poor. The poor people in exporting Third World countries are going to suffer real devastation.

[JohnH]

like you, I admire Warren Buffett's business judgement and his economic philosophies in general. However, I'd have more respect for him on this particular issue when and if he and everyone else signing the letter adds an addendum. The addendum would say that they want to demonstrate their commitment to this position by calculating what their taxes should be and voluntarily paying the additional amount. (we all know there's already a mechanism in place to do exactly that) This would prove that they have the courage to back up their convictions, rather than just grabbing a few headlines with meaningless prattle. If they believe this is a morally right thing to do, they should not hide behind the current tax law as a excuse to avoid doing the right thing.