Do progressive taxes

[veritas]

increase the wealth of the few at the expense of many?

I have been thinking about this since reading some of ,Alexis de Tocqueville's Democracy in America.

Essentially in one part he stated the difference between Europe and America was that here wealth was diminished in a few generations while in Europe it did not.

My premise is now in order to avoid punitive taxes especially death taxes, those with wealth establish trusts and other devices. This creates concentrations of wealth that accumulate more and more to the few.

High tariffs in the mid 19th century created very wealthy individuals due to the lack of competition.

[erchess]

One argument would be

that our current system is not truly Progressive because there are so many deductions and credits that for one reason or another only relatively wealthy people take. A case in point would be Warren Buffet if his claim is true that he pays a lower percentage of his income in tax than does his secretary.

Regardless of whether you think the current rates are progressive, it's obvious that they could be made more so since they were indeed more so during the Eisenhower and Kennedy years.

[taxxcpa]

Progressive taxes

It would be best if all itemized deductions and all tax credits were eliminated. Tax rates could be reduced while at the same time the tax would remain progressive.
In lieu of all the deductions and credits, a higher standard deduction and higher exemptions would keep it progressive. Higher incomes could still pay at a higher percentage, but possibly lower than the current rates, especially for incomes under $ 1 million.
The capital gains tax is partly a tax on inflation so it might be fairer to index it to inflation; i.e. multiply the basis by a factor based on the year acquired.

Instead of the present Earned Income tax credit, some sort of provision could possibly be made to lessen the burden of social security tax on low-income workers.

[JohnH]

Warren's complaint about his not paying a higher percentage of his income than his secretary would carry a lot more weight with me if he would just write a check and send it on in to the US Treasury. He could then challenge other like-minded wealthy Americans who share his sentiments to follow his noble example. This would be the principled approach. Is he saying he needs the force of the US government to come down on him in order to make him do the right thing?

His hype creates nothing but a credibility gap. Rather than just being so much mindless bluster, paying up would prove to me that he's willing to put his money where his mouth is. Surely his tax preparer could take a look at his secretary's tax return, run the math, and then tell him how much he needs to ante up in order to meet his responsibilities. Absent taking these simple concrete steps to demonstrate his sincerity, he sounds like nothing but a big windbag with respect to this particular issue.

[BOB W]

I read someplace that one of Buffett's corporations is fighting IRS for multiple years and IRS thinks he owes upwards of $4 million dollars in taxes. I wonder what he is getting for his comment to help win his problem with the IRS?

[BOB W]

ho, ho ho........look what I found..........

http://weeklyworldnews.com/headlines/38511/warren-buffett-arrested-for-tax-evasion/

[veritas]

Well heck

What I was trying to say was, progressive taxes do not redistribute wealth but in fact does the opposite.

Had we no inheritance taxes for instance what would happen to the money? Would it not be devised to family for the most part? What does your experience tell you happens to large sums of money/property received by inheritance, lottery winnings other windfalls?

Now great trusts are created with limits as to what can be done with the assets, perpetuating them forever.

[veritas]

The article I read said

I read someplace that one of Buffett's corporations is fighting IRS for multiple years and IRS thinks he owes upwards of $4 million dollars in taxes. I wonder what he is getting for his comment to help win his problem with the IRS?

One Billion dollars in contested taxes. They have been fighting it for years costing the government a fortune in legal fees.

[erchess]

Buffet the man the argument and his fund

I concur that it seems strange that the man does not pay up what he apparently feels he should have to until he actually does have to. It is therefore plausible to argue that he may not really believe in his gut what he is saying. That does not change the validity of his argument which is one of fact. He either does or does not pay a lower percentage of his income in tax than does his secretary. Some might argue that he should pay only the same percentage as his secretary but surely no one would argue that he should pay a lower percentage. As to his fund that isn't his money even though he owns shares in it. He has a fiduciary duty as manager of the fund to pay only the tax he and his tax advisers believe that the fund owes and to fight the IRS if they believe that the IRS is asking for more than the law says the fund owes.

[JohnH]

I have great respect for Warren Buffett's financial acumen and his common-sense approach to business management. He truly is an investing genius whom few others in the investing community can match. The best evidence for this is how often he is attacked by so many finacial advisers rooting for him to fail.

But in this particular case, his actions (or inactions) speak so loudly that I'm not presuaded that he actually believes what he says. It's a very cynical and insincere gesture, and makes me wonder who he's trying to manipulate. Unlike him, IMO. One would think that his advisers would discuss this with him - I understand he is very approachable by those in his inner circle.

[taxxcpa]

Buffett

He may believe what he says. There are some things that I believe would be best for society as a whole that are not in my own best interests. For example, I get a lot more from social security than I've paid in to the system.
For years the SS max was $ 4800 and the rate was lower than the current rate. This is not the way I believe the program should work, but it works OK for me. It will work a lot less well for my children and grandchildren since you can't borrow from Peter to pay Paul forever. Someday you run out of Peter.

[JohnH]

Well, that's reasonable as far as it goes. But are you saying you don't deserve what you're getting? I don't believe that's what you said.

If you honestly believe you don't deserve it, then I'd apply the same standard to that statement that I apply to WB's statement. It may sound noble, but the evidence suggests it's a meaningless statement unless it's accompanied by concrete action.

[taxxcpa]

Taxes

Well, that's reasonable as far as it goes. But are you saying you don't deserve what you're getting? I don't believe that's what you said.

If you honestly believe you don't deserve it, then I'd apply the same standard to that statement that I apply to WB's statement. It may sound noble, but the evidence suggests it's a meaningless statement unless it's accompanied by concrete action.

Even if it were accompanied by concrete action, it would be a meaningless statement.

I don't think it is a matter of deserving it. You don't look a gift horse in the mouth. I'm willing to take anything I can get legally, but that does not mean it is a good thing. My comment was not intended as a "noble" sounding statement.

People drawing social security, even Warren Buffet, probably deserve it, but it should not have been funded as a burden on future generations.

[Burke]

And I am willing to bet that he does draw Social Security and probably has Medicare, and if he had taxable IRA's probably took the option in 2010 to transfer to ROTH's and spread the tax over the next 2 years, sold his house(s) a time or two and took the applicable exclusions available at the time, etc. and anything else in the tax code that wasn't excluded by his AGI. Of course, he probably pays AMT too. I think his basic premise is the ridiculously low rate for qualified dividend income, which used to be treated like anything else and is now 15% or less for anyone. I don't have a problem with favorable cap gains rates on the sale of stocks, but I think it could be graduated over a 5-yr holding period. Max rates of 25%, 20%, 15%, 10% and 5%.

[JohnH]

Even if it were accompanied by concrete action, it would be a meaningless statement.

I don't think it is a matter of deserving it. You don't look a gift horse in the mouth. I'm willing to take anything I can get legally, but that does not mean it is a good thing. My comment was not intended as a "noble" sounding statement.

People drawing social security, even Warren Buffet, probably deserve it, but it should not have been funded as a burden on future generations.

I do see your point, and I agree with you in many ways with respect to Social Security. However, I still see a difference between the sentiment you expressed and his position on tax rates. The difference between your statement and WB is that he took a quantifiable position on the issue. He can measure it, and he could lead by example if he were serious. Instead, he just blows hot air and grabs headlines- for what purpose remains to be seen.