Herman Cain caught in BOLD debate LIE!!!

[JD Barleycorn]

Cain has said that this a step to the fair tax. There will be thresolds on income before certain taxes will kick in so the poor will save on food, medicine, and other vital needs. I do have to wonder why no one ever remembers that cancellation of loopholes that allows people Warren Buffet to pay a pittance against his yearly income. If you talk about 9-9-9 then you need to talk about the removal of loopholes. They are both part and partial of the plan.

[Texas Contrarian]

Originally Posted by CuteOldGuy

WTF and Doove, actually I was. I told people that I would happily find another job if that monstrosity were repealed.

Hobbydude, what would the $!M earner do with the $910k? Probably not keep it in a mattress. Most likely it would be invested, which would lead to more consumption. At the very least, if he put it in a savings account, it would be loaned to consumers to spend.

I will back up CuteOldGuy on his first point. In fact, my own primary tax lawyer considers the tax code nothing short of a national embarrassment. Why in the world would he have any interest in stating otherwise? If I were a tax attorney, I certainly don't think I'd mind reinforcing my clients' likely beliefs that they need to rely on the expertise of professionals to navigate the tax minefields.

And to his second point, yes, we need investment, production, and capital formation just as much as we need consumption. In fact, the U.S. economy has been heavily reliant on domestic comsumption for decades; much more so than other wealthy nations. The fact that we have such a low savings rate is not a healthy situation. Although it is up into the roughly 5% range now according to some analysts, it declined to zero during the peak of the debt-fueled consumption binge (near the height of the housing bubble). As a result of all this, we are going through a household-sector deleveraging process and we will be continuing to do so for a number of years.

This will result in difficult challenges as we move toward rebalancing our economy, but the deleveraging process is necessary -- otherwise, we will never be able to set the stage for a sustained, healthy recovery.

[Iaintliein]

Too funny! Next thing you know he'll swear he won't use "signing statements" on legislation, won't sign legislation until it's posted online for all to see for days in advance, won't hire lobbiests, won't raise taxes, will close Gitmo. . . I'm sure I've forgotten a few.

[WTF]

Look we should convert to a VAT but the devil would be hell on wheels in those details!

[CuteOldGuy]

NO VAT! That would be an administrative nightmare. A good tax is simple, understandable, and appears to be fair.

Unless you are filing a 1040EZ or 1040A, you are a fool if you don't hire a tax professional to assist you with your tax compliance and preparation. I've dealt with the IRS, they are NOT NICE! I have gotten IRS agents in trouble for violating regulations and taxpayer rights, and I paid the price. The system is out of control, and needs to be scrapped. Instead, the IRS is being made responsible for health care. God help us all!

[Texaspride74]

Originally Posted by CuteOldGuy

Oh, THAT lie. They discussed that on Bloomberg right after the debate. Very unimpressive. Also, I understand his 999 plan better than he does. It's a good plan in the wrong hands.

It is a very big deal considering Cain's ties with the Federal Reserve and the elite that run it. If he were to be elected, he would do the Fed's bidding just like Obama, Bush, and other puppet Presidents have.

As for the 999 plan, it is a horrible plan no matter who is presenting it. 9-9-9 will quickly turn into 20-20-20. This is just giving the corrupt Federal Government another way to bleed the American citizens dry.

[Texaspride74]

Originally Posted by CuteOldGuy

I'm neither Republican or Democrat either. So you support the current tax system? Explain how it works, and how it can be made fair. Please cite to hundreds of Federal Register articles, and from the several thousand pages of regulations.

Please document how a 20%+ reduction in costs will make life harder for business, and keep prices high.

Explain how a good deal for everyone is bad if somehow, the rich do better too.

Don't discuss things you don't understand.

I don't buy into the false left/right paradigm that is the Republicans and Democrats either. I don't support the current tax system either. I also don't support the 999 plan because it would never stay at 999. If we got back to small government and less entitlements, very little taxes would be needed, but if you think this would happen with any other candidate then Ron Paul (or Gary Johnson) then you are delusional.

[dilbert firestorm]

the only problem with the 9-9-9 plan is that business do not pay taxes (not really), they pass those taxes on to the consumer in the form of price increases.

so, basically, the plan is more like 9-0-18

[CuteOldGuy]

Remember, it would take a 2/3 majority to raise the taxes, and the people would know their taxes are being raised. Congress would be held accountable for the first time in several generations.

Yes, taxes are a business expense, but this plan is designed to be a bridge to the Fair Tax.

Read what Arthur Laffer, economist, has to say about the 999 plan.

http://www.humanevents.com/article.php?id=46828

It's a good plan, in the wrong hands.

[TexTushHog]

Originally Posted by CuteOldGuy

So you support the current tax system? Explain how it works, and how it can be made fair.

I'm sure that it can be improved and likely simplified. But like everything else, my idea of improvement and your idea of improvement are probably incompatible. So the current code remains until the public, in significant numbers, gets behind over version of reform or another.

I think it needs to be more progressive. I think it needs to treat capital gains after some modest amount (say $10,000 per year) as ordinary income. Same with dividends. I think you need to eliminate the home interest deduction on all home debt above $500,000 or so. I think that we need a slightly bigger EITC. I think churches should be taxed just like anybody else. I think we need to eliminate the cap on earnings that are taxed for SS purposes (or except income from $100,000 or so, but pick back up at $200,000.) My guess is that you disagree with most of these proposals, except perhaps the last one.

That being said, I don't find compliance with the current tax code all that onerous or expensive. I've had both inside and outside accountants for my business and the costs of both were fairly modest, all things considered. My impressions is that if you keep your books correctly, don't engage in questionable deductions, and try to adhere to the law that you'll have very few problems. Of course, I'm sure that there are isolated horror stories, just like in any field, but every dealing I've had with the IRS has been resolved in fairly short order. We missed a deadline once when we had a very large bonus that changed our status from a monthly filer to a daily filer on payroll taxes. We were assessed a small penalty and a bit of interest. We appealed the penalty successfully, paid the interest and went about our business. It took about half an hour of my time and about two hours of accountant time. We had a couple of other minor issues where I don't recall the details, but a few phone calls resolved the issues in short order.

[TexTushHog]

Originally Posted by JD Barleycorn

C I do have to wonder why no one ever remembers that cancellation of loopholes that allows people Warren Buffet to pay a pittin has said that this a step to the fair tax.

Wrong. The "loophole" that allows Buffet to pay so little is the preferential treatment of capital gains income. It is now taxed as low as 15%, where as Mr. Buffet's secretary's income is taxed at up to 35%. Under Cain's proposal, capital gains are not taxed at all. It eliminated the small pittance that Buffet pays and he would now pay nothing. Nada. Zip. The big goose egg.

[thehobbydude]

Has Cain published how much revenue will be generated with 999? I looked up his website and there are no detailed analysis of his proposals.

[Texas Contrarian]

Originally Posted by TexTushHog

I think it needs to be more progressive. I think it needs to treat capital gains after some modest amount (say $10,000 per year) as ordinary income. Same with dividends.

(I will simply copy and paste a few random paragraphs I've posted elsewhere, so if my post looks somewhat disjointed and doesn't flow well, that's my excuse!)

There is a very strong inverse correlation between net realizations and the top tax rate on cap gains. I think you could probably raise the rate to 20% (where it was from 1997-2003) without producing significant distortions, but if you tried to push it much beyond that, you'd find that a lot of the anticipated revenue would quickly pull a disappearing act.



The above graph surprises a lot of people. Non-investors always seem to find this sort of mysterious, but it's really pretty easy to understand when you consider all the ways people can reduce their cap gains tax burdens.

When the top rate is 15-20%, many investors sell off a lot of stocks in overvalued markets (such as 1998-99 and 2006-07) without worrying much about tax consequences. If the cap gains rate were 35% or 40% (which is about where it was during much of the 1970s) that's not the case. Then investors were disincentivized to realize gains, or at least careful to match up gains and losses in the same tax year.

People should always remember that realizing gains is completely optional. Another technique non-investors are generally unaware of is borrowing against an appreciated asset. With today's ultra-low interest rates, that's especially appealing. You can protect your gain with simple hedging techniques that cost a tiny fraction of the increase in capital gains taxes sought by liberals.

Even the finance ministers of Europe's social democracies do not advocate that capital gains tax rates be raised to anywhere near the levels to which they've pushed rates on ordinary income. There are very good reasons for that.

Returning the tax rate on qualified dividends to the ordinary income rate would also produce some unintended consequences. First of all, I and many other investors like dividend-paying stocks when the tax rate is 15%. If the rate were pushed all the way up to about 45% (expiration of the Bush tax cuts plus the proposed 5.6% surcharge on income from dividends and cap gains), then owning high-dividend stocks would not be very appealing. If politicians decide to get serious about pursuing these types of tax increases (most investors believe they are not going to happen anytime soon) people in the top bracket will sell out of these stocks, exerting downward pressure on the prices of many utility stocks and other categories that retirees who are not very affluent depend on for income.

Creating the sort of selling pressure that would knock a few percentage points off the portfolio values of middle-class Americans is not exactly my idea of good public policy.

You should always remember that when politicians start trying to fire bullets at the wealthy, of lot of middle-class innocent bystanders get caught in the crossfire.

Originally Posted by TexTushHog

Wrong. The "loophole" that allows Buffet [sic] to pay so little is the preferential treatment of capital gains income. It is now taxed as low as 15%...

Not true.

Buffett pays little or no capital gains tax because he rarely sells anything. Remember, he has famously said on many occasions that his favorite holding period for an investment is "forever." The "loophole" that has allowed him to amass great wealth without paying much tax is the corporate exclusion on dividend income upstreamed from ownership interests in dividend-paying public companies.

There was a long thread on Buffett's tax issues just a couple of months ago. I covered the issue in some detail, so I'll just quote my post from Aug 23rd:

Originally Posted by CaptainMidnight

Do any of you believe for a minute that Buffett has any intention whatsoever of paying additional taxes amounting to anything more than a rounding error in comparison to his net worth?

Just think about a couple of things for a minute. His op-ed stated that he paid tax at a rate of about 17.4%, leaving him with a tax liability of about $7 million. That suggests that his "taxable income" was around $40 million. Let that sink in for just a minute. $40 million. Did any of you notice that that's less than one-tenth of one percent of Buffett's estimated $50 billion net worth? And almost certainly not much more than a couple of percentage points of the dividend income Berkshire Hathaway received?

The simple and obvious point is that you could raise tax rates back to 1990s levels and it would hardly make any difference to Buffett.

Another obvious point is that if Buffett really did want to pay more tax, he could own most of that stock directly rather than through a corporate holding company such as Berkshire Hathaway. Most people don't realize that such corporations get an 80% exclusion on dividend income paid by companies in which they have greater than a 20% stake. Thus businesses owned by Berkshire Hathaway can upstream large amounts of cash to the holding company, which in turn pays corporate tax on dividend income at a rate of only 20% of what an individual holder would pay.

That's a big part of the reason Buffett's company is such a fantastic compounding machine. He can amass wealth on a mostly tax free basis, and he's been doing it for decades. Of course, almost all of Buffett's net worth will go the the Gates foundation and other charitable causes. Good for him. He obviously feels that they'll choose a more deserving set of beneficiaries that the U.S. government. (Hard to disagree with that opinion!)

What Buffett is essentially saying is that he wants and expects you to pay more tax if you are moderately affluent (but not rich), but he will make other choices regarding what to do with his money. The same is the case with many other wealthy individuals. I'm not telling you that that's right or just or fair; I'm simply telling you that's the way it is.

On the other hand, if you're affluent (but not wealthy) you may have no way to easily and conveniently escape increased levels of taxation. If your income sources are primarily salary, fees, or commissions, you'll pay a higher rate. If you're wealthy and they're primarily capital gains, you'll have choices regarding timing of realization, selling in a tax year in which you can partially or wholly offset with losses, choosing instead to borrow against an appreciated asset, etc. Those are just a couple of the reasons capital gains tax rate increases never raise anywhere near the revenue predicted by their supporters.

By the way, it might be worth mentioning that in the opinion of some, there's a good reason for this exclusion. It's often the case that insurance companies, for example, own substantial stakes in other companies. If the parent pays corporate tax on dividend income received, and then in turn someone else pays tax on dividends paid by the parent -- but from resources upstreamed to it by subsidiaries --the end result is multiple levels of taxation on the same stream(s) of income. That's arguably inappropriate, and would be avoided by different choices concerning ownership structure.

It should be noted that someone generally pays tax (eventually, anyway) since the parent company itself usually pays dividends from resorces upstreamed to it, even though that's not the case with Berkshire Hathaway (which does not pay dividends.)

Here's another point I believe is worth mentioning: Since Buffett can amass net worth at a rapid rate because Berkshire Hathaway's dividend income is largely sheltered, other wealthy investors -- who in most cases do receive at least some taxable dividends -- are placed at a comparative disadvantage relative to Buffett.

[Jackie S]

JD Barleycorn said it, and most of us know it.

There is nothing wrong with the current tax sysyem aside from the fact that it is rampant with all sorts of "loopholes" that allow those that know to avoid paying much in the way of direct federal income tax.

But then there is an entire industry built around the current system, hundreds of thousands of CPA's and Lawyers do nothing but take care of the "rich" peoples affairs so they can take advantage of every possibility that allows them to avoid the actual high tax.

Solution: Treat all income as the same, whether it was "earned" or not.
Take away all loopholes. Period. If you are in the 37 percent bracket, write a check.
Put the entire Country in the Social Security System, (including and government employs and elected officials), and remove the cap. That way, George Clooney pays on Social Security on the entire $50 million he makes a year.

Of course, none of this will happen. Way too many people make a good living off of the tax system as it exist now, and the polititians would not be able to use the tax code as a way to garner favor.

[CuteOldGuy]

Cain says it has been projected to be revenue neutral. There is a lot wrong with our current system, but I will have to explain that at a later date. I'm gone for a few days.