Entries Tagged 'Taxes' ↓

I’ve cleared up one concern I’ve had about Warren Buffets call to tax millionaires!

Most of us think that the current recession is largely due to a lack of private spending in our economy. So, what would a millionaires’ income tax do? Would it help or would it set us back?

Ed Hammond, in his Perspective column in the House & Home section of the Financial Times (October 8/9, 2011) wrote a piece called “Measuring the pay gap in square feet.” Continue reading →

As Warren Buffett pointed out, the rich are paying more money in taxes because they are richer than the rest of us, but the rich are not paying as high a proportion of their income for taxes. Even their secretaries pay a higher proportional rate of income tax on what they earn than the rich do. Why is that?

Because, as F. Scott Fitzgerald once wrote, “Let me tell you about the very rich. They are different from you and me.”

For one thing, the rich can always move. Continue reading →

The mere suggestion of a tax on the wealthy was one of the factors that caused last week’s dire slump in global markets. But this suggestion wasn’t made in the USA and it had nothing to do with earned income. (“EU Tobin tax” Financial Times Lex column 8/18/11 p10.)

Much as I appreciate Warren Buffet’s offer, as one of the wealthiest Americans, to pay a higher rate of  income tax, I can’t help but suspect that the wealthy are not eager to have us look at the other types of taxes they pay or don’t pay; taxes they could be asked to pay, i.e., the capital gains tax or the Tobin tax.

The capital gains tax rewards long-term (over a year) investors for saving and earning money. Money invested for the long-term earns the investor income (called “portfolio income”). This portfolio income is taxed at a rate that is about equal to the second lowest of the six income tax brackets in the US. The capital gains tax favors those who make their money long-term by buying (and selling) capital over those who earn their money by selling their own labor and those who make money by hiring workers in their small businesses.

The Tobin tax is the opposite of a capital gains tax. It is a transaction tax, i.e., a sales tax, on the financial transactions of investors. Money invested, including money invested repeatedly for the short-term is taxed at a minuscule percentage (such as .005 to .05 of a percent) every time a financial transaction (i.e., the buying and selling of investments) takes place. The Tobin tax obviously promotes the spending of money for hiring labor or buying property rather spending that cash solely on financial investments.

According to Representative Peter DeFazio who sponsored a 2009 bill to implement a Tobin tax in the US, the country previously instituted an even larger Tobin-type tax after the Great Depression, and this tax lasted with no ill-effects until the 1960s. The US Tobin tax was levied in order to dampen the type of financial speculation that led to the Wall Street crash in 1929.

However, it was a mere suggestion of a global Tobin tax in talks between France and Germany last week that sent European financial markets into a panic this week. “Deutsche Börse and the London Stock Exchange were down by 5 and 3 percent respectively.” (“EU Tobin tax,” Financial Times Lex column, 8/18/100 p10) Continue reading →