The Rich Get Richer While the Poor Get Poorer

[Dharma Bum]

I will say that the tax code is unfair. Wall street investors like me get to pay only 15% taxes on qualifying dividends.

You pay 49% Federal tax on your share of earnings. Add in state and it's over 50%.

We also pay no state tax on our treasury notes and bonds.

And you receive a lower yield because of it. It's an implicit tax.

[Alan]

Is wealth zero-sum?

No, it's not like a pizza, where if I take too many pieces someone else must eat the box. The economy & wealth is dynamic and in any practical sense, unlimited.

[freein05]

You pay 49% Federal tax on your share of earnings. Add in state and it's over 50%.



And you receive a lower yield because of it. It's an implicit tax.

My accountent gives me a statement with my taxes showing the effective tax. Last year my federal effective tax was 8% and my state was 2% and that is in California. As far as US Treasury investments you are missing one very important reason to invest in them and that is safety of principal. If you look at bonds you will see as your principal is more at risk the rate of interest is higher. I don't know where you get I pay 49% on my share of earnings. Yes the corporation pays a tax before they pay out earnings but that has nothing to do with my yield on dividends. I invest in stocks based on the dividend yield to me. We must pay taxes to live in our country. Those who can afford to pay more should.

[Dharma Bum]

As far as US Treasury investments you are missing one very important reason to invest in them and that is safety of principal.

Safety is fine and affects yield but not what I'm talking. People invest on an after tax basis. If you don't have to pay tax, you are willing to take a lower yield as you after tax return is the same. This applies to munis too. Way back when I defended Teresa Heinz Kerry against charges she paid little income tax because all her money was in tax exempt bonds. But she got a lower return on those because people will accept x% for a tax exempt bond but require x/(1-y) where y is the tax rate as a decimal for a taxable yield. There is some arbitrage benefit as the result of tax exempts distorting the market but not much and one reason (in addition to liquidity) govt insured CDs yield higher than bonds.

I don't know where you get I pay 49% on my share of earnings.

You're right, I can't type. Should have been 45%. If you own a business and it makes $100, you have income that's taxed at 35%, leaving you $65. Let's say you put it in an LLC. No change, you have $100 income and have $65 left. Now let's say you form a corporation. That same $100 of income has tax of $35 at the corporate level. When it distributes the $65 to you you have $10 of tax leaving you $55. But under you logic you are saving taxes since you have reduced your $35 tax bill to $10 right?

[Tenngal]

sign me up for one of the adjoining mud huts with Jemima and kib..........

[Gregg]

Is wealth zero-sum?

It may be a little more complex than a rising tide floating all boats, but generally speaking the metaphor stands up. I', amazed that any of our universities would even try to teach any other view in the face of overwhelming evidence to the contrary, but many (most?) do. DS, who is an otherwise intelligent, articulate and on the way to becoming a well educated individual can not grasp the concept that wealth is NOT zero-sum. He need look no farther than his own family for proof, but it just doesn't click. He is graduating this spring from a top tier school (albeit one in California!), but I really feel he is in for a significant slap down when he gets to the real world. He has professors that will argue that the only 'creation' of wealth in the last thousand years occurred when someone dug more gold out of the ground. Boggles the mind.

[Dharma Bum]

sign me up for one of the adjoining mud huts with Jemima and kib..........

I can see a whole village sprouting up.

[morris_rl]

"Free people are not equal and equal people are not free."
Lawrence Reed

Further, per R. Cardinali:

http://www.citeulike.org/user/NLRG/article/774247

"Inequality and freedom mean different things to different people; whether inequality should encapsulate ethical concepts such as the desirability of a particular system of rewards or simply mean differences in income appears to be the subject of much debate. The World Bank conceptualises inequality as the dispersion of a distribution, whether that is income, consumption or some other welfare indicator or attribute of a population.

"When Lawrence Reed introduced his seven principles of sound public policy at a presentation at the Economic Club of Detroit, one item that stood out was his principle which stated that "free people are not equal and equal people are not free". He was not addressing the foundation of equality in society but about income and material wealth a person may earn in the marketplace, essentially he was addressing "economic equality".

"Hofstede touches on a number of postulates when he speaks of inequality within a society and how it is visible in the existence of different social classes: upper, the middle, and lower. According to Hofstede, classes differ in their access to and their opportunities to benefit from the advantages of society. He cites education and the benefits derived by advanced education.

"The World Bank has concluded that inequality in intelligence is part of the human condition and inescapably contributes to a substantial degree of income inequality that greater equality of opportunity cannot circumvent. This article examines a number of concepts which dispel formal equality theory and the belief that equality is achieved if the law treat likes alike is faulted."

I would observe that one may strive (and should strive, I think) to ensure equality of opportunity in places such as the public schools, but for one to attempt to mandate equality of outcome in all things is witless, IMHO.

On a practical level, who in this forum seriously advocates confiscating the roughly $1,000,000 financial net worth of "loosechickens" and her husband? Anybody?

Given the choice, I'll opt for freedom over equality imposed by state coercion...


Best,


Rodger Morris
"Brother Railgun of Quiet Reflection"

[ApatheticNoMore]

Gross inequality is incompatible with freedom. They buy up the political system and make laws to their benefit.

[morris_rl]

Gross inequality is incompatible with freedom. They buy up the political system and make laws to their benefit.

"Free people are not equal. Equal people are not free."
Lawrence Reed

That said, I am all for equality of opportunity.


Best,


Rodger
"Brother Railgun of Quiet Reflection"