ERICOPOLY

You've made a scale model of my argument that is 13x to 26x it's actual size and your new argument is effectively "hey, it's ridiculously large". You aren't saying that 8 years is ridiculous, you are saying that the 19th century is ridiculous.

It clearly showed nothing except that you have adopted a strategy of distortion. From my point of view when somebody does that they have stopped arguing facts -- instead they attempt to stretch the perception of the facts. The fact is that the tax cuts took place 8 years ago. This is too short a time frame for you, because it is too familiar for all of us. We can easily remember and imagine going back to 2003 -- thus it feels like it's within the bounds of returning to a status quo. So you attempt to kill that feeling by comparing it to a 111-211 year time frame. There, with a slight of hand you've attempted to get the reader to think of a really long time frame when the tax cut of 2003 is mentioned. Why would you do this? Of course, it's because 8 years is not long enough. You didn't compare it to something that happened in 2009. Why not? Well, because that would have the opposite effect on the reader. Your goal is not to make the reader think of a vastly shorter time frame, but rather a much longer one. Much much longer. The tax cuts took place in 2003 -- that's 8 years. Modern times. You compared this to the 19th century, anywhere from 111 to 211 years ago. Why, now it's as if I'm arguing about buggy whips. Clever! Simple but clever! In other words, the timescale was too small so in order to make your argument fit you had to stretch it from 13x to 26x. Take something reasonable in time frame, stretch it 13x to 26x until it becomes unreasonable, and then say "See how unreasonable it is! Hah, it is "silly and absurd"".

This one is a gem. We're done debating using logic now, we'll just call each other "silly" or "naughty poo poo head" now.

Nobody called you a Republican, but if you feel like you are taking similar stances then what is a Republican after all? I doubt anyone is 100% Republican. Strip out the moral/religious garbage and many of the tax arguments and they still have things I would stand for. So, it's a spectrum. I'm not registered to any party -- there are things I like from both. The minimum wage argument is supported by members of both parties, but I think it's a Republican stronghold. I wasn't referring to you -- over the years I've heard a billion times the minimum wage argument.

I found this documentary to be instructive in understanding how the comfortable and fortunate in society can disregard the unfortunate: National Geographic: Science of Evil http://movies.netflix.com/WiMovie/National_Geographic_Science_of_Evil/70146678?trkid=2361637 The documentary covers the experiment at the Stanford County Prison (a psych lab on the Stanford University campus) where they take a group of students and make them guards and another group and make them prisoners. The guards fall into their role and abuse the prisoners. Even the psychologist directing the study gets sucked into allowing abuses that shock his peers. My point is that the "let them eat cake" people can be completely normal people. They are not evil -- it's just that the situation brings it out of them. It's somewhat like an economic prison we're running here. We have the guards (the wealthy elite), and the prisoners (the working class). Unless some economic power is taken from the guards, I'm afraid they will continue to behave abusively.

A month or two ago I saw an article stating that Bay Area GDP grew in the mid-teens over the past year. So there isn't a recession for them -- they're growing faster than China.

So Myth what do you think is going on with Australia? They have a $15 minimum wage and an unemployment rate under 5%. Our Republican friends here in the USA think our much lower minimum wage is driving jobs away. What is keeping them from having the runaway unemployment that people say will happen here if minimum wages were raised? Does their no-double-taxation if the Australian corporation already paid tax -- does that keep jobs in Australia by making them more competitive against foreign labor? Is it the import tariffs? Their exported commodities aren't vulnerable to retaliatory tariffs. Do they just have everyone employed in government jobs picking up trash in the park, or what? What do you see in Melbourne? I understand mining is a job that can't get exported. Perhaps when demand for their resources cools off the party ends? Does a higher minimum wage only work for economies that export raw commodities in this period of globalized manufacturing?

It was top-down managing when it was cut to 15% in the first place. Did you say at that time "This kind of top-down managing is not something I believe in or have seen any evidence of working very well historically". No, I regard the status quo as 0%. Taxing is top-managing, cutting taxes is changing management from the top to the bottom. Regarding tax-cutting as subsidizing seems to me a very odd outlook on government's role in the economy. But this is another issue. It would be a net of 0% -- just putting back what was already there originally. Your handle is "always invert". I'm merely inverting it. It's a top-down management in one direction but not the other according to you -- yet it nets out to 0%. That becomes a logical imbalance actually. Inverting is not the same as calling things something they aren't. Cutting taxes is not central planning, it is diverting power to the citizenry at the expense of top-down management. The net result of cutting taxes is less power in the hands of government, no matter what the motives behind the cut is. If that is a good thing or not is another story and up for debate. If you are going to play the game of it being "a net of 0%" I can just point to the 19th century or whenever there was no capital gains tax in the US. Productive discussion, eh? So if I point out that the tax was cut less than 10 years ago to 15%, then you'll go back to the 19th century? No, this is not productive. The tax cut even had a sunset provision. It has been temporarily extended. Yes, by all means keep arguing that this is as good as going back to the 19th century. I'm nearly 40 years old. 10 years no longer seems like much. Maybe you are only 20 and 10 years is 1/2 of your life? If not, what's with the 19th century argument?

It was top-down managing when it was cut to 15% in the first place. Did you say at that time "This kind of top-down managing is not something I believe in or have seen any evidence of working very well historically". No, I regard the status quo as 0%. Taxing is top-managing, cutting taxes is changing management from the top to the bottom. Regarding tax-cutting as subsidizing seems to me a very odd outlook on government's role in the economy. But this is another issue. It would be a net of 0% -- just putting back what was already there originally. Your handle is "always invert". I'm merely inverting it. It's a top-down management in one direction but not the other according to you -- yet it nets out to 0%. That becomes a logical imbalance actually.

It was top-down managing when it was cut to 15% in the first place. Did you say at that time "This kind of top-down managing is not something I believe in or have seen any evidence of working very well historically".

The big "IF" though. "IF" it is taxed away in excess of reinvestment opportunities. Right now, it looks like the answer (at present capital gains rates) is NO. There is a lot of cash sloshing around earning close to zero. Thus, at present levels it is not too high of a tax. Thus it can be pushed higher until it reaches that point (but not more than that point). We can instead debate where that point is. Yes, I agree it exists. I just disagree that we're already at that point (evidenced by all the cash that's not being invested). Take a portion of that unused cash away, and there is still a lot of unused cash sitting there idle. No net loss of investment, no job destruction. The trick is in finding taxes that can be increased without discouraging the formation or expansion of operating companies. You've listed several that are not good candidates such as income taxes or corporate taxes. The capital gains tax however is uniquely focused largely on passive investors, not active investors.

We're pretty much in agreement. I was only talking about capital gains tax and shaking my head at the assertion it would lead to less investment in operating companies. Now, maybe somebody is trading financial assets within the operating companies. That very well may be so, however it doesn't create jobs and isn't innovative. A higher capital gains tax might get them to slow down their trading, but probably won't get them to fire the employees on the operating side of the business.

The capitalists who disagree with Buffett are essentially asking for a free handout from the government. Buffett differs from them in that he feels everyone should pay their share, and not take the free handout. The "free handout" is the basic welfare services that the government provides to keep the bench warm -- the people sitting on that bench are the laid-off workers. The companies need that bench to be kept warm so that when business demand returns these workers are clothed/fed/healthy and ready to go. The capitalists of course are happy to take this benefit but don't want to pay anything for the benefit. Thus, the capitalists ask for a "free handout". Ironic isn't it? These are the same people who claim the unemployed are getting the handouts! Buffett recently (in an interview) was asked if he would be interested in hiring more workers for the good of the country. He responded "No", that instead he would hire them only when business demand dictates it. He elaborated that it is the governments' role to provide food, medicine, clothes and shelter for them until that business demand returns. This is an interesting point he is making: 1) businesses should hire labor and keep them employed only when business conditions dictate it 2) they should hire them back (clothed, healthy, fed) in a "ready to work" state when the time comes So basically he doesn't want idle hands hanging around the factory, and is happy to pay the government to "outsource" their care until needed once again. I think most of the capitalists feel the same way (don't want idle hands on the payroll), except these other capitalists don't think they should be paying for the care of their idled workforce (through taxes) when not employed.

The conversation that you jumped into was about the capital gains tax. I had to provide an example based on sale of a business. People were suggesting that there would be no iPads were we to have a higher capital gains tax. No iPads? Well, okay. So long as we're talking about blockbuster products and capital gains, then logically the poster is worried about not being able to sell good ideas for high capital gains. Thus, I'd say selling out for $10m would be low-ball. Thus I provided a conservative example. It only strengthens my point if (as I believe) the small businesses largely pays it's taxes through the federal income tax return. That's sort of the whole point that I'm fighting here -- this idea that capital gains taxes are squashing the small businessmen is an argument that we can laugh at all day long. It's obvious to me that people are worried about their passive investment gains mostly, but are not standing up to say so. Instead, these fictitious arguments about the job creators.

I think the name of the game is to throw out something vague and attack the other side for fighting straw men. LOL.

Small businesses... how do the capital gains taxes impact them??? I thought if you owned a small business you largely pay corporate taxes and payroll taxes. Maybe you pay taxes on your dividends. But capital gains taxes???

Suppose you had one or more of these "game changer" business ideas right now... You might have $100k to your name, invest it in the business, and sell out for $10m. 35% capital gains rate means you walk away with roughly $6.5m, and at 15% capital gains rate you walk away with roughly $8.5m. So it's a 65x gain vs an 85x gain. The incentive is still there. Nobody is going to give up on the 65x return simply because it's not 85x. Would you rather hold onto your 100k instead of making a 65x return (refuse to invest at 35% rates) if you can't have 85x (invest only at 15% rates)?

How would a lower capital gains tax rate bring us more innovations like the iPad? For one thing, companies like Microsoft Apple and Google have enough cash to fund any such ideas, and their profits fall under the corporate tax rules rather than capital gains. You guys are throwing out great sounding ideas but you are not explaining how the capital gains tax is standing in the way. I see only strong assertions. Bill Gates decided to give up on Microsoft in the 1970s because the capital gains tax was too high?

My reference point is the present. Watsa says we have excess capacity. Yet you guys think if there were more "float" in the system it would boost investment. You would seriously go out and hire more workers if only taxes were lower? That's where your argument breaks down.

Perhaps we need person C and person D. Person C: capitalist Person D: debtor consumer You (might) agree: Person C will invest when Person D can afford to buy more things. You recommend: Cutting taxes for Person C so he will invest However, I say: Person C won't invest until Person D can afford to buy more things I fear: Lower tax rates on capital gains will do nothing but make person C accumulate cash faster. We would likely cut person D's services in order to afford the tax cuts. Thus you make C better while D is getting even worse off. Instead I think we should try to heal person D.

I think he expects other capitalists to behave as he would. He says that if final demand is there, he will invest in expanding production. Otherwise, he'll sit on his cash until it returns. Lower capital gains tax policy changes nothing in this time line, except his cash piles up faster. So I don't think he's wrong. He just thinks that if you have more cash and demand still isn't there, then you'll still be sitting on your cash (you'll just have a softer cushion). You're not going to go out and waste your extra cash to produce goods that nobody wants. Or would you? Maybe you disagree with him after all.

Guys, I like to keep more of my profits too but in this argument I'm playing the devils advocate. I'm trying to see where the logic flows. Isn't the lack of final demand the issue that is holding up investment and job creation? I believe it has absolutely nothing to do with the capital gains tax rate. Meaning... there is not enough demand to justify an increase in output. If you produce more, and it just sits there, it's a loss. So lowering the tax rate makes the loss more enticing? I'm scratching my head. Having a lower capital gains tax doesn't increase final demand, or does it? And if we already have excess capacity, then wtf with the lower tax argument?

You may only deduct up to 50% of adjusted gross income for charitable deductions. Unused deduction is carried forward to the next year.

Person A has a debt on his boat and another on his sportscar. He has no liquid assets to invest. Person B is a billionaire and has no debts. How does eliminating capital gains tax help person A pay down his debts? I can see how it helps person B, but person A? Person A already has a large incentive to pay down his debts -- the interest rate on his loans is much higher than interest rates available elsewhere. Why does changing the capital gains rate have much to do with anything related to deleveraging?

I was in Sydney for all of October 2008. It was great because when I woke up in the morning I would get the final market score -- be it up 10% or down 10% for the day. I didn't have to watch it go nuts all day long.