My Response To Buffett And Obama - WSJ

[Guest]

As Misterstockwell said our Constitution and system does not, and should not care about luck, health, sickness, or type of Parents you have. Our system works best when everyone individually, and yes selfishly, works to the best of his ability for his own success. And yes, there are some people out there that are more talented than others. These are the entrepreneurs that create most of the jobs. These people should be praised and encouraged, not vilified. As far as taxes are concerned, 50% of the population not paying taxes is rediculous. I am all for eliminating deductions and loopholes and creating a flat tax, where everyone pays the same rate. This would broaden the tax base so everyone pays.

 

I'll have to respectfully disagree. If everyone did things expressly for him/herself, we would go through a revolution once every few decades. We would be like a 3rd world country.

 

 

Let's say I'm the one (from luck or skill) became the first millionaire...where there was almost no one else that was even close.  The gap between rich and poor were even higher a few hundred years ago than they are now.

 

I then pay off politicians to make things work my way. If someone comes out with a better widget, I outlaw it or buy it and bury it. I would have ever incentive to not let my power go.

[Guest]

In my view, we determine our own fate, and luck has nothing to do with it. Work hard. Make good choices. Don't give more than your fair share to Obama.

 

LOL

 

Since this message board is "the Value Investor's Haven", a quote from WEB seems fitting:

 

I’ve had it so good in this world, you know. The odds were fifty-to-one against me born in the United States in 1930. I won the lottery the day I emerged from the womb by being in the United States instead of in some other country where my chances would have been way different.

 

Imagine there are two identical twins in the womb, both equally bright and energetic. And the genie says to them, “One of you is going to be born in the United States, and one of you is going to be born in Bangladesh. And if you wind up in Bangladesh, you will pay no taxes. What percentage of your income would you bid to be the one this is born in the United States?” It says something about the fact that society has something to do with your fate and not just your innate qualities. The people who say, “I did it all myself,” and think of themselves as Horatio Alger – believe me, they’d bid more to be in the United States than in Bangladesh. That’s the Ovarian Lottery.

 

Another one:

 

If you could put your ball back, and they took out, at random, a hundred other balls, and you had to pick one of those, would you put your ball back in? Now, of those hundred balls … roughly five of them will be American. … Half of them are going to be below-average intelligence, half will be above. Do you want to put your ball back? Most of you, I think, will not. … What you’re saying is, “I’m in the luckiest 1% of the world right now.”

 

 

Those are all well and good, but this thread is about living in the USA and paying taxes in the USA. The vast majority were born here and it's a moot point. We are all equally genetically and geographically "lucky" in that regard. The question is whether those who are more successful in the USA should pay more tax that can then be redistributed to those who make less?

 

misterstockwell, if you would be so kind, please tell me about your family background, childhood, etc. Nothing too personal to be identifying, of course.

[ERICOPOLY]

I wonder what it would look like if 401k and IRA plan contribution deductions were eliminated.  So effectively you can still contribute, but it would be all after-tax contributions.  When withdrawn, you don't pay tax on your cost basis but you pay tax on the gains.  Same rules as the after-tax contributions we currently have in IRAs.

 

They are always talking about cutting Social Security and Medicare because we "can't afford them", but likewise can we afford to give the 401k tax deductions?

 

Our tax bill when we were working would have been roughly 3x as high were they to have not offered such retirement plan contribution deductions.

 

Yes, it gets taxed one day upon withdrawal, but there is a difference between dodging the 35% on the front end and instead pulling it out at 10% or 15% rate on the back end.

 

 

 

 

 

 

[ERICOPOLY]

If nothing else (even if tax rates the same), the present value of $16,000 taxed at 25% this year vs $16,000 being taxed at 25% in 40 years.

 

In either case, it's a tax bill of $4,000.  But discount $4,000 to the present at... say... 3% annualized.

 

$4,000 isn't exactly going to buy much in 40 years is my guess.

 

To the individual, it's the same either way -- so no cost to the person.  To the government, it's a huge difference.

 

The only time it costs the person anything is if they can't deduct it at 35% and withdraw at say 15% after retirement.  So they lose the benefit of income-shifting into lower tax brackets during retirement years.

 

There is of course a cost to the person (they might be able to invest $200 today and have it grow to $4,000 in 40 years).  But the average person in the debate won't catch it.