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September 20, 2011


“the Obama administration will do its utmost to close the U.S. prison at Guantanamo Bay” -- Eric Holder

Notice, he didn’t say it will close.

I will do my utmost to live forever. Check back later for results.


here's another perspective, at least as it applies to Buffet's poor secretary...

If Buffett cared so much about her, why hasn't he structured her pay package so that she too could receive most of her income in the form of lower-taxed capital gains and dividends? He's the boss, it isn't as if anyone is standing in his way of doing so.

Since he hasn't done so, I can only conclude that he is deliberating screwing her in order to use her as a prop in his and Obama's campaign to raise taxes.


I've always believed that everybody needs some skin in the game, so there should be a $1 minimum tax for everybody.


You can do this by linking the capital gain rate to AGI in some fashion. It's not rocket science in terms of design, which is a good thing because the people proposing this are likely to be the dimmer twirly-lights in the drawer.

Jim Miller

Tom - On this one, I'll have to disagree with you.

Here's a key quote, from your post:

"Middle-class families shouldn’t pay higher taxes than millionaires and billionaires."

That implies that middle class families are paying higher taxes than millionaires and billionaires -- and that Obama's proposals will end that unfair situation.

The qualifiers that you add are simply not there. They may be implicit in Obama's proposal -- but they aren't in his speeches.

And most in his audiences are going to hear that millionaires and billionaires -- as a group -- are paying less than middle class taxpayers.

Captain Hate

I hope people that have Warren Buffett in their dead pools are the next winners.


Well they are a little more useful than this:



Can't you just picture Warren Buffet at a dinner with Obama...they've had a few drinks...big dinner...dessert...a few more drinks and the retire to the Drawing Room for cigars:

WB: I gotta tell you BO that you throw a real nice spread.
BO: Why thank you WB. Did I tell you that you are my favorite businessman?
WB: Naw...but thanks BO. It's really just the tricks of the trade.
BO: Really? Like what?
WB: Well..I set my income up so that most of it comes from capital gains and investments. Heck...I probably pay less than my secretary does in a real tax rate...
BO: We've got to fix that.
WB: Yeah..sure. Hey...speaking of green jobs...you got an extra billion or two to invest in wind farms?


I find it hard to believe that is a legitimate Whitehous.gov link, TM. I do not see “[applause]” anywhere, which may be true. The fact that the text does not have “[laughter]” is the telltale.

Danube of Thought

First, those who make capital gains based on their ownership of shares are taxed (as part owners) at a rate of 35% on the company's income. If they sell the shares they pay an additional tax, but it is not sensible, and is a bit dishonest, to compare that rate, in isolation, with the ordinary income rate paid by the secretary. (I believe this is the double taxation issue TM alludes to).

Second, while it is apparently true that there are some filers (fewer than 2,000) with incomes above 1M who paid no tax, before restructuring the tax code simply for the purpose extracting money from that relative handful of people, it would be highly advisable to examine each of those returns to determine exactly why no tax was paid. In every case, the answer will be that they were doing something that the government, through its various tax incentives, wanted them to do. Does Obama still want people to do whatever that was, or does he want to eliminate the exclusion, or credit, or whatever it was? And if the answer is that he wants to eliminate it for the rich, he must then be willing to see the rich stop doing whatever it was that, up to now, the government has encouraged them to do.

I don't think he has devoted a great deal of thought to these matters.

Danube of Thought

Let me put it more simply: would it be to much to ask that this infuriating bastard tell us--just this once--exactly what it is he is proposing? If he is propsing the elimination of some tax deductions, credits, exemptions or exclusions, which ones are they?


i agree with the above comments. obama knows what he's doing when he implies that millionaires pay lower tax rates than the middle class, any specificity regarding capital gains is willfully excluded. but even worse is the notion that capital gains' lower rates is some egregious loophole exploited by the extravagantly wealthy. i'd say of all the "tax loopholes" in the current tax system, capital gains is actually the least and more correctly not a loophole at all if we consider the moral question of tax policy mentioned in the post regarding multiple taxation of the same income.


He's campaigning, DoT, that's what he doing. He hasn't a clue.


--You can do this by linking the capital gain rate to AGI in some fashion.--

Indeed, and I imagine the number of people exceeding that magic number will drop precipitously even though they will be just about as rich as they were before. They'll just shelter or not realize their gains thereby distorting investment decisions even further; salve for a weak economy.

At the risk of getting the IRS on my tail again, even someone as relatively unsophisticated as I am as an individual, can quite legally manipulate my earnings so that I pay close to zero income tax.
If the rate were low enough I wouldn't bother with the burdensome mechanisms needed to do so.
If not well........
I was audited for the years I was most aggressive in shielding income and ended up with a refund from the IRS.
The fact is you either have a low cap gains rate and get lots of activity and revenue or you do something stupid that no one will pay, other than a few fools and end up with less revenue and less growth. Those are the two choices, unless one eliminates the cap gains tax altogether as some countries do.

Dave (in MA)



Does Obama still want people to do whatever that was, or does he want to eliminate the exclusion, or credit, or whatever it was? And if the answer is that he wants to eliminate it for the rich, he must then be willing to see the rich stop doing whatever it was that, up to now, the government has encouraged them to do.

I believe he wants to shake them down for campaign donations.

As for the cap gains tax, as was discussed a few days go, this is essentially a tax that is levied on top of the income tax. One invests using after-tax income and then gets taxed earnings from that.


Dave in Ma-- you can't say that. People will die.

Rob Crawford

How about we just tax all income at the capital gains rate, regardless of your level of income?


The way Obama uses the word "income" in his demogoguing could not be more disingenuous. He speaks as though salary income, dividend income, and capital gains are all exactly the same thing.

The purpose of his muddying the waters is to cover up that he is trying to institute his belief that people who invest and risk their capital in growing the economy should have no tax advantages over workers who earn their salaries by the sweat of their brow.

That's his bottom line.


Principle, not principal:

"To respond, as the AP does, that most millionaires (or the average millionaire) is in compliance with that higher-taxes principal is not relevant."


Let's see what his contributions are now from the silicon valley hotshots who all have structured as much of their income as capital gains as is legal and possible.

Rob Crawford

Oh, and in unrelated news, my search for vacation/future home site land has taken become urgent with the news that Disney is going to sully WDW with an "Avatard" themed section at the Animal Kingdom park.


((How about we just tax all income at the capital gains rate, regardless of your level of income?))

I'd be philosophically opposed to that even-handed approach because I believe people who invest their already-taxed capital into the economy deserve a little extra reward for their risk-taking and contribution.


Why doesn't Berkshire Hathaway pay a dividend, Warren? Huh? Cat got your tongue, you effing hypocrite?

Rob Crawford

I can see that, Chubby.


Where there is smoke, . .


Melinda Romanoff


Solyndra execs refuse to testify in front of Issa.


Very interesting, Mel.


Apparently they can't their lies, I mean stories straight. In news North of the border:



More on Solyndra execs - they are going to plead the fifth. See LUN.


As for TM's post, point made. But I think the AP was trying to give Obama the benefit of the doubt that his big idea actually addresses a big problem.

Danube of Thought

It's true, Jimmyk, that the capital investment is made with after-tax income, and that a second tax is levied upon the sale--just as the estate consists of after-tax monry that is taxed again at death. But it's also true, at least in the case of equity securities, that the holder is taxed throughout the period he owns the securities. It's just that the corporate officers administer the payment on behalf of the shareholders.


Ace points out this interesting detail, about
Obama's investment habits


Rick Ballard

I hope Issa explores the possibility of granting immunity to the Solyndra execs. The FBI raid gives them perfect justification for pleading the Fifth and I would never contemplate the possibility that a totally politicized DoJ would hesitate to provide cover for the pack of jackals currently ensconced in the West Wing.

C'mon, Issa, immunize them. I wanna hear all about the WH push for photo ops and all the attempts to flog the dead horse forward at any cost - to US taxpayers.

Danube of Thought

Why some millionaires pay no income tax.

Danube of Thought

I don't think Issa can ask a court to grant them immunity without a two-thirds vote of his committee, and I doubt he can get it.


Stiles at NRO reports that the Soylndra officials now pleading the 5th, earlier told the committee they would testify if given adequate time to prepare. They were given the time they requested and then , nevertheless, pleaded the 5th. Stik a fork in Obama this one has everything the public likes and can understand in a scandal and is a shiv in the heart of his spendarama.

Rick Ballard


Then the tactic switches to a public discussion of the grant of immunity followed by a vote. If the Dems vote against immunity then Solyndra becomes Enron + Abramoff. I think I'd go with a proposal to grant immunity only to the CFO at this point. If they broke any laws the CEO could still be hanged. Next to Chu.


Why do otherwise smart people, assume facts not in evidence:


Danube of Thought

I hope he goes that way, RB. I'll have to check to see who the Dems are on the committee.

I agree, Clarice--the legs on this thing are lengthening.

Danube of Thought

There are 23 GOP and 17 Dems, so he'd need four to cross over. Can't cut and paste the names, but one is Kucinich who very well might. Don't know much about the others, except Elijah Cummings and Eleanor Holmes Norton (I also don't know whether she counts for the purposes of the two-thirds; he may need only three).

Melinda Romanoff


A really, really bad fractional joke leaps to mind...

Captain Hate


Danube of Thought

Do tell, Mel.


I object to the notion that it's immoral for the rich to pay the same tax rate as the less affluent.

My son's new Social Studies teacher made this same claim during the first day of school this year, even using the word "immoral," but the boy was already prepared to be dubious. And here's why...

When I first explained taxes to him, I used the example of snow plowing. I asked him if everyone on the street should chip in and pay for the street to be plowed after a snowfall, since each home had the same interest in getting the snow plowed. Of course, he agreed. Then I asked if it would be "fair" for the government to force the higher-income people to pay more for snow plowing than the lower-income families. I was careful not to feed him a particular response, but he thought it wouldn't be fair.

Neither do I.

I did also ask if if would be "fair" - assuming there were truly poor people who lived on the street, who couldn't afford the snow plowing fee - for the government to force the other people to cover them so that they wouldn't have to pay anything. He thought not: that it should be voluntary for the rest of the people to cover the poor ones, but otherwise everyone should have to pay, regardless of wealth.

At that point I explained that snow-plowing taxes are levied based on the value of people's homes, which he found surprising. I added (since his mother, who lives in my ex-architectural masterpiece, has a nice pool) that people with pools have to pay even more.

This didn't sit well with him, and it doesn't sit well with me when liberals try to make this a moral argument, since it's not.

It would be moral for everyone to pay the same absolute value of taxes. Anything else is politics.


From the article:

"This year, households making more than $1 million will pay an average of 29.1 percent of their income in federal taxes, including income taxes and payroll taxes, according to the Tax Policy Center, a Washington think tank.

Households making between $50,000 and $75,000 will pay 15 percent of their income in federal taxes.

Lower-income households will pay less. For example, households making between $40,000 and $50,000 will pay an average of 12.5 percent of their income in federal taxes. Households making between $20,000 and $30,000 will pay 5.7 percent."

Answers Obama pretty effectively in my opinion.


What Danube said, though I suspect that almost everyone who "made over a million dollars and paid no tax" paid no tax because they were carrying forward previous year losses from investment or business.

We might decide, as a nation, that allowing people to deduct (or carry forward such deductions) investment or personal business losses is a bad idea*, but I'm unaware of any way that someone can make am illion dollars in real income and pay no Federal income taxes at all apart from that.

(* I think doing so would be a bad idea, because I think investments are good, and letting people deduct losses is the natural inverse of taxing them on gains.)


Should be an annual tax on accumulated money. Not income. On total.

Say Bill Gates is worth $40 Billion. A 2.5% tax on that would be $1 Billion.

And of course that would be per year. Further, it should be apply on Non-profits, such as Ford, Heinz, Joyce, and Harvard.

I don't know if 2.5% would be the right amount.

What is the net worth of the US? Annual GDP is $13 trillion, so lets pretent that net worth in private hands is $120 trillion. 2.5% of $120 trillion would be $3 Trillion. That is just about the same as the federal annual budget.

If you have no savings, no stock, no property, then you pay zero.


Why are there taxes on capital gains? Why are those taxes lower? Why do we want people to invest in our companies? Who pays capital gains taxes? When there's are lower capital gains rate does the government take in more money? Why does Warren Buffett only claim $200,000 as income to pay the higher rate on and the rest of it at the capital gains rate? Why doesn't Warren Buffett claim $1,000,000 at the higher rate and the rest at the capital gains rate, if he wants to pay more in taxes?

This is all such a joke. Without serious tax reform, there is no sense playing with rates, etc.

Danube of Thought

Questiosn for Mr. Obama:

Mrs. Jones suffered a $1 million capital loss in 2009. This year she realized a gain of $1 million. Should she not be allowed to carry the loss forward and offset it against the gain?

If the number in each case were $10,000 instead of $1 million, would your answer be the same? Why or why not?


Answers Obama pretty effectively in my opinion.

Not only that, but most of what the lower income groups pay is the payroll tax, which to some extent is offset by implied future SS benefits. (Yes, this is a controversial point, but I don't buy the argument that payroll taxes should be 100% lumped together with other taxes, especially for lower income groups.)

DonM, you're just making up numbers here. Total net worth is more like $60 trillion, not $120 trillion, and a lot of that is in illiquid assets like real estate, and most of it would be subject to capital gains taxes. Beyond the practical problems, confiscating people's wealth is a downright wacky and dangerous proposition.

Andy Freeman

Warren Buffet is correct - he should pay higher taxes. However, none of his proposals actually affect him - most of them hit other people and "just happen" to benefit him. (The estate tax which he likes so much puts money in his pocket. Meanwhile, almost none of his estate will be taxed.)

I suggest a 5% tax on unrealized equity capital gains over 5 years old for both individuals and companies.

Buffet has about $50B of such gains, so he gets to pay $2.5B. Of course, he can avoid this tax by realizing his gains.


Sorry, no. You're completely off base. By retelling the example of Beuffett's secretary its not about the less than 10% who pay a smaller rate. First off this assumes everyone in the lower brackets pay the full rate. They don't. Second you cannot take a random example and apply it to the whole or majority which is what Obama does and then act like you are only talking about the vast minority.

Danube of Thought

"Should be an annual tax on accumulated money."

Would require a constitutional amendment, and it is such a stupid idea that its chance of happening is zero.


If you're "cutting" to the WH for clarification on the lies this bastard proposes, then you are an idiot. The "smoke and mirrors politics" is about to come crashing down around this President and those in media (and other places) that helped elect this buffon. Too many who supported him are suffering, and their memory of his effects won't be erased with a few simple jabs from TOTUS.


You are right that while the rich as a class do indeed pay generally higher taxes, some of the rich, that Obama was referencing, like Buffett, do not, because of the lower capital gains rate. But this does not make Obamas proposal fair.

Obamas idea of tax reform might be good, except he is not really talking about tax reform, but tax hikes. Real tax reform would be revenue neutral. It would use any funds gained by closing out loopholes, like the lower capital gains rate, to lower rates in general, especially for the top brackets that benefit most from the loopholes. This would still result in the top bracket paying most of the taxes, but there would be less variability, nobody like Buffet would get special breaks, but many of them who had been paying the top rates, would pay slightly less. Repubs like Ryan have indeed proposed this. But Obama has not, his calls for tax reform, without revenue neutrality, are a disguised call for tax hikes.

Ralph L

A really, really bad fractional joke leaps to mind...
Posted by: Melinda Romanoff
I imagine it involves three fifths, and I don't mean bottles of Scotch.


If Obama wants to cite "the favorable capital gains rate", I suppose I can go along with him.

But if he wants to raise that "favorable rate" he should index the gain for inflation. I bought a townhouse in about 1985 for $85 thousand. I sold that townhouse in 2008 for $185 thousand. Anybody who thinks I made a hundred thousand dollars on the deal, and wants to tax me for it, is an economic ignoramus. And I really, really do not want him meddling in my governance.


Tom McGuire,

If it pains you, you probably shouldn't do it because you first instinct was right.

Obama also said that by closing that loophole and ending the Bush high end tax cuts he would bring in $1.5 Trillion in 10 years.

The Bush tax cuts would only bring in $80 Billion. That leaves $70 Billion Obama is promising on the appox. 3,500 Americans who have only capital gains or carried interest income.

The numbers don't add up.


One issue that many people forget about is inflation. Capital Gains Tax is not indexed for inflation. So it is perfectly possible for you to sell a long held stock for a 100%+ book profit but have negative true return.


My happy compromise: totally eliminate corporate tax. THEN, we can eliminate all tax-advantaged rates on cap gains and dividends, having now dispensed with the double-taxation economists dislike so much.

That should make everyone happy and bring tons of jobs to the US. Though I suppose it'll just piss everyone off.


What Obama wants to eliminate is the only source of income elderly Americans have other than Social Security. Near-zero interest on savings - check. Capital gains and dividends taxed at income tax rates - check. So what's left? Government bonds that probably aren't worth much more than the paper they're not printed on anymore...


--My happy compromise: totally eliminate corporate tax. THEN, we can eliminate all tax-advantaged rates on cap gains and dividends--

My even happier compromise: totally eliminate corporate, capital gains, dividends and "unearned" income tax.
Replace with flat income tax or national sales tax and no deductions with the possible exception of charitable ones.
Presto, no more tax caused distortions of investments or economic activity.


I agree with Jim Miller. Obama wants everyone to think that Buffet is typical and that all, or at least most millionares pay less than the middle class. But it's interesting listening to Buffet. It's not even clear if Buffet is being disengenous. He says his secretary has a higher tax rate, let's say 25% if she's making 75K. But he means marginal rates, but is not saying it. He knows better. And Buffet pays 15% capital gains. But her effective tax rate is probably below 15%. So her marginal tax rate might be higher but her effective rate is probably less.


Tom, I can't agree with you entirely on this.

Yes, of course, Mr. Obama is not explicitly saying that all rich folks pay taxes at a higher rate than their secretaries. But does anyone doubt that the President wants Americans to believe that this Buffett-style tax inequity is widespread and evidence of a system that's corrupt and stacked in favor of the rich?

The AP piece rightly focuses not on what Obama's explicit words are, but rather, the impression he is trying to implant in the collective pyche of the American electorate.


S-Corporations and LLCs are not double-taxed. A capital gain from an S-Corp or an LLC is taxed at 15%, once.

And, as we know, many large C-Corporations pay no tax at all. The double-tax issue is a red herring.

I don't understand why I should pay a higher rate for working than an S-Corp or LLC owner pays for capital gains. I'm not asking for the S-Corp owner to have a higher rate, just the same rate. As it was under Reagan, when the highest income rate and the capital gains rate were both 28%.

If a low capitals gains tax rate was such a job creator, we wouldn't be sitting on 9% unemployment. We have a decade of evidence that tells us it doesn't have the claimed effect.

Danube of Thought

"A capital gain from an S-Corp or an LLC is taxed at 15%, once."

At what rate is S-Corp and LLC income taxed? Last I knew, it was at ordinary income rates. The owners get taxed at that rate as long as they are owners, and then when they sell get taxed on whatever added value the after-tax income has added to the enterprise.

East Bay Jay

I've seen it stated that Mr. Buffet's secretary makes $60,000. No, not per month, per year.

I thought I was cheap.


I wonder if he lines his shoes with pages from the New York Times.



Yes, the income from an S-Corp or LLC is taxed at ordinary income rates (and is not double-taxed). The capital gain of selling all or part of the company, whenever that happens, is taxed at capital gains rates (and is not double-taxed).

Walter Sobchak

Tom: I think you have over analyzed Hussein's speech. Clearly it was not meant to be an economic analysis or legislative language. It was an outpouring of emotion intended to rouse the base. I think he really meant to insinuate that "millionaires and billionaires" don't pay their fair share because the evil Bush tax cuts let them use Jedi mind tricks.

The AP's response is to throw cold water on the overheated rhetoric by bring some mere facts to the table. I think they are right to do so.

If you want the raw numbers, try this page:


ABO 2012

Interesting that he'd go the "fair share" route when over 40% aren't paying any income tax. Unless they make no use of government funded services, there's the more prevalent inequity. Perhaps everyone could have swipe cards that, based on income/wealth, determine what sales tax to rate to apply to the purchase. Actually, logic would suggest that after one makes a certain amount of taxable income, the fair share of supporting government (citizenry toll) would be met and anything above that would be untouched. That would still essentially be "progressive". If you really want to go fair share, you could argue that lower incomes should be taxed higher than higher incomes..in an attempt to get low income citizens to pay their "fair share". But that's logical thought, not political.


Perhaps, in an effort to set the minimum tax, we should consider that favorite of the Progressive crowd, comparable worth.
As and example, let's consider all graduating JD's from Harvard Law School in 1992. We take the average salary of this group, then set a minimum based on that.
Sounds quite simple and fair. Who would object ?


The Constitution once prohibited these taxes: "No Capitation, or other direct, Tax shall be laid, unless in Proportion to the Census or enumeration herein before directed to be taken."

That means each citizen, being equal, in direct taxation (that is, income taxes), had to be taxed equally. Repeal the 16th amendment.


"" The average for the two men, after imposition of a minimum rate on one of them, will be 37.5%. In this example, the Indiviglio method would have projected additional revenue of $100,000 (5% of $2 million). However, the actual revenue increase would be $150,000 (15% on Smith's million plus nothing new from Johnson.)""

Nice try. And what would the revenue be if Smith and Johnson took their money out of investments, along with 5 million other people and the stock market drops 40%?

Where's your revenue now?

Jeff H

Why on earth does anyone with more than a single lonely brain cell think that the fox can secure the hen house?

Obama and his slimy ilk in control of Congress for the last 6 years have created a hugely disproportionate share of the current deficit. They are morally and ethically disqualified to have any part in attempting to solve the problem.

When does the armed revolution start and where can I sign up?


On average, yes. But the AP makes it up on volume.

John E

Tom, I have to disagree with you in part -- yes, Obama seems to be only claiming that some rich folk pay lower tax rates than does their help, but then he always takes a step further and demands that the wealthiest pay their "fair share."

So even if he isn't directly claiming all the rich are paying less than the middle class, he's certainly claiming that the rich are undertaxed, and the Buffet example is part of the whole rhetorical move.

I'm studying Shakespeare's Richard II with my students now, and the part where Richard seizes the estates of Lancaster seem eerily familiar.

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