Author Topic: Re: Klarman worried about political divide  (Read 19430 times)

Tim Eriksen

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 804
Re: Klarman worried about political divide
« Reply #50 on: January 22, 2019, 05:01:50 PM »
The effective rate combined (federal state and local) in the 1950's for the top 1% was 42%.  In 2014 it was just over 36%.   
https://taxfoundation.org/taxes-rich-1950-not-high/

Please people do your homework and understand that the wealthy incorporated in the 50's to 70s in order to lower their taxes since the corporate rate was much lower.   LT Cap gains rate was 25%.   

Sadly people do not realize that it is a myth that the rich are not paying taxes.  Buffett paid way more than his secretary too.   


Gregmal

  • Hero Member
  • *****
  • Posts: 4159
Re: Klarman worried about political divide
« Reply #51 on: January 22, 2019, 05:03:52 PM »
But LC said they did!

meiroy

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 1121
Re: Klarman worried about political divide
« Reply #52 on: January 22, 2019, 05:17:23 PM »


In the real world, extreme wealth is anti-capitalistic.  In the real world, such wealth, by itself, has a tremendous competitive advantage on so many levels. It distorts the capitalistic economy and destroys competition and market efficiency.

Again, this is how it is in the real world, where the USA is not a closed economy and the markets are not strongly efficient.

Ironically, her proposals are the result of the same cause that got Trump into power.  The pendulum simply swings to the other extreme, until the underlying cause is fixed.



 

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3986
Re: Klarman worried about political divide
« Reply #53 on: January 22, 2019, 05:18:25 PM »
For the folks against a higher marginal tax at the top levels, let's look at it this way.

Do you think that a professional athlete would say "Nah, I'm going to work as a teacher since I'm paying 70% of taxes on my income over $10 million?" or still do the job?

Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I'm extremely skeptical about how much taxes impact people's work/career decisions.

I'd love a scenario where it would be illegal (or perhaps higher taxes) for the higher ups of a company to be capped at certain amount per median employee salary - let's say 150x.

Further, a lot of their compensation would be tied into company stock they couldn't sell for 5 or 10 years. And guess what, virtually every CEO would start thinking about things more long term because of that.

We could then take those funds and higher more teachers, or build better bridges, etc. Instead we're just getting more and more of a national debt until who knows when.

Do you think society would be better off with these things?

I do agree with Klarman that one day they'll be serious consequences to all of that. That could be another 10 or 20+ years though. who knows?

Clearly we are not even close to being in agreement.  Do you want to reduce the deficit or add more teachers??  Do we even need more teachers?  I understand infrastructure needs.  Spending it doesn't change the deficit.   Let's see 70% federal rate means about 83% total rate for California or NY City residents.  Might as well have payroll tax on full amount too and push it over 90%.

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation?   

Well, we could do both, couldn't we? I didn't say all of the savings had to be spent on teachers or infrastructure. I also never said anything about taxing capital gains at a 70% rate.
Paul

stahleyp

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3986
Re: Klarman worried about political divide
« Reply #54 on: January 22, 2019, 05:21:15 PM »
Do you think a person would turn down a CEO job in the same scenario? Have you ever not taken a higher paying jobs due to higher marginal taxes?

Do you really think society will be worse off?

I think the larger risk is that society gradually reconfigures in response to excessive tax rates and lowers productivity not by changing what jobs people choose to do, but how much of the job they choose to do in a year.

We're currently in a world where there is a -very- strong social norm of working a 40+ hour work week in most high-status professions. In most of those jobs, you could dramatically raise your after-tax per-hour compensation by cutting your hours-worked from 40 to 20 a week. Especially interesting is that these sort of jobs tend to be those "knowledge economy" type jobs where it's actually totally feasible to give people flexible/non-standard schedules. In practice, however, there's generally a lot of institutional inertia that prevents these sort of arrangements from surfacing. In a certain large physician group I'm familiar with, there is an explicit option for working a 50% schedule, but in practice it is culturally unsupported, with really strange organizational burdens placed on those opting-in. A physician in this market moving from full-time to half-time would cut their hours in half, but maybe reduce their after-tax comp by only 30%, something that strikes me as a pretty compelling value already, as rates stand today.

Some physicians play this game already in another form: they work a few weeks or months at a time, then go on vacation for a like amount of time. Effectively working half-time, all the while I keep hearing people complain about doctor shortages.

But at some unknowable tax rate at some unpredictable bracket, you create enough pressure that all of these institutions overcome the rolling resistance and begin re-orienting to the new world. This might be a "slowly at first, then all at once" situation and I don't see people consider it very seriously. It seems to me we live in a very interesting world where we've sort of tricked a lot of highly capable people to work themselves to the bone, and I'd be nervous about disrupting that equilibrium.

What physicians are making $10 million a year?
Paul

Gregmal

  • Hero Member
  • *****
  • Posts: 4159
Re: Klarman worried about political divide
« Reply #55 on: January 22, 2019, 05:21:54 PM »
I'd also add, as I scroll through various news feeds and keep seeing Klarman's headlines, that I can't help but think that sometimes these guys just need to shut up. Klarman is another one of the many that for the past while couldn't hit the broad side of a barn. He's another one of those guys who we've talked about here in the investing forum who's performance of late is terrible. His last top 5 longs are FOX, LNG, AGN, VSAT, and a whole bunch of recently purchased PCG. In other words, he's continued to suck big time. It's hard not to get the feeling that these opinion pieces are just thinly veiled excuses for being wrong and distractions for investors.

Schwab711

  • Hero Member
  • *****
  • Posts: 1814
Re: Klarman worried about political divide
« Reply #56 on: January 22, 2019, 05:27:06 PM »
The effective rate combined (federal state and local) in the 1950's for the top 1% was 42%.  In 2014 it was just over 36%.   
https://taxfoundation.org/taxes-rich-1950-not-high/

Please people do your homework and understand that the wealthy incorporated in the 50's to 70s in order to lower their taxes since the corporate rate was much lower.   LT Cap gains rate was 25%.   

Sadly people do not realize that it is a myth that the rich are not paying taxes.  Buffett paid way more than his secretary too.   


They obviously pay taxes. Due to the income levels being discussed, they obviously pay a large nominal amount. Tax fraud is also a major problem in the US and I think that's what most of the frustration around tax rates comes down to.

This thread feels like my days programming. Some non-programming manager requests something. I would build it and they said that's not what they want. I'd tell them that's what they asked for and this back-and-forth would continue. At some point, I had to realize what they wanted my not always be what they are asking for.

The question is not "what's the ideal tax structure". We aren't heading down that path in this thread and it's probably too complicated of a question to answer in this format. We should be asking why are folks on each side upset and what is the problem that underlies that frustration. One of the counters to high marginal rates is it's hard to enforce - so why punish those that follow the law with higher rates. Part of the reason folks want higher rates is because of the high rate of tax avoidance in the US (which is being polite considering how many 'avoidance maneuvers' are almost certainly illegal). If there was a higher rate of enforcing obvious tax violations, there would probably be less desire to raise taxes and punish rich/corporations. Both sides of this thread and both political parties probably want the same outcome, better tax law enforcement.
« Last Edit: January 22, 2019, 05:44:13 PM by Schwab711 »

Cardboard

  • Lifetime Member
  • Hero Member
  • *****
  • Posts: 3356
Re: Klarman worried about political divide
« Reply #57 on: January 22, 2019, 06:49:52 PM »
"If there was a higher rate of enforcing obvious tax violations, there would probably be less desire to raise taxes and punish rich/corporations. Both sides of this thread and both political parties probably want the same outcome, better tax law enforcement."

Now that is smart! That is fairness!

Unfortunately, what Ocasio-Cortez and some of the Left (not even mentioning extreme Left anymore since they are now all extreme) want is to really play class warfare. They want to extract every dime possible from the rich. It is a sin to be rich according to them.

Same game that they play with woman, LGBT, blacks, etc. Divide and conquer. And if you disagree with us on how we want to proceed you are on the wrong side obviously. Demonize them.

If you carefully listen to them, and maybe it is because they are uneducated, what they are talking about is really asset confiscation. It is not income inequality. She mentioned: "If we allow billionaires to exist..." Does that not ring a bell?

A guy like Buffett has effectively no income relative to his wealth. You can say something similar for Bezos and Gates. What these guys have are stocks in their own company. They started a business, it has become very successful and they are worth a fortune... on paper.

Now I don't disagree that this "paper" is true wealth. However, it is not like this is cash. If you want to tax that wealth then you need to force a sale and for that you need some really rich people to buy it from them. Even if you were to tax the increase, these people would also be forced to sell stock to pay for these taxes. Again you need buyers with a lot of money.

Not sure what is the exact economic impact but, obviously that money now has to be used to buy shares of BRK, AMZN and MSFT vs doing something else.

Some will say: "Nah, that is not what we are talking about" Then what are we talking about really? Just taxing the people that realize their gains, the athletes or CEO's?

Then you are not really impacting at all billionaires.

Cardboard


LC

  • Hero Member
  • *****
  • Posts: 4910
Re: Klarman worried about political divide
« Reply #58 on: January 22, 2019, 07:35:29 PM »
If there was a higher rate of enforcing obvious tax violations, there would probably be less desire to raise taxes and punish rich/corporations. Both sides of this thread and both political parties probably want the same outcome, better tax law enforcement.
I think all would love to see real tax reform and real tax enforcement.

It is difficult to do when the President is slashing IRS funding, and Congress refuses to pass tax reform.

It is also difficult to do when many of the wealthiest families in the country are consistently lobbying for tax cuts, tax loopholes, etc. and the government does not hold them to task. It is plutocracy in action.
"Lethargy bordering on sloth remains the cornerstone of our investment style."
----------------------------------------------------------------------------------------
akam| brk.b | goog | irm | lyv | net | nlsn | pm | ssd | t | tfsl | v | wfc | xom

Gregmal

  • Hero Member
  • *****
  • Posts: 4159
Re: Klarman worried about political divide
« Reply #59 on: January 22, 2019, 08:01:34 PM »
Quote
This socialist crap taking a hold on the world more and more is scary as hell. Yes, let's make it less desirable to go through the difficulties and years of hard work to be successful by allowing those that succeed to keep less and less of it. And oh wait, here's the kicker, let's allow politicians, the least ethical of all humans, to decide how it is redistributed. I'm sure they won't take advantage of their position cause that never happened in history ever.

Quote

Would you risk capital in a business enterprise if you were already rich if you could lose your investment and the upside is only 15 or 20% of the pre-tax profit?  If no, what impact would that have on job creation? 

This is the main issue and something that just doesn't resonate with the pee ons because it is so farfetched to even imagine being in that position. They can't conceive it. Much easier to think "gee, doesn't come out of my pocket, and might go into my pocket. GREAT RISK/REWARD!"...

The top bracket tax rate was 70+% during the following decades:
1950s
1960s
1970s
A portion of the 1980s

These were the golden age of socialism in the USA, right watchwoord?

And nobody ever invested during those years, right Greg? Imagine! We almost missed out on Warren Buffett because he was playing the ukulele during those high-tax years.

LC you were called out about how egregiously incorrect this was. Care to comment?