‘Buffett Rule’ on U.S. Taxes Seen as Easier Said Than Done

[steve2470]

http://www.businessweek.com/news/2011-09-20/-buffett-rule-on-u-s-taxes-seen-as-easier-said-than-done.html

Sept. 20 (Bloomberg) -- Turning the “Buffett rule” proposed yesterday by President Barack Obama from a political concept into real-world tax policy aimed at the highest-earning U.S. households will prove logistically and mathematically difficult.

The concept, named for billionaire investor Warren Buffett, would require Americans earning more than $1 million a year to pay at least the same tax rate as middle-class households. Constructing such a rule would be tricky because high earners aren’t the only taxpayers benefiting from breaks; many middle- income families use deductions, credits and exemptions to drive their rates below the 17.4 percent that Buffett says he pays.

For now, the Buffett rule is less of a concrete legislative proposal and more of a political talking point that has elicited Republican cries of “class warfare.” Democrats defended the idea and urged Congress to adopt it in designing a new tax system.

“We’re not going to give the Congress a detailed proposal for how to meet that principle because we think there are a bunch of different ways to do that,” said Treasury Secretary Timothy Geithner, adding that the details of the rule would depend on the rest of the structure of a revamped tax code.

[Warren DeMontague]

1. Laws an' shit are HARD, maaaaan!

I mean, not the kind of laws that involve dragging cancer grannies off to prison for getting high... those are EASY to do!!!

[Yupster]

2. So if I'm a retired billionaire

and I put my billion into tax free bonds, then I get $ 50 million a year tax free interest.

Now how am I going to get up to a 30 % tax bracket?

It will be school districts, hospitals, cities and airports screaming if you start messing with tax free bonds.

[Warren DeMontague]

3. If all that money was going into, say, tax-free munis

we wouldn't have the infrastructure issues we do, I would think.

[Yupster]

5. That's where rich people put their money

Isn't it where you'd put yours?

Very safe, 5 % dividends, completely tax free.

[Warren DeMontague]

7. I guess I'm old fashioned, if I was anything approaching "rich" I would go for a balanced portfolio.

Certainly, tax free municipals are a good part of any diversification strategy IMHO. But I strongly doubt that "rich people" are putting anything close to all their money in 'em. On the upside, they DO fund things like hospitals and other crucial infrastructure, so I suppose that's the plus.

Although, really... 5%? I'm not an expert but that sounds a little high for the returns.

[Yupster]

8. Just walk into your local stockbrokers office

and ask for A rated muni bonds and there should be some at 5 %.

Even better if you're willing to loan to one of the basketcase states like California, Illinois or Nevada. Usually some of those at 5.5 %.

So let's say you sell your small business for $ 10 million and retire.

How about $ 9 million in muni bonds and $ 1 million in stocks and gold.

That would get you $ 450,000 per year tax free dividends. You'd maybe have $ 20,000 a year in taxable dividends and pretty much no capital gains most years.

So your effective tax rate would be about 2 %.

Is this guy doing anything wrong?

Is there any reason for him to take more risk than this?

I wouldn't if I was him. A lifetime income of $ 450,000 tax free sounds good enough to me.

[Warren DeMontague]

9. None of the 'small business owners' I've known who could walk away with anything like 10 Million

(probably one I can think of, that's about it) simply wouldn't invest that conservatively. They wouldn't. I think it's the personality type.

Is the guy doing anything 'wrong'? No. It's his money, he can invest it how he wants.

Is there any reason for him to take more risk than this? Some people might not, but at least the type-a small business owner personality types I've met probably would, because where you and I would be comfortable with that $450,000, they would be chafing at their shorts over all the money they weren't making.

It's the same psychological mindset that makes it hard for high rollers to leave the casino.

[Modern_Matthew]

4. I'm neither middle, nor high income...

Now where's my tiny violin?

[applegrove]

6. Regardless of whether or not it passes Obama wins. He either has

an election issue to run on if the House refuses to pass it or if they do accept tax increases then he has a big win to add to his health care and Osama bin Laden and financial reform successes. It is great to see Obama in the thick of the fight once again. He looks good there.