Open Letter from William H. Gross

[CrusaderFrank]

Government has no respect for taxpayer money no matter who it comes from, so no.

 

[Dot Com]

are taxes at anywhere near an historic high?

 

[CrusaderFrank]

are taxes at anywhere near an historic high?

Government spending is

 

[Dot Com]

are taxes at anywhere near an historic high?

Government spending is

it is?

 

[Trajan]

I think the terms are hiding to an extent the debate, my analogy may suck but I'll try; its like the head of a law firm being given an out on the money the firm makes that he takes a part of , there by forgoing taxes on that 'income'.

Carried interest is profit allocation. It's a bonus for the profits you make. Typically, carried interest is 20%. So if you give the manager your money and he earns 10%, you get 8% and he gets 2%. It's your capital he risks, yet the tax code pretends its the money manager's money.

In every other industry, that 2% bonus to the money manager is taxed as income. In finance, it's taxed as capital gains.

yes, I understand, I was just trying find to another way to describe it.

I can add to my law firm analogy by saying the head of the firm still gets a piece of the billable hours, even if the case tanks and they get no share of a settlement, ergo- IF they loses the case they still get the billable hours or keep the retainer cash and on top of that he pays a different rate from say a co. they won for......he can only win.

 

[Trajan]

are taxes at anywhere near an historic high?

that depends on how you slice it, if you're going to use that ole 90% marginal rate gig, no, but......


you tell me

 

[BDBoop]

are taxes at anywhere near an historic high?

Nope. Nor is government spending.

 

[C_Clayton_Jones]

But (mostly you guys) acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, “build that,” you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions.

Indeed.

Time for pragmatism and honesty, as opposed to dogma and rhetoric.

 

[CrusaderFrank]

are taxes at anywhere near an historic high?

Nope. Nor is government spending.

^ Obama Context Filter distorts reality

 

[Toro]

I think the terms are hiding to an extent the debate, my analogy may suck but I'll try; its like the head of a law firm being given an out on the money the firm makes that he takes a part of , there by forgoing taxes on that 'income'.

Carried interest is profit allocation. It's a bonus for the profits you make. Typically, carried interest is 20%. So if you give the manager your money and he earns 10%, you get 8% and he gets 2%. It's your capital he risks, yet the tax code pretends its the money manager's money.

In every other industry, that 2% bonus to the money manager is taxed as income. In finance, it's taxed as capital gains.

yes, I understand, I was just trying find to another way to describe it.

I can add to my law firm analogy by saying the head of the firm still gets a piece of the billable hours, even if the case tanks and they get no share of a settlement, ergo- IF they loses the case they still get the billable hours or keep the retainer cash and on top of that he pays a different rate from say a co. they won for......he can only win.

A better legal analogy is carried interest is like a contingent fee. If the lawyer loses the suit, he get nothing. If he wins, he gets X%.

 

[expat_panama]

...I said "carried interest."

--and that makes twice you've appeared to call for higher vengeance taxes at the expense of general economic well being and reduction of general revenue. Look, you're the one trying to get your hands on my money. You either convince me that it's for something I want or you can't have it.

 

[expat_panama]

are taxes at anywhere near an historic high?

Nope. Nor is government spending.

Arguing is easy, doesn't get anywhere, and it can't pay bills. Say what you want about the budget, the fact remains that even though tax rates have soared beyond Clintonian levels to included massive crippling ACA tax hikes, tax revenues are still a $T behind where they would have been without the recession that came with the 110th congress.

On top of that, spending hikes now total more than $4T above pre-recession levels. There's no arguing the fact that new borrowing in this time frame has almost doubled the national debt.

 

[william the wie]

interest should be taxed

Yeah, that'll show 'em. Just like cap gains taxes. Back in '08 candidtate Ob. was asked why he liked capgains taxes even if they reduced revenue. He answered saying "It's a matter of fairness".

Taxing interest reduces the money supply and that deflates the economy and that reduces revenue.

So does financial repression by the same reasoning.

 

[Quantum Windbag]

PIMCO | Investment Outlook - Scrooge McDucks

Still, I would ask the Scrooge McDucks of the world who so vehemently criticize what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income, to consider this: Instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1% pay, consider how much of the national income you’ve been privileged to make. In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled from 10% in the 1970s to 20% today. Admit that you, and I and others in the magnificent “1%” grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living. Yes I know many of you money people worked hard as did I, and you survived and prospered where others did not. A fair economic system should always allow for an opportunity to succeed. Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, “build that,” you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions. You’ll still be able to attend those charity galas and demonstrate your benevolence and philanthropic character to your admiring public. You’ll just have to write a little bit smaller check. Scrooge McDuck would complain but then he’s swimming in it, and can afford to duck paddle to a shallower end for a while. If you’re in the privileged 1%, you should be paddling right alongside and willing to support higher taxes on carried interest, and certainly capital gains readjusted to existing marginal income tax rates. Stanley Druckenmiller and Warren Buffett have recently advocated similar proposals. The era of taxing “capital” at lower rates than “labor” should now end.

I would love for everybody to read this missive word-for-word, and then comment.

Yeah. I know.

But it would be nice.

Want to know why he is being as dishonest as Buffet was when he advocated it? Go look at the responses to the Buffet proposal, especially the fact that raising the capital gains would negatively impact the middle class. As for carried interest, feel free to explain to everyone who is already getting screwed over on royalty payments why you think they should pay more taxes, I am sure they will understand.

 

[Quantum Windbag]

...love for everybody to read this missive word-for-word, and then comment...

The idea of a 'Scrooge McDuck with all that money was so much fun--

--back when we were kids. This letter is from the looney left/Buffet/Soros/Krugman school of financialfantasy and so full of nonsense that exposing all the lies would take weeks and nobody would care.

I'd love for you to go though it with you one point at a time, and I'll even let you take the first point.

OK

Carried interest should be taxed at the normal rate of income, not as capital gains, because it is a fee paid for performance, not because someone risked capital.

Only in some cases, in others it is a decision to risk current earnings on the hope of future earnings, for example, taking a share of the gate over a flat fee for a performance. That means that the person is actually risking capital, even if they don't actually transfer it as cash.

 

[Quantum Windbag]

I think the terms are hiding to an extent the debate, my analogy may suck but I'll try; its like the head of a law firm being given an out on the money the firm makes that he takes a part of , there by forgoing taxes on that 'income'.

Carried interest is profit allocation. It's a bonus for the profits you make. Typically, carried interest is 20%. So if you give the manager your money and he earns 10%, you get 8% and he gets 2%. It's your capital he risks, yet the tax code pretends its the money manager's money.

In every other industry, that 2% bonus to the money manager is taxed as income. In finance, it's taxed as capital gains.

That is a bit of an oversimplification.

The taxes are based on liquidation value of the assets. If all the assets of a hedge fund are sold off the owner receives nothing but interest, because he put nothing in. In the specific example of a hedge fund, like Berkshire Hathaway, all interest payments are capital gains, so they are taxed that way. In other words, this only happens to very rare individuals, all of whom would be left with nothing if their ventures failed.

Buffet is perfectly free to report his personal earnings as regular income, but he choses not to, while lobbying the government to change the tax code.

 

[Quantum Windbag]

are taxes at anywhere near an historic high?

Revenue is.

Should I also point out that taxes are at the same percent of GDP when taxes were at a historical high, or would that break your brain?

 

[Toro]

I think the terms are hiding to an extent the debate, my analogy may suck but I'll try; its like the head of a law firm being given an out on the money the firm makes that he takes a part of , there by forgoing taxes on that 'income'.

Carried interest is profit allocation. It's a bonus for the profits you make. Typically, carried interest is 20%. So if you give the manager your money and he earns 10%, you get 8% and he gets 2%. It's your capital he risks, yet the tax code pretends its the money manager's money.

In every other industry, that 2% bonus to the money manager is taxed as income. In finance, it's taxed as capital gains.

That is a bit of an oversimplification.

The taxes are based on liquidation value of the assets. If all the assets of a hedge fund are sold off the owner receives nothing but interest, because he put nothing in. In the specific example of a hedge fund, like Berkshire Hathaway, all interest payments are capital gains, so they are taxed that way. In other words, this only happens to very rare individuals, all of whom would be left with nothing if their ventures failed.

Buffet is perfectly free to report his personal earnings as regular income, but he choses not to, while lobbying the government to change the tax code.

Virtually everything you wrote in this post is wrong.

I'm not going to respond to this line of thinking any further because it's hard to believe it could get even more wrong.

 

[Toro]

...I said "carried interest."

--and that makes twice you've appeared to call for higher vengeance taxes at the expense of general economic well being and reduction of general revenue. Look, you're the one trying to get your hands on my money. You either convince me that it's for something I want or you can't have it.

Given that you apparently don't understand the point at hand, calling out others to go through each point probably isn't a good idea.

 

[william the wie]

Toro unless you can show that carried interest is effectively risk free your point makes no sense. And you should probably state what you consider to be effectively risk free.