05/05/11 Dow down 83 points yesterday. Gold down $25.
We’re waiting for a sell-off…either at the end of QE 2…or in anticipation of it. When will it come? We don’t know, but it won’t keep us waiting forever.
Meanwhile, we are seeing more and more rich-bashing in the press.
Most people hate the rich. And why shouldn’t they?
The rich are good at hogging the good things in life. That’s why they’re rich, after all.
They get the fancy digs. The fancy cars. The fancy girlfriends.
You see them enjoying life in business class seats, while you ache in economy. You see them pulling their Mercedes and Audis into their big garages, while you make do with a humble split-level on the wrong side of time. And their wives always look like they just came out of a beauty spa….
Their stocks are going up…while you can’t find a job!
The rich learn how to manipulate the system for their own benefit. That’s the way it always works. Money likes power. Power likes money. Usually, they find a way to work together.
The rich howl about how much in taxes they pay. They whine about ‘soak the rich’ proposals. They kvetch about ‘giveaways’ to the zombies. But, they are probably more in control than they appear.
Take Mark Zuckerberg for example. Please. Here’s a guy who says he would be “cool” if they raised his income taxes. In this refrain, he joins the sanctimonious choir headed by Warren Buffett, Ted Turner, and other do-gooders.
Well, guess what. You know why they don’t mind an increase in the income tax rate? It’s because
1) they are so rich that the marginal utility of money for them is close to zero. They won’t even notice an income tax hike. Money hardly counts when you have as much of it as they have. It is like an extra snowball to an Eskimo. It just doesn’t make any difference.
2) They don’t pay much in income taxes anyway. They tend to have their wealth in stocks. And they make most of their money from stock market gains, which aren’t taxed as regular income; they’re taxed as capital gains.
Here’s Newsweek with the story:
It’s easy for Mark Zuckerberg to say he’s ‘cool’ with raising income-tax rates. Because it won’t affect him.
It drives economist Bruce Bartlett crazy every time he hears another bazillionaire announce he’s in favor of paying higher taxes. Most recently it was Mark Zuckerberg who got Bartlett’s blood boiling when the Facebook founder declared himself “cool” with paying more in federal taxes, joining such tycoons as Bill Gates, Warren Buffett, Ted Turner, and even a stray hedge-fund manager or two.
Bartlett, a former member of the Reagan White House, isn’t against the wealthy paying higher taxes. He’s that rare conservative who thinks higher taxes need to be part of the deficit debate. His beef? It’s a hollow gesture to say the federal government should raise the tax rate on the country’s top wage earners when the likes of Zuckerberg have most of their wealth tied up in stock. Many of the super-rich see virtually all their income as capital gains, and capital gains are taxed at a much lower rate—15 percent—than ordinary income. When Warren Buffett talks about paying a lower tax rate than his secretary, that’s because she sees most of her pay through a paycheck, while the bulk of his compensation comes in the form of capital gains and dividends. In 2006, for instance, Buffett paid 17.7 percent in taxes on the $46 million he booked that year, while his secretary lost 30 percent of her $60,000 salary to the government.
“It’s easy to say ‘Raise taxes’ when you know you’re not going to have to pay those taxes,” Bartlett says. “What I don’t hear is ‘Let’s raise the capital-gains tax.’
Bill Bonner
Since founding Agora Inc. in 1979, Bill Bonner has found success and garnered camaraderie in numerous communities and industries. A man of many talents, his entrepreneurial savvy, unique writings, philanthropic undertakings, and preservationist activities have all been recognized and awarded by some of America's most respected authorities. Along with Addison Wiggin, his friend and colleague, Bill has written two New York Times best-selling books, Financial Reckoning Day and Empire of Debt. Both works have been critically acclaimed internationally. With political journalist Lila Rajiva, he wrote his third New York Times best-selling book, Mobs, Messiahs and Markets, which offers concrete advice on how to avoid the public spectacle of modern finance. Since 1999, Bill has been a daily contributor and the driving force behind The Daily Reckoning. Dice Have No Memory: Big Bets & Bad Economics from Paris to the Pampas, the newest book from Bill Bonner, is the definitive compendium of Bill’s daily reckonings from more than a decade: 1999-2010.
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Not sure there will be any capital gains to tax for 2011.
Holy Cow what a wipe-out today! I’ve been watching the CRB index for 25 years and I don’t think I’ve ever seen a day like today.
You know what this all means? —QE3 is on the way(!)
Would seem that’s all part of the plot. Each hot sector rotates into a parabolic move upwards, chased upward by cheap easy money for leverage, followed by a bone crushing crash that leaves anyone who participated with borrowed money bankrupt.
But it would seem to me they –Bernanke and Company– are kind of running out of areas in the economy to “bubbleize”. They’ve already done the stock market, the real estate market, the commodities market, –what the hell is left? Forever postage stamps???
Buffett has often talked about the unfairness of capital gains being taxed at a far lower rate than, say, the payroll tax (15.3%)…Not your best piece, Bill (generally, they are very good and often hilarious).
The whole world knows QE2 expires June.
Commodity players knows too well. Would that factor in to cause a panic selling?
With the advance knowledge averages out fears or panics the imminent correction probably could be mildly felt.
Life can’t go on without the essential artificial bloodflow. To render a conducive economic weather, QE3 will sooner or later show up. It won’t keep us waiting for long. Meanwile, those money mongers with their natural instinct and sharp-hook eyes would spot the opportunity and snap up those commodities in the low tide.
The economic wound would be still lingering. Not much changes. Why should one pursue in sell-off and keep the fiat paper? As one knows the tensile strength of paper is negligible.
Mr. Buffet, Mr. Turner, Mr. Zuckerberg, Mr. Steven King:
Make your voluntary contribution tax checks out to “UNITED STATES TREASURY.”
And make it a BIG gravity-defying, tsunami-inducing, time-traveling amount. Cleanse yourselves of those undeserved ill-gotten gains!
Then don’t forget next year and the year after that. After all, Uncle Sucker knows how to spend your vast wealth better than you or any of your favorite charitable foundations.
PS: Since you all talk the talk, I’m just guessin’ you probably aren’t walking the walk.
Greed and pride are the big ones.
Buffett has brought up many times how wrong that it is that he pays low taxes on his capital gains while wage earners pay much higher tax rates. Buffett is the most honest man in business that I have ever heard of. He has been paying himself a low $100,000 per year for the entire deration of his running of Berkshire Hathaway. He recieves no stock options and no other benefits. That’s it. He is rich because he kept his money in Berkshire the whole time. Mind you, he is donating 99% of his shares to charity. Ridiculous article that shows your serious lack of honest reporting.
So Buffett isn’t donating 99% of his Berk shares to the IRS after all?
The nerve.
Bill touches upon a good point.
The tax system is gamed by those with enough money to buy politicians such that the wealthy have myriad ways to retain wealth while the non-wealthy get caught flush.
Flat tax … NO DEDUCTIONS is the way to go simply for the reason that as soon as deductions are allowed then the whole perverted gaming of the tax system takes place.
We already have a “Flat Tax”. It is called Social Security.
Uh, Mr. elephant – social security tax has a maximum. Some call it regressive.
Wasn’t the income cap on social security originally put in place based upon the cap of benefit payout you could receive upon retirement?