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The Buffett Rule

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#1 tastywheat

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Posted 20 April 2017 - 10:18 PM

Meet the 48 millionaires who pay no income tax, not even the Medicare levy

Forty-eight of Australia's highest earners paid no income tax in 2014-15, not even the Medicare levy, according to an analysis of Tax Office data that lends weight to calls for legislated minimum tax payments.

Each of the 48 earned more than $1 million before deductions, an average of $2.46 million each.

 

All were able to drive their taxable incomes down below the $18,200 tax-free threshold. Thirty-four reported taxable incomes of zero, while 12 reported combined losses of $13.9 million.

Extraordinarily, the biggest deduction claimed by 19 of the 48 was "cost of managing tax affairs", averaging about $1.07 million each.

 

On the face of it, the figures suggest these people spent almost half of their reported incomes managing their tax affairs, a proportion so high as to raise suspicions that their actual incomes were higher.

The Tax Office defines "cost of managing tax affairs" as including the cost of preparing and lodging tax returns, the fees paid to recognised tax advisers, the cost of court appeals and interest charges imposed in relation to tax disputes.

 

Bizarrely, a handful of the highest earners who escaped the Medicare levy were forced to pay the Medicare levy surcharge. The surcharge is meant to be charged on top of the levy for high earners who don't have private health insurance, but a budget change in 2008 applied to a broader measure of income than the levy itself.

 

The levy itself applies only to taxable income, which 579 people earning more than $250,000 managed to cut to less than the tax-free threshold.

[source]

 

I think competent people who make money by working hard, benefiting the economy, and creating jobs, should be rewarded in a way that reflects their hard work.  Anything less would be met with the stifling economic impacts of 20th century communism.  The problem isn't making money, or being wealthy, it's taking from the Australian society in the form of infrastructure, public services, and governance, and not giving anything back.

 

The Buffett Rule was coined by Warren Buffett in 2011 when he realised that his secretary paid more tax than he did.  It proposes a minimum tax rate after income earners cross the no-tax threshold, regardless of deductions.  This seems entirely too logical to me, so I'd be interested to hear what objections Atomicans raise?


Edited by tastywheat, 20 April 2017 - 10:20 PM.


#2 Rybags

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Posted 20 April 2017 - 10:54 PM

This is just part of the problem.  Offshore tax havens are probably 10 times or more as bad.  And the only way to fix that would be by international treaty.

 

The tax system is fucked.  It penalizes honest hardworking people but rewards those who have enough money to jump the loopholes and squirrel money away offshore.  Problem is, the lame solution bandied about is to lower income and raise consumption taxes which would only serve to punish the majority and make life even easier for the super rich.



#3 tastywheat

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Posted 20 April 2017 - 11:01 PM

This is just part of the problem.  Offshore tax havens are probably 10 times or more as bad.  And the only way to fix that would be by international treaty.

 

The tax system is fucked.  It penalizes honest hardworking people but rewards those who have enough money to jump the loopholes and squirrel money away offshore.  Problem is, the lame solution bandied about is to lower income and raise consumption taxes which would only serve to punish the majority and make life even easier for the super rich.

 

Agree with all of the above.

 

However, the Buffett rule is one of the more simple options available, and simple options have proven to be more robust in the past.  It'll obviously have no impact transfer pricing, and other international tax dodges, but even given the other loopholes, it's worth supporting.



#4 Cybes

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Posted 20 April 2017 - 11:06 PM

I think competent people who make money by working hard, benefiting the economy, and creating jobs, should be rewarded in a way that reflects their hard work.  Anything less would be met with the stifling economic impacts of 20th century communism.  The problem isn't making money, or being wealthy, it's taking from the Australian society in the form of infrastructure, public services, and governance, and not giving anything back.

 

 

I not only have no problem with them being rewarded for it, I think it's vital.  What becomes an issue for me about that, though, is that the way our system is set up, money makes money - no effort or skill required.  When that feedback loop gets to the point that someone is essentially winning Powerball every day for nothing more than getting out of bed, it should be obvious to everyone that something is seriously amiss.  There is only so much money in circulation at any one time, and concentrating it all in the pockets of a tiny few has dire consequences for the economy as a whole.

 

As to the Buffett Rule... No argument against that from me.


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#5 Rybags

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Posted 20 April 2017 - 11:07 PM

That said though, we shouldn't be focussing too much on "individuals" as such.

 

Generally the rich will have companies, the fact they pay little or no income tax on personal income is just one part of the picture.  Corporate practices deserve even more attention, especially the likes of Apple who essentially pay "themselves" huge royalties to holding companies based in tax havens.  Their entire operational structure is formulated to maximize expenses and minimize income in countries like ours, meanwhile the income stream occurs in places like the Bahamas where corporate tax is next to nothing.



#6 tastywheat

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Posted 21 April 2017 - 12:06 AM

That said though, we shouldn't be focussing too much on "individuals" as such.

 

Generally the rich will have companies, the fact they pay little or no income tax on personal income is just one part of the picture.  Corporate practices deserve even more attention, especially the likes of Apple who essentially pay "themselves" huge royalties to holding companies based in tax havens.  Their entire operational structure is formulated to maximize expenses and minimize income in countries like ours, meanwhile the income stream occurs in places like the Bahamas where corporate tax is next to nothing.

So I agree that corporations are the bigger problem.  Cracking down on individual taxes won't necessarily fix the budget deficit.  The first point of call should be a crackdown on things like  transfer pricing, and other corporate tax minimisation strategies, that have zero benefit to Australian society.

 

However, social stability relies on equality in the real sense.  The hours you work, the skills you bring, should be compensated accordingly.  This should be universal.  There should be no rich person's club that allows you to sped $1.1 million on accountants, and completely dodge the medicare levy that social contracts are built on.  That sort of behaviour is categorically unethical.

 

So we need a rethink of how we do business in Australian, a way that doesn't unfairly advantage international or wealthy interests.



#7 Leonid

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Posted 22 April 2017 - 09:01 PM

[The Buffett Rule was coined by Warren Buffett in 2011 when he realised that his secretary paid more tax than he did.]

This be one of those "false facts".

The Buffett Rule relates to the fact that he paid a lower rate of tax than his secretary under America's regressive taxation system.

I'm 2010, he paid a federal income tax bill of $6.9m on a taxable income of $39m.

I absolutely guarantee you his secretary does not pay more than $6.9m in tax.

In fact I absolutely guarantee you, her income over 20 years won't hit this figure.
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#8 Leonid

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Posted 23 April 2017 - 12:45 AM

And just in a by the by, when an individual pays SIX POINT FUCKING NINE MILLION BUCKS in tax, I don't give a shit what percentage he pays.

He's paid far more than he consumes as a citizen.
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"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell

#9 eveln

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Posted 23 April 2017 - 01:20 AM

And just in a by the by, when an individual pays SIX POINT FUCKING NINE MILLION BUCKS in tax, I don't give a shit what percentage he pays.

He's paid far more than he consumes as a citizen.

Um, Not necessarily.

If the taxable income is 39 million I'd say it's a logical conclusion that this person could afford to consume more than you at your taxable income rate, could imagine.


I'm assuming here the word "consume" refers to more than just eating, yes ? ;)


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#10 Leonid

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Posted 23 April 2017 - 03:37 AM


And just in a by the by, when an individual pays SIX POINT FUCKING NINE MILLION BUCKS in tax, I don't give a shit what percentage he pays.

He's paid far more than he consumes as a citizen.

Um, Not necessarily.
If the taxable income is 39 million I'd say it's a logical conclusion that this person could afford to consume more than you at your taxable income rate, could imagine.

I'm assuming here the word "consume" refers to more than just eating, yes ? ;)

Does Warren Buffett consume more government healthcare than his secretary?

How about social handouts?

The fact of the matter is rich people either use the same government services at the same rate or lower than us mere mortals.

Yes, they often use more services such as grants available to companies. But their companies pay for that in tax too.

But that's company tax. I don't want to go there.

I just want to talk about personal income tax.

When Warren pays $6.9m dollars, and Betty in the mail room pays $1200 and then the government hands her $20k in family tax benefits, well... I reckon Warren's paid for far more than what he's getting from the government in return.
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"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell

#11 TheManFromPOST

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Posted 23 April 2017 - 10:07 AM

this thread set my mind to wonder how much tax I have paid over my 35 years working

 

I am now sad :(



#12 eveln

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Posted 23 April 2017 - 10:15 AM

 

 

And just in a by the by, when an individual pays SIX POINT FUCKING NINE MILLION BUCKS in tax, I don't give a shit what percentage he pays.

He's paid far more than he consumes as a citizen.

Um, Not necessarily.
If the taxable income is 39 million I'd say it's a logical conclusion that this person could afford to consume more than you at your taxable income rate, could imagine.

I'm assuming here the word "consume" refers to more than just eating, yes ? ;)


....



When Warren pays $6.9m dollars, and Betty in the mail room pays $1200 and then the government hands her $20k in family tax benefits, well...

 

If Betty's tax is only $1200, then her taxable income would indeed be in need of some help for her family's benefit. No wonder Warren is soo wealthy.


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#13 Leonid

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Posted 23 April 2017 - 12:11 PM

Warren isn't wealthy because Betty has no skills.

The money in the world isn't limited. We don't split it and say "no Betty you can't have more, there's not enough left".

Warren is rich because of luck, hard work, education, tenacity, ambition.
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#14 Cybes

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Posted 23 April 2017 - 01:16 PM

The money in the world isn't limited.


/blink

Yeah, it really is - or at least, it's supposed to be for anyone who isn't the US (because they're special). When it isn't that's how hyperinflation occurs and you end up with million-dollar toilet paper.


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#15 Leonid

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Posted 23 April 2017 - 06:59 PM

The money in the world isn't limited.


/blink

Yeah, it really is - or at least, it's supposed to be for anyone who isn't the US (because they're special). When it isn't that's how hyperinflation occurs and you end up with million-dollar toilet paper.

Only in the physical and electronic world.

For example - asset appreciation. If Betty bought a place in Sydney 10 years ago, she's a millionaire today but could still have no money - she just has assets.

I very much doubt Warren has an account with $40m bucks in it.

There's supposedly about $75trillion dollars floating about. But that number isn't fixed because assets increase in value but don't enter the market.

I had a uni economics lecturer for my general studies course at UNSW.

He captured the whole class's attention in the first sentence, asking a few questions.

Q1. When is the best time to start a business?
A1. Yesterday

Q2. Why does socialism always fail as spectacularly as it starts?
A2. Because after everyone's been equally poor for a while, those who are more equal than others run out of explanations as to why.

Q3. Why do we study past political and economic systems?
A3. So that we learn what not to do ever again.

Wise words, even though I did not believe them then.
"I'd rather die standing up than live on my knees." - Stephane Charbonnier (1967-2015)

"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell

#16 tastywheat

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Posted 23 April 2017 - 09:41 PM

[The Buffett Rule was coined by Warren Buffett in 2011 when he realised that his secretary paid more tax than he did.]

This be one of those "false facts".

 

Yup, I should have stated it as more tax as a portion of his income.

 

Omaha
 
OUR leaders have asked for “shared sacrifice.” But when they did the asking, they spared me. I checked with my mega-rich friends to learn what pain they were expecting. They, too, were left untouched.
 
While the poor and middle class fight for us in Afghanistan, and while most Americans struggle to make ends meet, we mega-rich continue to get our extraordinary tax breaks. Some of us are investment managers who earn billions from our daily labors but are allowed to classify our income as “carried interest,” thereby getting a bargain 15 percent tax rate. Others own stock index futures for 10 minutes and have 60 percent of their gain taxed at 15 percent, as if they’d been long-term investors.
 
These and other blessings are showered upon us by legislators in Washington who feel compelled to protect us, much as if we were spotted owls or some other endangered species. It’s nice to have friends in high places.
 
Last year my federal tax bill — the income tax I paid, as well as payroll taxes paid by me and on my behalf — was $6,938,744. That sounds like a lot of money. But what I paid was only 17.4 percent of my taxable income — and that’s actually a lower percentage than was paid by any of the other 20 people in our office. Their tax burdens ranged from 33 percent to 41 percent and averaged 36 percent.
 
If you make money with money, as some of my super-rich friends do, your percentage may be a bit lower than mine. But if you earn money from a job, your percentage will surely exceed mine — most likely by a lot.
 
Source: Stop Coddling the Super-Rich, Warren Buffett
 
 
 
 
As a society, we agree to give up a portion of our income to support the things we appeciate in a modern country.  Governance.  Defence.  Infrastructure.  Universal access to education and health.  A pension that supports your grandma.  The Buffett rule wouldn't tax the rich at a rate any higher than the average Australian worker.  It's capped at 30%.  And the 48 milliares from the original article aren't paying millions of dollars in income tax.  They're paying nothing.


#17 Cybes

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Posted 24 April 2017 - 03:27 AM

[money being limited]

Only in the physical and electronic world.

For example - asset appreciation.

 

I'm going to assume you meant "logically", rather than just limiting it to electronically, since accounting has been happening since the invention of numbers.

 

Asset appreciation and depreciation are accounted for in the economic model, and even if they weren't are still finite.


"Reality does not care what you think." - Dr Richard Feynman
"Ideas do not deserve respect.- people do." - Peter Boghossian (paraphrase)


#18 Leonid

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Posted 24 April 2017 - 06:10 AM

[money being limited]
Only in the physical and electronic world.

For example - asset appreciation.

 
I'm going to assume you meant "logically", rather than just limiting it to electronically, since accounting has been happening since the invention of numbers.
 
Asset appreciation and depreciation are accounted for in the economic model, and even if they weren't are still finite.


Actually they're infinite by virtue of the fact that you can't assign a hard number to them.

Again, this is central to what my economics professor briefly taught us.

Imagine Betty owns a home that's worth a mil. While she holds it, her assets value isn't recorded in the world's money supply.

Once she does - there's a bank giving her a mil and someone else giving the bank an IOU. At that point, a sum of money has been put into play.

But now imagine a different situation:
Imagine that 10% of Australians decide to sell their homes, tomorrow. While their book value may be 2.3m (10% of Aussies) x 1m (assuming avg. house price), the reality is investors (of every variety, inc first home owners) will look to the market and determine that 10% selloff is probably related to a risk.

Which drops the asset value of individual assets based on group action.

This is the law of supply and demand as it relates to assets - which means that an asset's value is both finite at a point in time and infinite (within stretchable reason) at other times.

This is why assets are generally not included in the calculation of "money" - and it's also why money is effectively unlimited - more is "virtually" generated every single day, outside inflationary pressures.
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#19 Cybes

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Posted 24 April 2017 - 08:24 AM

Actually they're infinite by virtue of the fact that you can't assign a hard number to them.


Again, this is central to what my economics professor briefly taught us.

 

Your prof (and thus you as well) have a non-standard definition of "infinite".  "Infinite", in every use except mathematics means "of immeasurable magnitude" - which is most assuredly not the case in respect to money, assets, or indeed resources.  I believe the term you want is "undefined" or "indefinite", meaning "we don't know what this number is".

 

You can skip the "introduction to economics" lecture, thanks.  I have my HD already.


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#20 Leonid

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Posted 24 April 2017 - 12:01 PM


Actually they're infinite by virtue of the fact that you can't assign a hard number to them.
Again, this is central to what my economics professor briefly taught us.

 
Your prof (and thus you as well) have a non-standard definition of "infinite".  "Infinite", in every use except mathematics means "of immeasurable magnitude" - which is most assuredly not the case in respect to money, assets, or indeed resources.  I believe the term you want is "undefined" or "indefinite", meaning "we don't know what this number is".
 
You can skip the "introduction to economics" lecture, thanks.  I have my HD already.

The problem is that infinite is being created right now in exactly that sense. Asset formats are being brought in all the time.

Take Bitcoin as an example. And other cryptocurrencies which are being mined.

The word infinite is very very precise because when you have undefined values and new assets being "born", there truly is no limit to money, in all it's senses.
"I'd rather die standing up than live on my knees." - Stephane Charbonnier (1967-2015)

"If liberty means anything, it means the right to tell people what they do not want to hear." - George Orwell




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