Taxes for USA citizens. 50% don't pay Federal income tax. What this means?

[chilon]

Although in this case one could argue the owner is paying for the privilege of incorporation and limits on liability.

Precisely. That proves the point better than my post. The limited liability is absolutely huge and the whole point for corporations to begin with.

[conon394]

I also wonder about the ideal of paying the profit to the one owner as a dividend? So yes you incorporated (or similar) and accepted the cost because you need or want the risk limitation. I doubt you would pay a dividend rather the owner would simply pay themselves a wage out of the company.

In any case I would actually argue we would be better off without corporate taxes since they help to make corporations super citizens. I much rather have taxes levied to only real people and they just suck it up and pay for the services they vote for in good times (or in bad you want a Global War on Terror than pay the Global War on Terror surtax) and not piss and moan about borrowing when it needs to happen.

[Big War Bird]

So basically you are just speculating with no concrete evidence on Buffett personally.

Dissembling the revenue streams and taxes paid along the way would entail innumerable man hours of work and more expertise than I possess, and I suspect more expertise than anyone possesses. Tax accounting and complience costs account for scores of billions of dollars every year BH and WB

BTW its not exactly accurate to equate corporate taxes to taxation on personal profit the way you do even if the owner is a single person. Those are still corporate taxes not personal taxes so the point still stands. I understand what you are trying to say, but its also a bit misleading to imply that all corporate profits that are paid in corporate taxes should count as "lost income to taxes" for individual stakeholders. Its not the stakeholder's money yet at that point so to claim it as an individual paying taxes is obfuscating.

At the end of the day all revenue of any corporation belongs to individuals with perhaps the exception of charitable trusts. So in this regard you are just plain wrong.

Precisely. That proves the point better than my post. The limited liability is absolutely huge and the whole point for corporations to begin with.

It actually destroys your point. You are on the one hand claiming that corporate taxes are separate from individuals and then on the hand claiming paying taxes through corporations protects the individual investor. You cannot have it both ways.

[conon394]

It actually destroys your point. You are on the one hand claiming that corporate taxes are separate from individuals and then on the hand claiming paying taxes through corporations protects the individual investor. You cannot have it both ways.

No he is not a corporation is distinct legal entity and its owners are protected from its actions. Suppose tomorrow Apple is sued for all of it assets for whatever reason if you own one share you are only out the price of that share as an assets not libel for all you personal property and what not even though technically you are by a tiny percent an owner.

[Big War Bird]

You have ownership through that one share. You own both the liability and the revenue up to your one share. Why is that so hard to understand?

[chilon]

You have ownership through that one share. You own both the liability and the revenue up to your one share. Why is that so hard to understand?

Whats hard for me to understand is your misleading comment against Buffett when after looking into your argument you seem to be not taking into account the whole point of a corporation: limited liability. That is a legal bonus (risk reduction of investment) granted to investors of corporations. It makes perfect sense for corporate tax rate to be considered the "fee" for the right to have limited liability. Now you can argue that corporate tax rate should be lower and I would agree with you, but it doesn't really make sense to insist that because a corporation got taxed and that reduced potential revenue to investors then somehow the investors are already paying "taxes" through the corporate tax rate which is essentially your (and the WSJ if I am not mistaken) main criticism of Buffet's stance.

[Big War Bird]

Thank for finally acknowledging that corporate taxes are expenses for investors that must be considered when assessing the apparent disparity between ordinary earned income and capital gains income. Therefore one cannot compare capital gains taxes on persons tax return to income tax on another. To do so ignores the taxes paid on another set of books (the corporations) which does not happen with ordinary income.

Certainly I agree that the corporate tax should be abolished. As it is now it promotes tax avoidance at the expense of good business decisions and serves to cannibalize other taxes.

[conon394]

You have ownership through that one share. You own both the liability and the revenue up to your one share. Why is that so hard to understand?

Because the comparable alternative is a Sole Proprietorship where the individual owner (per your example) is (typically) libel for all his worldly goods. The point is a corporation creates a separate legal fiction in your one owner example and thus I don't see the problem. Yes the owner is double taxed but that is because he has created a new separate legal entity - the corporation - in order to limit personal risk. Of course the picture is not B and W since there are lots of legal/accounting shades of grey between the ideal ends of the spectrum accross both federal and state law.

In particular:

" You own both the liability and the revenue up to your one share"

But it is reduced to a purely money loss, to go back to Apple even if Apple turns out to have been really running drugs and hiring prostitutes and stealing US secrets to get better deals in China, building safe homes for Bin Ladin and killing puppies for fun, you are still just out the cost of one share when the company folds. Apple exists separately from it's nominal owners.

[Big War Bird]

You have me so confused. You are saying you disagree with me yet you seem to be agreeing with my premise, my reasoning and my conclusions.

Let me refresh my argument.

I said:

Buffett's claim to pay less than his secretary is a misleading simplification to the taxes levied on the revenue stream that terminates with him paying a 15% capital gains taxes.

I suppose I could have said that phrased something like this. One cannot make a straight comparison between income taxes paid by one person to capital gains taxes paid by another person even when all other things are equal. They are not the same thing.

You are right in saying that the LLC protects the owners and the owners pay for that protection through an overall higher tax rate.

Let take three tax scenarios for LLC One in which the LLC pays all the taxes, one in which the investors pay all the taxes and one in which the LLC and owners pay equally.

Imagine that the government wants to take 40% of every dollar of profit.
In scenario 1 the LLC pays on a $1M profita 40% tax for $400K. The owners pay $0
In scenario 2 the LLC pays $0,distribute all the profits the Owners paying a 40% tax rate for a total of $400K
In scenario 3 the LLC pays a 20% tax for $200K and distributes 800K to the owners who must pay a 25% tax for $200K more.

In all cases the government collects $400K. But if a observer tries to compare personal income tax to personal capital gains taxes, he would think scenarios 1 and 3 unfair, but 2 fair, even though in all three cases the owners have the same amount of money at the end. It only appears that 1 and 3 are unfair because, well the observer is a dumbmass.

[MathiasOfAthens]

http://www.google.com/#hl=en&gs_nf=1...iw=964&bih=827

I live in as suburb a suburb can be, buses pick up in three places.

Have you ever wondered why there are more cemetaries in Chicago than Parks? I might be wrong but I counted more Cemetaries and one of them was ing huge... I thought it was a ing park it was so large. Its north of the city btw. Which has some really nice apartments to live in.

One example doesnt destroy my argument. Most suburbs... lack bus routes that service residents and workers in crucial times. I remember one city had no bus route after 6pm... so you have to hope you only work daytime. And those who work daytime prob dont need a bus.

Springfield Missouri, population 157,000..Third largest city in Missouri.

14 fixed day routes, 4 fixed night routes. 25 fixed route buses, 5 on demand route buses, 1.2 million miles of transit in 2011. Passenger revenue of 1.45 million dollars in 2011. Net operating income for City Utilities is a profit of 11k.

Contrast that with MTA of New York City which has a daily weekday ridership of 11 million people and can only create half the revenue needed to cover its expenses.

Must be something to do with management.

I would agree it might very well be the management but then again you have to remember subways are expensive to maintain... does Springfield have light-rail? Bus routes are a lot cheaper... but they dont create livable communities all that well. Like in west LA and the Miracle Mile that approaches Beverly hills. Where the Subway line heads along Willshire Blvd I believe. Great place to live.

I wonder how LA Metro does? In terms of profits and such?

[Col. Tartleton]

This is an extremely elitist idea. What is your reasoning that the poorest people in America don't deserve the right to vote?

BTW everyone pays State taxes: Sales Tax.

You would prefer a system where only property owners are able to vote? Thats even more elitist than your first idea.

I have yet to see anyone prove that what Buffett personally pays in taxes is greater than his secretary. Do you have proof of this?

Referencing a lawsuit involving a company owned by Berkshire does not support the argument that Buffett personally pays more than his secretary. Its a red herring.

I'm suggesting we get rid of income taxes and get a federal sales tax. I didn't say I was in favor of owning property as a requirement for suffrage. I said I think people should have to pay taxes and in effect be in the line of fire. Which would likely be either by means of a mandatory draft or voluntary entry into a pool. When we wage war entirely on borrowed credit the people aren't paying for the burden and when we rely purely on paid volunteers we limit the impact of it to a few percent of the population (soldiers and their families) which leads to situations where there is a large debt accrued, a lack of concern for what's going on, and a general malaise over everything which is inevitably followed by financial issues and when compounded with economic problems as we are currently facing we risk a total collapse into mob rule.

We've been at war for 11 years. We ought to have drafted some people to take some strain off the volunteers. The same small group shouldn't shoulder the burden.

Barack Obama pays a lower tax rate than his secretary. Though he also gave over 1/5 of his income to charity so I have nothing against that. If he wasn't arguing that rich people are all bastards when he's an example of a rich person who isn't a bastard I'd like him more. Mitt Romney pays a low tax rate, pays a lot in charity and he's arguing he isn't a bastard. There can't be a double standard. Why isn't Obama paying 50% tax? Or 90% tax? He's advocating the taxes go up, but you're allowed to pay more than you have to. Plus given he's making about half his income on a government salary, he's kind of just paying himself... Capital Gains taxes should be low, it's to encourage people to invest their savings into other businesses rather than just sitting on them. You pay full taxes when you make money, then you invest it and pay a lower capital gains tax on that income, then you pay sales taxes when you spend that money or a death tax when you don't spend that money.

There are a lot of problems. I'm better at pointing them out than composing solutions.

[The spartan]

I'm suggesting we get rid of income taxes and get a federal sales tax. I didn't say I was in favor of owning property as a requirement for suffrage. I said I think people should have to pay taxes and in effect be in the line of fire. Which would likely be either by means of a mandatory draft or voluntary entry into a pool. When we wage war entirely on borrowed credit the people aren't paying for the burden and when we rely purely on paid volunteers we limit the impact of it to a few percent of the population (soldiers and their families) which leads to situations where there is a large debt accrued, a lack of concern for what's going on, and a general malaise over everything which is inevitably followed by financial issues and when compounded with economic problems as we are currently facing we risk a total collapse into mob rule.

We've been at war for 11 years. We ought to have drafted some people to take some strain off the volunteers. The same small group shouldn't shoulder the burden.

Barack Obama pays a lower tax rate than his secretary. Though he also gave over 1/5 of his income to charity so I have nothing against that. If he wasn't arguing that rich people are all bastards when he's an example of a rich person who isn't a bastard I'd like him more. Mitt Romney pays a low tax rate, pays a lot in charity and he's arguing he isn't a bastard. There can't be a double standard. Why isn't Obama paying 50% tax? Or 90% tax? He's advocating the taxes go up, but you're allowed to pay more than you have to. Plus given he's making about half his income on a government salary, he's kind of just paying himself... Capital Gains taxes should be low, it's to encourage people to invest their savings into other businesses rather than just sitting on them. You pay full taxes when you make money, then you invest it and pay a lower capital gains tax on that income, then you pay sales taxes when you spend that money or a death tax when you don't spend that money.

Yes yes, if everyone gave to good charitable causes then there would be no need for taxes, we get it. Problem is, most people don't want to just give to charity for the sake of giving to charity. Most that do do so to increase their public image. Charity is a great thing, it just isn't reliable or really even that fair (those who are generous do without the some resources while those who hoard get to keep all of theirs).

There are a lot of problems. I'm better at pointing them out than composing solutions.

Aren't we all...