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May 06, 2011

Comments

"•The Top 400's average tax rate increased 8.2%, to 18.11% (up from 16.62% in 2007)."

The only saving grace is that when you look at more of the stats the top 400 also pay 18% of the income tax in the country. The top 1% pay 38% of all taxes, and the top 5% pay 59%, the top 10% pay 70%. That leaves 30% for the 40% of taxpayers between 50% and 90%.

So, really, its hard not to raise taxes on the rich.

I mean the the cut off for the top 10% is $113,000 dollars.

If everyone would quit talking about it and just raise taxes across the board 60% of the increase falls on those in the top 5%. And while my math is sometimes suspect I believe that means we geta lot more out of those that make more than 250k than the projected 700B because the lower marginal rates are also increased.

But heck, lets keep arguing about who should pay and not pay, it get votes.

I wouldn't trust anything the Tax Foundation says without asking an expert to examine their statements and the underlying basis for them, if any (see, e.g.).

And Marty it's the top 0.1% of taxpayers that pay 18% of the income tax in the country, which is 140,000 taxpayers not 400 (assuming the numbers the Tax Foundation reported are correct, as to which see above).

And while my math is sometimes suspect I believe that means we geta lot more out of those that make more than 250k than the projected 700B because the lower marginal rates are also increased.

Some more, not a lot. You're talking about a fairly small percentage of the population and a small percentage (how small depends on how much more than $250k they make) of their income that is subject to the lower marginal rates. And since we're talking about the lower marginal rates we're talking mostly about earned income.

Most of the additional revenue gained from raising the lower marginal rates would come from the multitudes of people who don't earn enough to pay the higher marginal rates.

Yeah, we're talking about a group of people who probably aren't paying nearly all of the upper-bracket rate anyway, because lots of their income is capital gains, which is taxed at the capital gains rate.

hsh,

There are 4M returns between 1% and 5%, 7M between 5% and 10%, and then 20M between 10% and 25% when the laws of bigger numbers kick in.

So, my guess, is that in the 1% to 5% group you still get a pretty nice chunk of individuals over 200K and couples over 250K out of that 4M, plus the 1.3M returns in the top 1%. But your right, it isn't 20M.

"Yeah, we're talking about a group of people who probably aren't paying nearly all of the upper-bracket rate anyway, because lots of their income is capital gains, which is taxed at the capital gains rate."

This seems always seems to me to question how much we get by raising the top marginal rate in the first place, but everyone keeps using 70B a year.

I bet myself a beer that Dobie's link would be about INCOME TAX statistics.
I won.

Dobie may suspect his own math, but I am sure he is good enough at it to understand this: if we had a DEAD FLAT income tax, and the top 10% had 70% of ALL INCOME, they would be paying 70% of all INCOME TAX. They'd still bitch and moan about it, of course. But it does not take a math genius to recognize that statistics like "the top 10% pay 70%" say more about the unequal distribution of INCOME than about the iniquity of the TAX CODE.

But back to the reality that the bottom 90% pay the majority of FICA, which the bitch-and-moan crowd tries so hard to ignore. One reason they try to ignore it is embarrassment over this fact: that tax, paid by the little people, generates a SURPLUS, while the oppressively progressive income tax paid so preponderantly by the bitch-and-moan crowd generates a deficit. The little people are effectively lending money to the bitch-and-moaners, and have been doing so for about 3 decades, when you look at the overall federal tax structure.

And just incidentally, Alan Simpson is an old coot who has no business worrying about the long-term finances of anything. When I hear him babble about 75-year projections for Social Security, I keep wondering which will happen first: the birth of the first American who will be retiring 75 years from now, or Alan Simpson's funeral.

--TP

Whenever I hear folks go on about the worthy self-employed, and personal choices and their consequences, etc etc etc, my first thought is "Who's going to make the donuts?"

A hell of a lot of stuff - the vast majority of stuff - doesn't happen because somebody has a clever idea. It happens because a sh*t load of somebodies get up, eat breakfast, and go to work.

And *none* of the clever ideas actually make money - not a dime - until and unless a sh*tload of somebodies get up, eat breakfast, and go to work.

Just saying.

An entrepreneur without staff is an annoying guy with a stack of PowerPoint slides who wants your money.

Just saying.

As far as taxes, US income taxes are flat above about $380K, and most folks that have very large incomes make a lot of their money via capital gains, which as slarti notes are taxed at a much lower rate.

Net/net, wealthy people are doing perfectly well tax-wise, thank you very much.

Folks who claim that we need to leave their income alone or they will stop creating jobs need to get off of their @sses and start creating some MFing jobs.

tp,

I would like you to point out any word that I typed that was complaining about taxes. I didn't eveen start the discussion.

Ugh, thanks, 140,000 is right, it is .1%.

russell's comment has me picturing a couple of electricians in a dirty manhole splicing together a 5kV line that feeds an entire enterprise. (Talk about keeping the lights on.) We'd be really and truly fncked if a good number of those guys went Galt. Somehow I think we'd get by without most of the hedge fund managers.

Whenever I hear someone going on about who is going to make the donuts I remember one of my first jobs in a donut shop.

I got up at 2, went to work at three, made donuts until 5. (It was a small donut shop, most started earlier.) Then the owner came in and took over making the donuts. I then became the breakfast shift dishwasher until 10.

I got the job because my Dad taught me to make donuts when I was 12, we made them for church donut sales.

What that, or most of what russell wrote, has to do with being an entrepeneur, I am not sure.

The guy who saved up, rented the space, bought the equipment, worked seven days a week, hired me and the other five people that worked there, bought the materials, washed the dishes the day I quit, well he worked for himself. He probably would make more than 250k today, surely would if managed to have two donut shops. I have a lot of respect for him. And yeah, most of the time he made the donuts.

CCDG,

Where did I type that you were "complaining about taxes"?

--TP

HSH, your mental image is quite close to the reality.

If the garbagemen and the plumbers go Galt it'll be time to call it day.

An entrepreneur with no staff is a guy who is not delivering product, whatever "product" happens to be. No deliver product, no revenue. No revenue, nobody and I do mean nobody gets paid.

And yeah, I work in the software industry, so I know lots and lots of expert consultants. Some of them are great, some of them are full of crap. Most are kind of somewhere in between.

Folks that come in to actually *produce something* on a for-hire basis can be worthwhile if their participation is managed well.

Folks that come in with bright ideas for sale about how *you* should produce something in a wonderful new and exciting way, not so much. The number of wonderful new and exciting ways that actually create value are, sadly, few and far between.

That's my experience.

In any case, expert consultants for hire are pretty much all expensive, and that comes off of somebody's bottom line.

The moral of the story is you deliver product, or you don't get paid. So it is, so it ever shall be.

Somebody has to make the freaking donuts. The number of situations where "making the freaking donuts" can usefully be done by one industrious bright up-by-the-bootstraps individual is, actually, quite small.

Of course, these days, quite a variety of donuts can now be made in the third world. Our big export is scrap cardboard, which turns into boxes in which the donuts can be shipped back to us.

My suggestion to young people starting out is grow your own food, don't borrow money, and learn plumbing. Plumbing can't be outsourced.

And to repeat my point about taxes:

1. US income tax is flat above $380K
2. Most high income folks get a significant amount of their money from cap gains, which are taxed approximately half what income is taxed at those income levels.

Those are the plain and simple facts of the matter. Rich folks are fine tax-wise.

Tp,


"Where did I type that you were "complaining about taxes"?"

" They'd still bitch and moan about it, of course. But it does not take a math genius to recognize that statistics like "the top 10% pay 70%" say more about the unequal distribution of INCOME than about the iniquity of the TAX CODE."

I guess i interpreted this as such, if not my apologies.

As far as FICA goes, I have no problem with how it's paid in, I do have a problem with how it's paid out.

Putting it here just because.

Well, because of tribute to the godfather.

What that, or most of what russell wrote, has to do with being an entrepeneur, I am not sure.

I'm responding to this:

I suggest this has a lot to do with differing approaches to supporting livelihood between those who prefer to be self-employed (lean Republican) and those who choose to labor on behalf of others (lean Democrat). The former would like the government to get out of the way and the latter seem to be always looking for some intervention between the government and their employer to protect them from their own choices.

And this:

some who think when their chosen employment no longer exists where they live, they can draw unemployment benefits for some indeterminate period

And this:

many highly competent technical types cease working-for-the-man and become consultants in the area of their technical expertise. This changes the boundaries of where they can go, what they can do, as well as compensation.

And this:

Isn't there some point where packing up and moving to where there is a job the right answer?

And any of the other 1,000,000 million comments per day that basically view folks who work for a living as somehow a drag on the productive economy, and/or that view folks being out of work as being somehow due to their own lack of initiative, cleverness, or ability.

People who work for a living *are* the productive economy.

It's great you had a constructive and formative early work experience. I hope the guy you worked for did, in fact, make the equivalent of $250K a year. He sounds like he was a hard-working dude, more power to him.

But what that has to do with the realities of unemployment nowadays escapes me.

People who are out of work these days are quite often out of work not by their own choice. Sometimes they can find other things to do, sometimes they can't. Sometimes they can move, sometimes they can't.

I haven't looked at the U6 numbers lately, but last time I looked they were bumping up in the high teens. That's something like 1 in 6 people who could work, but who aren't working.

That's a freaking disaster, and it's not one that's going to be solved by people hanging out a shingle as "expert consultants", or going into real estate, or opening donut shops.

Even just looking at the U3, you're talking about almost 15 million people unemployed. We don't need 15 million expert consultants, or real estate agents, or donut shop owners.

We need broad-based middle class employment.

The personal virtue and gumption of the folks who are out of work is not the problem.

Well, because of tribute to the godfather.

Trevino is not the guy he was when he hung out here. Not even when he hung out at RedState.

He's gone down the clash of civilizations rabbit hole.

Too bad.

Ahem, perhaps props to our daddy as well.

As much as the Count would protest that mimes are integral and necesary to the functioning of are society and couldn't we all pitch in $0.001 to presverve and protect, I challenge you to show where did Rich Little ever ever ask for money from the gummint. What are we going to do now with the cowboy poets, jugglers, and yodelers and the like.? Pu them out on the streets? I'm pretty hard hearted and say that they can make what they can at county fairs or farmers' market days.

If the village pays so that I can see Blue Oyster Cult for free, or maybe Marshall Tucker,I can dig that, but not this lame, French, Commie crap, that the effete left coasters go for.

Sorry Count, I confused you with russell. I heard you were establishing a helper monkey farm and are going to sell them at TheBurningMan. Make sure you pay all your sales taxes. You know what, you could set up a little kiosk for the other venders to submit their 1099s for a small fee.

...with the help of the displaced communists..."

I hold in my hand a list....

"And to repeat my point about taxes:

1. US income tax is flat above $380K
2. Most high income folks get a significant amount of their money from cap gains, which are taxed approximately half what income is taxed at those income levels.

Those are the plain and simple facts of the matter. Rich folks are fine tax-wise."

After reading this about seven thousand times I am wondering who you are trying to convince? Rich folks are fine. Taxes are flat above 380k for all 1.4M people that qualify.

On the other hand everybody else is doing ok tax wise also. You always leave that part out.

The bottom fifty percent average paying 2.6% (most don't pay any income tax, yes TP they pay FICA). The next tier (25-50%)average paying 6.75%, 10-25% average 9.29%, 5-10% average 12.44%.


Everyone in the top 5% pays over 20%.

And yes, the 6% matters more than the 20%, so does the price of food, rent, gas,etc. It is better to be rich, it just is.


"Rich folks are fine."

Heh. Well, they shouldn't be.

Russell is SO spot on with this:

Folks that come in to actually *produce something* on a for-hire basis can be worthwhile if their participation is managed well.

Folks that come in with bright ideas for sale about how *you* should produce something in a wonderful new and exciting way, not so much.

These two sentences should be written in gold letters a foot high on marble tablets, and set to music.

Nonetheless, in this sad world many people make a nice living doing the second thing. They make a nice living because they get paid well. By willing customers. Who value their advice because it's so expensive.

Old joke: a vigorous young bull once peed on an electric fence; when he reappeared in the pasture he was wearing a suit and carrying a briefcase. "I'm a consultant now," he explained.

--TP

On the other hand everybody else is doing ok tax wise also. You always leave that part out.

Everybody else isn't b*tching about being gouged by Uncle.

Hence, the omission.

And for the record, I'm cool with rolling back the marginal rates to the pre-Bush rates, across the board.

Heh. Well, they shouldn't be.

I'm not sure what this was intended to mean, but what it says is an opinion. Which is approximately equal to useless, as far as I'm concerned.

Here's what I think: get rid of the capital-gains classification completely. See what happens to revenue. Then consider raising the upper-bracket rate, which either is or isn't effective, depending on whose statistics you want to believe.

Always tax capital gains as income when realized. You can tax-shelter the gains for all I care, but when they're income (i.e. transferred out of tax-shelter, or inherited), they get taxed.

JMHO of course. I personally would be just fine and dandy when the top income earners pay at least as much tax, percentage-wise, as the middle class. Or the upper middle class, for all that.

Always tax capital gains as income when realized.

Every time I think about that, I remember that the world is full of capital LOSSES as well as capital gains. What's the right way to treat realized capital losses in the tax code?

We have evolved an income-based tax system at the federal level, and go through all sorts of contortions to make it "fair". If we could start over, I would advocate taxing wealth, not income. That's how we fund government at the local level -- although we stick to taxing mainly one particular form of wealth, namely real estate.

I can make a plausible argument that a federal tax system based on taxing wealth instead of income could work and be "fair", but not tonight.

--TP

Maybe one day Earth (or at least the US) will not go Galt but Golgafrincham. But keep the telephone sanitisers.
And I say, we'd live in paradise, if emperor Frederick III hadn't listend to his WASP wife to get a second medical opinion on that throat cancer.
Tax elective plastic surgery and porn and the deficit will take care of itself.
These two (€) cents were brought to you by the Slightly Silly Party.

The bottom fifty percent average paying 2.6% (most don't pay any income tax, yes TP they pay FICA).

You mean federal income tax, right? And, aside from FICA, there's sales tax, gas tax (and other excise taxes), property tax (even if you rent), all sorts of licensing and permitting fees, and stuff I can't think of that others could probably add to the list.

Everyone in the top 5% pays over 20%.

Do you mean on average?

And yes, the 6% matters more than the 20%, so does the price of food, rent, gas,etc. It is better to be rich, it just is.

Of course it is. I don't see anyone denying that or suggesting that it should be otherwise. The question is how much better should it be (in certain respects, anyway)?

Eighty obne Catholic academics have signed a letter to Boehner, condemnig the immorallity of Repulbican policies toward the disabled, the elderly, and the unemployed. To that I add my own complaint about the immorality toward those of us who still have a living wage at a union job.

The policies of Republicans--destroy the few remaining living wage jobs, favor corporations and the weatlhy, lie, lie, lie, deliberatley create deficits and blame everyone but themselves, further impoverish the children and disabled people who use Medicaid, turn Medicare into a poverty program and under fund it, create a policy to destroy uemployment benefits and, with delibertate deceptiveness name it the JOBS act...these are not the sorts of policies supported by moral people.

I know what the ratioalizations are. Mostly there are two catagories: "I have a ideology!" and "Those other people are undeserving!"

The "I have an ideology" rationalization puts a person's ego investment in their little personal get-out-of -thinking-for -free cop-out ahead of the effect of the ideology on real people. That's selfish.

The "Those other people are undeserving" ratioalization comes from people who do not
need what the Repulbican politicians are attacking and don't care about the people who do. They only care about some perceived benefit to themselves that they think they will get by supporting Republicans. It is interesting that the unemployed are being portrayed as dummies who should be self employed, who can just magiccly transport themselves to some new place and get a McJob somewhere since after all back in the day it was easy to get jobs so why bother understading anything about the current job market? Just blame the unemployed for being unemployed and use that as an excuse to defund unemployment.

That's how it works. It always comes back to ratioalizations for beig selfish. And, as the Catholic academics observed, the Repulbican approach to domestic economic issues is fundamentally unChristian. Also unBuddhist, un-any kind of responsible moral code.

Every time I think about that, I remember that the world is full of capital LOSSES as well as capital gains. What's the right way to treat realized capital losses in the tax code?

Sh!t happens. I get hit by a hurricane, have to replace my roof but my insurance company disagrees; is there a place for me to write that loss off? No, there isn't. Or at least, there are limits on fire, storm and theft loss that don't map well to capital loss. They're only effective, for example, to the extent that they exceed 10% of your AGI.

I'm a little torn on this one, honestly, but the federal government is not a hedge on your investment IMO.

Just my POV, anyway.

Capital losses that offset capital gains only, just like now, at least most of the time. Once you have your net (with a lower limit of zero), add that to the rest of your income to be taxed at the applicable rate. It's conceptually what we do now, except for treating (net) capital gains just like earned income and getting rid of the special rate. That would be my first swipe at it.

'That's how it works. It always comes back to ratioalizations for beig selfish. And, as the Catholic academics observed, the Repulbican approach to domestic economic issues is fundamentally unChristian. Also unBuddhist, un-any kind of responsible moral code.'

I have no idea where you may be trying to get to with the kind of discourse in your comment. If you are just venting, fine. If you are trying to persuade someone that your POV is valid and someone else's is lacking, it seems your sweep is too broad and loaded with strong condemnations and is an attack on the very voters who have sent many of these politicians into office (and recently). And many who supported these elected officials do not view themselves as Republicans. Certainly your invective delivery is not unique, even among those who comment here, so it remains to be seen if your approach will yield the results you seek.

I mean can I just

... an attack on the very voters who have sent many of these politicians into office ...

Why should voters be exempt from attack? Or condemnation? Or ridicule? It's not news to me that the current crop of clowns and hooligans in Congress with an R after their name were voted into office BY VOTERS.

And many who supported these elected officials do not view themselves as Republicans.

So what? How people "view themselves" is not the same as what they look like. I view myself as handsome and charming, for instance.

--TP

Here's what I think: get rid of the capital-gains classification completely. See what happens to revenue.

And see what happens to business formation, expansion and everyone's pension funds when long term risk is taxed as if it were ordinary income. Money invested in a new business is money at risk. A part of what makes that risk worth the effort is the reduced tax burden when and if a gain is realized. That risk continues for the life of the company, whether public or private. That is, each new investor/owner is banking on the continued success of his/her investment in the hopes of selling someday at a decent rate of return. One of the key features that makes buying an existing operation attractive is the fact that when it's sold, the tax treatment is more favorable.

Capital losses that offset capital gains only, just like now, at least most of the time.

What losses does someone have against their earned income? None. Expenses of living, but those aren't losses in any accounting or financial sense. There is no risk in working and making a salary, other than the risk of losing your job which is unavoidable. An investment is by definition a risk and not every risk pays off. Long term capital losses are offset against long term gains and then any net long term loss is amortized at the princely sum of $3000 a year (or, at least this was the number when I last looked, several years ago). If you have way more losses than gains--that would be me--you have to get back to even before you ever pay the reduced tax rate.

A part of what makes that risk worth the effort is the reduced tax burden when and if a gain is realized.

So what you're saying is that society encourages risk taking by reducing the risk of taking a risk. Thus we bring you another example of government policy shaping behavior. It follows that since this is a government action, it is "skewing incentives", encouraging "economic misallocation", and borderline evil.

Interestingly, the correlation of countries with zero cap gains taxes and low standard of living seems high (i.e., many developing countries have no cap gains tax).

You would think all the Galtian overlords would move to these places....but there must be something more to this. More study is warranted.

This is not to be construed as an opinion, which of course, is useless (Slarti's postulate).

;) :):):)

If you have way more losses than gains--that would be me--you have to get back to even before you ever pay the reduced tax rate.

So, what's your point? This is how the law currently works, and I don't think anyone is saying that (and I'm not even sure how this would work) capital losses should also be taxed. You lose money on your investments, and realize that loss, and you pay no taxes because there is no gain. Please don't argue for small government and then expect the IRS to indemnify you against investment losses; if that's what you're doing, it makes no sense.

But I think that you make a decent point, even if incidentally. The reason capital gains exists as a completely separate category of income, with a different tax structure, is that the government has decided to incentivize certain behaviors (in this case, obviously, investment). When the government (through the tax code) elects to try and influence people's behaviors, it does two things (at least): it distorts the market, and it adds complexity to the tax code. Oh, and a third: there are always unintended consequences.

And yes, I realize that the above logically argues for the removal of the home mortgage interest deduction. I'm ok with that, provided it's done in a way that's revenue-neutral.

So what you're saying is that society encourages risk taking by reducing the risk of taking a risk. Thus we bring you another example of government policy shaping behavior. It follows that since this is a government action, it is "skewing incentives", encouraging "economic misallocation", and borderline evil.

Slarti makes a similar and similary erroneous observation. First, you had capital and capital growth long before you had an income tax. The tax regime was imposed on the pre-existing economy and its initial drafters were intelligent enough to recognize that taking investment risks were necessary to growing and maintaining an economy, that capital appreciation builds up over time and that discouraging capital investment by making the risk unacceptable by taxing the gains excessively would be bad for the economy onto which the tax regime was being imposed. Here, the egg came first, then the chicken.

You lose money on your investments, and realize that loss, and you pay no taxes because there is no gain. Please don't argue for small government and then expect the IRS to indemnify you against investment losses; if that's what you're doing, it makes no sense.

You are taking my statement out of context. There is zero risk to earning income as an employed person, other than your employer going out of business or downsizing you. However, that is not a risk that arises from showing up at work and getting paid for your work at the end of the day. Capital investment, however, is a risk ab initio. Sometimes the risk pays off, sometimes it doesn't. Treating lost investment as if it were an expense of doing business fails to recognize the fundamental difference between capital and expenses generated in the course of earning income. For example, if someone buys a business, they don't get to deduct the purchase price of the business from earnings in the out years. They only deduct current expenses attendant to operating the business. Capital assets can be depreciated, but not more than the asset's basis. Intangibles, good will, etc are paid for but not deducted. The gain from those assets isn't realized until the company is sold, assuming it is sold at a profit. If you want people to start new businesses, to buy and expand existing businesses, don't tax their capital at rates that will discourage precisely what you want.

Put differently, an investor looks for a rate of return on his/her capital. If a stock is going to be held for a year or more, with the attendant risk of the price falling or the business failing (I owned a lot of Indymac, thanks Sen. Schumer!), the rate of return the investor anticipates is tied directly to the tax imposed on the gain, gain and rate of return being the same thing. Raise the tax rates such that return rates diminsh and people will put their money in safer, lower rate-of-return opportunities.

Put differently still, a business owner is at risk everyday. He/she pays ordinary income rates on earned income, reinvests previously taxed dollars in the business, hoping someday to sell some or all of the business and make it all worthwhile. Raise the rates, and suddenly, it's not all so worthwhile.

Raise the tax rates such that return rates diminsh and people will put their money in safer, lower rate-of-return opportunities.

Those safer opportunities would also be for a rate of return subject to tax on earnings or gains. People will put their money where they think they have the best chance to make the most money. Whether that best chance becomes somewhat less gainful than it is now is only relevant if it becomes not the best chance to make the most money.

Frankly, considering the silly risks that the FIRE sector has deemed best in recent years, I'm not so concerned about reducing risk taking. In fact, I like the idea.

There is zero risk to earning income as an employed person, other than your employer going out of business or downsizing you.

Which is to say: definitely nonzero risk. The millions of additional people who are not working today (as compared with a few years ago) would beg to differ with you.

don't tax their capital

I'm not talking about taxing capital; I'm taling about taxing realized capital gains. Taxing capital is akin to a wealth tax, which I'm not in favor of.

From Political Animal:

"When it comes to raising the debt ceiling, House Republican leaders have been sticking to an aggressive hostage strategy: give them the (unspecified) cuts or the GOP will create a recession on purpose. Thus far, Senate Republicans haven’t played much of a role, though that started to change yesterday.

The Senate minority leader, Mitch McConnell, said Thursday that the debt ceiling debate provides Congress with a rare opportunity to make sweeping changes to entitlement programs and spending, and that he would not vote to raise the level without significant budget cuts and revisions to Medicare and Medicaid.

“Divided government is the best time — and some would argue the only time — where you can do really big stuff,” Mr. McConnell said at a news conference after a meeting between President Obama and Republican senators. He said he had thought the meeting would be a waste of time but was pleased that it was a “candid exchange.”

This is, of course, identical to the House leadership’s threat. McConnell will help cause an economic catastrophe, deliberately, unless Democrats give Republicans what the GOP demands."

This is Norquist's plan coming to fruitition. Everyone who continues to support Republicans owes the rest of us one heck of a apology. Invective? So what?. It is way more offensive for people to rationalize policies that harm one's neighbors than to object with invective to those policies and the rationalizations.

I would acknowledge McKinney's point about investment risk versus employment risk. The risks are different in that losing your job means that you no longer get paid for work you are no longer doing. You don't have to pay back the money you already made (normally). You don't get fired retroactively (normally). That's different from losing money that was once yours.

With that, there is an aspect of risk for someone who has lost a high-paying job and is now unemployed taking a new job that might not last very long, particularly if it doesn't pay nearly as well as the previous one, given the way unemployment insurance works.

The millions of additional people who are not working today (as compared with a few years ago) would beg to differ with you.

Of course, but the sole risk is that of unemployment. There is no investment, no essential, paid-in-advance cost of taking a job that is put at risk by the simple act of accepting employment. To illustrate: just to open my doors on day one, I was upside down roughly 150K. I had one partner (who did not sign the LOC, or the lease or anything else), two associate attorneys and 3 clericals. If I flopped, I was out the 150K plus the non-realized profit, i.e. not only did I lose money up front, I didn't make any. My partner and employees got paid up until the day they last worked. Their risk: that I wouldn't generate enough clients to keep the doors open. Their loss: whatever income, less unemployment payments, until they found their next job. Relatively speaking, a minimal risk.

You don't have to pay back the money you already made (normally). You don't get fired retroactively (normally).

But those things shouldn't happen to normal investors either. A reasonable investor should invest in a risk-balanced portfolio of assets such that the probability of losing most of it in a short time is zero. If an investor decides to behave like a drunken casino goer and bet it all on red, well, taxing the daylights out of such behavior doesn't really trouble me.

Link to the article Laura referenced, above, but didn't link to.

Of course, but the sole risk is that of unemployment.

This analysis ignores how people actually live. In practice, most employed people are massively upside-down on mortgages: if they lose their job, they don't just forgo income, but they also face a substantial risk of losing their home and all the equity they built up. Right?

There is no investment, no essential, paid-in-advance cost of taking a job that is put at risk by the simple act of accepting employment.

Well, now, that depends on what kind of job it is, and how much training you had to undertake -- sometimes at your own expense -- to get it. If you pursue a college degree, incurring loan debt to do so, and find yourself jobless and unable to pay that loan, you're kinda screwed. Or substitute vocational training for college degree if it suits you.

(Cue a bunch of semantic gobbledygook from McK about how that has nothing to do with the job qua job, and thus he shouldn't have to pay taxes.)

just to open my doors on day one, I was upside down roughly 150K

Sure. There's always the possibility that you fail. Is it reasonable for you, a small-government conservative, to expect government to indemnify your risk for you?

If the risk isn't worth the return, don't take it.

Let's suppose I bought a house back in, say, 2006, and I paid $700k for it. That same house is now valued at $400k, and I've got to sell because I lost my job. Who's going to indemnify my risk?

A reasonable investor should invest in a risk-balanced portfolio of assets such that the probability of losing most of it in a short time is zero. If an investor decides to behave like a drunken casino goer and bet it all on red, well, taxing the daylights out of such behavior doesn't really trouble me.

Putting it all on the line to start a business is akin putting it all on red. Are you sure you want to discourage that type of investment?

Are you sure you want to discourage that type of investment?

I'm not proposing we discourage it, just that we encourage it less.

Your decision, whether you want to still form a business and go for it. IIRC you're already in, so your concerns don't apply to you right now.

Actually the capital-gains discussion was targeted more at the people who make most of their income from capital gains, in the top bracket. If you feel that this unfairly affects you, we can discuss possible changes to the rules attendant to small businesses.

But, once more: what I'm proposing is a tax on capital gains when realized. To my knowledge (and my knowledge in this area is somewhat limited) capital gains are normally not taxed until realized. In other words, taken as income.

Which is what it really is. You seem to want some kinds of income to be more special than others.

Putting it all on the line to start a business is akin putting it all on red. Are you sure you want to discourage that type of investment?

Yeah, actually, I am. If you can't afford to lose it all, then I don't think your gambling, er, "investment" should get special tax breaks.

I mean, I really don't think people should be encouraged to take crazy reckless risks with *all* of their wealth. If you want to take crazy reckless risks with a chuck of your assets that you can afford to lose, that's fine, but by definition, that's a much safer endeavor.

If there is a good reason to think that your business will be successful, you should be able to secure financing or partners. If you can't convince anyone in the world that your brilliant plan is a win, well, maybe it is a stupid idea....

If the risk isn't worth the return, don't take it.

Exactly, and if you don't want people taking those kinds of risks, feel free to raise the rates, and folks won't have to worry about losing a job that never came into existence and there won't be any revenue from the business that never started to tax. We can all feel happy about taxing those rich, capital gains bastards, regardless of the pain we inflict on ourselves.

If anyone wants to read something that discusses capital gains rates in great detail and their effects on investor behavior and tax revenue, here it is:

http://www.cbo.gov/ftpdocs/84xx/doc8449/88-CBO-007.pdf

From what I've read so far, it's not terribly predictable. Rates have changed over the years, so there are data, but the effects are hard to tease out, given other variables in play.

Exactly, and if you don't want people taking those kinds of risks, feel free to raise the rates, and folks won't have to worry about losing a job that never came into existence and there won't be any revenue from the business that never started to tax.

I see. So there was no investment and there were no jobs in the past when rates where higher. And if we didn't tax capital gains at all, we'd be living in nirvana. No one will invest in anything if we tax capital gains, when realized, as undifferentiated from earned income. People will just sit on their money, happy to make nothing, for fear of only making some percentage of some amount of money, rather than some other percentage of some amount of money.

We can all feel happy about taxing those rich, capital gains bastards, regardless of the pain we inflict on ourselves.

Note that I haven't included any rhetoric demonizing or otherwise condemning the rich, or (really) anyone at all. Or, for that matter, placing any emphasis on my own level of happiness.

See, I have this thing about not basing my arguments 100% on to what extent a given policy change causes me advantage or disadvantage. What you're doing in this thread, McKTx, could be excised whole and placed next to reactionary as a case in point. You've already disposed of it as a bad idea, and you're just going to poke at it.

You might actually have a good argument in there somewhere, but as far as I can see your whole point seems to be based on this would suck for me.

That aside, and riffing off of hsh's comment above: for you, what do you think the ideal capital gains rate is? 0%? What it is now? Some other value?

Once you've answered that, I'd like you to say a few things in response to my inquiry as to why you think capital gains income is special or privileged.

Thanks!

but as far as I can see your whole point seems to be based on this would suck for me.

That aside, and riffing off of hsh's comment above: for you, what do you think the ideal capital gains rate is? 0%? What it is now? Some other value?

Once you've answered that, I'd like you to say a few things in response to my inquiry as to why you think capital gains income is special or privileged.

In order of your inquiries/comments:

1. You've misread me. I think lowering cap gains is really, really bad idea for the country.

2. Two brackets: 20% up to 500K in gains, 25% above 500K in gains off of publicly traded securities and 15% of the first 5mm and 20% above 5mm on the gain realized off of the sale of a closely held business, as in where someone sells their life's work to another purchaser, the gain is taxed at 15% then 20%. For the most part, you are looking at a once in a lifetime windfall and I think the business owner/risk taker shouldn't be taxed much at all on that one deal.

3. It is special or privileged because what makes starting a business or buying an ongoing business, or a part of that ongoing business, attractive is the favorable tax treatment on the gain realized on that business when it is sold. The risk/reward calculus is materially impacted by the tax rates applied to profits. I want a growing economy where investors take risks because that produces more jobs, goods and services. The idea that you can jack cap gains rates up to 35 or 40%, or higher, and get the same willingness to invest is simply wrong-headed.

Slarti, my cap gains income is minimal by any objective standard. However,I know and represent many small business owners. Their retirement hinges on selling their businesses, usually to employees but sometimes to other buyers, and having a nest egg to live off of. Some of these sales will be in the tens of millions of dollars, meaning capital has to be raised, even if the gain is somewhere in the 3-5 million range. Where is that capital going to come from if the risk is no longer worth the investment?

I see. So there was no investment and there were no jobs in the past when rates where higher. And if we didn't tax capital gains at all, we'd be living in nirvana. No one will invest in anything if we tax capital gains, when realized, as undifferentiated from earned income. People will just sit on their money, happy to make nothing, for fear of only making some percentage of some amount of money, rather than some other percentage of some amount of money.

Long term cap gains were never higher than 20% and have never been taxed at ordinary income rates, so your rejoinder describes a non-existent time and place. People will not risk losing some or all of the money they have already earned and already paid tax on just to have the next round of profit on a sale, if any, taxed at rates that make the risk itself not worth taking.

Or, the carrying charges on the investment will be so prohibitively high that only the wealthy can afford to pay them. So much for upward mobility.

Or, the carrying charges on the investment will be so prohibitively high that only the wealthy can afford to pay them. So much for upward mobility.

Heaven forfend we sacrifice upward mobility.

Thanks for your answers, McKTx, although your answer #1 really wants a great deal of unpacking. A bad idea...why?

The risk/reward calculus is materially impacted by the tax rates applied to profits.

I'm not talking about tax on operating profits, I'm talking about tax on capital gains. Aren't those really two completely separate things?

The idea that you can jack cap gains rates up to 35 or 40%, or higher, and get the same willingness to invest is simply wrong-headed.

I'm not talking about jacking up the capital-gains rate; I'm talking about taxing gains as if they were ordinary income. Why aren't they ordinary income?

The answer to your life-savings hypothetical could be permit such businesses to be valid tax-sheltered investments. In such a case, you could realize the gain inside the tax shelter, but only pay taxes on them when you're taking money out.

...and I'm back to why other taxpayers must shoulder the burden of risks taken by entrepeneurs. Why is that? Do you agree that's what is happening? If not, why not?

Note, again, that I have nothing against entrepeneurs. I have some of those in my family, and I realize how difficult it is to start your own business. But we're not talking business income, here; we're talking about what happens when you sell the business, which is another thing altogether.

Heaven forfend we sacrifice upward mobility.

Inequality and immobility are different things, Phil. I suspect we have income mobility issues as well, but that's not what the Gini coefficient gauges.

Slarti, I feel like we are talking about two totally different concepts. If I borrow a million dollars to buy or start a business, and then I make a living off of that business, but reinvest my after tax profits, then I sell that business, I am realizing a gain off of my initial loan (which is paid back with after tax dollars, i.e. are not an expense charged against current earnings) plus my reinvested, after tax dollars. That is a risk of capital far above and beyond simply taking a job with someone else. That risk produces a steady stream of income that is taxed, employees who get jobs (and pay their taxes), provides a service etc.

Your response to this is why [should} other taxpayers . . . shoulder the burden of risks taken by entrepeneurs? The business owner is a tax payer too. He/she has added value not only to the country through his/her annual tax payments but has also created jobs. How is that a burden on taxpayers? Because, at the end of the day, his/her return on capital is taxed at a lower rate?

If you find that burden to great to bear, how about the burden of people deciding that taxes are too high, so less business get started and less people are employed? Why isn't that a burden?

You state, several times, that capital gains and ordinary income are different, and yes, they are different. Business income is ordinary income. Capital gains is the return on invested capital. One carries a higher risk factor and also produces benefits beyond the reward to the investor. Ergo, different tax treatment.

Long term cap gains were never higher than 20% and have never been taxed at ordinary income rates, so your rejoinder describes a non-existent time and place.

You should read the PDF at the URL in my 11:32 AM comment, McKinney. You will then know that what I quoted above from you is false.

People will not risk losing some or all of the money they have already earned and already paid tax on just to have the next round of profit on a sale, if any, taxed at rates that make the risk itself not worth taking.

The question is whether the rates we're talking about will make the risk itself not worth taking. You're begging the question here by burrying your conclusion within your premise.

I will acknowledge that there very well may, almost certainly, be instances where the reduced potential return on an investment will push it into the "not worth the risk" category were we to raise tax rates on capital gains. But, again, I don't think insufficient risk taking is a particular problem in today's market - quite the opposite.

Personally, I'd probably be amenable to treating the sale of one's own business differently from the sale of stock in publicly traded corporations for the purposes of capital-gains taxation, depending on the details. Maybe that's more of what's got you bothered, and I think there's a valid distinction between the two situations.

The business owner is a tax payer too. He/she has added value not only to the country through his/her annual tax payments but has also created jobs.

I'm sure the country is properly grateful for your contribution, but that's not really why you put your own business together, is it? To help others?

How is that a burden on taxpayers? Because, at the end of the day, his/her return on capital is taxed at a lower rate?

I'm not getting you, McKTx. It still sounds as if you think you deserve your own special tax rate because you're doing what you really wanted to do in the first place. And another thing: at the end of the day is particularly poor phrasing in the context of a capital gains discussion. Who takes capital gains on a daily basis, that I should be careful about discouraging?

If you think that the risk that small business owners are worth the reward of a lower effective tax rate, I am just peachy with moving that entire discussion over into different tax accounting for business owners, and concentrate on a sane level of taxation for people who earn nearly all of their income from investments in e.g. stock.

Which, I remind you, is the primary reason why Warren Buffett pays a lower tax rate than does his secretary. I've got nothing against Warren Buffett or Bill Gates or any of those other fabulously wealthy folks, but I'm not all that enthusiastic about indemnifying their risk.

HSH:

Personally, I'd probably be amenable to treating the sale of one's own business differently from the sale of stock in publicly traded corporations for the purposes of capital-gains taxation, depending on the details. Maybe that's more of what's got you bothered, and I think there's a valid distinction between the two situations.

Me:

If you think that the risk that small business owners are worth the reward of a lower effective tax rate, I am just peachy with moving that entire discussion over into different tax accounting for business owners, and concentrate on a sane level of taxation for people who earn nearly all of their income from investments in e.g. stock.

I think we've encountered one of those improbable events on the scale of my coffee spontaneously heating itself back up at the expense of other objects in the room.

Cats and Dogs living together... Mass Hysteria!

It still sounds as if you think you deserve your own special tax rate because you're doing what you really wanted to do in the first place. And another thing: at the end of the day is particularly poor phrasing in the context of a capital gains discussion. Who takes capital gains on a daily basis, that I should be careful about discouraging?

If you want to personalize this, I won't be paid a penny for my lawfirm when I retire that is taxed at anything other than ordinary tax rates, assuming I can find someone to buy me out. "At the end of the day" refers to the one time sale of someone who has started and then sold a business, the end of the day being the day of the sale.

One carries a higher risk factor and also produces benefits beyond the reward to the investor.

Ah. The social case for capital gains treatment. This tax creates a special form of income effectively subsidizing a particular behavior (entrepeneurship). As I said, it reduces the risk of taking certain kinds of financial risk. McKT argues this "creates jobs" as if there would be no jobs otherwise...That cannard aside, there are social costs to encouraging this type of behavior--social stratification, concentration of political power in the hands of those whose wealth (and income thereby derived) can now grow faster due to special tax treatment, etc.

The entire treatment of capital is also a socially sanctioned (i.e., codified into law) subsidy. A social action implimented by the government. Wealth can accummulate and grow without being subject to tax--reinvestment. Only recently have wage earners been provided with a similar financial vehicle (IRA's, etc.).

There is also scale. Nearly all start-ups fail. The overwhelming number of businesses in this country are so small that they effectively constitute a class of people who saved up enough money to buy themselves a job. A juicy cap gain payoff in the distant future is generally not a factor in the decision to open the enterprise...the ability to generate a good income and run a lot of day to day expenses through as "business expense" is. Most of these firms die a peaceful death by being liquidated when the owner decides to call it a day. You can't live very handsomely off a $300,000 investment in t-bills, but a successful small restaurant? Perhaps.

And the allegedly common outcome of "selling it to the employees"? Please. Don't insult our intelligence.

If you want to personalize this

No, I don't. Consider "you" in that context as "you small-business owners that happen to agree with McKTx".

This isn't really about your personal preferences other than to the extent that your wants together with everyone else that agrees with you tend to drive tax policy. That kind of thing is, IMO, a good chunk of why we have a nearly impossibly complex set of tax law.

Heaven forfend we sacrifice upward mobility.

Inequality and immobility are different things, Phil. I suspect we have income mobility issues as well, but that's not what the Gini coefficient gauges.

I highly suspect but can't prove that a lack of the latter is what leads to an increase in the former.

Dylan Matthews explains here that the US is near the bottom of OECD nations when it comes to income mobility. I think that pretty conclusively demonstrates Phil's point.

Phil: ...a class of people who saved up enough money to buy themselves a job.

An old friend of mine used to describe his little machine shop business as "owning my own job." I always liked that phrase.

McTx: I want a growing economy where investors take risks because that produces more jobs, goods and services.

Something bothers me about that phrase. "Goods and services" are things we consume; "jobs" are not. Our standard of living (individually and in the aggregate) is increased by consuming more goods and services, not by having more work to do. "Jobs, goods and services" is a list of three things, not a category.

Slarti: Taxing capital is akin to a wealth tax, which I'm not in favor of.

A wealth tax is a radical idea (except, as I keep noting, at the municipal level) but I think it's worth considering in place of, not in addition to, our income-based tax structure with all the contortions it contains in pursuit of "fairness".

I hear that there are hedge funds, mutual funds, and other "investment vehicles" whose fee structure is essentially the same as a "wealth tax": you pay (quarterly? annually?) X% of your portfolio value to the fund managers. Never mind whether people are nuts to sign up for a such a fee structure. The important point is that paying 1% or 2% of your "wealth" every year is not unheard of -- and can even be a good deal.

I would like to see a tax system based on wealth rather than income because wealth is a better measure of "ability to pay" than income is. Some people's wealth amounts to a slow and patient accumulation of savings out of their income. Other people's wealth is inherited. Still others own wealth in the form of appreciated assets. However acquired, wealth is in fact what each of us pays his bills -- from groceries to taxes -- out of.

Just to be clear: if you're living paycheck-to-paycheck, your "wealth" goes up a few hundred bucks on payday and you draw it down to live on until (you hope!) next payday. That's what I mean by "wealth is what each of us pays his bills out of". But I am not proposing a weekly wealth tax, any more than I would propose a weekly real-estate tax.

No, I am dreaming of a situation where your weekly or monthly bills do not include taxes. Money is NOT withheld from your paycheck to be forwarded to the IRS. You could spend the extra money on "goods and services" and be as flat broke at the end of the year as you were at the start. You would owe no "wealth tax" -- but you would have "stimulated the economy" in the meanwhile. And we all want a stimulated economy, right?

--TP

Elites who gather unto themselves an overwhelming amount of wealth tend to blow it off recklessly to society's detriment. It strikes me this is exacerbated in our modern society with its technological progress, economic growth and wealth accumulation.

Reigning in this tendency is thus a social good, and a tax on wealth would serve nicely.

But that's just my useless opinion.

I say we institute a wealth tax and a consumption tax, and let them fight it out.

The challenge is fundamentally redefining all of our metrics of economic growth so that job growth/sustainability is the number one metric, with other metrics being secondary.

Then GDP and other metrics become supportive to that goal. Taxation becomes a function of fairness across a fully employed workforce, inflation becomes a less invasive problem, etc.

And we should tax wealth, not income.

So, I agree with everybody.

Here's a metric I would use to measure the economic health of a society: what fraction of his or her life does the average person spend working?

Opinions might differ on how to interpret the metric. In Country A, the average person works 80% of his waking hours between the cradle and the grave. In Country B, it's 40%. Which country has the higher standard of living?

--TP

And we should tax wealth, not income.

I think that would monkey with most people's retirement planning, a bit. Maybe not in a bad way, though, but it would definitely change things.

I suspect it would definitely change, or would have to change, the way we currently operate life insurance and annuities. And you know that sooner or later (most likely sooner) someone is going to create tax shelters for wealth, and probably only people with a lot of money (and, hence, incentive) can take advantage of those shelters.

Germane to the tax discussion here (listen twice, a little disjointed), especially in defining terms like "income", "wealth", "productivity", etc. Also, the history of the income tax and the way in which the discussion about taxation has turned to pure shite in this country.

http://michael-hudson.com/2011/01/why-america-had-a-90-income-tax/

Sorry for the dead link. Resurrect.

Interesting factoid: the average stock, in the stock market, was held for an average of 22 seconds this year, compared to 20 seconds last year.

Real estate flipping -- same useless, damaging activity.

What was produced from those "investments"?

Surely something far inferior to and much more eminently taxable than MckT's capital investment in his law practice.

None of us really know what we're talking about regarding taxation, which is just the way Andrew Mellon, Eric Bolling, Grover Norquist and Arthur Laffer have planned it.

Also, for Goodoleboy, there's a very balanced article at Washington Monthly (see the banner on top or on the sidebar) on the dangers facing your natural gas boom in the U.S., and the dangers don't all come from the direction you propagandize.

I'm interested in your thoughts from a lurking perspective.


Just a note to the Count's note, any profits on stocks held for 20 seconds are already taxed at the same rates as ordinary income.

For you and me, yes, but not for hedge funds.

I suspect, but don't know exactly, that most or all of the gains made from high frequency trading through hedge funds, which accounts for most of the volume on exchanges in recent years, is taxed at capital gains rates.

And I'd wager, if I had wages, that much of that is not taxed at all through whatever strategems these "people" have devised.

Eric Bolling, of Fox Business News and hedge fund infamy, is a racist bug in his attitudes toward Obama, but the Adminstrations's proposals to tax hedge fund gains as ordinary income is what really motivates his despicable Lester Maddox act.

Correction, I think:

Hedge funds trades, nearly all short-term, are taxed as ordinary income.

The very high fees and service charges, which are "income" to the hedge fund managers under any sane definition of the word, are taxed at the lower capital gains rate.

This is a specially carved out loophole for them.

Still, the economic value of high frequency trading to a productive economy is much more questionable, to say the least, than MckT's job-creating capital investment in his law practice.

If I could high-frequency trade McKinney, McKinney and Kvetchky, Inc eight million times a day, it would do absolutely nothing do improve the productivity or pay of his beleaguered file clerk. In fact, I'd probably demand (during one of my 22-second stints as an "owner" of the business) that he fire the poor guy to raise the unemployment rate and improve the return on my "investment".

I usually only get one thing right in my comments -- in this case: Eric Bolling is a racist bug.

"The very high fees and service charges, which are "income" to the hedge fund managers under any sane definition of the word, are taxed at the lower capital gains rate."

Well, it's kind a of fees and service charges. It is the fund managers pay which is usually split into a fixed fee for assets under management that is taxed as ordinary income and a percentage of the profit for the year that is taxed as capital gains.

The underlying logic is the annual profits are a piece of what is usually a partnerships profit, thus a gain on the partnership,earned over a year thus long term thus a capital gain.

It is not specific to hedge funds, it also applies to VC funds where the logic is clearer and the timelines are usually longer.

Countme-In:

'Also, for Goodoleboy, there's a very balanced article at Washington Monthly (see the banner on top or on the sidebar) on the dangers facing your natural gas boom in the U.S., and the dangers don't all come from the direction you propagandize.

I'm interested in your thoughts from a lurking perspective.'

Thanks for pointing to that article. I agree that it is balanced and I generally support efforts like that of Fox to reveal things going on that are not getting the exposure they may warrant. Sometimes, zealotry in the interest of one side or the other, when there is a tension, can mar otherwise commendable reporting of facts. Don't know if any of that is present here, but the Colorado Oil & Gas Conservation Commission raised several points of interest regarding the cases of methane gas in drinking water supply and concluded that not all of the documentary accorded with their understanding of the facts.

I support safeguarding the environment from serious damage caused by commercial exploitation of natural resources. My suggestion that the government get out of the way is directed primarily at the concept of 'bans' on such exploitation without definitive evidence that such is needed.

My suggestion that the government get out of the way is directed primarily at the concept of 'bans' on such exploitation without definitive evidence that such is needed.

Really? Please provide an example of "definitive evidence" that would sway you to endorse a ban on such exploration.

IIRC the case for taxing capital gains at a lower rate is: (i) to offset the bias against saving (because w/o a tax deferral it's done with after tax dollars and gains from savings are also taxed); (ii) to reflect that not all gains are "real" gains due to inflation; and (iii) to reduce the incidence of double taxation from the corporate income tax.

As to each: (i) those who hold their investments in the form of 401k, IRA, or other pension plan, get nothing from the reduced rate, I forget what % of, e.g., publicly traded stocks are held in these forms (alot, I think); (ii) this helps a little but there are other ways for taking into account inflation, plus it's not like inflation doesn't eat into non-capital gain income too; (iii) the lower capital gains rate applies not only to assets held in corporate solution, but to assets held directly or via pass-through entities, thus not all gains have been taxed twice (and, to the extent corporations pay a lower rate than the 35% statutory rate, not all are taxed twice at the full marginal rate).

I would also note in this regard that the capital gains tax rate on assets held by corporations is 35%, i.e., the 15% rate applies only to individuals (directly or indirectly through pass-throughs).

Also, regarding (iii), double taxation = so what?

Also, regarding (iii), double taxation = so what?

That's a fair point in that to the extent corporation's are to be treated as separate legal entity with its own set of rights and also have limited liability, then they should be taxed separately too. Though to be fair such a tax would need to also be imposed on S-corporations and limited partnerships/LLCs as well, which provide limited liability these days without the extra tax burden.

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