Buffett secretary to attend State of the Union

[ERICOPOLY]

There should be less economic divide once the boomers have substantially died off.

 

Wealth is skewed towards the 50+ demographic.

 

Aging boomers have made the headline inequality worse.  As they die things will get better in terms of the rich vs poor.

 

[txlaw]

Hint:  don't directly own the JNJ stock.  Utilize a holding company that doesn't distribute dividends.  But make sure you hold the equities in insurance subs so as not to trigger the Personal Holding Company rules on distributing earnings.

 

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice?

 

JNJ pre-tax income gets reduced by corporate tax rate.

 

Dividends to insurance sub get taxed, though not at full 35% rate.

 

Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income.

 

Or am I wrong here?

[RichardGibbons]

I think the statement that most of the benefits of society have all gone to the rich is wrong. If that was the case you would have rioting in the street not just a pretend OWS protest that is a bunch of progressives trying to tax their fellow citizens.

 

Well, you can think that, but you could also look at the evidence.  Consider the "Winners take all" graphs here, particularly the second one.

 

http://motherjones.com/politics/2011/02/income-inequality-in-america-chart-graph

 

Basically, for a generation, all the income growth has gone to the upper 20%.  There's a bunch of evidence that show this.

 

I speculate that's a natural consequence of globalization and union busting (both relatively good things, IMO).  I'd agree with you that we're risking rioting in the street because of things like this.  It seems to me pretty likely that if OWS does not result in significant changes, there will be a much more violent version of OWS some time in the next decade.  That's why I believe that we should look for ways to reduce inequality.

 

Finland, for instance, seems to have figured out some good ways to reduce inequality, while maintaining a productive economy. There are probably lessons to be learned there.

[ERICOPOLY]

Hint:  don't directly own the JNJ stock.  Utilize a holding company that doesn't distribute dividends.  But make sure you hold the equities in insurance subs so as not to trigger the Personal Holding Company rules on distributing earnings.

 

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice?

 

JNJ pre-tax income gets reduced by corporate tax rate.

 

Dividends to insurance sub get taxed, though not at full 35% rate.

 

Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income.

 

Or am I wrong here?

 

 

You are right that there is extra tax if Berkshire pays a dividend or if you sell some stock.

 

However if you live on the income from the tax-free munis and treat Berkshire as a family wealth asset (to be passed to heirs) then there is no second tax (step up in basis when you die).

 

Wealthy families can benefit greatly from this terrific tax shelter that Warren runs for them.

 

[txlaw]

Hint:  don't directly own the JNJ stock.  Utilize a holding company that doesn't distribute dividends.  But make sure you hold the equities in insurance subs so as not to trigger the Personal Holding Company rules on distributing earnings.

 

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice?

 

JNJ pre-tax income gets reduced by corporate tax rate.

 

Dividends to insurance sub get taxed, though not at full 35% rate.

 

Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income.

 

Or am I wrong here?

 

 

You are right that there is extra tax if Berkshire pays a dividend or if you sell some stock.

 

However if you live on the income from the tax-free munis and treat Berkshire as a family wealth asset (to be passed to heirs) then there is no second tax (step up in basis when you die).

 

Wealthy families can benefit greatly from this terrific tax shelter that Warren runs for them.

 

Ok, agreed.  I hope to benefit from that tax shelter someday.

 

Not happening anytime soon, though.

[Packer16]

One thing those graphs do not show but imply is the top 1% 10, 20 or 30 years ago are the same folks as today.  I know many dot-com millionares are no longer with us.  So I think that top 1% is very fluid.  If that is the case, then riots in the streets will not happen. 

 

The other aspect is does the top 1% live like royalty versus the 99%?  Many in the 1% live like the other 99%.  (This is an Amrican tradition going back to de Toqueville's time)  I think not except some of the Hollywood folks which to be fair there should be an Occupy Hollywood as they are the ones who have the wealth and show it and may be that is why they support OWS versus the normal folks who think it may good but is not effecting thier lives.  Overall, I think this is a distraction from solving the big problems we face and Obama is using this issue to avoid taking a stand on the more difficult issues of entitlement reform.  I think unless he comes up with a plan other than the status quo and tax the rich, he will be out of office.  Just my 2 cents.

 

Packer   

[ERICOPOLY]

Hint:  don't directly own the JNJ stock.  Utilize a holding company that doesn't distribute dividends.  But make sure you hold the equities in insurance subs so as not to trigger the Personal Holding Company rules on distributing earnings.

 

Isn't the rejoinder here that if you do what you're talking about (and you're not LUK, who never seems to pay tax), your "look through" earnings get taxed thrice?

 

JNJ pre-tax income gets reduced by corporate tax rate.

 

Dividends to insurance sub get taxed, though not at full 35% rate.

 

Finally, to personally realize the benefits from the JNJ income, which in theory should be reflected in stock price appreciation, you must sell some stock and pay another 15% on the appreciation associated with the JNJ income.

 

Or am I wrong here?

 

 

You are right that there is extra tax if Berkshire pays a dividend or if you sell some stock.

 

However if you live on the income from the tax-free munis and treat Berkshire as a family wealth asset (to be passed to heirs) then there is no second tax (step up in basis when you die).

 

Wealthy families can benefit greatly from this terrific tax shelter that Warren runs for them.

 

Ok, agreed.  I hope to benefit from that tax shelter someday.

 

Not happening anytime soon, though.

 

 

Buffett ought to shift his personal portfolio to 100% muni bonds and then give Debbie a raise to $100,001.  He would then have roughly 1% in bonds, 99% in equities, and pay no personal income taxes whatsoever except for his $100,000 Berkshire salary.

 

Then he can claim that Debbie pays more tax than him on an absolute basis. 

 

 

[RichardGibbons]

One thing those graphs do not show but imply is the top 1% 10, 20 or 30 years ago are the same folks as today.  I know many dot-com millionares are no longer with us.  So I think that top 1% is very fluid.  If that is the case, then riots in the streets will not happen. 

 

Yeah, you'll also find you're wrong about that.  Search for "social mobility", and you'll find out that USA is typically one of the worst countries in the world when it comes to social mobility.  Basically, the rich get richer, and the anecdotal dot-com millionaires are not representative.  e.g.

 

http://www.guardian.co.uk/business/2010/mar/10/oecd-uk-worst-social-mobility

 

Basically, if you look at the evidence, it's very hard to escape the conclusion that in the USA, the richer are getting richer, and the poorer are getting poorer.

 

That said, I think that this topic is one of those where "it's is difficult to get a man to understand something, when his salary depends upon his not understanding it".

[Packer16]

I did do a google search and the case is more open than closed about economic mobility.  The following Wikipedia link has some interesting findings:

 

http://en.wikipedia.org/wiki/Economic_mobility

 

A rich child only has only a 22% chance of remaining in the top 5%.  The stats for the bottom are worse and it sounds like we need to spend more time/effort supporting families that can provide an encouraging environment for kids.  An interesting note about the European countries noted is they were destroyed by WWII so they started from a much more equal point than we did.  Another point worth mentioning is that passing on wealth does not appear to be an effective strategy to hold onto or grow wealth as what ever you are invested can lose its value.  I do agree that the effect can be cumulative so the interesting question is why has not are inequality been great when our wealth has not been destroyed like the Europeans?

 

Packer 

[RichardGibbons]

Basically everything in that wikipedia link implies that there isn't significant economic mobility in the USA.  It isn't under dispute.

 

The answer to your question is that the inequality has been great.

[ERICOPOLY]

The article also pointed out that mobility is greater in Australia vs the US.

 

However we spend more per student on education than does Australia.

 

Our tax policies are (I believe) more punitive on wealth accumulation (inheritance tax for example).

 

So what is going to improve mobility in the US -- does tax policy really have much to do with it?  It is sort of assumed to be so, but we have Australia to show that maybe that's not the case.

[Tim Eriksen]

Basically everything in that wikipedia link implies that there isn't significant economic mobility in the USA.  It isn't under dispute.

 

The answer to your question is that the inequality has been great.

 

It apparently comes down to how to measure mobility.  If 58% of children born in the lowest quintile move out of it, that sounds like there is serious potential for upward mobility.  If 61% of those born in the top quintile don't stay there, that sounds like there is serious risk of downward mobility to me.  Mobility does not mean the elimination of poverty or that all who are poor move out of it.  It means there is reasonable opportunity to significantly better your financial situation (i.e. one or two quintiles) through education and hard work.  That is still true.