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1 lostlakehiker  Tue, Nov 27, 2012 1:34:34pm

The risk level matters here. In the 1950's, with the US just about the only industrial base left standing, investment in plant and equipment had a big tailwind.

But suppose the investment is a risk that either doubles your money or halves it, and suppose your marginal tax rate is 50%. The expected value before is strongly positive. But what about after taxes? Any losses are not deductible except to the tune of a meaningless $3000 a year. Winnings, on the other hand, will be taxed at 50 percent. Now, the expected after tax return is near zero.

Tax law should be constructed to bring in revenue from the public in general, with emphasis on those who can best afford it. But an eye should also be kept on the likely consequences of tax law changes. Kennedy famously cut rates and reaped a big harvest of extra revenue. Did that make him a conservative?

2 ReamWorks SKG  Tue, Nov 27, 2012 1:39:19pm

I vehemently disagree with him. He is out of touch.

Read Nate Silver for the other side:

[Link: fivethirtyeight.blogs.nytimes.com...]

(I think we ALL should pay a fair percentage our our income. I favor raising all the tax brackets.)

3 EPR-radar  Tue, Nov 27, 2012 7:51:36pm

re: #2 ReamWorks SKG

Nate Silver seems to be arguing against creating a tax bubble, where the tax rates are not applied marginally. This appears to be an idiotic idea being floated by some in Congress to get more revenue without touching the rates. Hopefully, this goes nowhere.

Buffet's proposal as in the OP appear to be different (basically an AMT for the wealthy).

For what it is worth, I think the AMT (and any relatives) of it are basically a bad idea. If the ordinary definition of taxable income has become so broken that ultra-wealthy people with massive income actually have no taxable income (the issue that led to the creation of the AMT), then the better solution is to repair the definition of taxable income.


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