Obtuse Observer

March 25, 2013

Fair Share

Filed under: Income Tax — Obtuse Observer @ 2:07 pm

Utopian Idealist:               The rich should pay their fair share they must pay more in income taxes!

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Realist:                                 But they already do pay more in total value of taxes collected as well as higher rates.

UI:                                          But they don’t pay enough and that is not fair.

Realist:                                 Why isn’t it enough or fair?

UI:                                          Because they have more money.

R:                                            It is unfair that they have more money?

UI:                                          Yes, that is unfair.

R:                                            It is unfair that some have more than others?

UI:                                          Yes.

R:                                            It is unfair because those with more took from those with less or it is unfair in some cosmological sense?

UI:                                          Yes, both.

R:                                            So, because it is unfair that X has more than Y government should take more of  X’s money?

UI:                                          Yes.

R:                                            So, because in case 1 these undifferentiated “takers- X” have taken from these unidentified “takees-Y” the government should

take more from X?

UI:                                          Yes.

R:                                            It doesn’t strike you as odd that you’ve imposed a financial penalty on X for a crime against an unidentified Y that lacks any

basis in fact?

UI:                                          It is unfair that they are rich, they must pay their fair share.

R:                                            And in case 2 you’ve declared a cosmic injustice is to be found in the disparity of resources between X and Y without any

temporal accounting for that disparity and declared that the government shall employ its taxing powers to right this cosmic


UI:                                          It is unfair that they are rich, they must pay their fair share.

R:                                            It doesn’t strike you as odd that you’ve substituted the IRS for God as the arbiter of cosmic justice?

UI:                                          It is unfair that they are rich, they must pay their fair share.

R:                                            Did you hear that Ole Miss knocked out the number 5 seed Wisconsin from the NCAA Tournament?

UI:                                          It is unfair that they are rich, they must pay their fair share.

R:                                            Want to go get a beer?

UI:                                          It is unfair that they are rich, they must pay their fair share.

December 14, 2011

The Rich?

Filed under: 1%,Gold Homer,Income Tax,The Rich,Warren Buffett — Tags: , , , , — Obtuse Observer @ 8:39 am

Having recently read the snide partisan ramblings of an author asserting that the Republicans, the party of greed and the rich don’t'cha know, have created a toxic political atmosphere, bamboozled millions into voting for them against their own best interests (which were of course best served by Democrats – though apparently civility demanded that he only mention the parties by transparent allusion) through the use of divisive tactics focusing on race, class and hate filled rhetoric I had to stand back in awe at the magnitude of irony on full display.  In this caustic, fully partisan rant soaked full of sweeping and overbroad generalizations on facebook casting scorn on “the rich”; the author regarded challenges to and dissent from his proclamations from on high as the hallmark of incivility and badgering.  It was something to behold.  I kinda enjoy bringing it up because it amuses me but it actually serves as a decent example of exactly what we (any of us) shouldn’t do.

Perhaps a couple comments.   For my part, I’ll use the top 1% of wage earners as the standard for “the rich” because it is easy to identify. 

When one fills one’s rhetoric with references to “the rich” without ever bothering to define what is meant by “the rich” is a very clear example of demagoguery, that is, using a device of argument to create “us” and “them” which is to say that it is specifically the practice of divineness.  Neither party is above it.  Thinking so requires self-delusion.

“The rich” do not have secret meetings and decide the fate of the world and place elected officials to do their bidding – though individual rich people do.  There is a big difference between those two points of fact.  Beware politicians and talking heads who ignore this distinction.

“The rich” are as politically divided as the not rich.  George Soros is rich – he is not a Republican nor a Conservative.  Mr. Soros has spent a great deal of money on politics in order to influence election results (perfectly legal – donations to campaign funds etc).  He’s by no means an isolated example; nor are rich Republicans.  It is stupid to believe that either side of the political spectrum has a monopoly of membership by “the rich.”  Believing so is an expression of frustration that the other side is winning (whether they actually are or are not).

“The rich” is a remarkably fluid group whose membership changes often.  Those who enter don’t stay long.  This means many more than 1% of wage earners have occupied that bracket at one time or another.

“The rich” do not control everything but many of them are attracted to power and as such are attracted to politics.  See the Soros example above.

We tax income not wealth.  Taxing a person’s wealth would be a “taking” for legal purposes – can’t do it.  Income taxes would be too but for the 18th Amendment authorizing them.  Pay attention to politicians sliding too easily from one notion to the other without bothering to make that distinction clear.

47% of Americans pay no federal income taxes.  That those 47% pay payroll taxes does not distinguish them from the other 53% who also pay those taxes.  Beware when Warren Buffet holds that distinction up as reason that some people (he never actually tells us) should pay even more in federal income taxes.

The top 5% of federal income tax payers paid 60% of income taxes collected.  Good, bad or ugly it is true.  When deciding if “the rich” have paid their fair share it is appropriate to keep actual facts in mind.


December 8, 2011

Rich OWS Supporters and Obama’s Vitriolic Rhetoric

Here is an interesting list of people who have apparently (not my list – happy to be corrected if anyone listed inaccurately) voiced support at one time or another with varying degrees of volume as well as their net worth: 


Recently there has been much vitriol and overbroad criticism leveled at “the rich” not least of which by our President and an author from North Dakota whom I used to respect.  Some one I was communicating with about this anger at “the rich” noted that these angry people really don’t hate the rich so much as they hate the rich who don’t give money to liberal causes or support liberal candidates.  What they really mean is that they hate Republicans, the monolithic party of greed according to that author, with money and regard anyone who is not rich that supports them is brain dead lackeys who fail to recognize that Obama is trying to take the rich guy’s money (“I think when you spread the wealth around, it’s good for everybody”) and  and give it to more deserving people, that is, Democrats. 

They express a more angry, heated and emotion-only based version of an argument made by Thomas Frank in What’s The Matter With Kansas? How Conservatives Won the Heart of America.  He argues that non-rich supporters of GOP candidates vote against their own economic interests.  Obama and others say the same thing only they remove any semblance of civility, reason or fact.  (That “the rich” don’t pay their fair share of income and other taxes is absurd considering the federal income tax burden borne by the top 5% of American wage earners, roughly 60%of all federal income taxes paid in 2009).  However, with the President’s approval ratings below Jimmy Carter’s bitter demagogic behavior from him and his trickling supply of supporters is not shocking in the least.

Leon Cooperman, worth an estimated $1.8B, and former Obama supporter recently issued an open letter to President Obama expressing his concern for the political tone the President is setting (echoed by that author by the way).  I’m sure he will now be purged from the party for heresy and added to the list of nasty greedy rich people.  I excerpt two paragraphs from the full letter found here:

But what I can justifiably hold you accountable for is your and your minions’ role in setting the tenor of the rancorous debate now roiling us that smacks of what so many have characterized as “class warfare”. Whether this reflects your principled belief that the eternal divide between the haves and have-nots is at the root of all the evils that afflict our society or just a cynical, populist appeal to his base by a president struggling in the polls is of little importance. What does matter is that the divisive, polarizing tone of your rhetoric is cleaving a widening gulf, at this point as much visceral as philosophical, between the downtrodden and those best positioned to help them. It is a gulf that is at once counterproductive and freighted with dangerous historical precedents. And it is an approach to governing that owes more to desperate demagoguery than your Administration should feel comfortable with.

With due respect, Mr. President, it’s time for you to throttle-down the partisan rhetoric and appeal to people’s better instincts, not their worst. Rather than assume that the wealthy are a monolithic, selfish and unfeeling lot who must be subjugated by the force of the state, set a tone that encourages people of good will to meet in the middle. When you were a community organizer in Chicago, you learned the art of waging a guerilla campaign against a far superior force. But you’ve graduated from that milieu and now help to set the agenda for that superior force. You might do well at this point to eschew the polarizing vernacular of political militancy and become the transcendent leader you were elected to be. You are likely to be far more effective, and history is likely to treat you far more kindly for it.

It is odd how similar that author’s recent polemics (monolithic selfish wealth) mirror the very same rhetoric from President Obama that is lamented in this open letter.  It would be nice if Obama can change his tone and appeal to our better angels rather than demonize for short term political gain, but, like pretty much all of the change promised by President there appears little reason to hope for it.


August 24, 2011

Buffett: Stop Misleading Your Readers pt. II

Filed under: Effective Tax Rate,Income Tax,Warren Buffett — Tags: , , — Obtuse Observer @ 1:23 am

Warren Buffett paid $6,938,744 in federal income tax for 2010.  He then tells us that his is 17.4% of his taxable income.  The 17.4% is known as an Effective Tax Rate.  Taxable income is technically referred to as Adjusted Gross Income (AGI) rather than gross income.  He then tells you that this was lower than any of the twenty people in his office who paid 23 and 41% but averaged 36%.  He does not tell us how he calculated those rates.  His op-ed.

The bulk of Mr. Buffett’s income comes from investments in either sales  of assets or dividends.  While assets held less than a year receive ordinary tax treatment assets held longer are taxed at 15%  and the rules just get murkier from there.  However, on this point, that investment income is often taxed at lower rates, we completely agree with Mr. Buffett.  Whether this is reasonable is subject to debate but we are discussing what is not what should or should not be.  

The income for the vast majority of Americans comes from wages.  Wages are taxes at ordinary rates (2010 tax brackets).  Only 53% of Americans pay federal income taxes.  Of the 53% who do pay federal income taxes 87% of those earning less than $100,000 have an effective tax rate of less than 10%.

This leads us to ask some interesting questions.  Is Mr. Buffett wrong when he tells you his employees pay at egregiously higher rates then he does, does he pay them far and above $100,000 a year in wages or is he comparing apples to oranges?

Let me suggest to you that Mr. Buffett is offering his rate based on AGI and his employees’ rates based on their gross income.  Effective tax rates don’t come out in whole round numbers.  They have lots of little decimal points at the end.  See for example; Mr. Buffett’s effective tax rate of %17.4.  Does an honest dealer try to persuade you by offering as same things not same?



…tomorrow more on taxes and how Buffett continues include other forms of taxation and mischaracterize them in order to further mislead his readers so he may generate their antipathy for the super-rich; whomever they may be.

December 2, 2010

Costly Tax Cuts?

Filed under: Income Tax — Tags: — Obtuse Observer @ 10:20 am

I ran across a very interesting point in the article Tax Extension in a recent National Review issue by Reihan Salam.  Mr. Salam notes that President Obama has pledged to allow the tax cuts for the richest two percent of Americans because we cannot, “afford to borrow an additional $700 billion from other countries to make all the Bush tax cuts permanent, even for the wealthiest 2 percent of Americans.” 

Reihan points out that Obama is using a ten year window to arrive at that very large figure and that over that same period the middle-income tax cuts will cost $3,000,000,000,000.  That’s three trillion dollars.  I have no idea what that really means even if I’m told how far those dollar bills would reach end to end.  However, even with a public school education I am able to understand that $700 billion is less than $3 trillion.  $3 trillion is in fact over four times as much money as $700 billion.  Accepting these facts as true; that Obama is concerned about lost revenue and is reluctant to borrow (wish he had the same hesitation when it comes to spending) from other countries his choice is puzzling and very expensive.

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