[Today’s run:\u00a0 1 mile, then 10 x 200m]<\/p>\n
A lot in the news these days about how Warren Buffett pays a lower tax rate than his secretary.\u00a0 The same issue has come up since presidential candidate Mitt Romney released his tax returns showing his rate to be 15%.<\/p>\n
I think most people don’t understand much about capitol gains.<\/p>\n
I am not an accountant or an economist, but here’s what I know:\u00a0 Sometime I have some money and I put it in the bank.\u00a0 If I put it in a savings account it may earn a bit of interest.\u00a0 Mitt Romney and Warren Buffett have lots of money and they put their money in savings and in stocks and bonds and whatever other places they want.<\/p>\n
When I get a bit of interest on my savings account, that is capital gain.\u00a0 I put in $100 and over\u00a0 a year I earn another $1 in interest.\u00a0 I have to pay taxes on that dollar.<\/p>\n
I think most working people are used to the idea that the government takes a cut from their paycheck, an “income” tax.\u00a0 It’s really a wage tax, since it shows up on all kinds of wages.<\/p>\n
Warren Buffett makes some money in wages if he has a regular salary or does consulting work or writes a book.\u00a0 But putting his billions in the bank doesn’t earn wages it earns capital gains.<\/p>\n
We have a tax on working and we have a tax on saving.\u00a0 The tax on working is higher than the tax on saving.<\/p>\n
The transaction of working is that I give you my time and expertise (and maybe an artifact of my effort), you give me some money.\u00a0 The government gets a cut.\u00a0 So I charge you a bit more and I get to keep a bit less.<\/p>\n
The transaction of saving\/investing is that I give you my money now, and you give it back to me later with a bit more.\u00a0 The government gets a cut, so\u00a0 you have to pay a bit higher interest and I have to settle for a bit less earnings.<\/p>\n
Mitt Romney could put his\u00a0 millions in a hole in the ground, no problem. He can live off of that for the rest of his life and he would never have to pay taxes<\/strong>.\u00a0 But he wants to make more money so he puts some in the savings account\/mutual fund\/stock investment\/whatever\u00a0 and hopes that it comes back bigger in the end (it may not come back at all!)\u00a0 He pays taxes on the gain, the increase, if there was one.<\/p>\n Personally, I’m more likely to be on the borrower side of the ledger.\u00a0 Let’s say I borrow some money from Mitt Romney.\u00a0 He lends me a million bucks and I’m paying 10% interest.\u00a0 Over a period of a\u00a0 year I pay back his million and I end up paying him the extra $100,000 as interest.\u00a0 Some chunk of the $100,000 goes straight to Uncle Sam.\u00a0 It is a tax on borrowing as much as it is a tax on “investing”.<\/p>\n The tax on a loaning\/borrowing\u00a0 transaction is lower then the tax on an employment\/working transaction.<\/p>\n So when they say that Warren Buffett payed a lower tax rate than his secretary, that’s because his secretary makes her living by wages and Buffett makes his living by investment.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" [Today’s run:\u00a0 1 mile, then 10 x 200m] A lot in the news these days about how Warren Buffett pays a lower tax rate than his secretary.\u00a0 The same issue has come up since presidential candidate Mitt Romney released his tax returns showing his rate to be 15%. I think most people don’t understand much […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8,3],"tags":[],"class_list":["post-2130","post","type-post","status-publish","format-standard","hentry","category-other-thoughts","category-politics"],"_links":{"self":[{"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=\/wp\/v2\/posts\/2130","targetHints":{"allow":["GET"]}}],"collection":[{"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=2130"}],"version-history":[{"count":1,"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=\/wp\/v2\/posts\/2130\/revisions"}],"predecessor-version":[{"id":2131,"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=\/wp\/v2\/posts\/2130\/revisions\/2131"}],"wp:attachment":[{"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=2130"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=2130"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/w0ep.us\/OM\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=2130"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}