Politics Who's Gonna Win?

Perhaps Obama can clarify what he means when he says he wants the rich to pay their fair share and to pay a rate no lower than everyone else. In the case of muni's and there are other investment types that can lower the effective tax rate of billionaires - they can structure their financial plan to pay zero in taxes if they wanted.

If I were a trust-fund baby, a New York bachelor just having a good time, and my gramps put $100,000,000 in muni bonds for me, netting $5 mil a year tax free, I would go to Washington and line up for a photo op with the Pres. supporting the Buffet Tax - if they let me keep the muni exemption. The type of person that would actually pay the Buffet Tax is a guy like a NBA player who just signs a $10 million dollar per year contract with no financial plan, that guy with pay the Fed tax, State Tax, City Tax, FICA Tax, Agent Tax (not really a tax), and have $10 million look more like $3 or $4 million.

I think the real focus is on "hedge fund managers", people who technically earn capital gains but the government thinks it should be treated as ordinary income. In this case, how fast can you spell Cayman Islands? If I were a New York hedge fund manager making $10 million being taxed at 15% that is $1.5 million in taxes, if the government wants to double that to $3 million, I now have 3 million reasons to move operations to the Cayman Islands rather than 1.5 million reasons. I don't know what you would do, but for me at some point a mill here or there starts to add up, and I just may want to keep some of that.

Talk to any financial planner, don;t take my word for it. And if you ever win the MegaMillion lotto, send me a PM before you go public.

In the circles where people actually have that kind of money in muni's, they would have "people" who manage that portfolio. The point was the federal tax free return they can get. Odds are that they can achieve yields greater than what you or I could achieve - so the 5% number was probably low.

You think big money invested in muni's is a fantasy??? This is a big deal to investors, municipalities and the federal government - if they screw it up the consequences would be high.

Roubini Global Economics - The U.S. Municipal Bond Market
--- merged: Apr 16, 2012 at 12:26 PM ---

Actually I am getting a bit confused. Are you saying Obama is following Reagan's economic script?

 

I agree that you are a bit confused.

I am saying that the Obama tax plan, including the Buffet Rule, will not contribute $trillions to the national debt over the next 10 years, as did the Reagan (and Bush) tax cuts for the wealthy.

 

You're confused. The tax-exemptedness of munis only extends to interest payments, not capital gains. If gramps bought $100 mill par of munis for you he'd pay for the tax exemptedness when he bought the bonds (because the market is aware of the fact that interest payments for munis are tax free) and then you'd pay capital gains taxes on the market value of the bonds once he gave them to you (0.15*$100000000*[whatever the market price of the bonds is]). Or something like that. You can't just give someone $100 million worth of anything without the government getting a piece. Even if he just slipped you the interest payments, you'd have to pay income on that because you weren't directly getting the money from the munis, but as a gift from him (I'm not a tax expert, so maybe this isn't true).

Here's where you confuse tax rates with tax loopholes.

I could ask the municipal bond trader who works 15 feet away from my cube, but, you know, I think I'll probably defer to you, the guy who doesn't understand the difference between money derived from capital gains and money derived from interest payments.

Odds are you don't know what you're talking about. Did you know that a bond's coupon payments (the 5% in your example) are often nowhere near that bond's yield (especially for non-Treasury bonds)? For instance, there's an upcoming issuance of CA munis that will have a coupon payment of 4.45 but will actually yield 2.97. Coupon is just one of the factors that determines yield. Munis are a whole lot more complicated than you seem to think.

I maintain that if taxes on muni capital gains are exempted from any larger capital gain rate adjustment, then that's dumb. However, I don't think that incentivising private investment in public infrastructure a la tax exempt muni interest payments is a problem. I'm not an expert here, though, so take my opinion with a grain of salt.

No. Someone handing me $100 million in munis is a fantasy. How often does that happen to anyone? Even if it did, there'd still be taxes paid. You're oversimplification of reality is a fantasy.

 

O.k., we know you, Obama, liberals in general think Reagonmics was a failure. Why would Obama quote Reagan in the context of tax policy or the economy?
--- merged: Apr 16, 2012 at 5:40 PM ---

I remember asking this before of another poster, I ask you - True or false my (meaning you as you read this) financial success comes at the expense of others? I answer False. My financial success has never come at the expense of others. In fact when I do well, others do well. When others do well, I do well. I depend on a cycle of economic growth and I contribute to that growth in return. How are you situated in the economy in this context?

 

Dave Stockman and Bruce Bartlett, two of the supply side guiding forces in Reagan's OMB said Reaganomics was a failure in that it never paid for itself in terms of its stimulative effect, busted the budget, contributed $trillions to the total debt and required tax increases later in Reagan's term.

Both said it would be even worse, given current economics.

Focusing on the "fairness" issue that Reagan raised, but did not follow through, is not an endorsement of Reaganomics.

 

There are zero coupon municipal bond and there are bonds that provide direct interest payments.

Some avoid "death taxes" through estate planning. There are many legal and legitimate strategies. Here is one example involving Bill Gates

http://www.policyandtaxationgroup.com/pdf/The46BillionDollarQuestionGates.pdf

I guess this could be a fantasy - I have not verified the above, perhaps you will if interested.

Ask him or her, and tell me what he says.

Dude? where do you want to go with this. It was a simple example.

But, for the record there is a yield to maturity. You buy at issue and you hold.
You can buy when rates are high and you sell when rates are low, netting cap gains along the way.
You ladder maturities, so today, yields may be low - but if you have a $100,000,000 portfolio - odds are you have a wide range, including some high yeilders.

In fact with $100,000,000 you may buy without the costs average investors might pay.

I bet if you ask your trader friend if he could get a 5% on $100,000,000 he would say he could do it easily - if not ask him what his problem is?

I am discussing the 1% of the 1%. To you $100,000,000 may be a fantasy. If I controlled $100,000,000 and lived in a place like New York, you can bet I would have a big portion of my money in muni's - what are you saying you would do? Pay the taxes?
--- merged: Apr 16, 2012 at 6:05 PM ---

O.k, so more people think Reagonmics was a failure -you did not answer the question. What was Obama's point?

 

I get it now.

You dont like having someone point out how Reagan's words did not match his actions...and given the income gap that has grown exponentially as a result of the mostly non-stimulative, non-trickle down Reagan/Bush tax cuts at a cost of $trillions contributed to the national debt..that it is time for action if one is to take the Republicans at their word that the growing debt is the greatest threat to the country.
--- merged: Apr 16, 2012 at 6:18 PM ---
On top of the $3-4 trillion resulting debt already accumulated as a result of Reagan/Bush tax policies, why would you want to add another $4-5 trillion to the debt over the next ten years (according to CBO and other non-partisan economists, as well as Stockman, Bartlett and others) by making permanent the Bush tax cuts on the top one half of one percent?

 

My question is the wrong question - got it.
--- merged: Apr 16, 2012 at 6:35 PM ---

I know what I think about Reagonomics. What I don't know is why Obama, who thinks Regaonomics was a failure, would reference it the way he did in an attempt to sell us on his plan? These political nuances go right over my head - I assume it is a political nuance. I suppose I will never understand - it is not going to change my view of his plan - it won't change your view of his plan, etc., etc.

 

We were talking about municipal bonds here, not loopholes and the estate tax. Given your inability to answer my previous question, I'm just going to assume that you don't even know whether the Buffet rule would affect interest payments from munis or not and that you've somehow gotten lost.

Ask him what? If he can settle an argument I'm having on the internet with a person who apparently doesn't know the difference between interest payments and capital gains?

It was so simple that it had nothing to do with reality. That's my point. You're a shining example of the old adage about "lies, damn lies and statistics", which is another way of saying that you obfuscate simplistic arguments with numbers.

Yield to maturity doesn't require buying at issue.

It really depends. Average investors don't buy directly, and if you're investing via hedge fund, you're probably paying a lot more than "average" investors for the privilege.

5% what? Over what timeframe? What's your horizon? Any asshole can buy high yield bonds and hope for the best. That doesn't necessarily make for a good investment.

If I had a mind to invest, I'd find a set of positions that had the right combination of risk and yield. It's naive to think that the tax-free solution is always the best.

 

If you re-read my post, the legislation being proposed would exclude income from municipal bonds, a loophole. A big loophole. this is counter to Obama's goal of making sure millionaires pay a minimum tax. With municiple bond investment, rich people can effectively pay no income tax on that income. Is this what you dispute?

I had a Series 7 license at one point, passed on the first attempt. I have personally made a shit load of money and lost a shit load of money - I know more about this subject than I will ever share here, unless I am gonna get paid. I know the theory and have learned from the ride up and down - and I am currently going back up. My attitude has always been what can I learn form others - I am not learning anything from you on this subject and you don't think I know what I am talking about - so let's move on.

 

The current rules already exclude interest paid by municipal bonds, which have nothing to do with capital gains tax rates, and capital gains tax rates are ostensibly the driver of the Buffett rule. Why would you expect the Buffett rule to address tax exemption re: munis? Does Buffett pay a smaller effective tax rate than his secretary because he derives most of his income from munis? Have you ever thought that it might be useful to encourage private investment in public infrastructure? What do you think would happen to investment in public infrastructure if all of a sudden muni interest wasn't tax exempt?

Why are you pretending to care about this? You only bring it up because you think it makes Obama look inconsistent.

Surely someone as educated as yourself on the complexities of investment strategy sees the folly of supporting your arguments with ridiculously simplistic examples.

 

If you're a supply side advocate and the beneficiary of low cap-gains taxes, this is the article you write. Especially if you're Kudlow.

Nothing new, informative (even rhetorically) or timely in this article. If TFP had a wastebasket, it would already be gone from my monitor.

 

Ooch! Halo 4 released on election day 11/6. Obama needs big turnout of young voters, he just lost a big portion of college age males.

Halo 4 Release Date Announced - News - www.GameInformer.com


I wonder if this is a Republican conspiracy or something, now all we need is a Twilight Movie!




At this point given Obama v. Romney v. taking an hour away from Halo 4 to vote, I don't know what I am going to do - well actually I think I do - but I wasn't going to vote for Romney anyway.