So, correct me if I'm wrong. Seriously, please do.
If someone (Warren Buffet) chooses to draw their income from his investments rather than a salaried income, the rate of taxes is lower.
This is why his secretary pays more, because her income is based on a salary.
Presuming the above is true...
Does it not make at least some sense that if someone chooses to take the implied risk of living off the return on their investments, that they be 'rewarded' by a lower tax rate? And doesn't that lower tax rate (ideally) promote more investment?
So my point would be that salaried people are not being 'penalized' as much as people who choose the path of higher risk are rewarded. But this of course is based off my premise, presuming it is true.
1) If you have a multi-million dollar nest egg somewhere (or in Berkshire Hathaway's case, $30 billion), can it really be called risk?
2) This is particularly egregious in Mitt Romney's case, where he doesn't even manage his own investments
. That's the definition of corporate leech, right there. Buffet and Gates will personally get involved in where their investments are going, and have made some of these adventures the focus of some of their talks.
3) You are taxed on earnings after investment costs, in most situations. This is one of the prime reasons why the 94% top tax bracket era was the greatest period of economic expansion in world history - in order to not pay ridiculous amounts in taxes, you had
The economy's overall strength is given by how fast dollars move, and there is a threshold at which 'wealth redistribution' will in fact move it faster than individual action. What constitutes 'fair' here may be disputed, but if you want the strongest economy possible, you structure the tax rate so that money is moving fastest:
1) No sales taxes, except possibly on high-end luxury goods
2) Income taxes at zero through all nondiscretionary spending, and a little ways into discretionary. It would then scale to ensure that money either spent or taxed.
Some issues with the above:
1) The problem of course is that #2 makes the individual situation too vulnerable. We need to allow for some savings. However, no one deserves to live off of the rest of humanity for all eternity. There is a middle ground that we can find.
2) It might be possible to bring Romney and many investors like him in on fraud charges. Taking money for driving companies into bankruptcy ought to seem, at the very least, suspicious.
In any case, imagine you're making $200 million a year.
Under the current system, you get taxed around %15, and thus, pocket the $170 million. You stash it in a bank, offshore accounts, etc.
Normally, this would be okay-ish. Said banks would invest your funds for you, and give you a reduced return on the interest.
However, when the economy falls into a liquidity trap, like we are in now, that stops - banks no longer provide loans as frequently (i.e. invest), and they basically throw their money at the only institution they trust to provide a return - the Government. This is why interest rates are so low. However, we also have a political apparatus that has made the idea that borrowing a good chunk of this money is a toxic proposal for the Government, so we can't go that route. So, in summary
1) People aren't spending, so
2) Investors aren't investing, so
3) Banks aren't investing, and
4) The Government isn't allowed to borrow, so
5) The economy suffers.
Contrast this with what happens when you have a 94%-or-so bracket.
You make $200 million. Your effective tax rate is 90%. You have two options
1) Let the government take $180 million
2) Invest enough, this year
, that the government will take a much fairer share.
Boom. Liquidity trap no longer possible. The housing bubble breaks a lot of banks, but far fewer homes, because investors have to keep moving their money, meaning
1) More people are employed
2) People are spending more
3) Meaning those investments are more likely to be profitable
4) Meaning investors have more money next year to invest with.
5) Meaning they'll need to hire more people next year, unless they want it all to go to the government...