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The Buffett Tax Explained Using A Hippopotamus And An Oxpecker

Tyler Durden's picture




 

Via Michael Cembalest, CIO JPMorgan

When Warren Buffett claimed that a lot of secretaries pay higher tax rates than the super-wealthy, JPMorgan's Michael Cembalest wanted to take a closer look. As shown in the first chart, Buffett’s assertion is only the case in a minority of situations (like his own).

 

 

The vast majority of taxpayers with adjusted gross income over $1 million and over $5 million have effective tax rates in the 22%-35% range, considerably higher than the range of tax rates paid by those with AGI below $100k. As a result, Cembalest notes he was not expecting to see large revenue estimates from an analysis of the fiscal impact of the proposals in the Fair-Share Act of 2012, since if the first chart is correct, there are not that many people that would be impacted by a minimum 30% effective tax rate. Now let’s look at some numbers.

The Congressional Joint Committee on Taxation and the Brookings Tax Policy Center analyzed the proposal, under the assumption that the Bush tax cuts sunset for the top two brackets. If that’s the case, the incremental revenue raised by the Fair-Share Tax Act is around $8 billion per year.

This is real money and may be sound public policy, but in the context of a $1 trillion budget deficit expected for FY2013, it’s a rounding error.

 

To convey this zoologically, we show two animals whose volume is proportionally the same (125 to 1): a hippopotamus, and its symbiotic companion, the yellow-billed oxpecker.

 

I would like to think that elected officials and political commentators would avoid grandstanding and not mislead anyone on the fiscal impact of their proposals, but right now, there are some people who need help distinguishing between birds and hippos.

Source:JPMorgan

Full Eye On The Markets Here.

 

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Thu, 11/29/2012 - 16:05 | 3021634 Thecomingcollapse
Thecomingcollapse's picture

Weeeeeeeee, it's fixed

It's more easily explained by the debt hippo, and the cocksucker

Thu, 11/29/2012 - 16:11 | 3021642 TruthInSunshine
TruthInSunshine's picture

I don't know about all of that, but I think I do finally understand --

Ben Bernanke's Virtuous Circle

-- finally!

Thu, 11/29/2012 - 16:16 | 3021683 Zero Govt
Zero Govt's picture

i would have preferred Pixiebell (a small productive Angel) on the bloated tummy of Jabba the Hut parasite Govt as images go 

Uncle Warren could shed a few pounds (stone) too 

Thu, 11/29/2012 - 16:20 | 3021694 Pladizow
Pladizow's picture

Hungry, Hungry........Warren? - Da na na na na na!

http://www.youtube.com/watch?v=8HPI_HT6yjo

Thu, 11/29/2012 - 16:43 | 3021779 nope-1004
nope-1004's picture

Charlie Munger is the hippos' asshole.

 

Thu, 11/29/2012 - 18:06 | 3022015 TruthInSunshine
TruthInSunshine's picture

Don't you see?!!! Don't you see....??? It's all right there!!! The proof of fractional reserve fraud/chicanery!!!

Paddy's Dollars = FRNs

Thu, 11/29/2012 - 16:13 | 3021672 Chuck Walla
Chuck Walla's picture

It's more easily explained by the debt hippo, and the cocksucker.

There is just no excuse to drag Becky Quick into this!

FORWARD SOVIET!

Thu, 11/29/2012 - 16:17 | 3021689 Hippocratic Oaf
Hippocratic Oaf's picture

Fuck Buffet.

That greasy old fuck.

Nobody cares about him anymore.

Tell me you old shit-stain......what came to you this time while taking a bath?

 

Thu, 11/29/2012 - 16:50 | 3021804 geewhiz
geewhiz's picture

There is no need to be disrespectful to the Senile of Omaha.

Thu, 11/29/2012 - 17:43 | 3021975 Zap Powerz
Zap Powerz's picture

You guys realize we are a minority right?

You do realize,, of course, that almost everyone else in this stupid fucking cuntry doesnt care about the debt and if they do say they care and you confront them with the fact that in order to eliminate the debt they would have to give up a lot of social programs they depend on then they suddenly dont care about the debt.

The incentive to continue this bankrupt, corrupt system of govt and finance is HUGE compared to the disincentive to stop it.  And so it wont stop until it cant go on anymore.  Then it will stop abruptly (like a plane stopping when it nose dives into the ground).

Of course, it will be up to guys like us to put the shit back together once it breaks.  Of course the parasites will be begging us to "fix it"!!!!!!  And what they will want is a return to the status quo that broke in the first place because they are stupid.

I hope that when SHTF it happens in the winter.  The fucking dead of the coldest, brutalist winter ever.  Freezing temps will cull the herd nicely.  They will be too cold to plunder and destroy.  Movement will be difficult in the snow so they will stay in their urban concrete jungles and starve/freeze.

Meanwhile, those that have been reading the writing on the wall will be hunkered down, warm and well fed,and we will wait them out.

All through human history it has been the elements, starvation and disease that have killed most humans.  Not war or violence.  It will happen again.

Havea  nice day.

Thu, 11/29/2012 - 22:58 | 3022671 smiler03
smiler03's picture

Because of course none of the lower waged on food stamps are involved in keeping energy supplies going to keep you warm.

Thu, 11/29/2012 - 16:08 | 3021648 blunderdog
blunderdog's picture

$8 billion certainly isn't enough to bother worrying about. 

That's only about 5 times the cost of free phones for po'folk.

Thu, 11/29/2012 - 16:08 | 3021650 odatruf
odatruf's picture

I see two hippos.

 

Thu, 11/29/2012 - 16:40 | 3021772 Zero Govt
Zero Govt's picture

Tequila strikes again

Thu, 11/29/2012 - 16:10 | 3021655 LoneStarHog
LoneStarHog's picture

Tyler, "Oxpecker" should be two words.

Thu, 11/29/2012 - 16:10 | 3021659 venturen
venturen's picture

You have to tax wealth creation...regardless if it is income or capital gain(or off shore). It should be a flat tax across the spectrum and should be done on a yearly basis with no deductions and only credits for child. Then the you and Buffet pay the same percentage....of course he would hate that...as his wealth builds tax free till he sells....where your income is taxed yearly. Of course Hell hasn't frozen over...so Goldman, Blackrock, etc don't want people to accumlate wealth...they are happy to grow their wealth tax free at your expense!

Thu, 11/29/2012 - 16:11 | 3021663 alien-IQ
alien-IQ's picture

Yes because surely, JPM can be relied upon to present us with honest, unbiased and factual information...right?

Thu, 11/29/2012 - 16:22 | 3021710 Tyler Durden
Tyler Durden's picture

Here is the same data presented from other "honest, unbiased and factual" sources (as presented previously here in April).

Thu, 11/29/2012 - 16:47 | 3021790 alien-IQ
alien-IQ's picture

It's all irrelevant really. When you are staring at a tax code that consists of more than 13,000 pages worth of obfuscations, the results of any tweak here and there can be spun to look like whatever it is the author is trying to make it look like.

All this talk of Buffet rule and shit like that is just window dressing and pacification in the form of obfuscative gobbledygook. It's meaningless, divisive and a complete waste of time. It is arguing for the sake of arguing with no intent to actually fix anything. We already have a congress and a senate that gets paid to argue without the intent of fixing anything...why must we all play the same useless game?

Thu, 11/29/2012 - 19:07 | 3022181 GernB
GernB's picture

I don't think attempting to exposing a bogus debate as bogus is meaningless. I don't think attempt to get people to stop thinking we can solve our fiscal problems by just raising taxes on a few rich people is a waste of time. And the truth is only is divisive in a society that has been steeped in lies. I don't think the people that will loose their jobs when taxes on the rich go up will consider it a useless game. If your solution is to roll over and let whatever happens happen without trying to spread the truth, then you are the one arguing with no intent to fix anyting.

Thu, 11/29/2012 - 19:33 | 3022255 Urban Redneck
Urban Redneck's picture

19,270 pages

 

26 CFR is 15,460 pages (Apr 1 2012 printing)

26 USC is 3,837 pages (2011 edition)

Thu, 11/29/2012 - 22:10 | 3022584 Clever Name
Clever Name's picture

+1000 for "obfuscative gobbledygook"

Thu, 11/29/2012 - 16:49 | 3021800 Yen Cross
Yen Cross's picture

Tyler the chart wasn't necessary/ Warren is looking for vindication. 

Thu, 11/29/2012 - 16:25 | 3021719 Sextus Empiricus
Sextus Empiricus's picture

*Grain of salt*

Sometimes even liars have to tell the truth in order to protect their own interests. Data is data.

Thu, 11/29/2012 - 16:25 | 3021720 Zero Govt
Zero Govt's picture

as JPMorgue are one of the subversive mega-parasites behind Govt wrecking the country i suspect this piece is counter-propaganda

Uncle Warren may be in JPM's crosshairs next after doing-over MF Global

Thu, 11/29/2012 - 16:11 | 3021664 francis_sawyer
francis_sawyer's picture

Fuck Warren Buffett & the hippo he rode in on...

Thu, 11/29/2012 - 17:11 | 3021886 e_goldstein
e_goldstein's picture

and the morgue, and any who may work there.

Thu, 11/29/2012 - 16:11 | 3021665 Cognitive Dissonance
Cognitive Dissonance's picture

I see a soon-to-be-dead hippo.

<Long live the prepared Oxpecker.>

Thu, 11/29/2012 - 17:50 | 3021986 A82EBA
A82EBA's picture

We're long oxpeckers !

Thu, 11/29/2012 - 16:15 | 3021666 Debtless
Debtless's picture

That's the problem with any solution anyone puts on the table at this point - it's not enough to dent the big nut - so let's not do it. I hear it all day on every solution proposed...it's this one solution must fix all of it nonsense that is gridlocking the US. Just shut the fuck up with that arguement - time to pay up now. And then onto capital gains bitchez, we're going to need some of them too.

Thu, 11/29/2012 - 16:17 | 3021693 alien-IQ
alien-IQ's picture

The current multi-thousand page tax code has far too many loopholes and workarounds to be in any way an accurate measuring tool of who is paying a larger percentage than who in taxes.

If you really want to know who's getting fucked on taxes and who's doing the fucking, just apply a 25% flat tax on gross income with no loopholes or deductions and then you'll really clearly see who screams in pain.

Thu, 11/29/2012 - 20:11 | 3022314 fuu
fuu's picture

Someone should say it, fuck taxing income. Tax purchases of non-essentials.

The argument over what is essential will be more illuminating.

Hell with Americans all being gluttonous sloths there is way more money in the purchases.

Thu, 11/29/2012 - 16:20 | 3021705 NoDebt
NoDebt's picture

Ah, so you DO understand.  They don't want anything fixed.  They're going to ride this hippo until it collapses under them.  Then they'll look for a new hippo somewhere else.

 

Thu, 11/29/2012 - 16:20 | 3021707 Debtless
Debtless's picture

Yup.

Thu, 11/29/2012 - 16:15 | 3021675 LouisDega
Thu, 11/29/2012 - 16:16 | 3021688 Sextus Empiricus
Sextus Empiricus's picture

I've looked around a very long time and never found a "tax" anywhere.

I've found theft, though.  Lots of people even have the gall to call it something else.

Thu, 11/29/2012 - 18:39 | 3022085 Optimusprime
Optimusprime's picture

Love your handle.  Outlines of Pyrrhonism should be a basic text.

Thu, 11/29/2012 - 16:16 | 3021690 Yen Cross
Yen Cross's picture

 Earth to Carlos Slim?

Thu, 11/29/2012 - 16:17 | 3021695 pods
pods's picture

Bitching about the drapes while the house is on fire.
These numbers are bad, but they are just current account.  What about liabilities like SS and Medicare?

We are toast.  Ain't no amount of taxation going to fix it.

 This "fiscal cliff" is but a small bump when compared to the mountain of debt coming due.

We cannot have a discussion about that.  For there is no solution that will keep the status quo.

Fucking theater, all of it. From the sanctimonious cocksuckers with their press conferences, to the projections that have no basis in reality.

Unless of course they can find a way to print oil?

pods

Thu, 11/29/2012 - 16:22 | 3021713 Sextus Empiricus
Sextus Empiricus's picture

I'm sure as soon as they steal the world's fresh water supply (Great Lakes, etc.), viola!, all of a sudden the hydro cars will come out.  And then water will be more expensive than oil.

We'll just have to wait for the oil to run out before they move on towards a different monopoly, this time the very thing which gives life.  You know it's going in this direction... has been for a long time.

Thu, 11/29/2012 - 16:18 | 3021699 Sextus Empiricus
Sextus Empiricus's picture

Why doesn't Buffett just give most of his money away if it's so important for the government to have it?

Methinks he makes even more money than he already has by proposing ridiculous ideas.  Clever.  Most clever, indeed.

Thu, 11/29/2012 - 17:01 | 3021846 Dr. Engali
Dr. Engali's picture

It helps that he stashed his wealth  away in a charitable remainder tust so it avoides the estate tax and he gets all the other benefits that come along with it.

Thu, 11/29/2012 - 17:29 | 3021927 Cathartes Aura
Cathartes Aura's picture

this recent "Giving Pledge" story seems to hint at an attempt to spend all the billions of pixel-allocations before they dis-appear. . .

Warren Buffett got 11 more billionaires to agree to give away half of their wealth to charity.

The Giving Pledge, a philanthropic initiative started by the business mogul and the Bill and Melinda Gates Foundation, aims to get the super rich to pledge their fortunes early in their lives, so that they can have more control of how it’s spent. In the two years since it was launched, the pledge has recruited 92 billionaires, including the likes of Facebook founder Mark Zuckerberg and New York Mayor Michael Bloomberg.

http://www.huffingtonpost.com/2012/09/19/warren-buffett-giving-pledge-ne...

it's quite a club they've got going, steering "health" and "education" initiatives, which sounds so sweet until you really dig around,

http://www.forbes.com/sites/samanthasharf/2012/09/19/untying-the-philant...

http://blogs.reuters.com/felix-salmon/2012/03/15/havent-gates-and-buffet...

of course, attaching the Foundations to a Philanthropist tag earns sooo much respect, very easy to get away with murder, in plain sight.

*cough*

Thu, 11/29/2012 - 16:20 | 3021702 Yen Cross
Yen Cross's picture

There is a HUGE difference between "several hundred million" and 20 or 30 BILLION!

Thu, 11/29/2012 - 16:19 | 3021703 Joebloinvestor
Joebloinvestor's picture

Experts ? the symbiotic relationship with the peckers as they are known for keeping wounds open to attract more parasites which they feed on.

Thu, 11/29/2012 - 16:24 | 3021718 JohnnyBriefcase
JohnnyBriefcase's picture

Ahh who the fuck even cares anymore?

 

*back to drinking*

Thu, 11/29/2012 - 16:35 | 3021744 Zero Govt
Zero Govt's picture

we should care enough to be the historic generation that hangs, draws and quarters the biggest wrecker of society, that shithole called Govt

and in the culling point out to Warren Buffet and the handbag swinging Christine Lagarde they've got the wrong end of the stick (and the wrong answer)....a pitchfork where the sun doesn't shine to drive the point home 

Stop Paying Tax ...let them eat shit cake

Thu, 11/29/2012 - 16:45 | 3021786 Sextus Empiricus
Sextus Empiricus's picture

This generation might not have the courage to do it.  We're too used to our lifestyle.  But with the way things are going, the next generation will have the courage.  That's how the pattern works.  We reveal it, then they carry it out.  First the idea has to be planted and then it sprouts with the right conditions.

Thu, 11/29/2012 - 16:40 | 3021724 Yen Cross
Yen Cross's picture

 Fuck off Mexicans! your corrupt shit hole is a Joke! Southern California is BEAN VILLE' 

 

 Most of the well educated HISPANICS ,I know are fed up with immigration bull shit! They are smart, and not buying votes!

   They are fed up with the crap/ politics, and working hard!

Thu, 11/29/2012 - 16:28 | 3021730 stateside
stateside's picture

By the way, speaking of Buffet, does anybody know if Becky Quick is breastfeeding?  Hard to tell on camera.

stateside

Fri, 11/30/2012 - 00:47 | 3022827 Go Tribe
Go Tribe's picture

Breastfeeding who - Buffet?

Thu, 11/29/2012 - 16:28 | 3021731 Let them eat iPads
Let them eat iPads's picture

What's the marginal rate on oxpeckers?

Thu, 11/29/2012 - 16:29 | 3021738 I am Jobe
I am Jobe's picture

Where is the Press Release and a Live Telecast of the crap?

 

Thu, 11/29/2012 - 16:36 | 3021756 Crtrvlt
Crtrvlt's picture

so what's caused the massive downtrend in tax revenue as a % of gdp to 15% now from 21% in clinton's last year vs a historical 18%?  on a 16 trillion economy that's a pretty massive revenue hole.  

Thu, 11/29/2012 - 16:36 | 3021759 rehypothecator
rehypothecator's picture

"To convey this zoologically, we show two animals whose volume is proportionally the same (125 to 1): a hippopotamus, and its symbiotic companion, the yellow-billed oxpecker."

Far be it from me to suggest that JP Morgan is misleading, but in order for the ratio of volumes of the bird and the beast to be 125:1, that means a grid of 11 x 11 birds, which is 121 birds, would be about the same as one hippo, and 12x12 birds (144) would be larger than the hippo.  But, 11x11 birds could stand on the back of the hippo without it even noticing.  The cube root of 125 is 5, so the correct-sized bird, 1/5 the linear size of the hippo, is closer to the ones walking in the background, not the one standing on its back. 

Thu, 11/29/2012 - 16:52 | 3021783 Yen Cross
Yen Cross's picture

Already /priced it out!  Comes in just under 3 hundred thousand dollars>  Fore Skin Ward> E

  THOSE Birds NEED HANDLERS/

Thu, 11/29/2012 - 17:36 | 3021957 Tenshin Headache
Tenshin Headache's picture

or that.

Thu, 11/29/2012 - 16:47 | 3021788 schatzi
schatzi's picture

oxpecker weight: 50 grammes

hippo: 4.500 kg

 

differential: 1: 90.000

 

I see JP Morgan staff are really clued up when it comes to numbers. Makes me feel so much more secure in knowing the world economy is in safe hands.

Thu, 11/29/2012 - 17:35 | 3021954 Tenshin Headache
Tenshin Headache's picture

It was volume they were talking about, but I'm pretty sure I could stuff a lot more than 125 of those birds inside that hippo.

Thu, 11/29/2012 - 17:45 | 3021980 schatzi
schatzi's picture

Thx. Yeah missed that. Volume will undoubtedly be less of an error, but as you say, still quite a large error.

Thu, 11/29/2012 - 16:48 | 3021793 BrainDead
BrainDead's picture

Taking 100% of all income of the top 1% of earners would only generate about $480 billion based on 2009 figures, assuming that the 1% would actually

  • remain in the USA, and
  • would even bother generating income knowing it was all going to be stolen, and
  • report their income to the IRS, and
  • not purchase a new tax loop,

All talk of raising taxes is counter-productive.  The notion that any authority has the right to theivery in the name of anything is a farce. Regardless one's belief in the falacy of authority, the "progressive" tax system in particular IS AN ENTRY BARRIER TO WEALTH.  Buffett and his ilk like the idea of high INCOME taxes because it protects the status of WEALTH.  The higher the income tax rate the more difficult for new members to join the Club of Wealth.

 

Thu, 11/29/2012 - 16:53 | 3021813 Crtrvlt
Crtrvlt's picture

the top 1% made AGI of 1.326 trillion in 2009  

Thu, 11/29/2012 - 16:58 | 3021830 Dr. Engali
Dr. Engali's picture

So I gather that you are in the take it all from them and fund the defecit for one year camp....what do you do next year then?

Thu, 11/29/2012 - 17:05 | 3021863 blunderdog
blunderdog's picture

Where'd you gather that from?  It certainly wasn't in the post you're replying to.

Thu, 11/29/2012 - 16:54 | 3021821 Yen Cross
Yen Cross's picture

i GIVE UP> Power ball Bitchez

Thu, 11/29/2012 - 16:59 | 3021837 Miss Expectations
Miss Expectations's picture

There's a Bird on Me (Song)

http://www.youtube.com/watch?v=RbluA8ZWw80

Thu, 11/29/2012 - 17:18 | 3021910 Zymurguy
Zymurguy's picture

Can someone post here the numbers of what I've seen called the "effective tax rate" or something like that?

I've seen it somewhere that regardless of the rate the public is taxed, the amount paid into the government remains pretty constant.

Thu, 11/29/2012 - 17:36 | 3021952 csmith
csmith's picture

U.S. Federal tax revenue has remained within a couple percentage points of 18% of GDP since WWII, whether marginal tax rates were 91% (1950s) or 28% (1980s).

Thu, 11/29/2012 - 23:28 | 3022712 smiler03
smiler03's picture

As far as receipts go you are right, but surely more important is the deficit/surplus?

 

Receipts - Outlays = surplus/deficit

Again, things since 1945 have averaged within a few percentage points:

UNTIL you look at 2009 onwards, when the deficit percentage increased ENORMOUSLY to figures not seen since 1945. (roughly a 300% increase).

source: http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

Thu, 11/29/2012 - 18:46 | 3022118 Matt
Thu, 11/29/2012 - 17:43 | 3021962 you enjoy myself
you enjoy myself's picture

$8 billion a year?  that's off by 10X.  the CBO pegs it at $80 billion a year ($824B over 10 years).  of course, those numbers are likely way off (though not by an order or magnitude) because the first 5 years are projected at $300B ($524B on the back five).  and we all know how accurate forecasts of the 'out years' have been.

the CBO also infamously uses static tax analysis, though i didn't bother to confirm whether that's the case here.  the idea that the affected 2% (either individuals or LLC's) won't alter their behavior, when that behavior is penalized even more, is demonstrably false.  so, using the inherently more accurate per annum of the first five years ($60B) and guesstimating that a dyanmic tax analysis would shave 30% off of that, we're looking at $40B per year in extra revenue.  $40 effing billion.  that's what TOTUS thinks is the solution?

cuomo and christie just requested twice that amount for a hurricane.

Edit:  durp, my bad.  was confusing the fair share act with the current efforts to repeal the Bush rates.

 

Thu, 11/29/2012 - 17:43 | 3021974 knotjammin2
knotjammin2's picture

I say screw all this fiscal cliff BS!!  Lets ride this baby over the edge........https://www.youtube.com/watch?v=wcW_Ygs6hm0

Thu, 11/29/2012 - 19:45 | 3022285 gould's fisker
gould&#039;s fisker's picture

And everyone out there is hanging on Warren's every word about politics because ? . . . he has a microphone stuffed in his mouth everywhere he goes?  Anything else--has he ever been right about anything politically? Any demonstrated knowledge about politicians except when he orders them to bend over they line up to do so.  That's really not insight perse.

Thu, 11/29/2012 - 20:06 | 3022332 Richard Head
Richard Head's picture

Can Buffett just die already, please?  The Gates Foundation could probably use his money sooner than later.

Fri, 11/30/2012 - 01:16 | 3022864 Lord Of Finance
Lord Of Finance's picture

Warren Buffet is a 'do-gooder'. Do as I say not as I do, the rules will not apply to me, they will only apply to you. The IRS audited Berk/Hath. over the last several years and states the Berk/Hath owes 1 billion in taxes due to bad right offs. Buffet claims he really wants to pay more ,but he is protesting the IRS audit. C'mon Do-Gooder Warren. The IRS acountants said you are not paying the fair share you insist must be paid by the likes of Do-Gooder Hypocrits or should I say Hippocrits such as yourself.

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