Art Cashin's Three Observations On The Millionaire Tax

Tyler Durden's picture

As usual, UBS' Art Cashin, who may suffer the occasional pint but never outright idiocy, cuts right to the chase. His bottom line: "According to the Tax Foundation, after the 1929 crash, Congress proceeded to raise the top marginal tax rate from 25% to 63% by the end of Hoover’s term.... As you may recall, hiking those rates may have made folks feel that rates were more equitable but it sure didn’t help the economy."

Full note:

The Millionaire’s Tax - Three Observations - The expected proposal by the President to tax annual income above a million dollars may be too cute by half. It clearly looks like a “populist” initiative and clever political maneuver. By setting the threshold at $1,000,000 it boxes out almost all the Republican allusions to small business entrepreneurs and hits a number associated with wealth in popular culture (“So You Want To Be A Millionaire”, etc).

 

But, it looks so much like an “in your face” political challenge to his opponents, that may have evaporated all that talk about “constructive compromise” that popped up after the disgraceful debt ceiling debate. Markets sold off after the debt debate on fears that if a real national crisis were to erupt, both parties would continue to posture in partisan acrimony as the situation worsened. We’ll see if the new tax proposal re-ignites those fears.

 

Secondly, the tax proposal is being dubbed the Buffett tax since Mr. Buffett has long proclaimed that it is unfair and embarrassing that he pays taxes at a lower rate than his secretary. That could be instantly remedied by Mr. Buffett (or one of his accountants) by listing his income as ordinary income on his 1040A. Then he would be taxed at a rate equal to, or, more likely, higher than his hard working assistant.

 

Third, the proposal flies in the face of the lessons of history. According to the Tax Foundation, after the 1929 crash, Congress proceeded to raise the top marginal tax rate from 25% to 63% by the end of Hoover’s term (hat tip to the sharpeyed Mike Higley’s “By the Numbers”). As you may recall, hiking those rates may have made folks feel that rates were more equitable but it sure didn’t help the economy. Just a few thoughts.

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tmosley's picture

That's great and all, except that we will all be "millionaires" in a few years, if not "billionaires", "trillionaires", or higher.  As with the alternative minimum tax, this tax will soon come to haunt the poor (no more middle class by then).  Swell move there, Feds.

LawsofPhysics's picture

Exactly, got physical? Know your neighbors?  You better.

Cognitive Dissonance's picture

 

 

As with the alternative minimum tax, this tax will soon come to haunt the poor (no more middle class by then).

I am so tired of hearing about tax rates. The tax rate means shit to the rich. It is the effective tax rate that the rich and their advisors are expert at minimizing.

Nascent_Variable's picture

Exactly.  Lowering the top rates and closing loopholes is the only way to fix the tax code.  The current version is expressly designed to reward cheaters and encourage capital flight.

Augustus's picture

Let's even out the tax rates.

I want to be in that group that pays NOTHING in income taxes.

Let those moochers pay their Fair Share.

RIGHT NOW.  RIGHT DAMN NOW.

theabyss11's picture

Yeah man, I'm up for it. I'll tell you what. I support a family of four on about 2K a month. Bunch of goddamn moochers that we are, we don't pay any taxes. We can switch jobs (mine's easy and doesn't require any intelligence to do right?) and I'll take your tax burden off your hands for you.

How about taxing people based on the percent of wealth they control? If the top 20% control 85% of the wealth, shouldn't they be paying 85% of taxes? Nothing more fair than that. You pay into society what you take out. You seem to forget that the bottom 80% of this country only control 15% of the wealth.

I don't understand why people bitch about food stamps or really any help given to the poor but don't have a problem with giving out trillions in corporate welfare and tax breaks to the banksters and corporate elite that are raping this country.

 

 

FlyPaper's picture

I help a homeless guy, and he stays in a shelter.  Every month when the SS disability checks arrive, the shelter loses about 1/3 of its guests - for about 5 days, until they run out of money for their drug binge; and they end up right back in the shelter.

Giving people this money isn't helping them, and pisses me off no end.  You are working and can't make ends meet?   I'm fine with helping you and others, and I'll bet that the majority of the people posting to this site would too.

The waste is horrendous.  Drug addict guy I know has received at least $500k in free medical services by sticking needles and getting infections, septis, collapsed veins, flesh-eating bacteria.  Seen it all.   He takes zero responsibility and whines incessantly when people push back on him when he demands services "I know my rights" he says.  

Why should the taxpaying public support someone who has a death-wish?  Why should my insurance premiums go through the roof to provide free care to someone like this?  Because our government MANDATES it.   I actually help this guy with food because he would starve - and he's a fellow human being; but I make the choice personally to help; and I don't have the fricking government telling me where my moral compass ought to be.

One doesn't have to lack compassion to resent misallocation, fraud, cronyism and abuse of our government chums.  Nor do I lack compassion when I am against this kind of "wealth redistribution."

Would help a hell of a lot more if Americans got off their butts and actually helped others - we'd be able to roll back government and have a better society.  Socialism ruins lives.

 

 

 

nedwardkelly's picture

I am so tired of hearing about tax rates. The tax rate means shit to the rich. It is the effective tax rate that the rich and their advisors are expert at minimizing.

I am too, but because I think we have a SPENDING problem. It doesn't matter what the tax rates are, if they perpetually plan on spending more than they bring in.

You're right on about 'effective' tax rates though, but not just for the rich.

Buckaroo Banzai's picture

The income tax rate question is an easy one to answer, in a free society. Income tax rates must be ZERO for everyone in a society of Free Men. When your labor benefits someone else (the government) before it benefits you, then you are a slave. Really, it's that simple.

Until the 20th century, the Federal Gov't did just fine with excise taxes. Excise taxes are perfectly compatible with freedom and liberty. Income taxes are SLAVERY.

Do you want to live like a slave? If so, then keep arguing about income tax rates.

Immortal Flatulence's picture

Amen! Bring back the times when gov't didn't pilage enough to get big.

aaronb17's picture

This would be an incredible windfall to the middle class, who currently is weighed down by crazy amounts of debt.  I would LOVE for inflation to devaluate the hell out of my student loans and mortgage.  If I was making a million a year, even if it meant that I lost some purchasing power, I would still be in great shape, because the $2000 a month I currently pay in interest to the banks would suddenly be very very manageable.  

Which is why I doubt it's going to happen.  

Marco's picture

You are exactly right ... hyperinflation is not the end game of TPTB. Inflation is allowed as long as they can still steal more wealth, but as soon as we start seeing not just inflation but wage inflation starts keeping pace then the real end game will be set in ... deflation and massive waves of defaults.

 

The banks will collapse, most everyone will default ... and the creditors at the top will end up owning almost everything from the collected collateral. At which point they will also promptly give anarcho capitalists among us what they want, low taxes and small government. Because as soon as you own everything why would you need government anymore to steal anything for you?

Paul Bogdanich's picture

in 1992 Clinton raised taxes on high earners and the dire predictions were all the same and the tax did not hurt anything and the economy grew just fine.  Then when Bush came in he repealed the 1992 tax increases and the deficit ballooned and so on.   

ExpendableOne's picture

I remember the luxury tax.  Congress thought it would be great to tax luxury items like big boats.  That tax put several small shipyards out of business.  The idiotic tax code is just a make work program for tax attorneys and accountants.  We just need to peg the tax rate at a simple percentage for everyone.  But then, we'd have to make sure everyone could do a bit of math....

Marco's picture

When you increase taxes to reduce wealth inequality luxury shipyards going out of business is what _should_ happen ... you reduce consumption from the rich, you increase consumption from the poor and middle class ... and they don't buy yachts.

Sgt.Sausage's picture

==> you reduce consumption from the rich, you increase consumption from the poor and middle class

Hogwash. When you reduce comsumption from the rich, you reduce consumption from the rich. That is all you can conclude. Period.

Let's say I have 26 million laying around I was gonna spend on a yaht. Now I don't spend it on a yaht 'cause I don't want to spend the extra tax. How the hell -- can you *explicitely* tell me how the "consumption from the poor and middle class" increases by me leaving my 26 million right where it is. We'll be waiting. Moron.

 

 

 

Augustus's picture

The Clintoon miracle resulted from $10 oil prices and taxes on an internet bubble.

Did his high tax rates cause oil prices to drop to $10?

Cheap energy prices stimulate all parts of the economy.

malek's picture

It's getting tiresome to read all these "under Clinton it was better / fine" claims.

If he was really so great, why you don't get over it and demand Bill Clinton to be reinstated a president right now, as then everything will magically turnaround and good times will return, indefinitely?

ToNYC's picture

 

I learned long, long ago that we have a Progressive Income Tax system in the USA. This language arts excuse for a stalemate as we embrace cognitive dissonance is an experience in senility.

maxmad's picture

Cashin, bitchez!

Corn1945's picture

It has nothing to do with helping the economy.

Obama: "Hey, look at those people over there. (Pay no attention to the fact you are jobless and future-less.)"

LetThemEatRand's picture

Classic political theatre about nothing.  Democrats:  "the answer is more taxes.  The rich need to contribute more."  Republicans:  "the answer is lower taxes.  We need to stop giving so much to the poor."  Meanwhile, our entire economy has been transported overseas to benefit our corporate oligarch masters and no one is even talking about trying to fix that.  I guess if you're one of the oligarchs or one of the politicians they control, it ain't broken so why fix it.  

Caviar Emptor's picture

Art, Art, Art....Last time wealth was so concentrated at the top we had a Great Depression. During the 4 decades when the wealth disparity was at a minimum the economy boomed at astounding levels. And now it's concentrated again, the natural outcome capitalism. The world has watched this movie before. No, wealth never trickles down. Ever. It gets hoarded, offshored, and placed into non-productive assets including trust funds for the children and grand-children of wealth. Eventually it becomes an aristocratic wealth system of inherited entitlements. 

LawsofPhysics's picture

Yeah I love how these folks whine about "entitlements" like food stamps after firing thousands of employees.  Someone needs to talk about these kleptocrat's "wealh entitlements" including all the tax loopholes and socialization of massive corporate losses because these motherfuckers feel "entitled" to large bonuses even when they FAIL.

kalum's picture

Re food stamps

 

Thanks to Bernbanke policy of zero interest rates on my savings, I am a retired person now eligible for foodstamps. No wonder the  rolls are rising. More misguided FR and fed govt policies making more and more of us eligible for "entitlements" I guess they think it means more votes to keep the entitlement going.

serndipity's picture

The real reason you're on Food Stamps, is because your assets (e.g. cash, savings, investments etc.) are less than $3,000 (e.g. the maximum amount allowed to qualify).

GeorgeHayduke's picture

Hey now, you can't mention anything bad about wealthy folks and the mythology they have spent decades creating around here. Such talk is blasphemous and you can bet several adherents of the religion of wealth, and even some high priests, will be here to read from the Holy Book of the Wealthy and Wannabes. Such talk is as sacrilegious as cuts to military spending.

You watch, they will come in droves to prove you wrong and vote against your comments. It's always comical to watch the serfs defend their servitude and their masters in the hopes they one day will have serfs of their own.

Caviar Emptor's picture

The wannabes are more vocal and evangelical than the truely rich. They have to be to cling to their delusions

tmosley's picture

Amazing how we have gotten the "natural outcome of capitalism" TWICE when we didn't have capitalism, which we last had in 1913.

DaBernank's picture

And what, exactly does this Kabuki theatre of "millionaires' tax" have to do with changing the wealth disparity situation? There are already more than enough loopholes to dodge this fucker before it gets discussed seriously, just got to pay the accountants and lawyers enough. My wife's sister is a lawyer in Panama, for $1,500 plus some fees, you can set up a shell company, have that company move its money through the Bahamas and whoo hoo!

So, effectively, this will be a tax on those who make between 1-2 million per year, successful doctors and engineers will get screwed, can't say I care about the lawyers. How about a flat-tax @19% with zero loopholes?

ExpendableOne's picture

Try to talk to a recent college graduate about a flat tax.  They will probably tell you that's not fair!  You'll have to get out the big crayon and draw them a picture...

kalum's picture

speaks volumes about our education system

lolmao500's picture

Like congress are gonna pass tax hikes on themselves! LOL!

LawsofPhysics's picture

Sweet, according to Art we have a depression and world war to look forward to.

Cuchulain's picture

A nonsensical and irrelevant comparison.

Quinvarius's picture

Another reason to own physical gold off the financial grid.  I guess buried cash works just as well if you don't mind the depreciation.  But keeping it in the sysytem is just giving it away to socialists.

mahalopamala's picture

There are two tax codes. One for the uninformed, and one for the informed.  You can legally and ethically pay less tax if you have the money to hire tax attorneys and tax accountants. 

 I have a very low opinion of Buffet myself.  To me, when you make lots of money, it is for the betterment of your family/descendants, society, and in creation of jobs.  Too many billionaires use their money to keep score and try to tell others how to live. Some even believe that their accumulation of wealth elevates them to a holy standard- their ideas and beliefs must be better than the common folk because, they have gained an abundance of money.  I do think that many billionaires pay a lot less in tax.  There is no way that changing the tax code will help.  The understanding and application of the sheer number of laws, codes, and statutes is a full time job for all the CPA's I know. 

What a mess.  Just scrap the whole tax code and get rid of the IRS.  While we are at it- we can get rid of the FED, kick out all the macroeconomist advisors to the government and then we might have a chance to go back to a real economy - not a manipulated shell of an economy.  MONDAY MORNING - exciting times. Thanks for posting Tyler!

Pool Shark's picture

You will pay more tax if you work for your money. You will pay less (or no) tax if your money works for you (i.e., passive income; think muni's).

The tax code is written to punish productive workers, and reward non-workers; including both welfare recipients and the very rich who live of their critical mass of wealth by way of tax-free investments.

This is the reality of the US tax code.

Everybodys All American's picture

Obama is clearly the most unfit president we have ever had and likely a one termer. Having said that tax changes are necessary as are massive spending cuts. Having concluded Obama is not ready to lead we are in for a miserable end to his presidency.

lizzy36's picture

Obama is just a name.

Is there a man/women currently running or has run at any time in the last 20 years, that could effectively do what needs to be done, with the cooperation of the congress and senate.

Has the game of governing become more about winning the battles within ones party than winning the future for ones country?

lizzy36's picture

One wonders which class benefits more from labelling this a class warfare?

What people really want in inherent fairness in the system.

BTW, i am amused that socialism is getting the blame for "American Dream". When in fact what is really killing the American Dream is crony capitalism. But, yes lets continue to blame the lower and middle class.

firstdivision's picture

 I see all this potential, and I see squandering. God damn it, an entire generation pumping gas, waiting tables; slaves with white collars. Advertising has us chasing cars and clothes, working jobs we hate so we can buy shit we don't need. We're the middle children of history, man. No purpose or place. We have no Great War. No Great Depression. Our Great War's a spiritual war... our Great Depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off.

Who knew how true this would ring nearly 16 years after it was written.

Dantzler's picture

Nice reference, 1stdiv . I hope many more will see the wisdom inherent in these words and shape their lives accordingly.

Why let stuff own you?

Why choose to give others a claim on your future productivity?

Dantzler's picture

Socialization of losses is a corrosive action to the lower & middle classes. Perhaps that would be a part of crony capitalism.

Always enjoy your comments, lizzy36.

jonan's picture

i'll watch capital flight while i hug my gold through the night...

Toolshed's picture

EAT THE RICH!!!!

proLiberty's picture

How does this differ from the Alternate Minimum Tax, which I have never paid but forces my accountant to add about 1/3 to the pagecount of my tax return each year?

 

The shameful aspect of the Buffet Tax will be to cause a repricing of tax-free bonds, because depending if you "qualify" or not for the tax, these bonds will no longer be exempt from taxation.   It will also change the ROI for venture capital and angel investors.  Because moves the net after-tax ROI downward, it will cut off investment in the lower tiers of startups.   For post-Solyndra liberals, this means fewer startups, fewer real (that is non-government) jobs created.

The solution to the problem that Buffet has is twofold: 1) he is free to write a check; 2) his secretary and everyone in her tax bracket should be given the option to pay only as much tax (as a percent) as Buffet pays.  This is why so many people favor a flat tax and the "Fair Tax".