How private equity firms make money

[bush_cheney2004]

Nope...the middle class is doing fine and growing...around the world. Think global...not 1950's "North America".

[Pliny]

Shit, Pliny, get it together. The graph you've posted doesn't make the case you think it does.

It is simple numbers that anyone can understand.

The number of people eligible for food stamps or Medicaid doesn't actually tell us whether more people are paying federal taxes or not. You know what would tell us whether more people are paying taxes or not? Statistics about whether people are paying taxes or not.

Also, that little blue line along the bottom? The one charting private sector employment? That actually corresponds nicely with the "Zero or Negative Income Tax, as a percentage" line in the chart. The precipitous dip in private sector employment at the end of 2008 corresponds with the high point of "no tax" tax units reached in 2008; the rise in private sector employment shown on your graph corresponds with the decrease in "no tax" tax units.

I think it's your ability to interpret data that needs a little further looking into.

"Tax units" increased by 7 million from 2008 to 2011.

If the number of "makers" refers to the number of people who paid federal income tax, then the number of "makers" went from 77.2 million in 2008 to 87.6 million in 2011. That's not "negligible".

This is not so simple to understand and doesn't really reconcile with the real data and the reason is probably this from the TPC website:

Aging and Extrapolation Process

For the years from 2005 to 2022, we "age" the data based on CBO forecasts and projections for growth in various types of income, CBO and JCT baseline revenue projections, IRS estimates of future growth in the number of tax returns, JCT estimates of the distribution of tax units by income, and Bureau of the Census data on the size and age-composition of the population. We use actual 2005 through 2009 data when they are available.² A two-step process produces a representative sample of the filing and non-filing population in years beyond 2004. We first inflate the dollar amounts for income, adjustments, deductions, and credits on each record by their appropriate forecasted per capita growth rates. We use the CBO’s forecast for per capita growth in major income sources such as wages, capital gains, and non-wage income (interest, dividends, Social Security benefits, and others). We assume that most other items grow at CBO’s projected growth rate for per capita personal income. In the second stage of the extrapolation, we use a linear programming algorithm to adjust the weights on each record so that the major income items, adjustments, and deductions match aggregate targets. We also attempt to adjust the overall distribution of income to match published information from the Statistics of Income (SOI) division of the Internal Revenue Service (IRS) for 2004 through 2009 and published estimates of the 2010 and 2011 distributions from JCT. We extrapolate recent trends to obtain projected distributions for years beyond 2011.

It seems they are only projections.

As for the number of people receiving benefits... what of it?

It is very easily understood. They are a simple compilation of numbers and there isn't much more you need to know. They don't require any analysis about human behavior, how questions were worded or how the answers were interpreted.

Look, dude, if you're going to compare Barack Obama to Hugo Chavez, people aren't going to take you seriously.

Do they not compare? Are they opposites?

Mindless partisanship was the most polite explanation for your remark that I could think of.

(Other possibilities included:

-you've suffered a concussion

-you've suffered a psychiatric event of some description

-you're trying out material for a stand-up comedy routine

-you're afflicted with some sort of genetic abnormality that impaired the formation of your brain.)

Simple opinion. And there are not many who don't attack my point of view you're just one of many.

The fact is there isn't a lot I can't understand if I am willing to put in the time and weed through what's fact and what's BS. Most of us can do the same if we are willing to and can recognize and ignore our biases and any proclivity to hate - like "asswipe" politicians or arrogant Bosses or peremptory posters like myself.

The fact of the matter is, Obama has been very generous to businesses, and to the rich, and with tax rates. The stock market has done astoundingly well during the past 4 years. This idea that he's hostile to business couldn't be more wrong-- he's overly generous to business. He's done nothing to address the issues of the wealthiest individuals and the most profitable businesses paying next to nothing. The "Wall Street Reform" isn't nearly strong enough. Obama's a big softie.

Did you see the stock market in Zimbabwe when Mugabe started to seize farm land and inflate the currency. It went up almost vertical for six months. A rise in the stock market is not an indicator of a healthy economy. Actually, the NYSE seems on a roller coaster and moves on political news rather than

market news.

When you start seeing the market rising really fast it will mean that money is looking for safety.

Obama isn't a softie - that's just the wool he has pulled over your eyes.

He will probably allow the fiscal cliff to occur blaming it on Republicans and with the ensuing economic turmoil will take the opportunity to nationalize the banks.

The real reason bankers and corporations supported Romney so heavily? The knew that he'd be even *more* generous.

Corporations are funny things. They may be right or left but they are not democracies. There may be a strong Founder who dictates the company policy or the owners or shareholders act more like the politburo in the Soviet Union. So they can be run by right or left wing dictator types or communally by the shareholders but there is a difference between a corporation and a government. Corporations require voluntary co-operation to function Government makes laws that force people to co-operate.

Certainly they turned away from Obama because he wouldn't foster business and his policies would not grow the economy. Romney has some understanding of business at least and ran a good Olympics. Obama promised to improve the economy but there is no policy to show that - tax the rich seems his only plan.

The rich and the corporations are the only ones whose income is growing. Why shouldn't their share of the tax burden grow accordingly?

-k

Banks and corporations will receive new money first and that is why their income is growing - it's a start of the inflation cycle. Their share does grow if you simply apply the same tax rate. 20% of 1 million is 200,000. 20% of 2 million is 400,000 or double the amount of taxes. Of course you would like an exponential growth. If they make 2 million they should pay 30% or $600,000. They can afford it. But who are you to decide what they can afford. They may have spent $700,000 to make the extra million in which case if the tax level went to 30% they wuold have lost $100,000. They all don't live like Warren Buffet in a three bedroom bungalow. Warren Buffet spends very little on things that don't show a return. Government wastes a lot of money on things it shouldn't even be concerning itself with, wars, population control, marketing boards, corporate subsidies, and other forms of social engineering.

[Bonam]

Banks and corporations will receive new money first and that is why their income is growing - it's a start of the inflation cycle. Their share does grow if you simply apply the same tax rate. 20% of 1 million is 200,000. 20% of 2 million is 400,000 or double the amount of taxes. Of course you would like an exponential growth. If they make 2 million they should pay 30% or $600,000. They can afford it. But who are you to decide what they can afford. They may have spent $700,000 to make the extra million in which case if the tax level went to 30% they wuold have lost $100,000.

Wrong. Corporations are taxed on profits, not revenues. You subtract the 700k first, then apply the tax rate.

Edited December 6, 2012 by Bonam

[Pliny]

How long is long?

There are more rich now than at the social safety net's inception, and they're also richer.

We tried society for a good long while without the safety net, and that doesn't seem so great. Charity remained an insufficient means. So here we are.

And also: what kind of "democracy" would we have where people couldn't "vote themselves entitlements"?

How long is long?

The short period of time it takes to collapse the economy.

There are more rich now than at the social safety net's inception, and they're also richer.

Isn't it supposed to work that more people get rich? There are those who are content to be entertained and not worry about getting rich.

We tried society for a good long while without the safety net, and that doesn't seem so great. Charity remained an insufficient means. So here we are.

Charity never grew the ranks of the poor like a social safety net will. And there were poor tax laws in the 18th century in England.

And also: what kind of "democracy" would we have where people couldn't "vote themselves entitlements"?

One without "special interests" where people thought about national interests that mattered to and benefited all their fellow citizens not how they or their special interest can benefit at the expense of society.

[Pliny]

Wrong. Corporations are taxed on profits, not revenues. You subtract the 700k first, then apply the tax rate.

I was making an example of an individual filing income tax. I suppose I should have started a new paragraph after the first sentence.

The point is If the taxable income doubles the tax filer pays double the amount of tax if the tax rate is at the same level. So his share of the tax burden is growing accordingly. If the tax rate were progressive and went from 20% at 1 million to 60% at $2 million he would have lost money and it would not make any sense to try and make more money, or applying that more to the broader social economy, put more effort into contributing to it.

Edited December 6, 2012 by Pliny

[bleeding heart]

Isn't it supposed to work that more people get rich?

I didn't say it was bad. I said it was the case. The social safety net has been a robust part of the process.

Charity never grew the ranks of the poor like a social safety net will.

I didn't say that charity grew the ranks of the poor. I said that charity, without the tax-based safety net, was insufficient to tackle the problem.

One without "special interests" where people thought about national interests that mattered to and benefited all their fellow citizens not how they or their special interest can benefit at the expense of society.

First of all, like what? Everything in which some people are going to gain at taxpayers' expense is going to have "special interests." Want a strong military? Well, there's lots of money to be made, and there are people who are going to even advocate for war because it improves their bottom line...this can even be a legal necessity, if one has shareholders to which he is beholden. The same is true for infrastructure, policing and prisons, and in fact every single funded matter you could dream of.

Second, lots of people vote for what you consider "entitlements"...but not for their personal gain at the expense of society. Lots of people vote for a stronger social safety net because they think it is for the benefit of society as a whole.

This ongoing theme of selfishness, using "other people's money" ignores the fact that the people most in need are the people least likely to vote.

If I were voting based on my personal wants "at the expense of society" then I would vote Conservative. They are most likley to be beneficial to me on a short-term financial basis. I'm not poor. But federally, i have lately been voting NDP. (Provincially, I sometimes vote PC...NB PC's are ideologically indistinguishable from the Liberals). Now, whether that's a wise choice or not, it's certainly not my doing so for "special interests"...or no more so than saying "we got to protect the ever-victimized rich"...for there are few smaller-in-number "special interest" groups than the wealthy. Ditto for military spending; more military spending is obviously a financial boon to small special interest groups, whose business is not "national security"...their business is Business. Of course.

So tell me: what do we do, vote-wise, to "benefit society" while not benefitting special interest groups?

[Pliny]

I didn't say it was bad. I said it was the case. The social safety net has been a robust part of the process.

At some point it probably was to some people. Now it's a drag on most people, killing incentive for both producers and beneficiaries.

The inevitable result.

I didn't say that charity grew the ranks of the poor. I said that charity, without the tax-based safety net, was insufficient to tackle the problem.

It didn't grow the ranks so it must have been sufficient. More people were not in need of it.

First of all, like what? Everything in which some people are going to gain at taxpayers' expense is going to have "special interests." Want a strong military? Well, there's lots of money to be made, and there are people who are going to even advocate for war because it improves their bottom line...this can even be a legal necessity, if one has shareholders to which he is beholden. The same is true for infrastructure, policing and prisons, and in fact every single funded matter you could dream of.

No. We don't need a strong military. Afghanistan beat back the Russians and seems to be holding off the US quite well with very little.

Yes some people will benefit form war but none more than the government itself who will promote it. The job of government is to keep the populace in fear.

Second, lots of people vote for what you consider "entitlements"...but not for their personal gain at the expense of society. Lots of people vote for a stronger social safety net because they think it is for the benefit of society as a whole.

If it is then why do we need a law or a government to force it upon us?

This ongoing theme of selfishness, using "other people's money" ignores the fact that the people most in need are the people least likely to vote.

Untrue. Tell them they will get a free phone or bigger welfare check and they will vote.

If I were voting based on my personal wants "at the expense of society" then I would vote Conservative. They are most likley to be beneficial to me on a short-term financial basis. I'm not poor. But federally, i have lately been voting NDP. (Provincially, I sometimes vote PC...NB PC's are ideologically indistinguishable from the Liberals). Now, whether that's a wise choice or not, it's certainly not my doing so for "special interests"...or no more so than saying "we got to protect the ever-victimized rich"...for there are few smaller-in-number "special interest" groups than the wealthy. Ditto for military spending; more military spending is obviously a financial boon to small special interest groups, whose business is not "national security"...their business is Business. Of course.

Some people will vote Libertarian because they promise to legalize marijuana. Is that a benefit to society? The question needs to be asked as to why it is a national concern. If your community doesn't like marijuana let them make a law. Why should your or anyone's financial well-being be improved by Conservatives? Should government provide a minimum annual income? Why is that a national concern? Should they print the money and direct the economy? Or would that be fascist?

So tell me: what do we do, vote-wise, to "benefit society" while not benefitting special interest groups?

Allow free enterprise and society to evolve on its own. The "benefit" to society is not what it can provide to its citizens it is how it can keep coercive forces, including itself, from interfering with the harmonious and mutually beneficial co-operation of participating individuals that together comprise a rational society. Gays need rights but not more rights than any other individual. Women need rights but not more rights than any other individual.

All races need rights but not more rights than any other race. The individual needs protection from coercive forces that violate his right to the sanctity of person and property. .

[Wilber]

I was making an example of an individual filing income tax. I suppose I should have started a new paragraph after the first sentence.

The point is If the taxable income doubles the tax filer pays double the amount of tax if the tax rate is at the same level. So his share of the tax burden is growing accordingly. If the tax rate were progressive and went from 20% at 1 million to 60% at $2 million he would have lost money and it would not make any sense to try and make more money, or applying that more to the broader social economy, put more effort into contributing to it.

We are talking about increasing the top rate, not the overall rate. A higher tax rate applies to the amount of income over the previous level, not the entire income. In your example the 60% rate would apply to the second million, not the first.

[bleeding heart]

Allow free enterprise and society to evolve on its own. The "benefit" to society is not what it can provide to its citizens it is how it can keep coercive forces, including itself, from interfering with the harmonious and mutually beneficial co-operation of participating individuals that together comprise a rational society. Gays need rights but not more rights than any other individual. Women need rights but not more rights than any other individual.

All races need rights but not more rights than any other race. The individual needs protection from coercive forces that violate his right to the sanctity of person and property. .

Perhaps you could explain how this begins--or even attempts--to answer the question posed.

[dre]

Allow free enterprise and society to evolve on its own. The "benefit" to society is not what it can provide to its citizens it is how it can keep coercive forces, including itself, from interfering with the harmonious and mutually beneficial co-operation of participating individuals that together comprise a rational society.

Thats basically what we did and how this system emerged.

[Pliny]

We are talking about increasing the top rate, not the overall rate. A higher tax rate applies to the amount of income over the previous level, not the entire income. In your example the 60% rate would apply to the second million, not the first.

In my example, that is how a graduated income tax rate is applied.

[Pliny]

Thats basically what we did and how this system emerged.

That's how it emerged in the US. The Federal government gradually eroded it and now we have its "savior", the man who will totally separate it from its roots, Barack Obama.

[Wilber]

In my example, that is how a graduated income tax rate is applied.

When was the last time you filled out a tax return?

[kimmy]

The point is If the taxable income doubles the tax filer pays double the amount of tax if the tax rate is at the same level. So his share of the tax burden is growing accordingly. If the tax rate were progressive and went from 20% at 1 million to 60% at $2 million he would have lost money and it would not make any sense to try and make more money, or applying that more to the broader social economy, put more effort into contributing to it.

If the tax rate jumps from 20% to 60% at 1 million, then the guy who made $1 million pays $200,000. The guy who made $2 million pays 20% on money up to $1 million, and 60% on his second million. The guy who made $1 million keeps $800,000 and the guy who made $2 million keeps $1.2 million.

This is a concept that ought to be familiar to any Canadian who does their own tax return, because our taxes work the same way.

-k

[kimmy]

It is simple numbers that anyone can understand.

This is not so simple to understand and doesn't really reconcile with the real data and the reason is probably this from the TPC website:

It seems they are only projections.

It is very easily understood. They are a simple compilation of numbers and there isn't much more you need to know. They don't require any analysis about human behavior, how questions were worded or how the answers were interpreted.

If the "47%" figure provided by Tax Policy Center was good enough for Willard and all the top conservative thinkers and mouthpieces in the media, I'm not sure why you're skeptical of it.

No, Pliny, the number of people enrolled in food stamps or medicaid doesn't contradict the number of people paying federal income tax. It might be a result of changes in eligibility requirements, or of lower after-tax income, or rising expenses.

As well, the growth in people on food stamps is most likely among people who were in the "not paying taxes" category in both 2008 and 2011, so I'm not sure why you think there's any contradiction.

As well, you've picked a graph where everything is normalized to year 2001, rather than one showing raw numbers. Without raw data the relative increase in the number of people on food stamps is completely meaningless.

As well, as I pointed out earlier, the part of your graph that actually does pertain to the "makers vs takers" argument-- the private sector employment line-- actually supports the premise that there are more "makers" now than in 2008.

Do they not compare? Are they opposites?

No, they don't compare.

Simple opinion. And there are not many who don't attack my point of view you're just one of many.

The fact is there isn't a lot I can't understand if I am willing to put in the time and weed through what's fact and what's BS.

Dark matter, magnets, high-school physics, marginal tax rates...

-k

[Pliny]

If the tax rate jumps from 20% to 60% at 1 million, then the guy who made $1 million pays $200,000. The guy who made $2 million pays 20% on money up to $1 million, and 60% on his second million. The guy who made $1 million keeps $800,000 and the guy who made $2 million keeps $1.2 million.

This is a concept that ought to be familiar to any Canadian who does their own tax return, because our taxes work the same way.

-k

Definition of 'Progressive Tax'

A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.

Read more: http://www.investope...p#ixzz2EUzmHlPc

The person who earns $373,650 doesn't pay 10% on his first $8375 and thirty five percent on the balance. He pays 35% on all his income

Do you have some different information?

Edited December 8, 2012 by Pliny

[Pliny]

When was the last time you filled out a tax return?

When was the last time you filled out a tax return?

A better question might be when was the last time I jumped a tax bracket.

I don't figure out how much tax I pay in all the different tax brackets add them up and pay that amount. If I am in a certain tax bracket I pay the taxes at the rate of the tax bracket I'm in period.

[kimmy]

Definition of 'Progressive Tax'

A tax that takes a larger percentage from the income of high-income earners than it does from low-income individuals. The United States income tax is considered progressive: in 2010, individuals who earned up to $8,375 fell into the 10% tax bracket, while individuals earning $373,650 or more fell into the 35% tax bracket. Basically, taxpayers are broken down into categories based on taxable income; the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels.

Read more: http://www.investope...p#ixzz2EUzmHlPc

The person who earns $373,650 doesn't pay 10% on his first $8375 and thirty five percent on the balance. He pays 35% on all his income

In what's becoming a common refrain with you, the information you've cited doesn't make the claim you think it does. It doesn't say that being in the 35% tax bracket means that all of the individual's income is taxed at 35%.

Do you have some different information?

As a matter of fact, yes. Here's a screenshot from the 2011 IRS tax guide.

This illustrates the concept of marginal tax rates.

Someone who made $379150 pays (379150*.33-15103) = 110016.50

Someone who made $379151 pays (379151*.35-22686) = 110016.85

The first $379,150.00 were taxed at the exact same rate as the guy in the 33% tax bracket. The extra dollar was taxed at 35%. Nobody loses money by going up a tax bracket.

Also observe that $110016.85 taxes on $379,151 income works out to 29%.

Here's the Canada Revenue Agency version:

So if the same guy made $379151 in Canada, he pays 15% on the first $41544, plus 22% on the next $41544, plus 26% on the $45712 after that, plus 29% on everything above $128,800. That works out to $99857.79, or about a 26.4% rate.

So as you see, both Canada and the United States use a system where only money made above certain thresholds is taxed at higher rates.

I hope that clears up your confusion.

-k

[Wilber]

A better question might be when was the last time I jumped a tax bracket.

I don't figure out how much tax I pay in all the different tax brackets add them up and pay that amount. If I am in a certain tax bracket I pay the taxes at the rate of the tax bracket I'm in period.

As Kimmy has pointed out. Actually, you do.

A little more education http://www.cra-arc.gc.ca/tx/ndvdls/fq/txrts-eng.html#federal

As you can see a person earning up to 132,406 would be paying 28,020 in Federal tax or 21.2% on his total taxable income even though part of his income is being taxed at 26%. A person who has part of their income in the highest bracket of 29% and earning 150,000 would be paying 33,122 in tax or 22.1% of his total taxable income.

[Argus]

As you can see a person earning up to 132,406 would be paying 28,020 in Federal tax or 21.2% on his total taxable income even though part of his income is being taxed at 26%. A person who has part of their income in the highest bracket of 29% and earning 150,000 would be paying 33,122 in tax or 22.1% of his total taxable income.

Of course, he'd then add in the provincial taxes, which in Ontario are another 12%.

My understanding is in the US, an individual can deduct his state taxes from his federal taxes to some degree.

[Wilber]

Of course, he'd then add in the provincial taxes, which in Ontario are another 12%.

My understanding is in the US, an individual can deduct his state taxes from his federal taxes to some degree.

Yes but they vary with every province and state. Several US states have no state income tax.

[Argus]

Yes but they vary with every province and state. Several US states have no state income tax.

What revenue do they use for operations?

Mind you, without having to pay for health care the provincial budgets could shrink dramatically, so they'd need far less money too.

[Wilber]

What revenue do they use for operations?

Mind you, without having to pay for health care the provincial budgets could shrink dramatically, so they'd need far less money too.

Sales and other taxes. In the case of Alaska, royalties on oil and other resources. Alaska has no sales tax either. It can make for some interesting scenarios. I know people who live in Vancouver Washington where there is no state income tax and do their shopping across the river in Portland Oregon where there is no sales tax.

Edited December 10, 2012 by Wilber

[dre]

What revenue do they use for operations?

Mind you, without having to pay for health care the provincial budgets could shrink dramatically, so they'd need far less money too.

They will have to pay for a lot of healthcare no matter what, even if you did away with the Canada Health Act.

[Pliny]

In what's becoming a common refrain with you, the information you've cited doesn't make the claim you think it does. It doesn't say that being in the 35% tax bracket means that all of the individual's income is taxed at 35%.

It does say that actually.

" the more one earns, the more taxes they will have to pay once they cross the benchmark cut-off points between the different tax bracket levels."

As a matter of fact, yes. Here's a screenshot from the 2011 IRS tax guide.

So as you see, both Canada and the United States use a system where only money made above certain thresholds is taxed at higher rates.

I hope that clears up your confusion.

-k

That adds more information, yes. The example I gave was incorrect and doesn't reflect the current system. So thanks for the information and the correction.

Edited December 10, 2012 by Pliny