Obama: I was it on Youtube so it must be true.

Josh_R

Registered User
Jan 29, 2005
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#1
Well, kinda. Just keep reading.

http://reason.com/blog/2011/12/07/obama-declares-that-1-percent-tax-rates

Obama Declares That 1 Percent Tax Rates on Billionaires are the Height of Unfairness, Not That He Has Any Evidence That Such Rates Exist
Peter Suderman | December 7, 2011

During yesterday's big-hug-to-Teddy-Roosevelt speech on the economy, President Obama declared that “Some billionaires have a tax rate as low as 1 percent—1 percent. That is the height of unfairness.” Billionaires who pay just a single percent of their ginormous incomes in taxes? Can you believe it?!?!

Better question: Should you?

Glenn Kessler, who writes The Washington Post's Fact Checker column, decided to look into the source of the data point about billionaire tax rates. Turns out there isn't one. Here's Kessler:

This is a striking statistic. But the only evidence that the White House could offer for it was a TV clip of a conversation on Bloomberg TV, in which correspondent Gigi Stone made this assertion during a discussion about the tax strategies that the very wealthy use to avoid paying taxes. The TV clip was promoted by the left-leaning website Think Progress.

Stone quoted from a Bloomberg News article last month that reported on such tax strategies, which mostly involve complicated ways to defer paying capital gains taxes. But the article never made the one-percent claim. It also noted that the IRS had gotten more hostile to such transactions in recent years.


An administration official conceded the White House had no actual data to back up the president’s assertion, but argued that other reports showed that some of the wealthy pay little in taxes. [bold added]

To put it in terms Obama might use: There are some who say that that billionaires pay tax rates as low as 1 percent, but they don't have have any evidence for the claim.
 

MrAbovePar

En Taro Anthony
Mar 14, 2005
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#4
Well it's not like Obama could get hard numbers or anything. It's not like the IRS is under the executive branch...
 

Begbie

Wackbag Generalissimo
Jul 21, 2003
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#6
Reminds me of that one Obama economic advisor that determined Americans were over their fears of a pending deeper recession/depression based on the fact that those terms slipped in rank on Google Trends. Dumb, dumb, dumb.
 

Norm Stansfield

私は亀が好きだ。
Mar 17, 2009
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#7
Obama was "it" on Youtube? Was he playing tag? :action-sm
The President is spreading blatant class warfare propaganda? Quick, let's find someone who misspelled a word. Stupid fucking drone you are.
 

Owenay

Those who fail to learn from history are doomed...
May 10, 2007
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#8
The President is spreading blatant class warfare propaganda? Quick, let's find someone who misspelled a word. Stupid fucking drone you are.
Not just blatant class warfare propaganda, but he was saying the American system as the Founders envisioned has never worked. While laying out what he envisions for America's future he all but admitted that he favors some form of Marxism. Remember way back in 2009 when anyone who dared to call suggest as such was called every name in the book? One of these days he and his cronies are going to be emboldened enough to outright admit it.
 

Party Rooster

Unleash The Beast
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#10
And here's one of the articles sourced:

November 21, 2011
Billionaires Delay Paying Millions In Capital Gains Taxes

(Bloomberg News) When billionaire Billy Joe “Red” McCombs, co-founder of Clear Channel Communications Inc., reported a $9.8 million loss on his tax return, he failed to include about $259 million from a lucrative stock transaction.

After an audit, the Internal Revenue Service ordered him to pay $44.7 million in back taxes. McCombs, who is worth an estimated $1.4 billion and is a former owner of the Minnesota Vikings, Denver Nuggets and San Antonio Spurs sports franchises, sued the IRS, settling the case in March for about half the disputed amount.

McCombs’s fight with the IRS illustrates an overlooked facet in the debate over tax rates paid by the nation’s wealthiest. Billionaires -- from McCombs to Philip Anschutz to Ronald S. Lauder -- who derive the bulk of their wealth from stock appreciation are using strategies that reap hundreds of millions of dollars from those valuable shares in ways the IRS often doesn’t classify as taxable income, securities filings and tax court records show.

“The 800-pound gorilla is unrealized appreciation,” said Edward J. McCaffery, a professor of law, economics and political science at the University of Southern California in Los Angeles.

While Warren Buffett has generated attention with his complaints that he and his fellow billionaires pay federal income taxes at a lower rate than his secretary -- about 17 percent -- the real figure is often smaller, said David S. Miller, former chair of the tax section of the New York State Bar Association and a partner at Cadwalader, Wickersham & Taft LLP in New York.

“The problem is not that people like Warren Buffett pay tax at a 17 percent rate, it’s that they can use complex transactions not available to most Americans to get cash from their appreciated stock without paying any taxes at all,” Miller said.

Tip of Iceberg

The rate at which the 400 U.S. taxpayers with the highest adjusted gross income actually paid federal income taxes --their so-called effective tax rate -- fell to about 18 percent in 2008 from almost 30 percent in 1995, IRS data show. That’s the tip of the iceberg, since much of their wealth never converts into income on a tax return, McCaffery said.

In the McCombs case, the billionaire entered into transactions known as variable prepaid forward contracts. He received about $259 million for lending an investment bank his Clear Channel shares with a promise to deliver the stock for good a few years later. The arrangement enabled McCombs to defer paying capital gains tax because he hadn’t sold his shares, lawyers for the billionaire said. The IRS deemed the transaction a sale since the bank paid McCombs cash and got the use of his stock almost immediately.

Taxes On Millionaires

Transactions like these may complicate plans by U.S. President Barack Obama to help close the federal deficit by increasing taxes on millionaires. Obama has said the tax code should contain a “Buffett Rule” to ensure that millionaires pay taxes at least at the same rate as middle-class Americans. Republicans have said they prefer lowering tax rates for businesses and the wealthy. Buffett declined to comment.

In the past two years, some of the wealthiest executives in the U.S. have used deals similar to McCombs’s to reap returns while deferring the taxes without running afoul of IRS rules, securities filings show.

Dole Food Co. Chairman David H. Murdock received about $228.6 million in 2009 against his Dole shares -- tax-free until he is scheduled to deliver shares in November 2012, a filing shows.

Starr International

Starr International Co., the investment vehicle run by Maurice “Hank” Greenberg -- forced from his position as chairman and chief executive officer of American International Group Inc. in 2005 -- utilized a prepaid forward agreement last year to receive $278.2 million from an investment bank, according to a March 2010 regulatory filing. The investment vehicle isn’t slated to deliver the AIG stock until 2013.

Lauder received $72.9 million in June as part of a variable prepaid forward sale and is scheduled to deliver the Estee Lauder Cos. shares in June 2014, according to a filing with the U.S. Securities and Exchange Commission.

Spokespersons for Lauder, Murdock and Starr International declined to comment.

Realized Gains

While the tax treatment of these plans isn’t disclosed in the filings, “there’s no other reason to enter into such a convoluted arrangement,” said Robert Willens, an independent tax accounting analyst in New York. These arrangements can cost several million dollars in fees, according to tax planners.

Taxes on capital gains are triggered when assets like appreciated shares are sold -- a process called realization. What constitutes a realized, taxable sale is a frequent bone of contention between the IRS and the clients of tax planners.

Transactions intended to pull cash out of appreciated assets tax-free aren’t limited to stock. Boston real estate developer Arthur M. Winn exited his interest in a piece of real estate by converting his stake into a share of a partnership free of any capital gains tax, court filings show.

The IRS objected and claimed Winn and his partner should have reported a $12 million taxable gain. A U.S. Tax Court judge sided with Winn on one aspect of the deal; others were settled with the government. The details haven’t been disclosed.

Winn, who earlier this month pleaded guilty to making illegal campaign contributions, has retired from WinnCompanies. He did not respond to messages left with his attorney and with the company.

Mark-to-Market

Miller, the former chair of the tax section of the New York State Bar Association, has proposed a so-called mark-to-market system to tax the annual appreciation in the stock holdings of the top 1/10th of 1 percent of taxpayers. That would essentially tax gains in a given year regardless of whether the shares are sold. In a 2005 article in the journal Tax Notes he estimated this approach would raise between $490 billion and $750 billion over a decade.

Borrowing against appreciated stock and real estate is a popular tax deferral strategy particularly as interest rates plummet, said Randy Beeman, a private wealth manager at The Wise Investor Group in Reston, Virginia, a unit of Robert W. Baird & Co. The interest rate on loans to some wealthy individuals has hovered around 1 percent.

Vikings Purchase

McCombs, ranked 312 on the most recent Forbes 400 list of the richest Americans, made his fortune in automobiles, real estate, and then by building Clear Channel into a large radio station operator and outdoor advertising business. He is now the chairman of Xe Services LLC, the military security contractor formerly called Blackwater Worldwide.

In the late 1990s, McCombs borrowed about $300 million to finance the purchase of the National Football League’s Minnesota Vikings. By 2002, the Clear Channel shares pledged as collateral were falling in value and McCombs faced margin calls from lenders. He didn’t want to sell his shares, partly because of “a strong emotional attachment to his ownership in the company,” according to a filing by his lawyers in U.S. Tax Court.

Instead, he entered into a series of variable prepaid forward contracts, receiving about $259 million from JPMorgan Chase & Co. in exchange for an agreement to deliver his Clear Channel stock in one to three years. The transaction was structured to limit his potential losses by varying how many shares he would deliver at the end of the transaction.

He loaned those shares to JPMorgan in the interim. That allowed the New York-based bank to short the stock -- selling the borrowed shares to hedge against any decline in the price of the stock it would eventually receive from McCombs.

Lawyers said the cash received up front didn’t have to be reported as income because it wasn’t a taxable sale until McCombs turned over those shares for good.

The IRS said the transaction was a cash sale of the shares, generating taxable income of as much as $213 million.

Benefits And Burdens

Over the years, the IRS has tried to crack down on such deals. In 2006, the agency declared that including a share loan meant these types of transactions were sales, triggering an immediate income tax obligation. In McCombs’s case, his lawyers contended that the share loan was separate from the first part of the transaction, and thus didn’t transfer the so-called “benefits and burdens” of owning the stock. He settled his case for $23 million in back taxes plus interest.

In 2010, a U.S. Tax Court judge found Philip Anschutz, the entertainment, oil and media investor, owed $94 million in taxes after he used transactions similar to the ones used by McCombs. Anschutz, identified by Forbes as the 39th richest man in the U.S., is appealing the decision.

‘More Hostile’

“The IRS shifted its view and threatened a legitimate business practice and that will have a dampening effect on investment,” said a spokesman for Anschutz.

The IRS has “gotten more hostile toward these transactions over the years,” through its various technical pronouncements and litigation, said Willens, the accounting analyst. Since 2006, such transactions haven’t included the interim loan of shares to the investment bank, he said.

“It’s still desirable to defer the tax and wind up with an interest free loan from the government,” he said. “Chances are you don’t get audited and if it does get challenged the odds are good you’ll have a settlement for some fraction of the amount you saved. Who wouldn’t want that?”

http://www.fa-mag.com/fa-news/9200-billionaires-delay-paying-millions-in-capital-gains-taxes.html
In the McCombs case, the billionaire entered into transactions known as variable prepaid forward contracts. He received about $259 million for lending an investment bank his Clear Channel shares with a promise to deliver the stock for good a few years later. The arrangement enabled McCombs to defer paying capital gains tax because he hadn’t sold his shares, lawyers for the billionaire said. The IRS deemed the transaction a sale since the bank paid McCombs cash and got the use of his stock almost immediately.
I think I want to setup a "variable prepaid forward contract" with my employer. I'll give them my services now but I don't want to be counted as an employee until I'm retired and in a lower tax bracket. Genius!

This tax thing is so complicated. If only there were a presidential candidate who would propose some extreme simplification of the tax code...:icon_cool
 

Norm Stansfield

私は亀が好きだ。
Mar 17, 2009
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#11
The irony of being called a drone by the likes of Norm Stansfield is very entertaining to me. Almost as funny as you using a term like "class warfare" when discussing propaganda.
Who are you talking to? And why do you think using the term class warfare is propaganda?
 

Party Rooster

Unleash The Beast
Apr 27, 2005
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#12
Who are you talking to?
I think the more appropriate term would be "what."

And why do you think using the term class warfare is propaganda?
It's a tad bit hyperbolic when used like you did. Just like it was an exaggeration for Obama to somehow make the claim that it's running rampant. Only about 1500 people paid zero income taxes in 2009, so I doubt the number is that much higher for people only paying 1%. Love how Reason.com wasn't able to come up with that number. Took less than 5 minutes of Googling.
 

Josh_R

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Jan 29, 2005
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#13
It's a tad bit hyperbolic when used like you did. Just like it was an exaggeration for Obama to somehow make the claim that it's running rampant. Only about 1500 people paid zero income taxes in 2009, so I doubt the number is that much higher for people only paying 1%. Love how Reason.com wasn't able to come up with that number. Took less than 5 minutes of Googling.
That wasn't exactly the point of the article. The point was that the administration admitted that they didn't even attempt to verify that the huge hyperbolic point that they made was actually true. Maybe the line about billionaires is true, but if it's only because they made a good guess with no proof, then it's not really a "win".