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Taxy Taxy The 1% Says Bill Gross

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Scrooge McDucks Speed Read

1) Growth depends on investment and investment in part depends on an equitable rebalancing of personal income taxes, capital gains and carried interest.

2) The era of taxing “capital” at lower rates than “labor” should end.

3) Investors in the U.S. and elsewhere must look for investment in the real economy, not share buy-back maneuvers that artificially elevate stock prices.

Having benefited enormously via the leveraging of capital since the beginning of my career and having shared a decreasing percentage of my income thanks to Presidents Reagan and Bush 43 via lower government taxes, I now find my intellectual leanings shifting to the plight of labor. I often tell my wife Sue it’s probably a Kennedy-esque type of phenomenon. Having gotten rich at the expense of labor, the guilt sets in and I begin to feel sorry for the less well-off, writing very public Investment Outlooks that “dis” the success that provided me the soapbox in the first place. If your immediate reaction is to nod up and down, then give yourself some points in this intellectual tête-à-tête. Still, I would ask the Scrooge McDucks of the world who so vehemently criticize what they consider to be counterproductive, even crippling taxation of the wealthy in the midst of historically high corporate profits and personal income, to consider this: Instead of approaching the tax reform argument from the standpoint of what an enormous percentage of the overall income taxes the top 1% pay, consider how much of the national income you’ve been privileged to make. In the United States, the share of total pre-tax income accruing to the top 1% has more than doubled from 10% in the 1970s to 20% today. Admit that you, and I and others in the magnificent “1%” grew up in a gilded age of credit, where those who borrowed money or charged fees on expanding financial assets had a much better chance of making it to the big tent than those who used their hands for a living. Yes I know many of you money people worked hard as did I, and you survived and prospered where others did not. A fair economic system should always allow for an opportunity to succeed. Congratulations. Smoke that cigar, enjoy that Chateau Lafite 1989. But (mostly you guys) acknowledge your good fortune at having been born in the ‘40s, ‘50s or ‘60s, entering the male-dominated workforce 25 years later, and having had the privilege of riding a credit wave and a credit boom for the past three decades. You did not, as President Obama averred, “build that,” you did not create that wave. You rode it. And now it’s time to kick out and share some of your good fortune by paying higher taxes or reforming them to favor economic growth and labor, as opposed to corporate profits and individual gazillions. You’ll still be able to attend those charity galas and demonstrate your benevolence and philanthropic character to your admiring public. You’ll just have to write a little bit smaller check. Scrooge McDuck would complain but then he’s swimming in it, and can afford to duck paddle to a shallower end for a while. If you’re in the privileged 1%, you should be paddling right alongside and willing to support higher taxes on carried interest, and certainly capital gains readjusted to existing marginal income tax rates. Stanley Druckenmiller and Warren Buffett have recently advocated similar proposals. The era of taxing “capital” at lower rates than “labor” should now end.

Taxy taxy.

Good to see him acknowledging the impact of Reagan (Thatcher in UK) in enriching the 1%, the credit boom, financialisation, gini co-efficient, return to capital v labour and the deliterious effects on US economy.

Shame UK (Cameron, Osborne, Boris, Carney) are set on going off in the opposite direction to this but I suspect Gross is on the right side of the argument, and they're on the wrong side.

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The 1% either start to realign wages to worker productivity (aka stop stealing so much) or face a slow death of successive reactionary neosocialist governments addressing the situation for them (probably badly). And I mean proper socialists, not Thatcherite pretenders like Blair.

I'd rather we had a mutually beneficial economic society where everything meets in the middle. Imagine a world where companies still make profit, public servies are affordably run by.. the public sector and workers feel little to zero need for Union membership!? However the 1% aren't interested, and the consequences of this will be a political state of regressive flux.

Edited by PopGun

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Taxing the rich, what could possible go wrong.


It's 100% going to happen. Only issue is timing.

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Has Gross being visited early by the Christmas ghosts? Is he now wondering about his own immortal soul? Never too late I guess.

He's been banging on about it for a couple of years now actually. Investment and education in particular.

One can play the game whilst still understanding how it needs to change. He's very open about how the post-Reagan model has benefitted him and the 1%. I think he's gone for a pretty conservative solution in this post by only talking about taxing capital at the same rate as labour. He could have gone much further but I guess he's attempting to carry his rentier constituency with him.

Romney's failure and the Republican nutters failure on the debt ceiling suggess that they're increasingly marginalised. You don't need a weatherman to know which way the winds blowing.

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I suppose it all depends on who is in power in the Whitehouse. At some point someone will come along and realise that the masses have been squeezed as much as possible and will simply turn around and look at the ripe fullness of the little taxed super rich 1%.

I can't see it coming from this UK government alas and Obama is running out of time in the US - even if he was of such a mindset.

History teaches us that whenever the gap between the rich and the masses becomes too great that war and revolution eventually follow. It can take a long, long time for that to happen though.

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