Buffett Also Pays Taxes on Trading Profits
There are many variations on increasing taxes on the rich. One is to have a separate treatment in the tax code for the highest income earners. Another is to target dividend income. Dividend income, however, is usually used for capital reinvestment; it would be tough to support putting such a penalty on investment. Would a universal taxation system, such as value-added tax (VAT), get support from those in favor of universal? That does not seem to be the case. Even the Democrats are not favoring a VAT of up to 15 percent. Such a measure would not be popular with the self-employed or small businesses.
How the burden of taxation should be distributed is the crux of the matter. Sweden, a favorite of welfare advocates, excises as much as 23 percent for VAT and no estate tax or wealth. Not many people are aware that Sweden has indirect taxation system. Compared to its welfare system, Sweden’s taxation system has been largely ignored.
Buffett has been credited for a proposal to increase taxes for people earning more than $1 million. But there is no specific mention as to which taxes will be increased. Obama would be hard pressed to push for increasing the capital gains tax, even if it is needed for the U.S. to survive financially, as capital gains constitute the majority of Buffett’s. In the U.S., 237,000 people have adjusted gross incomes above $1 million, paying a total of $178 billion in income taxes. However, Obama’s bill would apply a tax increase to individuals earning more than $200,000 or families earning more than $250,000. There are 3,920,000 people earning more than $200,000, paying a combined tax of $434 billion.
What started out as a proposal to increase taxes for million-dollar income earners, people like Buffett, is now affecting individuals earning above $200,000 and families earning above $250,000, people considered middle class. Obama chose to be realistic by considering how the increased taxes can be practically collected. What would happen in South Korea if there were increased taxes for being married? Women’s organizations would spill out onto the street at once. Considering that the household constitutes the basic economy, putting a penalty on filing a joint return, a so-called marriage penalty, is completely not valid. Real estate tax can be considered a type of joint tax.
High income earners in South Korea also pay a lot of taxes. The 19,700 people earning more than 100 million won pay an average of 3.9 percent tax rate. However, altogether, they contribute 67 percent of the total tax revenue. If the tax burden is increased to 5 percent, the tax revenue from this group can easily reach 80 percent. There are only 11,900 people with incomes exceeding 500 million won, or 0.4 percent of the taxpayers, but they pay over 50 percent of the total taxes.
South Korea should also impose the capital gains tax. There are virtually no countries not doing so. Even Buffett pays a low 15 percent capital gains tax in the U.S. This is not the case in South Korea; even if trading profits amount to billions of won, not a cent goes into taxes. This is done under the pretext of nurturing the securities market. However, there is now an overabundance of foreign investment; each time there is a rush of foreign funds in and out of the market, it causes a shake up in the exchange rates and the economy. It is a situation of the tail wagging the dog.
Among the factors of production — land, labor and capital — only capital is not being taxed. However, depending on the total stake, capital gains may then be taxable. Why shouldn’t it be done more generally? Inheritance tax, too, should be more fair. In most countries, people are exempt from paying taxes on inherited assets until they are sold. However, in South Korea, even though operating a business is difficult, and even more so for a large company, inheritance can be taxed as much as 65 percent. No other countries have such a high tax rate. Instead of debating over increasing or reducing tax, it is better to revise an outdated taxation system.
Controversy over the market being a playground for speculation can also be eliminated. The problem is economic officials are not sure how to proceed. A transfer tax system can be managed conveniently as the government would no longer need to tenaciously keep track of gains and losses in the securities market. Buffett, also, is showing duplicity: He does not want to pay the already low tax rate of 15 percent. Therefore, a few days ago, a proposal to raise taxes on short-term investments and reduce taxes on long-term investment was brought up. Buffett himself is a long-term investor. There are quite a lot of people who respect Buffett in South Korea but are unaware of this.
How the burden of taxation should be distributed is the crux of the matter. Sweden, a favorite of welfare advocates, excises as much as 23 percent for VAT and no estate tax or wealth. Not many people are aware that Sweden has indirect taxation system. Compared to its welfare system, Sweden’s taxation system has been largely ignored.
Buffett has been credited for a proposal to increase taxes for people earning more than $1 million. But there is no specific mention as to which taxes will be increased. Obama would be hard pressed to push for increasing the capital gains tax, even if it is needed for the U.S. to survive financially, as capital gains constitute the majority of Buffett’s. In the U.S., 237,000 people have adjusted gross incomes above $1 million, paying a total of $178 billion in income taxes. However, Obama’s bill would apply a tax increase to individuals earning more than $200,000 or families earning more than $250,000. There are 3,920,000 people earning more than $200,000, paying a combined tax of $434 billion.
What started out as a proposal to increase taxes for million-dollar income earners, people like Buffett, is now affecting individuals earning above $200,000 and families earning above $250,000, people considered middle class. Obama chose to be realistic by considering how the increased taxes can be practically collected. What would happen in South Korea if there were increased taxes for being married? Women’s organizations would spill out onto the street at once. Considering that the household constitutes the basic economy, putting a penalty on filing a joint return, a so-called marriage penalty, is completely not valid. Real estate tax can be considered a type of joint tax.
High income earners in South Korea also pay a lot of taxes. The 19,700 people earning more than 100 million won pay an average of 3.9 percent tax rate. However, altogether, they contribute 67 percent of the total tax revenue. If the tax burden is increased to 5 percent, the tax revenue from this group can easily reach 80 percent. There are only 11,900 people with incomes exceeding 500 million won, or 0.4 percent of the taxpayers, but they pay over 50 percent of the total taxes.
South Korea should also impose the capital gains tax. There are virtually no countries not doing so. Even Buffett pays a low 15 percent capital gains tax in the U.S. This is not the case in South Korea; even if trading profits amount to billions of won, not a cent goes into taxes. This is done under the pretext of nurturing the securities market. However, there is now an overabundance of foreign investment; each time there is a rush of foreign funds in and out of the market, it causes a shake up in the exchange rates and the economy. It is a situation of the tail wagging the dog.
Among the factors of production — land, labor and capital — only capital is not being taxed. However, depending on the total stake, capital gains may then be taxable. Why shouldn’t it be done more generally? Inheritance tax, too, should be more fair. In most countries, people are exempt from paying taxes on inherited assets until they are sold. However, in South Korea, even though operating a business is difficult, and even more so for a large company, inheritance can be taxed as much as 65 percent. No other countries have such a high tax rate. Instead of debating over increasing or reducing tax, it is better to revise an outdated taxation system.
Controversy over the market being a playground for speculation can also be eliminated. The problem is economic officials are not sure how to proceed. A transfer tax system can be managed conveniently as the government would no longer need to tenaciously keep track of gains and losses in the securities market. Buffett, also, is showing duplicity: He does not want to pay the already low tax rate of 15 percent. Therefore, a few days ago, a proposal to raise taxes on short-term investments and reduce taxes on long-term investment was brought up. Buffett himself is a long-term investor. There are quite a lot of people who respect Buffett in South Korea but are unaware of this.