Money?

[klo1335]

I am sure that everyone worries about money. But what makes me crazy is when I drive around my neighborhood and am astonished at the new housing developments being built. Maybe its just the area I live in but, the signs for the places advertise "starting in the low 400s or low 500s." It makes me wonder at the rising prices of things. Will prices keep getting higher and higher? Yet more and more people losing their jobs? Is there going to be a breaking point and another Depression?

[crazy-girl]

Rising prices seriously freak me out. When I was in college I bought a newer model used car for just $10,000 and then the other day I heard myself saying "That one is nice and it's under $20,000" Day-um. It hasn't been that many years and cars are already so much more expensive, even though there are more brands and types.

What really depresses me is that my parents were able to buy their first house for $30,000. That's a two bedroom, 2 bathroom house with a basement full of storage. Nowadays that same house would be $150,000.

Depressing.

[reva_544]

I don't think you need to worry about increasing prices too much. Inflation in the United States is the lowest it has ever been in a LONG time and it's likely the lowest of any country in the world. Somebody correct me if I'm wrong, but isn't Japan experiencing ungodly inflation right now? In fact, the Fed is actually concerned about the U.S. slipping into a DEflationary economic state right now, which apparently would be catostrophic and WOULD cause a depression.

Also, if I remember correctly, America experienced some pretty bad inflation of our own in the late 70's early 80's, so I say be glad you're not living in those times!

Economics is an interesting subject. A lot of things are really conterintuitive (like deflation).

Also, some of it is likely psychological. A more expensive car catches your eye because now that you're out of school, you make more money. I'm trying to compare it to the "more-money-you-have-the-more-money-you-spend" theory. I can remember back in college when I could live off of my 20-hour-per-week-10.50-per-hour job and still have money left over for beer. Now I make just over $40k and feel like I'm living paycheck to paycheck.

Crazy-girl is right though. Cars at least have been getting more and more expensive. And as far as homes go, cheap financing allows people to purchase homes they couldn't before. Mortgage rates were ungodly back in the 80's so people just couldn't afford to finance those big houses!

See, isn't econ interesting...you should take a class!

[jku]

This is an excellent topic, and a real eye-opener on the relation of the stock market, politics, and economics to real life.

What you're seeing is the begin of a deflation and a possible Depression. Consumer goods are beginning to decrease in price, which sounds good - BUT, that means companies aren't making as much and that leads to layoffs in the long run. In relation to that Houses are INCREASING in price because interest rates are LOW, but as house prices rise they not keeping up with WAGES, which are stagnant or decreasing.

That's why I wonder why the Administration is giving stock breaks on dividends that go to wealthy people who own stocks and actually SEE money from dividends.
Why not a break on CAPITOL GAINS tax?
Better yet, why not a break on PAYROLL TAXES? Consumers make-up 60% plus of the economy, right? If more people buy stuff, companies make more stuff, and they need to HIRE more people who in turn make more money and keep the economy afloat.
Give me an extra $100 a week, I'll do a lot with it. Give it to my rich uncle and he'll just pile it on what he's got.

The definition of being RICH is that you have EXTRA money. Giving rich people more money doesn't do anything. Their personal expenses stay the same, they just SAVE more of it in banks and interest earning accounts.

Why would you give 20 acorns to ONE squirrel with a TREE full of acorns, instead of giving 2 acorns to a bunch of squirrels who have a small amount of acorns saved away? Will that squirrel with 20 acorns give his acorns away to the ones who have less?

What if that ONE squirrel donated to your political campaign and helped you get into office? :)

[klo1335]

Would you please explain to me what a Capital Gain tax is? I understand the taxes that come out of my paycheck. But when everything gets more technical...I get lost.

Thanks!

[andrewx]

Crazy-girl, I do wish to mention one thing: You don't have to spend $ 20,000 for a new car. I purchased a new Toyota Corolla, model year 2003, for under $16,000 last October. It is the lower end version. STILL, I like the car.

Houses and condominiums are getting more expensive. Still, they are a nice thing to own once you buy one.

Respectfully,

Andrewx

PS: Crazy-girl, are you currently living in Chicago? Homes are expensive there. STILL, once you buy a Chicago property you OWN a Chicago property. That is a nice thing once you accomplish it.

[reva_544]

klo, capital gains tax is the tax paid on any gain you make on a capital asset when you sell it (clear as mud, right!). A capital asset is an asset used in the course of business or stocks or bonds...things like that. As a QLCer, I doubt you pay capital gains tax. All wages and interest income is considered "ordinary income" and are therefore taxed at ordinary rates. Capital gains tax rates are lower than ordinary rates...Congress structured this system to encourage taxpayers to invest in capital assets. I don't know how much good it would be to lower capital rates anymore, since damn near everyone's stock investments are in a loss position.

Also, if you have a minute, read the following analogy which helps explain why rich people always benefit more from tax cuts than your average Joe:

Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100. If they paid their bill the way we pay our taxes, it would go something like this:

-The first four men (the poorest) would pay nothing
-The fifth would pay $1
-The sixth would pay $3
-The seventh $7
-The eighth $12
-The ninth $18
-The tenth man (the richest) would pay $59.

So, that's what they decided to do. The ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20."

So now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his "fair share?"

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being "paid" to eat their meal.

So the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay. And so:

-The fifth man, like the first four, now paid nothing (100% savings)
-The sixth now paid $2 instead of $3 (33% savings)
-The seventh now paid $5 instead of $7 (28% savings)
-The eighth now paid $9 instead of $12 (25% savings)
-The ninth now paid $14 instead of $18 (22% savings)
-The tenth now paid $49 instead $59 (16% savings)

Each of the six was better off than before. And the first four continued to eat for free.

But once outside the restaurant, the men began to compare their savings. "I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth. "But he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"

"That's true!" shouted the seventh man. "Why should he get $10 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!"

The nine men surrounded the tenth man and beat him up.

The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The people who pay the highest taxes get the most benefit from a tax reduction.

Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore. There are lots of good restaurants in Europe and the Caribbean.

David R. Kamerschen, Ph.D
Distinguished Professor of Economics
University of Georgia

[sunbear]

klo,
The housing prices are going up because of the decline in the stock market.
When the markets went down, Greenspan cut interest rates so much that it was an opportunity for a lot of people to refinance or start a new mortgage. This is causing the market for real estate to go up so the prices on these homes are going to go up as well. So people also made a lot of money by selling their homes recently too.

So, if Greenspan decides to increase rates the housing market will get cheaper. This shouldn't happen until after the stock market gets better.

And about taxes, it's funny how tax rates don't keep up with inflation. When my parents were my age, I believe that the poverty level then was really close to what we are paying now, but the value of the dollar today is much stronger because of inflation. Percentage wise, that means we're expected to pay them way more than what our parents did. The thought of it just kind of tires me out.

[dakotagopher]

Reva - nice analogy. Catchy.

Housing prices are high because of tax law, combined with market demand. When you buy a house, even if it's a little starter home, a few years later it'll be worth more than you paid for it. Generally speaking. Say you paid $100,000 for a condo and five years later it's worth $150,000. YOu can sell it, and take the "capital gain" of $50,000 tax free IF you pour it right back into another home. That's where most people's downpayments on these huge homes comes from.

Plus, with a more expensive home, you pay more interest to the mortgage company, which you write off your taxes.

As people marry (developing dual incomes) and earn higher individual incomes as they grow older, it becomes pretty easy pretty fast for an educated couple to easily buy a $500,000+ home. I know lots of couples in their late 20's that are living in ridiculous homes; way more than they need, or even want in some cases, but this is the route they take to build wealth and shield some income from taxation.

The tax law exists, as stated before, to stimulate capital investment thus enabling regular people to build wealth and security.

[TankgirlyC]

Someone mentioned how their parents bought a 2 bedroom, 2 bathroom house with a basement for storage at 30K.

Keep in mind that minimum wage 30 years ago was about $1.50 per hour. A burger cost 15 CENTS.....

My Dad went to BU for $1,500 A YEAR.....my mothers rent was $95 A MONTH and this was steep back then...

THe problem with prices is that while a 2 bedroom 2 bathroom house would cost around $150K now........our minimum wage is around $6 an hour....not much of an increase since 30 years ago.

As for there being another depression.....the FDIC was created to prevent that from EVER happening. The main reason for the depression was banks went out of business and people who had money in accounts lost their $ due to the bank going under. the FDIC backs every CENT you put in...so if your bank went bankrupt...you still get your account totals.

Just some thoughts =)

[jku]

Here is a handy definition of depression vs. recession.
http://economics.about.com/library/weekly/aa112002b.htm

I think the FDIC guarantees the money you keep in the bank to a certain amount, which means if the bank goes under you get your money back ONLY if its under the amount that is Federally Insured. I'm not sure how that could prevent a DEPRESSION since the definition is that "a depression is any economic downturn where real GDP declines by more than 10 percent. A recession is an economic downturn that is less severe." Can someone with an econ background explain that?

I work in the media, so I don't know shit except about Christina Aguilera'a new hair color (BTW, its black).

And in RE to reva's TAX ANALOGY, it seems flawed. What about wonderful tax breaks for the wealthy? I'm talking about overseas accounts, HUGE write-offs, tax shelters, etc.? It doesn't fit into that ostensibly ultra-simplified dinner analogy.

I don't get the argument by the GOP on taxes? Is the goal to pay ZERO taxes? What is a fair amount? Do conservatives want to pay NO taxes, thus bankrupt schools, roads, destroy social programs, keep criminals on the street, have no regulation on air, food, cars, dining, etc.?

Well, there are places like that where the rich do whatever they want and you pay no taxes.
Its called Guatemala, Belize, and Honduras.

I have a friend whose Dad is on the Forbes list. They're BILLIONAIRES. Of course they're Republicans because they know that's the party that works for them. And he's in FAVOR of ESTATE TAXES (also called "death tax," which is a JOKE) because he doesn't think we should have ROYALTY in America.
Recently he told me something scary about the many BILLIONAIRE families he has met. They look at middle class people like cattle - as they can "be bought and sold like common goods and will do anything for a meager $300,000 salary." He also said that they may have pictures of Jesus in their house, but the real GOD is the dollar bill and your worth is simply a matter of numbers. He likens it to a form of mental illness.

The thing is the super rich that run this country are NOT seen. You can't find their faces in the paper, on "Access Hollywood," or the deck of a Carrier. They pull the strings that directly impact our lives. It's a fact, and the sooner we the people who have to work for a living realize it, the better off we will be.

It's not "class warfare," its economic fact.

[tipsy88]

I believe the FDIC limit is $100,000 on the amount that is covered.

It's a fact, and the sooner we the people who have to work for a living realize it, the better off we will be.

Just curious, (not saying they wouldn't) but how exactly will people be better off?


What i find ironic is that western democracy (err democratic republic) values the idea of equality among the people, while capitalism itself tends to creates inequality among the people.

But i digress, because even with its pitfalls, its still probably the best system we have

[jku]

"The thing is the super rich that run this country are NOT seen. You can't find their faces in the paper, on "Access Hollywood," or the deck of a Carrier. They pull the strings that directly impact our lives.It's a fact, and the sooner we the people who have to work for a living realize it, the better off we will be."

Q:Just curious, (not saying they wouldn't) but how exactly will people be better off?

Politicians and legislators only do as much as the people want them to. Left to their own devices, they are easily bought-out and benevolent to a small minority of people whose PERSONAL interest is not necessarily that of the GENERAL PUBLIC.
I.E: I believe this last war's primary intention was to provide lucrative contracts to private companies, and get re-elected; NOT to protect us from terrorism. Can someone prove me wrong with FACTS and not rhetoric?

I've met some very powerful people from different areas of leadership/industry/media. The one thing they find shocking is how UNaware the general public is about REAL issues that impact their lives. I mean its ridiculous that some guy will know who the leading rebounder in the NBA Western Conference Finals, but have no idea that his local congressman voted to cut something or other that impacts his life directly.

Rune Arledge, the recently deceased TV Exec, said that when he travelled the country he met lots of people who understood tremendous levels of nuance in sports and athletics. He said that it gave him hope as to the ABILITY and APTITUDE of the American public to understand issues that impact their lives. It's just that people in power have a lot to gain from an ignorant public, and they will do their best to keep it that way.
I.E: How many people do you know that are aware of the upcoming changes in the FCC's rules on Media Ownership?

Someone said that "the greatest gift we can give our politicians is our ignorance." I agree.

[reva_544]

I believe that a recession can be defined as two consecutive quarters of negative GDP growth...

And I think my analogy well descibes how our tax system works...

And I have to say that I have several clients who make a nice wad of cash and they pay plenty of taxes. Granted, none of them are billionaires (and I admint right here that tax shelters are not my specialty), but there are PLENTY of tax breaks out there for people who don't make very much money. People below this poverty line that has been discussed can even get back more money than they pay in through the Earned Income Credit. The unfortunate thing is that few people at this income level know about this credit b/c they can't afford to pay a tax preparer. That's what's sad.

jku, I'd be interested to hear more specifics about what "HUGE" write-off the rich are taking. All the provisions of the 2001 tax law (with the exception of the phase out of the estate tax) have income limitations placed on them so not everyone can take advantage of them...in fact, hardly any of my clients get advantage (well, of course they got advantage of the decreasing rates). So, before I completely disagree with you, I'd like to know exactly what you're talking about.

And yes, the FDIC limit is $100,000 and is was created as part of the depression recovery, and so were a lot of programs, including Social Security and the Securities and Exchange Commission. jku is right in that it does not prevent a depression. The main reason for the depression was not that banks went out of business. The cause of the depression is a whole other discussion.

And I also have to say that housing prices did not go up because of the decline in the stock market. The stock market does not control the economy. It is one of the many indicators we use to determine the strength of the economy. And the Fed did not lower interest rates because he wanted people to refinance their mortgages. Changing interest rates is the manner in which the Fed controls our money supply, which has a major effect on certain aspects of our economy.

[jku]

Hi Reva (and everyone else)
There was this books called AMERICA: WHO REALLY PAYS THE TAXES? that came out in '94. The following is the link and an excerpt from the PW review. http://www.amazon.com/exec/obidos/tg/detail/-/0671871579/104-1729716-1117509?vi=glance

BTW - In your last post, you referred to "...MY CLIENTS" - I mean no disrespect, but I'm not sure who your clients are; are you sure you're not basing your overall understanding of taxes on your personal experience? I feel like that happens often. Many people look at the world through their tiny window. For example, I work at a place that has armed guards and famous people come by; wouldn't it be strange if I thought ALL people who work have armed guards and famous people come by?
Regardless, you actually work in a field related to taxes, so I'm sure you have interesting insight that can be shared with all of us.
Q2Reva: Is the ESTATE TAX really being PHASED OUT? Is it permanent?

Here's part of the book review:
"Wealthy individuals squirrel away money through tax-free bonds, charitable-donations deductions and racehorses, among other write-offs; and the wealthiest corporations benefit from foreign tax credits, deductions for estimated worth of brand names and even the writing-off of interest on loans taken out to pay their stockholders (Weren't stockholders supposed to share both profits and losses?). All of which, the authors note with jackhammer regularity, leaves Joe and Jane Shmoe holding the tab. The authors are bipartisan in their apportionment of blame, rounding up not only the usual Republican presidential suspects but also Democrats like LBJ (whose "unified budget" amounted to a grand-scale doctoring of the books)"

It's probably situations like this that have led to my understanding of the fundamental unfairness of our tax system.

http://www.cbsnews.com/stories/2002/01/16/politics/main324530.shtml

This is an interesting evaluation of the tax system...
http://www.tompaine.com/feature.cfm/ID/7392

"To risk stating the obvious, the federal tax system isn't just the personal income tax. It's also the payroll tax (which finances Social Security and Medicare coverage), the corporate income tax, various excise taxes -- notably on gasoline, alcohol and tobacco -- and the estate tax. And for most households, the payroll tax takes a bigger bite out of their income than any other federal tax.
In fact, for the bottom 80 percent of households, personal income tax is only 28 percent of their federal tax burden, according to Citizens for Tax Justice. The payroll tax for this group is more than twice as large, representing 59 percent of their federal tax burden. At the top of the income distribution, in contrast, the 20 percent of households with the highest incomes pay 61 percent of their federal taxes as personal income taxes while payroll taxes take up only 26 percent."

[sunbear]

Reva,
Nothing is directly related or intentional. Of course the Fed didn't cut interest rates because they wanted to increase the real estate market. It just happened that way, with a cause and effect type of logic. They cut interest rates in order to boost the economy and home buyers took a huge advantage of it.
The stock market is only one indicator of the entire market.

[jku]

http://www.latimes.com/news/opinion/commentary/la-oe-burman20may20,1,6627532.story?coll=la%2Dnews%2Dcom ment%2Dopinions

Reva or anyone else, I'm curious what you think of THIS? Its from today's LA TIMES.

[reva_544]

I don't really know how to respond to that except that, when it comes to tax, nobody has a good look at the whole picture. And since I haven't read the book, I don't want to nock it. However, it just the excerpt leaves me with questions...if someone wants to invest in tax-free bonds, let them...the returns suck! And the charitable contribution deduction is limited in all cases...you're average Joe benefits from these breaks too.

Anyhoo, enough with that. To answer your question, the phase out of the estate tax does work in kind of a stupid way. Before the law passed you could die with an estate worth somewhere around $600,000 and it would not be taxed. That amount slowing increases until 2010 when the limitation no longer exists and all estates go untaxed. Except that Congress tacked on a sunset provision that wipes out the whole law in 2011 and the exclusion goes back to the original amount around $600,000. So unless Congress does something to make it permanent, the estate tax is only non-existant if you die in 2010! Pretty silly huh? Except that most people don't die with estates that large, so it doesn't really affect a lot of people.

Sorry to bore you...we can go back to talking about exciting stuff you want.

jku, I'll check out your article in a few...apparently I have to register...

[sunbear]

Jku,
you're billionaire story was pretty facinating.

Here are my rants about it.
**No kidding about the "cattle" thing. We need money that we don't have to pay for even our basic needs.

With the basic concept that 5% of the country has 95% of the country's wealth, (just approximately) The reason why the tax rates are supposed to increase with wealth is to keep people from having too much money but they know how to get away with it.
I'm so confused as to where the fine line is supposed to be drawn between a capitalistic and an aristocratic society

[reva_544]

I am generally a Bush supporter, and of course, I am all about tax cuts. However, I am against eliminating the tax on corporate dividends. I think it will end up being more costly than anyone can estimate. Now, I can't speak for the President, but it seems like he is only thinking of how this relates to publicly traded companies. Seems like he hasn't considered how closely held corporations would be affected.

Lets say you are a 100% owner of a coroporation. You also run the business and draw a salary of $200,000 instead of taking a dividend on the company's $100,000 profit. And then let's say that the President passes his bill. Instead of that $200,000 salary draw, which between you and the corp you pay 15.3% Social Security and Medicare, unemployment, and personal income tax, you take a $50,000 salary and a $150,000 dividend. Now, the corporation will have to pay additional tax because the $150,000 would not be deductible, but the corporate rate is much lower than the owners personal rate. BUT the corporation doesn't have to match the FICA or pay unemployment tax. In the meantime, the owner reduces his personal taxable income by $150,000 and also misses out on the FICA tax.

I just think it opens the door wide open for abuse. And I don't think we need to put any more strain on the Social Security program.

[jku]

I think your right S-bear, many argue we have a plutocracy disguised as a democracy.
Plutocracy
n. pl. plu·toc·ra·cies
1.Government by the wealthy.
2.A wealthy class that controls a government.
3.A government or state in which the wealthy rule.

Reva - thanks for the info on Estate Taxes. I think the "Sunset" provision was discussed on NPR the other day. From what I read about the ESTATE TAX moratorium, it caused a ruckus among the rich. The MARS family and GALLO family (candy and wine) were the major families fighting to get rid of it. BILL GATES SENIOR wants it to stay in place - he feels America shouldn't have a wealthy aristocracy like Europe. In fact, I believe the whole idea of the Estate Tax was founded on getting rid of aristocrats.
The American people supported ESTATE TAX until a poll found that if you call it a "DEATH TAX," people then opposed it. So our President went out and called it a "DEATH TAX." The poll also found that most people wouldn't be subject to a DEATH TAX, but that many people also believe they could one day become MILLIONAIRES and then would like to leave that money to their kids.
Rich people should pay more in taxes. What about the education that got them there? What about the government regulatory groups that monitor banks and helped them earn that money? What about everyone from the Treasury to local police that protect their money? Why should they take advantage of all this country offers, and its protections, and then feel like they shouldn't pay anything because THEY earned it?

Nobody earns anything without a little help. There is no such thing as TRULY self-made (wo)man.

[daphne]

In response to original question, I think that there's a lot more pressure to live beyond your means than there was in our parents generation. Consumer debt and credit-card debt is out of control. The average suburban home now is huge compared to those built in the 70's. $400- $500k doesn't seem so bad when you stretch it out over 30 years. Then you have to fill the house with quickly depreciating nice things to live up to your new lifestyle. It's a vicious cycle.

You Are Not Your Square Footage (http://iisd1.iisd.ca/pcdf/meadows/squarefootage.htm)

[klo1335]

ugh...this whole tax thing confuses me. When they start talking percentages and other numbers...my mind just goes blank! Is there a book out there that breaks down and explains everything to someone who is numerically challenged like me? People have tried to explain to me why the rich get less taken then middle and low class people do. But I just can't seem to follow. Even the previous explanations with the dinner and the other one...I just don't follow it :)

[sunbear]

I'm reading up on another article about the same thing.

http://money.cnn.com/2003/05/20/news/buffett_tax/index.htm

[sunbear]

Just so I'm not confused here- the underlying concept of the articles are that the lower classes will not always be shareholders and will not have access to the tax breaks, even if it will help people with their retirement nest eggs. In the mean time, corperations and the wealthy are going to step on it and get their breaks. I can't even get into the numbers yet.

I totally agree when they say helping the lower classes will better stimulate the economy than helping the wealthy.

The one part that goofs me up though is in LaTimes, 4th paragraph: "For these reasons, the president's proposal that shareholders' dividends or capital gains be tax-free if the corporation's income had already been fully taxed could be a good idea, were it paid for through offsetting tax changes rather than higher deficits. But it's not."
************************************************** **
"...offsetting tax changes rather than higher deficits. But it's not."
************************************************** **
The middle class is taxed way too much, we have sales taxes, property taxes, income taxes, state taxes, taxes on using our funds from our IRA's, etc. The middle and lower classes are paying WAY too much.

I have a few suggestions to help the lower classes:
1)without penalty, reduce taxes here for people paying off large amounts of debt along with interest if it's a larger percentage than their net worth or if they're in the negative as far as their net worths.
2)Tax people and entities(ie. corperations) heavily upon leaving the country. This may also keep jobs in our own country along. I don't have the fine print to all of this, but I think it's going to get the wealthy.
3)Pay all taxes (ie. sales, property, sin, etc.) according to what the taxable income is, not property value.
4)Add on a sin tax to the Heidi Fleiss stock. Along with capital gains, she's pimping out other women and breaking up homes. She's hideous and I don't like her. :twisted: This one deserves a double taxation.
5)Decrease wasteful government expenses. And I don't mean underpaying the lower government employees either.

maybe it's a little far fetched, but that's my tangent. It will probably help us all out more than the dividend tax cuts.

[tipsy88]

[QUOTE]5)Decrease wasteful government expenses. QUOTE]

HA! That'll never happen for the simple reason that everyone is fighting for a share of the pie. Besides, not everyone will agree on the definition of wasteful.

Ironically reducing corruption of the system is probably the best thing for the people in the long run. It not so much that paying taxes is bad, but rather what the government chooses to spend it on. Unfortunately it is improbable to eliminate.

[jku]

But I think anyone can agree $1 TRILLION (1000x1000 MILLION DOLLARS!!) of UNACCOUNTED PENTABONG spending is a bi-partisan "what's going on?" agreement on a waste of taxpayer money.

I think we are all in favor a healthy defense budget, but when ours is equal to the NEXT 15 NATIONS COMBINED, something CAN and must be cut out of that. How about starting with a missle defense "shield" that has been touted on for years ,but has one problem in that it DOES NOT WORK?

How can the GOP support the waste of all that money, and then point the finger at immigrants and poor single mothers on welfare as "sucking middle class taxpayers dry."

How can they claim to be the party of morality and virtue with this kind of record?

[dakotagopher]

Quote
===========================================
With the basic concept that 5% of the country has 95% of the country's wealth........ The reason why the tax rates are supposed to increase with wealth is to keep people from having too much money ......
===========================================

This is NOT the reason tax rates are supposed to increase with wealth. "To keep people from having too much money'!?!?!?!?!!? What, are we living in communist russia now??? just kidding.

They increase with wealth because wealthy people can afford to pay more than poor people because it takes less of their proportional income. This is called a "progressive tax" because it hits those with the ability to pay harder than those who are unable to pay.

When did it become a crime and/or despicable to be wealthy? The Wealthy move the country. Granted, there is a small percentage that are born with the silver spoon and contribute little, but thousands upon thousands of people have become wealthy through their hard work, ie, building businesses, etc.

Would be interesting to see what would happen if every person with a 7 figure net worth would stop contributing to society. I think that very, very soon the rest of us would be begging them to come back and save us.

It's a dangerous thing when a capitalistic society starts punishing success.............

[reva_544]

Great point dakotagopher! Wealthy people also contribute a great deal of money to the community be it a university, museum, or other not-for-profit organization. I live in the town where Amway is located. The owners of that corp practically built this town! I don't think it would be a very nice place to live without them.

You'd be surprised by the amount of money really wealthy people are willing to give away. So what if they get a good tax break for it. At least they can keep the money in this city and my property and city taxes don't have to be increased to pay for a new museum I'm never going to visit.

[jku]

The issue here isn't "are rich people good or bad" - or is success being punished! Sounds like a lot of the rhetorical BS pumped out by the Administration - these current tax cuts are a scam and when 2005 "sunsets" on these cuts hit we're all REALLY gonna pay for the lies being sold now!

Of course there are GOOD wealthy people who contribute (the Gates, Buffet, Soros, etc), and they receive tax deductions for it to boot - but the issue is about wealthy people who weasel out of paying taxes, then use their political mouthpieces to get middle class taxpayers to blame the poor for "sucking up all the money." The disease is called GREED, and its killing this country.

Let me give you a perfect example. James Dart, heir to the DART FOAM fortune, didn't want to pay taxes in the States - so he moved to Belize. Fine - you don't want to pay, then leave! A few months later, a GOP Congressman asked to put an embassy from Belize in Boca Raton, FL. After some research, they found that the consulate general from Belize will be James Dart! (as Slick Rick said - this type of shit happens everyday)

If you've made your fortune in this country, you have a duty to pay something back so another person can have the same chances you did (i.e. Student Loans). It's NOT time to shut down the spigot and start preaching about "class warfare" and "punishing success" - it's also not the time to take JOBS to foreign countries like Mexico and China so you can skirt around basic HUMAN RIGHTS!

Generosity and appreciation for your good fortune is GOOD. Greed and selfishness is BAD!

Didn't these -illionaires learn anything in Kindergarten? :)

[dakotagopher]

Quote
=============================================
If you've made your fortune in this country, you have a duty to pay something back so another person can have the same chances you did (i.e. Student Loans). It's NOT time to shut down the spigot and start preaching about "class warfare" and "punishing success"
=============================================

No one (other than crazies on the extreme, extreme Right) is disputing the duty of the successful to pay something back to the society that enabled their success; the issue is whether taxation on the wealthy has/is reaching punative levels, and whether taxing the wealthy at these levels has passed the point of diminishing returns for society. Might society be better off long-term if the tax rates for the wealthy are lowered?

JKU - Open your mind - Don't allow the specific to influence your view of the general - There will always be a few bad seeds, like this Dart fellow, but don't let the handful of bad seeds poison your mind to the vast majority of wealthy/successful people who keep this country moving, pay their fair share, and are honest. I believe that something like the wealthiest 5% pay around 80% of the taxes, no? I may be off a bit on that, but I think that's ballpark accurate.

Also, the tax deductions for charitable giving aren't all they're cracked up to be. If I give $10,000 to charity tomorrow, that results in about a $3,000 tax savings for me. I assume (I could be wrong) that this is somewhat proportional as your giving increases. Not quite the advantage the extremists on the left make it out to be, is it? Keep that in mind when you criticize the wealthy for taking advantage of tax breaks for charitable giving.

[jku]

http://www.commondreams.org/headlines02/0728-09.htm

Thanks DGopher - this is an excellent issue to discuss. I appreciate your intelligent input.
As in any debate, you and I are not the judge, it's the general viewing public of these discourses that make their own decision.

I'm making a nice living these days looking at issues on both sides, and then writing what I know is not true and sell it to the public - all in the name of "fairness to both sides." I feel coming here is a place to vent what I know is true. I tell a few people the truth as objectively as I see it - then go and sell lies to millions. I have no agenda other than the TRUTH.

But the fact is that the wealthy as a whole get a break on a lot more taxes than their "fair" share - and how do you delineate between "punitive" and "fair" anyhow? These are subjective terms.
How did Bush just raise $22 MILLION in one night? People paid $2000 a seat, and ate filet mignon.
Did you or anyone you know go to that dinner? Could you afford to? What did the people who went to the dinner get for their money? JUST the filet mignon? Isn't it glaringly obvious there is something is going on here?

As for deductions - maybe Reva knows - but isn't that money that is written off for everything from business related deductions to deciding what charity gets your tax money vs. the government?

[reva_544]

jku,

Not sure I understand your question...perhaps you could rephrase. I'd be happy to relay what I know about the charitable contributions deduction...

[tipsy88]

that insurance loop hole isn't just confined to the rich, anyone can do it, you don't have to have millions of dollar to take out an insurance policy. By overfunding your life insurance policy and investing the proceeds you can shelter the gains from capital gains on the investment. over time the investment can build and the gains you make from your investments pay for your yearly premium, and in effect the policy is "self-funded".

I believe you can even start taking out chunks of money after a certain time period but you would have to report as income at that point. but in the event that you do die, all those gains are passed to your beneficiaries without the death tax on it.

I have a policy like that and although it's a life insurance policy, i treat it more like an investment account which gains can accumulate tax free.

[jku]

I've read a few articles about the current tax cuts - the pros are that it will save money for families making about 50K with 2 kids all the way to wealthy couples with kids making $500K. That's a good thing and has the possibility of lifting the economy and getting the unemployed among our group some work.

But the BIG con is the huge deficits it will contribute to, and with the cost of reconstruction in Iraq not yet figured out - leaving the real payback for what is happening now to 10 years down the road -when we on this list will be in our 30s and just getting well into our careers and making real money.

Also something to keep in mind if one wants to look at the politics of this issue is that McCaine, Voinivich Snowe and other Republican senators were either against this whole idea or cut it drastically. In addition, the only economists who support these cuts are members of the Administration. There is not a single economist who supports this cut - As a final note, even the second richest man in America - Warren Buffet, who has a lot to gain from this second round of cuts, is opposed to it.

[dakotagopher]

Tipsy - yes you are right, anybody can access the "insurance loophole" and avoid capital gains taxes entirely, assuming congress doesn't change the tax laws in the future to eliminate this incentive.

These are referred to, typically, as Variable Universal or Variable Whole life insurance policies. You buy a death benefit and pay a monthy payment to the insurance company. The monthly payment is "inflated" to pay for more than the cost of insurance. The extra dollars you pay are pumped into mutual funds, stocks, etc. Because this is tied in to the life policy, you are fully shielded from capital gains.

In theory, after funding this for 20+ years, your cash value that you've been pumping into the mutual funds will be very substantial. Good policies then allow you to take zero interest loans from your cash balance; that way, since it's a loan and not a disbursement, you avoid the capital gains tax entirely. Of course, since the money is yours to begin with, you never have to pay the loan back.

Excellent retirement planning tool, I personally am funding two of these, and I know a couple of guys in their late 20's who are pumping $50,000+ a year "extra" into these plans. You get full advantage of stock market proceeds without getting slammed by the tax man. In theory. There are some negatives of these plans also, FYI, but too complex to review here.

These are very, very slick, and are is a great way for regular people to grow wealth faster (because is tax free). Of course, you need to be very careful what type of policy you buy and what funds you invest in, etc. Usually best to work w/a good financial advisor or insurance pro you trust, and with a major name insurer that will still be in business when time comes for you to retire.

[jku]

This is excellent information Dgopher - THANK YOU! :)

As for tax cuts, let's wait and see. I think this article has the best analysis in regards to our discussions this past week, hands down:

http://www.latimes.com/news/nationworld/nation/la-na-assess24may24,1,6744816.story?coll=la%2Dhome%2Dhea dlines

Happy Memorial Day Weekend everyone!

[dpc]

TRY THIS SMALL INVESTMENT OF $7.00 US DOLLARS & EARN $960,800

THE KEY TO THIS WHOLE INVESTMENT IS THAT EVERYONE MUST BE TOTALLY HONEST. THERE IS NOTHING TO LOSE, BUT ALL TO GAIN!

MAKE EASY MONEY LEGALLY WITHOUT DOING ANY HARD WORK. IT WORKS, BUT YOU MUST FOLLOW THE DIRECTIONS COMPLETELY AND HONESTLY.

You may have heard about this program or something relative to this on the Oprah show, 20/20 or in the Wall Street Journal.

Hi...My name is Denise. A little while back, I was browsing through newsgroups, just like you are doing right now. I came across an article similar to this one that said you could make thousands of dollars within weeks with only an initial investment of $7.00. So I thought, you know I have tried everything else, why not give this a try. It said to send $1.00 to each of the 7 names and addresses stated in the article. No catch. That was it. I had nothing really to lose except for 7 postage stamps and $7.00, and it is more blessed to give anyway, right? Like most of us, I was a little skeptical, but decided to give it a try anyway and follow through as directed. So this is how it goes. It has been checked it out with the U.S. Post Office (1-800-725-2161) and has been confirmed that it indeed is legal! I then invested the requested $7.00. Within the next 7 days, started getting money in the mail. Yes, it is a shocker at first! Figured it would end pretty soon, but the money continued to come. In the first week, made about $27.00. By the end of the second week, made a total over $1,000. In the third week, made over $10,000 and it continued to grow. In the fourth week, the total is just over $42,000 and it still comes in rapidly. Believe me, it is certainly worth the 7 postage stamps and $7.00. I have spent 3x as much on junk food.

This is how it works and more importantly, why it works. Make sure that you print a copy of this article NOW! So you will have the information constantly before you as it is needed.

STEP #1: Get 7 separate pieces of dark paper, gift wrapping paper, newspaper or magazine paper for security and theft purposes when traveling through the postal system or you can purchase security envelopes and avoid using the dark paper and gift paper. Write this message on 7 pieces of small paper, "PLEASE PUT ME ON YOUR MAILING LIST", along with your Name, full postal address, city, zip code and name of your country (Example: USA). If you use the security envelopes, then just write the above message on white paper and wrap your $1.00 inside of it. Now get your 7 $1.00 US bills, your 7 pieces of small paper with the above message and your mailing information, your 7 postage stamps, and 7 #10 envelopes. Wrap each $1.00 bill along with one of the small pieces of paper with the above message inside of the dark paper, gift wrapping paper, newspaper or magazine paper. Place each wrapped $1.00 bill and message inside of a #10 business envelopes (the long ones). Now you have 7 envelopes, each containing a $1.00 bill, and message requesting to be put on the mailing list. By doing this, you are creating a service. THIS IS ABSOLUTELY LEGAL!

REMEMBER! Don’t forget to write your own COMPLETE POSTAL ADDRESS with zip code on the outer (main) envelope, in order to receive your undeliverable pieces of mail back. Affix proper postal stamps (shouldn’t be anymore than the normal first class postal, currently .39 cents). Always add the name of your Country in your mailing address on the list as well as on the outer envelope.

Now mail the 7 $1.00 envelopes with postage to the following addresses.

1. Vlantoiu Gheorghe Serban C.P. 72 - 21, Bucharest, ROMANIA.
2. Kerry, 2134 Paterno Avenue, Las Vegas, NV 89123, U. S. A.
3. Philip Andrews, ' Rosmuc' , Fountainstown Co . Cork, IRELAND.
4. ML Enterprises, 27 - 1300, King Street, E. Box 135, Oshwa Ontario, CANADA L 1H-8J4
5. Justin Monaghan, 4 Finlaysons Road, Swan Creek, NSW 2462, AUSTRALIA.
6. Henrik Falla, Sonnavn, 87, 1476 Rasta, NORWAY
7. Denise Comer, 26510 Chardon Road, Richmond Heights, Ohio 44143-1232, USA

STEP #2: Remove name #1 from the above list and move the other names up one. Now place your name on the list in position #7. Please keep all names in their original numerical order.

STEP #3: How To Post To Newsgroups & Message Boards. Do not retype this entire letter to do your own posting. Change anything you need to, but try to keep this article as close to original as possible. Now, post your amended article to at least 200-250 newsgroups and message boards, which there are several thousands to choose from. Remember, the more you post, the more money you make. Simply put your cursor at the beginning of this letter and, left click and hold down your mouse and drag your Cursor to the bottom of this document, then release your mouse; now right click and left click “Copy” from the Edit menu, then right click and left click “Paste” and put your document to Newsgroups and/or Message Boards. This will copy the entire letter into the computer memory. Make sure to save your document in Microsoft Word or Notepad. If you save in Notepad, save it as a .txt file, not a .doc file. If you want to do your postings in different sittings, you'll always have this file to go back to.

Step #4: Use Netscape or Internet explorer and try searching for various newsgroups (on-line forums, message boards, chat sites, discussions.) Log onto any search engine like yahoo.com, google.com, altavista.com, or excite.com. Search with these subjects, "millionaire message board"; "money making message board; "money making discussions"; "money making forum"; "employment message board"; opportunity message board; or "business or bulletin message board", etc. You will find thousands and thousands of message boards. Click one by one then you will find the option to post a new message.

Step #5: Visit these message boards and post this article as a new message by highlighting the text of this letter and selecting paste from the edit menu. Fill in the Subject, this will be the header that everyone sees as they scroll through the list of postings in a particular group, click the post message button. You're done with your first one.

Congratulations!…That’s It! All you have to do is jump to different newsgroups and post away. After you get the hang of it, it will take about 30 seconds for each newsgroup! **REMEMBER, THE MORE NEWSGROUPS OR MESSAGE BOARDS YOU POST IN, THE MORE MONEY YOU WILL MAKE. BUT YOU HAVE TO POST AT LEAST A MINIMUM OF 200-250** Now, you will begin receiving money from around the world within days! If you don’t have a Post Office Box (POB), eventually you may need to rent one due to the large amounts of mail that you will receive. If you desire to remain anonymous, you can use a psuedoname, as long as the postal person will deliver it. **NOTE! MAKE SURE ALL THE ADDRESSES ARE CORRECT.**

NOTE: You may also do Direct Mail and send your letter to Opportunity Seekers, but be very careful when purchasing your Mailing Lists to do this. Do lots of research first.

WHY 200-250 POSTINGS? Out of 200-250 postings, let’s say you receive only 7 responses (a very low example). See the following mathematical calculations:

LEVEL 1: You get 7 members and from 7 members you get US$ 7. Level 2 ----- 7 Members in turn get 7 members each ... total : 7 x 7 = 49, you get US$ 49...... and so on..... at Level 7, you get 7 x 7 x 7 x 7 x 7 x 7 x 7 = US$ 823,543.

TOTAL AMOUNT YOU MAY EXPECT TO RECEIVE = US$ 7 + 49 + 343 + 2401 + 16807 + 117649 + 823,543 = US$ 960,799 say US$ 960,800 ( approximately). These are mathematical calculations. These cannot go wrong.

7 persons who just sent me $1.00 make the MINIMUM 250 postings, each with my name at, for example #2 and only 7 persons respond to each of the original 5, that is another $49.00 for me and so on..... it’s continuous.

With an original investment of only $7.00 US dollars. AMAZING! When your name is no longer on the list, you just take latest posting in the newsgroups, and send out another $7 to names on the list, putting your name at #7 again. And start posting again. The thing to remember is that thousands of people all over the world are joining the internet and reading these articles everyday, JUST LIKE YOU are now!! So you can afford $7.00…and see if it really works? I think so… People have said, “What if the plan is played out and no one sends you: the money?” So what are the chances of that happening when there are tons of new honest users and new honest people who are joining the internet and newsgroups everyday and are willing to give it a try? Estimates are at 20,000 to 50,000 new users, every day, with thousands of those joining the actual Internet.

REMEMBER! Treat Others The Way That You Would Like To Be Treated and this will work for you. Be Honest and Be Fair. Plant A Seed and Receive A Harvest. DO NOT try to deceive people by posting the message with your name in the list and not sending the CASH to the rest of the people already on the list. You will NOT receive much of anything. This is the fairest and most honest way of earning EASY money LEGALLY sitting at home. You can share the wealth of the world without costing anything but only YOUR TIME. Always keep a list of the people who send you CASH.

This program remains successful because of the honesty and integrity of the participants and by their careful adherence to the directions.

God Bless! Just Believe.

[girllost]

Banks will give you a mortgage for a lot more than you can reasonably afford these days. There are also interest only loans, where you only pay the interest first.

I have also noticed that all of the new homes being built are at least $400,000+. I really don't understand how anyone could afford this without a substantial down payment or a job that pays a ton. I can't imagine that many people are making that much money. I think what it comes down to are a lot of people are living beyond their means. Also a lot of older people are selling their homes which are already paid off and then putting a substantial down payment on these huge cookie cutter homes.

Personally I dont see why anyone needs such a large home unless they have a lot of kids. Who wants to spend the time cleaning it?

[yankeeyosh]

Banks will give you a mortgage for a lot more than you can reasonably afford these days. There are also interest only loans, where you only pay the interest first.

I have also noticed that all of the new homes being built are at least $400,000+. I really don't understand how anyone could afford this without a substantial down payment or a job that pays a ton. I can't imagine that many people are making that much money. I think what it comes down to are a lot of people are living beyond their means. Also a lot of older people are selling their homes which are already paid off and then putting a substantial down payment on these huge cookie cutter homes.

Personally I dont see why anyone needs such a large home unless they have a lot of kids. Who wants to spend the time cleaning it?

Yeah, I just don't understand it myself. It's amazing how the demand for housing (ESPECIALLY for 20-somethings) has skyrocketed even as prices have skyrocketed in turn.

I just find it funny that people are OK with paying $1,500 a month in a mortgage but will never pay more than half of that in rent. Granted, you get equity, but you wonder if people who have these big mortgages can really afford it.

[jrwilheim]

Would you please explain to me what a Capital Gain tax is? I understand the taxes that come out of my paycheck. But when everything gets more technical...I get lost.

Thanks!

Capital gains taxes are taxes on the gains you make when you sell an investment, such as a stock, mutual fund, or home (although your home is exempt from these taxes up to a certain amount). Taxes on this form of income are lower than on income you earn in other ways.

For instance, let's say you bought $1,000 worth of a particular mutual fund. After a few years, you sell it for $2,000--thus earning a profit of $1,000. That $1,000 is taxed at a lower rate than your ordinary income tax provided that you've held onto the fund for more than a year.

[jrwilheim]

http://www.commondreams.org/headlines02/0728-09.htm

Thanks DGopher - this is an excellent issue to discuss. I appreciate your intelligent input.
As in any debate, you and I are not the judge, it's the general viewing public of these discourses that make their own decision.

I'm making a nice living these days looking at issues on both sides, and then writing what I know is not true and sell it to the public - all in the name of "fairness to both sides." I feel coming here is a place to vent what I know is true. I tell a few people the truth as objectively as I see it - then go and sell lies to millions. I have no agenda other than the TRUTH.

But the fact is that the wealthy as a whole get a break on a lot more taxes than their "fair" share - and how do you delineate between "punitive" and "fair" anyhow? These are subjective terms.
How did Bush just raise $22 MILLION in one night? People paid $2000 a seat, and ate filet mignon.
Did you or anyone you know go to that dinner? Could you afford to? What did the people who went to the dinner get for their money? JUST the filet mignon? Isn't it glaringly obvious there is something is going on here?

As for deductions - maybe Reva knows - but isn't that money that is written off for everything from business related deductions to deciding what charity gets your tax money vs. the government?

This is an example of the kind of distortion caused by the liberal media in this country. Both political parties give $2,000-a-plate fundraising dinners, but the media only makes a fuss over it when the conservative party, the Republicans, do it. I remember reading about how, shortly after Bush's first inauguration, Dan Rather did a story on Bush's cabinet and how they were "mostly millionaires" supposedly out of touch with ordinary people. In fact, Bush's cabinet had the exact same number of millionaires as the Clinton cabinet, but Rather had not done such a story after Clinton's inauguration.

[jrwilheim]

As for there being another depression.....the FDIC was created to prevent that from EVER happening. The main reason for the depression was banks went out of business and people who had money in accounts lost their $ due to the bank going under. the FDIC backs every CENT you put in...so if your bank went bankrupt...you still get your account totals.

Just some thoughts =)

This isn't entirely true. The FDIC insures bank deposits up to $100,000. Granted, that's a lot more than most people keep in a bank savings account, but it isn't every penny a person puts in. I remember reading something in a personal finance book advising married couples of how they could get up to $1,400,000 FDIC-insured at any one bank by using different combinations of their and their kids' names.

The other thing to keep in mind about the FDIC is that the amount of money it keeps in reserve to insure deposits is nowhere near the amount of money on deposit in all the banks in the country. So the FDIC can deal very well with the collapse of individual banks, but probably can't prevent or control a system-wide collapse. What the FDIC did, and still does, is provide psychological security to depositors. Back in the 1920s, before the FDIC, banks that got robbed would almost always fold soon afterward, because news of the robbery would cause a bank run. The FDIC gives depositors thes security of knowing that even if there is a robbery, or a collapse, their deposits are probably safe. But that doesn't really mean the FDIC can prevent another depression.

[Lubere]

tenth man analogy - theory? Is this a commonly accepted teaching among Universities?? Any links?