[Nonsuch]

Check out this op-ed from the Washington Post. Perhaps not stunningly new or insightful, but it put a few things neatly in perspective for me.

Good for Investors, Bad for Everyone Else

If you work for a living in George W. Bush's America, you're a sap.

Take a quick look, or a long one, at the tax code as Bush has altered it during his three years as president, and you're compelled to conclude that work has become a distinctly inferior kind of income acquisition in the eyes of the law. Bush tax policy rewards investment and inheritance. Relying on work for your income, by contrast, turns you into a second-class citizen.

In his first round of tax cuts in 2001, Bush got Congress to phase out the estate tax by 2010. Last year, with Republicans in control on Capitol Hill, he reduced the top tax rate on dividends from 39.6 percent to 15 percent, and brought the capital gains tax rate down from 20 percent to 15 percent as well.

This year, his new budget proposes that families be allowed to shield as much as $30,000 yearly on their investment income, which will abolish all remaining taxes on such income. Meanwhile, the income tax cuts to most middle-class families don't exceed a couple of hundred dollars, and payroll taxes for employees remain untouched.

[...]

To be sure, investment income and corporate profits are high. But just 278,000 new jobs have been generated since June, which means the recovery is about 7.5 million jobs shy of the norm for post-World War II recoveries. Bush's Council of Economic Advisers had predicted job growth of 510,000 from the 2003 tax cuts, plus another 1,335,000 new jobs, during the second half of last year.

To say that reality is lagging behind the theory of investment-led growth, then, is to understate. The problem is that to invest today in stocks or mutual funds doesn't mean you're investing in job creation in the United States.

[thunderous_funker]

I'm happy at least some people get it.

Thanks for the link.

[CRASH HARDDRIVE]

Relying on work for your income, by contrast, turns you into a second-class citizen.

Relying on a salary paid in current dollars vs. what it will cost you to live in the future (a hell of a lot more) turns you into a PAUPER. Period.

Sad how the class envy crowd uses the term 'Investor' in their typical 'this group vs. that group' straw man setup.

Anyone can be an �Investor�. Despite the best efforts of the class envy crowd, to try and make the term sound like a specific group of people to pit in some stupid �US vs. THEM bullcrap battle with each other, there's no special group of people that qualify to be 'Investors'. It's not magic. It's not rocket science. It's merely the people that aren't complete idiots when it comes to managing their money. Therefore anyone could benefit from any �Investor� tax break. Anyone.

That many people don't choose to figure that out, and choose to be the 'Everyone Else' fooling themselves that they'll ever have much without putting the money they currently earn to work so it'll actually be worth something in the future, isn't anyone else's fault but their own.

So people that have figured something out that the 'Everyone Elses� haven't get a break for their diligence and the class envy types want to whine about it?

Tough $hit.

[BlackGriffen]

Originally posted by CRASH HARDDRIVE:
Anyone can be an �Investor�.

If they have enough capital to spare for an investment.

Keep in mind, sir, that such is not a given.

BlackGriffen

[BRussell]

One of the li(n)es that this administration has used is that the majority of people have money in the stock market. That is true, but most people have the majority of their investments in tax-free retirement accounts already, so these investment tax reductions don't help them anyway.

And anyway, it's OK to cut taxes as much as we want, and increase spending as much as we want, haven't you heard? It's sound economics!

[CRASH HARDDRIVE]

Originally posted by BlackGriffen:
If they have enough capital to spare for an investment.

Keep in mind, sir, that such is not a given.

BlackGriffen

That excuse gets tiring though.

I've personally got no sympathy for people that say "I don't have enough money to invest," yet they'll buy a $200+ pair of sneakers, or a $6,000 flat screen TV on average wages, or make ludicrous payments on a car they can't really afford.

Or name a thousand other incredible wastes of money.

Which is perfectly fine, don't get me wrong- people can and should do what they want with their money- just if you've made poor use of money you could have socked away(which is NOT uncommon) don't later take the bull$hit tack that you don't have enough 'capital' to invest, and start grousing and belaboring the fruits reaped by those that had some measure of better financial sense.

Well sure people don't have capital to invest, if they never do any financial planning, and don't realize that they have more than they�ve been led to believe. Contrary to the popular myth, it doesn�t take that much money to invest. But yes, it does take more discipline than many of the �me, me, I, I, gimme gimme� generation may have; like atleast a few times buying (or not) the more reasonable car/TV/stereo/shoes/redundant computer system/trip to Vegas where you dropped the rent, etc. rather than the money pit monstrosities many people �invest� in, other than the kind that pay.

[SimeyTheLimey]

On this subject. Wall Street Journal Editorial Page (Link requires free registration).

Our good friend, Mr. Rumor, has it that on Tuesday night President Bush will revive the proposal for two new tax-exempt savings accounts in his State of the Union address.

The first, a lifetime savings account, would allow individuals of any age and any income to contribute up to $7,500 a year. Interest and investment income would accumulate tax-free and withdrawals could be made at any time, for any purpose, without a tax penalty. Permitting tax-free withdrawals distinguishes this account from the current, more specialized, medical or education savings accounts by offering savers immediate, penalty-free liquidity.

The second, a retirement savings account, would be similar to a Roth IRA but much more powerful. Like current IRAs, withdrawals would not be permitted until a certain age is reached. Interest and investment income would grow tax-free and withdrawals would also be tax-exempt. But the new account would more than double the contribution to $7,500 a year, per individual, and has no income caps for eligibility. (Currently, to be eligible for a Roth IRA, joint income cannot exceed $160,000.)

This sounds like something anyone can use.

[BRussell]

Eh, anyone wanna place bets that there will be absolutely no attempt to even pretend to cover the revenue shortfall that even more tax cuts will produce?

[thunderous_funker]

Published on Thursday, January 8, 2004 by the Christian Science Monitor
The Myth of the Populist Stock Market
by David Callahan

Wall Street analysts are predicting another great year for the stock market in 2004, and Americans are again pouring their savings into stocks. Tens of billions of dollars have flowed back into equities since last summer. As the Dow and Nasdaq soar, more money is likely to follow. There are also signs of a revival of the '90s myth of the populist stock market -a myth in which Wall Street gives everyone on Main Street a shot at a better life.

Can Americans possibly fall once more for this nonsense? Maybe. The scandals of recent years, most lately in the mutual-fund industry, have done little to debunk the notion that Wall Street is geared toward ordinary investors and that stocks offer a universal path to wealth creation. At the height of the boom, however, the bottom three-quarters of American households owned less than 15 percent of all stock. Barely a third of households hold more than $ 5,000 in stock. Most Americans have more debt on their credit cards than money in their mutual funds.

Stock-market gains have reflected the top-heavy ownership patterns. Between 1989 and 1997, the most recent year for which there is good data, 86 percent of stock market gains went to just the top 10 percent of households. Yet when the market tanked, it was often ordinary investors who felt the sharpest pain - pain that many will cope with well into retirement. According to a March survey by Greenwich Associates, major retirement pension plans lost $ 1 trillion from the beginning of 2000 through beginning of 2003.

Apart from getting burned by the vast scams in tech stocks, those ordinary Americans who did try to benefit from the last bull market got mauled in myriad smaller ways. Thousands of Americans are suing financial firms over things like hidden fees and inflated commissions, dishonest investing advice, and reckless trading practices. In the past two years, investors have filed more than 2,000 cases alleging "churning" by their brokers - that is, unnecessary trading to rack up commission fees.

Today, as middle-class investors go back into the water, the sharks are still there. While many investors will make gains if the market continues to rise - and stocks are probably a better place to put your money than under a mattress - the crackdown so far on Wall Street abuses is not very reassuring. Big firms like Merrill Lynch got only a slap on the wrist for misleading investors and admitted no wrongdoing. In 2002, New York Attorney General Eliot Spitzer helped to extract a $ 1.4 billion settlement from America's top 10 brokerage firms, but not a single individual in those firms faced criminal charges or admitted personal responsibility.

Although it's too early to predict the final outcomes of the mutual-fund investigations - which revealed yet more unfair practices that hurt ordinary investors - it appears that the accused in these cases are also headed for a soft landing, given the lax laws governing the fund industry until recently. In all, it's hard to see why future wrongdoers on Wall Street will be deterred by any of the punishments that authorities have meted out so far.

Meanwhile, self-regulation, the first line of defense against bad behavior by brokerage firms, remains something of a joke. The National Association of Securities Dealers is notorious for its lax discipline of miscreant brokers who prey on investors. NASD remains ill-equipped to police more than 600,000 securities dealers in the US or to dutifully investigate the 5,000 or so consumer complaints it receives every year.

And the biggest cop on the Wall Street beat, the SEC, still lacks the muscle to really do its job, despite all the lessons learned during the past few years about the costs of weak regulation.

The SEC's weakness has been driven home anew by the mutual-fund scandals. The SEC failed to prevent - or even notice - these scandals, not only because it lacked the staff and expertise to adequately police the nation's 13,000 mutual funds, but also because special-interest money blocked stronger reform efforts in Washington. Indeed, in the wake of the corporate scandals that began with Enron, the financial-services industry has stepped up its efforts to influence lawmakers.

In the 2002 election cycle, securities and investment firms gave $ 59 million in campaign donations, according to the Center for Responsive Politics. These firms have already contributed more than $ 20 million toward the 2004 election. That money comes on top of the $ 30 million-plus a year the industry spends on direct lobbying.

Investors on Main Street think good times are here again. Yet amid signs of a returning bull market, there is plenty of evidence that Wall Street has not fully mended its ways.

In this climate, the most important asset for any smart investor is a long memory.

[SimeyTheLimey]

That article doesn't seem to mention pension plans. How can you talk about the stock market and forget about pension plans?

[thunderous_funker]

Originally posted by SimeyTheLimey:
That article doesn't seem to mention pension plans. How can you talk about the stock market and forget about pension plans?

The last sentence of paragraph 3.

[SimeyTheLimey]

Originally posted by thunderous_funker:
The last sentence of paragraph 3.

OK, but that contradicts the idea that only the few are involved in the stock market. Anyone with a pension or an IRA is in the stock market.

It also is besides the point if the stock market loses value in a recession (the article neatly and rather artificially picks 2000 to 2003 as its sample, those were recession years). Nobody measures a pension plan that way. Pension plans invest for the long haul. The stock market has picked up, and historically increases steadily.

[vmarks]

T_F, may I recommend that you read the Motley Fool books, particularly http://www.amazon.com/exec/obidos/tg...books&n=507846

entitled "You Have More Than You Think."

The populist stock market is not a myth, and does not have to be one. Moreover, it shouldn't be one. The market, on average, gives an annualized return of 11 percent.

If you put $1000 into the market 70 years ago, you'd have $1,488,000 today. In the 71st year you'd net $163,700 on top of that, more than 163 times the whole amount you socked into the market 71 years ago. Sure, there have been ups and downs- but the safest thing to do isn't day-trade, it's invest for the long-haul.

The problem is, so many of us (a) put our money into frivolous things as CRASH pointed out, and (b) lack the patience to take a handful of core holdings and end a half century later with $22 million (Anne Scheiber )

But what's that you say? No regular joe has money they can afford to sock away for investing? It comes down to personal finance. Dividing up what are survival needs, growth investments in yourself, and luxury items.

Chicken sandwiches, winter socks, and water are survival needs. As much as I regret saying so, beer is not. If you're a professional guitarist and you just bought a new guitar on Visa, that's a growth investment. If you're a graphic artist who just bought a jet ski, that doesn't count. Buying concert tickets or Nancy Sinatra's Greatest Hits CD would be a luxury item.

Don't buy luxury items with credit cards until you're out of debt.

Save 10 to 15% of your salary. If that's just $115 out of biweekly salary payments, that's 3 grand at the end of the year if you're making 28000 a year. Put 3 grand into the stock market each year from the time you're 27 until you're 60, and at 11% annual return, what's the math say? It says that before taxes you get $920,512. Yes, all of that without a single pay raise.

Seriously, I think personal finance and investments needs to be a required class in school. It would demystify the subject, render a whole generation better prepared to improve their lives.

[BRussell]

That description of how many Americans have money in the stock market must include retirement plans like IRAs and 401ks. Not sure if it includes corporate-run pensions, though. But the point is still the same - cap gains tax cuts and dividend tax cuts don't help those plans, because they're already tax free.

vmarks - couldn't agree more. I'm stunned when I see all the late-model SUVs that people drive around. There's no way that all these people can truly afford those things. We have a consumer society, not a savings society, and lots of people buy into that game.

[thunderous_funker]

Originally posted by SimeyTheLimey:
OK, but that contradicts the idea that only the few are involved in the stock market. Anyone with a pension or an IRA is in the stock market.

It also is besides the point if the stock market loses value in a recession (the article neatly and rather artificially picks 2000 to 2003 as its sample, those were recession years). Nobody measures a pension plan that way. Pension plans invest for the long haul. The stock market has picked up, and historically increases steadily.

Where did the author argue that only a few are involved? Rather, he's arguing that the idea that everyone can get rich from the Stock Market is a mostly a myth. The big returns are not enjoyed by most investors and recent scandals have wiped out the modest returns for many.

More to the point, he's arguing that there are systemic flaws in the market that actually make it infinitely more risky than many would think--namely, you're at the mercy of unscrupulous managers, brokers, traders, regulators, etc.

Obviously some poeple do very well in the market. But the idea that everyone will get rich belies the reality that most get only a marginal return while some get utterly wiped out.

As for the average return of 11%, that is an aggregate number. In that are the people who get 30% and the people who get -30%. Its not like a savings account. The author is arguing that the risks are under-appreciated by average investors who are not only subject to the vagaries of the market, but the avarice of those who run it.

[SimeyTheLimey]

Originally posted by thunderous_funker:
Obviously some poeple do very well in the market. But the idea that everyone will get rich belies the reality that most get only a marginal return while some get utterly wiped out.

As for the average return of 11%, that is an aggregate number. In that are the people who get 30% and the people who get -30%. Its not like a savings account. The author is arguing that the risks are under-appreciated by average investors who are not only subject to the vagaries of the market, but the avarice of those who run it.

It's very unlikely that you will be "utterly wiped out" with a pension plan or a 401K. They are just too diversified and the average growth in the stock market measured over the decades outweighs temporary short term setbacks. That's why the author's cherrypicking the years 2000 to 2003 was transparently misleading.

Of course, if you are stupid and put all your retirement funds into one stock (like Enron), then you can be wiped out. But in general, that isn't going to happen.

The idea of a pension plan isn't to make you rich. The only way you are going to become rich in the stock market is to either be rich to begin with, get improbably lucky, deal in inside trades, or have a recklessly high risk threshold. Otherwise, the purpose is to invest enough and prudently enough so that you will be comfortable. This is something most people can do, and it is not a myth.

[CRASH HARDDRIVE]

Originally posted by thunderous_funker:
Where did the author argue that only a few are involved? Rather, he's arguing that the idea that everyone can get rich from the Stock Market is a mostly a myth.

Of course that's a myth. The problem is, it's the author that's floating the myth (and you repeating it). The idea of the stock market ISN'T to 'get rich' nor is it a guarantee of 'a better life' and it most certainly isn't 'get rich quick'. The goal is long term perseverance of the value of your savings. Getting rich off your returns is nice, but value preservation is more realistic.

The big returns are not enjoyed by most investors and recent scandals have wiped out the modest returns for many.

*sigh.* This has been rehashed again and again. People who don't put all their eggs into one basket (IE: most investors who DIVERSIFY) don't get wiped out when ONE of the companies they invested in goes through a scandal. I just don't know how anything gets more basic common sense 101 than this, but people keep insisting on trying to deride the idea of investing, based on the fact that some people let *everything* ride on lucky number 7, then wonder why they lost.

But the idea that everyone will get rich...

Completely false premise to begin with. The only people in it who kid themselves that they will get rich overnight are Play Traders, the types that watch daily ups and downs and don�t have a clue about using the market long term.

As for the average return of 11%, that is an aggregate number. In that are the people who get 30% and the people who get -30%. Its not like a savings account.

Actually a portfolio is a savings account. And anyone with a long term return of -30 ??? Personally I'd like to know how that was even possible over the course of the last 15 years unless some idiot was just ringing up a tab on margin with blind picks on absolute dogs.

What the heck is the wretched return on a bank savings account anyway? 1 or 2%? Inflation alone will absolutely ANNILIATE that. Anyone who thinks their piddly bank savings account is going to do it for them, is in for a rude awakening someday. My sympathies for those headed for that wake up call. 40 years from now: �What? The average house now cost more than what I earned my entire work life, and to eat lunch cost $97.50??!! How did that happen?!!??� Inflation grandpa.

The author is arguing that the risks are under-appreciated by average investors who are not only subject to the vagaries of the market, but the avarice of those who run it.

I'm not quite sure who it is that's supposed to be 'running' the market, but the fact that it's a risk is even MORE reason to reward people tax wise who put their money at risk in order to invest.
.

[thunderous_funker]

So we all agree that the "everyone gets rich" idea is myth. The question seems to be whether or not anyone actually believed that. I think the author is correct to suggest that was a prevalent myth in the mid to late 90's and is reminding people that it is just a myth.

If people suggest that the myth wasn't prevalent in the 90's then I guess we'd just have to say we disagree. I know far too many people who believed it. Especially in the tech industry. Hell, when I worked for AOL that is the only thing you ever heard from managment--"Keep plugging away and we'll all get rich."

I also take issue with those who dismiss the threat of getting wiped out as relatively minor. Of course diversity is the best practice, but the author is talking about precisely the fact that because people are relying on "professionals" to do their thinking for them, they are at risk. Thousands of pensioners really did get wiped out. This actually happened. It isn't an urban legend. Did they have sound investment strategies? No. Why? Because they had faith that someone was managing their pension wisely when that wasn't the case.

2 kinds of people get wiped out: those who don't know what they're doing and those who get screwed by following the bad advice of someone who is supposed to know that they are doing. The former has always been the case, as many of you pointed out. The latter, however, is the lesson of the 90's that few seem to have learned.

We're not talking about Freddy Five Fingers Boiler Room Associates. We're talking about the largest, richest and most powerful firms in the industry that literally robbed people blind by pursuing self-interested practices that exposed their trusting clients to horrendous losses.

So I read the author as saying:

1) the "get rich quick" myth really is a myth, don't forget
2) people who thought they were protected were not because their trust was misplaced
3) the systemic problems that allowed these wall street bandits to conduct themselves so badly are not only still there, but none of the criminals are getting held to account for it

4) Buyer be ware. see above

I don't read the author as saying the stock market is a sham or that no one should invest.

[nonhuman]

Originally posted by BRussell:
Eh, anyone wanna place bets that there will be absolutely no attempt to even pretend to cover the revenue shortfall that even more tax cuts will produce?

We're renewing the space program. That aught to help...

[BRussell]

Hmm, I have to say I think you can get rich by investing in the stock market. Not quick, of course, but rich.

Crash, 10% long-term return is a helluva lot better than simply beating inflation. And if you sock it away in a retirement account regularly, you're benefiting from compounding and dollar-cost-averaging, you're getting completely tax free gains, and you're reducing your taxes because retirement accounts reduce your income pre-tax.

Sure, if you trust some advisor to invest your money rather than just sticking it in a no-fee or low-fee index fund, then you can get screwed by their shenanigans. But you don't have to do that unless you're forced to by your retirement plan.

[vmarks]

Originally posted by BRussell:

Sure, if you trust some advisor to invest your money rather than just sticking it in a no-fee or low-fee index fund, then you can get screwed by their shenanigans. But you don't have to do that unless you're forced to by your retirement plan.

First question to ask any advisor who wants to sell you his services?

How do you make money?

Second question?

How do you make more money than that?

Why ask these? Because you want to keep your money, and giving it to him isn't working towards that aim. This isn't to say that all advisors and brokers are worthless, just that you have to make certain that you understand who they're really working for- themselves.

[CRASH HARDDRIVE]

Originally posted by BRussell:

Crash, 10% long-term return is a helluva lot better than simply beating inflation.

True, but I was referring to the piddly interest rate on a standard bank savings account.

Sure, if you trust some advisor to invest your money rather than just sticking it in a no-fee or low-fee index fund, then you can get screwed by their shenanigans. But you don't have to do that unless you're forced to by your retirement plan.

Personally I don't really like the idea of being beholden to some rotten M-Fund manager either. But an Index fund is still a mutual fund, it�s just set on 'autopilot' with the performance tied to one of the major indexes like the S & P. So all the risks of the stock market are still inherent in it. Still, I'd choose an Index over a managed MF.

[Krusty]

This thread seems to have veered off of the primary point -- that Bush and Co. have DRAMATICALLY tipped the balance of tax revenues toward money earned from WORK and dramatically away from capital gains, inheritance, and dividends.

Should and could more people invest ? Absolutely. But, IMHO, there is drastic problem when a person who makes 40k/yr thru WORK pays a 32.65% marginal rate (and approximately 27.5% overall rate)* while 40k made thru means other than work pay only 15%. Shouldn't "free" money be taxed at rates at least comparable to money earned thru work?
The point of the article is correct. The current tax structure rewards having-money-already far more than actually working for it.



*tax rate + required payroll taxes of 6.20% for FICA and 1.45% for MediCare which are not graduated and only apply to earned wages.


-------------

side note: vmarks, your 3k/yr saving scenario looks great on paper -- 920k by age 60 !! I verified your numbers through a financial application I have. Now ... take the average inflation rate for the last 35 years and that 920k will be equivalent to 172k in 2004 dollars by the time it is taken out. Nothing to sneeze at, but definitely not enough for a secure retirement. Also, you used 10% based on 28k (about 13.50/hr) to get 3k/yr. The median household income in the US is 52k for families and 25.9k for individuals. So your scenario is not viable for over half the population. The >50% of workers who make less than 28k will have to allocate more than 10% to hit an absolute 3k -- and these are the same people who are far MORE likely to not have health care or 401ks thru their work, thus decreasing even further the ability to set aside > 10% regularly to acheive the (completely inadequate) 172k by retirement.

[thunderous_funker]

[CRASH HARDDRIVE]

So your scenario is not viable for over half the population. The >50% of workers who make less than 28k will have to allocate more than 10% to hit an absolute 3k -- and these are the same people who are far MORE likely to not have health care or 401ks thru their work, thus decreasing even further the ability to set aside > 10% regularly to acheive the (completely inadequate) 172k by retirement.

So your �solution� is to label their savings as �free money�, complain how they didn�t �work� for it, and after a lifetime of working and paying taxes at their own current rates and struggling to save, hit them AGAIN with a full current rate on their (by your own estimation inadequate) savings and take that much more out of their pockets to dump down some government black hole??? In the name of �fairness� with those who have their own chance to save what they can while they are working and paying taxes (only to be vilified and hit again at outrageous current rates by the class-envy crowd of the future I guess).

[thunderous_funker]

Originally posted by CRASH HARDDRIVE:
So your �solution� is to label their savings as �free money�, complain how they didn�t �work� for it, and after a lifetime of working and paying taxes at their own current rates and struggling to save, hit them AGAIN with a full current rate on their (by your own estimation inadequate) savings and take that much more out of their pockets to dump down some government black hole??? In the name of �fairness� with those who have their own chance to save what they can while they are working and paying taxes (only to be vilified and hit again at outrageous current rates by the class-envy crowd of the future I guess).

All your schlock about "class envy" goes out the window as soon as tax rates on investment are comparable to tax rates on wages.

What breeds "class envy" is the inequity that rewards one and punishes the other.

[CRASH HARDDRIVE]

Originally posted by thunderous_funker:
All your schlock about "class envy" goes out the window as soon as tax rates on investment are comparable to tax rates on wages.

What breeds "class envy" is the inequity that rewards one and punishes the other.

It's interesting that you admit tax rates are punitive.

So again, your 'solution' is to bring the punishment of higher taxes to the savings of people (IE: what an investment is) rather than seek to lower current taxes on wages to less punishing rates?

How is pretending that there's some big 'Us vs. Then' battle between people who earn/earned wages and pay/paid taxes as well as invest, vs. those who just earn wages and pay taxes yet don�t invest, not class envy?

How is trying to characterize what people have saved long and hard to realize some level of (hopefully not taxed out of existence) financial reward as �free money� not a typical class-envy tactic?

[thunderous_funker]

Originally posted by CRASH HARDDRIVE:
It's interesting that you admit tax rates are punitive.

So again, your 'solution' is to bring the punishment of higher taxes to the savings of people (IE: what an investment is) rather than seek to lower current taxes on wages to less punishing rates?

How is pretending that there's some big 'Us vs. Then' battle between people who earn/earned wages and pay/paid taxes as well as invest, vs. those who just earn wages and pay taxes yet don�t invest, not class envy?

How is trying to characterize what people have saved long and hard to realize some level of (hopefully not taxed out of existence) financial reward as �free money� not a typical class-envy tactic?

I didn't say raise taxes. I said "class envy" stems from inequitable taxation.

I'd be happy if taxes on labor were lowered to the level of taxes on capital. Wouldn't you?

You also seem to be under the impression that not investing is some sort of character flaw. It isn't. People at a subsistance level don't have the luxory of setting aside 10-15% of their income. Nor is there strong evidence that such pathetic levels of investment would yield particularly attractive gains. They might as well put it in a savings account. But again, if they had it to spare they probably would do that anyway so we're back to square one.

So we have a system that systematically punishes labor and rewards capital, but anyone who complains about such inequity is guilty of class warfare. That's a blatantly one-sided view.

[BlackGriffen]

Originally posted by CRASH HARDDRIVE:
So again, your 'solution' is to bring the punishment of higher taxes to the savings of people (IE: what an investment is) rather than seek to lower current taxes on wages to less punishing rates?

Because, Einstein, somebody has to foot the bill. It might as well be the people who can afford to.

So your �solution� is to label their savings as �free money�,[...]

Nice mischaracterization, there. Try again: we label the interest free money and tax that. I'll grant that the money isn't totally free, the person lending it has to "forego his/her own enjoyment of it." The fact, though, is that the investor doesn't really have less during this whole process - the debt is a salable/tradable asset. This whole time, the person is free to continue to earn money by working. Thus, those who didn't have access to capital from, say, inheritance are at a disadvantage in terms of earning power.

That's fine, though, it's essentially a fact of life. Income from capital (note that this is the interest and not the capital itself), though, should not be taxed less than income from from work.

Now, I admit that I am actually flexible on this. It depends on what the economy needs, though: if the economy needs more spending/trade, then the tax structure should reduce the burden on those most likely to spend/trade their money; if the economy needs more investment, then the tax burden on those most likely to invest should be reduced.

It doesn't fit in to a sound bite simplistic world view, though, so most only ascribe to one or the other as the end all be all solution.

BlackGriffen

[CRASH HARDDRIVE]

Originally posted by thunderous_funker:

I'd be happy if taxes on labor were lowered to the level of taxes on capital. Wouldn't you?

If that's your position, then yes, we're in total agreement. Forgive me for assuming you were making the usual class-envy argument such as, oh, I dunno, pulling a phrase out of the ether here:

"Because, Einstein, somebody has to foot the bill. It might as well be the people who can afford to."

You also seem to be under the impression that not investing is some sort of character flaw. It isn't. People at a subsistance level don't have the luxory of setting aside 10-15% of their income.

As has been shown by lower income people that buy $200 pairs of sneakers and $6,000 flat screen TVs (to name but a few examples), people do have expendable money that could be invested. I've seen first hand how small amounts of money can turn into large chunks of capital over time if invested, and anyone can do it. The excuses don't fly with those that have seen how things work first hand.

No, not investing isn't a character flaw, I've never said it was. As I stated people can do what they want with their money. But the flip side of that is, don't bitch piss and moan for more tax dollars from people who have invested when you haven't. The benefits of investing (which contrary to popular myth DOES require much sacrifice in doing without so that one can set portions of their income aside) is not to be reaped by everyone who later wants to whine even though they didn't do the same thing. Not directly, nor through some Federal redistribution in the guise of making anything 'fair'. It's to be reaped by those that made the sacrifices necessary to EARN with that money in the first place.

Nor is there strong evidence that such pathetic levels of investment would yield particularly attractive gains. They might as well put it in a savings account. But again, if they had it to spare they probably would do that anyway so we're back to square one.

All I can say is, people that want to fall back on 'might as well put it into a savings account': don't come running to everyone who had better financial sense than that once you learn the hard lessons of time and inflation. If that's a person's tack, so be it, but don't blame society for the wretched outcome.

I notice there's always an attempt to put a hopeless spin on everything by some. Take Krusty's example, whereby a person ends up with $172k. (First of all, I think his figuring is flawed, because he seems to base it in a perpetual 2004, and on the assumption a person will never rise above a certain 2004 income level).

Even if one were to end up with only $172k at retirement after such an investment track record (which I believe is likely to yield far more), that's money that could be used to buy a decent property, and said property used as a rental to provide retirement income. Are you going to be having lunch down at the club with Joe Moneybags everyday? Probably not. But then, as has been pointed out, the purpose of investing isn't 'get rich' the purpose is preserving the value of your savings. Enough to afford yourself some modest property and income is a lot better than nothing, and then whining for someone else's tax dollars to float you.

So we have a system that systematically punishes labor and rewards capital, but anyone who complains about such inequity is guilty of class warfare. That's a blatantly one-sided view.

Again, if your take is 'then let's also reward labor with lower tax rates' I'm all for it and we're in complete agreement. Capital deserves to be rewarded, and encouraged, and so does labor. If the tack (which so many lazy people have) is: "let's punish capital too because I've deemed they can afford it" and try to make things 'fair' by spreading 'punishment' then that's falling back on the old class-envy standby, and I stand by the charge that that�s exactly what it is.

[thunderous_funker]

I guess for your argument to hold water you've got to show some statistics on exactly how many people living at or below the poverty level have $200 shoes and $6000 TVs.

edit: Or at least show that the people who aren't investing have such irrational luxory spending.

[itai195]

Originally posted by thunderous_funker:
I guess for your argument to hold water you've got to show some statistics on exactly how many people living at or below the poverty level have $200 shoes and $6000 TVs.

People in this situation probably aren't even spending their income, they're taking on debt. That's just compounding the problem though -- someone making $28k/year probably doesn't have enough income to invest regardless of their debt load.

[BlackGriffen]

Originally posted by CRASH HARDDRIVE:
If that's your position, then yes, we're in total agreement. Forgive me for assuming you were making the usual class-envy argument such as, oh, I dunno, pulling a phrase out of the ether here:

"Because, Einstein, somebody has to foot the bill. It might as well be the people who can afford to."

Damnit, where's the finger smiley?

You didn't even bother to read the rest of my post, did you? I see the idiot repellant at the top worked.

BlackGriffen

[finboy]

Originally posted by thunderous_funker:
I'm happy at least some people get it.

Thanks for the link.

I'm still looking for those folks who "get it." Evidently, there are quite a few more who don't, if this kind of stuff "strikes a chord in the heartland." Just say "baaaaah."

[finboy]

Originally posted by thunderous_funker:
I guess for your argument to hold water you've got to show some statistics on exactly how many people living at or below the poverty level have $200 shoes and $6000 TVs.

edit: Or at least show that the people who aren't investing have such irrational luxory spending.

It's amazing that folks can be so out of touch with those at the low end of the income scale. If you're around them all the time, and have friends and family in the category, you know it to be true. It's not so much an abuse of "the system" as it is a reliance upon the supposed safety net of wealth transfer, or a belief that nothing better is to be expected, instilled by the politics and media of patronage and favor-trading. We have, without question, the wealthiest poor folks in the history of mankind. Does that mean they need to be poorer? No, but it also doesn't lead one to conclude that my child has to starve so theirs eat better.

[thunderous_funker]

Another who argues that the people who aren't investing are simply of guilty of stupidity or irrational luxory spending.

Either of you care to back that up with some facts?

[The Mick]

To me, the only real solution is a flat tax for all types of income or revenue across the board. That helps to eliminate these feelings of class-envy and the irrefutable fact that we have a pretty bad tax inequity problem.

I still enjoy invoking the fact that Russia switched to a flat tax model and actually increased government revenue while making it unnecessary for the majority of Russians to file a tax return. GW Bush hailed the changes during a visit to the US by President Putin, saying, "We both proudly stand here as tax reformers." He wishes. Russians have a flat 13% tax rate and corporate taxes are a flat 24%, both significantly lower than in the USA.

As far as the ability to invest goes, you sure make it sound easy, Crash, and I wish it were so. I'm sure there are al lot of people who have very modest incomes who wear new Air Jordans, drive Audis, and listen to iPods. However, for each one of them, there's a guy like me; a single income household with an infant who is wearing the same $35 "dress shoes" from JC Penny that I bought when I started my current job nearly 3 years ago. I drive a base model Corolla, and my wife has a used base model Honda Accord. Ain't got no iPod, ain't got no Tivo, ain't got no plasma TV. You really expect me to find 10% to set aside when I already lose nearly 50% of my income to payroll taxes, FICA, Medicare, state income tax, property tax and sales tax? Get real.

[thunderous_funker]

Originally posted by The Mick:
As far as the ability to invest goes, you sure make it sound easy, Crash, and I wish it were so. I'm sure there are al lot of people who have very modest incomes who wear new Air Jordans, drive Audis, and listen to iPods. However, for each one of them, there's a guy like me; a single income household with an infant who is wearing the same $35 "dress shoes" from JC Penny that I bought when I started my current job nearly 3 years ago. I drive a base model Corolla, and my wife has a used base model Honda Accord. Ain't got no iPod, ain't got no Tivo, ain't got no plasma TV. You really expect me to find 10% to set aside when I already lose nearly 50% of my income to payroll taxes, FICA, Medicare, state income tax, property tax and sales tax? Get real.

Not to mention cost of living issues. Which, incidently, is my biggest complaint of a flat-tax proposal. As soon as you start calculating cost of living you get into the grey area.

Obviously we could simplify the existing code tremendously, but I don't think the simple flat-tax is quite the fix-all that it might seem.

[BlackGriffen]

Originally posted by thunderous_funker:


Not to mention cost of living issues. Which, incidently, is my biggest complaint of a flat-tax proposal. As soon as you start calculating cost of living you get into the grey area.

Obviously we could simplify the existing code tremendously, but I don't think the simple flat-tax is quite the fix-all that it might seem.

Especially given what I mentioned above: if the economy needs more investment, reduce the tax burden on investors (via capital gains and whatnot); if the economy needs more trade, reduce the tax burden on those most likely to trade.

It isn't that hard a concept to grasp.

BlackGriffen

[CRASH HARDDRIVE]

Originally posted by The Mick:
As far as the ability to invest goes, you sure make it sound easy, Crash, and I wish it were so.

I never said it was easy. It requires sacrifice. Exactly why the dividends aren't 'Free Money' as some of your cohorts would gleefully label it so they could fleece you after you did manage to scrimp and save enough to invest, and managed to get some benefit from it.

Seems to me you're taking aim at the wrong side, I�m not the one who seems to think all of this is so 'easy' and that the rewards are all 'free' and therefore should be subject to punitive taxation.

I drive a base model Corolla, and my wife has a used base model Honda Accord. Ain't got no iPod, ain't got no Tivo, ain't got no plasma TV.

My grandfather didn't even own a car, worked during a great depression at a time when 30 cents an hour was an actual wage -if one could even find a job- lived through a world war that drafted him, and still managed to end up with money to invest. How did his generation do it? ThehellifIknow. I'm not trying to belittle your situation, but a 2 car family minus a few luxury items isn't the worst anyone has ever had to muddle through.

You really expect me to find 10% to set aside when I already lose nearly 50% of my income to payroll taxes, FICA, Medicare, state income tax, property tax and sales tax? Get real.

Personally, I don't expect you to do anything. Once again, seems like you're aiming in the wrong direction. If it were up to me, your tax burden would be a lot less than 50%. I'm all in favor of the flat tax, with a graduated lower end. But it's not up to me. And lo and behold, it isn't my side of the aisle that would be screaming bloody murder and acting like the world just came to and end if anyone ever tried lowering your taxes significantly.

Sounds to me like your beef is with the government that docks 50% of your pay (and the cheerleaders that have snookered folks into believing they mean someone ELSE has been labeled as 'rich' when they cheerlead for the govt. to soak you even more.) So by all means, take aim at the government that docks your pay, and those whose cheerleading emboldened them to do so in the first place. I'm right there with you- it's ridiculous that working people pay so much of their income in taxes. It's not of my making, nor encouraging.

[BlackGriffen]

Originally posted by CRASH HARDDRIVE:
I never said it was easy. It requires sacrifice. Exactly why the dividends aren't 'Free Money' as some of your cohorts would gleefully label it so they could fleece you after you did manage to scrimp and save enough to invest, and managed to get some benefit from it.

Seems to me you're taking aim at the wrong side, I�m not the one who seems to think all of this is so 'easy' and that the rewards are all 'free' and therefore should be subject to punitive taxation.

Turning off your brain is like hitting a light switch. *flick*

BG

[Krusty]

Originally posted by BlackGriffen:
Especially given what I mentioned above: if the economy needs more investment, reduce the tax burden on investors (via capital gains and whatnot); if the economy needs more trade, reduce the tax burden on those most likely to trade.

It isn't that hard a concept to grasp.

BlackGriffen

The "concept" isn't what's hard, its actually getting the desired results from the investing/trading class. I think that 50 years ago, reducing the tax burden on investors/traders typically resulted in good things for the economy (new investment/more jobs). Nowadays, its not necessarily so. We are currently seeing how this is playing out in a post-NAFTA, global economy. Stock market is up, employment in the US stays bleak and real wages have fallen. Problem is, investors/traders are going to invest in their own self-interest , NOT in the interest of the US economy as a whole. So we are seeing the typical increase in investment since the tax cuts: we're just seeing it being invested outside the US. When we see profitable companies hiring 2500 people, its very often been 3000 in India and -500 in the US.

What you're are describing is just regular 'ole supply-side economics: "Give more money to a tiny investing class and they will do good things for the US economy." Unfortunately they're not doing that this time. Its more lucrative for them to invest outside the US (via outsourcing), so that's what they are doing. Personally, I favor "demand side" or "consumer side" economics -- a little more money in the hands of hundreds of millions of American workers is FAR more likely to have a huge domestic impact than a lot more money in the hands of the small capitalist/investing class that may not spend a dime of that extra dough in the US.

[CRASH HARDDRIVE]

Originally posted by BlackGriffen:
Turning off your brain is like hitting a light switch. *flick*

BG

That explains a LOT of your posts. Thanks for clarifying.

A word of advice: keep it on more BG.

[BlackGriffen]

Originally posted by CRASH HARDDRIVE:
That explains a LOT of your posts. Thanks for clarifying.

A word of advice: keep it on more BG.

Ah, crash, I apologize for getting too conversational. I won't make that mistake again.

Now, do I turn off your brain again, or is it worth having to scroll past your mouth-foaming rants? Decisions, decisions....

BlackGriffen

[The Mick]

Originally posted by CRASH HARDDRIVE:
I never said it was easy. It requires sacrifice. Exactly why the dividends aren't 'Free Money' as some of your cohorts would gleefully label it so they could fleece you after you did manage to scrimp and save enough to invest, and managed to get some benefit from it.

Seems to me you're taking aim at the wrong side, I�m not the one who seems to think all of this is so 'easy' and that the rewards are all 'free' and therefore should be subject to punitive taxation.


My grandfather didn't even own a car, worked during a great depression at a time when 30 cents an hour was an actual wage -if one could even find a job- lived through a world war that drafted him, and still managed to end up with money to invest. How did his generation do it? ThehellifIknow. I'm not trying to belittle your situation, but a 2 car family minus a few luxury items isn't the worst anyone has ever had to muddle through.




Personally, I don't expect you to do anything. Once again, seems like you're aiming in the wrong direction. If it were up to me, your tax burden would be a lot less than 50%. I'm all in favor of the flat tax, with a graduated lower end. But it's not up to me. And lo and behold, it isn't my side of the aisle that would be screaming bloody murder and acting like the world just came to and end if anyone ever tried lowering your taxes significantly.

Sounds to me like your beef is with the government that docks 50% of your pay (and the cheerleaders that have snookered folks into believing they mean someone ELSE has been labeled as 'rich' when they cheerlead for the govt. to soak you even more.) So by all means, take aim at the government that docks your pay, and those whose cheerleading emboldened them to do so in the first place. I'm right there with you- it's ridiculous that working people pay so much of their income in taxes. It's not of my making, nor encouraging.

All true, and I wasn't trying to lay the blame upon you, sorry if I rubbed you the wrong way. It just irritates me when people get presumptuous about others' spending habits. I'm no pauper by any stretch, but I'd sure like to be able to invest 10% of my income. Given the current economic situations and the average citizen's tax burden, it seems to be getting harder and harder.

[The Mick]

Originally posted by thunderous_funker:
Not to mention cost of living issues. Which, incidently, is my biggest complaint of a flat-tax proposal. As soon as you start calculating cost of living you get into the grey area.

Obviously we could simplify the existing code tremendously, but I don't think the simple flat-tax is quite the fix-all that it might seem.

Obviously I'm no taxation expert, but where does the government calculating the cost of living come into play regarding a flat tax rate?

[Earth Mk. II]

Originally posted by The Mick:

Obviously I'm no taxation expert, but where does the government calculating the cost of living come into play regarding a flat tax rate?

I would imagine (I'm no expert either, just a lowly CS major taking a guess at what one's argument might be) that a model illustrating how cost of living would be a factor regarding a flat-tax would look something like this:

Take 2 imaginary people. All things are equal between them, but one makes approximately $20,000 a year and the other $100,000 a year. They live in an apartment that has a rent of $100/mo. and taxes are 30%, regardless of income. (values were chosen on a purely arbitrary basis for ease of computation. Has no basis on the real world)

Person 1:
salary: $20,000
taxes: ($20,000 * .3) = ($6,000)
rent: ($100 * 12) = ($1,200)
total: $12,800

Person 2:
salary: $100,000
taxes: ($100,000 * .3) = ($30,000)
rent: ($100 * 12) = ($1,200)
total: $68,800

Now, this model is far from perfect. Obviously, it's in no way directly related to the world, since people have more necessary expenses than just taxes and rent. Which is fine, because I'm not trying to prove a point here, but take a guess at the reasons for another's post.

The cost of living, which I'll say is equivalent to the cost of rent for this example, is $1,200 for both persons. But, after taxes, is roughly 8.6% of Person 1's income yet only 1.7% of Person 2's income. Add more to the cost of living and the percentage of Person 1's income which it represents will grow at a higher rate than Person 2's will. This would erode the amount of income available for Person 1 to invest (as a percentage) at a higher rate than the available income for Person 2 to invest.

So, I can see how low-income households could be a concern when considering a flat-tax plan. At least, that's my take on it.

[thunderous_funker]

Originally posted by Krusty:
The "concept" isn't what's hard, its actually getting the desired results from the investing/trading class. I think that 50 years ago, reducing the tax burden on investors/traders typically resulted in good things for the economy (new investment/more jobs). Nowadays, its not necessarily so. We are currently seeing how this is playing out in a post-NAFTA, global economy. Stock market is up, employment in the US stays bleak and real wages have fallen. Problem is, investors/traders are going to invest in their own self-interest , NOT in the interest of the US economy as a whole. So we are seeing the typical increase in investment since the tax cuts: we're just seeing it being invested outside the US. When we see profitable companies hiring 2500 people, its very often been 3000 in India and -500 in the US.

What you're are describing is just regular 'ole supply-side economics: "Give more money to a tiny investing class and they will do good things for the US economy." Unfortunately they're not doing that this time. Its more lucrative for them to invest outside the US (via outsourcing), so that's what they are doing. Personally, I favor "demand side" or "consumer side" economics -- a little more money in the hands of hundreds of millions of American workers is FAR more likely to have a huge domestic impact than a lot more money in the hands of the small capitalist/investing class that may not spend a dime of that extra dough in the US.

:clapping:

[The Mick]

Originally posted by Earth Mk. II:
I would imagine (I'm no expert either, just a lowly CS major taking a guess at what one's argument might be) that a model illustrating how cost of living would be a factor regarding a flat-tax would look something like this:

Take 2 imaginary people. All things are equal between them, but one makes approximately $20,000 a year and the other $100,000 a year. They live in an apartment that has a rent of $100/mo. and taxes are 30%, regardless of income. (values were chosen on a purely arbitrary basis for ease of computation. Has no basis on the real world)

Person 1:
salary: $20,000
taxes: ($20,000 * .3) = ($6,000)
rent: ($100 * 12) = ($1,200)
total: $12,800

Person 2:
salary: $100,000
taxes: ($100,000 * .3) = ($30,000)
rent: ($100 * 12) = ($1,200)
total: $68,800

Now, this model is far from perfect. Obviously, it's in no way directly related to the world, since people have more necessary expenses than just taxes and rent. Which is fine, because I'm not trying to prove a point here, but take a guess at the reasons for another's post.

The cost of living, which I'll say is equivalent to the cost of rent for this example, is $1,200 for both persons. But, after taxes, is roughly 8.6% of Person 1's income yet only 1.7% of Person 2's income. Add more to the cost of living and the percentage of Person 1's income which it represents will grow at a higher rate than Person 2's will. This would erode the amount of income available for Person 1 to invest (as a percentage) at a higher rate than the available income for Person 2 to invest.

So, I can see how low-income households could be a concern when considering a flat-tax plan. At least, that's my take on it.

We do not live in a classless system, but your example leads me to think that opponents of a flat tax want the government to adjust tax rates to close the gap between the classes. Sounds like communism to me. A flat tax is the only real fair and equitable solution. Person 2 earns 5 times the money as Person 1, and he pays 5 times the taxes. It is not the responsibility of the government to regulate the impact of a $200 rent increase by manipulating tax rates. If Person 1 cannot afford the increase, he should move to a less expensive apartment, or work harder to earn a raise. Crying to the IRS should never enter the picture. I know many flat tax proposals would raise the tax rates on low income groups, but I say that's the price you pay to live free in the USA, and with a flat tax, that price is the same for everyone (percentage-wise).

[thunderous_funker]

Originally posted by The Mick:
We do not live in a classless system, but your example leads me to think that opponents of a flat tax want the government to adjust tax rates to close the gap between the classes. Sounds like communism to me. A flat tax is the only real fair and equitable solution. Person 2 earns 5 times the money as Person 1, and he pays 5 times the taxes. It is not the responsibility of the government to regulate the impact of a $200 rent increase by manipulating tax rates. If Person 1 cannot afford the increase, he should move to a less expensive apartment, or work harder to earn a raise. Crying to the IRS should never enter the picture. I know many flat tax proposals would raise the tax rates on low income groups, but I say that's the price you pay to live free in the USA, and with a flat tax, that price is the same for everyone (percentage-wise).

That is utterly laughable.

A tax code that ignores the difference between earning $30K in Los Angeles and $30K in Witchita would be catastrophic.