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YouTube - Confessions of an Economic Hit Man - Part I
Interesting interview: Confessions of an Economic Hit Man |
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Excellent post, flere-imsaho. It's good to read a post that rejects the rationalised self-interest that is corrupting so much economic debate currently. I almost considered excluding my signature :rolleyes: |
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Couple of thoughts on a couple of Obama's proposals that directly affect me.
1) I'm one of those families that may actually cut back on work to improve my financial position. Depending on the details that are passed in a bill, our accountant has advised that we may need to cut my wife's salary back to a certain level. I don't know the specifics, but that's all kinds of wacky that lowering your salary could be a benefit at any income level. It seems awfully counter-productive. 2) With the housing market as it currently is, do we really think that getting rid of some mortgage income deductions for the higher income taxpayers is a good idea? Giving less incentive for property ownership for the people who can afford to boost this market doesn't seem like a very good idea IMO. |
I'd really quiz your accountant. There's very little likelihood that reducing gross income will result in greater net income. It may be possible, but tax brackets only apply to income above a set level, not the total income.
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Understood. I just threw it out there because I was surprised to even hear this kind of thing. I think the reason for cutting back would be certain deductions would only be allowed for people who make less than $XXX,XXX. And it certainly should be noted that the proposals by Obama will likely differ significantly from what eventually is passed through Congress. |
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BINGO!! the accountant is either spun or an idiot. |
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Even considering deductions, it seems unlikely. Whatever passes will probably have a scale based on income. I doubt that it will be 100% at 249,999 and 0% at 250,000. |
yup...how stupid. Typical.
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Agreed. I just thought I'd ask about it because I wasn't certain if anyone had heard something different. |
The more I think about it the more I'd recommend getting a new accountant. Nothing has been passed or even brought to the floor. There's no possibility of knowing exactly what the final bill will mean as regards to your personal finances. Giving you advice now on lowering your gross income is completely irresponsible.
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Oh I didnt realize your post above was a question...lemme see if I can find a question mark in it or if it was posed as a question or being passed as some semblance of knowledgable information sharing to paint the upcoming budget as somewhat challenging to you and your familiy's drive to increase your income. nope. |
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Trust me, I'm not lowering anything without a final bill. It was something mentioned as a possibility. It goes without saying that I'd prefer to continue to maximize my income. |
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What's your motivation? After all, the government is just going to take more and more of your money as you make more.... :devil: |
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Thanks. File that under the same file as the e-mail stating that every citizen would get $200K if the gov't distributed the stimulus money equally. |
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But on the other hand, the expansion of gov't by the same administration who increases my taxes further ensures my job will be here for some time. What's a man to do? :) |
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You obviously have more faith in the current crop in DC than a lot of people do. |
I typed out a lot and deleted it all because countering MBBF's question is such a waste of time I find it silly beyond almost anything. He knows exactly what he means at all times. At least Jon is funny.
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You give me FAR too much credit. I was being sincere and honestly didn't have any alternative motive. |
Im shocked. <-----feigned shock.
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At least he wasn't surprised by something this time.
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:eek: |
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Thanks. I was going to say something along those lines. |
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It's just up to one's beliefs in all politics. You'll never change someone's mind, but it's good to discuss, argue, and kept those ideas flowing. |
Okay, time to fess up. Who were the 11 guys who voted for "No Recession"?
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Any changes to the AMT?
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I'm generally a peaceful guy, but this shit makes me want to get a torch and pitchfork, and probably another blood pressure pill.
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$1m*52 weeks=52 million/year $10m*52 weeks=520 million/year 350 million/100=3.5 million people $52million/year*3.5 million people = $182,000,000,000,000 $182 trillion/$15 trillion = the top 1% supposedly earning >12 times the US GDP Now that's basic mathematics. But at least we know where Obama is getting his figures to say taxing the top 1% will pay for everything. (For fun - 40 hours*52 weeks*$50,000 median income = $104 million/year if a person made the yearly median income every hour.) Quote:
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While it can be argued that its 'fair' to tax the top 1% heavier than others - its unrealistic for many reasons.
These people have huge amounts of cash - if they have taxes raised in one country they'll relocate to another, its not like they're a massive corporation and can't do this ... indeed the very money that Obama etc. are trying to get off them makes it extremely easy an practical for them to do so. Not only that but their wealth means other countries will welcome them with open arms because they're likely to invest and spend a higher proportion in the country they're based within. |
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My wife has a S Corp that she funnels her income through. Perhaps there is something there that I'm not understanding that could change. |
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Not sure if you are lumping this in...but this would also describe why I believe corporate tax rates being higher, in a world that can now support remote offices, etc. is the wrong approach. The US is now "competing", at some level, for corporations & rich people alike, to want to live and base here. I don't like the whole "rich people suckup" as a strategy for policy...but they are the one's who drive the economy. Not people like me who buy groceries and the occassional splurge on a TV(or some such purchase). |
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But there was no mass exodus of the wealthy during Clinton. Why would you expect that to happen now? For that matter we had plenty of rich folks in the fifties and sixties when the top rate was much higher. |
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How many exodus depends relationally with how many loop holes are available to allow them to dodge the tax. For instance you can put in a 40% upper bracket limit with no side effect if you allow the same people to open a limited company and then pay themselves via. dividends at a much lower rate (this is quite common place in England for instance if you look through companies house you'll find all Premiership footballers pretty much are paid this way simply because dividend payments are taxable only at a 20% rate). If you close off the loopholes then you WILL find people will exodus, maybe not visibly but enough to dodge paying tax ... no one likes giving away wadges of cash when they don't need to. (on the other hand if you're happy with just making gestures for the medias sake and leaving loopholes open then obviously it'll have no effect at all in reality apart from making accountants a little richer as people employ more of them to just through the hoops) |
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Seriously, someone you know is going to move elsewhere because their $250K+ per year is taxed at 5% (35% to 39.6%) more than it was before? Hell, in some cases, moving costs more than wipe out any tax gain you'd get. Oh, and did I mention that pretty much all of the 1st world has higher taxes than us currently. Most places in Europe hang around 40% while some go up to 60%. I don't see the rich moving to the Eastern Bloc, Middle East, or Africa to pay less taxes- it's just not going to happen as they can't get the standard of life they enjoy currently. And I suspect they don't have the crazy level of deductions that we allow here, as almost all of these countries are more heavily regulated so a good tax lawyer gets you paying a lot less here in the US. So, please, let's stop this meme of "they'll go elsewhere" because it's a load of crap. SI |
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I fail to see how the rich drive the economy we currently enjoy. No, that's glib. But, I fail to see how they drive it more than the middle class, considering what an extreme consumer-based economy we have. Once you get beyond a certain level of living, you can't consume any more. Considering you have 99 "poorer" people for every 1 rich person- how does letting them have money to buy 1 Rolls Royce help the economy more than 10 of those 99 having the money to buy a car from GM? Great, so they can buy a $5M home. Does that employ more people than 10 of those 99 buying a $150K home? $100 bottle of wine/$3 6-pack of coke? Expensive work of art/tv? $100 restaurant meal/Mickey-D's? Most of the money the rich have is tied up in assets like stock either for investment or owning corporations, funds, real estate (derivatives), etc- in short, investments. In a way those help the economy run, but clearly a lot of that is just vehicles of moving capital up the ladder, making the rich richer and the poor poorer- as we've seen very clearly in the last few months, robbing long term 401k's to make a quick buck, etc. How does that help the economy at all? Basically, the poorer you get, the more is spent locally on everyday needs on consumer goods. Now, if you want to argue whether a consumer-based economy is good, we've got a lot longer conversation. But the fact remains that the further away you get from everyday needs, in terms of income, the less is going to circulate, especially for the US. If you have just basic needs, they will mostly be met by US workers: gotta have locals to build your home/apartment, make your food, run your cable/electricity/water, build your car- American or American-made foreign car, etc. Put that together with some cheap electronics, furniture, and necessities like pots/pans/etc that are made in China and you have a basic living. As you go up the ladder towards more luxuries, you're talking about branching out to a lot more foreign sources. And you know what's good about capitalism, as a basic system: If you removed the top 1% right now, there'd be millions of people left, looking to take their place, making products, employing people, and selling products and become the new top 1%. So, let's not pretend the current rich we have now are the people who deign us to spend their money and give us jobs by their good graces. SI |
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You'll find some people will - simple as that, I know a LOT of people who have left England as their careers have progressed and for many a reduction in tax paid has been a factor in that. (I also know some people who have moved to the UK from higher taxed European countries for similar reasons) It should also be noted that the people involved aren't just 'tax payers' they also people who tend to drive the economy by starting companies etc. - hence their loss to a country is more than just the immediate personal tax contribution imho. So no I don't think its just 'crap' - but however I do also acknowledge that the effect is somewhat muted so long as countries retain the normal tax dodges (such as the one I mentioned that Premiership players use in the UK) available to the hugely weathy and instead just treat such rises as an attack on the middle class who are caught in the 'reasonably affluent' but not rich bracket. |
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my thoughts exactly |
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nailing it on the motherfucking head man! |
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Ok using an example of someone I've met personally - Ian Livingstone is a fairly affluent person and undoubtably pays a fair whack in income tax. Ian founded Games Workshop (bloodbowl, warhammer etc.), then invented the 'Fighting Fantasy' gamebooks (choose your own adventure etc), he then got involved Domark and when they were bought out became chairman of Eidos for ages (which is around the time I met him). Now I'm biased because he's a nice bloke and I've always admired the games he's had a hand in creating but .... I think its safe to say that the amount of income tax he paid was marginal in contrast to the effect on the economy of the jobs and companies he created. Thats whats generally meant by the importance of the higher paid individuals - they aren't thinking of high paid 'employees', most people in those brackets are involved in stimulating the economy by creating jobs etc. |
BTW if Oil already tested it's low anyone want to tell me what the $/barrel was? :)
on the other hand GE continues to get pounded relentlessly and IMO unwarranted (or grossly exaggerated). GE Capital while a large and exposed facet of the company I do not believe will cause it to get a ratings downgrade (although if the stock price drops far enough it will put more pressure on the company to raise capital - I cant believe Im saying this about GE) and while they have taken unnecessary risks I see this as an incredible value going forward. Im still scaling in for a $/avg that is much lower than I anticipated but I cant believe that it's dropped this much. Shocking and right in line with everything contra-flasch. |
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But if he doesn't have a large consumer base to buy his products his innovation doesn't matter. It's all about a balance between creators and consumers. |
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yeah I was just commenting last night that there are a lot of blue-chip names that have been oversold with very attractive valuations and I need to consider building positions in some of them for the very-longterm as well as considering my strategy for participating in the market upside - whether it's solely via index funds to capture the broad market upside, or whether I toss some sector-specific ETF's in there as well... |
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I agree there is a balance to be had between the two, but its often economic incentives which gives people the 'push' to create companies and thus jobs etc. Thats the arguement against having hugely onerous taxes (without loopholes) for rich people. Strangely this is also the 'standard' arguement against socialism - ie. if you pay everyone the same and limit incentives for people to go above and beyond you end up with very little stimulation of an economy or improvements. There are some interesting economic papers which have been written on capitalism being introduced to China incidentally which if you're interested in this sort of thing make fascinating reading (I've got a book at home in Florida which references a load of them - if anyones interested PM me and I'll forward the name etc. onward once I get back there in a few days time). |
I would agree, but our definition of onerous is very different. All of the Western European democracies have a wealthy class and the tax tax burden in some of those countries is significantly higher than the U.S. In the nineties the U.S. had a wealthy class and Obama plans to restore the top marginal rate to what is was under Clinton. There's no rational argument to be made for that tax change to cause a mass exodus of wealth from the U.S.
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Marc,
That won't happen in the US first one simple reason. The US taxes it citizens on their worldwide income, regardless or residency. I believe that the first certain amount is tax-free, but after that the US taxes it. The rich do tend to legally reside in tax-free states like Florida and Texas. In defense of Marc, the wealthy Europeans flock to places Monaco, Switzerland, and the UK (which only taxes foreigners on UK income only). Those countries have a very high level standard of living. I'm can see Marc's view, but it doesn't apply in the US. One thing about Obama's plan that could backfire is the AMT. Unless it's changed, won't it wipe out those "middle class" tax cuts down the line? |
I laugh at the threats of tax exodus, to be honest we would be better off without most of those morons in the country (especially if it means we could get some new corporate leadership that doesn't suck). SterlingIce pretty much described the basis of a real economy, I've played with numerous toy economies (it is my hobby) and studies... the U.S. is basically capital rich, it would take an apocalyptic event (not a tax hike) to really drive down investment necessary for basic functioning of the economy. In fact, the unregulated, untaxed corporate looting of the Bush era may be more responsible for the largest reduction of investment power we have seen in decades.... you are seeing productive capital being exploited and extorted away in this economy into places where it will not generate growth (such as speculation). The growth it does tend to encourage is not the best kind, such as increases in the use of leverage, or various bubblenomic situations (currently we are in a negative bubble, it is so easy to short and there is so much money doing it that it can drive prices below norm).
Anyhoo, in a capital rich environment economic growth is driven fastest by increases in average standard of living (more products consumed, increasing net revenues). If that is coupled with increasing efficiency (i.e. less waste per product) it creates the most sustainable growth... out of control subsidizing of production combined with inefficiency has a tendency to both run up the costs of debt and dealing with pollution (health care, cleanup, toxic accidents, decline in property values near pollution). The best balance, according to my random asshattery, is to have money flow in common sense patterns. That means allowing standard of living to go up through natural processes (technology, mass production, and efficiency) and not allowing exploitation of resources for the benefit of a few. It also means rewarding rich investors with gains from that increased overall standard of living... but that value remains there whether you tax it or not. The amount of tax you need to make a severe disincentive is pretty high... if you want to compete with the third world or second world (haha, never hear that one, I wonder what it means)... well you can't. They don't mind living like shit and they have the revolutions to prove it. You need structures that build economies, NOT ARISTOCRATS, that is the whole basis of American economic success. Unfortunately, most of our elites are too busy patting themselves on the back and corrupting things further to see they are killing the cow that keeps them fed as much as the rest of us. I personally want to be fricking super wealthy. I don't want to be taxed into oblivion when I get there, but I'm willing to pay taxes to live here in America, hire Americans, and do my business in America... not because of home team loyalty, but because we've got the best culture, technology, and prospects for innovative growth. I'll let the fatcats go exploit some third world country and laugh when their mansion gets overrun by a revolt, or their daughter gets kidnapped for ransom. Instead I'd rather be here at the center of creative activity in the world economy, making the businesses that will make me crazy rich, and make the products to make me feel crazy good (like flying cars dammit, and robot women... for uh doing laundry, ya thats the ticket). |
Oh forgot my whole original purpose. Liquidated my GE short (started at 12, hit my target at 6 and auto-executed at 6.17). Bit of a gamble, but I decided to reshuffle around my money to basically buy twice as many shares as I shorted originally. I'm figuring if the ten cent dividend holds up a 6% yield at 6.5 share price is not too bad.
My averaged out long price is 7.5. I am hoping the Contra-Flasch theorem does not screw me and GE reveals something like it bought a trillion dollars worth of credit default swaps. |
These threats of the wealthy abandoning ship are just as stupid as all the actors who stated they would move out of the country if Bush was re-elected in 2004. They just hung around and kept complaining.
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