Hope you didn't really want to be rich!

You didn't really want to get rich, did you?

We just received a long letter from our tax planner going over all of the Federal & State tax increases.  Some of the Federal increases are contingent upon what happens with the "Bush Tax Cuts".  Others, however,  mostly associated with ObamaCare,  are certain.   Then comes the Prop. 30 increases on the State level.  

I could go over all of these MASSIVE tax increases by number,  but I don't think many of us really pay all that much attention (as evidenced by the voting).   So let's suffice it to say this:

If you were kind of rich... you won't be much longer.

If you hoped to be rich....forget about it. 

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Chris Nicholson November 19, 2012 at 12:35 AM
@Karen: I was mainly thinking of Obamacare when I said "social programs," but there are others. Perhaps I should have focused on spending in general. Here's a breakdown: http://www.usgovernmentspending.com/year_spending_2013USbn_13bs1n_4047#usgs302 Obamacare alone will add $200B/year to this spending. Look, we don't let our poor starve in the U.S. (obesity is a bigger problem than starvation amongst our poor), and we are not going to balance the budget by cutting back on food stamps. My point is that, across the board, the Obama (and Moonbeam) plans call for increases in taxes on top earners only, making increased spending "free" at the margin for all others. The false choice presented is: cut backs or soak the rich. The real solution is cut spending and grow the economy--- and probably raise taxes for everyone.
Chris Nicholson November 19, 2012 at 12:37 AM
Or, stated differently, directed to the people who pay for >2/3 of everything....
Fritz 'Congodog' Stoop November 19, 2012 at 04:48 AM
I believe it is time to abolish the IRS and create a small bureaucracy that collects a flat 10% of gross earnings. The only deduction would be limited, by a percentage of your gross, charitable deductions. Good bye National debt, hello surplus. It is long past due. Hell, if we can revamp the Moraga Town Council, we can certainly be the "ji" of the creation of the 'Flat Tax" Just imagine the corruption and manipulation that would be sent packing. Where would the lobbyists go, the unemployment line? The IRS proper employs about 100,000. Figure in the related agencies and I'm sure it approaches 1M. The entire Federal Gov employs about 2.2M with about 800,000 of that going to the Military. The tax code is a beheman labyrinth so complex as to be incomprehensible and unenforceable. So dump it and all its manipulators and finaglers. Just budget in 10%. The Feds will have so much cash, they can underwrite the states on a prorata basis with plenty to spare. So, no more state income tax (for those that have it). Time to puncture this outrageous bubble and get simple. People that haul in $300,000 and whine about being 'poor' (or is that un-rich) had better manage a bit more closely. We're not complaining. Time for a little perspective folks. Even at those numbers, many, if not most, live beyond their means. Do Be Do Be Do.
c5 November 19, 2012 at 06:04 AM
the state of california voted to commit economic suicide imo...it will take a few years, but as always the revenues won't show up as planned as individuals and businesses modify their behavior to minimize the california income they report. some will leave altogether or expand in other states. this always happens, it is just legal human behavior. in my household we have already started changing behavior--we are eliminating any donations to california based education charities and generally lowering charitable contributions across the board. we are also decreasing asset exposure to this state. we can't offset all of the disastrous tax increase but will do what we can to mitigate as much of the impacts as possible. as for the discussion at the federal level, the talk of increasing the top tax rate is political rhetoric with no basis in economic fact. if you want to soak the rich (who as a percentage of overall taxes collected are currently paying the highest percentage they ever have), the dumbest way to do it is to raise the top rate...much smarter to limit or eliminate some deductions/credits to get rid of some of the complexity and inefficiency of the tax code. i fear that at the federal level we are going to try to cure most of our spending problem with tax increases, and badly designed ones at that...which will mimic the disaster that we have foisted on ourselves in calfornia. if we want a smart solution, just implement bowles/simpson as it stands.
Nice and Rough November 19, 2012 at 07:10 AM
Save our country. Stop the social security madness. Immediately cease all monthly social security giveaways. Immediately discontinue taxing workers and businesses. This massive welfare program must be stopped. It's little more than treason as it's going to cripple our country.
Chris Nicholson November 19, 2012 at 07:37 AM
No phase out period for grandma? That's a bit harsh.
Fritz 'Congodog' Stoop November 19, 2012 at 03:16 PM
Most folks have paid into SS as their only 'retirement' program. Limited by paltry wages due to captivity in a social strata cycle that keeps them poor and under-educated. Middle class folks like to smirk about the ease of pulling one's self up by your bootstraps. Well, it just is not that easy. So you say, Stop paying them! Then there is a transition to crime to avoid starvation. Most of the socio-economics referred to herein would like to believe the underclasses simply do not exist. Flash: They do.
Andrew L. November 19, 2012 at 03:47 PM
Well said. As long as our initiative system allows people to vote for others, but not themselves, to pay higher taxes, we'll be stuck on the crazy train.
Andrew L. November 19, 2012 at 03:48 PM
Can you or anyone else by the way tell me why "$250,000" suddenly became Obama's and every other Democratic politician's magic income threshold? Why not $100,000, why not $1,000,000?
Nice and Rough November 19, 2012 at 05:02 PM
CN - If grandma didn't budget for her retirement and her children won't help her then there is always welfare and food stamps. Social security was never meant to be a retirement fund. Harsh but reality.
Nice and Rough November 19, 2012 at 05:04 PM
Fritz - SS is not a retirement program and nobody paid into it. People paid payroll taxes. There is still welfare and food stamps to assist any elderly folks who didn't plan for retirement & those whose children won't help them. Families - not society - should be the safety net.
Chris Nicholson November 19, 2012 at 05:10 PM
N&R: whatever you call it, it is not nice to frustrate grandma's reasonable expectation that the SS check she got last month will show up next month. My view is that we should purge the fiction of SS as universal pension, get rid of payroll deduction and simply fund it through a revenue-neutral increase in income tax rates across the board, and change SS into a means-tested safety net for destitute seniors. But, realistically, we need a transition period--- which we need to start ASAP.
c5 November 19, 2012 at 05:59 PM
ss was set up as a govt sponsored retirement savings program, not as another entitlement. that is why taxes are capped, as are benefits. i would be in favor of making ss benefits taxable, that seems to be a reasonable way to 'means test' the benefits...but eliminating the cap would be blatantly unfair unless benefits were uncapped as well.
Chris Nicholson November 19, 2012 at 06:04 PM
@c5: your logic is good, but we need to be honest and migrate this to a safety net, not a program that will provide 100% of seniors' needs. Extent of benefits should be determined only with reference to other income/wealth, not contributions. It should be welfare for the old. Won't be comfortable, but no one starves. We don't cap taxes that go to other welfare, even though benefits are capped. By pretending it is not a tax, we hide a massive additional income tax burden. Better to treat all flows to the gov't as income taxes and set priorities in broad daylight.
Nice and Rough November 19, 2012 at 06:59 PM
CN - Further honesty is needed. Stop all social security payments. Let grandma hop on food stamps & welfare like anyone else. Social Security is little more than welfare for old people. So put grandma on the correctly named program: welfare. That's what SS is & that's what it should be called. Most importantly, teach families it's their responsibility to pay for grandma, not the rest of us.
Chris Nicholson November 19, 2012 at 07:10 PM
N&R: take a class on marketing and another on psychology. Assistance for able bodied people under retirement age should carry a stigma and should be uncomfortable. For the elderly, especially those who had a reasonable expectation of assistance, there should be no stigma during the transition and even the post-transition stigma should be less than w/r/t assistance to younger people. The economic productivity of the median unemployed 30 year old is much higher than an average 80 year old, so why use the same labels/stigma/incentives. Beyond the surface, I think you and I are saying the same thing: reset expectations (I would have a transition period) that individuals and families are accountable for cradle-to-grave care, and that government programs will be minimal and unpleasant safety nets.
Regular Guy November 19, 2012 at 07:44 PM
The Social Security situation is similar to the government retirement plan situation. For decades government made impossibly generous promises of future benefit payments until a huge actuarial deficit was built up. Somebody has to take the hit for the accumulated deficit. It is unfair to load all that burden onto future participants in the plan rather than taxpayers in general. That's as unreasonable as asking parents of school-aged children to pay 100% of the deficit accumulated in the retirement benefits of public school teachers and administrators. Government accumulated these deficits by over-promising in order to buy votes over several decades. This was not the fault of today's young people. The pain needs to be spread everywhere, including today's beneficiaries. Treat it as the bankruptcy it is and give everyone a haircut, including grandma. Looking at it objectively, grandma will still have gotten a much better deal than her children or grandchildren.
Karen Lewis November 19, 2012 at 08:05 PM
Karen Lewis undefined How about everyone in on this SS discussion educate yourselves about Social Security Retirement Benefits and Supplemental Security Income (SSI) including how they work, who is eligible and why, etc. And while you are at it, take a go at Medicare and Medi-Cal. Then be the first to offer to give up all of the above benefits for yourselves, parents, and children - should any of them/you qualify at any point- (including paying for nursing home care and selling the family home/s). It's easy to judge, curse and stigmatize others until it's your turn.
Regular Guy November 19, 2012 at 08:49 PM
Karen, what cannot be paid will not be paid. When a benefit promise clashes with financial reality, reality wins and the promise is broken. In a world of unlimited money, keeping those promises would be the best and most fair choice. In the real world, scaling back those promises (by haircuts to all) is better than suddenly ending them in a financial collapse. No fair option is available. Within the constraint of financial reality there are only unfair options to choose from. Ask the Hostess Teamsters, who agreed to a pay cut to save their jobs. Because the other union refused a similar deal, everyone lost their jobs. This is exactly the kind of choice we face with many government benefits promised to retirees. The numbers need to add up or the whole thing crashes. You can hit the brakes now or hit the wall later. Continuing to drive at full speed is an available option, but its outcome will be horrible.
c5 November 19, 2012 at 10:11 PM
if i had the option of taking a major haircut on benefits or continuing on in its current form, i'd take the big haircut...or maybe let me out completely. the plan is busted, and i do not agree with chris's assertion that we should just uncap the taxes. that is probably the worst fix we could come up with. i continue to favor some form of reform of the benefits via cola adjustment, slightly older qualifying age, and possibly taxing some or all of the benefits to soak the rich some more. a massive income tax rate increase imo would be suicidal to the economy, and frankly not needed to fix this. small changes make huge differences to the plan over time.
Nice and Rough November 19, 2012 at 10:17 PM
Welfare is welfare whether you call it Social Security or something else. We've simply deluded ourselves into thinking Social Security isn't socialism at its finest. Entitlements for any age group are problematic.
Fritz 'Congodog' Stoop November 19, 2012 at 10:34 PM
Social Security is a mandatory retirement system established in 1935 as part of President Franklin D. Roosevelt's New Deal. It is run by the Social Security Administration, or SSA, based in Woodlawn, Maryland, just outside Baltimore. The agency includes 10 regional offices, eight processing centers, some 1,300 field offices, and 37 Teleservice Centers. About 62,000 people work for the SSA. The Social Security Act—as it is formally known—was created out of the devastating effects from the Great Depression. Millions of Americans lost their jobs, savings disappeared and the elderly were often left without a source of income. The SSA provides benefits to retirees and disabled workers. It is a “pay-as-you-go” program in which current workers fund benefits for current retirees and disabled Americans. In most cases, a worker must have 10 years of covered employment to be eligible for retirement benefits. The rest can be found (for what it is worth: http://www.cnbc.com/id/43840296/Social_Security_CNBC_Explains Fortunately, my life does not hang in that balance!
Regular Guy November 19, 2012 at 10:44 PM
Fritz, FDR wanted Social Security to be fully funded and actuarially sound. Several years after its enactment, Congress began changing it to pay as you go, a structure which FDR had opposed. Had FDR's original version remained intact, Social Security would not be facing any funding gap. Read about this at http://www.washingtonpost.com/opinions/would-roosevelt-recognize-todays-social-security/2012/04/08/gIQALChd4S_print.html
Fritz 'Congodog' Stoop November 19, 2012 at 11:55 PM
Good info, Thanks RG!
Nice and Rough November 20, 2012 at 04:25 AM
That's Roosevelt's public story. But the facts tell otherwise. In the very first lawsuit challenging Social Security, the Feds admitted it was a tax provision and a separate benefits provision. The two are not linked in any way and never have been. That's the only way it passed constitutional scrutiny. Social Security has been a sham perpetuated on the American public since the day it was created. The impression that it was a contributory retirement account was a deliberate trick by politicians.
Douglas Home November 20, 2012 at 04:35 PM
I created an Excel spreadsheet that calculated a typical life similar to most working Americans. It figured in Social Security payroll deductions plus employer contributions starting in 1975 and then assumed that they were privately invested. The results are shocking and the truth irrefutable (except to 2nd Gen I'm sure) At a 6% annual ROR you would have over $1 million in the account within 30 years. Anybody look at their SS account statement recently? Amazing what little happens when government has your money, isn't it?
Fritz 'Congodog' Stoop November 20, 2012 at 11:34 PM
Chris Nicholson November 21, 2012 at 12:29 AM
Fritz: why the exasperation around the 6% number? Over a ~40 year working career I think long-term real returns in equities have beaten that benchmark so even after blending in more fixed income for the last decade, 6% seems reasonable. Most pension plans use 7.5-8.5% assumption for nominal returns (not adjusted for inflation), so 6% seems OK, if perhaps not conservative NOW for shorter (0-10 year) horizons. Another irony of the "Robin Hood" approach i that when you target any policy objective other than GDP growth, all boats are lowered. Risk taking behavior in pursuit of growth (and after-tax returns) is what drives investment returns. If we make a series of policy decisions that lowers long-term real returns from say 6% to say 4%, think how much worse off we'll all be in 40 years...
Eastofthehills November 21, 2012 at 01:35 AM
As much as I hate to say it votes should be treated like shares in a company; your voting power should be proportional to your tax dollars paid. i.e. $1 paid to the gov't = 1 "share" The problem with our current system now is that too many of the mis-alignment of stakeholders. It's really easy for 10 people contributing nothing to gang up on one guy paying for it all.... especially when it's one vote one person.
Douglas Home November 21, 2012 at 02:55 AM
That's right, Chris, 6% was just a conservative annualized return for case of argument. If average return on the DOW, for instance, over same time period were used - that individual would be far "richer" in 30 years. In short, if we all would just rat hole at least 10% of every dollar we ever made, and buy even T-bills with it....we'd all be "rich" by 40 and wouldn't give the same rat's arse about Social Security. Still wouldn't change the fact that we can't trust government with our money.


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