With the Bush tax cuts set to expire next year, there’s going to be a big debate during the mid-term elections this November!  But, should there really even be a tax debate?  It’s obvious that we should NOT raise taxes on small business owners and higher income, hard working Americans in a nascent economic recovery!

Everybody knows roughly 47% of Americans pay no federal income taxes.  Hence, the ultimate solution for tax legislation is to strip away tax voting rights for the 47% of Americans who pay no tax, but who still get to enjoy the benefits of other people’s contributions.  If you’re one of the 100+ million Americans who pay no income tax, isn’t it good enough to enjoy free public schooling, nice roads, friendly firemen and police officers protecting your neighborhood?  Being thankful is a great disposition to have.  Being greedy is not.

An Example Of A Family Making $120,000 Paying No Taxes:

“Say you’re married with salary income of $120,000, 401(k) contributions of $12,000, two under-age-17 kids, and a college student with $4,000 in education expenses. Assume you also bought a home this year that qualifies for the now-defunct $6,500 credit for existing homeowners. Finally, assume you’re eligible for the $1,500 credit for energy-efficient home improvements. Believe it or not, your 2010 federal income tax bill will be zero even if you only claim the standard deduction.

Your tax bill of $11,950 is completely wiped out by $13,300 in credits ($2,000 child credit, $2,500 education credit, $6,500 home buyer credit, $1,500 credit for energy-efficient improvements, and the $800 Making Work Pay credit). In fact, you’ll get a $1,350 check from the government because some of your credits are refundable ($13,300 of credits – $11,950 of tax = $1,350 of free money),” writes Bill Bischoff of SmartMoney.

VOTING TO RAISE TAXES ON OTHERS WHEN YOU PAY NO TAXES IS LIKE……..

* Dr. Phil writing a book and telling someone to lose weight.

* Suzie Orman telling you to invest in the stock market when only 2% of her wealth is invested in equities.

* A recent college graduate teaching you how to be rich.

* A hardcore vegetarian who wears leather shoes.

* A priest who preaches acceptance but expects you to burn in hell when Armageddon comes if you don’t convert.

* The United States implementing economic sanctions against emerging countries for polluting.

* A boss who tells you to work hard but goes and plays golf every other day and takes long lunches.

* US Treasury Secretary Geithner saying raising taxes is “the right thing to do” but cheats on his own taxes.

CONCLUSION

Some may argue that voting is a fundamental right as decreed by the 15th amendment of the Constitution.  I agree, go ahead and vote on whether the government should implement a flat tax on those who pay nothing. It’s only fair.  Just don’t go around pretending as a non tax payer, you have the right to vote on persecuting others to pay for your own free government benefits.

It’s so obvious to any rational person that if you pay no taxes, you can’t possibly be able to vote for people whose agenda it is to raise taxes on others.  Yet, millions of non tax paying Americans continue to support tax increases for the rich, who may very well be the ones who help keep the millions who don’t pay taxes employed!

Friendly Americans who pay no taxes, please have a heart and enjoy your spoils and stop punishing others further.  For the 53% of Americans who do pay taxes, let us decide what is the right level of income taxation to help support the economy and you guys.  We might vote to raise our own taxes and dis-incentivize ourselves to work hard.  So be it.  At least we get to vote on our own destiny!  Thanks!

Readers, do you think it’s right that the 47% of Americans who pay no taxes can vote on raising taxes for others who already pay?

Why do you think the government and the people of America allow this type of double standard?

Any suggestions on how to stop the persecution of hard working Americans?

Any other examples of “voting to raise taxes on others when you pay no taxes”?

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our E-mail or RSS feed.

Related posts:

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Hear that?  That is the sound of another self righteous employed person complaining about the unemployed sucking up resources and driving the government deficit further into the red.  Who cares employed people??  You guys aren’t the ones who are struggling to find a job in this economy!

There are several tautologies here:

1) Few can live a comfortable lifestyle off of unemployment benefits which average $200-3oo a week

2) The vast majority of people who are unemployed want to make more money, find jobs, and do something meaningful with their lives.

3) Our budget is headed towards a $1.4 trillion+ deficit, so who cares if we’re going to spend another $50 billion to help millions of unemployed people survive for up to 99 weeks?

THE BUDGET DEFICIT DOES NOT MATTER WHEN YOU HAVE NO JOB

The big debate over the Republicans and Democrats on the latest unemployment benefit extension is how the government will pay for the bill?  The Democrats say don’t worry, it’ll come from somewhere while the Republicans say cut spending elsewhere to not add to the deficit.  Whatever the case may be, the budget deficit doesn’t matter if you’re struggling to survive, and at the margin are going to cost the economy an even bigger burden?  We’ll have to provide for shelters and more public safety officers when crime creeps higher as desperation kicks in.

The ramifications of a budget deficit are only theoretical.  People say the government will need to raise interest rates to attract foreigner capital to fund our greedy spending.  With higher rates by government, a crowding out effect occurs where efficient capital doesn’t get directed to the private sector.  Meanwhile, borrowing costs for citizens increase, also choking off investments.  Last I checked, the 10-year yield is close to 3%, and foreigners are happily funding us.  Meanwhile, plenty of people are smartly refinancing their mortgages and saving money.

People say budget deficits are also bad for our children.  How can we live with ourselves knowing that our children are the ones who are going to fund our bad spending habits?  We live with it just like we live with the fact that the older generation will happily collect their social security checks, while the younger generation continues to pay without expectations of anything in return!

Once again, all this budget deficit talk is just theoretical nonsense that carries very little weight in determining whether or not we should help our fellow needy citizens or not.

THE ONLY WEIGHT ON THE EMPLOYED

A portion of our paychecks are paid for by the employer.  This expense (unemployment insurance) is effectively calculated into a working person’s total compensation.  If the unemployment insurance expense is 6% per anum, one can assume that if an employer didn’t have to pay this expense due to 0% unemployment, perhaps a couple percent of the 6% may lead to a higher paycheck.

So here is the thing for those who argue it’s a bad thing to spend another $50 billion bucks extending unemployment benefits.  Would you rather have the Federal Government pay or pass a bill to increase the unemployment insurance paid by employers by another several percent?  If you choose the latter, prepare for MORE layoffs.

CONCLUSION

It continues to perplex me how vocal some employed people are about not helping the unemployed.  Unless you’ve been unemployed yourself, you have no idea what you’re talking about!  When you’re unemployed for an extended period of time you start doubting your self worth.  You ask yourself what’s the point of life if nobody is willing to give you a chance.  You give up looking because you can’t bare another non returned phone call or e-mail.  Each rejection is like a blade jabbed and then turned in the soul.

As I come to the end of this article, I realize why so many employed people are so smug about the unemployed.  The reason is they are very unhappy with their jobs.  They can’t stand the fact that someone is getting $1,200 a month to “do nothing” while they have to work 40 hours at their miserable jobs to only earn $3,500.  Miserable people like to make other people miserable.  The next time you see someone irrational complaining why helping others is a bad idea, just know that they are going through their own torment.

UPDATE 7/27/10: The more I think about it, the more I believe the reason why people are so smug is because they are insecure with their own jobs and angry about their current situation.  The smug take their contempt out on the unemployed to make themselves feel superior.  If you were happy with your job and made millions of dollars, don’t you think you’d be more supportive of trying to help your brothers and sisters out?  I think so!

Readers, why do you think there are so many people against helping the unemployed through federal funding?

Do you have a better idea for helping lower unemployment?

If you are a smug employed person, please share with us your reasoning why you are against the extension.

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our E-mail or RSS feed.

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As far as I’m concerned, the US economy is recovering handsomely.  How could it not with packed restaurants, and traffic that makes me want to pull your hair out?  The most anticipated IPO of the year is Facebook, which may very well go public for $20 billion plus dollars.  Meanwhile, the whole world is hooked on Apple products with iPads ($500-800) and iPhones ($200-300) selling like hotcakes.  Who needs yet another computing device?  I guess millions do!

There is so much money flowing into the Bay Area, it’s hard to imagine another financial crisis on the wing.  Yet, I’ve read plenty of posts on “steps to take when the next financial crisis comes” and I’m scratching my head.  Am I living in a parallel universe where every other car I see is a fancy German vehicle, and I can never get a reservation at my favorite sushi joint?  I feel like I’m living in a little optimistic bubble where the world isn’t falling off a cliff and is actually doing well.  Tell me if I am, because bubble living is delusional living at its finest.

The stock markets, although highly volatile have recovered some 50% from the bottom and generally serve as as a leading indicator for the economy.  Yet people are still talking about a double dip recession.  Yes, the biggest worry is stubbornly high unemployment, but you’ll never be able to tell if you walk the streets of San Francisco.

LOTS OF POSITIVE ANECDOTES

* Commute time from the city to the airport has increased from 25 minutes to 35 minutes on average due to traffic.

* The House Of Prime Rib is always packed and calling two days before gets one a reservation for two at 10pm.

* The BMW dealer says they are moving cars at the fastest pace since 2007.  The new 5 series is in, with a price tag of $72,000 for the 550i version.

* Venture Capital and Private Equity firms are flush with cash and are looking to find a home before they have to return money to investors.  Foursquare, Pandora, Zynga are getting funded for ridiculously high multiples.

* Banks are cashed up and lending again based off my conversation with three mortgage brokers.

* Headhunters (recruiters) are calling incessantly and it’s already past the halfway mark.

* You can never get a tennis reservation at 3:45pm, 5:15pm, or 6:30pm at my club because people make so much money they get to leave work early or don’t have to work at all.  Membership has increased by over 30% in one year.

* A house down the street received multiple offers and was in contract within 10 days.

* Advertisers have been filling my inbox seeking to do business.

* Landscaper had to delay a job for one week after already starting at my house because there was a bigger job to do elsewhere.

* Went to go buy a pair of retro Air Jordan Infrared VI shoes for $340 (package set of two) 20 minutes after Nike Town opened and they were sold out.  Went to two other stores, sold out!  Typical buyer?  High school kid.

* I can never get on the bus after 5:30pm because the bus gets completely full in the first 3 stops of a 7 stop pick up route.

CONCLUSION

The newspapers and TV stations constantly tell us how rocky things are.  Even fellow bloggers are urging caution.  Yet our fearless leaders in Washington are telling us we’re recovering quite well.  I’m generally wary about government prognostications, but with the amount of activity in the Bay Area, gosh darn it, I think they might be right!  How else can the government raise taxes for the rich to 60% (Federal, State, City, FICA, Medicare) next year without torpedoing the economy?  The government must know something, and it seems as if people are also catching wind that the good times are back again.  Even if the markets drop 10% further this summer, it still doesn’t take away the fact that activity is back, and in a big way.

Readers, do you believe the economy is solidly recovering?  How is your neck of the woods doing?  Any anecdotes you’d like to share indicating a weak or strong economy?

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

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One of the most anticipated NBA free-agent announcements came when Lebron told the world he’s heading to South Beach to play for the Miami Heat.  Of the six teams coveting him, really only three stood a chance: Miami, Cleveland, and New York City for obvious reasons.  The other three teams: Chicago, LAC, and New Jersey will just be footnotes and forgotten.

What’s most interesting is not Lebron’s decision to make millions of dollars less to join two guys he thinks he can win championships with.  Instead, Lebron’s decision to completely spurn President Obama is what really gets me thinking!  No less than seven times has President Obama made a public statement insisting that Lebron join the Chicago Bulls. As you know, Obama was the Senator of Illinois before he became President.  Many pundits also believe that Chicago is a better candidate for Lebron to win championships with Carlos Boozer, Luol Deng, Derrick Rose, Brad Miller, and Joakim Noah.  But, nope.  Not Lebron.

If Lebron James, who is a huge Obama fan, doesn’t even listen to Obama’s words, why should the general public?  It wasn’t like Obama was saying go to the Minnesota Timberwolves where they have a snowball’s chance in hell of winning.  Chicago is a seriously legitimate team if not the best choice!

FIVE REASONS WHY LEBRON DOESN’T LISTEN TO PRESIDENT OBAMA

* Relationships are most important. Lebron, Dwayne, and Chris created an amazing relationship after winning gold metals in the Beijing Olympics.  Their friendship transcends money, which jives well with the theory that money can’t bring happiness but friends can.

* Location matters. Let’s face it.  Chicago is a crappy place to live 6 months of the year.  Why on Earth would Lebron decide to move from crappy weather Cleveland to crappy weather Chicago?  He might as well stay in Cleveland!  Ever wonder why it wouldn’t be easier to get Dwayne Wade and Chris Bosh to go to Cleveland?  It’s because Cleveland is a hard place to live unless you have family there.  If you’re going to make a move, you might as well go all out and either move to Miami or LA because we all know that weather in NYC and NJ is horrendous as well.

* Charity is a good thing. At the end of the interview with ESPN, Lebron announced he is donating all proceeds raised from the “The Decision” to the Boys & Girls Club he’s so intricately involved in.  With President Obama limiting the tax break for charity deduction to 28%, that penalizes those in the higher income tax brackets who are the onse who make up the majority of this country’s donations!  The clear repercussion of this proposed legislation is that giving will decline by billions at the margin.

* Just say NO to discrimination. With President Obama allowing for an even higher progressive tax system, he is saying it is OK to discriminate against people based on their income.  If you worked hard and spent an extra 8 years of your life after college to become a physician and make $500,000, the Democrats believe it’s OK to tax you 39.6%.  Meanwhile, if you decide to goof off in school, not study and make $25,000 a year for the rest of your life, you are rewarded by only paying 15% in Federal income tax.

* Lower taxes is the result of fiscal prudence. Although Lebron has to pay 39.6% on his mega millions a year, he won’t have to pay state tax, which is a 10% savings compared to playing in California or New York, and a 6% savings compared to staying in Cleveland.  If you make conservatively $50 million a year after endorsements, you’re saving $5 million in state taxes a year!

CONCLUSION

It’s been a year and a half since President Obama came to office and some people are getting tired of rhetoric.  We’ve had a great recovery in the financial markets, but our employment outlook still looks murky.  We are spending record amounts of money on government programs, yet the government tells other people to practice financial austerity.  Federal government employees are raking it in with recession proof jobs and rising wages.  Lebron has lost faith in the President and his ability to help out the Midwest and his home state of Ohio.  As a result, he no longer listens, so why are you?

Readers, has anybody else lost faith in our President and his promises?

For basketball fans, did Lebron make the right choice going to Miami?

Why do you still not play or follow sports when America is a nation of sports enthusiasts?

** Very few people can claim to have worked in one job for 7 consecutive years right out of school.  So before you go bashing Lebron for his decision, like Cleveland Owner Dan Gilbert who just lost hundreds of millions in franchise value, take a look at your own track record.

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

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Yowza! Source: NY Times

Over 11 million people are estimated to have died by the hands of the Nazis during the Holocaust just 65 years ago.  5 to 6 million of the 11+ million were Jews and over 300,000 were Athenians during the Axis’ occupation of Greece.  It’s a fallacy to blame modern day Germans about the atrocities of the past.  Yet, just because the demons have all died, shall we forgive and forget?  Absolutely not.  The offspring and relatives of the 11+ million dead live on, and their stories will never ever be forgotten.

With a GDP of US$3.6 trillion, Germany is now the largest economy in Europe as well as the 4th largest economy in the world.  Germany also has roughly $50 billion in estimated loans to Greece, a large amount, but not an overwhelmingly debilitating amount given the size of their economy.  Saving Greece helps the Germans and the rest of the 27 EU members who in some way were all negatively affected by Germany decades ago.

GRAND STANDING AND FINGER WAGGING

Instead of taking this opportunity to save the world and make up for the atrocities of their past, Germany has decided to play politics, wagging their fingers violently at Greece for their complete, and utter mismanagement of their economy.  Make no mistake, the Greek fiasco is a crisis of politics, and not of economics, yet.

To put it simply, Greece’s budget deficit in 2009 was 12.7 per cent of GDP, and its overall debt was 113.4 per cent of GDP.  We’re talking one naughty, highly indebted country who spent way more than it earned for years and years and years.  Even debt-addicted America only has a overall debt to GDP ratio of 88%, and we tried hard to mess up our economy!

How can Greece be so foolish in their spending one might ask?  That’s easy, Greece knows their backstop is the European Union and politicians are to blame once again.  A dirty politician is the same in every country.  Politicians make promises they cannot keep, and spend more than they take in to get elected and feed their egos.  Discipline is thrown out the window when it comes to being able to gorge on other people’s money and not your own.  The empty promises are always the next politician’s problems!

When Greece gave up its Drachma currency in 2001, they did so unwillingly, but with the promises of a brighter future.  With the might of 26 other member countries, many of whom are much larger such as Spain (4X bigger), it behooves Greece to live like Gods and spend like the wind.  The problem lies in timing, and a complicated web of debt that creates knock-on effects for all countries.

THE REAL SOLUTION: GERMANY’S CHANCE OF A LIFETIME

For all those guilty German souls who feel bad their people pillaged much of Europe in the 1930s and 40s, now is the chance to improve their future legacy.  Imagine if all the citizens of Germany came together and voted for their government to be the white knight and bailout out Greece all by themselves.  Not only will the Greek be more forgiving of Germany, but so will every other European Union country perhaps.  The Germans have a phenomenal opportunity to change perceptions and negative stereotypes held by millions.

Germans are suffering needlessly because of uncontrollable past events.  If I were living in Germany, I’d vote for a Germany-lead bailout with pride. Maybe my future taxes get raised to pay for the bailout.  Or maybe not, as the German government decides to raise taxes on only the top 10% of income earners like we do here in the US.

In any case, I’d vote with vigor because I’m sick of people looking at me funny and discriminating.  Instead, politicians are playing the blame game and publicly trying to humiliate each other.  I don’t want my kids to ever, ever suffer from what someone did 100 years ago.  Chalk up $50-150 billion in German bailout money as unpaid interest of war reparations compounded over the past six decades.  The amount will never eradicate the past but at least it’ll help their future.

THE WORLD STEPS IN INSTEAD

Concerned that the fiscal damage could spread throughout the EU and the world, EU members and the IMF have pledged $1 trillion ($750 billion up front, $300 million over the next 3 years) to bail out Greece, but most notably the Euro. And since the United States is the largest contributor to the IMF budget at 17%, our share of the $1 trillion IMF package could be as high as $40 billion bucks!  That buys one heck a lot of spanikopita!

It’s safe to say that nobody knows exactly how much bailout money Greece needs, because it’s almost impossible to quantify the value of their debt to all their fellow European Union members.  What is known is that the strongest members of the European Union like Germany, can easily provides a $50+ billion bailout package and save their brother.  By not leading the charge, and letting the IMF and the US take control, Germany misses their oipportunity to make a difference.  Worse, the world will wonder why the largest economy in Europe, with much to lose if Greece goes under, didn’t do more while others did.

CONCLUSION

The US sub-prime crisis teaches us that without a concerted bailout, we all suffer.  We can blame Wall St. for creating exotic financial instruments which nobody understands.  We can also blame homeowners who bought way more house than they knowingly could afford.  But when crap hits the fan, we all get smeared, so we might as well all pitch in.  Once the rescue package arrives, we then enforce stringent regulations and make hard admonitions against guilty parties in hopes a crisis never happens again.  But rest assured, as long as humans exist, crises will happen.

Greece is to Bear Sterns what Spain is to Lehman.  Greece should consider itself lucky it’s relatively small, and first to announce it has a debt problem.  You know they will get bailed out, because The EU and the IMF can’t risk contagion.  The problem is, once Greece gets bailed out, many of our Spanish friends might do a little more binge spending and say, “Nosotros tambien! Si, como no?“  One by one, the fear is that every single EU country with a little bit of debt takes advantage of moral hazard and stop paying.  You thought The Moral Hazard of America was bad, you ain’t seen nothing yet!

Das Eisen schmieden, solange es heiß ist!

Readers, do you think Germany should lead the charge in bailing out Greece?  If so, will it help change perceptions about their role in World War II?

Can we blame Greece for behaving badly?  After all, they don’t have the Drachma to worry about anymore.

How big do you think this European debt crisis will become?

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Folllow on Twitter @FinancialSamurai and subscribe to our RSS feed.

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In “How To Dramatically Increase Your Job Security For Life“, the article suggests managers are more inclined to fire those workers who have nobody to support but themselves.  As a result, one should strategically at least hint at the intention of starting a family to protect oneself from unemploymentville.  Clearly I’m being somewhat flippant.  My goal is to make people realize that relationships and emotion play enormous roles in shaping work success.

Whether you work for a small family business or a large corporation, hiring and firing is a very personal decision that comes down to one or only a handful of decision makers.  By tugging at their souls, and increasing their guilt factor, you’re well on your way to dramatically higher job security for life.

Let’s say you’re not particularly wealthy, nor make a particularly impressive amount of money.  You still have loads of student loans and consumer debt to pay off.  In essence, you’re the typical American!  Shouldn’t you be putting on your air mask before helping others?

Child raising is estimated to cost anywhere between $250,000 to $1 million from birth to after college.  If a family can’t even have the discipline to save 20% of their paycheck after contributing to their 401K and IRA, how can one consciously start a family?

$250,000 ISN’T A LOT, YET HOW MANY CAN SAVE THAT MUCH?

A typical person graduates college by 22.  If you’re really slow, perhaps 25.  $250,000 divided by 25 is only $10,000/year in after tax costs to raise your child.  If you’re in the 25% tax bracket ($68,000-$137,000 income), you’ll need to make roughly $13,000 in gross income to net $10,000.  Right off the bat, you’ll have to save anywhere from 10-20% a year to pay for your child.  Sure, for the first 10 years you probably won’t be spending $10,000 a year, but what about for the last 15 years with tuition costs and inflation?

Any private college worth attending costs over $40,000 a year.  Let’s say little Johnny is brilliant and gets a 50% scholarship.  That’s $20,000 a year right there plus another $15,000 a year for living and school expenses.  Even public schools run about $20-$25,000 a year nowadays in tuition and living expenses.

The $1 MILLION DOLLAR PROPOSAL

In “Do “C” Students Deserve “A” Lifestyles“, the article suggests the government impose restrictions on what certain people can buy based on their average GPA in high school or college. For example, only if you have a 3.7/4.0 or higher in college, are you allowed to buy a BMW.  A 3.5 GPA allows you to buy a Honda Accord or cheaper, and those who couldn’t even crack 2.5 are restricted to biking or walking.

The idea is that if you were smart enough to get straight “A’s” in college, you are smart enough to realize that buying a $5,000 Hermes handbag, and spending more than you make is a sure way to financial ruin.  Conversely, if you were dumb enough to not try in school and not realize the importance of education, then it’s best to leave the weapons of mass financial destruction out of your hands.  Society shouldn’t have to bail you out in the end.

As the government continues to infiltrate all our lives, may I suggest a new proposal. Unless your household net worth is over $1 million, no American household is allowed to have a child!  OK, so $1 million is likely too high of a hurdle, but you get the idea.  Institute minimal financial standards, such as having at least a positive net worth and a declaration of a 10 year financial game plan before a couple can start a family.

Think about all the positives that will come out of this legislation:

1) Population control. We are the #1 user of Earth’s natural resources.  Curb population growth, decrease our fiscal burden, and let the world live longer.

2) Improved financial health. Those who really want kids will stop messing around and really start saving and working on their finances.

3) Increased care for the child. With a net worth of at least $1 million, there’s a lower chance your child will experience neglect due to lack of funds.

4) More well-rounded children. With more resources, a child can take as many art, music, sports lessons as he or she wants.  After school tutoring is no problem, neither is a cultural immersion trip overseas.

5) Less divorce and happier parents. Without the strains of money (the #1 item couples argue over), there’s less stress for couples.  Happier couples mean happier, less trauma-exposed children. 

CONCLUSION

With over 143 MILLION orphans around the world, maybe we should think thrice about having children.  Perhaps the Duggars family, with their 18 kids aren’t really doing “God’s work.”  Maybe they’d do better adopting 18 children who need help instead.

We all have the right to do whatever we want, but should we?  If we aren’t willing to help feed or adopt a starving child, at the very least, let’s not add another by making sure our financial health is in order first before having our own.

People frequently say there’s no right time to have children.  That’s baloney.  The right time to have children is when you have an unwavering desire to care for someone for 18+ years.  Your finances are the least of your worries because they’re set, and you have a clear plan for child raising.  If you have no plan, no money, and no intense desire please don’t have children.  Figure out how to take care of yourself first.

Readers, what are your thoughts about the government instituting a $1 million net worth rule before Americans can have children?  Too radical?

What do you think about the Duggars and their 18 children?  Will you be willing to pay for their food, shelter, and children if their parents can no longer afford to?

How do you suggest we help the millions of orphans?

What advice would you give a couple thinking about having children?  When is the best time?

Please explore UNICEF, and recommend other organizations which seek to help children who lack the basic means for survival.

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

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Insensitive statements by Senate Majority Leader Harry Reid (D) not only infuriates many, but also raises one titillating question: Why isn’t President Obama considered white? Obama’s mother is white, and his father is black.  He relates more to his white side of the family given his father left him as a child.  Hence, isn’t it logical to think Obama is more white than black?  Let’s see if we can change Obama’s default setting to the world.

THREE SUGGESTIONS AS TO WHY

1) “He doesn’t look white.”

Well, what does “white” look like?  Yes, Obama doesn’t look like a Norwegian Viking, but you can still tell he’s mixed.  Since when does being half black mean that he’s full black?  If a white person is only supposed to look like Tiger Wood’s wife Elin, then we need to revise what the definition of white is.

2) The media needs something unique to sell.

Saying the first black man wins the Presidency is more eye-catching than saying another rich white man wins.  Mitt Romney, with his hundreds of millions would fit right in with the Clintons, Bushes, and Cheneys.  However, since we’ve already had 43 Presidents who all look the same, it’s more exciting to have someone new.  Everybody loves an underdog story, and Obama’s story is no different.

3) We’re all racist and we don’t even know it.

Senator Harry Reed is unable to see Obama as a white man because he doesn’t fit the stereotype of what a white man should look like.  Harry can’t help his racist condition because he was born in 1939.  Segregation didn’t end until 1954, so Harry had a good 15+ years of brainwashing to think he’s unjustly superior due to his skin color.  Try as Harry may, he’s been influenced far too long to change.  Obama, watch out what Harry says about you behind closed doors!

CONCLUSION – WE SEE WHAT WE WANT TO SEE

The definition of the word majority, is simply more than the minority.  Since the majority of Americans are white, we can conclude that white America has the majority say in shaping our perceptions, especially in the past. 

But, what about tomorrow? Ethnic cultures are mixing at a rapid pace.  Are white folks endangered of stereotyping themselves out of existence?  That answer depends on whether we can abolish thinking between just white and black.  What about Asians, Latinos, and Mixed?  If we can include other races, and multi-cultural groups into the main stream, we have a chance of being more balanced.

The better Obama does, the more he will be embraced by his two ethnicities.  If it so happens Obama becomes the greatest President in history and finds a cure for cancer while he’s at it, how do you think perceptions will change?  In essence, we see what we want to see, and hear what we want to hear.  Our biases are so deeply rooted that it takes a mental nuclear bomb to go off before we realize our prejudices.

Just like politicians, the mass media will eventually be influenced by big business.  Once the target demographic with the most amount of money is identified, news and opinions will cater towards their cause.  Your mission if you choose to accept, is to open your mind and start embracing diversity!  Don’t become another Harry Reid decades from now!

****

Famous People Who Aren’t Considered Asian Even Though They’re Half Asian: Dean Cain, Rob Schneider, Vanessa Hudgens, Tiger Woods, Keanu Reeves, Carmen Elektra, Phoebe Cates, and Lou Diamond Philips.

Famous Folks Who Aren’t Considered White Even Though They’re Half White: Booker T. Washington, Bob Marley, Mariah Carey, Thandie Newton, Alicia Keys, Derek Jeter, and Lenny Kravitz.

Readers, why do you think Obama isn’t considered white?

If Obama does a phenomenal job for the next 7 years (very debatable currently), will the media change Obama’s ethnicity to suit their business constituents?

Why is there not a bigger uproar against Senator Harry Reid (D) and his remarks?  If a Republican said his words, he’d be booted out of the country!

If you’re not white or black, do you feel left out?

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Twitter @FinancialSamurai and subscribe to our RSS feed.

Related posts:

1. Even Lebron Doesn’t Listen To President Obama
2. Why Are President Obama And The Democrats Against Charity?
3. The World Stock Markets Are Crashing & You’re Going Shopping?!

President Obama plans on limiting the tax break for charity deductions to 28%, penalizes those in the 33%, 35%, and soon to be 40% federal income tax brackets.  Since the overwhelming majority of charitable contributions come from households, and the overwhelming absolute dollar amount comes from those in the highest tax brackets, one can deduce charitable contributions at the margin will go down in 2011 and beyond.  Given this logical conclusion, why are Democrats and President Obama against helping others through monetary means?

Currently, if you are in the 25% tax bracket, you can save 25% in taxes due to your charitable contributions i.e. donate $10,000, save $2,500 off your tax bill.  Meanwhile, there is equality among those who pay the highest taxes at 35%.  35% tax payers can equally save 35% in taxes from their donations.  So far, so good.

Due to massive government pork spending it’s egregious that politicians now want to not only raise the highest marginal tax bracket from 35% to 40%, but also cut tax breaks on charitable contributions down to 28%!  That’s two slaps in the faces of hard working Americans and a punch in the gut for those who need the most help.

BASIC UNDERSTANDING

The essence of charity is to help someone selflessly.  I should hope people’s main purpose of giving is not for tax breaks.  It’s kind of like going to the outlet mall where people go crazy buying more to save more.  It makes no sense, but then again, a lot of people don’t make a lot of sense.  So for starters, we are in agreement that most people give out of the goodness of their hearts.

Since some people do ascribe to the buy more, save more mentality, we can conclude there are also people who enjoy giving more to save more on taxes, which is not as crazy at all.  The biggest risk for introducing asymmetric tax breaks is the tremendous backlash the wealthy will have against the government.  Out of principle, there will be people who will simply refuse to donate at all because of the discrimination they face from the government.  This is a very real worry which is starting to permeate already.

GIVE PEOPLE THE POWER TO HELP THEMSELVES

The Democrats are like women who love going out with bad boys just so they can try and fix them.  They try to fix the unfix-able because for some reason, these women believe they are holier than these “troubled souls.”  Despite getting burned time and time again, they continue to try and change people by expending a tremendous amount of wasted time.  Wake up.  Some guys don’t want to be helped, so stop forcing yourself on them!

“Care Not Cash” here in San Francisco is one such initiative where we’ve probably sunk more money into the program to try and fix homelessness, rather than just promote ways for the homeless to find jobs to make money for themselves.  One organization, called “Street Beat” does exactly that.  They’ve created a self-funding newspaper written and produced by the homeless themselves.  Those who want to get involved go to HQ and pick out a bundle of the latest edition.  The homeless then try and sell each paper for $1 dollar to passerbys, creating a win-win situation for everyone.

Instead of encouraging those with money to donate to organizations who specialize in helping others in various capacities, the government believes they are more efficient in helping the masses through their own government works programs.  Clearly, there is a fundamental difference in how a large portion of the population sees things.  Are you better at spending your own money, or is someone else better at spending your money for you?

$6 BILLION GO BYE-BYE

Roughly $300 billion of charitable contributions happen each year.  It’s estimated that with the enactment of this asymmetric policy against high income earners, there will be a decline of roughly 2%, or $6 billion in charitable contributions per annum.  2% sounds quite conservative, but regardless of the amount, there will be a decline in charity exactly during a time when charities need the money the most!

On the flip side, the government estimates it will collect an extra $30 billion dollars a year to help fund the $1 trillion+ in deficit spending over the coming decade.  Riiiight.  Deficit spending is just going from bad to less bad.  I happily estimate that $20 billion of that money will be used to line the pockets of corrupt politicians and corporations, $5 billion will be used on projects which won’t get finished, while another $5 billion will be used to buy $100 thumbtacks and $500 staplers!

CONCLUSION

Massive deficit spending is clearly wrong because it puts a back-breaking burden on our children and financial system in general.  Eventually we have to pay back our debt.  In the meantime, we are held hostage by foreigners.  If we had no debt, we wouldn’t have to keep on announcing discriminatory practices against certain hard working citizens.

It’s so easy to say, “Well, if they’re rich, they can afford it,” when you’re a student or average income earner.  But if you were a recipient of charitable services or donations, the last thing you want is for the rich to be punished more.  It’s not OK to punish people and make a new set of standards just because someone is rich.

What I fear is a massive backlash from the rich, who are the main contributors of charities in the first place.  Clearly there will be a net decrease in charitable givings at the margin, so why is it that politicians are so against helping the poor and organizations who specialize in helping others?  The poor have already suffered enough, let’s not make them suffer some more.

Readers, why do you think President Obama is against helping the poor, but so pro helping the middle class?  Do you think it’s because the middle class are the majority of America and therefore are the majority of votes?

Do you think it’s right or fair to impose different standards on giving for wealthy Americans, even though they account for the majority of all givings?

Why not encourage wealthy Americans to give more by increasing the tax breaks?

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Related posts:

1. Even Lebron Doesn’t Listen To President Obama
2. The Ultimate Solution For A Fair Income Tax Policy In America
3. Why Isn’t President Obama Considered White to The World?

Congratulations to the Democrats for passing a smaller, less corrupt version of Obama’s health care plan to cover the 30 million+ Americans who are uninsured.  I’ve read numerous articles about the pros and cons of this plan, and I still can’t figure it all out.  An Associated Press article writes, “Obama practically needs a spreadsheet to tell people what’s going on and when.“  That said, progress has been made.  I’d like to go over some of the basics, and end with a discussion.

LOOKING OUT FOR EACH OTHER

Unlike making money, we can only do so much with our health until genetics take over.  We can eat fruits and vegetables until the cows come home.  We can work out 5 hours a week and play another 5 hours of tennis on the weekends to improve our fitness.  But who’s to say we don’t get cancer one day and die because we can no longer afford to treat the disease?  As far as scientists can tell, if we’re destined to get some disease, we will.  Wealth helps keep us alive.

Earning a living, on the other hand, is pretty straight forward.  Don’t slack off in grade school, go to a good university, get a reasonable job, don’t slack off at work, add value, spend less than you earn, and voila!  You will be rich when you retire.  Along the way, you’ll find impasses such as economic Armageddon we just experienced.  You might lose your job, or 30% of your net worth like I did.  But that’s OK.  We just go back to school, find another profession, extend our retirement age by a couple years and keep marching forward.

You can’t march forward if you are sick.  You can’t even stand sometimes.  This is where we MUST step in and provide a safety net for those who cannot help themselves.

HEALTH AND POVERTY

Watching a documentary about personal bankruptcies the other day, it was amazing to learn that 3 out of the 4 families profiled were living in poverty due to health related issues.

A beauty queen broke her neck, and couldn’t continue working.  She now lives in a shelter because she couldn’t afford to pay her medical bills.  A family of four live in their broken down car because the father severed a nerve in his arm at work, and could no longer operate the machinery.  The insurance for rehab ran out, and he was left stuck, unable to do return to his old job.

If we had a better health care system, perhaps we’d have less health related bankruptcies.  Is that so bad?  Should we not try and help others out who bet on red but get black?  We should.

THE OBJECTING CROWD

Everything comes down to money and service.  Those who oppose ask how we can afford free coverage for 30 million more people?  The opposition also asks with 30 million people in the system, does that mean my doctor’s visit wait jumps from 15 minutes to an 1 hour?  Do the citizens who can afford to pay get crowded out as a result?  Good questions, and I don’t have the answer.

However, if you were to ask me whether it’s OK to raise my taxes by a couple percent a year to insure that everybody in America can get proper health care, I say yes.  Let’s say I earn $100,000 a year, and the tax increase of 2% is earmarked for health care reform.  I’m willing to pay an extra $2,000 a year to ensure we all have the right to health care.

Whether my premiums go up $2,000 a year or my taxes go up by $2,000, it’s the same thing, so I’m not arguing where the money will come from.  Ask me to pay $2,000 more in taxes a year for some pork spending I have no idea about, I would vehemently vote no.

Let’s say I do have to wait 45 more minutes for the doctor because of a crowding out effect.  Fine, let me surf the web on my PDA, read some magazines, do some stretching, and perhaps take a nap.  Maybe I have to wait a week longer than normal to see a doctor.  That is a problem which will be solved by capitalists who will open more independent practices to meet demand.  Just knowing that I will get assistance tempers my worries.  And if you never had a shot at seeing a doctor in the first place, you won’t be complaining about a wait.

If I have an emergency, then off to the emergency room I go.  I will be treated according to the degree of my trauma.  Hopefully there won’t be millions of new hypochondriacs who abuse the emergency room system, but that is a chance I’m willing to take.

CONCLUSION

I feel it in my gut, opposing health care reform is bad.  It’s as if the karma police is watching me.  We can only do so much to control the outcome of our lives.  We don’t know how long we will live, and whether we will die peacefully or painfully.  Sickness affects a billionaire as easily as it affects a beggar.  Why should someone lose everything just because they are poor?  They shouldn’t, and that’s why I congratulate the passage of this bill again.  Let’s just make sure everybody helps pitch in, and not just those who aren’t lucky enough to be Nebraskans or particular union workers.

Readers, are you for or against health care reform?  Please highlight some of the NEGATIVES of the health care reform bill so we can get more into detail and provide a balanced argument.

* Note Consumerism Commentary has a great post highlighting “The New Health Insurance And Your Money.”  Good overview of what the bill may cost you.

Keiju,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Related posts:

1. Obama’s Universal Healthcare Proposal
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In celebration of tax time, I surveyed five of my married friends to answer two questions: 1) Did you pay more or less in taxes after you got married, and 2) How much more or less did you pay?  The answers I got were concerning.  They all responded they paid more and by a magnitude of $3,000 to $25,000!

It’s just not true that the “marriage penalty tax” no longer exists.  The IRS just renamed it the “love me long time tax.”

I’m by no means a personal income tax expert.  All I’m doing is highlighting facts from people around me, and proposing the likely reasons as to why their taxes went up.  Our income tax system is so darn confusing, hopefully someone can shed some light on the situation!

TWO QUESTIONS TO THINK ABOUT AND UNDERSTAND

1) Why Don’t Tax Bracket Levels Double When People Marry?

The reason is because the government believes men and women are NOT equal, hence why the tax brackets for married filers do not double.  To prove my point, let’s say Johnny made $500,000 a year (35% tax bracket) and marries Susie who also makes $500,000 a year.   As a single filer with no deductions, Johnny pays an effective Federal Tax rate of 29% or $148,000 in taxes (gulp).  As a married filer, their effective tax rate jumps to over 32%, thereby paying roughly $20,000 more in taxes.  How is that fair?

Solution: Double the 35% tax threshold from $380,000 for individuals to $760,000 for couples.  That’s equality!

2) Why Can’t Both Individuals Have A Deductible Mortgage?

Furthermore, let’s say Johnny has a $1,000,000 mortgage on his condo in San Francisco, while Susie also has a $1,000,000 mortgage on her house in Palo Alto.  They both have a 6% mortgage interest rate and pay $60,000 a year in mortgage interest, saving them $25,000 in taxes ($60,000 X their marginal tax rate of 35% = $25K not taking into account phase outs).

Both Susie and Johnny save a combined $50,000 in taxes if they were single because of their mortgage interest deductions, yet if they marry, they lose $25,000! How so you ask?  The current limit for mortgage indebtedness for single and married filers is $1,000,000.   When Susie and Johnny get married, they have a combined $2 million mortgage, but they can only write off interest on half!

Solution: Raise the amount of mortgage indebedtness for interest deduction to $2,000,000 from $1,000,000 for married couples.  Equality!

CONCLUSION

The government is essentially telling Susie and Johnny that one of them doesn’t deserve to make the money they do.  Have your own place with a mortgage?  Forget about it.   The government thinks one partner will give up his or her job and house, so that the other partner will provide for everything!

The government is targeting independent women because when politicians drew up their archaic tax laws they assumed men would be the primary breadwinners.  What if the man wants to be the homemaker?  The government is telling women and men to not marry, for if we do, one should stop working or work less to take care of the kids.  Who’s to say we’re going to have kids anyway?  It would be nice to one day “love you long time” and not have to pay extra for anything!

A good follow up article from Smartmoney arguing why it’s best for one spouse NOT to work.

The marriage calculator from the US Deptarment of Health & Human Services. (Not the easiest to use).  Here’s another simpler one, but it might not work for you.

Readers, is the reason why more people aren’t up in arms with government sexism because not many people make enough to get negatively effected?  If so, does that make government sexism right?

Why doesn’t the government recognize there are successful, highly paid women who also want to get married as well?

What is your experience with your tax liability after marriage?  Have you ever considered not getting married due to an increased tax liability?

Keiju (Regards),

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Related posts:

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The Rock Of Gibraltar, Only Backwards

Anybody want to guess what happened on Wed, January 19th right before the market fell off a cliff?  If you guessed Obama delivered a politically charged speech to rally for his own support and crucify others, you’re right!  On Wed, January 19th, Obama went on national TV to tell the world, “we want our money back” and “if they want a fight, a fight is what they’ll get.” The “they” of course, are “greedy rich” people.  The markets immediately started to sell-off and the S&P 500 is now down about 6% since.

Good old fashion class warfare is never good for the economy, neither is continuous political jibber jabber.  Do you ever remember a president being on TV as much as our current president?  The risk of overexposure is very real, and the record low approval rating for any president at this point in his term shows this.  The State of The Union address is supposed to be an opportunity to unify the people.  Besides the typical feel-good rhetoric, what I heard was a continued attack on others, protecting personal interest groups, and maintaining giant silos.

YOU SO CRAFTY NEBRASKA

Did you know that Nebraska is the only state in America that won”t have to pay for new Medicaid recipients if the bill passes?  What makes Nebraskans more special than other Americans?  The answer lies in a special deal the president brokered with Senator Ben Nelson to buy his vote!  If Nebraska did have to pay for new medicaid recipients, Senator Ben Nelson wouldn’t have voted for the bill!  Good for Senator Nelson for looking out for his people.  But tell me honorable readers, how is this legal, and not frowned upon by the rest of the country?

I am absolutely for health care reform.  We have an expensive system with 40 million + people who don’t have insurance for whatever reason.  We live in a society where if there’s a drug that costs $100,000 to extend your life by 6 months, everybody feels they deserve to take it, but nobody is willing to pay for it.  Fine.  Since everybody wants the best and most expensive health care, let’s spread the burden among everybody, and not just to the non-Nebraskans!

THE PEOPLE ASK FOR THEIR MONEY BACK AND LOSE BILLIONS MORE INSTEAD

I wonder if the angry mob knows that the more the government is against capitalism, the more we all suffer.  With the market down 6% in a week, the people have lost over $40 billion in equity from their 401Ks, IRAs, and general stock investments.  Essentially, anybody with anything to invest just got a nice black eye.

The funny thing is, the angry mob got what they deserved.  They asked for our president to come down hard on every financial institution, instead of just targeting particular people in power, and the mob is sharing in the pain.

CONCLUSION

What used to be an absolute certainty about Obama’s second term now looks tenuous at best.  The “wealthy” were instrumental in his candidacy, and now their support is gone.   If the unemployment figures do not improve over the next 12 months, there’s no doubt Obama will also start losing the middle class.

It’s sad, because I along with millions of Americans really wanted Obama to succeed.  He has fantastic oratory skills and knows how to galvanize people into action.  Obama was going to change dirty politics and turn our ship around.  What we’ve learned from the Massachusetts Senate change (which was consistently left for 30 years until Ed died) and the low approval ratings is that the public aren’t mindless idiots.

The people realize that buying votes is wrong and that punishing innocent people at non-TARP banks while protecting AIG and the auto industry who haven’t’ paid back anything is a double standard.  The people of America are speaking.  The question is, are the people in charge of America listening?

Readers, please read more about the deal Obama struck with the Senator of Nebraska regarding the health care bill.  It sickens me to my stomach that he talks about doing the right thing when he’s doing something else.

Do you think Obama knows what he did was wrong?  If so, is he thinking that the means justify the ends?

If the employment picture doesn’t improve, do you think Obama will get re-elected?

Why does the government want to punish everybody making over $200,000 and not encourage and reward them instead?

Keiju (Regards),

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.

Related posts:

1. Why Isn’t President Obama Considered White to The World?
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3. Why Are President Obama And The Democrats Against Charity?

Everybody was quietly watching the puppet show at the Asian Art Museum when I hear a “boooooooP!” What was that, I think to myself as a stench waffles in the air.  Someone must have farted!  I look around to see if I can identify the culprit.  Then I notice others looking around, with some staring right at me!

“Not me!” I silently voice with my lips as I point towards a kid rolling around on the floor in front of the stage.  “Probably the kid!” I mime again with each crease of my lips extending more exaggerated with every word.

Once the show was over I tap the kid on the shoulder and say, “Hey buddy, you got me in a lot of trouble with the adults.  The bathroom is over there!”

“Sorry sir, I was just farting.  Everybody likes to fart right?” replies the kid with a big, teethy smile.

“You’re right buddy, listen to this one!” KABOOM!  I let one rip right next to him.  We laugh and go on our separate ways.

THE MORAL HAZARD OF AMERICA

Someone always farts in a crowd, both men and women.  It’s sometimes hard to hold it in, and frankly even if you unleash the beast, nobody will know it’s you if you keep an oblivious face.  “Whoever smelt it delt it” was a favorite elementary school phrase because we’re able to lay blame on some poor classmate.  Furthermore, any weak retort never seemed to work!

HOUSING

When you know  the government will bail you out of your home, why not try and borrow as much money as possible and live the life you couldn’t otherwise?  If rough times occur, just hand back over the keys and let the bank deal with the fallen asset.  Meanwhile, you’ve enjoyed a lovely 5 years living large on someone else’s dime!

BANKS

The financial bailout of late has recently been punctuated by an even more ominous sign of moral hazard.  The government quietly allowed Citigroup to save billions of dollars in future taxes by changing the rules! The Washington Post’s article is somewhat confusing, but all you need to know is that Citigroup received another multi-billion bailout because the government is a shareholder and wants to claim investment success from its initial $45 billion investment.

CARS

A friend of mine is a genius at driving cars he can’t afford.  He leases them.  The other day, he picked up a new Audi A5 with no money down, and a payment of $968/month.  The duration of the lease is 60 months, and he figures after the second year, he’ll just tell the dealer he’s got no more money and hands over the keys.  What is the dealer going to do, repo his car?  Fine!  He has no equity in the car in the first place.  What about his credit?  Who cares, as the dealer gave him the lease with his mediocre credit rating in the first place.

GROUP PROJECTS

Facilitator, collaborator, slacker.  There’s always a slacker in a group project.  I remember being so tired after a long week that I fell asleep during a Friday night conference call.  We were strategizing about our final presentation!  Each member had their role.  I volunteered to hold the clip board and dozed off.

Do I feel bad for not carrying my weight?  A little bit, but not enough to stay awake.  In my heart, I knew that my team of go-getters would carry me towards a good grade because they felt it important to get straight A’s.  Getting a “B” was good enough for me, as there is a non grade disclosure policy.

HEALTH CARE

The National Health Statistics say that 34% of Americans are obese and 66% of all Americans are at least overweight. We Americans know there is universal health care reform coming, and “the rich” will be paying a disproportionate amount for this catch-all system.  If there are magical pills to pop and cheap doctors visits to extend the life of our hearts, why not keep eating to our heart’s content?

Can you imagine if America had NO health care system?  We’d probably be the fittest people on earth because everybody would work out like crazy knowing that there’s nothing to save them.

CONCLUSION

Confucius once said, “Wise man never play leap frog with unicorn.” In other words, he who knows the pitfalls makes informed decisions.  Americans are much smarter than the world gives us credit for.  We adeptly exploit inefficiencies to our own benefits, sometimes to the extreme.

Smart people somewhere in a boardroom are rubbing their hands together figuring out how far they can push and still get away with all the spoils.  The government will bail us out as they’ve demonstrated time and time again.  Just remember that when it’s crowded and you need to let one rip, go for it!  You can always blame someone else and walk away.  USA!

Readers, any additional types of moral hazard examples you can provide?

Have you ever participated in moral hazard?  If so, what was your thought process behind it?

Are we all in cahoots with each other and are we really just one corrupt nation?

Keigu,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Folllow on Twitter @FinancialSamurai and subscribe to our RSS feed.

Related posts:

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The government introduced new legislation to tax all “big banks” 0.15% of their assets to recoup about $120 billion in TARP money.  What’s interesting is that the government is also taxing banks who did not receive TARP money, while conveniently leaving out AIG and the auto industry!

Three Takeaways From Asymmetric Regulation:

1) Because the government is imposing a tax on assets for all big banks, they are encouraging all banks to take excessive risk and accept hand outs in the future.  If a non-bailed out bank is getting punished, why not join in on the fun too?  Friends at government-owned Citibank all went down to the Rose Bowl using free $500 face value company tickets ($1,000+ in the after market) with tax payer’s blessings.  Meanwhile another friend who works at a non-TARP bank can’t spend more than $100 for a client dinner total, without having to get approval.  Message to friend: tell your bosses to party it up if Citibank is having a great time!

2) AIG is exempt from new taxation because AIG is 80% owned by the government.  If the government punishes AIG, they are punishing themselves.  Federal government employees are raking it in, and I’ve spent about one hour so far learning how be a $170,000 a year Department of Transportation employee if my blogging career doesn’t make it in three years.  So exciting to have such a lucrative back up!  Back off people, the job is mine!

3) The auto industry, which has paid back absolutely nothing, and is the biggest contributor of the $120 billion in tax payer losses is protected because the rank and file auto worker is deemed more precious than the rank and file finance worker.  I’m all for helping out hard working people who had nothing to do with the collapse.  But, what did your local TARP bank teller do? Nothing, just like the factory man at GM had nothing to do with the latest horrible design and corporate strategy of the 2010 Buick LaCrosse.  Remember when GM executives flew in their private jets to the Congressional hearings?  We need to support private jets for auto execs like we need to support higher taxes for more pork spending.

CONCLUSION

The past 24 months has shown you that you must look out for yourself first.  When Armageddon hits, nobody else fights for you, because they are fighting for their own survival.  Furthermore, if there is a government hand out, be it through home loan forgiveness or TARP money, take it and run.  The government will spread out the cost to everyone so don’t be the one left paying for something without getting anything in return.  Take advantage of the system, because the system will always take advantage of you.

Readers, do you believe the US autoworker is more precious than the US financial services worker?  If so, why?

Do worker unions, like the United Autos Worker union play a big part in lobbying the government to take care of certain people over others?  Is this fair?  Would creating a Financial Services Workers Union help this group of people?

Do you think Congress will pass Obama’s tax proposal into law?

What government bailout money have you benefited from?

Keigu,

Sam Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamurai and subscribe to our RSS Feed.

Related posts:

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If I read one more biased article pushing people to convert to a ROTH IRA I’m going to lose it!  Not to be melodramatic or anything, but the lack of unbiased analysis is like seeing a sea of zombies instructed to walk off a cliff. Wake up zombies, wake up!  Don’t make a decision without seeing what lies down below.

The ROTH IRA conversion idea is that those who have pre-tax funded retirement accounts such as a 401K or Traditional IRA pay taxes UPFRONT in 2010, so as to not pay taxes when you retire.  This is just absolute hogwash donkey dumb for a large majority of people out there.

Proponents of the ROTH IRA conversion argue:

1) Tax rates are low and are just going to go up in the future.

2) You will likely make more money in your retirement years, and hence pay more taxes.

3) Paying taxes now improves performance in the long run all else being equal.

THE SAMURAI REBUTTAL:

1) The government is smarter than you.  They are geniuses at spending other people’s money, and extracting as much money from you! Despite so much red-tape, when it comes to fiscal and monetary policy, they’ve got geniuses running the show.  Sure, back in the 70′s and 80′s the absolute marginal tax rates were higher, but there were many more income levels of taxation, and if you calculate the inflation-adjusted income levels, we’re actually better off now!

Think about why the government introduced this wacky piece of legislation from the government’s point of view.  Obama and team are running a $2-3 trillion deficit.  How the heck are they going to fund their binge spending?  By introducing a new idea to be able to allow millions of people, and billions of dollars to be taxed right now to shore up their deficit!

They float the idea, that doing a ROTH IRA conversion is a GREAT IDEA, knowing in the back of their minds that taxes can’t go much higher than what Obama is proposing already.  Furthermore, the government gets people who make over $100,000/yr excited when they say “no income cap in terms of contribution and conversion”!  Another smart move so they can collect MORE tax dollars from the wealthier population now.

2) Love your enthusiasm that you think you’ll make more in your retirement years than in your prime 30-50 earning years.  But I just have one question.  Are you crazy? Let’s say you average $100,000 / year until you retire.  To replicate $100,000 in income, you will have to have at least 25X your income in capital, or $2.5 million at a 4% risk free return to produce $100,000/year!  The last time I checked, the best 5-yr CD’s now pay 3%, which means you need 33X your income as capital to produce $100,000 of income.  GOOD LUCK!

Let’s say Social Security brings in $25,000 a year, to make $75,000 still requires you to have $1,875,000 in liquid assets at a risk free 4% return.  When people are struggling to accumulate 10X their income in retirement savings, what makes you think you’ll be able to achieve 19-33X?

Let’s be realistic here guys.  The only age group that might make sense are those in their 20′s, when their earnings power and therefore tax rate is still relatively low.  Then again, if you are earning a smaller amount, the absolute tax savings won’t be that important anyway.

3) The results are the same based on 2nd grade math. Whether you pay taxes now and let your investment grow tax free, or you let your pre-tax investments grow, and then tax it upon retirement results is more or less the same! Don’t believe me?  Do a calculation yourself.  Here’s an equation: Y = A * B.  Re-arrange to A = Y / B.  Or Y = A * B is equal to Y = B * A.

CONCLUSION

Whenever something sounds too good to be true, it probably is. There is a reason why the government is offering this new “one time”, no income limit ROTH IRA conversion in 2010.  The reason is they need your money!  The government knows that they can’t possibly raise income taxes much further than the already 5-10% increase Obama proposes in 2011, otherwise nobody would work, and capitalism would fall for good!

Lucky for you, you’re not a mindless zombie listening to everything the government and other sites tells you.  You realize there are seven no income tax states in America you can retire in, thereby immediately wiping away 5-10% of your taxable bill.  If you move to Hawaii, the state can’t legally tax your pension or retirement contribution!

It’s a good problem to have if you are making more in retirement than during your working life.  However, the facts reflect a high unlikelihood you will have have 20X-33X+ your income  in capital to draw from when the time comes.  And remember, 20X your income is just the BREAK EVEN amount in taxes you’ll have to pay, all else being equal.  You need to have 30X+ your income as capital for a ROTH IRA conversion to make sense at an interest rate return of 4%. Even if you do have 30X your income in your 401K, you can draw on the NUT at a much LOWER level to keep you in a lower tax bracket.

Never pay taxes unless you absolutely have to. Can you imagine when you’re about to retire, the government introduces new legislation which benefits Traditional IRA and 401K holders by offering LOWER tax rates?  Meanwhile, over the past 20-40 years, the government has been using your ROTH IRA conversion to spend on a party that one day needs to be repaid.  I’d be pissed.  Don’t let the government trick you into converting.  Once you pay them, you can NEVER get the money back.

Readers, if you don’t agree, don’t be shy and tell me why.   I’m sure I’m probably missing something, but I don’t know what.

If you believe in paying more taxes up front with a ROTH conversion, do you mind giving me 25-35% of your money now?  I promise I will give you your money back when you retire in 20-40 years.  Some new guy will be in office but I promise!

If you are from the FBI or government watch guard, sorry, but the people have the right to know THE TRUTH.  Your “Cash For Clunkers” program put in debt 200,000 people for cars they didn’t need.  We won’t allow hundreds of thousands more to not fully understand their decisions.

If you do agree with this article, please share with others to prevent them from walking off a cliff. Have a nice day.

UPDATE 07/19/10: If you ended up not listening and converting, and are stuck with a higher tax bill than your ROTH is worth since the markets declined, don’t worry.  You might get a second chance by “recharacterizing” your loan.

Keiju,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS feed.

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Want to get happy?  Here’s a lovely article highlighting that over the past 18 months, the percentage of Federal Government employees making over $100,000 jumped from 14% to 19%!

An even more astonishing fact is that 1,690 employees at the Department of Transportation now make over $170,000 vs. only one before the recession started.

My grand plan now is to build my retirement nut in the private sector for 20 years, and then live it up with a fat salary and pension from the public sector for the next 20 years!

I’m going to the local library today to learn all I can about being a great DOT employee.  I will be the best planner, analyst, treasurer, whatever there is, so I too can make $170,000 too.

Anybody else dreaming about joining the Federal Government to take advantage of all the benefits?  After reading Jane White’s “Welcome To The Poorhouse” book, I was doubtful about my chances of making $174,000 in government because I’d have to be elected as a Congressman or Senator.  Now I’m ecstatic to discover there are 10,000+ Federal Government positions which pay just as well!

As a government official, I promise to support tax hikes for all income classes no matter how horrible the economy is.  After all, tax hikes are important to keep our guaranteed annual pay increases going.

Remember, only the government is allowed to persecute others and tell them how to spend their money.  As long as they focus the public’s attention on Wall St., maybe nobody will notice their ways.  “We’ll spend your money however way we damn feel like it!”  Go USA!

Readers, which public sector job do you dream of having?  Why would anybody ever want to join the private sector given all the insecurity, volatility, and pay differential?

Related Post: “Fortunes, Fortunes, Everywhere”

Keiju,

Financial Samurai – “Slicing Through Money’s Mysteries”

Follow me on Twitter @FinancialSamura and subscribe to our RSS feed.

Related posts:

1. Taxing All Big Banks Is A Double Standard And Is Unconstitutional
2. Why Are The Employed So Smug About The Unemployed?
3. The Government Is Sexist And Nobody Seems To Care