When President Obama gave the State Of The Union Address at 6pm PST, I had just left the office to go eat some yummy butter chicken and garlic naan at Amber Restaurant in downtown San Francisco. I assume many other hard-working West Coasters missed the SOTU address as well. Alas, living through an East Coast centric TV schedule is something we've grown used to.
But as any true patriot would do, I DVRed the SOTU address, watched the one hour long speech, took notes like a good student, and spent several hours putting together this 2,000 word article to help others think about our nation's issues.
It's important we all know and have an opinion about the main topics our nation faces. We don't have to all agree, but having the knowledge helps us make choices about how we want to live, what occupations we should pursue, the type of investments we should make, and how others might view Americans on a global stage. Oh, and after reading this article, I promise you'll be able to hold your own at any stuffy cocktail party on the planet.
Knowledge is what will set us all free!
THE STATE OF THE UNION ADDRESS 2015 CHEAT SHEET
“Tonight, after a breakthrough year for America, our economy is growing and creating jobs at the fastest pace since 1999. Our unemployment rate is now lower than it was before the financial crisis. More of our kids are graduating than ever before. … In the past five years, our businesses have created more than 11 million new jobs.”
– The economy feels strong, but it doesn't feel as strong as it did in 2007, right before the world blew up due to a cascade of mortgage defaults. The US Bureau of Labor Statistics says the US currently has an unemployment rate of 5.8% as of October 2014. But unless I'm blind, this unemployment chart clearly states we were at 4.4% on March, 2007.
“Will we accept an economy that only a few of us do spectacularly very well? Or will we commit ourselves to an economy that generates rising income and chances for everyone who makes the effort?”
– The widening wealth gap is the #1 social issue we face in America, and perhaps the world. The rich have gotten tremendously rich due to the acquisition of assets that have grown in value. But I do wonder whether income inequality really matters as much given there is much more social equality nowadays. I do hope my children and my nieces and nephews grow up where they have a level playing field to make their dreams come true.
“Tonight, since the first time since 911, our combat mission in Afghanistan is over. Six years ago, nearly 180,000 American troops served in Iraq and Afghanistan. Today, fewer than 15,000 remain.”
– War begets war. One of the biggest reasons why I don't want to pay taxes is because I know there is a massive military budget in America (~$600-700 billion per year) to not only keep us safe, but to also kill thousands of other people. How amazing would it be to spend $700 billion on education, infrastructure, helping the poor, and diplomacy instead.
“We believed we could reduce our dependence on foreign oil and protect our planet. And today, America is number one in oil and gas. America is number one in wind power. Every three weeks, we bring online as much solar power as we did in all of 2008. And thanks to lower gas prices and higher fuel standards, the typical family this year should save $750 at the pump.”
– Bravo! It's amazing to see oil prices plummet given it's like an instant tax cut for consumers. If I knew oil prices would decline by 50% within 12 months, maybe I would have bought a gas guzzling Range Rover Sport HSE instead! Oil is an input cost for many finished goods, not just gasoline. We're talking about plastics, cars, toys, and airfare prices.
“Today, thanks to a growing economy, the recovery is touching more and more lives. Wages are finally starting to rise again. We know that more small business owners plan to raise their employees’ pay than at any time since 2007.”
– As a small business owner, the red-tape is still immense, at least here in California. So many documents to file and fees to pay, it's very hard to keep track. The government makes things complicated in order to maximize their tax collection and keep certain interest groups alive imo. If you're never started a business, it's hard to imagine how difficult the process is. I hope companies like LegalZoom, who make starting a business easier, do well.
“Today, we’re the only advanced country on Earth that doesn’t guarantee paid sick leave or paid maternity leave to our workers. Forty-three million workers have no paid sick leave. Forty-three million. Think about that. And that forces too many parents to make the gut-wrenching choice between a paycheck and a sick kid at home.”
– The happiest countries in the world always hail from Europe due to their generous healthcare, sick leave, maternity leave, and vacation policies. If America wants to become one of the happiest, why not just follow Europe's lead? Sure, there are issues with motivation and production in Europe, but what's the end game? Money or happiness? I choose happiness. I've seen the future, and it looks bright because America is turning into Europe as we speak.
“Since 2010, America has put more people back to work than Europe, Japan, and all advanced economies combined. Our manufacturers have added almost 800,000 new jobs. Some of our bedrock sectors, like our auto industry, are booming. But there are also millions of Americans who work in jobs that didn’t even exist ten or twenty years ago — jobs at companies like Google, and eBay, and Tesla.”
– I'm glad President Obama highlighted Google, eBay, and Tesla because they are based right here in the San Francisco Bay Area. Part of gaining wealth is going where the wealth is. Any college student or mobile person should strongly consider coming out to San Francisco. The startup community is hiring like gangbusters because tremendous amounts of money are being raised. You might have to sacrifice a little by shacking up with strange roommates for $1,000 a month. But sacrificing is what makes success feel so much sweeter! I've got a couple posts in the hopper that will address my journey as an independent contractor post your feedback on whether company loyalty is costing you a fortune.
“I'm sending this Congress a plan to lower the cost of community college to ZERO. Keep in mind that 40% of our college students choose community college. Whoever you are, this plan is your chance to graduate, ready for the new economy without a load of debt. Understand you've got to earn it. You've got to keep your grades up and graduate on time! … Tennessee, a state with Republican leadership, and Chicago, a city with Democratic leadership, is showing that free community college is possible.”
– The cost might be ~$60 billion a year, but boy oh boy, this could be a huge step in creating better lives for millions of Americans in the future! I truly believe education is what will set us all free. When we understand how to communicate and are armed with knowledge, we're able to do more things we want to do. The student loan debt burden is out of control, especially when the Internet has made knowledge free. I'm curious to see who pays for the free community schools, but if it's me, I'm all for it!
“We're making it easier for Veterans to transfer their skills and experience into civilian jobs. To every CEO in America, if you want someone to get the job done, and done right, hire a veteran.”
– I'm proud of our government for helping Veterans get jobs when they come back home. It's an embarrassment to see any Veteran who has fought for us to be homeless or jobless.
“And let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth. We can use that money to help more families pay for childcare and send their kids to college. We need a tax code that truly helps working Americans trying to get a leg up in the new economy, and we can achieve that together.”
There can't be a President Obama speech without discussing taxes and the top one percent! It's true that the top one percent earn a tremendous amount of money through long-term capital gains, which is taxed at a much lower rate than the current top one percent's marginal federal tax rate of 39.6%. Now that I don't make top one percent money, and am purposefully trying to keep my AGI to $250,000 or less, I totally understand why it feels good to go after one income group when you don't have to pay more yourself! The question is: is discrimination OK just because we aren't being discriminated against?
“And in the past year alone, about ten million uninsured Americans finally gained the security of health coverage. We can’t put the security of families at risk by taking away their health insurances.”
– Ten million more insured families is a lot, and there are tens of millions more to go. The Affordable Care Act is super contentious because it doesn't just affect the top one percent. Based on my research regarding the subsidy amounts by income for ACA and what percentage of Americans make what, I'm estimating that roughly 20% of Americans are now called upon to subsidize singles who make under $47,000 and families of four who make under $78,000 a year.
Given I'm used to paying higher than average taxes as a lowly wage earner for 15+ years, I'm very amenable to The Affordable Care Act because at least I know my tax dollars are going to help families live or live longer! Genetics do not discriminate between the rich or poor. It is not fair that someone must suffer or die because they can't afford to fight cancer or some random illness they never asked for. Furthermore, in a nation as rich as ours, it seems comical that we weren't providing this health safety net, when plenty of other countries have.
The final piece of information everybody should know is that the President plans to roll back expanded tax cuts for 529 education savings plans that were enacted in 2001 for new contributions. This is somewhat of a curious move because it's taking away a benefit mostly used by the upper middle class, even though there is no income limit to contribute pre-tax (IRS). As a result, everybody who has kids or wants kids better start contributing more now!
IS THE UNION STRONG?
Every time I listen the the State Of The Union Address, I feel like working harder. I'm reminded that Americans are amazingly fortunate to be living in a country that has so much opportunity. For example, I strongly feel that if I put in more effort in writing more helpful articles, more people will come and say hello on Financial Samurai. I don't want to waste my chance, because chances don't last forever.
Being able to see a correlation with effort is what anybody ever wants.
There is this nasty perception by those who have, that those who don't have are lazy and feel entitled. I've spent time talking to people at the unemployment office, hanging out with fellow tennis junkies at Golden Gate Park, in the middle of the day between 2012 and 2013 when I didn't have a job, and I can unequivocally tell you that the desire for a hand out is not there. Everybody who was down on their luck just wanted a chance to succeed. And if they got that chance, they'd try like hell never to return to the state they were in.
One of my good friends Jabir has a wife and daughter. He camped out in front of the Apple store from 10pm – 7am multiple nights a week when the iPhone 5 came out just so he could buy two and resell them each for a $100 – $200 profit. He'd then proceed to drive 10 hours for Uber for $20 an hour. Now that is hustle!
So long as our country allows anybody with enough desire to succeed, America will always be #1.
How do you feel about our union? I'd love to hear from all of you on the highlights from President's Obama speech. Are you better off than you were six years ago? Are you hopeful about the next five years? What are some of the problems you still face?
62 thoughts on “The State Of The Union Address 2015 Cheat Sheet”
I agree we should give free college to everyone. The US only ranked 17th in the world education wise.
I also agree with Obamacare. Out of the top 11 developed nations in the world we rank dead last!
I also agree we should have our US companies pay more taxes to fund these programs. Maybe, then we can widen our lead.
Number 1 in the world in per capita education spending!
Number 1 in the world in per capita Health Expense!
Number 1 in the world corporate tax rate!
It seems to me that throwing more money at the problems is a waste. Fortunately, there are much smarter people in the world than me to make my decisions on how to spend my money.
I’m unemployed now, hoping to start receiving benefits soon (Its been about a month). Got fired for being injured on the job and filing workers comp which cost the managers their bonus, even though my big boss claims that the official reason is someone who went through my checkout line stole some items and that’s why I was fired. I like what you said about trying like hell if I had a chance. It certainly resonates with me. As for the questions are you better off then 6 years ago? I suppose I am, I do have a couple thousand in the bank to show for my six years of work as an unskilled employee. I’m not very hopeful about the next five years. Unskilled work is getting harder to find, and the additional health insurance means that I have to cut out saving money in things like 401k, stocks, etc to afford health insurance.
Great post financial samurai,
I too missed the SOTU address but I love your insightful review and great feedback! I believe the economy is growing, especially around real estate. If you have the means, people NOW is the time to get into rental property as you will be creating a safe place for single family dwelling, you can benefit from tax write offs too – seek professional tax advice for that one as it is state specific!
See you all soon!
Welcome big Al! I love real estate. It’s my favorite asset class!
The United States wastes far too much blood & money on military adventures (which realistically have been failures for the taxpayers).
The U.S. Defense Department is the largest social welfare program on the planet. The amount of taxpayer money being transferred to defense contractors for things the Pentagon doesn’t even want is just incredible. There is nothing more socialist than the military.
I’m very pro education. Increasing the quality/quantity of education for the average American would give us a competitive advantage in the global market place. The community college idea is a good investment.
Sounds like you and I are on the same page.
From my post:
War begets war. One of the biggest reasons why I don’t want to pay taxes is because I know there is a massive military budget in America (~$600-700 billion per year) to not only keep us safe, but to also kill thousands of other people. How amazing would it be to spend $700 billion on education, infrastructure, helping the poor, and diplomacy instead.
We are very much in agreement here. I’d feel better if my military investment was somewhat successful, but no thinking, unbiased person, would consider the Iraq or Afganistan operations successful (maybe a very slight success in Afganistan, but that is very arguable).
After upwards of $3 Trilllion, both of these countries are failed states. It is difficult to see any upside here!
As I said U.S has a huge military budget to keep peace around the world to maintain our self interest and resources mainly. Would you really want U.S. to significantly reduce its military budget and bring back all the troops from Germany, Japan, Korea, Italy, Persian Gulf etc and watch those countries significantly build up their military force again and cause tension? We are there because those countries want us there since they understand U.S. isn’t an occupier, but rather their protector. It’s also in U.S interest to keep peace and influence in those regions. As for Iraq and Afghanistan, it didn’t turn out as we hoped, but that isn’t the military’s fault. Also, there’s too much oil in that region for the major world powers not to get involved. At some point, those countries have to decide to take care of its own people. However, the effort to eradicate militant islam ideology by showing people in that region to embrace democracy by attempting to setup a democratic government in Iraq and Afghanistan was still a noble one.
Ah…. Keep peace around the world? Now that’s funny!
Japan and Germany are wealthy sophiscated countries whom are capable of providing their own defense (and they have their own militaries).
As for the Iraq issue. The place was fine until the U.S. invaded, overthrew the government, and then installed a new government.
I work with military veterans whom have spent time there. They all concur that Iraq is a complete disaster. What you have now are multiple tribes of Shia, Sunni, and Kurds (up north)….. They all hate each other. The level of daily violence is incredible.
I wonder if the evil powers to be would be as daring if US’s military budget got cut in half. I guess that’s the issue. We don’t really want to find out. But, we could reduce it, and I’m not sure many people could tell.
Could Japan and Germany “keep the peace”? Or are they relying on the US? And perhaps they are building up b/c the US continues to be massive?
I’m not exactly sure what “keep the peace” means?
There has never been any peace in my lifetime.
Let’s be realistic here. The United States doesn’t do empires very well. Do we really want to be an empire? Do US taxpayers really want to be paying for the defense of far flung nations?
I’m not concerned with Germany and Japan. World War II ended in 1945. 70 years ago. Come on!
You may as well worry about being invaded by King George!
And another thought:
When was the last time in which the United States truly won a military engagement? I mean where the outcome could noticeably be called a long term success?
The Korean Conflict? More of a stalemate….
As a taxpayer, I want some accountably. Why are so many US military operations such failures? Why is the US public so disengaged about being constantly at war?
I’m thinking it is time to reinstate the draft. I want my fellow citizens to be asking our political leaders tough questions and this is not happening.
I am iffy on the community college thing. On the one hand, there are states (California being one of them, Florida being another), where the community college system has been a huge boon: it’s much cheaper to educate a student at one of those schools, the system as a whole does really well, and doing 2 years of cc and transferring is a normal process for middle-of-the-road students. It is very much not just for lowish achievers. The problem is that this is not how it works nationwide.
Nationwide, only 15% of people who start a community college program end up earning a bachelor’s degree within 6 years. Yes, some of those CC students weren’t ever planning on getting a 4-year degree, but most (over 80%) were. You can blame some of this on lack of finances, but CCs are already very cheap. I also believe that everyone should contribute something financially to their own education (even if it’s just $1000 a year). Making anything free leads to abuse not taking the goods seriously. The biggest benefit I see for free CC is that it would put many of the for-profit vultures out of business, that is sorely needed. Their completion rates are even worse than CCs. (To be fair, there are a few for-profit schools that aren’t vultures, but these aren’t the ones that compete with CCs for business).
Fact source: https://ccrc.tc.columbia.edu/Community-College-FAQs.html
And oh-my-goodness if we get free CC, and if “vouchers” are allowed that can go to for-profit schools then Lord help us all!
Maybe a “free credit to CC, but if you don’t get at least a 3.0 and graduate then you got to pay it all back”?
Okay that actually sounds great–I would still be a little worried about admissions officers pressuring kids who aren’t quite ready to sign up for free tuition, but with a sensible GPA cutoff, the student would figure out pretty quickly that it’s not working and be able to gracefully bow out with minimal debt.
New reader, love what I’ve seen on here so far. I think linking the transcript in the blog post would be helpful to those people who want to go through it and don’t feel like sitting down to watch it the old-fashioned way. :)
To Claire, that is actually what the president said in his SOTU; that there would be grade and time requirements attached to the reimbursement of community college costs. No specifics but the fact that they were mentioned means they’d probably make it into that initiative if it does pan out.
“Forty percent of our college students choose community college. … Whoever you are, this plan is your chance to graduate ready for the new economy, without a load of debt. Understand, you’ve got to earn it — you’ve got to keep your grades up and graduate on time. … I want to spread that idea all across America, so that two years of college becomes as free and universal in America as high school is today.”
(sourced from https://www.cnn.com/2015/01/20/politics/state-of-the-union-2015-transcript-full-text/index.html )
Good point about the “for profit vultures.” The CEO of Phoenix Online sold his house for $25 million or so to the ex Yammer creator in 2014. Now that’s some big time profits!
And good points about not appreciating something once it’s free.
A degree is a stamp…. but the older I get, the more I realize that knowledge is what helps us get jobs, communicate well, and produce great things.
Yes, but not everyone wants to learn more. Not everyone has the motivation to succeed. Not everyone is going to produce great things. And honestly, that is okay.
I just don’t want to pay for people to learn more when in reality they have no motivation to succeed.
With all due respect:
You do realize that the annual budget of the United States is $3 Trillion. That’s $3,000,000,000,000!
And how much would offering free tuition at community colleges cost? Hmmm mm .
The USA was economically successful in the 20th century because of compulsory education through 12th grade. It seems like adding a few more years would be a wise decision and a global competitative advantage!
What is wrong with for-profit schools? What makes them more vultures than non-profit ones?
Probably b/c most quality schools are not for profit.
And when people end up paying thousands of dollars a year for education and can’t get a job, and the school doesn’t do everything possible to place the student, then that looks bad.
Discovered your blog a couple months ago and love it. The content is amazing. I’ve even forwarded the blog to a few friends. I have one piece of feedback: your articles don’t show the date they were published. I don’t know if that was intentional or not, but if it’s unintentional, I find it hard to tie the article with the issues of the time. Also, it makes it impossible to learn the frequency and pattern of when you publish. As a result, I only check your site weekly as opposed to daily the sites with dates.
Thanks for the suggestion. 80% of my articles are written in an evergreen manner. They are always updated, and I tend to respond to as many people as possible as well.
I publish 3-5 times a week, and the comments are always pretty robust.
Finally, you can sign up for my RSS e-mail feed so you get my articles right in your inbox whenever I write them! Welcome to Financial Samurai!
You come back now ya hear?
Taxing 529 plans at ordinary income is not a good move. Those of us in the middle class who make too little to qualify for aid and too much to afford the entire bill are the most penalized. Moreover, from a public policy standpoint, this disincentivizes people to save for college, which could result in more more crushing student loan debt, and how is that good for long-term economic growth? And education is already much more affordable in Europe – the rising costs of tuition coupled with little government help or incentives could result in less kids attending school here which could decrease American soft power over the long term.
I have mixed feelings about free CC. While I think it’s a great idea, I know that nothing is free, and taxes will rise to pay for this free benefit. I think it needs to be more defined. For example, the student has to get certain GPA, maybe complete some type of volunteer work, and concentrate on a major where we need students (engineering or a trade). Think of it as a scholarship instead of free. I was very lucky to have the opportunity to go to school for “free,” but I also received lots of scholarships due to my academic excellence, volunteer work, and area of study.
Republicans adamantly believe stealing is wrong!
Democrats adamantly believe stealing is wrong, unless of course they think they can spend the stolen money better than the person who actually earned it!
Quit cheer leading for the socialist decay of our country. It just doesn’t work out very well in the end. Look at every single country who tried it. United “Socialist” Soviet Republic ring any bells? I know you know better. Why are you selling out?
Can you explain what is selling out? Not sure I understand what is wrong why working hard, producing something, and enjoying life.
What are some of the things you are doing not to sell out?
Sam – What if you lived in a world where the president was talking about how patriotic it is for Americans to earn a lot money and; invest a lot of money; to make our economy the strongest on the planet without ratcheting up our national debt to $18 Trillion dollars in the process? Would you have quit your 1%’er job? I also quit my 1% corporate job after listening to this Marxist talking about me paying my fair share one too many times. He won, I won, you won, America lost. Quit pretending otherwise!
Probably. Life is too short not to take risks and so what you really want to do. I didn’t want to wake up one day with regret for not trying.
How has America lost in an economy as strong as it is now?
Here comes a truth bullet: Junior College is basically 13th Grade. (I know it is now “Community College” but that euphemism is similar to calling Welfare “CalFresh”, SNAP, or the EBT an “Independence Card”) and It is already subsidized through Property Taxes, State Funding, and often Construction Bonds. In Cali, the cost for JC is $46/unit. So a student pays less than $1,500 a year for a full-time course load. If you don’t think a student values their education at $1,500 a year, why does anyone think they will value it at “free”?.
In Cali, the State CC budget it $7.3 billion. There are 2.1 million students that average about 1.2 classes per semester. So it works out to around 250,000 Full Time Students. That is $28,000 a year, per full-time student. Read that out loud. Expect laughter.
And here is the dirty little secret about the JCs. People may complain about the low graduation rates, or the students who take years to complete a 2-year degree, but the one thing that cannot be denied is the ridiculously low course completion rate.. It is very difficult to find the number of “enrolled” and compare to those who “complete” the course with a grade (not an Incomplete). When people pay so little ($138 a 3-unit class), they don’t value it for the real cost to subsidize this student (90% and more to pay for instructor, administration, facility, accreditation, etc.). If you know anyone who works, boots on the ground, in this “higher learning”, ask them about the caliber of students. The dedication they show. The pressure instructors have to make the course work easy so the students don’t drop (and have to ask them not to drop right away, so the course won’t be cancelled). How many truly go on to a 4-year institution.
My point is that this is nonsense. A promise of “free s***”.
btw, the SOTU is, and has always been, a record for the sitting POTUS on what they want posterity to record. 20 years from now, historians or analysts will re-read the transcript, and take statements like “Unemployment is lower” (never mind that the Employment Participation rate is 62.7%, lower than it has been in 37 years, since 1978 in the Carter years). 48 million on Food Stamps in 2014, compared to 27 million in 2007. The problem isn’t “being positive” or “attitude.”
Myself, I do follow current events and government. But I stopped voting a few years back. Government cannot do anything on the few issues I see as important. As a nation, the U.S. hit the tipping point in 2000. Act accordingly.
What about the idea of going to CC for two years, getting great grades and transferring to a tier 1, four-year institution?
A lot of kids out of HS may have no money or just need a gap year to grow up. A CC provides an inexpensive way to find oneself while developing more knowledge along the way.
Respectfully, Jay is right on the money with his comment. The idea of free community college that is already heavily subsidized at both the federal and state level with a 60+% non-completion rate is simply a waste of taxpayer dollars. That student that you mention Sam, that is getting good grades and working hard is a small percentage of the attendees-and they are going to get scholarships anyway (in other words, there is already a system in place for the achievers, so government has zero need to get in the way).
All this proposal will do is create more tax dollar inefficiency-and there is already a ton of that in the Pell grant system. Take a page from the military-you don’t get good grades? You pay back your education benefit to the government. That method would certainly reduce the waste inherent in the current system, freeing up more money to actually benefit those who are serious.
I could write you pages of material about the current inefficiencies in even the university programs-I worked for one of them for a while, and even though they were actually fiscally responsible by comparison to most outfits, the amounts of waste that I witnessed at that job was sickening.
I also have a close friend who does work at a Community College-one that actually has a pretty high graduation rate (comparatively). He will echo JayCeezy’s comments about low calibre of students, and I’ve heard him make exactly the complaint above about being forced to dumb down his curriculum.
There are serious problems that need to be addressed with the education system in America, but throwing more money at it isn’t the answer. It is simply a sound byte for a politician so they can say “well I did something about that, remember?” when in truth they didn’t even commit to the due diligence to really understand the issue.
I live close to a local JC here in the Bay Area, and frequently run through the campus. Last year there appeared this “installation”, for lack of a better word, in the center of the campus. It’s some sort of frame, on which are tied a hundred or so thick ribbons, each with an individual personal affirmation written on it, and a sign above that says something to the effect of, “I can!”
I couldn’t help but be struck by how sad it was that at the college level, it was necessary to coddle students with an exercise that seems more fitting for kindergarten. Thinking of myself when I started college, I would have been horrified to have been so patronized!
I’ve also heard horror stories from JC administrators about the caliber of the majority of the students, and their unbelievable sense of entitlement. I’m praying that these are the exception rather than the rule, but it does make one uneasy for the future of the country….
I like that idea of empowerment!
A lot of the JCP students either may not have much money, have had a lot going on at home, or just need time to mature.
CC provides a low cost way to allow people to marinate and percolate!
The argument that the step up in basis is only benifiting super wealthy trust fund recipients is wrong at best and a total lie at worst. A widow recieving a stepped up basis on a real estate or stock holding to allow her to survive retirement is critical. Although maybe the government would prefer us all to rely on them for everything. There are certain situations in CA where an inherited piece of property with no step up in basis could result in heirs recieving ten cents on the dollar. Unlikely that this would go through a republican controlled house and senate, however it is an insight into the desire for expanded government.
Very nice article. I would point out that no one likes paying taxes, but using the tax revenue for a giant military budget is money well spent and is in U.S. self interest. Without the U.S. mighty military might keeping relative peace in the world, multinational firms won’t be able to operate very easily overseas and would have to spend tons in private security most likely, financial markets will get nervous because the world’s other powerful countries such as Germany and Japan would build up its military which would make their neighbors nervous, etc.
It’s also true financial discrimination against 1% isn’t fair, but for most people trivial. Senior discounts are unfair too to younger people who are far less wealthy compare to majority of senior citizens, but it’s not something most people fret over.
I agree. A country that cannot defend itself and protect it’s interests abroad(read Benghazi)is not a country. While it is true the military is our 4th largest government budget item, it is money well spent, especially with the ongoing terrorism and threats of terroism the Whitehouse seems unconcerned about.
If the government said tomorrow we have to put a 5% surtax on your pay to
be earmarked for the military I would have no problem with that at all.
Bottom line is, in the next two years Obama will do whatever the Republican Congress will let him do.
Hey Sam – you should write a post on saving for kids college when you live in one of the 13 states with no state income tax like WA (I think it’s 13).
No 529 tax benefit for my state and my state program requires funds saved go to WA state school.
Great post but yes, you and I (and lots of your readers here) will be paying for community college of others – no such thing as “free” when it comes to government.
Doesn’t bother me too much I’m already subsidizing health care but as someone with a pre-existing condition I’m glad I can’t be denied now.
Ah, but having NO state taxes is a blessing itself! There are only 7 states with no state income taxes. Consider yourself lucky! California’s state income tax is 7-13%!
I am not sure I’m able to understand how taxing everyone’s regular income 464,850th dollar at 39.6% and their 464,849th dollar at 35% is discrimination against some people. Anyone’s nth dollar is taxed at the same rate as anyone else’s nth dollar.
I would say that working Americans are the most discriminated-against group. For example a working couple earning 74k will pay a marginal rate of 10% on some of their money, and 15% on the rest. An early-retired couple earning 74k in qualified dividends will pay nothing. That’s a big FU to working Americans. At least taxing capital gains income before anyone inherits their dearly departed ancestor’s fortune is a no-brainer for anyone that has to work for a living.
It’s true we all pay the same taxes IF we get to those upper levels, but most never well. Hence, there are people who vote under the assumption to raise taxes on those who will get to that level or who are already at that level, yet DON’T have to pay more taxes themselves.
We should either ALL pay more taxes and pitch in together, or stop using a majority stance to vote on the finances of others.
Check out what happened when San Franciscans voted for everyone to pitch in to support our children’s education: https://www.financialsamurai.com/what-happens-if-i-dont-pay-my-taxes-because-ive-run-out-of-money/
On your last point, should a lifetime of savings and hard work be rewarded? It takes a lot of sacrifice to retire and earn 74K in qualified dividends. I would think that giving older folks a break in retirement is a good thing, no?
Sure… but we also all pay the same marginal rate on the first 40k. Minus the (positive?) discrimination for single earners in married couples and things. It is massively easier to save money at the higher rates. So high earners might have 80% of the income, but 95% of the wealth.
In the gains The hard work has already been rewarded – first when earning in the form of pay, then when retiring. Let’s take some unearned money from our own ER crowd. It’s not like I’m advocating taxing the principle.
Alternately, there could be a wealth tax even on the principle… but that seems to take directly from earned money that’s already been taxed. :(
fwiw I’m in a top 2% family this year, 33% marginal rate, and on the path to FIRE at 35 2 years from now… so I’m not proposing taxing others for my own benefit.
Actually, check out this chart I created from the IRS on various income groups. The Top 1% earn 20% of the total income and pay 38% of total income taxes – almost double.
Yes, I agree that it’s easier to save when you have more money. I believe that going after a tiny portion of the population isn’t going to make a difference. We need to make marginal differences in a huge portion of the population, which means increasing the breadth of participation. It’s just math vs. political rhetoric.
‘Going after’ a tiny portion of the population with 20% of the income (and more than 30% of the wealth) will make at least a little difference, even with math :).
I think the President’s initiatives are modest and generally good for the nation moving forward. The only thing I wish people would stop saying is “Free” Community College.
They need a better way of explaining/describing that Community College will be paid for through taxes like a lot of other services. ie. Federal Highways, Armed Services, Foreign Aid etc etc etc.
I have no problem with my tax dollars going to something like this. If my tax dollars are going to things I dislike such as the Military Industrial Complex and Private Prison Industrial Complex. Community College for 60 billion seems like a deal from heaven to me.
Overall I see good things for Obama’s next two years. I like the way he highlighted 11 million private business new jobs. The employment rate would be lower if the government didn’t shed 5 million jobs.
Can’t really complain about government size when there are 5 million less people working for the government than when Obama came in.
Yes, I can and will continue to complain about the size of government. And I have no interest in paying for other people’s college (community or otherwise). Clearly we are on opposite ends of the political spectrum. But I appreciate you saying it is not free. Make the case that taxes should be used for the community college.
I believe it is in the best interest of a country to have education available to its people.
If you wanted to extend it to 4 years of college, that would be fine with me also. If high school was needed, why stop there? In the end it is all a negotiation, finding a good medium.
I think 2 years of college is a good balance, with easier more transparent transfer rules to the 4 year colleges.
I have no interest in paying for the size of the military, prisons, and farm subsidies just like you have no interest in paying for CC. Guess what it comes with the package of living in the good ole US of A.
If you are going to continue to complain about the size of government, what is the correct size? Smaller government is very vague don’t you think?
Yes it is. And I’m sure it will never be as small as I wish. I’d simply prefer things be done by the state governments. If CA wants to offer community college to its residents, let it. If it is as successful as its proponents think, then other states will follow.
I hope nobody confuses me with believing that the free community college plan is actually free.
From my post:
“– The cost might be ~$60 billion a year, but boy oh boy, this could be a huge step in creating better lives for millions of Americans in the future! I truly believe education is what will set us all free. When we understand how to communicate and are armed with knowledge, we’re able to do more things we want to do. The student loan debt burden is out of control, especially when the Internet has made knowledge free. I’m curious to see who pays for the free community schools, but if it’s me, I’m all for it!”
I know you know that. Obama is the one who is claiming it is free. To be fair, politicians of all stripes always claims stuff is free, when we know better.
Mine was a general statement. I know you didn’t think the cost was free.
This was so helpful, thanks Sam! I didn’t get a chance to watch the state of the union, but now I feel like I did. :)
The unemployment figures are most curious to me. It’s good to see the percentage has dropped down. Although I agree it’s a bit odd that he said we’re below 2007 levels. Maybe it’s his reference to the non specific “pre financial crisis” time frame that makes it so if he’s using an older rate than 3/07. Or it’d be even better if he has access to more recent stats than Oct 2014 that show we’re below 4.4%. In any case, it’s great that UI rates are dropping!
The free community college is quite intriguing. It does sound very expensive to support a program like that, but I think it’d great that it if it goes into affect it will motivate more students to get better grades, and do it within the time limits in order to qualify. The urgency of having to stay disciplined is excellent training to have prior to entering the work force.
I tend to believe and experience has always reinforced this for me, that there is always opportunity for those that are willing to “pay the price”. Meaning they are willing to put in the work to make things happen. There is always an opportunity somewhere.
And in my opinion the web and growing ability to connect anywhere will continue to make for an abundance of opportunity.
Yes, I have witnessed the overall tone of a lot of people in my life change over the past 6-years. Especially from my wife’s side of the family who are almost all in some area of real estate. Things are much better than they were 6 years ago. But obviously not the same as pre-crisis, when things were getting overdone.
I absolutely agree that the $600-$700 Billion that we spend on military could be better spent in other areas like education. I think the free community college is a good step forward. To me investing in the education of your people is the best investment you can make with the public money. The more educated our society is the more innovative and prosperous our country will continue to be.
I personally came from a family that was on welfare and was fortunate enough to qualify for all the financial aid I needed to be the first person in my family to get a college education. So I may be a bit biased since I benefited from the system. But there are millions of kids like me that need that same kind of help.
And here is the rub. That investment is going to come back ten-fold in the form of taxes. Higher education will lead to higher paying jobs, that will eventually result in higher taxes. It is a win/win/win. Its a win for the individual, the government, and all those tax payers that paid into the system.
Very insightful there about growing up on welfare, and now being successfully to be able to pay a lot more taxes to give back to the government!
It’s so encouraging to hear a voice that’s positive about the state of the union. I especially like your take on the 1%: financial discrimination cuts both ways.
When he was talking about the 1%, he was referring to eliminating the step up in basis given to stocks to your descendants. Technically this affects everyone equally since it is not dependent on income. But the top 1% own the vast majority if stocks. So such a change would disproportionately affect them.
It’s true that step-up primarily benefits the wealthy. According to a CBO analysis, 21% of all savings from step up go to the top 1% (measured by income) and another 28% of savings go to those who fall in the 96% to 99% income distribution. And very big dollars are being saved here. Congress’ Joint Tax Committee estimates that step-up will cost the Treasury $175 billion during the five years form 2014 through 2018, making it one of the most expensive individual tax breaks in the code. Moreover, middle class and upper middle folks hold a growing share of their wealth in retirement accounts, which don’t get any advantage from step-up. And to further spare the middle class, Obama’s proposal would exempt gains of up to $250,000 per person/$500,000 per couple on a primary residence and $100,000 per person/$200,000 per couple of other capital gain. (Len Burman, director of the Tax Policy Center, makes the policy case for eliminating step-up here.) – Forbes
Eliminating the step up is confusing to many people, but the bottom line is that the majority of people who benefit from step-ups are not the middle class, therefore the attack against step-ups, and also the use of 529 plans.
While this MAY be true, there is already a tax that was supposed to account for this… and that is called the estate tax. If you don’t step up the basis… then how can the government come in again with an estate tax? We all scoff at the fact that these don’t impact us now… but the estate tax exemption never kept up with inflation which is why they increased it to $5M+ a few years ago. Also, I don’t want to be Europe… I don’t want to pay through the nose for others whom aren’t contributing to society. We are not socialists.
Speaking of the $5 million estate tax exception…. to clarify, the step-up only kicks in/matters after that threshold per person right?
No. Imagine you have a cost basis of zero on $100000 of stock and you are 99. If you sell it, you pay taxes on the gain at ltcg rates. That leaves you with $85000. Now you die. Your kids get $85000 tax free under the estate tax exemption. Now consider not selling it and dying. Now your kids get an increase in cost basis and can sell the stock for $100000 with no tax due. The step up is a big deal if you have highly appreciated stock.