patrick.net

HARM,

What do you consider productive? Was Henry James productive? Is Sandra Bullock productive? How about Teresa Heinz Kerry?

James was little noted as a writer in his lifetime. I would personally hate to have to decide who was 'idle' or what constituted the 'idle rich'. There are, after all, far more people who are not Paris Hilton than people who are.

I would personally hate to have to decide who was ‘idle’ or what constituted the ‘idle rich’.

Well, technically that's exactly what we all do every day --or, more accurately, what our elected representatives do when they decide who gets taxed how much for doing what activities. If we collectively decide that certain forms of consumption are 'nonproductive', we tax them ('sin tax' on cigarettes, alcohol, etc.). If we decided that we would prefer to have people working for a living, then we would tax employment or business income at a lower rate than capital gains. If we want to spur investment in a particular asset class --say, housing?-- then we lower capital gains tax for that asset class.

Today, we seem to have collectively decided that incentivizing passive investment income (capital gains) and hereditary wealth transfer (inheritance) is more important than incentivizing working for a living. So, today your marginal income tax rate is probably higher than the maximum c.g. rate, and definitely higher than the inheritance tax (0%). Of course, we could take Peter P's recommendation and be completely agnostic about all asset classes and activities by instituting some form of flat tax. Actually, I would consider this a vast improvement over the current loophole-ridden, overcomplicated, quasi-regressive tax structure we have today.

There are, after all, far more people who are not Paris Hilton than people who are.

People, yes. Rich people, no. :-)

Paris Hilton starred in a TV show and gets hundreds of thousands just for making appearances at club openings. And she hasn't inherited anything yet, has she?

"If we decided that we would prefer to have people working for a living, then we would tax employment or business income at a lower rate than capital gains."

Good point. Perhaps that line of thought would lend credence to a consumption tax? Of course, that assumes we would be richer as a society emphasizing productivity and savings/investment over consumption. The consumption tax may also tickle your sense of fair play, as the more you spend, the more you pay. DinOr buying his Sears john boat would pay much less tax than Ha-Ha buying his yacht. Same with the bloke who buys a $350,000 3100 sqft in Virginia, verses the fellow who buys his $800,000 1200 sqft in the Bay Area.

I will also add that I have had unpleasent experiences with those who have inherited a good living. I have met Taxi Cab company owners from all over the country, The ones who actually built their businesses tend to be down to earth. The owners who inherited from Dad or Gramps tend to be elitist pigs. These pigs actually believe they are superior folk who "worked their way up" to running the company their parents had passed on to them. Maybe it all will work out. One of our competitors was an heir with a 114 cab fleet. He ran the company into the ground, so we bought up the wreckage and incorporated into our fleet.

I say tax the devil out of any inherited wealth large to make the heirs unconcerned about earning a living. Other than that, just tax consumption.

"Paris Hilton starred in a TV show and gets hundreds of thousands just for making appearances at club openings. And she hasn’t inherited anything yet, has she?"

No, if by inherit you mean dead parents. Isn't Paris Hilton the beneficiary of trust funds set up long ago, possibly generations ago? Also, I think she was well provided for out of family wealth long before she was working in TV and making appearences. I do not think she drove an old Camry while working as waitress waiting for her big break. Also, if her name was not Hilton, would anyone care about her porn movies, inane TV shows, bimbo appearences, and jail time?

HARM,

Agreed. While everyone was busy marveling how much their home had appreciated on Zillow that day, they obviously weren't too concerned that their employer was actively lobbying and conspiring against them.

I mean why bother complaining about reduced company match and health benefits? At this rate I'll be retired up in Oregon with half a mil. tax free! I just need 5 more years just like... the last 5... and I'm home free!

How did Headset know that if I "did" buy a yacht I would expect to pay jon boat prices? Hmm?

Is it wrong for me to wish there would have been a major prison riot during her stay? You know what I think? I think the avg. American couldn't care less about her. It's the damn media that can't stop talking about her!

"I think the avg. American couldn’t care less about her. It’s the damn media that can’t stop talking about her!"

Admit it!!

All women want to BE her

All men want to DO her

>>I say tax the devil out of any inherited wealth large to make the heirs unconcerned about earning a living. Other than that, just tax consumption.

Good luck. You're trying to fight the American dream.

More people in America believe they'll one day be rich, than anywhere else in the world. So they know that big taxes will hurt them in the end.

Just look at the movement to fight the Estate (Death) Tax - even though most people will never run afoul of it.

Optimism is a great thing to take advantage of.

I sent the reporter the mortgage details I posted a couple of days ago on the local familicide.
Looks like he did some further research and disovered a recent refi (which hadn't shown up yet in PropertyShark).
In 2005, the couple bought their three-bedroom 1918 Craftsman home on Northside Avenue in Berkeley for $640,000 from a woman who had been a patient of Kawai's, according to public records and neighbors.
Note: 80% variable rate first mortgage. Fixed seond.

On June 6, 12 days before the tragedy, the couple refinanced the mortgage on their home and took out an additional $72,500 loan, records show.

HARM,

I think we're more in agreement than not.

I was interested by flat tax proposals as a part of Forbes's candidacy. Attractive as the idea may be - pace PeterP - I can't imagine it not becoming crusted over with congressional barnacles within a few years.

If we excluded capital gains and inheritance in a flat tax scheme, and provided a base exclusion of $20k or so, I'm told the rate would come to about 17%. I presume taxing estates and gains would come out a bit lower.

Hm.

EBGuy,

Morbid. Morbid and sad. Morbid and sad and true.

Would doing a short sale or having a foreclosure on your credit report be worse than this? Is ANY house worth this? Is it truly better to kill your own family and then yourself rather than become (God forbid) a "renter"?

Sad.

All men want to DO her

Uhh... not saying she's especially ugly or anything, but Paris Hilton does not fit my own physical ideal of attractiveness. For one thing, she's got a pointy beak of a bird-nose. She also has the physique of a scrawny teenage boy. Personally, I prefer curvy brunettes.

@Bruce,

Although I am obviously not a *big fan* of the current Administration, it's too bad the Bush tax reform plan ended up completely D.O.A. At the very least, it might have stimulated a long overdue debate on solutions to our current unwieldy mess.

I wouldn't kick her out of bed for eating crackers, but she isn't exactly Selma Hayek. Paris is rich, though. If you have ambitions about ruling a small tropical country, she might be your girl.

eburbed,

Great posts as always! I especially liked the "eco-friendly" house! WTF? The aerial photo says it all. Yes, extensive use of the old "fish-eye" lens is a dead give away.

Brand,

I think you should aspire to a younger Julia Louis Dreyfus. Great sense of humor, very attractive, a much richer daddy and no criminal record.

My second oldest sister is a dead ringer for "Elaine". Complete with squeaky voice, shallow, easily bored, ready to blame personality and yes... she DANCES like "Elaine"!! Sorry, she's been "happily married" for 28 years. As far as I can tell, at least SHE'S happy?

Every time I call, my brother-in-law is like, "You REALLY want to talk to her?"

If I wanted to be a banana republican dictator, I would like to have Madonna as a consort and Kate Winslet as a mistress.

I was actually joking that all men want to DO her. I would not put her as the thinking man's sex symbol.

She ain't that pretty

She ain't that smart

She got's the herpes and who knows what else.

And I would hope that women would aspire to be more like Carly Fiona, Meryle Streep, Nancy Pelosi, or Meg Thatcher. But, the grain of truth that made the joke is that it seems most women would rather be known for physical beauty and sex appeal than accomplishment.

I would find Paris Hilton much less objectionable if she looked like Giesele Bundchen.

On an earlier note, I see the High Grade Structured Credit Strategies for Make Glorious Nation of Kazakhstan has been swept under the rug.

Where it makes an unattractive lump.

Which BS hopes the guests won't notice.

"Where it makes an unattractive lump" LOL!

Now where's my rug beater damn'it! I_ just_ can't_ get _ this _ (whack!) damn _ thing_ down!

What a mess. Oh, and I'm smack dab in the middle of it! Every time I think we're a done deal they keep asking for more income documentation! But..but..bu.. HEY! I don't have anything left to give you guys damn'it!

If we excluded capital gains and inheritance in a flat tax scheme, and provided a base exclusion of $20k or so, I’m told the rate would come to about 17%.

And if someone says that the scheme regresses against the poor we can say it is technically a progressive tax system:

Below 20K: 0%
Above 20K: 17%

People live happier in an "unfair" capitalist society than in a supposedly "fair" system like the Soviet.

Besides, fairness is subjective. Any system is "unfair" to the bottom half of the population.

EBGuy :

Real sad story. Seems like, guns don't kill people, mortgages do.

I have no problems with rich, spoiled kids. They spend quickly and unwisely. They create employment and keep our economy going.

Great posts as always!

Thanks.

It's actually getting a little harder to run burbed.com now that prices in the crappy areas are declining a bit. It's not as much fun to make fun of a $399k house that looks like it's about to collapse, as it is with a $600k house.

It's also on the harder side to make fun of $1mil + houses. They tend to have better curb appeal.

These are the challenges I face. :)

It’s also on the harder side to make fun of $1mil + houses. They tend to have better curb appeal.

I am sure there are still quite a few million dollar shitboxes out there.

Yes, "fairness" is pretty subjective. How about "incentivizes economically productive activities or socially beneficial outcomes" as a substitute? Also somewhat subjective, but at least a bit easier to define.

@eburbed,

Not at all! Just the fact that they're asking any money period makes many of them a great source of entertainment! (Some might say "irritainment"?) It's one of my our favorite pastimes. I guess the wife and I would have to call it "they're asking WHAT!?"

People, people... lets try to refocus (well, it looks like the last couple of posts put us back on track already). Okay, how is this for a seque. Sunterra terminated a contract with Hilton Hotels and rebranded their Embassy Vacation Resort Grand Beach to Sunterra Lake Tahoe Vacation Resort. I just glanced at the secondary sales market and it looks like these timeshares are off by around 25% from their secondary market prices around a year ago (this is, of course, on top of the 50% discount you receive when you buy a resale timeshare) . Not sure if this is just due to the rebranding or the "robust" Tahoe market. I imagine there will be some good deals in the secondary timeshare market when the downturn gets into full swing and people are trying (desperately) to generate some cash. Note to threadmeisters, I'd like to see a timeshare thread at some point to discuss the good, bad and ugly of these beasts.

Here are some quality quotes from an impovrished high school senior talking about his internship at a real estate company. At least he now knows what he doen't want to do.

Trenado talks about his experiences in real estate with dry wit.

"But I knew to get this project to completion, I had to learn about the housing market in the Bay Area and about loans," he said. "The loan application, it's like a whole different genre. There's nonfiction, fiction, terror and horror, and then there are loan products. I really had to read and ask my mentor, OK, what does this mean?"

I have no problems with rich, spoiled kids. They spend quickly and unwisely. They create employment and keep our economy going.

I do when other kids are going without their most basic needs met - food, clothing, shelter and medical care. Capricious luxury spending by the idle rich might be great if you're a yacht salesman or Tiffany jeweler, but not so helpful if you're a line cook or schoolteacher.

If the rich choose to waste their fortune on partying and expensive crap, then fine. But don't come to ME later boo-hooing about how you cannot afford to contribute a paltry 15% of it towards basic services for the poor, or to help pay for police, military, infrastructure, etc. When it comes to the "something for nothing" crowd, no group is worse than the rich.

Capricious luxury spending by the idle rich might be great if you’re a yacht salesman or Tiffany jeweler, but not so helpful if you’re a line cook or schoolteacher.

But can't you buy stocks of yacht salesmen or jewelers? ;)

When it comes to the “something for nothing” crowd, no group is worse than the rich.

They can whine but some social services must be maintained.

I’d like to see a timeshare thread at some point to discuss the good, bad and ugly of these beasts.

EBGuy,
Thanks for the corralling efforts. I agree - timeshares would at least be a somewhat different from the usual stuff we talk about. It'll probably degenerate into more talk about japanese knives and sushi, though. :)

However, I think that not only is the timeshare market off considerably in second home markets like Tahoe, but the full-on condo and SFH market is significantly down there, too.

So, When will the credit party be over?

Will it be high interest rates (8% and up mortgages)?

Or can the last dance occur even with low rates, with the music stopped by much more strict borrower qualifications?

I remember that during the Savings and Loan collapse in 91, car prices fell rapidly not because interest rates went up, rather because loans were much harder to get. If you had the cash, bargains were easy.

I have read the well reasoned arguments on this blog that point to high stickiness for the ongoing house price correction, but I hoping that a tougher than expected loan approval process will insert a little teflon to the slide.

Oh I'd be open to talking about timeshares. Why not? At least there are discounter shops already set up to handle the excess inventory. We could learn a lot.

It was one of the first places I thought there would be bottom fishing opportunities. For those of you looking for a 75% correction, I think I've found it!

Speaking of "lifestyles of the rich and famous", check this out:

http://beta.cnn.com/2007/WORLD/europe/06/21/prince.william/index.html

--The heir to the British throne is serving as a second lieutenant ('leftenant'?) in the British army, and until today earned £22,000 a year. Obviously, his needs were lavishly well tended to as a child, but was the only money he directly controlled.
--Now that he's turned 25, he inherits a modest (by American rich standards) £250,000 to £300,000 per year.
--His future plans: "William will also do a stint with the Royal Air Force and the Navy, as well as carry on with his charitable work. He will also learn about state management and the constitution, Fitzwilliams said."

Can you imaging Paris or your typical spawn of the American super-rich accepting a similar lifestyle? Not saying the guy is exactly "roughing" it or that he's living like an ascetic monk, but this does provide an interesting contrast in terms of the social contract from across the pond vs. here.

HARM, comparing Prince William to Paris Hilton, only to conclude that the British have more class than Americans... that's just bullshit. Rich Americans are extremely generous with their money. Compare Bono to Angelina Jolie, Warren Buffet to Princess Diana, Bill Gates to the British royal family, and the playing field is pretty level.

If you want to compare Paris Hilton to her European peers, you will find a tremendous abundance of material from the Paparazzi. There is lots of old money in Europe (despite your idyllic vision of the place), and their trust fund babies can be every bit the reckless, hard-partying snots as ours.

@Brand

Ok, disclaimer: I posted that partly 'cause I knew it would get a rise out of you.

I don't doubt spoiled rich European trustafarians are every bit as bad as ours, human nature being what it is --they just have fewer of them, which is a good thing. :-)

Comparing the Bush twins to Prince William and Prince Harry, however, may be appropriate.... I think the Brits win that one.