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GOP Tax Reform Looks Great...Except for Urban Liberals


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2014 Feb 27, 2:39am   5,516 views  39 comments

by John Bailo   ➕follow (0)   💰tip   ignore  

I've been reading the GOP tax reform proposal and it looks great to me; however, almost no news media outlet is reporting it correctly. They keep saying it cuts popular deductions which is not true at all. It does limit some deductions like mortage so that the average Joe gets it, but someone living in a $2 million dollar pied a terre in Mahattan does not.

The mortgage interest deduction would be reduced for people buying houses costing more than $500,000. The deduction for charitable giving would be limited to contributions that exceed 2 percent of a taxpayer's income.

In exchange, income tax rates would be cut and the standard deduction, which is used by most taxpayers, would be nearly doubled. The child tax credit would be increased and a complicated series of tax breaks for education expenses would be consolidated and simplified.

http://news.yahoo.com/gop-tax-plan-lowers-rates-repeals-popular-breaks-205426022--finance.html

#housing

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1   HydroCabron   2014 Feb 27, 2:44am  

Why not keep rates the same, but get rid of those popular breaks? The rates are pretty damn low.

Probably because nobody wants to pay the full costs of government, even though we all have a part of it we like.

2   Heraclitusstudent   2014 Feb 27, 2:50am  

The mainstream is made of most politicians, industries like Wall Street, mortgage lenders, realtors, builders: basically a lot of people who don't want to see their subsidies go away. And the media is with them.

Now people have to pay inflated home prices - that could fall. High prices go against their interests, whereas it used to be that rising prices were in most people interests. So the tide will turn at some point.

3   Paralithodes   2014 Feb 27, 3:12am  

Getting rid of the mortgage interest deduction is a great idea, regardless of anything else. But it should be phased in vs. a significant drop at one point.

Phasing it out over time would:

a) Allow current owners who count on that deduction, or who paid an inflated price because they or someone they bid against factored the deduction into their bid, to grow out of it since their deduction falls every year anyway as the interest portion of their payments falls.

b) Allow current buyers to manage their expectations (e.g., learn to not factor the deduction into their offer prices, or to factor it in at a lower value, etc.

4   HEY YOU   2014 Feb 27, 3:54am  

El HydroCabron says

Why not keep rates the same, but get rid of those popular breaks? The rates are pretty damn low.

Probably because nobody wants to pay the full costs of government, even though we all have a part of it we like.

Wait just a damn minute! I don't like any part of the govt. especially the Democrats & Republicans. lmao

5   edvard2   2014 Feb 27, 4:02am  

Why should anyone be surprised here? As seen, the proposals being presented by the GOP do nothing to address the reality at all. Instead all they're proposing are is the elimination of certain tax deductions that are popular and beneficial to the middle class while not even breathing a word about the obvious problem- like having lower tax rates for the wealthy.

But even beyond that cliche' the REAL issue is that the GOP's plan of never-ever raising taxes is a plan prone to failure. If a business were being run and the company constantly cut their product's prices even though it meant they were losing money as a result then they wouldn't be in business for very long. Its the same thing with the tax situation in the US: Since the GOP made the word "Taxes" a dirty word they aren't being raised. It takes money to run a country no matter how frugal it might be.

6   Paralithodes   2014 Feb 27, 4:48am  

edvard2 says

Instead all they're proposing are is the elimination of certain tax deductions
that are popular and beneficial to the middle class

What is beneficial to the middle class about the mortgage interest deduction (which would not be eliminated but the threshold reduced)?

What is the problem with raising the standard deduction to $22K for couples/families? (This alone makes the mortgage interest deduction a moot point for the vast majority of homeowners).

edvard2 says

while not even breathing a word about the obvious problem- like having lower tax
rates for the wealthy.

How do you figure this?

edvard2 says

But even beyond that cliche' the REAL issue is that the GOP's plan of never-ever
raising taxes is a plan prone to failure. If a business were being run and the
company constantly cut their product's prices even though it meant they were
losing money as a result then they wouldn't be in business for very long.

Is this what happens when taxes are cut: revenues go down? Is this what annual revenue figures show on the OMB website, available for review and download right now? (your assertion of course also assumes that deductions, etc. are not cut).

edvard2 says

Since the GOP made the word "Taxes" a dirty word

Perhaps you are not familiar with the history of our country, from the beginning and even through current times.

7   mell   2014 Feb 27, 5:13am  

edvard2 says

Why should anyone be surprised here? As seen, the proposals being presented by the GOP do nothing to address the reality at all. Instead all they're proposing are is the elimination of certain tax deductions that are popular and beneficial to the middle class while not even breathing a word about the obvious problem- like having lower tax rates for the wealthy.

LOL you must be joking (hint, hint: surtax on the most wealthy). This is the first step in the right direction, eliminating crony capitalist loopholes which only benefit the parasitic FIRE sector. It's a shame that Obummer and the Dems couldn't come up with anything but raising taxes on the middle class. This is a great proposal actually worthy of more thorough consideration than partisan hackery.

8   edvard2   2014 Feb 27, 5:50am  

Paralithodes says

What is beneficial to the middle class about the mortgage interest deduction (which would not be eliminated but the threshold reduced)?

You asked? Should be obvious: Most middle class families own houses. Most have mortgages. Most benefit from having the ability to reduce their total tax via mortgage interest deductions. Simple enough.Paralithodes says

How do you figure this?

I'm not the only one to state the obvious and I'm befuddled I am having to "explain" this given its common knowledge. The tax system is lopsided. The largest chunk the of the country's wealth is tied up in a very small upper percentage of the population and as of now are taxed at a lower percentage than the bulk of the population. Mathematically that makes no sense.Paralithodes says

Is this what happens when taxes are cut: revenues go down? Is this what annual revenue figures show on the OMB website, available for review and download right now?

Believe you might have misunderstood my context. What happens with the cost of gas, milk, cars, houses, lumber, labor, and food? Why... it goes up over time. That's called inflation. So with inflation, people have to pay more for those things. What do you think all those ships, planes, and government cars run on. I think they run on gas... right? So if the cost of gas, food, and other items goes up and the government uses those- just like the rest of us- then would it be a fair assumption to say that they are also affected by inflation? I think we can agree on that, so moving on, does it make sense to continually cut revenue when the cost of running even the existing programs goes up over time like everything else? Of course not. hence why a plan to never raise taxation- which in this case is revenue- is impractical.Paralithodes says

Perhaps you are not familiar with the history of our country, from the beginning and even through current times.

I am. In fact, since I assume that you are as well then you too would see that as recently as the 60's and 70's that the aforementioned tax situation I mentioned previously was actually backwards from where it is now, where the upper level earning segment of the population paid a much greater tax rate versus today where they pay less. People seemed to be ok with that too. So with that established, I can only assume you agree with my previous statements.mell says

It's a shame that Obummer and the Dems couldn't come up with anything but raising taxes on the middle class. This is a great proposal actually worthy of more thorough consideration than partisan hackery.

... except taxes haven't been raised on the middle class. In fact, its been readily and widely shown that taxes for the middle class have been lower than they've been in over 60 years. Pehaps this "Obummer" you mentioned would have done it, but Obama hasn't.

I'd be curious if it were the Democrats who had come up with this "stunning" piece of legislation. Bet those arguing against me would be totally against it.

9   corntrollio   2014 Feb 27, 6:57am  

edvard2 says

You asked? Should be obvious: Most middle class families own houses. Most have mortgages. Most benefit from having the ability to reduce their total tax via mortgage interest deductions. Simple enough.

Only in high housing cost/high state tax states. If you live in flyover with low or no state income tax and have a $100K mortgage, then often you will benefit by taking the standard deduction.

The mortgage interest deduction is highly regressive. The more money you make, the more money it shields because it shields money at the marginal rate. The larger house, the larger deduction you can take.

edvard2 says

while not even breathing a word about the obvious problem- like having lower tax rates for the wealthy.

Yes, what would really help is making capital gains taxes the same as income taxes, just like in Reagan's 1986 reforms. The reality is that Reagan's tax plans were always more pragmatic than the current Republican party line because they generally raised taxes as much as they lowered taxes -- yes, marginal rates dropped to 28%, but so many loopholes were cut and so many taxes were raised in categories you couldn't even fathom if you think a 1040 is too complicated. Reagan's tax plan would be considered commie under the current Tea Party orthodoxy.

This plan keeps capital gains at the same rate because you can shield 40% of capital gains from taxation. That means if you are below the threshold, your capital gains tax rate is 15%, and if you are above the threshold, it's 21%, which is remarkably similar to the current 15%/20% brackets for capital gains. By the way, the loop hole on carried interest also needs to be killed.

10   finehoe   2014 Feb 27, 8:58am  

If tax reform is on the agenda, closing loopholes, subsidies and government welfare programs for Corporate America ought to be the top priority.

11   mell   2014 Feb 27, 9:16am  

edvard2 says

... except taxes haven't been raised on the middle class. In fact, its been readily and widely shown that taxes for the middle class have been lower than they've been in over 60 years. Pehaps this "Obummer" you mentioned would have done it, but Obama hasn't.

BS. The only people who benefited are those already dependent on the government (i.e. mostly qualified as poor-lower middle-class), the majority of the middle-class (the middle-class and upper middle-class) got shafted under Obummer. Furthermore people should not be encouraged to buy overpriced houses because they get a mortgage deduction similarly to nobody should get encouraged to take out a loan for stock speculation, buying a car or hookers and blow. Instead lower taxes on everybody except for the 1%, scrap entitlements and cut spending overall. Great plan, although there are plenty republican positions I don't agree on.

12   mell   2014 Feb 27, 9:17am  

finehoe says

If tax reform is on the agenda, closing loopholes, subsidies and government welfare programs for Corporate America ought to be the top priority.

Sure, for everybody, corporate and individuals. This plan definitely does much for to address this issue than anything from the Democrats and this administration.

13   corntrollio   2014 Feb 27, 9:19am  

mell says

The only people who benefited are those already dependent on the government (i.e. mostly qualified as poor-lower middle-class), the majority of the middle-class (the middle-class and upper middle-class) got shafted under Obummer.

That's a talking point that doesn't really have any substance. Where's your proof? What direct actions did Obama take the resulted in those things? Please explain. Obama doesn't always do things right, but I'm trying to find a causal pathway here.

Presidents get blamed for a lot of things they have no control over, and sometimes many things they *constitutionally* have no control over. It's quite strange.

14   mell   2014 Feb 27, 9:20am  

corntrollio says

This plan keeps capital gains at the same rate because you can shield 40% of capital gains from taxation. That means if you are below the threshold, your tax rate is 15%, and if you are above the threshold, it's 21%, which is remarkably similar to the current 15%/20% brackets for capital gains.

Which is good as investments are made from already taxed money and only the uber wealthy would pay higher investment taxes. Totally fair to exempt 40% as if somebody's income is mostly from investments they will end up paying much more. I am on board with this.

15   mell   2014 Feb 27, 9:25am  

corntrollio says

That's a talking point that doesn't really have any substance. Where's your proof?

My proof are my taxes since Obama took office, and I am (upper) middle-class. I am working on getting closer to the 1% as I don't thin much will change with this administration and the Dems and their asinine tax hikes. After taxes my gross income, which consists of salary plus capital gains, is reduced way too much. I should be able to retain 75% of it, esp. considering that there are literally no perks/services returned for your taxes, it all goes to the war machine and entitlements. I also advocate a fee based system similar to ballot measures where the fees are tied to one purpose only and cannot be abused and funneled into crony capitalist pockets like taxes. Taxes are very inefficient in general.

16   Paralithodes   2014 Feb 27, 9:42pm  

edvard2 says

You asked? Should be obvious: Most middle class families own houses. Most have
mortgages. Most benefit from having the ability to reduce their total tax via
mortgage interest deductions. Simple enough.

Not quite so simple or obvious... Homeowners pay for the alleged benefit of the mortgage interest deduction upfront with higher home prices. Not sure if you want to increase the bid on a certain house you want? Your realtor will remind you to not forget about the mortgage interest deduction, to supposedly make increasing your bid price more affordable.

This deduction is something that is marketed as a means to make homeownership more affordable, but what do those who are opposed to its reform claim? That reducing/ removing it will lower home values for current owners. Perhaps if you can explain this significant contradiction, things will be more simple and obvious.

As it stands, the mortgage interest deduction does not make homes more affordable, it simply makes taking on more debt easier.

edvard2 says

I'm not the only one to state the obvious and I'm befuddled I am having to
"explain" this given its common knowledge. The tax system is lopsided. The
largest chunk the of the country's wealth is tied up in a very small upper
percentage of the population and as of now are taxed at a lower percentage than
the bulk of the population. Mathematically that makes no sense

You claimed that this proposal would halve the rates of the rich. Yet the proposal has a 10% surcharge on the top 1% or so, which would bring their top rate to 35%. The largest % of individual federal income tax comes from the most wealthy. That is a mathematical fact, verifiable via www.irs.gov.

edvard2 says

I am. In fact, since I assume that you are as well then you too would see that
as recently as the 60's and 70's that the aforementioned tax situation I
mentioned previously was actually backwards from where it is now, where the
upper level earning segment of the population paid a much greater tax rate
versus today where they pay less. People seemed to be ok with that too. So with
that established, I can only assume you agree with my previous statements.

I agree with your previous statements regarding "taxes" being a dirty word. I disagree with your claim that it is the GOP that made taxes a dirty word (though I understand why you would make that claim on Patnet, because everything bad in the word is the GOP's fault here). The history of our country just doesn't support any claim that it is the GOP that is at fault for not liking taxes. We can start in the 1770s and talk about JFK as well...

edvard2 says

... except taxes haven't been raised on the middle class. In fact, its been
readily and widely shown that taxes for the middle class have been lower than
they've been in over 60 years.

Since it seems like removing deductions is viewed as a way of raising taxes on the middle class, let's use Obamacare as an example... It raises the medical expense deduction from above 7.5% of AGI to above 10% of AGI.

Now since someone with a very high income is not as likely to have medical expenses above 7.5% or 10% of their AGI, as someone with a lower income, who does this deduction impact the most?

Answer: The middle class, especially those with higher medical needs or special needs kids. I expect to get impacted by this for 2013 taxes. Good thing I'm in the relatively upper middle class instead of the more average middle class - relevant deductable expenses would be the same regardless, but it would certainly be more financially painful. (Note: I'm not personally complaining - I think most deductions should go away. But here is an example of something that specifically hits the middle class instead of the rich.).

17   Paralithodes   2014 Feb 27, 9:47pm  

corntrollio says

Only in high housing cost/high state tax states. If you live in flyover with
low or no state income tax and have a $100K mortgage, then often you will
benefit by taking the standard deduction.


The mortgage interest deduction is highly regressive. The more money you
make, the more money it shields because it shields money at the marginal rate.
The larger house, the larger deduction you can take.

Even in high cost/high housing states, it provides incentives to people to take on more debt to get the house they want, so they bid up prices.

This is one issue where "liberals" and "conservatives" could very much agree on if they understood more about the details. Even if their main points are different, they overlap enough and are difficult to refute. Bellingham Bill/Bob/Troy does a good job explaining this one.

18   bob2356   2014 Feb 27, 9:57pm  

mell says

My proof are my taxes since Obama took office, and I am (upper) middle-class.

What law did Obama pass that raised your taxes?

19   finehoe   2014 Feb 27, 10:53pm  

mell says

I am working on getting closer to the 1%

Dream on, honey.

20   control point   2014 Feb 27, 11:51pm  

Is the plan revenue neutral? Details are emerging, but the answer cannot be "yes" while cutting tax rates at the top unless taxes are increased elsewhere.

Elimination of write off from State and local taxes while doubling the standard deduction to $22,000? This effectively removes the mortgage interest deduction as well.

Very few other itemized deductions large enough besides taxes paid and mortgage, therefore mortgage interest would have to exceed at least $15-17k to exceed the standard deduction. (assuming at most 5-7k in other itemized deductions)

At 4%, that means a mortgage balance of $375k. At 80% LTV, home value would be ~$470k. About twice the median home.

Effective capital gains tax rate increase from 23.8% to 24.8% for ultra-rich? Yawn. This will most likely be offset by the reduction in their ordinary income rate from 39.6% to 25%.

i.e. if 90% of your income is taxed 1% higher but 10% of your income is taxed 14.6% lower, .9% increase offset by 1.46% decrease. In order to pay more under this plan, the "mix" of income must be greater than about 93.5% capital gains and 6.5% ordinary income.

Anytime you see a reduction in the EIC, you know who is going to have an increased tax burden. With the EIC the working poor have an effective negative tax rate. You could make the standard deduction $100k, but you are never going to get a negative tax rate through deductions.

Lets look at a median income family of 4. $55k income, $100k mortgage balance, 6% state income tax rate, 1.5% property tax rate.

Under Camp's plan, this family would have standard deduction of $22k, taxable income of $33k and a tax rate of 10%, so taxes due $3300, less 2*$1500 child tax credits, taxes of $300.

Currently, this family has 4*personal exemptions ($3900) = $15,600. They have $4k in mortgage interest, $1.7k in property taxes, and $3600 in state income taxes. They take the standard deduction of $12,200 since it is greater. So $55k - $15.6k - $12.2k = $27,200 in taxable income. They pay $1,785 plus 15% of (27,200-17,850) = 1402+1785. Total 3187 less $2k in child tax credits, taxes of $1187. Plus they get EIC of $4455. This median family would get a refund of $3268.

Current law, they have net tax rate of -5.9%. Camp's plan would have a median income family of 4 PAY .5%. Effectively, the tax rate for a median income family of 4 would increase 6.4%.

Beware wolf in sheep's clothing...

21   mell   2014 Feb 27, 11:56pm  

bob2356 says

mell says

My proof are my taxes since Obama took office, and I am (upper) middle-class.

What law did Obama pass that raised your taxes?

Surtax on Investment Income
Medicare Payroll Tax
Skyrocketing health care premiums (they had to drop the current provider in the middle of the year and scramble for one with less steep hikes)

All in all I estimated easily in an additional burden over 10K even without factoring in health care - so yeah, hope and change ;)

finehoe says

mell says

I am working on getting closer to the 1%

Dream on, honey.

I know Obummer is killing mobility for the middle-class and protecting the cronies, but whadda you gotta do? You just gotta try harder ;)

22   lostand confused   2014 Feb 28, 12:13am  

edvard2 says

You asked? Should be obvious: Most middle class families own houses. Most have
mortgages. Most benefit from having the ability to reduce their total tax via
mortgage interest deductions. Simple enough

Except in coastal bubble states-middle class don't buy 500k houses.

23   control point   2014 Feb 28, 12:18am  

mell says

bob2356
says



mell
says



My proof are my taxes since Obama took office, and I am (upper) middle-class.


What law did Obama pass that raised your taxes?


Surtax on Investment Income
Medicare Payroll Tax

Your quote above: I am (upper) middle class, does not mix with paying the Investment Income Surtax (MAGI over $250k/200k. You need gross income of at least $220k/$270k to have this)

This is not middle class, or upper middle class. It is 4/5 times the median household income. It is top 1.5%-2%.

"Middle" means middle. 25%-75% makes most sense. Maybe you could argue it is 35%-85%. But certainly not top 2%. You are rich, and Obama has made no bones about raising taxes on the rich. He campaigned and won on it twice.

Boo freakin hoo you pay .9% more in income taxes,and 3.8% more on investment income. At $300k income with $50k investment income, you pay $2350 more in taxes. $10k? Even at $450k income, $200k investment you pay only $7600 (3.8% of 200k more, you wouldn't pay medicare because that is only on Wages)

You obviously make under $450k because you didn't camplain about that tax increase.

24   mell   2014 Feb 28, 12:31am  

control point says

You obviously make under $450k because you didn't camplain about that tax increase.

That is correct, I am just over the lower end to pay for the other taxes I mentioned.

control point says

"Middle" means middle. 25%-75% makes most sense. Maybe you could argue it is 35%-85%. But certainly not top 2%. You are rich, and Obama has made no bones about raising taxes on the rich. He campaigned and won on it twice.

You cannot make a tech salary like that outside of CA, prob outside of the bay area. And that is upper middle class here. Nothing more. I give a fuck about what Obama thinks is rich, if he wanted to tax the "rich" he'd tax the 1% like the proposed levied surtax on the most wealthy by the GOP plan.

25   control point   2014 Feb 28, 12:38am  

mell says

You cannot make a tech salary like that outside of CA, prob outside of the
bay area. And that is upper middle class here. Nothing more. I give a fuck about
what Obama thinks is rich, if he wanted to tax the "rich" he'd tax the 1% like
the proposed levied surtax on the most wealthy by the GOP plan.

You don't understand math then. Even in the CA, or the BA, a $250k income is top 5%. That is rich compared to the median.

As an aside - I agree with you. I think the taxes should be more progressive - I think they should be 90% on incomes over $10 Million, I don't think there should be a different rate for capital gains and wages. I don't think they should have increased taxes on guys like you, it would have been better to do it MORE onthe generationally wealthy, the true capitalists. I think this because of large numbers - yeah, you are only 1.4999% away from Warren Buffett - but you are closer in income to the bum who just panhandled $20 bucks than your are to him in both absolute and percentage terms.

Your interests are not any more aligned than his are to the bum's. You would be better off if he paid more, FWIW.

But don't argue that you are middle class when your income is 4-5 times the median. By math, this is not true.

26   SiO2   2014 Feb 28, 12:54am  

bob2356 says

mell says

My proof are my taxes since Obama took office, and I am (upper) middle-class.

What law did Obama pass that raised your taxes?

There is an increase on investment tax for those with agi more than $250k. I can imagine that someone living in the Fortress might think that $250k annual income is middle class.

However, they would be wrong.

(this is not class envy or anything like that, just a factual statement. )

27   finehoe   2014 Feb 28, 1:15am  

control point says

Warren Buffett - but you are closer in income to the bum who just panhandled $20
bucks than your are to him in both absolute and percentage terms.

This in a nutshell is the problem with the vast majority of Republican voters. Because they make a decent salary and have some money in the bank, they think their interests are alligned with the Bill Gates and Jamie Diamonds of the world, when in reality they are wage-slaves like the rest of us. And are viewed that way by their plutocrat masters, just like the rest of us.

28   lostand confused   2014 Feb 28, 1:29am  

finehoe says

control point says



Warren Buffett - but you are closer in income to the bum who just panhandled $20
bucks than your are to him in both absolute and percentage terms.


This in a nutshell is the problem with the vast majority of Republican voters. Because they make a decent salary and have some money in the bank, they think their interests are alligned with the Bill Gates and Jamie Diamonds of the world, when in reality they are wage-slaves like the rest of us. And are viewed that way by their plutocrat masters, just like the rest of us.

And the problems with democrats is they want to grab what meager savings I have and give it to octomom and any numbe rof "worthy" causes.

29   mell   2014 Feb 28, 2:25am  

finehoe says

control point says

Warren Buffett - but you are closer in income to the bum who just panhandled $20

bucks than your are to him in both absolute and percentage terms.

This in a nutshell is the problem with the vast majority of Republican voters. Because they make a decent salary and have some money in the bank, they think their interests are alligned with the Bill Gates and Jamie Diamonds of the world, when in reality they are wage-slaves like the rest of us. And are viewed that way by their plutocrat masters, just like the rest of us.

But see it's not, had 2008 played out without market intervention, the wealthy with leveraged assets (even Buffet is leveraged) would have gotten wiped out or seen their wealth reduced dramatically while savings rates would have shot up for those who cannot leverage but save. The point is to allow and encourage investment with reduced taxes or - if same as income tax - dramatically reduce the income tax to like 25% whereas removing special deductions to discourage leveraging and too much speculation that will be payed for by the taxpayer when it fails. People who make 100K-300K need to have the ability to move upwards by investing smart and with calculated risk, not debt-driven leverage. The current tax system is killing mobility and - as lost and confused pointed out - rewards entitled dependents and thew 1% by burdening the middle class. The fact that by numbers middle class means far less income speaks volumes about this failed policy. Nobody considering themselves middle-class should have to depend on any special deductions or government handouts.

30   bob2356   2014 Feb 28, 2:47am  

lostand confused says

And the problems with democrats is they want to grab what meager savings I have and give it to octomom and any numbe rof "worthy" causes.

As opposed gabbing what meager savings you have and blowing it on military and wars?

31   control point   2014 Feb 28, 2:50am  

mell says

the wealthy with leveraged assets (even Buffet is leveraged) would have gotten
wiped out or seen their wealth reduced dramatically while savings rates would
have shot up for those who cannot leverage but save.

The would have been MORE of a consolidation of wealth not less. Warren Buffett maybe, maybe not. I seriously doubt he was leveraged and legally liable so much that without a bailout he would have been wiped out, but don't know his specific personal balance sheet in 2008.

Do you really think EVERY rich capitlaist was leveraged?

Prime example: Hostess Brands - no bailout there. Twinkies are still in production - the owner just changed. Now a new capitalist produces the same Twinkies at a lower marginal cost because he was able to eliminate the long term liabilities of the previous owner of Hostess, while acquiring the same income producing asset.

Who got screwed? Well, the union. That union (and the workers therein) contributed years of economic capital to build and maintain the value of Twinkies. Their deferred compensation (read: Pension) was what was destroyed when the new owners acquired only the assets (and not the liabilities) of the brand.

Without the bailouts, this would have happened everywhere. At least one rich guy was not leveraged, and after the deflationary spiral, his billions in unleveraged capital would have been all that remained in relative terms, suddenly enough to buy EVERYTHING. He would be able to outbid you unless you were willing to borrow, from HIM. This is an extreme example of ONE unleveraged rich guy, but in reality - there would have been enough Joe the plumber certainly isn't going to be acquiring income generating assets.

In the best times, Joe the plumber is barely treading water. In a deflationary depression - he is broke because all of his customers lost their jobs and are roke too.

You would have lost your job. Your investments would have plummeted in relative value. Any debt you had would have increased in relative value. Most of your net worth is the present value of your future earning potential. No job = no future earning potential. You couldn't borrow to take advantage of the buying opportunity. Your net worth would have been GONE. Even if it wasn't, you wouldn't be able liquidate your assets to buy more valuable assets.

32   mell   2014 Feb 28, 5:24am  

control point says

You would have lost your job.

Doubtful, I had enough offers even throughout the recession, but sure there's never a guarantee, that's why you need to save for a nice cushion instead of buying a house and leveraging yourself to the hilt.

control point says

Your investments would have plummeted in relative value.

Doubtful, I invest mainly in results driven biotech (even during the recession small caps were acquired if they had interesting pipelines), some agriculture, precious metals and solid real tech companies, instead of bullshit-hyped leveraged tech, financial or housing trannies. The portfolio didn't look great, but was doing ok in 2008.

control point says

You couldn't borrow to take advantage of the buying opportunity. Your net worth would have been GONE. Even if it wasn't, you wouldn't be able liquidate your assets to buy more valuable assets.

You shouldn't have to borrow, that's not sane capital formation, but debt-driven speculation. Unless you or your family is hit by a mostly unforseeable catastrophy (health, natural disaster etc.), you should never have to liquidate anything - and recessions don't count as catastrophies, they are part of the market cycle and necessary corrections, and they would be less often and shorter if not for government and Fed meddling which continues to distort the markets and blow bubbles left and right. Capital formation without leverage is the cornerstone of any successful and healthy economy, not deficit spending and debt-driven leverage. You can clearly see that it is not working and hammering the middle class.

33   tatupu70   2014 Feb 28, 8:31am  

mell says

Doubtful, I had enough offers even throughout the recession, but sure there's never a guarantee, that's why you need to save for a nice cushion instead of buying a house and leveraging yourself to the hilt.

mell says

Doubtful, I invest mainly in results driven biotech (even during the recession small caps were acquired if they had interesting pipelines), some agriculture, precious metals and solid real tech companies, instead of bullshit-hyped leveraged tech, financial or housing trannies. The portfolio didn't look great, but was doing ok in 2008.

Clearly you don't 'understand what a deep recession/depression is. It's not only bullshit-hyped leverage tech that goes down. There would be no job offers when you get laid off.

34   mell   2014 Feb 28, 9:30am  

tatupu70 says

Clearly you don't 'understand what a deep recession/depression is. It's not only bullshit-hyped leverage tech that goes down. There would be no job offers when you get laid off.

BS - in fact more productive jobs would have been created in the aftermath as the drain of the parasitic TBTFs would have come to a halt. You have a bad economy because you let crony-capitalist, parasitic lobbying companies exist that do nothing but siphon off money from the Fed spigot.

35   corntrollio   2014 Feb 28, 9:59am  

mell says

Which is good as investments are made from already taxed money and only the uber wealthy would pay higher investment taxes.

Lots of tax experts disagree. Reagan's certainly did. Reagan's tax plan, which continued through the Bush I and Clinton administrations, taxed capital gains and labor the same. This would help with a lot of wealth disparity, certainly.

mell says

My proof are my taxes since Obama took office [and a bunch of other nonsense]

That's not really an argument -- and I bet it's actually untrue. You haven't explained exactly what happened -- again, we need some facts and then an argument that logically flows from those facts.

mell says

Surtax on Investment Income

Medicare Payroll Tax

Skyrocketing health care premiums (they had to drop the current

No, actually, Congress passed those first two. Check your Constitution, bud.

The third one is based on the economy and the level of coverage. People who don't understand how insurance works always say this crap. Insurance is based on having assets and liabilities. The assets are the premiums paid in, which are invested. The liabilities are payments. If the investments aren't doing well, then you have to get more assets by raising the premium.

Hence, when the economy isn't doing well, premiums go up. When liabilities go up, premiums also go up. If your coverage is better, then premiums could go up, sure. You haven't given us enough information to know whether this claim is BS or not. I don't think you have the information, most likely, because you haven't done enough research into this to know whether it's true, and you don't have access to the actuarial formulas.

jojo says

End Prop 13

Agreed.

36   corntrollio   2014 Feb 28, 10:02am  

mell says

People who make 100K-300K need to have the ability to move upwards by investing smart and with calculated risk, not debt-driven leverage. The current tax system is killing mobility and - as lost and confused pointed out - rewards entitled dependents and thew 1% by burdening the middle class.

I agree with this part to a point. What gets obscured in all this is that a $180-200K salary is definitely in the top 5% of households. However, there's a big difference between top 5% and top 1%. And there's also a big difference between the top half of the top 1% and the bottom half of the top 1%. Most people from the top 5% up to the bottom half of the top 1% are wage slaves. Most people in the top half of the top 1% are living off investment income.

Budgets are being balanced on the back of the 0.51-5%, whereas they should be balanced more on the back of the top 0.5%. That's why investments should be taxed the same as labor -- this would equalize those groups better.

37   mell   2014 Feb 28, 10:36am  

corntrollio says

No, actually, Congress passed those first two. Check your Constitution, bud.

Of course they did, eventually. There is not much difference between mainstream Republicans and Democrats when it comes to the financial policy, as the two wings closest to each other eventually continue more of the same.

corntrollio says

Hence, when the economy isn't doing well, premiums go up. When liabilities go up, premiums also go up. If your coverage is better, then premiums could go up, sure. You haven't given us enough information to know whether this claim is BS or not. I don't think you have the information, most likely, because you haven't done enough research into this to know whether it's true, and you don't have access to the actuarial formulas.

There is not much formula research you have to do when your insurance provider tells you that they had to hike premiums due to provisions in the ACA. Sure you can accuse them of lying and maybe they are exaggerating their premium hikes either for pure greed or to cover their bases if payments will be higher than estimated, but there is no doubt that this has caused premium hikes.

corntrollio says

Budgets are being balanced on the back of the 0.51-5%, whereas they should be balanced more on the back of the top 0.5%.

Agreed if that's the two choices.

corntrollio says

That's why investments should be taxed the same as labor -- this would equalize those groups better.

I think that would discourage investment for the non 1%ers too much, certainly under the current income tax structure. I'd prefer something similar, taxing up to a certain amount at a reduced rate and the rest as income. Of course if income tax is 25%, then the tax burden would not be higher than today.

38   Paralithodes   2014 Mar 1, 11:14am  

corntrollio says

No, actually, Congress passed those first two. Check your Constitution, bud.

So when Congress passes something, when does it become law?

39   corntrollio   2014 Mar 4, 7:35am  

Paralithodes says

So when Congress passes something, when does it become law?

Well, it could become law if the president signs it. It also could become law if a larger proportionate of Congress agrees to it.

Again, presidents can't drive the agenda here. They can propose things and have Congress accept or reject them, but at the end of the day, they can't dictate legislation. Trying to say a president has extra-presidential powers is usually going to be a losing argument. You would do better to focus on a good counter-argument than the blame game.

mell says

There is not much formula research you have to do when your insurance provider tells you that they had to hike premiums due to provisions in the ACA. Sure you can accuse them of lying

Ding ding ding, a lot of them *were* lying. But they often simultaneously increased coverage while increasing premiums too. That will "raise premiums" but you'll get more back on the back end, on average.

Even Mr. Armstrong of AOL was lying. What did a couple babies being born premature in 2012 have to do with the Affordable Care Act? Absolutely nothing. Even his complaints about healthcare costs were somewhat bogus anyway -- they made bumper profits far beyond any alleged healthcare cost increase. He was just trying to make political hay.

mell says

but there is no doubt that this has caused premium hikes.

It is extremely hard to find an apples-to-apples comparison of premiums, so yes there is doubt. It's hard to say without knowing more specifics. For example, NY didn't have an individual mandate before, but did require certain coverage, and the individual mandate significantly lowered rates (about 50%, but not sure if that's apples-to-apples, i.e. the same plan or with adjustments to account for the plan being different). This is much more complex than a cheap talking point:

http://www.factcheck.org/2013/09/spinning-premium-rates/

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