patrick.net

completely OT, but is an amazing story that occurred here yesterday. Girl got sucked up into a storm on a paraglider, went up to 30,000 ft and -40 deg, was unconscious with oxygen deprivation for an hour while the glider flew itself, beaten by melon sized hail, then landed safely, and inadvertently set a new record for a human at altitude...

Mount Everest is 8848 metres, or 29,028 feet. Ms Wisnierska's track log - a flight trajectory downloaded from her GPS handset and altimeter - recorded her top altitude at 9946 metres.

+ here

One of the more intriguing taxation proposals I recall - and I imagine it's from sufficiently long ago that some here may be too young to remember it - was Steve Forbes' flat tax.

He had computer modelling done to see what the figure would have to be to provide a budget surplus (at the time) if all deductions of every kind were eliminated for both individuals and corporations. It was just shy of ten percent. Add up what came in this year, move the decimal one to the left, and then cut Uncle Sam his check.

No incentives involved, no social engineering or calculations of depreciation and so on, and on...

Well, memory's a beast. It was 17%.

HK has the optional flat 15% rate even now -- I believe you have the choice of doing all the usual calculations, or else just cutting them a check for 15%.

Oz used to have estate taxes ('death duties') levied on a state basis, so when one state removed death duties as a ploy, the flight of grey capital to that state meant all the other states soon followed suit...

I found in looking up Forbes' ideas that many of the countries which made up the former Soviet Union have adopted a flat tax. In Russia, the figure is 13%, and capital gains, inheritance, pensions and savings are exempt.

This is giving me ideas, though I imagine St. Petersburg's a bit chilly and dark about now.

I'm not a fan of flat tax systems, unless I can be convinced that social justice will be served by letting off people who have far more than they need to live lightly. You will still have 5% unemployment and welfare needs to service. However, you might see the disappearance of many of the tax avoidance advisors, which would be a welcome relief, although I'm concerned that people would still seek to avoid even the 15% tax rate. It might be better to close off some of the more obvious avoidance loopholes instead. Most ordinary wage earners find it very hard to find much to claim as a deduction in general, unless they are tradespersons. Altho if total tax revenues were reduced considerably, what would be the first thing to go? Expenditure on arms and the military-industrial complex? Congress salaries and perks? Maybe Washington would be less manipulative on the world stage with less money to throw around...

One of the more intriguing taxation proposals I recall - and I imagine it’s from sufficiently long ago that some here may be too young to remember it - was Steve Forbes’ flat tax.

I remember that... aside from that he had some other "interesting" ideas early on that are summed up in this wiki entry:

http://en.wikipedia.org/wiki/Steve_Forbes

Steve Forbes claimed, in a TV ad, that he helped craft a tax cut in New Jersey prior to entering the 1996 primary. Forbes entered the Republican primaries for President of the United States in 1996 and 2000, primarily running on a campaign to establish a flat income tax. He also supported the ideas of re-introducing 4 1/2% mortgages and term limits in 1996, but dropped both in 2000 (as they were minor planks in his overall platform).

In his 2000 campaign, Forbes professed his support for social conservatism along with his supply-side economics. Despite holding opposite positions in 1996, for the 2000 campaign, Forbes announced he was adamantly opposed to abortion and supported prayer in public schools.

Ah... voodo economics.

I don't imagine a flat tax would be a cure-all. The speculations and fiscal abuses retailed here would, I think, still be possible were we to scrap the current byzantine code in favor of flat taxation. Nonetheless I'm attracted by the prospect of so many personal and business decisions freed from consideration of tax implications.

Forbes had other planks in his platform which are evident within the current administration, legislature and courts.

DS,

I remember the 'Joh for PM' campaign, where he was pushing a flat tax. 25% and nothing on capital gains IIRC. He's also the guy who started the 'race to zero' with respect to state death duties.

I have wondered about how a flat tax at that level starting from dollar one would go if it were combined with every adult citizen getting an allowance equivalent to the age pension.

The problems of unemployment benefit eligibility would instantly vanish, so we wouldn't see so many people faking it to get disability pensions and the like. The social security system could focus on retraining and real problem cases. Give children's allowances to custodial parents.

Massive simplification at various points of the financial system would ensue.

Here. You know what to do...

Profiting on Foreclosures
by Jeff D. Opdyke
Tuesday, February 13, 2007

The bidding on home number 546527 -- a moss-colored brick house in Baton Rouge, Louisiana -- began at $103,333.33. Less than a minute later, Ray Williams owned a home he had never set foot in. His winning bid was $130,000. The appraised value: $155,000.

After looking it over, Mr. Williams figured he would spend $20,000 repairing rotted wood and other defects. Then he will put it up for sale -- at $205,000.

Seven months ago, Mr. Williams joined a legion of investors who buy and sell foreclosure properties. So far, he has bought seven.

"If I'm not confident I'll make $30,000 per property, I don't bid," says Mr. Williams, 42, who used to own and run Domino's Pizza outlets. He has hit his goal on the first five.

As interest rates rise, more homeowners are falling into foreclosure. That is what is prompting the wave of bargain-hunting investors now descending on courthouse auctions across the country.

"It's just crazy. We have 100 houses [at auction] each week, when we used to have 10 or so," says Elaine Began, a deed clerk in Macomb County, Mich. Three years ago, the Montgomery County (Ohio) Sheriff's Office was "lucky to get 50 people to an auction," says Laura Wright, a foreclosure clerk there. Today, 120 often show up.

Some may be sorry they did. Novices face a host of risks. Foreclosed homes can come with hidden debts. Homeowners generally won't let you inspect the home before you try to buy it out from under them. Not knowing the local rules, which vary from state to state, can also cost you big.

The notion that $250,000 homes can be had for a few thousand dollars "is largely a myth," says Peter O'Connell, a former banker who has invested in foreclosures for years, including near his home in the Florida Keys. "If there is any equity in a house, you're generally not going to get it cheaply."

Here's a primer:

The Process

The process usually begins when mortgagees fall three months behind on payments. The lender sends a default notice to the homeowner and to the county. If the homeowner can't pay up, a foreclosure date is set. County officials handle the auction and use the proceeds to pay off the mortgage and any other debts secured by the house. Leftover money goes to the foreclosed homeowner; leftover debt, in some cases, is the new owner's responsibility.

The mortgage lenders typically bid up to the remaining principal amount plus any foreclosure fees. Their goal is to recoup what they are owed, either from investors bidding more or by buying the home and reselling it. Foreclosed homeowners sometimes join the bidding and win the auction, even though they don't have the money, effectively delaying their eviction until another auction is held.

Investors can get in the game before or after auctions, too. They can try to buy directly from homeowners beforehand or from lenders who win the auction.

etc...

ajh Says:
I have wondered about how a flat tax at that level starting from dollar one would go if it were combined with every adult citizen getting an allowance equivalent to the age pension.

You could start a 'housing credit' system where people never pay rent, everything they pay goes into an 'equity' balance throughout the lifespan -- sort of like the 'rent to own' schemes in the UK. This would get people out of the trap of never being able to save a deposit because they are paying too much rent to do it.

But the politicians would never do it, they are too wedded to keeping everyone on the edge of desperation, except their well-heeled mates who own all the housing as landlords and the means of production...

I think you're a little off the mark all round, Shmend Rick... it remains to be seen whether housing gains the serious attention of politicians -- there was a recent Congressional enquiry into housing prices, for instance...

ajh Says:

> I believe the biggest single bonus paid by Goldman
> Sachs last year was to the head of the London
> “Structured Finance” team. I.e. to the guy heading
> up the tax avoidance team.

I don’t know the guy from Goldman in London but I know others at Goldman who work in “Structured Finance”. The Goldman guys I know (and everyone else I know that has ever used the term “Structured Finance”) are doing mostly CDO type debt and have nothing to do with tax avoidance…

Different Sean Says:

> You could start a ‘housing credit’ system where people
> never pay rent, everything they pay goes into an ‘equity’
> balance throughout the lifespan — sort of like the ‘rent
> to own’ schemes in the UK. This would get people out
> of the trap of never being able to save a deposit because
> they are paying too much rent to do it.

We already have great systems in the US to get people out of the “trap” of paying too much rent to save a deposit.

The first “system” is great for lazy people since they don’t need to work harder or get a new job. All they need to do is use the “room for rent systems” (including Craig’s List and Classifieds) and find smaller cheaper place.

If someone is not lazy and/or stupid they can use the “higher education system” and do anything from going to Junior College to learn how to be an IT guy or go to a couple real Colleges and become a corporate tax attorney.

Corporate tax avoidance is a bit different.

I don't buy the double taxation argument. It's one thing if you're getting double taxed on a single taxable event (like AMT taxing dollars you've already lost to your state government), it's a different matter when we're in fact dealing with multiple taxable events - which is what taxing inheritance tax would be.

Otherwise, if you are hit with sales tax or property tax paid out of your net income, you're getting double taxed. Money can be taxed numerous times, as long as its taxed at separate events, it's pretty standard procedure.

Furthermore, in the US, your estate get a step up in valuation at time of death (or 6 month afterwards) regardless of whether it ends up paying inheritance tax. For the vast majority of Americans, death will be a tax saving event, even if they end up paying a little bit of marginal estate tax.

I'm more inclined to buy the efficiency argument, but only if someone can demonstrate how it's more efficiency or desirable to heavily tax earned income. To me, taxing work seems the worst. Taxing capital gains or dead man's money at least has relative painlessness going for it.

DS,

Renting offers certain advantages over owning, such as flexibility and cheapness, that may in fact be a positive for working class or lower income but upwardly mobile people. Those people often needs flexibility of payment, flexibility to move, and comparative cheapness much more than whatever equity they might be able to accumulate in the first 10 or 15 years of "ownership."

Furthermore, debt servicing on any concept of short term "ownership" will largely wipe out the advantage any actual equity.

The big money is in corporate tax anyhow. Short of moving to a tax haven or doing heavy lifting trust work (which is arguably quasi corporate anyhow), a high income wage earner has relatively few tax saving options - most can be exercised without the help of any tax attorney.

Once you own a business, esp. once you own a C corporation or two, huge tax planning issues/opportunities come up and tax attorneys become a "must."

(The above is just my deranged ramblings and does not constitute tax planning advice or indeed advice of any kind.)

ubermonkey says: I think that are a necessity if you want any kind of meritocratic society. Otherwise, ones wealth will be based mostly on one’s parents merit, not on one’s own.

Eliminating the death tax would not create such a situation. That would endure one generation. Then the third generation would get a reduced amount because the second generation relied on their inheritance instead of working hard and producing something of value.

If a goal of tax policy is to prevent the formation of a quasi-feudal society (which we’re approaching in the U.S.) then taxing inheritance is one of the milder tools one can use. Be glad that we don’t have an asset tax on total financial assets (for example).

I think it's ludicrous to suggest that we are approaching a "quasi-feudal" society. The rich aren't suppressing the poor. The United States provides huge opportunities for immigrants who come here and work hard. I read a study on millionaires were a major percentage was first generation immigrants who started businesses and busted their butts.

We have a lot of well-meaning social programs intended to help less fortunate people. I think a lot of them aren't "less fortunate", they are simply mooching off the system. There is still money out there for hard workers. Maybe it's not in great locations, and maybe it's not great money, but this is still a land of opportunity for people who have drive and common sense. But I guess that's a lot less convinient than accepting government handouts.

If this system is going "quasi-feudal", it's because we're subsidizing a bunch of lazy people exploiting the system, including a whole lot of illegal immigrants. It is still a meritocracy because you can work your way up from fresh-off-the-boat to middle class in only one generation, as long as you can make disciplined sacrifices along the way. I fail to see where the rich or the government have done anything to undermine that opportunity.

http://post.polls.yahoo.com/quiz/financeresults.php

U.S. Housing starts in January dropped by more than expected to their lowest point in almost a decade. Has housing bottomed?

Yes 29%
No 72%

26499 Votes to date

Not exactly a huge vote of confidence. Did anyone read the CNN Money article on shoddy housing construction? Apparently builders were just slapping up homes as quickly as possible, and the quality on many new houses is quite low.

justme,

Like you, I've never lived under anything but a progressive tax system. But I'm willing to consider that placing progressivity in the realm of taxes removes it from life. Under the present conditions, if you work to build financial independence you keep less of what you've accomplished.

I'm no fan of tax dodges, but I think it should be evident that the current arrangement encourages the practice. If you set out to create a system to encourage an 'I've got mine and to hell with you' mentality, I think you'd have to be very clever to come up with one more effective than what we have now. Not that I aspire to change your mind. But to me, it is an issue of equality before the law.

I don't like to see any particular group favored over another, and if that means Scrooge McDuck pays an annual 13-15-17%, then so be it.

ubermonkey,

If some of the disadvantaged are living off the welfare system - your tax dollars - and some of the second- or third-generation wealthy are living off a trust fund - not your tax dollars - then what's your problem?

As a taxpayer, I am far more concerned with the former than the latter. The lower class forms an enormous base of people drawing benefits from tax dollars. We could take away everything that the rich own, and it would still only fill that deficit for a year or two.

By the way, all this communist garbage ignores the fact that the rich are often the greatest producers of wealth for the NATION, and not just themselves. Entrepeneurs create new businesses that draw in foreign revenues, thus increasing the corporate tax base from which the lower class will draw benefits in the form of jobs, health care and welfare. We should let wealthy business owners keep more of what they create, because it encourages them and benefits the nation as a whole.

And by business owners, I do not mean CEOs, who are generally a bunch of worthless puppets in suits. I mean private equity businessmen like Robert Kravis or Bill Gates, who build corporations that add tremendous worth to the U.S. economy.

Hear! Hear! I would certainly welcome a bumper crop of "corporate raiders" and shareholder advocates. There's a lot of similarity between many current Fortune 500 CEOs and G W Bush.

Brand. International estate dodge is a tricky business. Currently, most loopholes AKA planning opportunities lie in the IRC, not with moving abroad. I'll get more worked up about fairness or not of "double taxation" if salaries and capital gains are taxed at a similar rate.

Anonytroll,

Living with my parents in my teens/twenties would be preferable to living off my kids in my seventies. Freedom now can be deferred for greater freedom later.

Dear fake surfer-x (cowardly assmaggot that you are): If real estate is about community and making a home, then why do Realtwhores always position it as an investment? Possibly because if they called it what it was, then a lot fewer people would purchase homes in the Bay Area.

astrid,

Fine. Tax capital gains. Tax all sources of income. For everyone.

If you did, the rate would come in at or below the ten per cent I first mentioned, and you'd know that everyone you ever heard of from fry cook to Paris Hilton was paying the same tariff as you.

hmm, people are missing the mark, or point, even while shooting from all directions at once...

Would someone kindly delete the troll surfer-x comments.

Hey troll surfer-x I'll give you my home address if you would like to come by and discuss real estate. No? Ok, why don't you give my your address and I'll stop by and discuss real estate? No? Ok, well enjoy your trolling. Me? I'm off to dog beach, stop by if you want, we'll talk about real estate. No? Ahhh come on, what's the worst that could happen? Still no?

Shmend Rick Says:
sure they may have been, but just look at the numbers… who do you think they are likely to help? the lower income, who comprise the bulk of the country, or middle upper middle middle upper upper upper class of people who comprise this list? the government will never help social opportunists.

there is a growing realisation of the plight of the posters on this group, although prices in the market may cool by themselves once Gen X, Y and Z are simply unable to borrow the amounts being asked. that's what politicians have always counted on -- a housing market that reaches equilibrium and doesn't therefore need any price regulation or intervention (although they cheerfully regulate every other aspect of building design, construction quality, land zoning, density, height, etc etc). However, this model also allows and expects the creation of a huge pool of exploited renters in the lower echelons -- it's just that this pool is growing as housing prices soar.

creating low income housing will just make the situation of you folks even worse.

that's very debatable. i don't see why.

really, all you need to examine is what is it that you are really after? youre complaining that you didn’t get your fair shot at the ‘big time’? please, if you expect sympathy from the public you have to be kidding. some of the people who post here are outright sickening.

there is some confusion in the minds of some posters here as to what social justice initiatives should look like, and patrick.net is a broad and catholic church to boot. forgive them, father, they know not what they do...

basically, civilization is an agreement to cooperate.

that's a 'functionalist' model of society. however 'conflict theory' such as marxism suggests that it's not quite that simple, and that there is a lot of tension and disagreement in society.

for as long as you are doing less work, living longer, etc. then the majority of people( which is exactly what you are doing ), then you are exploiting that agreement. and you are expecting the general public to feel sorry for you that you are unable to do that as much as the guy next door?

there has grown up a reasonable expectation of home ownership in many western countries, where ownership rates traditionally have been as high as 80% post-WWII. that is now being undermined.

Marx was right, it is a relationship between property( capital ) and labor. He explained the situation of people like yourself quite lucidly( he called them the bourgeois ). I highly recommend reading Das Capital. http://en.wikipedia.org/wiki/Das_Kapital

the bourgeois as defined by marx are actually employers, the owners of the means of production, 'the ruling class'. small employers such as shopkeepers were labelled the 'petit bourgeoisie' in his class schema. the lower classes were the proletariat, or 'landless labor', and the bottom stratum was the 'lumpenproletariat' who were either dangerous or pretty useless. marx saw revolution coming from the proletariat against the bourgeoisie, in his polarised view of class conflict and 'dialectic materialism' after socrates. marx didn't foresee the rise of an affluent middle class of workers. i highly recommend reading or studying at least parts of 'das kapital' also, rick, although it's a long read. there'll be a test on monday, will you be ready?

justme Says:

> The flat tax proposal is a despicable and cynical
> attempt at exploiting people’s aversion to the
> complex tax code.

1. The flat tax will never happen (one of the many reasons is that the elimination of the mortgage interest deduction will lower the value of all residential property in America and bankrupt at least a million people (and a huge number of banks).

2. Even if we did get a flat tax the code would be complex since it takes a lot of detail to define “income” (if a corner store sells a candy bar for $1 are they taxed on the $1 of “income”, or can they deduct the cost of the candy bar? Can they deduct the salary of the guy that sold the candy bar? How about depreciating the candy rack or the building?)…

> Of course, the complexity of the tax code is all a result
> of lots of “rich people like myself and my friends” getting
> the special tax breaks of the type that applies only to
> “Sacramento Valley gentleman shrimp farmers in zip
> code 9xxxx with at least one windmill, and a blind
> brother-in-law that resides in Bermuda”. Ok, I’m
> exaggerating just a little bit here.

You are not exaggerating very much… I won’t name any of the people I know with hunting land in the Delta Area with special tax deals that make the example above look tame. I remember that Bernie Cantor (the Guy who founded Cantor Fitzgerald) took advantage of a special tax deduction when donating a piece of art before he died and it turns out that the way the law was worded only a single piece of art (the one he donated) would have been covered by the tax law…

> What the US needs is a good solid PROGRESSIVE
> taxation system with no deductive loopholes. End
> of story.

If the US want’s to say it is the land of equal opportunity everyone should have to pay the same tax “rate” and get the same SAT score to get in to public colleges

> Thanks, Astrid, for pointing out that the paper shuffle tax
> (capital gains tax) should NOT NOT NOT be lower than the
> real work sweat tax (regular income tax).

I’m all for this so if an actor makes $10mm on a movie he pays 20% and a guy at McDonalds makes $16K a year he pays 20% and If Grandma sells her Microsoft stock she pays 20% on the gain…

> And spare me the argument about all the rich people
> who are “creating jobs” with their capital and need extra-
> super-special rewards for it. Give me a freaking break.
> It is mostly OPM, and what else would they with it anyway.

The “rich” do “create” a lot more jobs than poor people and if the government takes away the upside of taking risks and hiring people the rich will just stick their cash in tax free munis or overseas…

Look at it this way, if this was 100% financial decision

Nice another ESL maggot. Hey fuckwad, learn some fuckin enrish why don't you. Afer all parent pay for correge why not rearn enrish?

To be considered as part of the community and not to be frowned upon.

Hmm, nice ESL. I rike your enrish, rots of ruck on your fitting in. Just be sure not to talk, otherwise risk retting peopre know not enrish speaker.

Just another trash talking piece of shit immigrant. Nice work!

FormerAptBroker Says:
We already have great systems in the US to get people out of the “trap” of paying too much rent to save a deposit.
The first “system” is great for lazy people since they don’t need to work harder or get a new job.

yes, that's right, FAB, the market takes care of everyone, and anyone who falls through the gaps is just 'lazy'. the answer is always just to get a better job or go to college. thus is the US welfare state defined...

that is why wal-mart workers are earning $6 ph -- why don't they just go to college and become corporate attorneys? or, of course, they can just work 2 $6 ph jobs for 80 hours per week, because that's all the quality of life they deserve. very soon there will be no wal-mart workers in the country at all, nor any other sort of store clerk, and corporate attorneys will have to select goods from online catalogues. and just how many hours per week does the $10M a year CEO work? or the inheritance brat?

astrid Says:
Renting offers certain advantages over owning, such as flexibility and cheapness, that may in fact be a positive for working class or lower income but upwardly mobile people. Those people often needs flexibility of payment, flexibility to move, and comparative cheapness much more than whatever equity they might be able to accumulate in the first 10 or 15 years of “ownership.”

Furthermore, debt servicing on any concept of short term “ownership” will largely wipe out the advantage any actual equity.

'rent to own' schemes are just about giving people a break. they have traditionally revolved around public housing ownership. the idea is that rental amounts go to a credit system which is actually buying equity rather than being 'dead money'. there are a lot of concessions made to these people, i.e. it is effectively offering an interest free loan. they are not in the loop of the usual mainstream usurious practices.

you can still remain mobile, you keep your equity balance and transfer it to another place. hence the idea of a lifelong 'housing credit' scheme. so you still get flexibility and cheapness.

it requires a fairly radical shift in thinking. but i have to ask you, if you could pay all your rental amounts into an equity account instead of landlords pockets, and still have the option of relocating, isn't that a better deal? perhaps the banks, the REI and the 'capitalists' have just set things up to suit themselves?

FormerAptBroker says:

> And spare me the argument about all the rich people
> who are “creating jobs” with their capital and need extra-
> super-special rewards for it. Give me a freaking break.
> It is mostly OPM, and what else would they with it anyway.

The “rich” do “create” a lot more jobs than poor people and if the government takes away the upside of taking risks and hiring people the rich will just stick their cash in tax free munis or overseas…

yeah, but the rich have been taking away an increasingly large share of corporate earnings in the last decade or two. they are increasingly looking like self-serving robber barons. the 'creation of jobs' argument seems to be just a side-effect of the rich needing a network of people to gather money for them, to be paid at the lowest hourly wage possible, and screwed down at every possible opportunity. alternatives to this system are co-ops, for instance, which empower and motivate workers and give them a fairer share of profits (aka share options in the current zeitgeist, I suppose). workers unite!

Bruce Says:

> justme, Like you, I’ve never lived under anything but
> a progressive tax system. But I’m willing to consider
> that placing progressivity in the realm of taxes removes
> it from life. Under the present conditions, if you work
> to build financial independence you keep less of what
> you’ve accomplished.

While the US “technically” has a “progressive” tax system in reality is does not. Over the years I’ve seen hundreds of tax returns of real estate owners who make a ton of money but pay a lower tax rate than all but the super poor who pay almost nothing…

It is not just real estate owners who take advantage of depreciation it is almost every richer than average person who pays a lower rate.

Example #1 Truck Driving Bob makes $29K is in the 15% tax bracket, rents a crappy apartment and is making payment on the used ’98 Camaro he just bought and pays a full 15% of the $29K he makes to Uncle Sam (plus Social Security and other taxes)

Example #2 Tom the CPA makes $155K a year and is in the 33% tax bracket, owns a $2mm condo with a $1.25mm 5% IO loan, maxes out his 401K and since he is well over the standard deduction with his CA taxes he also writes off donations at church and the charity golf tournaments he goes to every few months. Tom’s “Taxable Income” will be just over $50K so his “tax rate” will be about 11% of what he makes (and less than half of the 25% rate that Truck Driving Bob’s supervisor who makes $35K is paying)…

Flat tax for everything would take away a lot of the tax characterization business (both temporal and types). Taking away loopholes AKA deductions would take away a lot more. While a flat tax won't lead to starving tax attorneys, at least some of them could be channeled into bankruptcy work...or something.