patrick.net

Yahoo to close bill-paying service
Bloomberg News
Article Launched: 07/07/2007 01:40:36 AM PDT

Yahoo, owner of the most-visited U.S. Web site, will close its bill-paying service by Sept. 14, part of a plan to shed its less-popular products. Customers of the Yahoo Bill Pay service will have access to their accounts until Oct. 31, the Sunnyvale company said on its Web site. Yahoo co-founder Jerry Yang succeeded Terry Semel last month as chief executive, part of a shake-up designed to boost sales. The company said in May it would close its Yahoo Photo service to concentrate on its faster-growing Flickr site. Last month it shut down its online auctions site in the United States after the service failed to match the popularity of eBay.

- Bloomberg News

Brand,

I'm practically an ABC, so you should take any observations I offer with a grain of salt. My sense is that the Chinese cohesion suffers from three things:

1. stronger regional identity relative to national identity - this is particularly evident for the Beijing v. Shanghai, Mainland v. Hong Kong v. Taiwan divides; there is a lot of distrust and prejudice towards the "other" and the expressions are often at least as ugly as Red America v. Blue America or xenophobes v. "wetbacks"

2. arrogance - most of these young engineers think they're all that and more. That served them well as students in a highly competitive exam based system but make them terrible team players

3. inability to adjust to America's less hierarchical structure - China's traditional organization structure is extremely rigid, so some don't understand implied niceties of working in a team oriented environment

This isn't to say that cooperative and broadminded Chinese people do not exist, merely that they generally work against decades of social conditioning to get to that point.

I would like to hear from an Indian perspective on Chindians. As I understand it, India is a very diverse country as well. Do Indian computer scientists do better together because they share a similar regional/education background? Or is it more cultural?

I also wonder if I'm not overestimating Chinese tendency to disagree. I'm comparing them to Vietnamese and Koreans in this country, and those are very culturally cohesive groups.

I wouldn't say that young Indians are much better than young Chinese for collaboration. It's sometimes hard to get a team moving in a coherent direction because they all seem to focus on different parts of the problem without communicating.

I very much agree with your hierarchy comment. In a "flat" team, there seems to be a lot of jockeying for position.

Rolling over from the previous thread:

Malcolm Says:
Different Sean:
You understand that income tax taxes income right?

um, yes?

The point is that in Oz a property investor adds on their rental income to personal income, and deducts mortgage interest and other expenses from their personal income. If their investment expenses outweigh their rental income, then the Tax Office owes them a refund at their top marginal rate on the difference.

It was my belief, based on reading, that not all countries allow you to claim tax breaks on rental properties against *personal* income, but you had to treat the investment as a separate income producing entity. However, this could be wrong -- what is the position in the US on MID on investment properties? (You can also count the HOA, council rates, asset depreciation on fittings, etc as deductible expenses in the same fashion.)

Hence, many investors were encouraged (by gurus) to buy investment properties knowing they would make a loss on the income for 20 years, but that the Tax Office would bail them out at up to 50% or so of their loss (depending on their top marginal rate -- the more money you make, the more the Tax Office will refund you, in a perverse irony. Since adjusting the margins recently, tho, it's more likely to be 33%, thus discouraging tax-effective investment in property.) Further, the Treasurer halved capital gains tax, purportedly to benefit buying and selling of stocks, but the reality was that most people stampeded to property, believing yet another hurdle had been taken down to speculating.

The other thing that saves speculative investors who invest at a loss (or 'negative gearing crazies' as called by the SMH economics editor) is inflation. Eventually, the fixed dollar value of the original mortgage attenuates as the dollar inflates, although you've also had to pay interest on the loan throughout. After a decade or two, the mortgage amount is worth about the average annual salary instead of 10x the average salary, or whatever happens... Plus rental amounts have gone up with inflation also... so property investors are really playing a waiting game with inflation for the most part, knowing that inflation is almost inevitable in any economy...

Ok, I'll roll mine over here as well though kind of off topic here.

“The point is that in Oz a property investor adds on their rental income to personal income, and deducts mortgage interest and other expenses from their personal income. If their investment expenses outweigh their rental income, then the Tax Office owes them a refund at their top marginal rate on the difference. ”

Right, that’s called a business loss, that’s how it works here. A net loss on a rental comes off of your adjusted gorss income.

“Hence, many investors were encouraged (by gurus) to buy investment properties knowing they would make a loss on the income for 20 years, but that the Tax Office would bail them out at up to 50% or so of their loss (depending on their top marginal rate — the more money you make, the more the Tax Office will refund you, in a perverse irony. Since adjusting the margins recently, tho, it’s more likely to be 33%, thus discouraging tax-effective investment in property.) Further, the Treasurer halved capital gains tax, purportedly to benefit buying and selling of stocks, but the reality was that most people stampeded to property, believing yet another hurdle had been taken down to speculating.”

You’re killing me.
Yes, here as well you can lose money on a rental indefinitely and deduct it, but come on, the notion of someone deliberately losing money on something for 20 years is a bit of a stretch. You need to come and meet some Americans to really understand the pettiness here. The best way to get someone to overpay on a house is to tell them that they are benefiting a landlord by paying rent, and vice versa, the quickest way to get someone to sell a house is to tell them they are subsidizing a renter. BTW what you describe is basically a private rent subsidy, so why would anyone be against that as a matter of policy?

But I’ll help you do the same as the gurus. For every dollar you send me for the next 20 years, I will send you back 50 cents.

All kidding aside, here you don’t even need it to be an investment property, you can claim a second residence and deduct that interest as well straight off the top. I’ll patiently await the knee jerk outrage before I explain the thinking behind the 2nd residence rule, although I know there are people here smart enough to know the reasoning.

To elaborate on my 1st post because this is more an ideological discussion since facts aren’t in question. Like gambling, you have to take the losses with the wins. The state can’t have an income tax that only taxes the profit without allowing for the losses. I’m really struggling with the notion that somehow when a loss is applied against income it is somehow a subsidy by the state. Frankly that thinking scares me, but I realize there are two points of view here. Mine is that the state derives it’s powers and revenues from taxes paid from wealth, whereas the other point of view is that everthing starts out as belonging to the state, and the state takes what it deems a fair amount. The latter is distinctively un-American.

Here is our own irony and shows how silly this chasing after the rich taxing liberal policy is and how it backfires. In this country we lowered capital gains when people were actually making tons of money on houses (thank you) but now Congress wants to raise gains taxes right when people are going to be losing money on the gains. Translation, an even greater tax benefit to the same people that are despised the most on this board but still very funny to sit back and watch.

Realize that India is a country in the sense European Union would be a country (if they ever get around to having a constitution, issue a passport, hold "national" elections and so on). The regional identities in India are extremely strong. There are about 15 "official" languages - and each language group is a State in the Union. More and more states are being ruled by a regional party (i.e a political party whose reach does not extend beyond that state). The government in Delhi is a hodge-podge coalition, at the mercy about 10 parties. It is not an exaggeration to say that political India is a British creation - though there has always been cultural/religious similarity, much as how Europe shares a common Christian heritage.

What does all this mean? When you look at "Indians" here in the US, it is an extremely diverse group. I have 3 Indian colleagues, and each of us speak a different native language, so effectively our only common language is English. Most freshly arriving Indians would tend to socialize within their own linguistic group, though it is not uncommon to have friends across those boundaries too, particularly for Indians from major urban areas.

To the extent you see groupthink (housing in particular) that comes from a common "professional immigrant" feeling of a need to belong, need to put down roots and of course the female nesting instinct. In a way, you feel tentative as an immigrant until you buy that piece of American soil. That is what unites both Chinese and Indians in the housing market. These two groups stand out simply because of the sheer numbers in the valley.

To add to that, there is not a lot of prejudice based on linguistic groups in India - there are the equivalent of polish jokes but nothing too serious. We get our kicks from the Hindu caste prejudice, and then the Hindu/Muslim divide - though there are so few Indian Muslims in the US that it is not visible here. Professional Indians are quite good at hiding any latent prejudice - not that different from professional white Americans ;-)

Malcolm, first of all, no one pays 50% of their income in taxes. I can sit down and show you the math, but you make all kinds of mistakes in your calculations, like claiming that sales tax is 7%. How can someone pay 7% of their *total* income in sales tax, if 40% of it has already been taxed? They only have 60% left to spend! So if the sales tax rate was 7% and this hypothetical person didn't save a dime, they would still only pay .6 * .07 = 4.2% sales tax.

Lots of people pay 40% though, so I guess you are not that far off though.

Secondly, someone has to pay taxes. We can't keep running up Bush-style budget deficits forever. We actually should be trying to pay down the Public Debt, before the boomers retire, but fiscal responsibility has never been a strong point with politicians, particularly the ones that have been in power the last six years. If you don't want to raise capital gains tax, who do you want to raise taxes on? It is easy to complain, much harder to come up with a solution.

I vote that we abolish all internal taxes and only tax imports. :twisted:

skibum,

as I understand it, most Chinese 1st gen prefer new houses, so the natural inclination is to update the house instead of keeping its current "splendor". However, PA has a rather strict set of building codes, which to a certain extent stipulate that even a new house is to be erected, there won't be much allowance on extra footage on the same lot. Clearly the eichlers or modest modern stucco homes won't enjoy the honor of listing themselves on the city's preserved list, still, given the constraints of sq footage, a more reasonable venue for balancing desired lifestyle against city's overbearing supervision is to update and add space, instead of a tear-down and rebuild.

Mountain View perhaps has the most lenient building codes among the lovingly coined "fortress cities". So I would expect far more tear-down-rebuild in MV neighborhoods than PA.

Fair points Jimbo, but none of my posts are complaining about taxes. I don't really disagree with anything you are saying here. Do go back and check though, I have been pretty clear that I favor a simplified progressive tax rate system. I believe income tax is the fairest way to do this. I never voiced an opinion about capital gains rates, in fact in the original concept of income tax in this country capital gains were basically the only form of 'income' because salaries were considered an exchange of labor for pay, not real income. I don't see any reason to treat capital gains differently than ordinary income.

I also favor tariffs to offset the domestic tax base. I believe this will enhance entry level job opportunities as well as recoup the lost value add income tax from overseas outsourcing.

The zeal with which immigrants pursue housing, particular that of those coming from India and China, has more to do with their frame of reference. India was a semi-socialist, planned economy for many years, just like China. For anyone from India and China below the age of 35, they grew up having no memories of real estate distress, because real estate market hardly existed 20 something years ago. We are talking about at least 2 generations who along the property tide as their homelands opened up.

Recently, Shanghai apartments reached new high. A 100 sqm (roughly a bit larger than 1000 sqft) apartment in desirable parts of Shanghai sell for $300-400K, USD, the land is leased on a 70-year basis, and the monthly due is about $100. Now compare this to 1000 sqft condo in Cupertino selling for $750K, which one looks like a better deal??

In the high end segment, Los Altos Hills looks like a steal. Recently villas in Shanghai also hit all-time high, a 500sqm house/villa with less than 1/4 acre land in the nearby suburbs are sold for $5-6M USD, again, the land is on leased basis for 70 years, and you have to put up with the heavily polluted air and food. Your $5M certainly goes much further in Los Altos Hills.

The zeal with which immigrants pursue housing, particular that of those coming from India and China, has more to do with their frame of reference. India was a semi-soci--alist, planned economy for many years, just like China. For anyone from India and China below the age of 35, they grew up having no memories of real estate distress, because real estate market hardly existed 20 something years ago. We are talking about at least 2 generations who along the property tide as their homelands opened up.

Recently, Shanghai apartments reached new high. A 100 sqm (roughly a bit larger than 1000 sqft) apartment in desirable parts of Shanghai sell for $300-400K, USD, the land is leased on a 70-year basis, and the monthly due is about $100. Now compare this to 1000 sqft condo in Cupertino selling for $750K, which one looks like a better deal??

In the high end segment, Los Altos Hills looks like a steal. Recently villas in Shanghai also hit all-time high, a 500sqm house/villa with less than 1/4 acre land in the nearby suburbs are sold for $5-6M USD, again, the land is on leased basis for 70 years, and you have to put up with the heavily polluted air and food. Your $5M certainly goes much further in Los Altos Hills.

Jimbo, the difference in our estimates is FICA which if you are self employed is 15%, if you work for someone it is 8%. So unless you don't consider FICA a tax, and that is a legitimate point of view, it's either 48% or 55% pick your poison.

My using sales tax, and other taxes like property taxes were just extras to show that it doesn't even stop after the tax return. Think about the 3 layers of taxes on your gas, and how many layers of taxes are on a hotel room, or a rental car. Property tax can easily be 5% of your income. You have to give the government credit for being creative at how much it does tax us with people like Suzie Orman boasting how historically low our taxes are.

I vote that we abolish all internal taxes and only tax imports.

Why? That will slow international trade and that will be a net loss for the US economy.

I favor user fees instead of taxes. I understand that some public services are difficult to charge. In that case, I recommend a mild sales tax, a flat tax, or a slight regressive tax schedule.

I denouce all forms of progressive taxation. Productivity should not be penalized.

Sorry Malcolm, it just doesn't work out that way. Here is the real taxes on an income of $90k with nothing but the personal deduction:

IRS (from the tax tables): 19539
CA State (as above) : 8258
FICA (6.2% of salary): 5580
Medicare (1.45%): 1305

Now your employer also has to pay FICA and Medicare at the same rate, so it is fair to consider that as a tax on your employment, but even adding that in twice, I get

19539 + 8258 + 5580 + 5580 + 1305 + 1303 = 41567 in total taxes.

Okay, I have to admit that is 46% overall, 8% of which is paid by your employer. That is more than 40%, but still not 55%. And this is someone who is not filing for the standard deduction (even though they should!), has no 401(k), no mortgage deduction, nada.

This is pretty much the max possible, because above this there is no payroll tax, though it is partially offset by a bump up to 28% at $74k.

I don't think anyone actually pays this rate though, since anyone sane would grab as many deductions as they could. I know I am getting hit by the AMT and my overall tax rate is something like 35%.

Malcolm Says:
You’re killing me.
But I’ll help you do the same as the gurus. For every dollar you send me for the next 20 years, I will send you back 50 cents.

because of the capital gain in the property over 20 years -- supposedly at 10% a year -- exactly the same as buying and then selling yahoo shares for the capital gain and not for the dividend.

or make that GOOG shares

Yup, the only way it works is for the end harvest to not only be a larger gain than all of the combind losses but it also has to outweigh the opportunity costs on the principal fo the whole time. Historically houses don't go up 10% a year, since that would mean they would double in value every 7.5 years.

I'm not sure still what the problem is. I think you are more irritated by low gains rates since in your scenario you have to have a huge gain at the end for it to work. If it doesn't work and the house also goes down in value, the house ends up becoming a large loss for the bank when the investor walks away from it.

Peter P Says:
July 8th, 2007 at 12:40 am
"I vote that we abolish all internal taxes and only tax imports.
Why? That will slow international trade and that will be a net loss for the US economy.
I favor user fees instead of taxes. I understand that some public services are difficult to charge. In that case, I recommend a mild sales tax, a flat tax, or a slight regressive tax schedule.
I denouce all forms of progressive taxation. Productivity should not be penalized."

Why? If you tax consumption a guy like me would pay the same taxes as a poor person. What is wrong with taxing income verses consumption apart from simplicity?

Jimbo, all I can say is I originally said 50% you're at 46% you're not itemizing, but also not including the other hidden taxes so call it a wash. I really am not seeing a huge difference to split hairs over. Thanks for crunching the numbers for the official total I will use for discussion since I am in agreement with you.

I did want to say also that your point about a percentage of a percentage was valid. When you itemize your state withholding comes off as a deduction so if it is 9% that means your Federal tax is on 91% of your taxable income.

OO,

A part of the problem with Shanghai and Beijing real estate is that the upper middle class locals have no other place to save their money. Most of my relatives have already took out the money from the Chinese stockmarket (some of it put in more than a decade ago) because the bubble is so obvious. For them, housing looks like a good bet - barring a monstrous financial crisis, they're likely to at least keep up with inflation without paying more taxes.

Also, I don't think Shanghai real estate overall is that expensive. You're quoting the very high end that caters largely to expats and overseas people who don't know better. My parents recently heard of a 160 sq. meter listing near Remin Park going for 2M RMB. We were tempted, but we don't have any effective way to manage it as a rental and I think there's a good chance for a major financial crisis around 2010.

Most of my relatives have already took out the money from the Chinese stockmarket (some of it put in more than a decade ago) because the bubble is so obvious. For them, housing looks like a good bet - barring a monstrous financial crisis, they’re likely to at least keep up with inflation without paying more taxes.

astrid,
That's an interesting anecdote, as I recall several recent financial news pieces (WSJ, Bloomberg) and their analyses of the Chinese stock market bubble. Their conclusions were that Chinese have been saving less and less recently, and much of that money is going INTO the stock market. I wonder if your relatives are a bit more savvy, or if the news analysis is off.

PArenter,

Thanks for the explanation of the Chindian Lemmings/mob. I guess its their numbers and their sheer otherness that attracts attention.

skibum,

It's the very stupid money that's going into the Chinese stockmarket now, from the housecleaners and the pensioners. The smart(er) money is either in a holding pattern or on the way out.

Don't forget American mutual funds. They're eager to get a share of that white hot growth in India and China. But don't worry, they can mitigate the risk by mixing in some high-yield CDOs and MBS tranches.

Brand,

American mutual funds and American investors cannot invest in the Chinese domestic stockmarket. There might be a bubble in China stocks that Americans can buy, but the bubble is a lot smaller.

It’s the very stupid money that’s going into the Chinese stockmarket now, from the housecleaners and the pensioners. The smart(er) money is either in a holding pattern or on the way out.

If that's truly the case, then the financial analysts are off the mark, and China may be much later in the bubble stage than many think. Seems to me that this will come to a head after the Olympics and its associated giddiness dies down, but that's just my guess.

Malcolm said:

What is wrong with taxing income versus consumption apart from simplicity?

If taxation is applied to discourage specific behavior, as it seems to me it sometimes is, then Peter P's preferences encourage initiative and thrift.

If, on the other hand, it's shaped by a social model seeking to distribute wealth (or poverty), as it seems to me it also sometimes is, then you tax income and subsidize consumption. Which is where we are now.

astrid,

I am not quoting the super high-end price of apartments in Shanghai. I am quoting apartments with comparable finishes as the newly erected condos in the Bay Area, granite counter-top, hardwood floor, marble bathroom, etc.

As you know, most apartments sold in Shanghai are "maopei", which means bare-strip cement structure with no interior finish at all. If you desire the finish as stated above, a 100 sqm condo in the "upper corner" in Shanghai is selling for at least 3.5M RMB ($460K). I am quoting 100 sqm because apartments in Shanghai only have a yield of 75% in terms of carpet space, so when they advertise 150 sqm, the real comparable for carpeted space here is only about 112.5 sqm.

Therefore, the Condotino condos actually look like a much better deal than the Shanghai condos, which is much much higher density, and doesn't come with a guaranteed seat in the good school district, a big consideration for Chinese parents. Private international school tuition in Shanghai costs more than the US in absolute terms, and there is a much longer waiting list.

Taxation of income is always regressive in terms of incentive, assuming a free market for wages.

In other words, unless the government is setting wages *all* across the spectrum, then wages are based upon market factors. But extracting taxes "progressively" (or even flat as I'll point out in a moment), causes a decreasing slope of incentive to earn each marginal dollar. Even if taxes are fixed as a percentage of income, he who earns more will pay more. Past a point, that high income earner has paid more in taxes than can be reasonably apportioned to him. At this point, his extra efforts (luck, fortune, whatever) are enjoyed increasingly not by him but by those who did not earn marginal dollars, and thus pay incremental taxes. In such a scheme, even a "flat" tax is regressive.

The only fair way to properly levy taxes on income would be to change the slope downwards (pro-income tax people would call this "regressive"), in fact making income taxation progressive in terms of incentive. Therefore, the high earners would keep most of their marginal dollars.

Of course, this will never happen. It doesn't "feel" fair, and we love our class warfare.

So a consumption taxation regime system places the marginality squarely with the consumer. If a poor guy wants to squander his meager income on high-tax items, then that's his choice. If Mr. Moneybags wants to only buy bread and butter, then he can get away paying few taxes. In reality, this won't happen very often because of the very reason high earners try to earn a lot. They want to spend it on stuff. Stuff that gets taxed upon purchase.

But for this to work *all* income taxation has to be eliminated, without exception. No capital gains taxes. No income taxes. No state, county, or local taxes on incomes. We can still tax property, car licenses, bridge crossings. But no one is allowed to pronounce "you earned too much money, I shall therefore take it and give it to someone else".

All this may come to pass after the last living Boomer has died, been buried, been exhumed, had a leaden tipped wooden stake driven through their shriveled heart, decapitated, cremated, and then reburied.

Malcolm Says:
Yup, the only way it works is for the end harvest to not only be a larger gain than all of the combind losses but it also has to outweigh the opportunity costs on the principal fo the whole time. Historically houses don’t go up 10% a year, since that would mean they would double in value every 7.5 years.

I’m not sure still what the problem is. I think you are more irritated by low gains rates since in your scenario you have to have a huge gain at the end for it to work. If it doesn’t work and the house also goes down in value, the house ends up becoming a large loss for the bank when the investor walks away from it.

Malcolm, you don't seem to have got the gist of my post at all. There is no real rationality behind the stampede towards over-priced property with a poor cash return -- it is based on wishful thinking, the content of RE seminars and sales pitches by developers, tracking secular trends over the last 3 decades or so and cherry-picking the best figures, etc. I'm not saying property goes up 10% every year, the gurus and salesmen say it. This is the whole point of the post. You seem to think the world follows your logic, and you view the world through the prism of your logic, rather than seeing the world as it really is, irrational exuberance, unenlightened selfish individualism and all. The fact is that many people have been influenced to buy investment property even though it is heavily cash-flow negative at the outset, in the hope of making capital gains. One commentator has indicated there could be billions of dollars lost by these purchasing mistakes over time, and people are too embarassed to talk about their losses...

You don't get a 'huge gain at the end', there is supposed to be some sort of steady gain outstripping inflation, as per my post text. The fact that the economic fundamental of wages and salaries would suggest that this is not sustainable for very long doesn't seem to occur to the people stampeding into property purchases. As for the dot com boom/bust, with its crazy P-to-E ratios. In turn, the real estate industry then tries to keep the party going when it appears capital gains are not going to occur by raising rents, if that is possible in an oversupplied market.

The observations I have made represent about half the rationale of this web site. I'm not sure why you keep quibbling with everyone over every little thing.

OO,

True enough, you will pay a premium for a good finish and for an upper floor apartment with views (corner doesn't seem to be a big problem, all the new Shanghai construction seems to be provide a largely N-S plan). And yes, about 20% will be unusable public space (though I've seen some novel colonization efforts to reclaim public space). I'm thinking in terms of local purchasing power, in which case they would buy something like that 2M RMB place, spend 500K RMB finishing it up, and end up with a pretty decent 120 sq meter place in downtown Shanghai. That's insanely expensive when you look at the average local salary, but only about half of the price you indicated. One could spend a lot more, especially if one feel compelled to live in an American style McMansion in a close-in Shanghai suburb, but there's no need to.

Comparing downtown Shanghai to Cupertino is not really a very illuminating comparison. The lifestyles and locations are so different that they don't really compare at all even if the prices are similar. The downtown Shanghai buyer (even one looking at maopei second hand places) is at the top of the heap in the center of a major metropolitan area. The Cupertino condo buyer is at the bottom of the local homeowner heap and at the periphery of a the Bay Area. Cupertino is certainly preferable in many ways to even the cream of Shanghai's RE crop, but same could be said for London or New York or even SF.

As for the schooling issue. You're looking at it from an ex-pat perspective. I agree with you that I would not send my hypothetical children to any PRC school. However, my cousins have received pretty good education in China's grade schools. Indeed, to survive China's university system, one almost have to go through the grind of the grade school system first!