Bankers and Imbeciles

I am currently in a overwhelming rage.  I just read this Bloomberg article about bankers' and billionaires' opinions on their tax obligations.

These criminals use shady/borderline-illegal business practices to destroy the financial stability of this country yet it's the protester who is the "imbecile"?

One of the asshats, John A. Allison IV, says "Instead of an attack on the 1 percent, let's call it an attack on the very productive."  I'm not sure of Mr. Allison's daily duties as former CEO of BB&T Corp. but I'm relatively certain it didn't produce anything other than the taste of vomit in the back of my throat.  Calling the wealthiest 1 percent of Americans "very productive" is like calling pimps "investment bankers".  It's nonsensical and masks the reality of the tactics involved in acquiring and maintaining those positions.

No one is upset that these criminals individuals have been successful.  We are upset because many of them destroyed millions of lives in the process and then are given absurd tax incentives and loopholes to ensure they stay wealthy.  In a very basic sense, an extra 2% tax on income over $1,000,000 would be an additional $20,000 and, depending on how this income was acquired, result in a tax rate of 37%.  This would still leave the individual with $630,000.  Meanwhile (again, in a very basic sense not including tax credits or deductions) the single mom paying 15% on her $30,000 salary is left with $25,500.  Tax credits and deductions aside, food, shelter, transportation, and general quality of life become much more uncertain for the individual bringing home $2000/month than the individual bringing home $30,000/month.

This whole scenario is assuming any of the wealthy individual's income was actually considered income.  Capital gains on long-term investments, and several other forms of income, aren't technically counted as income.  The Long-Term Capital Gains tax is currently set at 15% which coincidentally is also the same tax rate the single mom in the previous example, working and earning $8,500-$34,500, is responsible for.  Yeah, that makes sense.

So to insinuate that the lowly hourly workers are just jealous and looking for a handout is arrogant and offensive.

According to a report from the IRS, average household income increased 62% from 1979 through 2007.  I won't list every year's inflation rate but the inflation rates during 1979-1981 were 11.22%, 13.58%, and 10.35%. respectively.  And as anyone with a credit card can tell you, calculating percentages of percentages is messy business.  This is significantly skewed by the fact that income for the top 1% "more than tripled" during this time making the actual number for the remaining 99% a bit lower than the reported 62%.  Factor in inflation, and the old adage of "The rich get richer, and the poor get poorer" doesn't sound too far from the truth.

(Quick math timeout to illustrate the previous comment:

Lets say all of your monthly bills cost you $1000 (if only, right?).  A 10.35% annual inflation rate means that the next year those same bills will cost you $1103.50.  That hurts already.  Most people won't be getting a raise worth $100 extra every month to cover that increase in expenses.  However, if that 10.35% increase came after previous annual increases of 11.22% and 13.58% your bills would have increased from $1000 to $1393.98 in just three years.

Using $1000 in 1979 as a base, and calculating each year's inflation rate on top of the previous year's rate, we see that in 2007 the same bills would cost roughly $3181.84.  An increase of 318%.  And, as stated previously, average household income (even including the top 1%) increased just 62% over this same time period while income for the top 1% alone "more than tripled".  Regardless of the actual number, roughly tripling income would account for the roughly tripling expenses.)



I'll leave you with a few quotes from the unjustly vilified patriots interviewed for the Bloomberg piece.

-When asked about willingness to pay higher tax rates Blackstone Group LP CEO Stephen Schwarzman instead chose to complain about low-income families who pay no income tax saying "...we should all be part of the system".  Classy.

-Robert Rosenkranz, CEO of Delphi Financial Group Inc., claims the 1% should be getting thanks instead of persecution.  He says "It's simply a fact that pretty much all the private-sector jobs in America are created by the decisions of 'the 1 percent' to hire and invest".  So the next time you see a new small business open in your town make sure to thank Robert Rosenkranz.

(No word as of yet on how Mr. Guildenstern feels about the U.S. tax code.)

-CEO of Euro Pacific Capital Inc. Peter Schiff claims his taxes are "more than a medieval lord would have taken from a serf".


Billionaire CEOs: modern-day serfs.

Let's Get Srsly Srs

The other day I was talking to my wife about the phantom tax cut that the Obama administration passed earlier this year.  This article from the NY Times talks about how most people didn't even realize it happened.

I made a comment to my wife that I was concerned about my annual tax liability staying the same when the amount allotted from each paycheck was less.  She asked for a little clarification of what I meant and this spewed forth:

The taxes being taken out of my paychecks are very similar to our property tax being rolled into the escrow with our mortgage.  We pay a little extra every month so it builds up to what we have to pay for yearly taxes.  Then when the taxes come due, the money is already there and we don't have to pay any more.  

The amount of taxes I owe at the end of the year is based on how much I make.  I have a certain amount taken out of each paycheck to go toward that amount.  This is basically how the tax refund works.  I give the government money from every paycheck to count toward my yearly tax liability.  At the end of the year if I've given them too much then they give me back the difference.  But, if I've given them too little then I have to pay the difference. 

Here's where my question comes in.  If the amount of taxes that I owe stays the same, and my exemptions/the government is taking less from each of my paychecks, then I will have a smaller refund or I might owe at the end of the year....unless they have made some adjustment to my overall tax liability.  I assume they would be blowing themselves on national television if they had done that so I don't thinks it's happened.  

This could mean that millions of Americans who have been claiming the same exemptions on their paychecks for years could have a dramatically different amount that they owe the government this year. 

It's just like the original version of the new homebuyer's credit.  Under the version that we [my wife and I] took advantage of, the credit is a one time gift from Uncle Sam thanking us for stimulating the economy by buying a house.  Under the version from the year before (the way I understand), it was basically an $8000 loan.  They were getting an $8000 advance on their next years' taxes.  Meaning, those people have to pay that $8000 back the next year (that year being this one).  

SO!!!  When tax time comes around next year we will have millions of homeowners (whether they're victims of a foreclosure or not) who now owe $8000 more than usual due to the original homebuyer's credit/loan.  AND you combine that with every working American not having as much money built up toward their yearly tax liability because of the hidden tax break.  This could make for a very bad combination.  Throw in outside factors such as the terrible housing market, the equally terrible job market, the ever-declining value of the dollar, and the "war" in Afghanistan, and you get a potential catastrophe.  

Okay...I got a little dramatic.  But you can see where I'm going.  Tax credits are great as long as they're real.  Don't have them be a hidden loan or something that could blindside us at tax time.

Sorry to get into something so serious.  Election season has me steering away from normal Apollo 13 references and more toward political issues.