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No. of Recommendations: 26
Spender-in-Chief currently in the White House

The last guy didn't do us any favors.

https://www.thebalance.com/trump-plans-to-reduce-national-de...

On Oct. 1, 2020, the debt hit a new record of $27 trillion.
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No. of Recommendations: 4
I wonder if the wealthy get a chuckle out of all these poor to middle class people defending tax breaks for the rich? I know I find it hilarious.

intercst


I find it deplorable.

CNC
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No. of Recommendations: 15
I would also, except the poor are doing it to themselves. I think that's his point. They vote Rep who in turn pass tax cuts for the 1%. They did it with Reagan, Bush Jr, and Trump. And they keep doing it.

A fool and his money are soon parted. (Or, more musically, "a fool and his money soon go separate ways"...I always liked that phrasing better anyway.)
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No. of Recommendations: 9
... the poor are doing it to themselves.

They're not only doing it to themselves though, there doing it to 99% of people in general.

culcha
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No. of Recommendations: 2
I find it deplorable.

I find it deplorable as well. Although, IMHO, it is more of an indictment of the education system and mass media in NOT explaining how big companies can legally pay no taxes. In the same vain when Warren Buffet and Jeff Bezos says we should raise incomes taxes on the rich and everyone cheers but few understand that it won't affect Warren or Jeff.

I have 2 sides businesses that make me money but yet pay no federal incomes taxes.

Don't hate the player, hate the game.

JLC
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No. of Recommendations: 1
I have 2 sides businesses that make me money but yet pay no federal incomes taxes.

If you're making money, how do you dodge Social Security and Medicare tax? Are they S corp?
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No. of Recommendations: 1
<<I have 2 sides businesses that make me money but yet pay no federal incomes taxes.>>

If you're making money, how do you dodge Social Security and Medicare tax? Are they S corp?

I don't know about JLC. I'm have a part-time small business and pay plenty in self-employment tax, $19,900 last year. I did not pay federal or state income tax.

Though last year my PPP load paid back more than the self-employment tax...
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No. of Recommendations: 14
In the same vain when Warren Buffet and Jeff Bezos says we should raise incomes taxes on the rich and everyone cheers but few understand that it won't affect Warren or Jeff.

Are you sure about that? In his famous editorial, Buffett said that the rich mostly make money via lightly taxed capital gains. He went onto say:

But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains.

https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the...

Buffett said he paid $6 million in taxes, but only draws a $100,000 salary, so a raise in capital gains rates would definitely increase his taxes.
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No. of Recommendations: 10
The history of taxation (at least for the last 50 years) is shifting the tax burden to the poor. Implement sales tax (regressive), reduce capital gains tax (which mostly the affluent benefit from), etc.

Buffett is correct. Increase cap gains tax to at least "ordinary income", if not larger. I would favor cap gains taxes being higher than ordinary income. Which would hurt me (I'll be retiring soon and living off cap gains), but I think it is the right thing to do.
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No. of Recommendations: 0
If you're making money, how do you dodge Social Security and Medicare tax? Are they S corp?

Medicare & Social Security taxes are only on earned income, think W2. Profit is not subject to Medicare or Social Security taxes. For example no payroll taxes on Schedule E (rent/ royalties) or Schedule D (capital gains). I believe in some or all cases Schedule C income (which can be self-employment) both are due.
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No. of Recommendations: 3
"Buffett is correct. Increase cap gains tax to at least "ordinary income", if not larger. I would favor cap gains taxes being higher than ordinary income. Which would hurt me (I'll be retiring soon and living off cap gains), but I think it is the right thing to do."


That would cause horrendous churn in the stock market as folks kept stocks 11 months or less to avoid having gains taxed at 'capital gains' rates.

There would be an entire industry of new mutual funds set up to churn stocks every 11.5 months, wait 2 months, then rebuy the stocks they sold again for 11.5 months.

No one 'wealthy' would pay capital gains taxes if they could if they were higher.

Probably also cause a lot more house moves to avoid more than $250,000 'capital gains' tax on sales of houses.....for singles .....$500,000 on marrieds....

Silly idea.

Buffet isn't going to pay much. He's planning to donate all his highly appreciated stock to charity and side step the tax man entirely in the next few years.

Bill Gates - same deal......all his highly appreciated stock will never be sold for cap gains - just donated to charity.


t.
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No. of Recommendations: 15
That would cause horrendous churn in the stock market as folks kept stocks 11 months or less to avoid having gains taxed at 'capital gains' rates.

I doubt anyone would suggest or is suggesting that short term cap gains be taxed at rates lower than long-term capital gains. More that people working for a living shouldn't have to pay higher rates than those who get their income from their money making more money.
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No. of Recommendations: 3
Tele,

Perhaps I am interpreting your post incorrectly,but it seems that you are saying that someone donating appreciated stock to charity is somehow a bad thing. The person donating the stock gets no economic benefit from the act of donation,so where is the problem with that?

JK
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No. of Recommendations: 3
I realized after posting that my phrasing was incomplete and unclear. It seems to me that the tax benefit to the ultra wealthy are immaterial relative to the overall benefits to the world. After all the choices of where the money goes are the government,the heirs,or those in the world who are less fortunate. I would certainly prefer to incentivize being the less fortunate.

JK
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No. of Recommendations: 3
JimKredux asks,

Perhaps I am interpreting your post incorrectly,but it seems that you are saying that someone donating appreciated stock to charity is somehow a bad thing. The person donating the stock gets no economic benefit from the act of donation,so where is the problem with that?

</snip>


Actually that's not true. There's a whole industry advising wealthy people how to make a donation to Yale and Harvard so that their kids get a leg-up on admissions. Similarly, there's more social cache in donating to the Metropolitan Opera or the New York Philharmonic rather than a local food bank or the Salvation Army.

We probably should have a limit on how much of an estate can get the charitable deduction to the Estate Tax (say 50% or 60%) and let the remainder be taxed for the general public good.

Harvard already has enough money. They'll never be able to spend down their $40 billion endowment.

intercst
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No. of Recommendations: 12
lot of profitable Fortune 500 companies pay zero taxes

Fortune 500 companies pay "zero taxes"??

Really? Which ones?

Or are you making this up.

And 'ordinary people' being fleeced?? Really??? According to the IRS SOI for 2018, the top 25% of AGIs paid 87% of all Fed income taxes while the first 75% of US households, net of refundable credits (a welfare program administered by the IRS) paid 13% of all Fed income tax. Is that a 'FLEECING' of 'ordinary people'??

Whew!

BruceM
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No. of Recommendations: 22
Back in 2018, 91 Fortune 500 companies paid no taxes.

26 companies post Trump tax breaks have paid no taxes for the last 3 years.

https://www.nytimes.com/2021/04/02/business/economy/zero-cor...

Includes FEDEX and Nike.

Yeah, things are seriously broken and people defending it are just clueless.
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No. of Recommendations: 4
Profit is not subject to Medicare or Social Security taxes. For example no payroll taxes on Schedule E (rent/ royalties) or Schedule D)

It depends on the business form....but all 'income from services' from a business is subject to FICA tax. This includes line 31 of Schedule C for self employed and W2 box 3 and 5 for employees of corporations or K-1 ordinary income of a partnership.

This is why the Biden's organized as two S-Corps for their speaking fees/book royalties. They paid themselves about $122k in 2017 and about $250k each in 2018 as 'salaries' subject to FICA tax and took the remaining $Millions in income as a 'dividend' NOT subject to FICA tax. This saved them several hundred thousand bucks in employment tax.

BruceM
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No. of Recommendations: 3
Back in 2018, 91 Fortune 500 companies paid no taxes.

You mean no...
Employment taxes for employees
State tax
Excise tax
Sales tax
Transfer tax
Local tax
Property tax

AMZN is infamous for paying "NO TAXES", but a quick look at their 2020 income statement shows an 'Income Tax Expense' of $2.863B. They show income taxes paid every year going back to 2005.

BruceM
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No. of Recommendations: 3
Harvard already has enough money. They'll never be able to spend down their $40 billion endowment.

Exactly.

The top 10 college endowments are as follows

Harvard University (MA)............ $40,929,700,000
Yale University (CT)............ $30,295,003,000
Stanford University (CA) ........$27,699,834,000
Princeton University (NJ) ........$25,623,600,000
Massachusetts Institute of Technology $17,443,750,000
University of Pennsylvania ........$14,649,761,000
Texas A&M University ................$12,632,092,945
University of Michigan—Ann Arbor $12,273,834,000
University of Notre Dame (IN) ........$11,565,964,000
Columbia University (NY) ........$10,950,738,000

Total ...............................$204,064,276,945


$204.1B??? Really???

How about a new piece of legislation that requires every university with over $5B in their endowment to direct that money into a central trust that is used exclusively to pay a % of delinquent student debt that meets specific eligibility requirements for student economic hardship. I mean, wouldn't that be the perfect use of pre-tax dollars designated for higher education?

BruceM
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No. of Recommendations: 5
I mean, wouldn't that be the perfect use of pre-tax dollars designated for higher education?

Wow. That’s sure a big-government solution, telling a private school what they can do with their money.

Are you proposing that Harvard use its endowment to pay down student debt incurred at o the schools?

You realize that Harvard and Yale and some other schools fully fund tuition for students whose parents earn less than $65k a year, and sliding scale after that.

Only 7% of incoming freshmen at Harvard take out student loans, and the average loan amount is about $6k.

https://www.collegefactual.com/colleges/harvard-university/p...
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No. of Recommendations: 3
jj:"More that people working for a living shouldn't have to pay higher rates than those who get their income from their money making more money."

really? You work for company X. You have zero money invested in company X. You work 40 hours, get paid 40 hours. You really don't care if the company makes a little money, no money or is a non-profit. It's a paycheck. You take your deductions when you do taxes, your real estate deduction if you pay real estate taxes, etc, and pay some on your earnings. Half of all people don't even pay ANY income taxes.

Now, you finally save $5000 and invest in stocks. Say pets.com and a several others like it. They've been going up and up.

Two months later, your stocks are worth $300.

You 'risked' $5000 of your money. Invest wisely with luck....and you 'make' money - maybe. Invest poorly, you lose some, most or ALL of YOUR MONEY.

That's the difference between getting a 'wage' and making money with YOUR MONEY. RISK!

t.
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No. of Recommendations: 11
BruceCM asks,

<<lot of profitable Fortune 500 companies pay zero taxes>>

Fortune 500 companies pay "zero taxes"??

Really? Which ones?

Or are you making this up.


</snip>


For a "retired financial planner", I'm astonished at how poorly informed you are on this issue.

No Federal Taxes for Dozens of Big, Profitable Companies
https://www.nytimes.com/2021/04/02/business/economy/zero-cor...

FedEx and Nike are among those found to have avoided U.S. tax liability for three straight years.

</snip>


You live in the Portland area. Do you really believe that Nike isn't making money? <LOL>

intercst
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No. of Recommendations: 1
JK:"Perhaps I am interpreting your post incorrectly,but it seems that you are saying that someone donating appreciated stock to charity is somehow a bad thing. The person donating the stock gets no economic benefit from the act of donation,so where is the problem with that?"

Well, if you are a person who wants to see the 'rich' pay a lot of taxes - you'd be disappointed when Buffets 50 billion dollars and Gates' 50 billion dollars that he now owns....

Get donated to a charitable foundation.....and they pay ZERO estate taxes. You can make your estate tax 100% and they won't pay a dime.

Is it a good thing? Not if you're concerned with 'tax collection' and 'taxing appreciated assets and the capital gains' of it.

On the other hand, foundations like the Ford Foundation, the Carnegie Foundation and dozens of others cough up money for PBS, for this, that, medical research, etc......and pay no taxes....

So when you hear they should increase estate taxes from XX% to YY% to 'tax the rich', just laugh....the rich won't be paying it.

You need to read the Millionaire Next Door. The rich leave nothing for the tax man - using Trusts, donations, and everything else including life insurance.

t.
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No. of Recommendations: 2
intercst:"Harvard already has enough money. They'll never be able to spend down their $40 billion endowment."

But they'll be spending about 5% of it a year....

I just read that Harvard's entering class is ....31% white this year......hmm...... 'correctness at work'.....

If you're not a Harvard alum's son or daughter - your chances as a white student are less than zero.

t.
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No. of Recommendations: 0
Tele,
I would much rather see the money to go charity than to taxes. I simply believe that charities have a better chance of helping those in need than the government.
More tax revenue for the government has never meant less government spending in my lifetime.

JK
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No. of Recommendations: 5
Tele,

Perhaps I am interpreting your post incorrectly,but it seems that you are saying that someone donating appreciated stock to charity is somehow a bad thing. The person donating the stock gets no economic benefit from the act of donation,so where is the problem with that?

JK


To tele, paying any tax at all is a BAD THING!!!

This psychosis seems to be common in the RWCJ.

CNC
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No. of Recommendations: 2
I just read that Harvard's entering class is ....31% white this year......hmm...... 'correctness at work'.....

If you're not a Harvard alum's son or daughter - your chances as a white student are less than zero.


Not so. 14% of Harvard's class of 2022 are legacy admissions. So even if all of them were white (and they're not), 17% of the class would be white students with no family tie to Harvard.

Ira
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No. of Recommendations: 26
That's the difference between getting a 'wage' and making money with YOUR MONEY. RISK!

I've always wondered why "Money at risk" is more significant than having life at risk. Using risk as a factor in determining tax rates implies those with the most at risk, their lives, front line critical workers, police, military, fire should pay the least taxes.

If risk is used to set tax rates, those of us who make our money with minimal risk, stocks, bonds should be taxed the highest, financial risk is much lower than the risk of losing ones sole source of income. My stocks dropped 40% (2008 anyone) and my standard of living didn't change, I slept in my bed, got the same medical care, same food. Those who were working and lost their jobs lost their homes and marriages, they didn't fare as well.
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No. of Recommendations: 1
It depends on the business form....but all 'income from services' from a business is subject to FICA tax. This includes line 31 of Schedule C for self employed and W2 box 3 and 5 for employees of corporations or K-1 ordinary income of a partnership.

Which is why I separated out Schedule C as sometimes having payroll taxes and not scheduled D & E.
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No. of Recommendations: 16
BruceCM: "And 'ordinary people' being fleeced?? Really??? According to the IRS SOI for 2018, the top 25% of AGIs paid 87% of all Fed income taxes while the first 75% of US households, net of refundable credits (a welfare program administered by the IRS) paid 13% of all Fed income tax. Is that a 'FLEECING' of 'ordinary people'??"

I find that people who post percentage of people versus percentage of federal income tax without also posting percentage of income reported are usually tryin to intentionally tilt emotions.

I am not sure what data set (or year) you used, but

https://taxfoundation.org/summary-of-the-latest-federal-inco...

reports that the top 25% reported 69.1% of AGI and paid 86.1% of federal income taxes and
therefore the bottom 75% reported 30.% of AGI and paid 13.9% of federal income tax; in addition the top 25% reported more than twice the amount of AGI as the bottom 75% (roughly 2.2x more).

Given standard deductions and progressive rate structure, that seems not surprising.

Regards, JAFO
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No. of Recommendations: 0
JR:"I've always wondered why "Money at risk" is more significant than having life at risk. Using risk as a factor in determining tax rates implies those with the most at risk, their lives, front line critical workers, police, military, fire should pay the least taxes."

Only, what, 5% of all people fall into that category, right? Maybe significantly less than that. Most folks in the military probably don't make enough money (they have free room and board) to pay any significant income taxes - if any at all.

So for the other 95%....including lots of police who sit on their butts 8 hours a day at desk jobs, or detective or other positions.... there is no significant 'risk to life'



- - -----



JR:"If risk is used to set tax rates, those of us who make our money with minimal risk, stocks, bonds should be taxed the highest, financial risk is much lower than the risk of losing ones sole source of income."

Really? If you had WHOOPS bonds - supposed nice safe type gov't bonds....and they defaulted and bond holders got zip.....you might be eating dog food. Same with GM bonds - that suddenly became worthless. If you retired with a big chunk of them in your portfolio, suddenly youare destitute and eating dog food or worse. Of course, there is risk in financial markets of 'losing your sole source of income'. you could have been a GM spin off retirement - what was it? I forget - but when GM went bust, your pension went bust - taken over by the pension guarantee board - and likely chopped. Your GM stock was worthless - maybe you had saved all your life and were living off dividends - to supplement your pension which got the ax....and of course, if you had GM bonds....zip. You likely lost your job if you were still employed, too.

- ------



JR" My stocks dropped 40% (2008 anyone) and my standard of living didn't change, I slept in my bed, got the same medical care, same food. Those who were working and lost their jobs lost their homes and marriages, they didn't fare as well."

And the dot com bust saw tons of retirees go bust, lose their houses, lose their jobs.....

When your 'assets' plunge and suddenly is dog food and not much more for meals.....that's taking risks....when you're 70, there is no way to 'start over'

Oh, and if no one is 'willing' to risk assets to buy stocks.....well, the economy will crater as companies can't expand, hire new people, build new plants, can they?

- - ----

The markets have worked well when people have an INCENTIVE to invest (and risk their money) . If you kill that incentive - well, you kill the economy. Simple. Same for corporate bonds - there is also risk there. (think GM....MCI....WCOM.....Enron...)....

t.
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No. of Recommendations: 0
I find that people who post percentage of people versus percentage of federal income tax without also posting percentage of income reported are usually tryin to intentionally tilt emotions.

And shouldn’t we include total amount of taxes paid including payroll taxes & sales tax which are regressive. And should capital gains be taxed at the same rate as income?
https://itep.org/who-pays-taxes-in-america-in-2019/
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No. of Recommendations: 10
For a "retired financial planner", I'm astonished at how poorly informed you are on this issue.

For a profession 'retire early' maven, I'm surprised at how poorly you read and comprehend.

Your original comment was lot of profitable Fortune 500 companies pay zero taxes

My response is NO, those companies...every one of them....do indeed pay taxes. And that is 100% correct as written.

Read --- think --- write, in that order.

BruceM
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No. of Recommendations: 0
I find that people who post percentage of people versus percentage of federal income tax without also posting percentage of income reported are usually tryin to intentionally tilt emotions.

It depends on what question you're trying to answer.

The issue here, at least as I read it, is who amongst US households, pays the highest percent of Federal Income tax. The problem with using IRS data as you have shown for this is there is a percent of household who do not file, simply because their reportable income is less than their standard deduction and they have had no FITW during the year to file to get refunded and they are not eligible for a refundable credit they'd have to file to get. This group does need to be included in apportioning percentages to answer this question accurately.

And your link to the Tax Foundation data is a bit old, 2018 (filing year) data are available from the IRS SOI you can Google to.

BruceM
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No. of Recommendations: 15
Your original comment was lot of profitable Fortune 500 companies pay zero taxes

My response is NO, those companies...every one of them....do indeed pay taxes. And that is 100% correct as written.

Read --- think --- write, in that order.

BruceM



I'm not particularly bright, but even I understood their comment to be within the conversation's context of federal corporate taxes.
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No. of Recommendations: 3
PULLEEZE people ! Take this kind of "bickering" off the public boards ... do it privately/personally (read e-mail).

Rich (haywool) long on "on topic" for the Fool boards
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No. of Recommendations: 0
If you're making money, how do you dodge Social Security and Medicare tax? Are they S corp?

LLC.

But more importantly, depreciation outstrips the income on the tax form. Therefore, no federal income taxes (actually a loss goes on my return) but actual money goes in my pocket.

JLC
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No. of Recommendations: 1
JLC explains,

<<<If you're making money, how do you dodge Social Security and Medicare tax? Are they S corp?

LLC.>>>

But more importantly, depreciation outstrips the income on the tax form. Therefore, no federal income taxes (actually a loss goes on my return) but actual money goes in my pocket.

</snip>


Sounds like you're in some kind of low rent real estate deal like "slumlording" an apartment or perhaps running a trailer park.

intercst
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No. of Recommendations: 21
Fortune 500 companies pay "zero taxes"??
Really? Which ones?
Or are you making this up.


These 91 companies paid no federal taxes in 2018
https://www.cnbc.com/2019/12/16/these-91-fortune-500-compani...

55 major companies paid $0 in federal taxes on their 2020 profits: report

Of those 55 companies, 26 were identified by ITEP as having paid no federal income taxes for three consecutive years—despite having reported profits in each of those years, and a combined $77 billion in earnings over that three-year span.
https://fortune.com/2021/04/02/55-companies-paid-zero-in-fed...
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No. of Recommendations: 4
"And should capital gains be taxed at the same rate as income?"

That one's easy.
The answer is yes.
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No. of Recommendations: 7
I disagree. I think cap gains should be taxed more than ordinary income. Maybe half-again the rate of ordinary income, so if you pay 30% on income then it should be 45% on cap gains.

As someone pointed out, working should not be taxed more than "money making money".
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No. of Recommendations: 0
Even better. I stand corrected.
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No. of Recommendations: 1
"I'm not particularly bright, but even I understood their comment to be within the conversation's context of federal corporate taxes"

"A lot of Fortune 500 companies pay NO taxes"

What is there about that you don't understand.

One of the things you learn quickly when you get into the business of financial planning is you speak accurately, not recklessly. If your communication is sloppy two things happen...1. Your peers start ignoring you and 2. Your clients get confused and frustrated and you run the risk of losing them.

But you're certainly welcome to interpret 'company taxes' however you wish.

BruceM
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No. of Recommendations: 9
" if you pay 30% on income then it should be 45% on cap gains.

As someone pointed out, working should not be taxed more than "money making money".


Really? Why bother to invest then for retirement. You put aside money in a taxable account. Buy Facebook and Tesla and a bunch of other companies that do well. You then pay 45% on it when you retire and plan to live on your saved 2 million dollars? If you live in NY or CA, another 10% goes to the state.

They get more than HALF your income?

How about we tax your SS the same? Heck, it's just 'money making money' in your lockbox.....

Maybe your pension too!


t.
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No. of Recommendations: 3
One of the things you learn quickly when you get into the business of financial planning is you speak accurately, not recklessly. If your communication is sloppy two things happen...1. Your peers start ignoring you and 2. Your clients get confused and frustrated and you run the risk of losing them.

Better yet, use the terminology appropriate for the audience. This is a public message board. Jargon is often obfuscating, something to eschew.
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No. of Recommendations: 11
Really? If you had WHOOPS bonds - supposed nice safe type gov't bonds....and they defaulted and bond holders got zip.....you might be eating dog food. Same with GM bonds - that suddenly became worthless. If you retired with a big chunk of them in your portfolio, suddenly youare destitute and eating dog food or worse. Of course, there is risk in financial markets of 'losing your sole source of income'. you could have been a GM spin off retirement - what was it? I forget - but when GM went bust, your pension went bust - taken over by the pension guarantee board - and likely chopped. Your GM stock was worthless - maybe you had saved all your life and were living off dividends - to supplement your pension which got the ax....and of course, if you had GM bonds....zip. You likely lost your job if you were still employed, too.

Exactly! You put your money at risk. In exchange for taking that risk you get the promise of interest, dividends, or capital appreciation.

It is flat silly to suggest you need special tax treatment because you took a risk. What next? Professional bungee jumpers should pay lower taxes than accountants because they have riskier jobs. Or people who speculate in Beanie Babies should have a lower tax rate than people who buy bonds because Beanie Babies are riskier. Completely silly way of thinking.
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No. of Recommendations: 5
Are you proposing that Harvard use its endowment to pay down student debt incurred at o the schools?

Exactly.

The dollars in the endowment are pre-tax. Were these dollars the university had paid tax on, then certainly the university would own them and so could do with them as they wish. But like pre-tax dollars in an IRA or HSA or FSA, they are restricted in what they may be used for. For an educational endowment, their use is restricted to paying for post secondary education expenses, to include student tuition and fees.

That's great Harvard or Yale or A&M or podunkU pay for this or that qualified post secondary educational expense for their students. Terrific! But that doesn't change the fact that these universities have amassed hundreds of billions of dollars at taxpayers expense for no reason other than demonstrating their power and influence. Instead of parking those billions of pre-tax dollars for purposes of prestige, wouldn't it make more sense to actually use them constructively for what they were originally intended...or is amassing wealth a worthy goal all by itself.

BruceM
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No. of Recommendations: 3
It is flat silly to suggest you need special tax treatment because you took a risk.

I don't think that is the "reasoning." I think it is to encourage investing some of your savings in the markets so that there is plenty of capital to create and expand businesses that provide jobs.

Mike
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No. of Recommendations: 21
I disagree. I think cap gains should be taxed more than ordinary incomE

I have a really easy solution to eliminate 1,000 pages of IRS regulations:

Anything that you receive is income. Whether that comes from wages, interest, stock gains, inheritance from Uncle Harry, lottery winnings, or anything else. If you didn’t have it yesterday and you do have it today, it’s income.

Anything that you spend in pursuit of income is expense. This does not include living expenses (food, shelter, automobile, meals, entertainment) but does include other expenses including the cost of investment real estate, stocks, bonds, maintenance, and so on. Expenses may be deducted from income gradually for hard assets like buildings or vehicles, otherwise deduct all at once.

Everyone gets a personal deduction of $X (argue about it). Nobody gets more.

If you manage your taxes so that they fall less than Z% of your income, you pay Z% anyway, as a minimum tax.

End of plan.

No exceptions.

One final regulation: If you are found to have given money to a political candidate, you will die in the electric chair with the heat of 10,000 angry suns.
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No. of Recommendations: 1
Neuromancer:

{{{"And should capital gains be taxed at the same rate as income?"}}}

"That one's easy.
The answer is yes."</i?

I do not think that it is as easy as you suggest.

It ignores inflation, especially compounding over time, for long term assets.

Say I bought a rental house for $100,000 in 1990.

I pay taxes on the net rental income each year.

In 2019, because I am older, DIY projects are harder to do, and Covid, I sell the house for $300,000 net of sales costs.

Do I have real capital gains of $200,000 and what amount should I be paying in capital gains taxes?

Does your opinion change if I point out, that based on inflation, $100k is the equivalent of $310,263.35?

https://www.usinflationcalculator.com/

If not, why not?

Did my capital really increase? Remember, I paid income taxes every year on the net rental income.
I would even suggest, arguendo, that I suffered a small capital loss and tat requiring me to pay capital gains taxes on $200,000 does not align with economic reality.

Regards, JAFO
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No. of Recommendations: 8
Instead of parking those billions of pre-tax dollars for purposes of prestige, wouldn't it make more sense to actually use them constructively for what they were originally intended...or is amassing wealth a worthy goal all by itself.

For a lot of people, amassing wealth is a worthy goal.... why should it be different for a university? I actually have zero problem with large college endowments. I don’t have a problem if you happen to have a large bank account, either. Colleges use the money to fund scholarships, research, build new buildings, attract better teachers, etc. Turning out well-educated students who will do good things in the world is a good thing as well, and finding labs etc that do research can benefit everyone.

I also think it’s a mistake to somehow conflate colleges’ endowments and the student loan issue, and especially using schools like Harvard and Yale, since they use their endowments to fund scholarships and the number of people taking out student loans to go there is actually pretty low.

The fact is, a lot of the student loan problem is related to people taking out large loans to go to substandard schools that don’t prepare students for employment good enough to pay back the loans. Or by borrowers who’ve used their loans irresponsibly. None of that has anything to do with Harvard’s endowment.
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No. of Recommendations: 4
" You put your money at risk. In exchange for taking that risk you get the promise of interest, dividends, or capital appreciation.

It is flat silly to suggest you need special tax treatment because you took a risk."

---

Really? If paying 45% income tax on dividends and interest gets you down to a pittance, no one will invest in the stock market - and companies will be starved. No new expansion, no new jobs, no new products. Well, here in the USA.

Of course, in countries with different rules, companies will be able to borrow and expand. They'll take over US markets. You'll spend 99% of your money buying foreign goods because no company here will be in business long.

Simple.

Why should anyone take risk when they can invest in Treasury Bills 100% risk free, with guaranteed return of capital. And your retirement savings.

And you didn't answer the question - you save and save and save for retirement. After 40 years, most of it is re-invested dividends and inflation caused 'capital appreciation'. THen when you retire, the government likely takes 45% of your monthly income. The state takes another 10%. That fair?

Please answer above question

----

Second, your simplistic view of the world shoots itself in the foot.

You're a businessman......

---

your simplistic idea

"Anything that you receive is income. Whether that comes from wages, interest, stock gains, inheritance from Uncle Harry, lottery winnings, or anything else. If you didn’t have it yesterday and you do have it today, it’s income."


OK...you're a landlord. Your tenants pay you $10,000 a month in rent on your 10-plex apartment building. You provide outdoor maintenance (lawn, snow plowing, parking lot repair, etc). YOu provide water/sewer/electricity for lighting hallways, outside areas, parking lot.

You also sold stock you've had for 20 years at $30,000.

So your 'income' that year was $40,000 let's say.

==========
Second part of your simplistic proposal


"Anything that you spend in pursuit of income is expense. This does not include living expenses (food, shelter, automobile, meals, entertainment) but does include other expenses including the cost of investment real estate, stocks, bonds, maintenance, and so on. Expenses may be deducted from income gradually for hard assets like buildings or vehicles, otherwise deduct all at once."

Well, right there we get into pages of definitions of 'expenses gradually' and what expenses. There's all sorts of 'buildings' from shopping centers to individual rental homes, to condos, to apartments. There's all sorts of tenant/landlord agreements. YOU've got tons of expenses for taxes, repairs (what's allowable), upgrades, and for vehicles - miles driven or actual depreciation of value? Do you get to deduct gas/mileage to go collect your rent/inspect your properties? How about writing off damage from bad tenant, or non-payment of rent and eviction fees/lawyer costs? Lawsuits? If you're a businessman in 10 cities running a dozen stores, don't you get to deduct your travel costs/hotel costs while there? And since you gotta eat out, some meal cost? hmmm.....

You also invested in a limited partnership that does some 'return of capital' and does annual 'losses' for tax write off purposes.

You bought a greenie vehicle and got a $7500 gov't discount. Is that income or not.

You've already acknowledged 500 pages of tax code 'definitions' already by your 'expenses' categories......

---

and no....inheritance is not income. Uncle Joe died. His estate may have already paid 55% estate tax. Let's say he died with 5 million. Now, Uncle Bidden will tax it more as 'appreciated gain' over xx amount.....

You'll some of it, let's say a million dollars - but it has a tax basis of $20,000 since Uncle Joe started saving at age 21.

So your income that year was $980,000 according to you. Let's see...well, that's 'risk free' income so we tax YOU at 45%. Then the state takes another 10%.

Suddenly Uncle Joe's money to you is 10% of what he died with, with the government getting 90% of it....

Oh, great...now you think you can retire....well, you'll get less than 20,000 a year in retirement on Uncle Joe's money you inherited. Good luck with that.

- -----

sadly, your spouse died. She left you a million dollar life insurance policy to take care of your 3 kids. Uncle Sam treats that like income, right (your definition - anything you get is income!)....Uncle Sam grabs 50% of it....then the state takes another 10%.

oh....but life insurance is not supposed to be taxed - well, one of those thousand pages of 'tax codes' - but you eliminated that, right!

And on your way to collect your check, you slip and fall on an icy sidewalk that should have been cleared. YOu break your back and wind up with $500,000 in hospital bills. You sue the owner and get a $500,000 settlement. But according to you, that's income and 60% of it goes to the feds and state. You wind up with $200,000 and the hospital and doctors are after you for $300,000 but you don't mind since you 'paid your fair share of taxes ' on 'your income' that year.

Right?

Or are you going to start making exceptions and have 1,000 pages of tax code defining 'income' and 'expenses' and 'deductions' and 'gains/losses' and 'depreciation' and everything else?


t.
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No. of Recommendations: 3
"I don't think that is the "reasoning." I think it is to encourage investing some of your savings in the markets so that there is plenty of capital to create and expand businesses that provide jobs.

Mike"
---------------------------

I clearly remember long ago when I first started investing in companies via stock purchases,
thinking that I was providing at-risk capital for said companies to use to build and
expand their business. And at the same time, those companies would be paying taxes on their
profits which would be used by the federal and state governments to build and invest in America.

So all of us investors were helping make our country, and our society, a better place, while
hopefully accumulating wealth to make our own lives better.

Wasn't that a cute way of thinking ? lol
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It ignores inflation, especially compounding over time, for long term assets.

Inflation is not ignored, the taxes are being paid with inflated dollars.
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Sounds like you're in some kind of low rent real estate deal like "slumlording" an apartment or perhaps running a trailer park.

Yes and no.

One is a trailer park. Not exactly "slum lording", it is a nice park in a great location, but not on par with what you would see in some FL or CA areas.

One is a beach condo in a very desirable 30A location. "Slum lording" there is relative to the other properties.

JLC
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No. of Recommendations: 7
JonathanRoth:

JAFO: <<<It ignores inflation, especially compounding over time, for long term assets.>>>

"Inflation is not ignored, the taxes are being paid with inflated dollars."

It does not matter that the taxes are being paid in inflated dollars in the example I gave.

There was no real gain. Being forced to pay CG taxes in the example I gave is simply capturing part of the original capital (there was no real gain) and this fact is unchanged even if CG taxes are paid in inflated dollars.

Regards, JAFO
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No. of Recommendations: 1
There was no real gain. Being forced to pay CG taxes in the example I gave is simply capturing part of the original capital (there was no real gain) and this fact is unchanged even if CG taxes are paid in inflated dollars.

This is true of other assets whose price does not keep up with inflation. Income from cash earning 0.01% or stock with under inflation return is still taxed, and also looses value over time. Compounding and duration makes the numbers bigger, not conceptually different.
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No. of Recommendations: 15
...I was providing at-risk capital for said companies to use to build and
expand their business.


Only if you participated in the actual offering. Otherwise you're just trading football (or baseball) cards with others.

If I buy 100 shares of INTC, does Intel get that money? No. They got the money for those 100 shares whenever they ran their public offering. YOU get that money if I'm buying them from you. And when I sell them I will get the money and someone else will have the shares. Etc. It affects the company not-at-all.

Just like buying a pack of football cards. TOPPS received money for the original purchase. But if I have a Joe Montana rookie card, whatever money I get from that is completely divorced from what benefit TOPPS got from the original sale.
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No. of Recommendations: 10
I clearly remember long ago when I first started investing in companies via stock purchases,
thinking that I was providing at-risk capital for said companies to use to build and
expand their business.


Sorry, no. Not unless you bought the stock directly from the company - in the IPO or some other offering of new stock from the company.

If you bought on the open market, your money went to the seller of the stock and not to the company.

The current stock markets actually serve to reduce the risk to those original stock purchasers. If there were no market, shareholders would only get a return on their money to the extent they collect dividends from the company. All of their investment would be at the mercy of the company to manage the business well.

Today, shareholders don't care all that much how well the business does. They only care about how well the stock does. All they want is for their stock to go up in the future. If management does that by running the business well, that's fine. But that's also hard work. It can be easier for management to manage the stock price. Keep the price going up and the shareholders won't care about the business. So leverage things up to goose the price. Engage in significant stock buybacks. Announce good news about the business. Suppress bad news to the extent you can. Arrange for some other company to buy up large chunks of stock - or the whole company - at inflated prices.

All of this "I'm providing capital for the business" is a bunch of garbage.

So, where do I fall on taxation? If you bought the stock from the company in a public offering, you can get the benefit of lower tax rates on your capital gains. You really DID provide some capital to a business. If you're trading in a secondary market - stock gains are just ordinary income and get taxed the same as wages.

--Peter
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No. of Recommendations: 2
I don't think that is the "reasoning." I think it is to encourage investing some of your savings in the markets so that there is plenty of capital to create and expand businesses that provide jobs.

That's maybe not "the" reasoning, but that was the reason tele gave. In one sense, there is a certain logic to what you are saying. Investment is good, so we want to encourage investment, right? But as others have pointed out, unless you are buying stock at the IPO or secondary offering you aren't actually investing capital in the company. Strictly speaking, you are saving, not investing.
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No. of Recommendations: 2
"But as others have pointed out, unless you are buying stock at the IPO or secondary offering you aren't actually investing capital in the company. Strictly speaking, you are saving, not investing."

well, yes and no....you buy a stock and you actually 'own' a part of the company. if they issue a million shares and you own 100, you are a part owner.

If he company pays dividends, YOU will collect them for risking your money owning their stock. It might go up. It might go down. the dividend might be cut in tough times.

If the company goes bankrupt - you lose 100%.

It's not like you are completely disinterested in the company. It's not like buying a CD with gov't guarantee of return of principal.

worse, income is figured yearly. Unless there is 1000% a year inflation, inflation does not come into the picture.

You buy a stock and hold it 30 years. You sell it. It might be 'worth' exactly the same after you calculate inflation. You have risked your money for 30 years. Hopefully collected a lot of dividends (think utility stocks). then you need to sell it. You don't really make any money. What cost you 100 hours of wages (dollar wise) in 1980) is exactly equal to 100 hours of wages in 2020. So why should you be taxed at regular income rates on essentially no gain in value?

Please explain.

Meanwhile lets say you bought a WV Camper Van in 1960 for $3000. Yesterday you sold it for $30,000. I'll be you didn't pay a dime in 'capital gains taxes' or regular income taxes, right? Didn't report a dime to the IRS. Why not?

No different than earning a stock.....which you bought at 3000 in 1960 and sold yesterday for 30,000....

so you'd be a tax cheat? report the sale of your WV? No way. But you'd report the sale of your stock because you have to.



t.
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No. of Recommendations: 7
The fact is, a lot of the student loan problem is related to people taking out large loans to go to substandard schools that don’t prepare students for employment good enough to pay back the loans.

'substandard' is a subjective opinion.

For most adults, the responsibility for taking out a 'large loan' they cannot pay back, is their responsibility and so they get to deal with it. The core issue with student loans is most are taken out by 18-20 year old children. Yes, CHILDREN. They have no idea what a life commitment to debt means. Yet we allow them to make this life commitment. This is a social responsibility as though we allowed 5 year olds to make life decisions by themselves. Hence the constructive use of excess college endowments to offset some...but not all...of this debt. And second, quit allowing children to make this kind of life commitment.

BruceM
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No. of Recommendations: 1
That's maybe not "the" reasoning, but that was the reason tele gave. In one sense, there is a certain logic to what you are saying. Investment is good, so we want to encourage investment, right? But as others have pointed out, unless you are buying stock at the IPO or secondary offering you aren't actually investing capital in the company. Strictly speaking, you are saving, not investing.


As others have pointed out, without buyers after the IPO trading the stock that provides liquidity to those IPO buyers there would be far fewer IPOs. No?

The idea that someone else suggested that people only want a stock to do well and not the business. Yeah, some people have that short-term trader mentality. But, anyone who has read or listened to TMF founders just a little bit know that finding good companies and investing for the long term is different than day trading and short term thinking. Stocks don't rise over many years (and/or pay good dividends) without being successful good businesses providing produces/services that people want to pay for -- think of a few of the long term TMF stocks, such as Amazon, Netflix, Starbucks, Apple.

Mike
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No. of Recommendations: 3
The core issue with student loans is most are taken out by 18-20 year old children. Yes, CHILDREN. They have no idea what a life commitment to debt means.

Not in isolation. As you say, these are children and I agree, but children (even at the ages of 18-20) have guardians. They're called parents. This is where the responsibility for guidance and direction should occur, but isn't in many cases.

Pete
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No. of Recommendations: 7
but children (even at the ages of 18-20) have guardians.

Not where I live in California.

Lot's of kids grow up in a system and get kicked out at age 18. Many parents are financially incompetent and thus cannot provide a financial education to their children.
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No. of Recommendations: 1
but children (even at the ages of 18-20) have guardians.

To clarify my remark: I meant this not necessarily legally, but practically and with familial responsibilities. I've worked in the college and university environment for many decades and there are few students who do not depend in most ways on their parents/guardians whether or not they are legally assigned. This is, in fact, one of the difficulties parents **do** face since many students want the independence of bring an adult while retaining all of the benefits of being a child.

Higher Ed has guardian responsibilities, too, but there are limits to how much they can control their student bodies as witnessed by the ascendance of micro-aggression philosophies heavily promoted by students, which their boards of trustees and admins have had to respond.

Pete
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".I was providing at-risk capital for said companies to use to build and
expand their business.

Only if you participated in the actual offering. Otherwise you're just trading football (or baseball) cards with others."
-----------------------------

I know that, I was being sarcastic. The stock market is the biggest casino in the world.
But, TINA keeps us all in it. ( and I know there are some alternatives, such as real estate,
but that doesn't look attractive to me and how I want to put my money to "work " )
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No. of Recommendations: 3
Not in isolation. As you say, these are children and I agree, but children (even at the ages of 18-20) have guardians. They're called parents. This is where the responsibility for guidance and direction should occur, but isn't in many cases.

Pete


------------------

Parents and students have been brainwashed that going to college is the only path to a decent job and a secure future. If your child doesn't go to college, you have failed as a parent. Going to college to obtain a debt laden degree that offers no employment opportunities is preferred to becoming a welder or an electrician.
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but children (even at the ages of 18-20) have guardians

Actually, they don't, assuming age 18 is the age of majority for that state. This age group are legally adults and so can make their own decisions without a guardian. (PLUS loans are made to parents for the student)

What I think you mean to say is that this group have parents (or a parent) and/or other family members who they listen to, who should be advising them on the potential life commitment they are making when they take out a student loan.

What FAFSA needs to do is quit making these loans so easy to get. These loans should come with a requirement the student show how he/she will be repaying them, or, limiting the loan amount by the academic major, which can be linked, through the dept of Labor stats, to the typical salary and wage growth of that career, or some other such calculable limit.

Student debt is spinning out of control. Currently, there are about 45 Million borrowers (students and parents), student loans represent about 11% of all household debt at $1.54T and is the second highest form of household debt, second only to mortgage debt. It is now greater than auto loan and credit card (revolving) debt. What is scary about this, is this debt is concentrated on a small slice of the adult population while the other forms of debt are spread over all age groups.

https://www.forbes.com/sites/zackfriedman/2020/02/03/student...

https://www.statista.com/statistics/500814/debt-owned-by-con...

BruceM
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No. of Recommendations: 7
...becoming a welder or an electrician.

You got that right!

My eldest nephew dropped out of college in pursuit of an electrical engineer degree due to the size of loans he would have to take out (he paid his first year from savings and parent's help), and so decided to work for a couple of years to earn enough to return and pay as he went. His parents, both skilled tradesmen/woman, helped get him into a job as an electrical assistant with a large electrical company. 15 years later he'd worked through the electrician's apprentice ship, tested for and became a journeyman and in 2016, qualified to earn the title Master Electrician. His salary this year will be >$200K as an electrical supervisor....and no student loans. He told me he could have the pick of jobs, most with large signing bonuses, as there are so many vacancies due to retirements.

Compare this to the parallel student who took out loans to a small private liberal arts college where she got a degree in 13th century interpretive dance and now teaches dance at the YMCA for minimum wage and no benefits....along with $50k in student loans.

BruceM
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you buy a stock and you actually 'own' a part of the company

Paying money to buy shares of stock generally isn't "investing in the company". It's buying partial ownership, but, as already pointed out, unless it's an offering direct from the company (IPO, secondary offering, or Treasury stock being issued), the company doesn't get any money. You are just buying your shares from another partial owner. That partial owner may, or may not, have invested directly with the company, but you aren't - you are just buying your partial ownership by giving them money for their partial ownership.

AJ
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No. of Recommendations: 9
If your child doesn't go to college, then their options are limited. But, yes, there are no guarantees. Depends what you studied. Though no education is a waste.

And, yes, I wish I earned as much as a crane operator. Skilled trades can earn lots of money.

But your blanket statement "that offers no employment opportunities" is not valid. I wouldn't have my job if I didn't have my MS. I wouldn't even have gotten the interview.
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But your blanket statement "that offers no employment opportunities" is not valid. I wouldn't have my job if I didn't have my MS. I wouldn't even have gotten the interview. - 1poorguy

-------------

C'mon, you know I wasn't talking about all degrees. I expect that your degree involved a useful skill than real companies need to produce real products that real people want to buy.

If your MS was in 13th century English Literature, you may be a docent at a museum or a barista but you aren't going to be high earner living comfortably in an expensive city while shouldering a $100K student debt.
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Compare this to the parallel student who took out loans to a small private liberal arts college where she got a degree in 13th century interpretive dance and now teaches dance at the YMCA for minimum wage and no benefits....along with $50k in student loans.

BruceM


Some times stupidity is its own reward... or punishment. My BIL dropped out of high school ... actually "tested out" meaning he took a test which gave him a high school equivalency. After bumming around for a few years, he got his parents to pay for a degree in art from a state university. Then he discovered that a BA in art is useless as a career builder. He got a job at a prestigious library/art museum. Then he discovered that a BA in Art meant he was a book boy - re-shelving books. He finally got a job teaching art at a primary school. He seemed content, and the children liked him (I found him to be childish himself.) The job didn't pay enough to support him in the way he wanted. Then one day he blew his brains out in a scenic part of a local park.

I used the word "stupid" above. He was actually bright. Had a huge vocabulary, and read a lot. A better word might be "otherworldly". But he didn't have a practical bone in his body.

I have veered off topic in telling his story. My point (if in fact I have one) is that a college degree per se is not an indicator of financial success. STEM degrees (or medicine or Law or accounting) are career prep sorts of schooling. Art or literature may make you "educated" but not necessarily more employable. Running up large debt for a no-profitable degree is a waste of time and money if you think it will result in a good career. The aristocrats who used to be conversant in several languages and connoisseurs of the arts have a more difficult life today, lacking inherited wealth or a family business. A BA degree is not a career building degree, usually.

CNC
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The core issue with student loans is most are taken out by 18-20 year old children.

And yet the balances for student loans are much higher for older borrowers, suggesting that adults are taking on their own debts or debts for their children.

Average student loan by age:

24 and younger: $14,807.69
25 to 34: $33,817.56
35 to 49: $42,373.23
50 to 61: $42,290.32
62 and older: $37,739.13

Interestingly, most people pay off the loans by age 46, yet there’s a lot of debt held by those much older (who presumably should know better, by your thesis).

https://www.google.com/amp/s/www.cnbc.com/amp/select/average...

Look, I’m not saying that student loan debt is not an issue. My only point is that colleges with large endowments should not have to use their endowment money to pay off some student’s debt at Trump University or Acme Beauty School.

I have a friend with a large amount of student debt. She decided to leave a lucrative career in IT because she found a calling to the clergy at age 40 and went to seminary. I support her decision, but she was actually a business major in college and knew exactly what she was getting into. I don’t cry too hard for her when she complains about her debt.
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C'mon, you know I wasn't talking about all degrees.

Actually, I wasn't sure. There are people that believe college is either a) useless, b) "liberal brainwashing", or c) both a and b. Your postings lean very conservative, and conservatives tend to think that way. So, no, I didn't really know. Especially given your previous post.

Back in the day, any college degree was a ticket to a good job. It wasn't that you have a specialized degree, it was that you successfully completed college (implying you were able to think and solve problems). Today a college degree is like a high school diploma was 50 years ago. You need a grad degree now. And, yes, what you study is important today. A degree in 13th century English lit isn't terribly useful for employment (unless you plan to teach it). It is an accomplishment in its own right, but Intel isn't likely to hire you with only that degree. Better to minor in that subject, and get a STEM degree major. Offices are automating, factories are automating...one person can do the work that 30 years ago was done by 20 (or more) people. That will continue. "Brain jobs" may go the same way someday, but right now they are the best shot at a good middle class living.

We only need so many plumbers and electricians (and other skilled trades). I don't think there's enough demand to absorb the segment of workers that -50 years ago- would have gotten a good union job in a factory. And it's getting worse.

Also, incurring excessive debt for college seems to be folly to me. A good state university isn't cheap, but you don't generally have to borrow $100K to get a bachelor's degree from one. In-state tuition in AZ is roughly $10K per year, so $40K for a bachelor's. Less if you have a job and are paying some as you go. Plus scholarships. Going to Stanford to study 16th century French poetry is foolish, unless you're already wealthy.
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Regarding taxing capital gains at higher rates

From the article cited by syke6
https://www.nytimes.com/2011/08/15/opinion/stop-coddling-the......


But for those making more than $1 million — there were 236,883 such households in 2009 — I would raise rates immediately on taxable income in excess of $1 million, including, of course, dividends and capital gains. And for those who make $10 million or more — there were 8,274 in 2009 — I would suggest an additional increase in rate.

My friends and I have been coddled long enough by a billionaire-friendly Congress. It’s time for our government to get serious about shared sacrifice.


I agree that for the very rich, making more than 1 million a year some adjustments in tax laws wouldn't hurt them a bit.
But us small investors?

I've been saving and investing my whole life and recently had the opportunity to benefit from a 0% capital gains tax year. I planned it. It was small potato amount, but then again, so is my income.
When you go from being a couple to a single person, it's those small potato amounts that matter. Minimizing the tax is important.

nag
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No. of Recommendations: 13

Also, incurring excessive debt for college seems to be folly to me. A good state university isn't cheap, but you don't generally have to borrow $100K to get a bachelor's degree from one. In-state tuition in AZ is roughly $10K per year, so $40K for a bachelor's. Less if you have a job and are paying some as you go. Plus scholarships.


I don’t have kids, but the people I know with kids, none have taken out the “$100k loans” reported in the media. Most have gone to college free or virtually free with scholarships, grants, Peace Corps loan forgiveness, ROTC or other military grants, etc. My DBF paid for his kid’s tuition at UT out of pocket. One friend’s kid incurred big loans for pharmacy school, but paid the off in less than 5 years with loan payments from her employer and some nice bonuses.

I am a big believer in education, and while someone upthread made the comment that parents don’t want their kids to go into the trades—well, there’s a reason for that. Sure, they pay pretty well, but for most people with physical jobs, there’s a real risk of injury, and many people aren’t able to work out not older ages because of physical toll on the body. (I work in insurance and see lots of medical records. Your average 50 year old electrician is physically ready to retire). And sure: Pete can open his own plumbing business and slide behind a desk when he gets older.... but a little education doesn’t hurt the chances for a successful business.

I’ve seen a lot of crazy student loan stories in the media, but the facts is the average loan balance for a 24 year old is about 15k. I don’t think we should use the statistical outliers of people with $200k loan balances for degrees in basket weaving to make public policy (Ie loan forgiveness).

Do I think we should be more rigorous re how much we lend and for what? Absolutely.
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I have veered off topic in telling his story. My point (if in fact I have one) is that a college degree per se is not an indicator of financial success. STEM degrees (or medicine or Law or accounting) are career prep sorts of schooling. Art or literature may make you "educated" but not necessarily more employable. The aristocrats who used to be conversant in several languages and connoisseurs of the arts have a more difficult life today, lacking inherited wealth or a family business. A BA degree is not a career building degree, usually.

They make you a lot more employable. Look at any big company's job openings for any type of non-technical management position (HR for example). They almost always require a bachelor's degree. They usually won't specify the type of degree, but they will require a degree. Even in the trades a degree can help advance your career. Outside of the fields you mentioned, there are a huge number of jobs that no degree really prepares you for. You acquire the skills on the job. But to get the job in the first place you need a degree.

I agree, if you are looking for a career in art history the pickings will be slim. But if you are looking for any kind of professional job, you're much better off with a BA than no degree. That's not the way it should be, but it is the way it is.
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No. of Recommendations: 5
It wasn't that you have a specialized degree, it was that you successfully completed college (implying you were able to think and solve problems)...A degree in 13th century English lit isn't terribly useful for employment (unless you plan to teach it). It is an accomplishment in its own right, but Intel isn't likely to hire you with only that degree. Better to minor in that subject, and get a STEM degree major.

Your first sentence is still true today. I have friend who works at AWS and is paid amazing amounts of money. He had a summer job working at a help desk for a software company and learned computer skills that way and that translated into a career in computer networking. Amazon requires a bachelor's degree for all their professional jobs. His degree is in history. Amazon (and his big tech employer before that) didn't care what his degree was in, only that he had one and what his job skills are.

The moral of the story is that regardless of your background you need to develop a marketable set of job skills. Sometimes you get those in college, sometimes not, but either way a degree helps to get a job.
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No. of Recommendations: 19
What FAFSA needs to do is quit making these loans so easy to get. These loans should come with a requirement the student show how he/she will be repaying them, or, limiting the loan amount by the academic major, which can be linked, through the dept of Labor stats, to the typical salary and wage growth of that career, or some other such calculable limit.

This is a truly awful idea.

Compare this to the parallel student who took out loans to a small private liberal arts college where she got a degree in 13th century interpretive dance...

You are under the misapprehension that the field of your degree is determinative of your career. It ain’t so.

After those jobs, however, the report starts to look more like the findings from a study from the Federal Reserve Bank of New York, which found that only 27 percent of college graduates work in a field related to their major.
https://www.insidehighered.com/news/2019/08/02/new-data-trac...

There are some fields where the degree is important; you would not be surprised to find tht engineering majors end up (mostly) in engineering, software development likewise, or that engish majors often wind up as teachers. But many 18 year olds have no idea what they want to do with their life, there are often career changes after the person experiences “the real world” for a job or two.

However (for better or worse, and IMO often for worse) a college degree is the minimum requirement to get past the Secretary at the front desk to apply for a job. (Or HR, obviously.) I started as a Mechanical Engineer. Changed to Speech. Wound up as a disk jockey for 10 years making minimum wage (but loving it.) But *because of the college degree* I moved up within the ranks of Westinghouse to become GM of several of their stations in Chicago, Boston, and Pittsburgh. Without that little piece of paper they wouldn’t have even considered me. That degree did not pay off until I was in my 40s, but it paid off handsomely.

I do agree that we downgrade “the trades” which is a shame, because there are good salaries and jobs to be had there, but that’s the way it is and I am powerless to figure out how to change it. One thing we could do is make college more affordable, but that would require fewer 24-hr student unions, free ice cream bars, smaller swimming pools, less plush dormitories, and all the other amenities that have come into vogue the last few decades. Personally I’d love to see “free” (yes, FREE) community colleges all over the country providing a decent education for those who want it, let the rich have the pool tables and lacrosse teams, and provide a good tradeschool path for kids as well.

But nobody listens to me.
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No. of Recommendations: 2
Average student loan by age:

24 and younger: $14,807.69
25 to 34: $33,817.56
35 to 49: $42,373.23
50 to 61: $42,290.32
62 and older: $37,739.13


Gotta watch your stats. Those you reported from the DOE are Fed loans and exclude private loans. They also include those who took loans or are taking loans that have not graduated. My concern is the amount of debt that is carried by those who have graduated with a Bachelors and are either looking for work or going on to an advanced degree. What kind of debt load do these graduates...and not their parents...carry.

Per the Saving for College web site:

69% of BS Grads finished with Fed and/or Private student loans
The Mean student loan balance upon graduation in 2019 was $29,900
The Mean across all BS graduates, including those who did not take student loans was $20,600
14% of parents of BS grads had Fed and private student loans taken in the parent's name avg $37,200 per student

Of course, a lot of detail gets lost in 'averages'. The variables affecting the amount of student debt includes the university attended (state, private non-profit, private for profit), the state (in residence or non-resident) and the number of semesters/quarters taken to graduate.

Then you can go on to grad school, where the average debt numbers at graduation are considerably greater.

My only point is that colleges with large endowments should not have to use their endowment money to pay off some student’s debt

We're going to have to agree to disagree here, as that is EXACTLY what I see those accrued hundreds of $Billions in exclusive university endowments SHOULD be used for. Of course, there would have to be restrictions and limits and maximum subsidies as there are for Fed student loan forgiveness programs and Income-Driven Repayment programs. The current system of driving up the endowment's value just to show who has the biggest schwanzstuker is absurd.

https://www.savingforcollege.com/article/average-student-loa...

BruceM
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We're going to have to agree to disagree here, as that is EXACTLY what I see those accrued hundreds of $Billions in exclusive university endowments SHOULD be used for.


Yeah, we’ll have to agree to disagree.

Pretty sure those endowments will decline substantially when the donors know that their money is not being used by/for their alma mater.

My college, a state school, has an endowment that is just under a billion. I’m glad that money is there to perpetuate the school and fund scholarships etc for future students at that school.
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No. of Recommendations: 7
If your MS was in 13th century English Literature, you may be a docent at a museum or a barista but you aren't going to be high earner living comfortably in an expensive city

Generalizations generally have exceptions. I'm one. Degree in German Language, yet paid for my own college and now am a "high earner living comfortably in an expensive city". A very expensive city. My liberal arts degree taught me to think and to recognize opportunity.

Tim
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No. of Recommendations: 37
I have first hand knowledge of two students who qualified for federal loans. Both got science degrees. (Genetics and computer science). One has been job hunting since Covid hit, a year. the second just started. Nothing so far.

Both worked in college, went in-state to state schools. Had some scholarships. Did everything right.

First has $40K in federal debt. Second has $40K federal, $20K personal debt (at 12%) because she has zero parental help and needed to eat.

These are real numbers for kids who did everything right. I know because I showed them the amortization schedules.

So take all the moralizing “if they had only bla bla” and stuff it. Really.
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"These are real numbers for kids who did everything right. I know because I showed them the amortization schedules."

*******************************************************************************

So - all undergraduate degrees should be paid for using federal tax money?
All graduate degrees should be paid for using public funding?
All incomplete degrees should be paid for by the public?
All technical school courses should be paid for by the public?
All religious school courses should be paid for by your tax dollars?
All professors should be paid by the public?
All laboratories for all universities should be fully funded by the government?

Howie52
And of course, all course content for all degrees must be approved of by the federal
government?

The laws of unintended consequences will involve such a fun discussion in the courts.
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No. of Recommendations: 7
First has $40K in federal debt. Second has $40K federal, $20K personal debt (at 12%) because she has zero parental help and needed to eat.

These are real numbers for kids who did everything right. I know because I showed them the amortization schedules.

So take all the moralizing “if they had only bla bla” and stuff it. Really.


I do sympathize with these children.
But.

they are legally adults. These are the choices they made freely without coercion. They could have delayed college. Gone to a different school. A different major. A million other things.

Why should my tax dollars pay for their choices? Money is not free no matter how much the socialists want to pretend ot is. They can pay for the obligations they took on voluntarily.

If you want to talk about raising that age of adulthood from 18 to 21 or 25, I will listen.
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So - all undergraduate degrees should be paid for using federal tax money?
All graduate degrees should be paid for using public funding?
All incomplete degrees should be paid for by the public?
All technical school courses should be paid for by the public?
All religious school courses should be paid for by your tax dollars?
All professors should be paid by the public?
All laboratories for all universities should be fully funded by the government?

In Germany, college tuition is (mostly) free. But your admission is limited to those for which your Abitur scores are in the right range. Abitur scores and the (presumed) needs of the country. I believe professors are paid by the gimmint*.

Germans usually are generally recognized as well educated.

CNC
*Someone will kindly correct me if I am wrong.
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"In Germany,"

********************************************************

Just mentioning - we are not in Germany.

https://www.indexmundi.com/factbook/compare/germany.united-s...

Howie52
And do not care to be in Germany.
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but children (even at the ages of 18-20) have guardians.

To clarify my remark: I meant this not necessarily legally, but practically and with familial responsibilities. I've worked in the college and university environment for many decades and there are few students who do not depend in most ways on their parents/guardians whether or not they are legally assigned.

Not so much, when mentoring at-risk kids they had no one in their life, other than me, who wasn't paid to be with them. A very common question to me was "You're not getting paid, why are you here?"

The fact that the children got into college means they've had a minimum level of support and success. The child I mentored took several attempts to pass the military entrance exam, college was not an option and he had no trade. The military, was a potential path to success.
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No. of Recommendations: 14
knighttof3 writes,

I do sympathize with these children.
But.

they are legally adults. These are the choices they made freely without coercion. They could have delayed college. Gone to a different school. A different major. A million other things.

Why should my tax dollars pay for their choices? Money is not free no matter how much the socialists want to pretend ot is. They can pay for the obligations they took on voluntarily. \

</snip>


How about we give children who make bad educational choices the same opportunity we give the "job creators" who make bad business choices (i.e., the ability to discharge debts in bankruptcy)? This would also temper all the bad, for-profit colleges pedaling programs of dubious economic value. No one would lend to their students without a demonstrated record of success.

If a college is sending enough Medieval Literature majors to jobs in the insurance industry or sales positions with salaries high enough to repay the loans, I wouldn't have a problem lending to them.

intercst
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No. of Recommendations: 20
Howie writes,

Just mentioning - we are not in Germany.

https://www.indexmundi.com/factbook/compare/germany.united-s...

Howie52
And do not care to be in Germany.

</snip>


I agree. West Virginia should be the model of success for the nation. <LOL>

What's the problem with studying what works elsewhere? Does "American exceptionalism" always have to be a celebration of racism, ignorance and innumeracy?

How come the Germans have twice as many doctors per capita? (per your link). I thought socialized medicine was supposed to be rationing care?

intercst
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An educated populace is a good thing. And paying for it is an investment for society and the future.

We're seeing what a lack of an educated populace has wrought.
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Interesting chart. Thanks for posting. I found these statistice interesting:

Health expenditures
Germany: 11.2% (2017) US17.1% (2017)

Physicians density
Germany: 4.25 physicians/1,000 population (2017) US2.61 physicians/1,000 population (2017)

Obesity - adult prevalence rate
Germany: 22.3% (2016) US: 36.2% (2016)

I cab see why you wouldn't want to live there.
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interecst: How come the Germans have twice as many doctors per capita? (per your link). I thought socialized medicine was supposed to be rationing care?

FWIW, I had to wait four months to have a squalmous cell carcinoma removed from my scalp. Relatively routine surgery, but the insurance had to have get a referral from my "Primary Care Physician", the adjusters review, approve, and then wait for a appointment with the surgeon.

CNC
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No. of Recommendations: 32
CountNoCount writes,

<<interecst: How come the Germans have twice as many doctors per capita? (per your link). I thought socialized medicine was supposed to be rationing care?>>

FWIW, I had to wait four months to have a squalmous cell carcinoma removed from my scalp. Relatively routine surgery, but the insurance had to have get a referral from my "Primary Care Physician", the adjusters review, approve, and then wait for a appointment with the surgeon.

</snip>


Sounds like you may have a Medicare Advantage plan that diverts too many resources to for-profit insurance company bureaucracy and Executive Compensation.

I started regular, traditional, fee-for-service Medicare on Feb 1st where the top bureaucrat in charge of the $1.5 Trillion program is paid $165,000/yr. I decided I should get a couple of suspicious spots on my right leg checked out. I had an appointment with a dermatologist on Feb 5th. Doctor looked at my leg and said, "That's not good", and he cut out two squalmous cell carcinoma lesions then and there -- no waiting. My 20% copay for the doctor visit and the surgery was $92.30. I got a bill from a dermatological pathologist specialist a few weeks later for 20% of that charge -- $14.20.

If I had my leg looked at a month earlier with my $5,000 deductible Obamacare plan it would have easily been $1,500 out of pocket.

Medicare is real insurance. Don't let a for-profit health insurance CEO take it away from you.

intercst
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JonathanRoth:

<<<There was no real gain. Being forced to pay CG taxes in the example I gave is simply capturing part of the original capital (there was no real gain) and this fact is unchanged even if CG taxes are paid in inflated dollars.>>>

"This is true of other assets whose price does not keep up with inflation."

Which is why, in part, that LTCG taxes are at rates less than ordinary income and STCG.

If there is no difference between STCG rates and LTCG rates then the disregard for inflation is even worse.

And the problem is exacerbated if LTCG rates are higher than ordinary income and STCG rates.

No one arguing for same or higher LTCG rates seems to want to discuss or account for the effect of inflation.

Regards, JAFO
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I for one would have no problem indexing long term gains to inflation. The rate for wage income and capital gains should be the same once gains are indexed for inflation,which would still result in a more equitable taxation policy than we currently have. I would also fund the IRS so that audits of incomes over 1 million dollars annually would be likely to be audited unless the taxes received were within strict parameters.I


JK
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" the ability to discharge debts in bankruptcy"

An absolute minimum requirement.
That will tighten loan issuance.
And yes, some will not go to college who might have benefited.
Life is not fair. Stuff happens. Adapt and survive.
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No. of Recommendations: 6
> It does not matter that the taxes are being paid in inflated dollars in the example I gave.

> There was no real gain. Being forced to pay CG taxes in the example I gave is simply capturing part of the original capital (there was no real gain) and this fact is unchanged even if CG taxes are paid in inflated dollars.

No real gain? Hey, sometimes investments don't work out.
But you owned the asset the whole time. Next time factor in that the investment should be gaining at a rate to account for the fact that you will be taxed on inflation.

There are too many people sitting on real estate or other assets, because they know that they can just hold and make money when the rest of the community makes things better and they sell their POS property for much more.

I say do everything we can to force owners to make their assets work. If they are concerned the asset is not keeping up with inflation, and the taxes associated with them, then they should sell and let someone one who is going to increase the value of the asset significantly.

As conservatives were saying just a short time ago. Reality doesn't care about your feelings.
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"What's the problem with studying what works elsewhere? Does "American exceptionalism" always have to be a celebration of racism, ignorance and innumeracy?

How come the Germans have twice as many doctors per capita? (per your link). I thought socialized medicine was supposed to be rationing care?

intercst "

**********************************************************************

Population and the age of the population as well as the population growth do tend to have major
impacts.

Howie52
I prefer West Virginia over Germany - but do not live in either location currently.
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No. of Recommendations: 6
"How come the Germans have twice as many doctors per capita? "

Maybe they only work half as much?

or are a lot less efficient?

Heck, in Canada, what was it? They have 10% of the number the US has per pop of MRIs, CAT scanners, and other diagnostic tools. So you wait for tests. For your cancer that may be eating away at you for months before you get a test - and then find out it's 3 months too late to remove your malignant cancer than will kill you in another 3 months.



Those month long summer vacations - that much of Europe takes and nothing happens? Other weeks off?

Likely not paid as much and don't work as much. So?

My mom's cousins in Sweden constantly complained about the 'health service' there. You go to the 'doctor' and see a different one most times. Like a big HMO....and they listened for 10 minutes, never fixed any problem, sent you home with the same pills that didn't do much.....and told you to come back in 3 months - and that went on for a decade.

My good friend Geoff in England....was in his early 80s and desperately needed bypass surgery. He was on the waiting list, and because of his age, was 'low priority'....those 'age adjusted years of life'. Oldsters have fewer so they get less services. Younger folks went first, and they only did so many bypass operations a month - and emergency cases always went first. Wait list was 18 months long. He died of massive heart attack after 17 months. In the US, he would have had operation in a few weeks.

Yeah, so maybe it's not 'how many doctors' but how much treatment you get - and needed operations. A lot of GPs aren't going to do heart surgery, brain surgery, cancer surgery. Just hand out a few pills and tell you to come back in 3 months. Heck, if I remember right, the German system also included 'spa treatments' for a dozen 'ailments'. Herr Doctor Klein will now Prescribe and see you in the 'baths' .......


t.
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You think American doctors don’t just rush people through and write useless prescriptions? Or do millions of unnecessary tests which lead to more unnecessary tests? The USA is the most over medicalized nation in history. And somehow we still end up with a shorter lifespan!
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hrse:

> It does not matter that the taxes are being paid in inflated dollars in the example I gave.

> There was no real gain. Being forced to pay CG taxes in the example I gave is simply capturing part of the original capital (there was no real gain) and this fact is unchanged even if CG taxes are paid in inflated dollars.

"No real gain? Hey, sometimes investments don't work out."

So then there should be no CG taxes due.

"But you owned the asset the whole time."

And paid income tax on the annual rent.

"Next time factor in that the investment should be gaining at a rate to account for the fact that you will be taxed on inflation."

How would you propose to do that? What is your analytical model? Inflation is not within the control of the individual investor. It is a function of the federal government and central bank (Federal Reserve in the USA) and its monetary policy.

"There are too many people sitting on real estate or other assets, because they know that they can just hold and make money when the rest of the community makes things better and they sell their POS property for much more."

And if there is a real gain, then CG taxes should be due. This argument is simply a tangent.

"I say do everything we can to force owners to make their assets work. If they are concerned the asset is not keeping up with inflation, and the taxes associated with them, then they should sell and let someone one who is going to increase the value of the asset significantly.

As conservatives were saying just a short time ago. Reality doesn't care about your feelings."


Why are you even talking about feelings? Another tangent. I was discussing real gains versus inflationary gains that are not real. No feelings involved.

What conservatives said "reality doesn't care about your feelings"? Certainly nobody who believed the election was stolen.

Why are you bringing politics into a non-political tax policy discussion?

JAFO
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You think American doctors don’t just rush people through and write useless prescriptions? Or do millions of unnecessary tests which lead to more unnecessary tests? The USA is the most over medicalized nation in history. And somehow we still end up with a shorter lifespan!

And objectively worse health care outcomes for a whole range of maladies:

https://www.healthsystemtracker.org/indicator/quality/mortal...
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"Why are you bringing politics into a non-political tax policy discussion?"

*******************************************************************************
Non-political tax policy?
Folk's fates may never be learned.

https://www.youtube.com/watch?v=Dh994JcEfkI

Howie52
How to learn to love folk music
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Among all the brilliant minds that know all the minute details of the tax code, what should and shouldn't be done regarding taxes, the neverending tax debates...

It's as if a boat is taking on more and more water and the only thing anyone can think to do is invent new ways to bail it out more quickly.

Gov't spending. Fix the leak, then let's talk taxes.
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Some of y'all seem to think that raising capital gains taxes happens in a vacuum independent of personal choices. You think it won't make folks more likely to hold onto appreciated assets?

You want to feel good about seeing a "get even" tax rate levied against those fortunate enough to have gains? Or do you want to actually see revenues flow to the treasury?


#TaxTheNaive
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Daniel wrote:
<Gov't spending. Fix the leak, then let's talk taxes.>

Ding ding ding, we have a Winnah!!!

Winnah, winnah, Chicken Dinnah!
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There is no leak. Unless you consider Social Security and Medicare "a leak". Between those, and the military, you've accounted for the lion's share of the annual budget. Most -though not all- other expenses are rounding errors.

We need to talk taxes. Raising them. A lot. Especially on the wealthy who have received the windfall of cuts since the 80s.
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Between those, and the military, you've accounted for the lion's share of the annual budget. Most -though not all- other expenses are rounding errors.

I like the Congressional Budget Office's infographic: https://www.cbo.gov/publication/56324

Actually, the CBO has a lot of good information on its site overall, for those who wish to explore the OP and subsequent posts' subject matter.

Pete
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"We need to talk taxes. Raising them. A lot. Especially on the wealthy who have received the windfall of cuts since the 80s. "

*************************************************************************************

I expect we will now see a long thread about how to minimize taxes paid on 401K and regular
IRAs.

Howie52
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>>"But you owned the asset the whole time."

> And paid income tax on the annual rent.


This stems from the original situation you posted...
Say I bought a rental house for $100,000 in 1990.

I pay taxes on the net rental income each year.

In 2019, because I am older, DIY projects are harder to do, and Covid, I sell the house for $300,000 net of sales costs.

Do I have real capital gains of $200,000 and what amount should I be paying in capital gains taxes?


I am asking from a place of true ignorance. But would your capital gains be from $200,000? Doesn't that imply that you have not depreciated the cost of the asset at all during the 30 years?

Asking because I really don't know.
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hrse:


>>"But you owned the asset the whole time."

> And paid income tax on the annual rent.

This stems from the original situation you posted...
Say I bought a rental house for $100,000 in 1990.

I pay taxes on the net rental income each year.

In 2019, because I am older, DIY projects are harder to do, and Covid, I sell the house for $300,000 net of sales costs.

Do I have real capital gains of $200,000 and what amount should I be paying in capital gains taxes? <

"I am asking from a place of true ignorance. But would your capital gains be from $200,000? Doesn't that imply that you have not depreciated the cost of the asset at all during the 30 years?

Asking because I really don't know."


I am not a tax expert or tax pro, but ass I understand it (1) depreciation taken or that could have been taken will need to be recaptured, (2) deprecation would have been based upon the value when placed in service (when i first leased in the example I posted), and (3) land cannot be depreciated, so the 100k purchase price would have to have been allocated between land and improvements.

So depreciation to be recaptured would need to be less than 100K.

One of the resident tax pros can correct me I am wrong in my uderstanding.

Regards, JAFO
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I am not a tax expert or tax pro, but as I understand it (1) depreciation taken or that could have been taken will need to be recaptured, (2) deprecation would have been based upon the value when placed in service (when i first leased in the example I posted), and (3) land cannot be depreciated, so the 100k purchase price would have to have been allocated between land and improvements.

So depreciation to be recaptured would need to be less than 100K.


Yes, that's correct. I will point out that the original depreciable basis ($100k minus the original land value) would have been fully depreciated after 27.5 years (sometime in 2017 or 2018 for property put in service in 1990), so absent any other depreciable items that would have added to the basis, the total gain will be $300k minus the original land value. However, it's not all taxed at LTCG rates. The recapture of the depreciation ($100k minus the original land value) will be taxed at ordinary income rates, and the $200k will be taxed at LTCG rates. So in answer to the original question: Yes, there will be a $200k taxable capital gain, plus an additional gain that will be taxed at ordinary income rates.

If there were other items that added to the basis, like a new roof, new flooring, etc., any depreciation that should have been taken on those items will also be recaptured at ordinary income rates. So you may have less than $200k taxed at LTCG rates, but more than the original depreciable basis taxed at ordinary income rates.

AJ
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AJ:"Yes, that's correct. I will point out that the original depreciable basis ($100k minus the original land value) would have been fully depreciated after 27.5 years (sometime in 2017 or 2018 for property put in service in 1990), so absent any other depreciable items that would have added to the basis, the total gain will be $300k minus the original land value. However, it's not all taxed at LTCG rates. The recapture of the depreciation ($100k minus the original land value) will be taxed at ordinary income rates, and the $200k will be taxed at LTCG rates. So in answer to the original question: Yes, there will be a $200k taxable capital gain, plus an additional gain that will be taxed at ordinary income rates."

Don't the real estate moguls, once they have fully depreciated a property, then buy something 'more expensive' than their basis through a Starker Trade (?) which then postpones paying any taxes at that point? It's all rolled forward - so some day, when they finally sell their property(ies), the tax man will have a feast - but if the inheritance laws permit heirs to claim an increased basis at time of death - might still be a good deal if the property not sold but passed as part of estate?

Beyond my pay grade..... I just own one house....and live in it.



t.
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Don't the real estate moguls, once they have fully depreciated a property, then buy something 'more expensive' than their basis through a Starker Trade (?) which then postpones paying any taxes at that point? It's all rolled forward - so some day, when they finally sell their property(ies), the tax man will have a feast - but if the inheritance laws permit heirs to claim an increased basis at time of death - might still be a good deal if the property not sold but passed as part of estate?

Sometimes. It's called a Starker Exchange, or 1031 exchange. It is possible to do, but since a facilitator must be paid to facilitate the exchange (not cheap), and there are very specific timeframes involved in identifying and purchasing the new property, along with requirements on how much of the proceeds have to be rolled into the new property, it's not always possible or even advisable.

If the 'mogul' is selling the property because they need the cash, they may not be able to do a 1031 exchange, since they won't be able to get cash out of the transaction. If the 'mogul' is dependent on income from the current property and can't get a similar income from the new property, it wouldn't be advisable to do an exchange. And even if the step up basis is still allowed, if estate tax exemptions are limited, 'moguls' heirs will still likely be hit by the estate tax.

AJ
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since a facilitator must be paid to facilitate the exchange (not cheap)

In my local market, the facilitator fee is $1,000 per transaction. I regularly broker deals involving 1031 exchanges.

Tim
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> Yes, that's correct. I will point out that the original depreciable basis ($100k minus the original land value) would have been fully depreciated after 27.5 years (sometime in 2017 or 2018 for property put in service in 1990), so absent any other depreciable items that would have added to the basis, the total gain will be $300k minus the original land value. However, it's not all taxed at LTCG rates. The recapture of the depreciation ($100k minus the original land value) will be taxed at ordinary income rates, and the $200k will be taxed at LTCG rates. So in answer to the original question: Yes, there will be a $200k taxable capital gain, plus an additional gain that will be taxed at ordinary income rates.


And you want to make this process more complicated by adding in calculations of inflation?!
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And you want to make this process more complicated by adding in calculations of inflation?!

Not me. I was just confirming how the taxes are currently calculated.

AJ
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We need to talk taxes. Raising them. A lot. Especially on the wealthy who have received the windfall of cuts since the 80

That's always been the populist cry....TAX THE RICH!! MAKE THEM PAY THEIR FAIR SHARE!!

Rolls right off the tongue and always a popular refrain. One problem...it isn't true.

From the IRS Statistics of Income...

For 2018, the top 1% of AGI paid about 39% of all collected Fed Income Tax
For 1996, the earliest year for which the SOI has data, the top 1% paid 7.7% of all Fed Income tax

For 2018, the bottom 8% of those with an AGI who filed, paid .2% of Fed income tax
For 1996, the bottom 10% of those with an AGI who filed, paid .5% of Fed income tax
not much difference

For the middle 20% to 70% of all returns with a positive AGI
For 2018 they paid 15.8% of Fed income tax
For 1996 they paid 45.6% of Fed income tax

The tax burden hasn't changed for the lowest AGIs, but has shifted from the middle class to the highest AGIs for this 22 year span.

Now, I'm not saying the highest AGI households should or shouldn't pay a higher effective tax rate. Maybe they should, maybe not. But keep in mind, the incomes of the top 10% of AGIs are fluid. There are a multitude of ways high incomes can be worked around by those with the resources and willingness to do it.

I know the 'TAX-THE-RICH' crowd doesn't like to hear it, but this country does not have a tax problem....it has a spending problem. And with the Spender-in-Chief currently in the White House surrounded by a Buy-the-votes Congress, this spending is only going up.

BruceM
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Spender-in-Chief currently in the White House

The last guy didn't do us any favors.

https://www.thebalance.com/trump-plans-to-reduce-national-de...

On Oct. 1, 2020, the debt hit a new record of $27 trillion.
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I know the 'TAX-THE-RICH' crowd doesn't like to hear it, but this country does not have a tax problem....it has a spending problem. And with the Spender-in-Chief currently in the White House surrounded by a Buy-the-votes Congress, this spending is only going up.


What would you suggest we eliminate? An aircraft carrier? How about a wing of F-22's?

CNC
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What would you suggest we eliminate? An aircraft carrier? How about a wing of F-22's?

</snip>


I wish we could get back the $4 Trillion plus we flushed down the drain in Iraq & Afghanistan.

intercst
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I know the 'TAX-THE-RICH' crowd doesn't like to hear it, but this country does not have a tax problem....it has a spending problem. And with the Spender-in-Chief currently in the White House surrounded by a Buy-the-votes Congress, this spending is only going up.

That is really silly. How could you call Biden the Spender-in-Chief if you had ever even lived a conscious life in the last 20 years. Of course if you have been in a drug induced comma than yea Biden is the Spender-in-Chief and nobody else has spent a dime or created any policies that have increased our debt. It is completely Biden's fault, the guy who has been President for 93 days.

Andy
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What would you suggest we eliminate? An aircraft carrier? How about a wing of F-22's?

Wouldn't even make a dent. Neither would eliminating funding for PBS, though conservatives are all hot and bothered about that.

No. You want to make a dent, cut SS and Medicare. By a lot. That will make a dent. As I've said before, almost every other spending initiative amounts to a rounding error in the budget.

It will also be a disaster, both socially (i.e. for people) and politically (i.e. for any politician dumb enough to do it).

Therefore, raise taxes on the wealthy. By a lot. The top tax bracket used to be something like 70% during Reagan's time. He's the one who cut it (and ended up tripling our national debt at that time). Restore it. Make the people benefiting the most from our society also pay the most. Because it's fair, and they can afford it.

1poorguy
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One problem...it isn't true.

It matters how you slice the bologna, I guess. The Top 1% pay most taxes because they get the most income. That is not a hard concept for most people to follow.

For the individual income tax, effective tax rates—measured as federal income tax divided by adjusted gross income (AGI) —have fallen significantly over the past seven decades for those in the top 1 percent of the income distribution. The individual income tax still is progressive— meaning that effective tax rates tend to go up with income—but the effective tax rates for those earners have dropped substantially over time.

For those in the top 0.1 percent of the income distribution the effective tax rates fell still further. From 1945 through 1995 effective tax rates were progressive even within the top one percent so that those with the highest incomes faced progressively higher rates. But by 2015 the effective tax rates of the very highest income earners were about the same as the rate of the 1 percent.

https://www.taxpolicycenter.org/taxvox/effective-income-tax-...

There’s a lovely chart at the link which makes it quite easy to understand what’s happened over the past 40-50-60 years, and as it turns out the tax rates for the richest have fallen, fallen, fallen.

I know the 'TAX-THE-RICH' crowd doesn't like to hear it, but this country does not have a tax problem....it has a spending problem. And with the Spender-in-Chief currently in the White House surrounded by a Buy-the-votes Congress, this spending is only going up.

I would agree, if only you would put “military” before “spending problem.” Oddly, the “spending problem” people never do that, even though we spend as much as the next 10 countries combined, 8 of who are allies. Weird.
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Well, let’s just tax the rich and be done with it.

Pete
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Well, let’s just tax the rich and be done with it.

Because of course the rich will just sit there and take it. Because that's just how they got rich, just sitting and letting others do whatever they want to them.
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Well, let’s just tax the rich and be done with it.

Pete


Supposedly, Dillinger was asked why he robbed banks. He looked puzzled and replied, "That's where the money is."

If you know a little American History, initially ALL tax was paid by the rich, on imports (customs) and excise taxes. There was no income tax until 1909, with the passage of the sixteenth amendment. Even then, the rich were the primary payers. https://en.wikipedia.org/wiki/Sixteenth_Amendment_to_the_Uni... Interestingly, Opposition to the Sixteenth Amendment was led by establishment Republicans because of their close ties to wealthy industrialists.

Historically it made little sense to tax the poor. They had no money. One could argue that an import tax is a tax on the poor, as they buy the imports. I argue that the rich bought more, and more expensive stuff, so an import tax was already somewhat progressive.

The rich also wield more influence in the government, agreed? Why should they not pay for that benefit?

CNC
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The rich also wield more influence in the government, agreed? Why should they not pay for that benefit?

They do. They just cut out the middle man, and go straight to the congressmen (i.e. representatives and senators).
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You want to make a dent, cut SS and Medicare. By a lot. That will make a dent.

It's too bad it wasn't set up as a separate, self-funded program. /s
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I would agree, if only you would put “military” before “spending problem.” ...we spend as much as the next 10 countries combined...

It's a jobs program for nearly 700,000 people, and a manufacturing support for all the companies that produce all the gear, equipment, and transportation for those 700K, and a subsidy for the universities that get paid to educate ROTC and enlisted.

B*tch about it all you want, but it's a huge government welfare program for the entire economy - no different, in that effect, than any other government welfare or jobs program.

How would all those people make a living if military spending were cut, say, in half? You think our corporations and small businesses can absorb that kind of supply in a short timeframe? Of course not; and then our ethereal "tax dollars" would be spent on unemployment benefits.

FC
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How would all those people make a living if military spending were cut, say, in half? You think our corporations and small businesses can absorb that kind of supply in a short timeframe? Of course not; and then our ethereal "tax dollars" would be spent on unemployment benefits.

Don't forget all the jobs for the morticians, therapists,Rehab for substance abuse and long term physical problems. It's a great job creator.

Andy
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It's a jobs program for nearly 700,000 people...

As a jobs program, it sucks.

The military budget is something north of $700 billion a year. That's a million dollars a year to employ those 700,000 people.

We could cut the military budget in half, presumably throwing 350,000 people out of work. Then we could just give those 350,000 people $100k a year. That would cost us $35 billion, but we'd save half of the military budget, or $350 billion. If I've done my math right, that would be a net savings of $315 billion. Per year.

That would likely be a net stimulus to the economy, as I doubt those 350,000 freshly laid off workers have an average wage of $100k.

--Peter

PS - There's a huge fly in the ointment here, but I'll let you figure out what that is. Hint: it would still be a net savings, but not as much.
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BruceCM:

{{{We need to talk taxes. Raising them. A lot. Especially on the wealthy who have received the windfall of cuts since the 80}}}

"That's always been the populist cry....TAX THE RICH!! MAKE THEM PAY THEIR FAIR SHARE!!

Rolls right off the tongue and always a popular refrain. One problem...it isn't true.

From the IRS Statistics of Income...

For 2018, the top 1% of AGI paid about 39% of all collected Fed Income Tax
For 1996, the earliest year for which the SOI has data, the top 1% paid 7.7% of all Fed Income tax

For 2018, the bottom 8% of those with an AGI who filed, paid .2% of Fed income tax
For 1996, the bottom 10% of those with an AGI who filed, paid .5% of Fed income tax
not much difference

For the middle 20% to 70% of all returns with a positive AGI
For 2018 they paid 15.8% of Fed income tax
For 1996 they paid 45.6% of Fed income tax

The tax burden hasn't changed for the lowest AGIs, but has shifted from the middle class to the highest AGIs for this 22 year span."


Once again you omit the income share reported by the Top 1%.

Given that I have previously noted this about your posts, I can only assume that you want polemical posts and not honest discussion.

Regards, JAFO
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JAFO: "Once again you omit the income share reported by the Top 1%."

Bingo.

JAFO: "Given that I have previously noted this about your posts, I can only assume that you want polemical posts and not honest discussion."

I disagree. I think he wears blinders that cause him to dismiss facts that contradict his ideology. He thinks that his posts are honest discussion.

Many of my baby boomer friends live in a separate reality created by right wing propaganda sites posing as news. When I encounter people like that here, I just accept that they have plenty to offer in other contexts and leave it at that.
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FlyingCircus:

{{{I would agree, if only you would put “military” before “spending problem.” ...we spend as much as the next 10 countries combined...}}}

"It's a jobs program for nearly 700,000 people, and a manufacturing support for all the companies that produce all the gear, equipment, and transportation for those 700K, and a subsidy for the universities that get paid to educate ROTC and enlisted.

B*tch about it all you want, but it's a huge government welfare program for the entire economy - no different, in that effect, than any other government welfare or jobs program."


I agree that it is a huge government welfare program, BUT it is very different from other government welfare programs in that it does not produce much of anything that can be consumed by consumers.

The WPA, for example, built all sorts of public works projects (including the city pool and park in my hometown) and roads, bridges, and buildings; given the sorry state of our infrastructure excess military spending redirected to public works would be much for useful,

The the CCC planted more than three billion trees and constructed trails and shelters in more than 800 parks nationwide during its existence, shaping the modern national and state park systems. Another more useful project than tanks, planes and ships that we prefer not to use.

How about more tutors, or daycare for children of working parents, or any of the of the useful and more productive things that could be accomplished with a smaller military budget?

Guns and butter, writ large.

Regards, JAFO
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WPA, CCC...
... good points!
or how about subsidizing the installation of 500,000 charging stations at the corner convenience store/gas stations, so that people might actually be have less "range anxiety" to worry about with EVs and get to that bigger goal of reducing emissions substantially by 2035? Or a new REA called the SEA for solar installations? Instead of more tax credits for the wealthy who can afford a $30K solar roof?
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JAFO:"I agree that it is a huge government welfare program, BUT it is very different from other government welfare programs in that it does not produce much of anything that can be consumed by consumers.

The WPA, for example, built all sorts of public works projects (including the city pool and park in my hometown) and roads, bridges, and buildings; given the sorry state of our infrastructure excess military spending redirected to public works would be much for useful,

The the CCC planted more than three billion trees and constructed trails and shelters in more than 800 parks nationwide during its existence, shaping the modern national and state park systems. Another more useful project than tanks, planes and ships that we prefer not to use.

How about more tutors, or daycare for children of working parents, or any of the of the useful and more productive things that could be accomplished with a smaller military budget?"

----

The WPA and the CCC (Works Progress - and the Civilian Conservation Corps) - were formed when unemployment spiked to 25% during the Great Depression to give jobs to folks - at minimum wage type deals - but they got fed/housed - although not in any conditions that 'modern' folks would stand for - tents, latrines, cook wagon food, hard labor all day - manual - digging ditches, chopping down trees, pouring concrete, building lodges and campgrounds, dams, etc.

All over TX, towns gave up land which turned into local parks, state parks, etc. Lakes were built here and there.

Of course, the federal budget blew through the roof financing all this - but it was part of FDRs swing to 'big government'. It all ended a few years after as WW2 ramped up and everyone could get a job - if not drafted into the military

There aren't a whole lot of area ready to be turned into state parks around the country - and of course, it would take 3-5 years for environmental impact statements, likely face a decade of lawsuits from the Sierra Club and others wishing to preserve nature - for critters, not people. Or new lakes - yeah, I can just see the opposition to flooding 'valuable farm land' for the creation of 'property' likely bought by the 'wealthy' as 'recreation spots'. Not going to happen - any time soon - and only after 5-10 years of lawsuits. Heck, Biden has already ramped up environmental regulations, killed any Trump relaxation of the regs, etc.

Roads? Takes a decade to plan, implement and get things done. Bridges? You aren't going to hire a 1,000 people to 'build' or replace bridges. Takes specialized training , specialized construction materials - and of course, always 'bidding' required these days for million dollar projects. Plus, of course, you've got to get in line for 10 million pounds of concrete, steel, etc.

Teacher - tutors - not over the NEA's dead bodies - ain't going to happen unless, of course, they are required to join the union (Likely Biden rule), pay union dues. This is 2021, not 1930. Plus, of course, they'd probably have to have 'teaching certificates' in the area of 'expertise'.

Dems are always chopping the military budget - which winds up getting into the next war- conflict. You do realize that Eisenhower's push for the Interstate system was 50% military? There was no way to move troops and EQUIPMENT around the country quickly. It took weeks to get a tank from east coast to west coast. So....ALL the interstates had to be constructed to allow a Sherman Tank on a tank carrier to fit under bridges - which is why there is a 16 foot clearance along the Interstate bridges. Of course, the rest of us benefitted in many ways.


t
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telegraph:

JAFO:"I agree that it is a huge government welfare program, BUT it is very different from other government welfare programs in that it does not produce much of anything that can be consumed by consumers.

The WPA, for example, built all sorts of public works projects (including the city pool and park in my hometown) and roads, bridges, and buildings; given the sorry state of our infrastructure excess military spending redirected to public works would be much for useful,

The the CCC planted more than three billion trees and constructed trails and shelters in more than 800 parks nationwide during its existence, shaping the modern national and state park systems. Another more useful project than tanks, planes and ships that we prefer not to use.

How about more tutors, or daycare for children of working parents, or any of the of the useful and more productive things that could be accomplished with a smaller military budget?"

----

"The WPA and the CCC (Works Progress - and the Civilian Conservation Corps) - were formed when unemployment spiked to 25% during the Great Depression to give jobs to folks - at minimum wage type deals - but they got fed/housed - although not in any conditions that 'modern' folks would stand for - tents, latrines, cook wagon food, hard labor all day - manual - digging ditches, chopping down trees, pouring concrete, building lodges and campgrounds, dams, etc.

All over TX, towns gave up land which turned into local parks, state parks, etc. Lakes were built here and there."


Yes, but so what. If you agree that military spending is a huge government welfare program, then you are getting lost in the weeds. I never suggested that we needed exactly a new WPA or CCC.

"Of course, the federal budget blew through the roof financing all this - but it was part of FDRs swing to 'big government'. It all ended a few years after as WW2 ramped up and everyone could get a job - if not drafted into the military."

Would you have prefrred that FDR continued to wallow in the Great Depression?

"Dems are always chopping the military budget - which winds up getting into the next war- conflict."

billions cum.
1 United States United States 738.0
2 China China 193.3
3 India India 64.1 257.4
4 United Kingdom United Kingdom 61.5 318.9
5 Russia Russia 60.6 369.5
6 France France 55.0 424.5
7 Germany Germany 51.3 475.8
8 Japan Japan 49.7 525.5
9 Saudi Arabia Saudi Arabia 48.5 574.0
10 South Korea South Korea 40.4 614.4
11 Australia Australia 31.3 645.7
12 Italy Italy 29.3 675.0
13 Brazil Brazil 22.1 697.1
14 Canada Canada 20.0 717.1
15 Israel Israel 19.9 737.0

https://en.wikipedia.org/wiki/List_of_countries_by_military_...

Perhaps because we spend more on defense then the next 14 countries with the largest military budgets, including at least 9, easily, are allies. And we outspend the second biggest spender by 3.8 : 1 (almost 4 times more)

When is enough enough?

"You do realize that Eisenhower's push for the Interstate system was 50% military? There was no way to move troops and EQUIPMENT around the country quickly. It took weeks to get a tank from east coast to west coast. So....ALL the interstates had to be constructed to allow a Sherman Tank on a tank carrier to fit under bridges - which is why there is a 16 foot clearance along the Interstate bridges. Of course, the rest of us benefitted in many ways."

I am well aware that was the legal rationale, but it is not conclusive.

Regards, JAFO
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