Redistribution of wealth

[pjorourke]

Originally Posted by Iaintliein

Constitutional???

Are you serious???

This post/picture should be moved to the "scared to death" thread.

[Texas Contrarian]

Originally Posted by pjorourke

Or change the income tax to a consumption tax. When you tax income, you get less of it. Tax consumption, you get more savings. A virtuous cycle.

Originally Posted by Clerkenwell

Quite. Fiscal authorities do not understand incentives.

True that!

We would be much better off if we taxed consumption more -- and work, savings, investment, and production less. We've consumed too much, imported too much, and produced and exported too little for many years. Those imbalances cannot continue without eventually causing an even worse calamity than the financial crisis of the late '00s.

Unfortunely, we'll probably eventually end up imposing a consumption tax (VAT) while keeping or even increasing the income tax, as government spends an ever-larger percentage of GDP.

[Guest102513-1]

I hear what your saying Captain...and of course it depends on your personal situation and how big your "nest egg" is.

I'm one of the lucky ones who had his nest egg @ 45year. Nest egg being define as the amount of principle that along with its income allows an individual to comfortably retire.

My entire portfolio, of course does not consist on muni's....but over 70% does. I do not plan on buying/selling bonds for capital gain (at some point interest rates got to rise...and certainly the trading value of my bonds will drop).

But with the help of a good friend....my effective interest rate on my muni's are right at 5.6%. That alone is nothing to build an empire on.

But if your one of the lucky ones, whose "empire" has been built, 5.6% tax free is sweet!

But again, this philosophy alone is not going to create any new multi-millionaries. But sweet if you can get!

And Please, I don't want to come off bragging...AT ALL. I have been very blessed at being at the right place, at the right time professionally to enjoy the good life.

[nevergaveitathought]

Originally Posted by pjorourke

Show me a constitutional basis for "re-distributing" wealth.

how would i do that

[DFW5Traveler]

Promoting the General Welfare has nothing to do with redistribution. It's about creating an environment for the people to pursue their individual dreams.

An unlimited power to tax involves, necessarily, a power to destroy; because there is a limit beyond which no institution and no property can bear taxation. - John Marshall, McCullough v. Maryland, 1819

[Texas Contrarian]

Originally Posted by vkmaster

...My entire portfolio, of course does not consist on muni's....but over 70% does. I do not plan on buying/selling bonds for capital gain (at some point interest rates got to rise...and certainly the trading value of my bonds will drop).

But with the help of a good friend....my effective interest rate on my muni's are right at 5.6%. That alone is nothing to build an empire on.

But if your one of the lucky ones, whose "empire" has been built, 5.6% tax free is sweet!...

I certainly agree that if you assembled your bond portfolio at a time when such yields were possible, you're sitting pretty!

In fact, I know several people who have done exactly the same thing. They know that over a period of a couple of decades or so, currency devaluation will erode the value of their principal, but they're comfortable with that. Some may consider private equity or real estate investments excessively risky (depending, of course, on what exactly they are).

My point was essentially that new investors should not be induced into believing they are avoiding taxation by investing in tax-frees. In essence, they're simply shifting the tax payment to a state or local entity, to the extent that they typically accept a lower rate of return in exchange for avoiding federal income tax liability -- although it should be mentioned that the tax-equivalent yield on munis is generally such that they're more attractive than taxables for anyone in the 35% bracket.

The federal tax exemption can be looked upon as another form of subsidy to the states, and it has existed for almost a century.

[pjorourke]

Originally Posted by vkmaster

But if your one of the lucky ones, whose "empire" has been built, 5.6% tax free is sweet!

Until the governments backing the bonds start defaulting because they are in a cost/tax death spiral (e.g., California):

California taxes away jobs while Texas adds them. “In 2008, 70 percent of all the jobs in the country were created in Texas. In 2009, all of America’s top five job-creating cities were in Texas.”

[Texas Contrarian]

Well, yes, there is that!

If analyst Meredith Whitney is even halfway right, we're headed for a whole heap of trouble. Could be that some muni issues could be just as risky as private equity.

Since the subject of this thread is "redistribution of wealth", let's not forget that some of the main beneficiaries of the redistributors are public employee unions and the political hacks who support them. Now the bills are coming due, and states can't possibly cover them without raising taxes to levels that would render them uncompetitive.

Even FDR knew back in the 1930s that public-sector unions were a terrible idea.

[Fastcars1966]

Originally Posted by heidilynnla

I don't mind them paying "nothing" if they make nothing, I just don't feel they need my money. I earned it. How can you get more back than you paid? Its called a refund.

The only good thing about giving people with nothing that kind of Money is they spend it quick. It does help the economy at our expense.

[coast_encounter]

Originally Posted by pjorourke

This post/picture should be moved to the "scared to death" thread.

+1 I think I am impotent now.

[Guest061619]

Originally Posted by topsgt38801

the wealthiest pay nothing because they have all the loopholes

That is just not factual. The top 1% of taxpayers pay more than 30% of all of income tax the government gets. Since 1990, that group's % of the tax burden has grown faster than their real income and faster than any other group.

96% of all taxes are paid by the upper half of all taxpayers.

America’s lowest-earning one-fifth of households receives roughly $8.21
in government spending for each dollar of taxes paid. Households with
middle-incomes receive $1.30 per tax dollar, and America’s highest earning
20% of households receive $0.41 in benefit per tax dollar paid.

It ain't utopia, but it ain't as "unfair" as the talking heads on TV say.

You can google "who pays the most taxes" and find countless sources that support the facts above.

[charlestudor2005]

Originally Posted by pjorourke

This post/picture should be moved to the "scared to death" thread.

Originally Posted by coast_encounter

+1 I think I am impotent now.

How about the HDH thread?

[Guest102513-1]

CaptainMidnight....I tip my hat to you and your knowledgable responses!

[Guest102513-1]

PJ, fornuately the Midwest has not seen the troubles out West.

If Bonds are AA, with insurance....and the project itself is sound, short of Treasury
Notes, I feel these type of bonds are safe. And they are such a key part to States
building their infra-struture that I believe some type of gov't backing will always be there.

Not sure if this is true, but my broker has told me several times (this was during the most rececnt time period where a lot of the bond insurers were being downgraded) that with the possible exception of some Calif bonds years ago, no muni bond has ever defaulted.

[Naomi4u]

Originally Posted by pjorourke

The ones with the highest incomes are not necessarily the wealthiest.

PJ, You are one smart man.