Saw this earlier today:

http://tinyurl.com/2e3bhl9

It seems the Obama deficit commission has decided that an ideal "starting point" for cutting the deficit is to cut social security and medicare.

There's only one small problem with that. Neither program is counted towards to federal budget, and therefore doesn't account for one penny of the deficit.

The other problem, of course, is that social security is the ONLY thing on the gov't books that is in the black.

A few Republicans have talked about "means testing" social security. They argue that a wealthy person has no need to receive it, and therefore shouldn't get such benefits. Which of course, would turn social security into a welfare program for the poor, which would make it that much easier to eliminate.

The plan would also "reduce income tax rates" and mortgage interest deductions, which of course means a net tax increase on the middle class, and further discourage Americans buying their own home. The idiocy of this is remarkable given we're still recovering from a burst housing bubble.

The plan would increase gas taxes, which is about as regressive as you can get, and enact medical malpractice tort reform, which would shift the cost of doctors fucking up on their patients.

All this after Obama has decided to extend Bush's tax cuts, which would cost 3 trillion over the next decade, which is just shy of running the entire Federal gov't for 1 year.

This website has an agency by agency break down of the current budget.

http://www.federalbudget.com/

What's interesting is that it clearly shows the problem areas: Treasury, Health & Human Services, and Defense. Since Social Security is on a seperate set of books, it shouldn't even enter into the debate.

From what I can guesstimate, interest on the debt accounts for 25% of Treasury. The other 75% is other Treasury functions, such as the IRS. An agency that can be cut down incredibly just by simplifying the income tax code (i.e. eliminating a few thousand pages of loopholes).

From there you can cut defense by getting out of countries we have no reason for being there. Another hefty cut wouldn't hurt, since the Pentagon is so flooded with money that they can waste it on 300 dollar hammers, when they're not busy losing a trillion more.

From there we have health and human services. Which means we might just need to save a little money to research new cures for diseases. Of course, if we stop giving our R&D away to the pharmaceutical industry, things wouldn't be so bad off.

From there you can eliminate capital gains taxes and just count it as income, and make income taxes more progressive. Hell, raising it to a measely 45%, which would be below the world average, would still make America rather billionaire-friendly.

My very rough estimation would be that this would eliminate the deficit entirely, and allow the country to begin saving 25 billion a year or so.

-- Modified on 11/11/2010 2:10:43 AM

Social Security should be repaid in total with interest to all those who contributed to SS. I will retire and someone else can take my job, thus reduce unemployment.

After that, no more Social Security for anyone.

Hey, I just want my money back.

for the government, two probably doesn't invest actively in the market, and three relies primarily on his government pension for his retirement?

I do laugh at the lack of liberals or progressives response to the latest round of Quantitative Easing. Do they not know what the Fed is doing in absence of Executive or Legislative leadership? Though Obama did mention in Asia his support for what Bernanke and the Fed is doing.

You basically got the Feds pumping up asset prices, i.e. equities. And the lower dollar is causing a rise in commodities, which is starting to hit the retail level. Now who does that hurt? You would think socially conscience liberals would get their panties in a wad, and yell at the "rich are getting richer"

Sadly, since we don't make anything anymore, we just shuffle paper around to pretend that we still have some wealth in this country. Mortgages encourage a lot of paper stuffling. But the advantage of mortgages, is that it allows people to put a house on lay-a-way, and still be able to live in it, instead of saving and renting for a long period of a finite life.

There are better options, IMHO. Mortgages backed by credit unions instead of banks, then use the returns made from the mortgage to give their customers cheaper services. It is wealth redistribution, but in a credit union, just about everyone is doing it for everyone else's benefit. Not a bad deal, given the options.

Particularly speculation in the market. Since we live in a country that just shuffles papers around to pretend we're not on a sinking ship, market speculation is one of the few ways left for certain people to soak up a few more dollars. It makes markets unstable that causes a lot of problems worldwide, especially in agriculture.

Given this country is suffering from overproduction, and we've had a history of strong and stable GDP growth in the past with far higher capital gains taxes, I think higher CG taxes would be a good idea.

However, as St. has pointed out in the past, it doesn't make much sense to heavily tax sectors dealing with innovation, especially high tech fields. When there is no demand in the economy for something because it hasn't been invented yet, then we should encourage it's development.

but after further reflection, I am going to fucking clean up, as is anyone else with any brains who kept "a little powder dry".

A weak dollar might cost me a few bucks as I travel abroad, which I do with regularity, but the impact on commodities, especially oil has the possibilty  of propeling me into the "capitalist class" that Charlie the Commie is always harping about. lol

I don't mean to toot my own horn, but I have had the foresight to lease up acreage with literally millions of barrel of recoverable oil underneath it. Fuck all the rest of you, I am going to be rich!!! roflmfao

"When I invest that money in a stock where I lose every penny; nobody from the government sends me a condolence letter, thanks me for being willing to take a risk, and encloses a check for what I lost. The loss is mine, all mine -- and I bear it alone."


       Not at all. Uncle Sam is still looking out for you and in fact does send you a letter (or at least will if you ask for it) of the IRS publication that explains how you may offset your capital gains with the capital losses on your investment in the Priapus53 National Buffet Company. Even though Priapus ate up all the profits, you still get a tax break for your losses.

     This is one of the best tax breaks in the Code for investors. Moreover, if no capital gains, you can deduct capital losses against ordinary income up to $3000. So in fact the federal government and all tax payers share in the burden of your loss insofar as you can shelter the capital gains tax you otherwise would have paid on your gains.

      And thank goodness for this break bc otherwise what would I do with all of my underwater Bank of America stock?
At least I can sell enough each year to cover my capital gains in Teco and the XLE.

Wow $3000!!!!! What about the poor slob that lost money in 2008, sold at the bottom, lost let's say $45K, afraid to get in the market, and now it will take him 15 years @ $3K a pop per year to finally write it off.

John's point is that the risk lies with the investor, not the govt, hence you have to make it attractive for investors to take risk.

take over. Instead of realizing that 45K loss in one year he would realize only enough to offset capital gains. The $3000 offset is for ordinary income if you have no capital gains. If you are just investing in one stock, you have no business of being in the market in the first place.

      There are no victims in the market (except possibly me), only volunteers. There is absolutely no reason for the tax code to make it attractive for this kind of investor to take risk.

    My disagreement with John was his statement that he bore the risk alone. In fact, the tax code provides a risk spreading mechanism.

     Now if you really want to discourage investment, eliminate the capital loss offset. That would discourage investment risk far more than any raise in CG rates.

There is actual production, it's just not done domestically.

If you mean "actual production" to be products made in the United States, then yes, you could say we suffer from under production.

Of course, that production declined, domestically anyway, at a time when taxes on those companies also declined.

Yes, abolish the home mortgage interest deduction. It used to be that mortgaged property was the exception rather than the rule. A young couple could live with the parents and work for a few years and buy their own home outright; with nothing more to pay except property taxes and insurance.

The advent of widespread mortgage availability expanded demand for houses ceaselessly, forcing prices up, up and up until it was no longer practical to save to buy a house because during the period spent saving, the price would double as more people became qualified to buy with no money down, artificially low temporary adjustable rates, etc.

This penalized the provident and hard-working while empowering consumerist tendencies. Even worse, it turned most homeowners who aren't senior citizens into indentured servants of banks.

Nobody with a mortgage owns his house. It doesn't matter whether he misses the first payment or the 250th payment; once it has been missed the bank can take it -- even if he has already paid in principle, interest and fees over twice the amount borrowed. The word mortgage, strictly translated, means "death promise."

Again, widespread availability of mortgages made the ability to buy a house outright -- once commonplace in America -- practically non-existent and turned the idea of home ownership into a farce where anyone who "owns" a house is actually a renter; though in many respects with fewer legal protections than a renter. It did this by causing the price of houses to rise at multiples of the rate of true inflation. If you compare the median wage and median home price in 1950 to the median wage and median home price of 2000; you'll see what I mean.

Before the advent of widespread mortgages, someone who lost his job didn't automatically lose his home; because he owned it. But now you can track the foreclosure rate along a curve that mimics the unemployment rate. When you take out a mortgage, you are making a bet that for the next 30 years you won't be unemployed for any length of time. If you lose that bet, you lose the house -- either by selling it to pay off the debt or through foreclosure.

Who gets rich off of mortgages? Banks and bankers, of course. Though I am over-simplifying because there are often people with gennie mae bonds in their portfolio and such. But the wheeling, dealing, discounting, combining and commissions all fall to bankers of various sorts.

The mortgage interest deduction serves to make it easier for people to get mortgages; thus increasing the number of people bidding on a house and the amount they can spend well beyond what is in their pocket. This causes the price of houses to be higher than it would otherwise be; making home ownership through thrift, savings and postponement of gratification even less possible.

And it therefore also serves another function. By encouraging a greater number of mortgages, AND mortgages for greater amounts of money ... it is a huge subsidy for the mortgage banking industry.

Yes, I have a house. Yes, I have seen its value cut in half. So what? It's current value is meaningless unless I am trying to sell it. And what if my advocacy causes it to be valued even lower? Who cares? A house is where I live. It is an asset to be sure, but not an investment. The only thing that ever made it an investment was artificially jacking up housing prices by ever-widening the pool of mortgaged borrowers (i.e. indentured servitude to banks) until that system imploded.

I would HAPPILY see the value of my property plummet if it meant that the next generation of home-buyers could look at stable housing prices that permitted planning to save their pennies and buy a house outright so it would be a source of security in an uncertain world in the future.

I invest.

I'm not one of those Wall Street "quants" who figures out clever ways of stealing all the fractional pennies and making a gazillion dollars on volume.

Rather, I look at macroeconomic trends and the businesses in which I invest -- and I invest for the longer term. I have stock that I have held since 1987.

Now, some of my investments have done pretty well -- but others have become worthless. I bought stock in the company that made a product called "Messenger" -- and the company failed utterly and I lost every penny. But I bought stock in another company that did much better. Overall, because I apply sound reasoning to my picks, my portfolio does well.

Okay -- the money I use to make those investments is what is left over after I have paid taxes. It is after tax money. The government has already taken its share.

When I invest that money in a stock where I lose every penny; nobody from the government sends me a condolence letter, thanks me for being willing to take a risk, and encloses a check for what I lost. The loss is mine, all mine -- and I bear it alone.

But when I invest money on which I have already been taxed and realize a gain when I sell it ... Whoa! ... Then somebody with the government is right there to take his "share!"

Here is the thing. Investments carry risk. In order to justify the risk, there also needs to be potential for reward. Taxation on that reward reduces the degree to which that reward offsets the risks. Therefore, there is some degree in which it reduces the willingness to invest at all.

As an extreme example, pretend all gains were taxed at 110%. Nobody would ever invest. Somewhere between 0% and 110%; each person investing has a "cut-off" where it will suppress his inclination to invest. The higher the rate, the greater the number of suppressed investments until when you reach 110% nobody invests at all.

I cannot quantify exactly how much investment would be suppressed at a higher tax rate; but I DO know it would be suppressed more than at a lower rate.

Investment in American businesses should be encouraged. Ultimately, the strength of this country comes from our innovation and productivity -- as fueled through investment. Suppress this enough, and even our government will fail.

your pushing on a string. That genni is never going back into the bottle. The time you dreaming about was what 60 years ago when houses cost $1,500.

but they are monitizing the debt. Treasury prints money sell bonds and the Fed buys the bonds. Value of the dollar drops, cost of debt goes down, not the debt but the cost.

Hurts the retired, people on fixed income, people who live on a pension. Their money buys less and less but there not important to the economy or the goverment, there a cost. The rich arn't necessarly getting richer but they can tread water until it crashes. Then they will have the money to buy up assests for nickles on the dollar.

You would think socially conscience liberals would get a brain and stop this mess but most of them are too stupid to understand. The action of the president and Fed is killing the middle class in this country.

We will either have hyper inflation or deflation. Either one will be impossible for the middle class to live with. There will be rich and poor. Right now the Fed and goverment is pushing for hyper-inflation.

At least half of my investments are in things that have serious utility and value -- stuff like oil, oil exploration, oil pipelines and the like for energy and even things like silver mines.

Hey, just think, maybe after this debacle I'll be able to afford to buy my very own Congressman to represent my interests.

LOL

Seriously though, I doubt I'd be rich as I define the term, but it darned sure won't hurt me any.

Yes, I DO get to deduct my losses from my gains -- and that gives me back whatever my marginal tax rate is when multiplied by my loss.

So if I gain 100k and lose 10k, I pay tax on 90k instead of 100k. That doesn't give me back the 10k I lost -- it only "gives" me back $2,800. BUT -- considering that a gift is a bit of a stretch since really they are just taking less of my money.

"John, because you lost 10k, we will take $2,800 less from you than we would ordinarily take."

The whole idea assumes, at baseline, that the feds have a moral right to my money to start with. Oh, no doubt they have a LEGAL right and lots of heavily armed individuals to back that up. But I dispute their moral right to tax capital gains AT ALL when those gains were made from investments made with after-tax money. So I don't see it as a gift -- just a lesser theft.

For argument sake you decide to sell your XLE and TECO positions. You have $45K in capital gains. You decide to sell in Nov or Dec based on information about the overall market, the sector, or issues associated with a specific company. You have no capital losses to offset those gains. You decide not to harvest your BAC losses, again based on information that you believe BAC may increase in value in 2011.  You will be required to pay either long term or short term gains with your 2010 return for that $45K. In the 2nd or 3rd quarter of 2011, you decide to sell BAC for a loss. Let's say you lost $45K, but decide to remain on the sidelines for the balance of the year. You can only write off $3K in 2011, and $3K each year thereafter, not unless you get back in the market and realize other gains.

The tax code almost forces you to sell a security like BAC before you want to in order to minimize your tax obligation in 2010. So in conclusion, I do agree that John is assuming the substantial risk, and the risk spreading mechanism is only designed for certain types of investors, or at least investors who are more active in the market.

... by "this country is suffering from overproduction."

That seems to contradict your earlier statement of "we live in a country that just shuffles papers around to pretend we're not on a sinking ship, market speculation is one of the few ways left for certain people to soak up a few more dollars."

It seems to me that we under-produce in terms of ACTUAL production.

I've doubled my money this year -- no way am I sharing that with an investment advisor, lol.

Seriously, though, I still disagree with your idea conceptually that the government shares my risk due to the way the tax code is laid out.

All that code does is allow me to subtract my losses from my gains -- which is no different from any other business.

When I sell squash, I get to subtract out my losses (i.e. seeds, advertising, etc.) from my gains (what I get paid for the squash.) I pay tax on the difference. The government isn't sharing my risk just because if my corn crop fails and I take a loss on that, the loss on corn is subtracted from my gain on squash. That's just simple fairness for not taxing me on income I didn't make.

Yes, the code allows me to spread my loss against my other income if I have no investment gains against which it can be offset. But it is a deduction, not a credit. So I deduct $3k, which gives me back $1k in taxes I don't have to pay.

But that still isn't some sort of gift. All they are doing is allowing me to keep my own money, which I earned.

I guess if we accept as a premise that I am owned by the government, and thus all of my productivity belongs to my owner; that the government might allow me to keep some portion of that production is indeed a great boon. Of course, accepting that premise, I wasn't really risking my own money anyway -- just some portion of funds to which my owner could assert a right at any time. Therefore the risk was my owner's and my owner simply entrusted me to make it.

But I'm a ways off from accepting such a premise. (*grin*)

and BTW keep in mind you can use your stock losses to offset all "passive income" not just capital gains.

One way is to create a new entitity, whether it be a partnership, LLC, corp is immaterial, AAR create an entity that is formed soley to trade equities,(or commodities, etc), call it "Marikod's BAC trading club" this new entity earning and/or losses will now be considered "active" income as opposed to "passive", if you completely blow out in the market and have no income to offset your losses, you are free to sell this entity, complete with it's tax losses to use to offset other income, from virtually any other lawful endeavor.

That 3,000 cap is a travesty IMO, just like the rules that apply to never selling a security and letting it go to zero also prevents you from taking the loss, What a fucking crock, most people don't realize that if they buy a stock and the company goes belly up, if they don't sell their stock before it goes to zero, they are unable to claim the loss. Conversely, if you short a stock into oblivion and never cover your short, your gain is completely tax free, rules are rules, don't hate the player..........lmao

the tax code forces me to sell stock before I may want to sell it in order to realize a loss if I want to take advantage of the offset.

       I also agree that any investor assumes a substantial risk and that he will be taxed on that risk if it succeeds, and unless he can generate capital losses will be limited to a $3000 deduction.

     But why should it be any other way? I've read enough of your posts to know you would not favor having government subsidize investor risk. The capital loss offset is really a pretty remarkable government subsidy if you think about it and for all practical purposes it is a benefit primarily used by the rich or near rich and not by regular folks.

    Why not keep CG taxes the same and eliminate the offset and let the rich cover their losses without taxpayer help?

"Rich" people will almost certainly have other forms of passive income that they can offset by their stock losses, "regular folks" are the ones most likely to leave the market, never to return.

Rich people are also much better equipped to "beat the system" than are "Joe lunchbucket" type investors.

The same rules apply for someone who had their entire nest egg wrapped up in a single mutual fund, or even mutual fund family, that was wiped out due to a market crash as an investor that took a hit only a single stock such as yourself.

Just like in any other "game", amateurs are much more likely to run afoul of the rules that they are not aware of than the professionals they are competing with.

There is always a way around the rules, and I may stop hoping, or even voting for those that might level the playing field, and just concentrate on "working the system", the more unfair a system is, the easier it is to manipulate.

Marikod, you may have just turned me into a Democrat. rofl

According to the right, we have not cut taxes enough to have the effect, that is why you are saying it doesn't work. Cut the damn taxes until it starts to work, balance the budget, create jobs, surpass China's o foreign currency reserve.

Until you have cut taxes where it starts to have the desired effect on the economy, you cannot say it doesn't work, can you?



[

It's well-known that I depart from the standard conservative lines in that my views encompass economic nationalism rather than economic globalism. My general view is that our Fedgov has an unambiguous Constitutionally conferred power to regulate international trade; and that doing so in a fashion favoring globalism ultimately threatens the wellbeing of the people of the United States as a whole.

Therefore I am not a big fan of the changes that have created a domestic economy of paper-shuffling with most real production taking place in other countries. Yes, we DO make very valuable intellectual property here; but most of our paper shuffling is far from substantive intellectual property.

One thing I want to take you back to is the Federal Reserve and the impact of this system as an impetus for offshoring.

Our inflationary system does not equally inflate wages and prices. Wages increase at a pittance compared to the rate of increase in prices.

As an example, look at the rise in the cost of things that cannot be offshored such as plumbing, car repairs, medical care, post-secondary education and the like. The spikes in these prices are always referred to as "increasing faster than the rate of inflation." Not so. They reflect the rate of TRUE inflation, and far outstrip the rate of increase in wages.

Companies have to figure out a way around inflation because otherwise with wages lagging prices, soon nobody would be able to afford their goods. They can't control the fed, but they can control costs -- and a key cost in most production is labor.

Doing it this way, instead of a widget costing $200 in 1980 and $400 by 1988 (reflecting what true inflation would do to the price); the company imports it from Taiwan. When Taiwan gets too expensive, they import it from Mexico. When Mexico gets too expensive, they import it from China, etc. This way, the sales price of the widget continues to be $200. So by off-shoring; the rate of "inflation" for consumer goods -- from the perspective of a purchaser who doesn't care where as widget is made -- is 0% over a period of decades.

Of course, there are other approaches besides offshoring -- mainly automation. Automation exists because it can dramatically reduce labor costs. The same applies to improvements in technology that lower prices. I remember buying 256k of RAM in 1988 for $300. Today I can buy a 1 gig flash drive (computers couldn't even address a gig back then) for $10.

But the improvements in technology could be applied domestically as well. Either way, the way our central banking functions is intimately tied to the off-shoring of production and the motivation for doing so.

Inflation is a hidden tax.

Or is that a typo and you meant sell the stocks in the entity?

       That would make sense but wouldn't this kind of entity be subject to the personal holding company tax? I thought about trying something like you propose a couple of years ago but concluded that the personal holding company tax would offset any other tax advantages.

Our tax system is monstrously complex -- full of special rules, exceptions, changes, things that only apply between certain dates and all kinds of crap. Certain things -- like income averaging -- disappear; while other things such as Alternative Minimum Tax become more widely applicable.

Now for me, I'm a reasonably bright guy and I keep a $425/hr specialized attorney on retainer for answering my questions. I can pretty much figure it out. But what about the guy -- which is most Americans -- who doesn't even know of the existence of such specialized attorneys? The whole thing becomes a game where those who can afford the specialists win, and those who don't -- lose. It becomes more about connections and specialized knowledge than fairness or taxing income in particular.

Some of my income is what would be called active -- from regular employment and certain types of business profits, etc. But a proportion of my income is passive -- such as royalty income for published works of various sorts.

Long, long ago I started incorporating businesses for filtering income in order to be able to subtract out expenses for research from the royalties I was getting and so forth. But I'm a savvy guy. If I didn't know to do that, I woud have paid a lot more taxes.

I guess what I'm saying is that our tax system really needs to be seriously simplified in the interests of basic justice.

I don't consider myself to be rich by any means; but I'm smart enough to game the system once you start making the rules complex. Thus, the tax system almost becomes an IQ test rather than a tax on income.

Basically, it's a disaster and a travesty of justice. Often, I can work it to my benefit. But I know that many do not. Two people can have the exact same income from the exact same sources and pay radically different rates of tax based upon strategy. That's crazy in terms of justice.

Let me add that the tax system isn't going to fleece any of the most wealthy of individuals; but it is VERY effective at protecting the wealthiest individuals from competition by preventing the accumulation of wealth even by those with high incomes in most cases.

If the leftists actually had a problem with the wealthiest 0.1%, they would tax wealth rather than income. One of these days, leftists will figure out that they are often serving the same masters as the rightists. LOL

I don't think it is too much to ask that the tax code be sufficiently simplified that someone with an IQ of 100 can have a reasonable clue as to whether or not he is breaking the law.

But I DO get your point.

Otherwise, most people would be fucking up their taxes. It's probably not going to happen. It complicated for a reason, no one knows the reason but there it is.

Every year we cook a leg of lamb for Thanksgiving. And every year we cut two inches off the small end. One year I asked why we did that. Was told' "Don't know, Mother always did." Called Mother and asked why.

She said; "Her pan was to small." We still cut the 2" every year, but now we know why.

In 1984 he was well on his way to simplfying the tax code where any idiot could figure his own taxes. The problem with a system so simple is that it is extremely difficult to cheat, so the "rich" rather than being the beneficiaries of a tax cut, found themselves acctully paying their share. We all know we can't have that, so in 1986 with a huge push from the left, we started recomplicating the tax code all over again, with the net effect that rich people can once again cheat on their taxes. God, America is such a wonderful country.

Of course, you don't really have to be rich to thrive in this country, you just need to learn the rules of the game, and then use them to your own advantage. I can't help it if most people are stupid, and quite frankly it not my problem if other people are too stupid to take advantage of a system that simply begs for it.