A bunch of random thoughts

I’ve had a million different things I’ve wanted to discuss on my blog, none of which were worthy of their own individual blog post. Today, I plan to get all of these things out of my mind and on to Punch Debt In The Face. Hopefully you are interested in at least one of the following topics…

Favorite new website:

Living 1,200 miles from Girl Ninja is no fun. I recently purchased a vat of plane tickets from Alaska Airlines for three separate trips I’ll take to visit her. Now I don’t know about you, but every time I go to buy airfare I break out in a cold sweat. I’m terrified that I’m going to get a bad deal. What if I buy and a month later ticket prices drop? What if I don’t buy right now and tomorrow the ticket is $100 more? I literally start having panic attacks (and by literally I mean figuratively).

I recently stumbled upon an article talking about some dude who started a handful of internet companies, one of those companies was Yapta. Have you ever heard of the website? Yeah, I hadn’t either. Yapta is really simple. At its core, Yapta allows users to track flight prices and check for airline refunds. I logged in, created an account, and added the three tickets I recently purchased on Alaska Airlines. I told Yapta how much I paid for the tickets and directed them to notify me of any drops in airfare over $5. Less than 24 hours later I had two emails from Yapta, the first email telling me one of my tickets dropped $30 and the second email saying that same ticket later dropped another $40. I hopped on the phone and gave Alaska Airlines customer service a call. I told them I had recently purchased tickets at a higher price and wanted a refund for the price reduction.

BOOM! Within two minutes I had email confirmation that my credit card was being refunded $70. I am seriously in love with this site. You should check it out and see if your preferred airlines offer refund credits for ticket price fluctuations. And in case you are wondering, No, I was not paid for this review.

There’s always going to be rich and poor people:

Yesterday I read a news story about NFL football players and how some of them are seeking out extremely aggressive short-term loans with high interest rates to get them through the current lockout. Basically football players haven’t been getting paid for about 2 months. As a result, at least 16 teams have had players seek short term loans to help keep them afloat. I could care less about the article (I don’t even like football all that much), but I am fascinated by the socioeconomic inferences. Wealthy football players don’t even have enough in the bank to get them through a couple no-income months. Emergency fund anyone? It kinda reminds me of the documentary I saw about the curse of the lottery. You know, the dozen or so stories about lottery winners who blow all their cash and end up bankrupt a few years later.

Much of today’s political debate is focused on the wealth and inequality in America. While I’m not saying there isn’t a problem, I am saying there isn’t much we (or Washington) can do about it. Congress doesn’t have the ability to mandate fiscal responsibility on an individual level. If we completely leveled the playing field by redistributing wealth and gave everyone in America $1,000,000 do you really think much would change? It wouldn’t be long before some people turned their millions in to billions and others turned their millions in to pop tarts and x-boxes.

Sticking with the topic of wealth:

I’ve never really understood why the phrase “Tax breaks for the rich” exists. To me, that phrase implies rich people are getting a deal that allows them to pay less tax than their middle (or lower class) counterparts. Last time I checked the richest 10% of Americans pay 68% of all federal tax. I don’t know about you, but to me that sounds like the worst “break” ever. I really wish, instead of saying we need to stop giving tax breaks to the rich, politicians just started saying “Look, they’re rich. They can afford to pay more, so we think they should.” At least then they’d be being honest with themselves and with us.

Comments? Insight? Questions?

49 thoughts on “A bunch of random thoughts”

  1. But what percent of the INCOME do the richest 10% make? What percent of the wealth do they own? It is much much more than 10% (though it probably is also less than 68%? But maybe not.) This is really really important when assessing the amount of tax they pay in terms of percentages (especially income).

    • To put things in perspective….

      The top 1% percent of the population earn 19 per­cent of the income but pay 37 percent of the income tax.

      The bottom 50 percent—those below the median income level—now earn 13 percent of the income but pay just 3 percent of the taxes

      • Something else for you to read, by a Nobel-prize winning professor of economics at Columbia:

        And in your zeal to defend the poor, overburdened 1%, don’t forget that federal income taxes are only one part of the tax picture. Don’t forget state taxes, sales taxes, and payroll taxes (Social Security and Medicare), the latter of which cap at little over $100K of income and thus disproportionately favor the highest earners.

        • I’m going to assume you were being dramatic ’cause I never implied the top 1% was “overburdened”. All I sought to do was point out two things.

          1) No matter how much we wish the playing field was level, we have to face the reality that there are always going to be financially responsible and financially irresponsible people. There is no way to mandate fiscal responsibility on an individual level. As long as people are free to spend or save as they please, there will always be a wealth inequality.

          2) I didn’t make the argument that wealthy people shouldn’t pay more (although I personally would much prefer a flat tax system). I just hate the political rhetoric that is used in wealth debates. If you think rich people should pay more, that’s fine, just say it. Don’t make it seem as though they aren’t already footin’ the majority of the US tax bill.

          • Individual fiscal responsibility is a different matter from tax policy. There are millionaires who squander their money and middle-class people who live below their means. Wealth inequality involves far more than individual responsibility, however, and tax policy is the only way the government has to counteract the disparity between rich and poor. Those who feel the wealthiest 1% need even greater tax cuts should be comforted, however, by the fact that marginal tax rates are as low as they’ve ever been and income for the 1% is rising at a faster pace than ever, while more in the middle-class are struggling and the poverty rate is accelerating too.

            As for political rhetoric, of course it exists, but so do tax breaks for the rich. That’s simply a fact, as should be clear from the money.msn article I linked to. And as for your flat tax, I totally oppose it on the grounds that it is the most punitive tax policy imaginable towards the lowest earners. If you want to impose a 15% flat tax (I assume federal income tax) on someone earning 1 million, that $150,000 is barely felt, where the $4500 imposed on someone earning $30,000 most likely creates a severe hardship. And the flat-taxers never take payroll taxes, property taxes, or state income taxes into account, or have any solution for those states that have no income tax of their own.

      • I swear I was just reading an article that the top 1% of the population controlled 50% of our nation’s wealth… Not sure how that equates into percent of income tax. And we aren’t necessarily just taxed on earnings for the year. It’s also on any vehicle that makes money: stocks, savings accounts etc.

  2. I’ve also been doing a lot of thinking along the lines of the rich and the poor and I guess I can’t argue with your assessment. It keeps the balance so you are right.

    In a similar way I wonder if some people having an emergency fund and some not also keeps the world at a balance. hmmmmmm?

    • Not exactly the first place I’d turn to for responsible analysis. Read in the comments the reply from “cm,” who demolishes quite well any pretense that a flat tax is “fair.”

  3. Your last two points summarize exactly how I feel. I don’t know if you have heard of it, but I think that the Fair Tax (http://www.fairtax.org/) makes more sense than a flat tax because it is based more on your consumption of goods. If you don’t want to pay as much in taxes, you don’t buy as much stuff.

  4. <>

    True, but wouldn’t some of those people with billions be from today’s working poor? And wouldn’t some of those people with pop tarts and x-boxes be today’s millionaires? My point is, the *opportunity* is what matters. Some of today’s poor will never become billionaires because they just didn’t get the education, or maybe had to declare bankruptcy because of medical bills, or maybe couldn’t get investment capital for their great ideas. And some of today’s millionaires will continue to be millionaires despite the fact that they’re absolute lazy idiots, because they have the money to hire a good financial planner.

    So, rather than giving out $1,000,000 to everyone, why don’t we guarantee a solid education for our children, provide health care to all citizens, and make sure everyone has access to credit to open a business? Nobody is asking for wealth redistribution… we’re just talking about providing *opportunities*.

    • I just don’t know if I necessarily believe that the wealthy are responsible for footing the majority of the bill for everyone else. I wish everyone could get a great education, but I don’t think I’m going to force the wealthy to provide that opportunity.

      In fact, I’d argue that there is plenty of resources already available to provide that education, politicians just don’t make it the priority it should be. Why are we (tax payers) funding space exploration when teachers in San Diego are getting laid off like crazy ’cause the schools’ budgets are dwindling. Priorities is the issue, not revenue.

  5. Don’t agree with Robin-Hood-Policies. Reality is…rich people work harder and work longer to get where they are. I ask myself all the time…would I be willing to work 60+ hours/week and stress myself to the brink of insanity just to make double of what I make now….honestly…nope, I like my free time.

    • “Reality is…rich people work harder and work longer to get where they are.”

      Reality is…not necessarily. I bet the cleaning service I use once a month to do my home works every bit as hard as I do. I bet the guys repairing the highways, sometimes at night in the pouring rain, work a lot harder than I do.

      Becoming rich is, unfortunately, not always the product of hard work and long hours. Remember the Winklevoss Twins from The Social Network? The wealthy sons of privilege who got into Harvard and whose only apparent ability is that they could row a boat? The dum-dums had an idea they had no idea what to do with, and when a bright middle-class programmer from Queens, NY, built it into a multi-billion dollar enterprise, they decide to sue him for intellectual property theft and walked off with $65 million. Lots of hard work and long hours there.

      It would be nice to think that hard work always pays off. Trouble is, in a lot of ways wealth results from connections, luck, good looks, who you sleep with, and all kinds of other factors having nothing to do with hard work or merit.

    • Ruth… I don’t agree with the Robin-Hood policies either, but the rich do not work harder, they work smarter, big difference.

      Lowest level earners rarely work smarter. Can they? Absolutely! Is it 100x more difficult? Absolutely! Are they willing to sacrifice and make the really, really tough choices to get out of poverty? Rarely.

      This is obviously a big-time stereotype, but I’ve heard countless people who are unemployed or in low income jobs say they are unwilling to make true sacrifices (i.e. move to a new area, go back to school) in order to get a better job. I completely sympathize with how difficult it would be, but if you don’t fight for yourself; stop complaining.

  6. I definitely think that the people who can “afford” to pay more taxes should. As a civil engineer, I understand just how expensive public works projects are, and we need to finance new infrastructure as well as repair infrastructure that may have been built 50+ years ago. Clean water, fire hydrants, sewers, and roads are no laughing matter.

    My husband and I are by no means wealthy – if we didn’t have massive student loans we’d be solidly middle class – for right now we’re tenuously middle class. Yet I think even we don’t pay enough taxes. We just submitted our tax return, and our effective tax rate was 8%. We’re about 4 1/2 times the poverty level, and still paying such low rates. Then, you have companies like GE paying $0 in taxes…

    My boss complains sometimes about having to pay 6 figures (!!) in taxes. He owned an engineering company and sold it to a global company, and also has quite a few rental properties.

    In my opinion, having to pay six figures in taxes is a wonderful problem to have – I’d take 35% on $1,000,000 over 0% on $14,000 any day.

  7. Hmm.. just realized my 35% on $1,000,000 example is nowhere near six figures – but the point still stands.

      • However, I don’t necessarily like the example. Of course anyone would rather have $1,000,000 and pay 35% then have $14,000 and pay 0%. But most people would rather have $1,000,000 and pay 20% then have $1,000,000 and pay 35%. People want what’s best for their bottom line.

        The things you mentioned “Clean water, fire hydrants, sewers, and roads” are shared goods. Why should the wealthy have to pay a higher percentage of their income to have an equal share of those goods? I agree, the tax system is whacky, and like you wouldn’t mind paying more taxes (if I felt that the revenue was being appropriated responsibly). I’m not necessarily saying taxes shouldn’t increase (although I don’t think they should), but more saying we shouldn’t target a small minority and require them to pay for the large majority.

        • I understand the point, that 20% would be preferable to 35% – I don’t dispute that on an individual level. Everyone wants what is best for them personally.

          But on a societal level, we can’t leave the most vulnerable to fend for themselves. A waterline that costs $1,000,000 to install on a street where most people are at the poverty level will be much less affordable to those residents than a waterline that costs $1,000,000 on a street where everyone makes that much or more in a year. Just because people may use equal shares of something doesn’t mean they absolutely must pay equal dollar amounts. We shouldn’t condemn the poorest people to shoddy infrastructure just because the people who make more money won’t be directly using that specific waterline.

          Same goes for schools – plenty of people don’t have children, but their taxes go to pay for the education of other people’s children. Society as a whole benefits from a better educated populace. Without a decent education, few people have any hope of escaping the poorest neighborhoods and being ready when opportunities for advancement may occur.

          Sometimes the public good outweighs the desire for people to pay only for what they themselves use.

          • I like Jen’s line of reasoning and would agree with all that. Taxation can’t be based on the individual’s use of the item taxed. With rare exceptions ($3 to get the President elected, $1 for this or that wildlife fund), none of us have any direct say in how our tax dollars are used. I have no children, but I pay for the schools in my district; I may not drive a car, but I am taxed on the roads. DN may not take a bath, but he is taxed for water. And my dollar pays for some older person’s social security/Medicare check, while DN’s dollar may eventually pay for mine. Of course there’s then the real problem of whose dollar pays for DN’s, but that’s the can down the road we’re always kicking.

        • I could easily argue that the ultra wealthy benefit more from public goods than the middle class or working class. The rich have more property to protect so they benefit from the police more. The rich have bigger and nicer homes, so they benefit more from the fire department in the event of a fire.

          • I think you might be stretching there a bit Ryan, but I will say I do see Jen, Larry, and your point of view. Definitely some valid points raised.

            That said, while I wish everyone could get a great education, I don’t think the wealthy have any moral or legal obligation to be the majority providers of said education. $1 trillion-ish is spent on public education in America every year. I don’t think the education issues we face are the result of alack of funds, but a the result of poor management of resources. Priorities is the issue, not revenue. Once the tax breaks on the wealthy go away, it wont be long before people start foaming at the mouth to tax them more. At some point we need to stop pointing the finger at others (wealthy) and start pointing the finger at us (America).

  8. I actually posted about the NFL players today as well, If they are too dumb to manage their money, then I don’t feel bad for them having to take out loans to support their lifestyle.

    But as far as taxation, it is very dangerous for a government to rely on the very rich for most of their tax income. Rich people have the most variable incomes. If I own a car dealership and we go through a recession, I might make $500,000 less that year than usual, which means $500,000 less of taxable income from me. When poor people lose their jobs, they weren’t paying much taxes anyway, so it doesn’t have a big impact on the system.

    Here’s an article about it: http://online.wsj.com/article/SB10001424052748704604704576220491592684626.html

  9. The professional athletes are similar to lottery winners, they cannot handle their instant wealth!
    Tax breaks are for everyone, but only people with disposable income can take advantage of some of those breaks. Generally speaking, rich people have more access to resources that can reduce their taxable income. If we really want to resolve the federal budget issues, we may need to go to a flat tax.

  10. This has been a sweet topic for conversation. I like how everyone is sharing their point of views.

    I’ve been reading everyones comment and I’ve started to form my own opinion on this whole taxation thing. If everyone is paying an equal percentage why isn’t that fair? It seems pretty fair to me but I am making that judgement based on the following point.

    If you and your spouse live together and you share the bills but your income level is far above hers, when you split do you expect her to foot exactly half of the bills, especially if half is more than her total income to begin with or would you prefer pays only 50% of her income level there by equaling the playing field?(I’m all for joint finances in a relationship so this is just an example)

    It may not be fair in some ways that someone who works harder in most cases have to pay more in taxes than that of his poorer comrade but the poor man is forced to giving what he can and in some cases what he can not so why shouldn’t the rich man do the same? In reality everyone is giving their fair share even if it is not by choice and only by doing this can society continue to function.

    I understand your point of a flat tax rate Ninja and yes the richer would still be giving more than the poor but the poor man is giving all that he can where as the rich person is not. Fair is fair on an individual basis so if 15% goes for you 15% should go for me and why not? I worked harder to get a higher income didn’t I?

    You have to remember that some people are limited in how far they can advance but that doesn’t mean he/she isn’t working just as hard as that higher income earner.

    This is a good debate with both sides having good points but I have to go against you on this one Ninja. I don’t think a flat tax rate is the fair way to go.

  11. Ugh…cannot resist anymore…

    I find the coincidence of this blog post following your last blog post regarding shared responsibility ironic. You argue how it would not be fair to make GN pay half of the expenses because she makes less than you. I agree. The same reason I agree that the wealthy should pay more to hold this country together. However, I do agree that resources are not being used properly because I feel there is a certain amount of corruption within the system.

    Sorry about this comment…I feel dirty now…

    • You are dirty. Go shower….haha.

      Glad you chimed in, don’t be scurred, this is a friendly place. I will say that I like the connection you draw, but have a rebuttal 🙂

      The difference in combining incomes with my spouse is that we ELECTED to split the bills 50/50, we weren’t told by someone else we had to. In regards to taxes, the wealthy have no choice. They pay what the politicians in Washington say they’ll pay.

      After looking over the “flat tax” comments above, I will say that I like all the counterarguments and do see the fairness in the current progressive tax system.

      Until I have a sense of confidence that there is some fiscal responsibility in Washington, I oppose them trying to collect more. It’s similar to a family that is in debt. Sure they could make the argument “If we just made more we could work our way out.” But if their behavior doesn’t indicate a genuine change of fiscal responsibility, then no amount of increased revenue will bring them out of debt. They have to fight the problem (bad stewardship) and not the symptom (debt).

      You view increasing taxes on the wealthy as a solution, I view it as a distraction from the real problem.

      • I agree that the people in Washington spend recklessly and provide giveaways to their buddies, rather than reinvesting in the American people. We should be able to improve our situation on a lower budget than we are spending now. It is a distraction from the real problem.

        I think the easiest way to solve the whole situation would be to remove most of the tax loopholes. It would have the same outcome: higher taxes on the richest people, who can afford it the most (and corporations, since apparently they count as people too). But it would be better in that it wouldn’t raise taxes on the almost rich ($300k in income per year) and would only effectively raise taxes the most on the very rich ($1,000,000+ in income per year, or corporations) who have been able to afford high-powered accountants and attorneys who know how to game the system.

        The argument about raising taxes on the rich is deceptive. If they truly paid the tax rates that are advertised (as many of the almost rich do), then it would be tough to argue they should pay much more. But the problem is that many do not pay the going rates, so their effective tax rates are much lower than they should be. (See Warren Buffet’s statement that he pays less in taxes than his secretary)

        The goal isn’t to penalize those who worked hard and now have high incomes. The goal is to eliminate the deficit without harming those who are the most vulnerable.

        • I like it. I’m all for simplifying the tax code. No more cash for clunkers, no more first time home buyer credits, roth conversions, blah blah blah. Just keep it simple, pick a percent and stick to it. Something as important as America’s financial situation should not be able to be “gamed”.

          • And can we say we agree that the solution is not increasing taxes on the wealthy, but a) be more resourceful with what we have and b) eliminate all the loopholes

            Does that mean I win if you agree? haha. just kidding….kind of.

          • Since I can’t reply to your comment below, I’ll reply here.

            I like to win, so I don’t think you do… haha

            I do think part of the solution is to increase taxes on the wealthy, though not by raising the tax rates, just be eliminating loopholes. Combine that with prioritizing our spending and spending more wisely (ie no need for subsidies for corn to biofuel), and then we have a true solution.

        • Jen,

          You have it wrong. Warren Buffet does not pay less in taxes, he pays millions in taxes. He pays a smaller percentage of his total income. If he were to make $100,000,000 a year in salary, he would pay $35,000,000 in taxes or 35%. Since most of his income comes from capital gains, he pays closer to 15% or the long term capital gains rate.

          And what loopholes? You keep talking about removing the loopholes, but don’t talk specifics. Most of the loopholes are business loopholes as the very rich are generally business owners. So if you remove the business loopholes you harm business.

          The true goal is to increase tax revenue to the government while reforming high cost entitlement programs.

          • “And what loopholes? You keep talking about removing the loopholes, but don’t talk specifics. Most of the loopholes are business loopholes as the very rich are generally business owners. So if you remove the business loopholes you harm business.”

            Not clear to me if you’re talking about individual or corporate tax, but if you need a few loopholes, scroll to my first post at the top and read the linked article.

            Perhaps not a loophole per se, but paying tax at the L-T capital gains rate is certainly a more favorable condition than paying tax on ordinary income, especially if you’re at the top marginal rate. I don’t think the lower 10% get such favorable tax treatment.

      • Not the best communicator right now, but I will try 🙂

        The wealthy do have a choice, they can leave the country. Yet they remain because this is probably the best one on the planet. Living in the United States of America, there is a cost we all must bear whether we like it or not. Military, infrastructure, education, even your current job must be funded by taxes most of us pay. As much as I dislike taxes, I dislike anarchy and chaos more. I do not have enough guns, bullets, or ninja friends to deal with an unraveling of our country which I fear is around the corner. Yeah, I’m a bit paranoid…

        In regards to fiscal responsibility, I wholeheartedly agree with you that our country is in a mess. I feel that because we humans manage it, it is susceptible to personal agendas. There seems to be more corruption stories emanating from all levels of government everyday. Disheartening. Will what happened in Egypt and Libya happen here?

        Ignorance is bliss…

  12. I also think a lot of problems come from poor management of resources but I am not american so I can’t say much else on that specific situation but poor management is a problem even outside of America.

    • That is a very good article, and should be read carefully by everyone who blithely accepts all the Reagonomics, “trickle-down,” “tax cuts create jobs,” and other economic fantasies propagated by the Right. The comments are kind of funny, too, especially the ones who criticize the article and generally provide zero evidence to support their claims. Ryan’s point about marginal tax rates in the 1950-60s is also to the point. I’m not saying everything was hunky-dorey back then (the situation for blacks, women, and gays was especially shameful, and the country has made genuine progress in those regards), but the nation prospered because the income gap was far less and the middle class made genuine advances. Maybe some day people will wake up and say they’re not going to take it any more, but with government now of the 1%, by the 1%, and for the 1%, I’m not holding my breath.

  13. I keep hearing so much “we have a spending problem, not a revenue problem”. I think it’s obvious we have both! The US has what, a bit over 14 trillion in debt that it must pay to holders of bonds and other Treasury securities? Even if we cut spending to $0 (which is clearly not desirable), we still have to come up with that money at some point. Mathematically, I don’t see how the middle class and lower classes could ever be expected to pay a significant portion of that. They simply don’t have the money.

    Marginal tax rates were way higher decades ago and I think most people would say the US was quite prosperous. The top rate was around 90% (!) in much of the 50s and 60s and applied to income over $400,000. Today that would be close to 29 million. Yet there’s no difference today whether your salary is in the mid 6 figures or 10 million!

    Then in 2001, we CUT taxes (for everybody mostly, but the rich benefited the most) AND decided to start a war. Anybody with any common sense knows you can’t decrease your income while increasing your expenses and expect everything to be ok.

  14. On “tax cuts for the rich”:

    This phrase came up recently in discussion of tax cuts, where Democrats and Republicans both agreed on retaining the Bush tax cuts for all but the highest tax brackets and the debate centered around what to do with the highest. People taking home $250k after taxes (and before health care, education expenses, and retirement savings that they may be able to write off) aren’t exactly “the poor” or “the middle class”. If you are talking about cutting just their taxes (which is what happens when you cut the rate for the top tier) you are talking about tax breaks for the rich. Technically, in this case, it would be marginally more accurate to say “preventing a scheduled tax hike at the expiration of some cuts” instead of “cuts” – but it’s a cut over what would have been without intervention (and over what had been budgeted for).

    On progressive taxation:

    I see three potential justifications for taxing those who make more at a higher rate than those who make less:

    1) Diminishing marginal utility – it hurts much more to take 20% of someone’s food than to take 20% of someone’s yacht. More generally, the value of money to us is what we’ll likely spend it on. If we add things to our budget in roughly their order of importance to us, when we have more money we are further down that list and the next dollar is not worth as much to us. A flat tax is not flat in the value people are giving up – it is regressive.

    2) Those with a higher income are arguably getting more from society’s status quo and should pay more to sustain it.

    3) Political power. Money is speech (the Supreme Court said so), and as people accumulate wealth they can turn some of this into political power. If we wish to be a democracy instead of a plutocracy, we have motivation to check wealth disparities, and a progressive tax is one of the few avenues the government has to do so.

  15. I agree that there will always be rich and poor people. The thing is, poor people would have a lesser difficult life if there are some of the rich who can give and share in some way. I just hope everybody would learn how to share.

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