Morning Joe

And then we had Mittens on bloviating about how we should bail out his pals at the banks but GASP-the stimulous package just spends money.Who ARE these people???

Joe and Chris Matthews both are so worried about their taxes. Chris was also painting $250,000 as not rich, but rather as well-to-do.NYTimes has a great, great headline and article on the budget proposals:A Bold Plan Sweeps Away Reagan IdeasBy DAVID LEONHARDTThe budget proposals seek to reverse the rapid increase in economic inequality over the last 30 years.http://www.nytimes.com/2009/02/27/business/economy/27policy.html?hp

Okay.So we’re going to tax the rich (earners above $250,000).How hard do you think it will be for them to report LESS than $250,000 in earnings? My clients hire me to help them do just that whenever there is a tax hike on the “wealthiest 5% in America”. What am I supposed to do? Ignore the loopholes? Go out of business for the greater good?You need to understand that when the “wealthy” are targeted, their money “disappears”. Do not be fooled; Democrats are every bit as responsible for the tax loopholes the wealthy enjoy as Repubs are.This tax increase will amount to the wealthy paying fewer taxes overall, and just so you can know this up front, they hire people like me, their attorneys, and their accountants to make sure of that.For example: President Obama wants to roll back the Capital gains tax to previous heights. Great. In this stock market, what that amounts to is a deduction for everyone who lost money. Especially for the largest losers; the wealthiest 2%. Not only that, but Congress wants to extend the ability of investors to be able to spread those losses out over three years.That amounts to taking multi-million dollar losses, and dividing those losses by three, then inserting those losses into the next three tax returns and voila!… instantly below the $250,000 level.”Congratulations Mr. Warbucks! You earned $10,000 last year. By the way, how’s that new corporate jet working out for you? You betcha!”Now what do you think a financial advisor like me is supposed to do with that information? If I do not inform my clients of it, I can go to jail. So can their accountant.Taxing the wealthy is one of the Democrats most famous campaign ploys. Trouble is, in reality, it’s just not practical, and mark my words, it will result in 95% of Americans paying a higher percentage of the taxes. The IRS website will bear that out.Go ahead and get excited about increasing taxes on the wealthy. You’re fooling yourselves if you believe they’ll actually pay more money.I have written a letter to President Obama (probably won’t see his desk)about an idea that would generate more revenue from the wealthy.I have an idea that would entice the wealthiest 5% to WANT to pay more taxes right now. It’s called making a Roth IRA available to everyone, and allowing everyone to invest as much as they want in it. The wealthy would snap that opportunity up immediately. It would encourage them to report more income, because only EARNED income can be invested in a ROTH. (Earned income is taxable income) The tradeoff is that as with current regulations, when they started making withdrawals, the growth in the IRA would not be taxed. Everything is withdrawn tax free. It amounts to our government getting the taxes up front, and causes wealthy people to rethink funding that Deferred Compensation plan that is fully tax deductible. It effectively raises taxes on the wealthy, and they actually WANT to do it.

Sorry Bob.

Sorry Bob.It’s not grumbling. It’s fact. I think you know it. But in case you don’t, I offer this so that you may know it: What do I have to gain by lying? I don’t make more than $250,000. I work with this stuff every day. The only way you can actually get more money in taxes from the wealthy is by making them WANT to pay it. There are ways to do that. None of those ways are in this budget, or in Obama’s plan. He’s being badly advised, and one of his advisors has a questionable tax history, Timothy Geithner.Tell me, Bob, do you trust Geithner?

So, in other word PPP, by raising taxes on the wealthy we encourage them to cheat more resulting in them paying less. Ergo, we need to lower thier taxes so they cheat less and pay more.Wow, it’s so simple once it’s explained that way. I’m going to run out and register as a republican right now! (Lobotomies don’t hurt much, do they?)

Good point Bob, along that train of thought, why do people live near erupting volcanoes? Or in cities below sea level? Because they’re idiots, right?

Much of our present difficulties may be traced to the inaccurately quoted national motto on our money.That “In God We Trust” stuff should have really been”In Greed We Trust” to give fair warning to all as to the real basis of our economic underpinnings. Regards.

oh yeah, and didn’t most people who made over 250,000 vote for Obama? I remember reading that somewhere. Someone feel free to look for the statistic, I could be wrong.

Being a New York City kid, I think we have to qualify what “New York City” is. It’s not just Manhattan. It’s the five boroughs (counties) in that area – Manhattan, Brooklyn, Queens, The Bronx, and Staten Island.That being said, I live in “New York City” and I’m currently lucky enough to make six figures but don’t make anywhere near $250,000. I’ve lived here pretty much my entire life (34 of my 42 years) and I don’t think I’ve known anyone personally that makes $250K. And yet, we “survive.” Due to my employment situation, I also made the least amount of money during the Clinton years – you could call it just above the poverty line – so I’ve seen both ends of it.Scarborough’s comment was ridiculous because he pretty much excluded at least 95% of New York City residents, but being called idiotic for living in NYC if you did make $250K with a family of five is also off base. You can live comfortably in NYC on $250K.Ultimately, my wife and I are considering moving for family planning reasons and will probably move out of NYC, but finances aren’t the reason, space is.

Bob,Your comment sounds like good old homespun common sense — except if you actually live in New York. You seem to forget that there are lots of people living in New York not because it’s Glamour Central or Where the Elite Meet to Eat, but because — well for the same reason that anybody lives anywhere — because it’s home. Like, maybe they grew up there, maybe they have a job there, maybe they married somebody who already lived there, maybe they just love the place. Whatever. I don’t think it’s a stupid question. In reality, especially in a place like NY, there’s a big difference between $250,000 and let’s say a million on up. So I hope the real answer is that the tax hike at around $250 G would not be very drastic.

I think PPP has a point in that a lot of people that make a salary somewhere in the $250K to $300K range are suddenly going to be making $249K and the balance would come as some other type of compensation. I don’t know that it’ll make a huge difference, but it will happen.Plus I have to admit that I’m not completely familiar with the plan. When the president says that anyone making less that $250K wont see any change, does that mean that $250K and above are suddenly paying the maximum or is it a small change from the current rate?

As to PPP:

You need to understand that when the “wealthy” are targeted, their money “disappears”.

A good chunk of the disappearing money will be spent on corporate owned stuff like retreat facilities (we call it a lake house) upgrades to existing structures, boat rehabs, etc – all stuff that puts people to work making and installing it. It will then be a business expense not taxable income but it will alow some people to earn a living from these expenses. Hopefully these expenses will be created in America and not Hong Kong.

here’s a thought – how about we require people who make over about $119K annually to pay the same 6.2% of their wages into Social Security, the way the rest of us do?? Or would that be considered too much of a burden on them, too?

“lose it”

Alan4s:You need to dig a little deeper, or look up a little higher because – and this is just me – the best way for those who make more than $250k to hide their money is to spend it.CCan’t that be a good thing for the economy? I’d hate see PPP unemployed and posting here all day long. He makes good points. Tax needs to be kept simple so that human psychology can act on it.

bjritz,Money that wealthy people hide is not money they spend. They hide it to keep it, not to spend it. That’s the whole point.

Currently, all our system does is encourage people to hide money. For every rate increase, there will be an equal scheme to avoid it.

Is there no value in trying to close the loopholes, and avoid the schemes? I understand what you’re saying, but why do we accept that?

Slouch,The people who hide money offshore aren’t the largest problem. Offshore accounts are being examined right now, and anything that isn’t clean will be “frozen” for further examination. Besides, you write laws for the law abiding, not the criminal. For the criminal, the law is there to provide a means of determining guilt.The Roth would work for the vast majority of “wealthy” taxpayers, who already obey the law, but merely use the vehicles the government has provided.The Roth isn’t an enemy of the government just because people are saving. They need to save. People who have savings are far more likely to spend discretionary cash than those who don’t.Regarding taxing the distribution, it won’t matter. This is a circle. As the older Roth IRA’s are withdrawing, younger Roth IRA’s are contributing taxed money. And local businesses will benefit from that tax-free income, while the government will get the money from the income earned by these businesses who sold products and services to the Roth IRA owners. (The government says, “Sooner or later, we gonna get yo money)The problem as I see it is this; Our government provides loopholes for the wealthy, because the wealthy helped our government write the tax code. Raising the rates on the wealthy is window dressing, and ineffective.

Joining in with all the NY defenders. Bob – I think your point is that Joe’s fetching at straws pulling out the hypothetical to dismiss the overall point. I’d rather you say that, though. The fact is- beaurocracy always yields to the absurd cases. I mentioned a while back when my dad was still alive how discouraged I was to discover that he no longer qualified for services he’d been accustomed to, because he got $74.00 too much a month. From a beaurocratic standpoint – there has to be a cut off… from a human standpoint – what was my dad supposed to do? We can’t NOT have a beaurocracy just because the lines drawn in the sand are largely arbitrary. What’s needed, but never proposed, are government humanizers – people who can act on behalf of the government to help those who are falling in the cracks.QT

PPP,Good points. Hopefully, I’ll still be able to convert my reg. IRA to a Roth in 2010.