I particularly liked the one below that displays the amount of taxes paid by 10% of the population. Double click for a larger view.
The scary part, is the fact that the government is very dependent on that “rich” group of people to fund the current budget. They could disappear in a financial implosion.The thing that has me in awe right now, is the amount of the projected financial losses by various institutions. Money is being lost, trillions of dollars. And still not one investor has lost a dime.
Greed created this whole mess. People “invested” in a house to make money. The Realtors here in San Diego were probably trolling the border for new home buyers (they might have missed a few). Now I know why the phone systems around here say “press 1 for English and 2 for Spanish.” Then there were the finance companies that made 10K to 40K per loan. It was very obvious to bloggers back in 2006 that this real estate speculation lacked common sense. Right now, in our area in San Marcos, there are 6 houses in foreclosure and 5 in preforeclosure on Camino Del Sol (it’s probably a mile in length). We are talking 600K houses.
It seems like in California we are adding 1,000 houses to the foreclosure roles daily and no one is really concerned.
Do you get the feeling that everyone is holding their breath??? Nah, it's just my imagination running amok again.
21 comments:
Yes, I am also truly amazed at the "resiliency" of this economy and stock market. *barf*
It seems to be nothing more that manipulation of epic proportions. We'll see how long it can last, and it cannot last indefinitely.
The income tax chart is interesting, but perhaps it would be more revealing to see how ALL the city/state/federal income is derived. Research in the UK indicates that the poorest section pays around 40% of their income in various forms of taxation, direct and indirect. And despite the apparent tax generosity of the top 1%, it seems that the USA's Gini index continues to rise, as it has done for the last 40 years.
Equity: Karl Denninger's post yesterday predicted that all asset classes will plummet when the wave breaks.
Hi Tyrone
I agree, I wonder if it can last until the elections??
Hi Sack
Your figures are right on. The graph says "Income Tax" which is misleading but true. If you go to the third page of that link you'll see that income tax makes up 45 percent of the mix and social insurance makes up another 34 percent. That pretty much falls in line with the 40% that you refer to in the UK. The real irritating thing is that even though it is considered a social insurance tax it is used for what ever the government choses.
A lot of people argue that the government can't spend our retirement funds, but the Supreme Court ruled that Social Security was a tax and as such the government could spend it as it chooses(which it does).
The Hoi Polloi get fooled (taxed) into thinking that they are going to get it back when they retire. It's a variation of a carrot on a stick to get the mule to pull the cart.
I've got more written on this for a later post, take care
That graph only shows one side of the story. Place a graph of what that 1%, 2-5% and 6-10% earned along side and also what they would have paid vs their income in the early 80's when we had a stepped tax rate and see how the whole picture looks.
The rich have robbed America blind.
What a travesty for the Nation. The US will never recover from the last 16 yrs, esp., the last 8.
Hi Anon 6:19
I have to disagree with you. It's the poor that are robbing this country bind. They get to enjoy this country and it's institutions for free if their income is under a certain amount.
I think that everyone should give the government one month of their time as a tax or pay the equivalent in cash. If you don't contribute to the system you shouldn't be able to draw from it.
"Tax the rich" rings hollow. I am rich by default if you are broke or have figured out a way to hide your income from the government.
The gang shootings in LA have just about shut down the hospital emergency rooms in that area because all of the care provided will never be paid for. It's the free ride that is killing our institutions.
This country wasn't built by poor people. It was built by people who worked hard and paid taxes.
Its the poor that need to be taxed. A month of labor is just as good as tax dollars. There is no free ride.
Of course there is an election coming up--so I guess we will get the chance to vote on this issue.
Thank you for your comments
Remind me again how much of this country's wealth is held by that top 1%?
I'd like to chip in with my take on the old chestnut.
If you don't like it here, go be rich someplace else.
The top 1 % can take what is left after the SHTF and go live it up anyplace on the globe. If I recall some little emirate is already building a "retreat" for the rich. I don't recall the name but it is real close to the new headquarters of Halliburton. Handing in your passport solves all future IRS debts.
Super Uber-rich Americans who are patriotic enough to stay and tuff it out are few and far between.
Spliting hairs on who pays what is a moot point. No one is going to be able to pay after the SHTF.
Welcome to Bartertown.
Speaking of which I think you can still become an Aussie if you pony up some big cash to start a business that employees fellow Aussies for x number of years. The Swiss, I think, still sell passports for large deposits. Heck you can buy your own small bankrupt sovereign island soon enough.
Some super rich are even building their own private rockets. Is a 3 bed 2 bath space station that far fetched when the whole planet goes in the crapper? There are many options for the top 1% other than paying all the taxes. They can pay none someplace else.
Hi Drew
The top 1% own one third of the wealth, and they earned it and had to pay taxes on it. Why would you tax them a second time just for being rich? It's not like they are going to die and take it with them. People over a lifetime do make successful investments and become rich. Some people start saving money when they're 18 and become quite rich. A lot of people save zip, it's their choice. You too can drive a corvette at the age of 18.
If you do strike it rich, there is a saying "Three generations between shirt sleeves to shirt sleeves. (its all gone).
A lot of what is great about this country was put in place by rich people. Carnegie built our library system for one. Our National Parks were another endeavor by the rich.
The world is a better place because of the rich. Things can't be very bad in the US if the rest of the world wants to live here.
A depression is a great wealth equalizer. The top 1% have the most at risk. Joe Six pack isn't in a position to even lose a dime. Half of nothing is still nothing.
If Congress has its way everyone will be in the same boat, dead broke.
That's just my opinion, thank you for your comments.
Hi I'm not Potus
I think your right, but it could be a two step process. A depression would wipe out the bond and stock markets. Toasting the Uber rich (I wouldn't mind being one of them)
Then as if it couldn't get any worse, the tax base will drop to zip because of unemployment, then Congress will try to print its way out of the mess.
The end result, we all end up broke. Maybe we will bump into each other looking for a card board box to call home. I hear Maytag makes a pretty good sidewalk "sleeper."
Hi Jim,
I recommend GE boxes, little bit thicker web than other brands.
Just saw this interview with Jim Rogers, thought you might like it.
http://www.moneymorning.com/2008/08/19/jim-rogers/
Hi Potus
Thanks for the link. I've been accused of preaching doom and gloom, but Rogers last piece has me beat by a mile. I sure hope he's a little wrong. I don't see the Fed dropping dead or Red China becoming a capitalistic country.
I hate being all doom and gloom also. The problem is that every optimist I interact with is woefully uninformed or completely obtuse to other peoples abilities or motivations.
Take Karl for example, (did you read him today?) poor bastard still thinking the sheeple can rise up.
I myself premise everything upon one simple fact.
The USA has about 5% of the worlds population and consumes almost HALF of everything. (people can nitpick the 50% but it is most assuredly no where close to 5% only using 5% of the globes energy, water, minerals, food, goods, etc.)
Everyone should take a minute to let that sink in and ask themselves, "What are you willing and capable of doing to preserve that?"
I know the answer for myself and I can hazard a good guess what Dick Chaney thinks and I might be going out on a limb by assuming the other 95% think this is not fair and that the other 95% are willing and capable to do something about that.
Taxes… my favorite subject. I used to be in the top 2-5% as indicated in the pretty chart. You say to yourself “that lucky S.O.B”. Read closely, that was “used-to-be” and had to make a life altering decision so that I could get out of the “rich” category.
I’m retired Navy and draw a monthly pension (which is taxed, thank you very much). Upon leaving the Navy after 21 years of service, I landed a great job with Lockheed Martin making (I thought) a pretty good salary. With my military pension and LM salary I grossed over 140k/year. Most would classify me as financially rich.
I contribution the maximum to my 401k, but all said and done my tax bill each year was still over 70k (including Federal, State, Local, SS, and Medicare). I claimed Single/Zero and still had to pay each year. Wow, still 70k to spend right? I lived in Northern Virginia as cheaply as possible and not overspending on anything. My annual expenses for lodging, utilities, transportation, food and clothing were 45k leaving me 25k left for savings and pocket money.
Although I loved that job, I left LM for the primary reason of the insane amount of taxes I was paying. I now work at a smaller company for half the salary and have increased my spending/saving money by more than 30%.
It does not pay to be “rich” in our country. You want the title; take it... its all yours!
Tom
Hi Potus
I guess we are stuck with the gloom and doom. Your right, about most people being in a fog.
I read Denninger and I see his frustration but I think it's way to late to stop this train wreck from happening. The money has been spent. Printing new money brings no new product to market, you just have more money chasing the same amount of goods. We're toast!
There is no argument over how much we have consumed, the trouble is, I don't think we really paid for it. We are about to get the bill.
We've gone from corn fed beef to corn fed cars. Congressional stupidity is rampant and getting worse!
Hi Tom
Thank you for your post. You are a perfect example of who shouldn't be taxed at a high rate. In my mind rich people don't have to work, and therefore live free. The government considers you as rich, but when a politician says tax the rich, he is not pointing at you. He is pointing at some never-worked-a-day-millionaire. Who gets taxed-- you guessed it!
I would like to see an income tax that maxes out on a 40 hour work week. Anything earned over that would be tax free. So if you got a second job to make ends meet, you don't end up being punished for being more productive.
In your present situation, as real estate gets cheaper (wait a year or two), you need to get some write offs. 5 rental houses at 20% down say 100k total would give you a tax depreciation deduction of about 20-40k per year for 27 years. Being "creative" could make it a lot more. I would suggest that you get some financial advice from a banker (I didn't say investment adviser for a reason, they live on commissions).
Best of luck to you
Eliminate Income Taxes Completely. It's a disincentive to production. Tax consumption instead. Reduce or eliminate most real property taxes.
It will never happen.
Back on track to the OP though...isn't there a way the thing can land softly? Even if chances are slim, does that mean we shouldn't try?
Is Jim Rogers God? Can he predict the future? I doubt it. But there is some truth there. We live to large and need to cut back. Preserve our wealth, reduce the imbalance of trade. Come up with ideas that create investment here in America that aren't consumption related...but production. Let's make something again and not just movies...
Hi Anon 9:52
I agree eliminate income taxes and go with a VAT (value added tax) on everything that is sold. When you look at it real estate is already VAT taxed.
Even a dope dealer gets taxed on this plan.
This could be where our tax system of the future may go. I think it will make more [cents] [sense](choose one I'm easy).
Thank you for your comments.
Hi
Who are the poor people? Are they everyone below the 50% mark? Where is the line drawn?
The arguments for how the rich are so much better than everyone else are disgusting and sad.
So you know how much an average school teacher makes? How about a typical scientist? Do these people contribute to society?
I think that to worship rich people for being rich goes beyond sad. It is flat out stupid.
Some rich people deploy wealth in a way so as to create something of value to society. Some rich people sit on thier butts and do nothing of value. Some sit in front of a computer and day trade. Please let me know how a day trader brings anything but the most trivial amount of value to society. The guy serving me fast food brings more value to me than some day trading loud mouth rich guy.
Oh, by the way, the fast food guy probably has his own blog.
Would we have to be talking like this if the banks hadn't exploded the money supply?
After much heart-searching (and encouragement from me), my brother recently became an American citizen. He sent me the crib book ("The Citizen's Almanac"). Page 5 ("Responsibilities Of A Citizen"), item one: "Support and defend the Constitution against all enemies, foreign and domestic." The explanatory paragraph ends, "When the Constitution and its ideals are challenged, citizens must defend these principles against all adversaries."
Please don't bridle if I quote the United States Constitution, Article 1, Section 10: "No State shall [...] emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts..."
It's not just about money, but allowing the bankers and politicians to corrupt the money system threatens liberty. We in the UK had a constitution based on civilised understandings that have been thrown out by mad revolutionaries, but you have a clearly expressed founding document more precious than any wretched paper dollars you may have. Lincoln said that the American nation was conceived in liberty and dedicated to equality; "... Now we are engaged in a great civil war, testing whether that nation, or any nation, so conceived and so dedicated, can long endure."
Then as now, you may be the last major nation to hold up that flame. It is not gold and silver that made America admirable, but the principles that bind her citizens. Perhaps excessive material wealth has proved a distraction and a subversion.
After the crash, there will still be Americans, and the American nation. May I humbly suggest that Denninger is right, and the miscreants who have threatened the community with their greed and irresponsibility, should be held to account?
Hi Sack
I don't think we can just blame the banks, this was a group effort. Those of us that saw through the smoke and mirrors tried to warn people and that didn't work. We even got laughed at. Now to add injury to insult, we have to help foot the bill.
This whole mess has not come to fruition yet. So being broke and not having a job could alter the way a lot of people think about money.
Tough times are most certainly ahead. I don't think that Denninger will be able to get his pound of flesh. Everybody was playing the game.
Time will tell. Thank you for your thoughts.
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