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Tuesday, November 13, 2012 - 6:06pmSanction this postReply
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You can listen to the NPR interview here:

http://www.opb.org/news/article/npr-unions-obama-call-for-higher-taxes-on-the-wealthy/

And here is an excerpt:
Audie Cornish:
Now, the president is also meeting with business leaders this week and we've heard from a group of CEOs called ... under the ... "Campaign To Fix The Debt" ... they call themselves. But they want to look to the Simpson-Bowles commission as a starting point, and that's a commission that certainly looked at proposals to, say, raise the retirement age, or make other tweaks to entitlement programs. Are you or your organization willing to consider that?

Mary Kay Henry:
Well, we reject the Simpson-Bowles approach in this moment when the rest of the nation has just declared in the November 6 election that we need to make progress by investing in getting people back to work by growing the economy from the middle out, by making sure that we reduce the debt through growing our way out of this. So we really think it's time to think about what the voters just said November 6th and to move the country forward.

Audie Cornish:
Are you essentially arguing that the nation has rejected compromise ... that most people have said this is going to be a case where there is going to be raised revenue, perhaps in the form of increased taxes and also tweaks to domestic programs and, therefore, entitlement programs? I mean, why can't that be on the table? Are you taking it completely off the table?

Mary Kay Henry:
Well, I think compromise is important in a situation when everybody has enough food to eat, where people can make ends meet by working one job, and that's just not the situation for the majority of Americans. And so I think that what we are called to do as a nation is what the president is leading on: saying that we need to extend the tax cuts for the middle class, we need the wealthiest to pay their fair share, and to invest in getting America back to work through "good jobs" -- and that is the way to continue the economic recovery.

The most disturbing part comes right after this (I know, as if this wasn't disturbing ENOUGH!) and it is where Audie C. challenges president Henry regarding how the math behind taxing the rich doesn't fix our fiscal crisis. You'll have to listen in order to hear it. There is no way that I could do justice to what follows ... by merely transcribing it here.


Ed

(Edited by Ed Thompson on 11/13, 6:09pm)


Post 1

Tuesday, November 13, 2012 - 8:03pmSanction this postReply
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Ed,

I think you forgot the following quote:

"Well, the 10 million fewer people that voted for Obama this year clearly think that the only solution to this is to tax the rich until they give us more jobs. We won't be attempting any other method until it works, because the American people have spoken. Math you say? We all know Americans don't like math."

Blech..gross..has Texas seceeded yet?

Post 2

Saturday, November 17, 2012 - 8:57amSanction this postReply
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Dan,

Good point about the 10 million-vote loss, which brings a question to my mind: How do you "fix" an election? There are 2 primary means or methods of fixing an election:

1) increase the number of votes for yourself
2) decrease the number of votes for your opponent

Of these, the 2nd one is more safe, because if you increase the number of votes for yourself by too much -- then you will exceed the number of registered voters and then the jig is up. There could be some county with 10,000 registered Democrat voters, for example, and then it is found that 30,000 votes came in for the Democrat in that county. Not realistic. What's more believable is to suppress the number of votes your opponent gets -- and people will never be able to figure it out. That's because voters will say to themselves:
Gosh, I know I voted for [Challenger] -- and bumper stickers for [Challenger] outnumbered bumper stickers for [Incumbent] by a ratio of 50-to-1 -- but I guess there weren't enough others who voted for him, too.
It's very likely that -- if there was some election-fixing this time around -- that the election-fixers were able to remove more than, say, 3 million votes that were caste for Romney (more than 60,000 per state), while leaving the votes that were caste for Obama unchanged.

Ed

(Edited by Ed Thompson on 11/17, 9:00am)


Post 3

Sunday, January 13, 2013 - 12:53pmSanction this postReply
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Check out this terrible news:

Between February 15, 2013 and March 15, 2013, the federal government will receive $277 billion in tax revenue but will have $452 billion in obligations. Federal financial obligations will be 165% of federal income, and this will only get worse over time (because of the socialists). Do these obligations including discretionary spending, or is discretionary spending something that is added on top of the obligations?

Ed


Post 4

Tuesday, January 15, 2013 - 7:08pmSanction this postReply
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Ed, I'm not sure if even looking at monthy data is valid, since some people/organizations pay more tax at different times of the year.

Post 5

Tuesday, January 15, 2013 - 8:34pmSanction this postReply
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Dean,

That's potentially a good point, but I think the revenue was averaged out for the year. The numbers were from online news but I lost the link. Anyway, if you take $277 billion and you collect it 12 times in a year, you get $3.3 trillion -- which might be what is projected for 2013. Also, if you take $452 billion and you pay it out 12 times in a year, you get $5.4 trillion -- which might be what is projected for 2013: a deficit of over $2 trillion for the year (but we can't tell because the democrats refuse to pass a budget). The alternative is as you say, simply assume it's not an average, but that it is that actual month's finances. Then the question becomes:

From April 15 (tax day) to May 15, what would be the revenue and expenses?

Would the revenue be huge (because of people paying their taxes)?

Would the expenses be small?

Ed


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Post 6

Wednesday, January 16, 2013 - 12:30amSanction this postReply
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Someone forgot to put the deficit on the whitehouse "terrorist kill list".

Post 7

Wednesday, January 16, 2013 - 9:01amSanction this postReply
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The debt limit has already been reached.

So, who is comfortable with Geithner's "extraordinary measures" to keep the government solvent?


Consisting of:

1] Deferring government employee pension fund contributions...as debt.
2] Waiting for Congress to raise the debt ceiling.
3] Making up for the deferred contributions by borrowing new debt, and continuing to make the current payments from the same debt.

...and similar finagled debt that is really debt but will be paid from future debt that Congress always authorizes in the future...

Isn't that currently taking on debt that isn't authorized?

Why do Americans obey the law at all, when our government does not?

Try to do this with your own pension plan. (You can actually borrow from -some- regulated plans, but not all. With some irony, most often, not if all the plan assets are all your own...but often, for plans where the assets are your contributions to your employees accounts! Cant see the fat fingers of lobbyists in those 'rules,' can we? Self employed single employee plans are some of the most restrictive; ask yourself why? Its their own contributions, 100%, to their own plans! No 'matching' magic from any tooth fairy...who can, under some circumstances, borrow from those plans!)

Just stopped by to say 'hi.' Back to my grind...

regards,
Fred






Post 8

Wednesday, January 16, 2013 - 11:55amSanction this postReply
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Good to see you, Fred.
----------

I've always been opposed to term limits for two reasons:
1.) The most important being that people should be able to vote for who they want.
2.) When each congress is always new, they are at a great disadvantage in power and knowledge relative to the bureaucrats.
But, our current system is so badly broken now that I see term limits differently. Now, each elected official is focused on re-election, that takes money, and that need for money brings in the special interests. If everyone only gets one term, and then they go home, it is a new ball game. They would be fighting over political principles, not keep-me-in-power games.

Voters get riled up, have tea party demonstrations, elect a whole new bunch of people... and two years later those new people are mostly just learning how to stay in office, and how to get along with the establishment.

If it is someone's first, and last term in office, then why not just fix the debt problem. They could fight it out and end up raising taxes through the roof, or cutting spending till we balance. But, no more putting it off, creating fiscal cliffs, squabbling over rule changes, etc.

Post 9

Wednesday, January 16, 2013 - 12:03pmSanction this postReply
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Self employed single employee plans are some of the most restrictive; ask yourself why?


It would be a big tax loophole if not. The business owner could put $X into the plan, take a deduction and reduce income tax by some fraction of $X, then borrow $X, non-taxed, from the plan. For the same reason, borrowing from an IRA is prohibited. One can withdraw from an IRA, but a withdrawal is taxed.

Post 10

Wednesday, January 16, 2013 - 2:21pmSanction this postReply
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Merlin:

???

"Borrow untaxed from the plan"

But, the owner would need to payback the plan; the plan's books still has an *asset*(the owners debt.)

When the owner draws from the plan (not borrows from the plan) that draw is taxed, as before.

I can understand a regulated requirement on pretax plans to payback the loan or else it will be taxed as withdrawal, but ... why are only some plans treated this way, and not all such plans?

Because for -some- regulated pension plans, it -is- possible to borrow from the plan.

Put this another way: an owner A funds a pension plan and invests those funds with third party entity B. B 'invests' those funds by buying mortgages. One of the mortgages that B buys belongs to owner A. A ends up paying interest on his mortgage to B. B pays interest or provides some other return to A's pension account for having invested his pension funds with B.

At the end of the obligation, the mortgage is paid off, A's pension fund is fully funded, and B has skimmed some of the interest A paid ... for borrowing his own capital.

Why wouldn't A just fund his own mortgage by borrowing from his own pension plan, and pay interest to his own investment account? Why does he need middleman B -- who provided neither the original capital nor anything else but a pocketful of wanna -- to do -anything- in this transaction?

A still has the obligation to payback his pension plan. At the end of his obligation, his pension plan is paid back -- with interest, his obligation is complete.

Don't look for any 'social good' here, the answer is obvious: B has lobbied Congress to make that nearly impossible for the broad middle class, and a tiny cabal of B's are riding the middle class by A] collecting up their pension assets and B] lending it back to some of them!

In between is a Monty Shuffle of assets, gee, I'm sorry, but that crappy mutual fund lost money last year...here is most of your capital back, and thank you for paying your mortgage in full. Do that to a broad enough school of fish, and who cares what the spread is between not a lot of return on your mutual funds (or even, negative return)and not a lot of interest on your mortgage...

The Tribe somehow has been convinced that it wouldn't be 'fair' if A was the person who could put his own pension assets to work for A...fairness demands that a B ride along for free, like a parasite, using A's capital...to loan back to A.

Don't be confused by what is happening to the Middle class; although many in the Middle class have pension assets, few have enough to fund their own mortgages. But not important in the least; the middle class's pension assets are aggregated and lent back to them. The middle class has both mortgages and pension assets, and the capital to fund their mortgages is coming indirectly from their own pension assets. They are pooled up, like cattle, and herded as an aggregate by laws that make it difficult/impossible for them to put their own pension assets directly to work, except through the hands of third parties waiting for their 'Real Marks.'


If the government can get away with this nonsense with temporarily not funding government pension assets, then it begs the question: why fund government employee pension assets at all, ever? Whenever they need to fund pension withdrawals, they can always just have Congress sign pen to paper and borrow whatever is required to fund whatever is needed.

If they are temporarily 'saving money' by not funding employee pensions and it is not an issue, then ... why did they have to fund it in the first place? Because in this instance, what they are going to do is, wait for Congress to inevitably raise the debt ceiling in the future, then fund those government employee pensions from the new authorized debt.

regards,
Fred

Post 11

Wednesday, January 16, 2013 - 7:46pmSanction this postReply
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Speaking of financial matters although Canadian this fellow has some interesting things to say that are also relevant to americans.

http://www.greaterfool.ca/

Post 12

Friday, January 18, 2013 - 5:34amSanction this postReply
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I can understand a regulated requirement on pretax plans to payback the loan or else it will be taxed as withdrawal, but ... why are only some plans treated this way, and not all such plans?
I guess because of the likelihood of abuse. If somebody could make a tax-deductible contribution to an IRA, then borrow from the IRA without being taxed, lots of people would exploit the loophole.

To the extent a plan is funded by employer contributions and the plan allows an employee to borrow from his/her account temporarily w/o paying taxes, the tax loophole is insignificant. The employer, not the borrower, gets the tax deduction for the contribution.

Post 13

Friday, January 18, 2013 - 2:15pmSanction this postReply
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Merlin:

I can understand a regulated requirement on pretax plans to payback the loan or else it will be taxed as withdrawal,...


Where is the loophole?

regards,
Fred



Post 14

Friday, January 18, 2013 - 2:21pmSanction this postReply
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Merlin:

"To the extent a plan is funded by employer contributions and the plan allows an employee to borrow from his/her account temporarily w/o paying taxes, the tax loophole is insignificant. The employer, not the borrower, gets the tax deduction for the contribution."


In both cases, the borrower has an obligation to repay the loan. So where is the loophole?

You are assessing the self-employed who borrow against -their own- capital as if they had no obligation to pay back their pension plan. I've stipulated that if they do not payback their pension plan, then those loans would be taxed as withdrawels. Let's say, with taxes and interest and even penalties due from the date of the loans.

So ... where is the loophole? It sounds like a capital honeypot for the government.

Post 15

Friday, January 18, 2013 - 7:47pmSanction this postReply
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Just another reason to not tax income, savings or investment.

I'd say that some form of safety for the employees so that they aren't left holding the bag if the employer borrows, but then can't pay back would be reasonable. But not on the employee who if he fails to pay back only harms himself with some higher taxes and penalty. I'd say Fred has it right when he points at special interest lobbying to get into a pot of money. I couldn't believe the paper work involved when I had a regulated plan where I was both the employer and the employee - and that was without either of us trying to borrow from it.

Post 16

Saturday, January 19, 2013 - 4:15amSanction this postReply
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Fred, I don't know how to make it plainer than this.

Case 1. XYZ Corporation employs John Doe. XYZ makes a $5000 contribution to its 401(k) plan on John Doe's behalf and gets a $5000 tax deduction for it (hence pays less tax). John Doe borrows $5000 from the 401(k) plan and pays no tax on it, provided he repays the loan within 5 years.
Case 2. Mary Doe is self-employed and contributes $5000 to a tax-qualified plan on her own behalf or contributes $5000 to an IRA. Mary Doe deducts the $5000 for tax purposes (hence pays less tax). Suppose tax law permitted her to borrow $5000 from the plan without paying tax on it, provided she repays the loan within 5 years.

Mary Doe's out-of-pocket cost is zero (ignoring the lower tax) or negative (recognizing the lower tax). XYZ Corporation's out-of-pocket cost is $5000 (ignoring the lower tax). The loophole is Mary Doe's case.

(Edited by Merlin Jetton on 1/19, 4:59am)


Post 17

Sunday, January 20, 2013 - 7:51amSanction this postReply
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Steve,
I couldn't believe the paper work involved when I had a regulated plan where I was both the employer and the employee - and that was without either of us trying to borrow from it.
You crack me up! Either of us? Is that like me, myself, and I?

:-)

Ed


Post 18

Sunday, January 20, 2013 - 3:48pmSanction this postReply
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Merlin:

You are making it plain, but I don't see the "loophole."

Mary still must pay back the plan(say within five years -- I was happy with "before making any withdrawels") or else she must pay tax + interest + penalties even, as if those were withdrawels.

And all she needs to do to get this bonanza is to pony up the $5000 to begin with, credit it to her plan, then borrow it back. Of course it is 'cost free' -- she is providing both the capital and taking the loan back.

But Mary isn't at "0 net" She both made the contribution and borrowed the money back, sure, ut she left an obligation -- debt to her plan that she must pay back. And guaranteed taxes to the government, one way or the other. Deferred consumption pension plans are 'pay me later."

You haven't shown how the government is losing taxation in the future from those pension assets either way.

If the self employed person earns and contributes the assets , keeps the assets in those plans and a third party does the same thing, no problem. Say that third party invests those assets as mortgage capital. He pays tax on the interest income ... and another third party gets a tax deduction for interest paid. Could be no net. But in the future, when mortgage has been repaid and withdrawals are made from the pension assets, taxes to the government.

If the self employed person contributes the assets to his own plan, and he is also the mortgage holder and mortgage holder, then the "possibly no net" is more apparent, but the same end result; when she has paid her obligation/mortgage, his pension is funded, her withdrawels are taxed in the future, exactly like before.


And why not? It was her damned capital to begin with? Why should Mary be forced to provide the capital for an unrelated third party, who will lend it back to her by way of her mortgage obligation? Big revolving door in the 'financial services' industries.... they accept the capital rolling in, as pension plan assets, and they lend that same capital going out as mortgages. They parasitically live on the spread ... on capital they didn't sweat to provide. It walks in ... it walks out.

When the employer and employee are separate...the employer makes the contribution and takes the deduction (Gee, it only costs him $5000 to get a $2000 deduction...I guess he can make up for that in volume?) ... but the employee gets to borrow from that $5000? Now that's a nearly free ride bonanza. The presumption is that the employee earned that contribution, so ... what is the difference? Same deduction either way.

Is the presumption that the self-employed do not earn what they contribute to their own pension plans?????

I don't see the lost revenue to the government in either scenario. In fact, because a % of plans will not be paid back, the resulting taxes and interest and penalties are a capital honey pot for the government.

The basis for whacky rules like this are schadenfreud, and the fact that the self-employed are not mobbed up in DC, period, paying off the parasites with guns..

regards,
Fred



Post 19

Monday, January 21, 2013 - 4:16amSanction this postReply
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Fred, I don't know what more to say. My first post was in response to your post 7, in which you said this about borrowing from a tax-qualified retirement plan:
Self employed single employee plans are some of the most restrictive; ask yourself why?
You offered no why, and I tried to give the government's why. The overriding purpose of allowing tax deductions for contributions to tax-qualified retirement plans is to offer an incentive for saving for retirement. Being able to borrow from such savings thwarts that purpose. Nevertheless, the tax code allows a limited amount of borrowing for purposes such as an emergency or downpayment on a house. An employer is not required to offer such loans and can add restrictions. When the employer and employee aren't the same person and with the 5-year limit, that limits the potential for thwarting the overriding purpose. If borrowing were allowed for 5 years, a self-employed person or the owner of an IRA could easily skirt the 5-year rule, by repaying and borrowing again the next day, and in effect extend the loan period indefinitely.
(Edited by Merlin Jetton on 1/21, 5:25am)


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