Handing out special rights costs the government $500 per gay. That's $15 billion right there.
This person has a fundamental misunderstanding of the federal system of government. Also, I may be off by a percent or five, but isn't the tax rate the writer's proposing for the affluent more or less the same as the effective rate for those folks today? I'm no expert on what happens at the top of the tax bracket (filed my 1040EZ in January), but those numbers sound directionally correct.
I wonder how the split would work out between the oil companies and the IRS... :)
I'm not seeing any ponies. A proper nutcase platform's got to have ponies.
While a compelling set of policies, this letter leaves out one of the simplest and most obvious components of good governance: Universal Pony Coverage. I'd like mine sparkly, please.
Beyond the idea that the IRS should give up collecting money from people in favor of handing out money to people, I don't see much here that has a chance of being enacted as policy. Damn our calcified, sclerotic bottleneckular checks and balances!
2: As I understand it, effectively it's not even close. If you had a *salary* at that level, you would be taxed at an effective rate of something like that. Past about $500k though, incomes tend to become less and less salary based; once you lose that direct connection there are many more accounting games to play. And there's the rub.
Isn't this just another version of Perot's pie charts, or the domino theory in Vietnam? It's terribly appealing to most humans to boil difficult, complicated policy issues down into nice, simple rules. Doesn't really matter what your political beliefs are, some version of this is always going to be seductive.
It's hard to pick out the dumbest line item in this list, but "[e]very child must graduate in order to get a driver's license" is a sentimental favorite of mine, because so many apparently non-insane people seem to think it's a reasonable proposal.
His proposed tax brackets hardly matter, since he wants to defund the IRS anyway.
It's so cute he thinks foreign aid is a substantial part of the budget! (Or your choice of adjective.)
Also cute - the word other : "As president I will stop sending American dollars to rebuild countries that are bombed by other countries"
Some jerk is bombing Iraq! And spending our money to clean it up!
"As president I will stop sending American dollars to rebuild countries that are bombed by other countries."
Who do you think he has in mind here?
12: I think it's a clumsy communication of the thought "It's not our fault they're poor," rather than having particular examples in mind.
7: Yeah, I was talking about salary, but your point is much better.
The last letter to the editor on that page is pretty funny.
Enough said
President Bush couldn't lead a silent prayer.
Mike Watkins
Bowling Green
"It's not our fault they're poor,"
Which makes sense, if you ignore our two massive air campaigns targeting infrastructure and the twelve years of sanctions we enforced in between.
7: Actually, I'd wager that most of the people making over $500,000 are making it in cash salary and bonuses. Sure, CEOs and top executives have options and highly valued benefits, but they actually don't make as much as people think unless they're managing one of the (relatively) few ultra-large companies.
I bet the majority of people making that kind of money are very successful doctors, dentists and lawyers (who admittedly can finagle taxes somewhat through declaring most of the company profits as dividends instead of salary), or they are finance, sports and entertainment types who are earning everything in difficult-to-hide salary and bonus.
"And each child upon turning the age of 18 who agrees to serve for two years or more in the U.S. military, upon completion will have their education completely paid for in whatever field they choose. No more student loans needed."
Isn't this pretty much government policy already? My uncle who got his engineering degree courtesy of ROTC and my friend who's attending language school on the Air Force's dime would certainly agree.
It's just not very popular when, you know, there's actually a chance of dying.
2,7,18:
You're basically right about wage income. But, 7's right. At the top-end, most income is investment-based and not wage-based, and you can do lots of complicated stuff there. It ends up working out that folks making over a million pay 11-15% or so.
This thread seems to be turning into a sober discussion of financial strategies, so I'll ask: Is there any reason at all why I should own a stock? The majority of my current assets (I assume) currently consist of some stock in a large banking corporation; my grandfather owned it for about 50 years, during which time his local bank was bought and changed names about 10 times, and finally he left some of it to me. I keep saying "I should sell some of this stock to pay for a computer" and things like that, but shouldn't I sell all of it and put it in an index fund?
Depends how badly you need a computer, Ned.
I don't need that many computers.
I also like his "Would you vote for me so far?", which seems to be meant in the spirit of "How... do you like me now?"
I keep saying "I should sell some of this stock to pay for a computer" and things like that, but shouldn't I sell all of it and put it in an index fund?
What kind of appreciation you seeing on that stock? Dividends? If it's posting double digit gains a year, maybe it's fine right where it's at.
Generally, selling any kind of stock to buy a computer, furniture, or a car is bad times as these things depreciate like a mo fo. But sometimes it has to happen.
"shouldn't I sell all of it and put it in an index fund"
Not investment advice but..
How's the stock been doing? Beating the index? Keep it till it stops doing so.
If not, sell & buy index if dealing costs are low. Or just sell & sate yourself on intoxicants and sexual excess.
19
My understanding is making the requirement 2 years would be a drastic reduction. I'm pretty sure my buddy who did Navy ROTC is in for 6.
21: Owning only a single stock seems a bit volatile, although banks are pretty stable. Seriously, though, if we are talking about any significant amount, (or anythig you'd really care about losing, for that matter) talk to an analyst or two about it.
talk to an analyst
What, you need to get psychological help nowadays just to buy and sell stocks?
18: I'm not sure about that, but I don't know the demographic split either. I have talked to more than one high-waged MD (so in the 500+ range) who were annoyed that they knew people in business (we're mostly talking entrepaneurs here, not CEO's or whatever) who made about the same yearly but could avoid most of the tax.
My vague understanding is that index funds are conservative, longer-term investments. They're appropriate when you want not to be exposed to too much risk. Stocks, on the other hand, expose you to more risk and gain; a portfolio with more stock than funds is recommended for younger people without dependants and mortages. It sounds like this might be an old-fashioned company you have stock in, though: those tend to be conservative investments more comparable to index funds.
One thing about owning stock is that you get to vet the company and its practices. Owning shares in a mutual fund means that your money is dispersed and invested for you in a billion companies, some of whom may be using investor cash to pay South African mercenaries to intimidate starving villagers. It is something to consider.
I have the feeling that the transaction costs of "talking to an analyst or two", or of engaging in multiple transactions, might cost more than it would benefit me.
32: It shouldn't cost you anything to talk to them, unless you want really detailed advice. Your vlue of your time for this I can't judge...
Owning shares in a mutual fund means that your money is dispersed and invested for you in a billion companies, some of whom may be using investor cash to pay South African mercenaries to intimidate starving villagers. It is something to consider.
This brings up another issue: Are there funds that invest in companies strictly on the basis of the companies' presumed efficacy in bribing legislators and warping the market unfairly to benefit them? I was shocked to find out that such companies as SAIC and Northrop Grumman, which not only fit the "too big to fail" category but deal exclusively with corrupt government officials who can repay their bribes tenfold with taxpayer money, are listed on public stock exchanges.
Why not invest based on presumed lobbying power?
27: Ah, fair enough, sounds good.
Err, Cryptic Ned et al., I'm currently getting my MBA (heavy heavy finance specialization) and I work for a major investment-rating company, I can probably spew forth on the stock-fund issue if anyone wishes.
I don't own any individual stocks except for the part of my salary I get in company stock, which I sell whenever it's more than a year old and hits a good price and put into an index fund. I don't trust betting on the performance of one company. Just don't sell it and spend it -- you have compound interest way on your side. If you don't trust yourself, put the money into an IRA or something where you can't touch it and it can just chug away until retirement.
It's so cute he thinks foreign aid is a substantial part of the budget! (Or your choice of adjective.)
Yep, I strongly suspect he doesn't know the difference between a million and a billion.
Northrup Grumman used to make great canoes.
I'm surprised you were surprised that they were publicly traded. JAC can probably correct me on this, but I'd imagine that the "presumed lobbying power" fund would intersect reasonably well with an "S&P 500"indexed fund.
Sometimes I wish that arrogant ignoramuses like this would get the chance to be president, so they could see how stupid their ideas are.
Then I realize that is what in fact happened to the country.
Well JAC, they say "Banks are very stable but you want to diversify". But I would have to spend a lot of time and brokerage fees pursuing the diversification process; and am obviously an amateur dealing with professionals unless I get some sort of illicit insider information. So why bother with stocks at all, rather than letting the fund manager do the specialized work?
JAC can probably correct me on this, but I'd imagine that the "presumed lobbying power" fund would intersect reasonably well with an "S&P 500"indexed fund.
But these companies have different lobbyists and different board members, some of whom have closer relationships with the relevant government officials than others. There must have been some companies that stuck with their old Democrat-associated lobbyists during the last 6 years, hoping to gain in the long term through loyalty points; my fund would go short on those stocks as soon as the Republicans took power.
And, two points: (1) There's more than one index you can put it into. Everyone thinks of the S&P 500 but consider the Wilshire 5000 if it's your primary investment because it will give you the small and mid-caps as well as the large-caps. There are also some international index funds that are worth looking at. (2) If you don't want to think about it at all consider just throwing it into a cheap targeted date fund that will do all the asset allocation for you without the cost overhead of an analyst or whatever. You won't become a millionaire or beat the market but slow and steady, etc.
If I'm ever president, I'll cancel the free tanning bed appointments the government provides for the gays. We won't need an IRS then!
CUT BACK FOREIGN AID TO 5% OF GDP AND SHOOT KIM JING OL IN THE ASS
40: Yes, likely you're better off buying diversified mutual funds, rather than individual stocks. You probably should see an advisor at least once--they've already done the research on mutual funds.
What you'd want to do to get a pure "evil index" is buy up a bunch of the S&P 500 index, and fund part of your purchase by shorting one of those cursed "Socially Responsible" funds. That way you'll effectively skim off only the returns on the evil corporations.
It's like skimming the delicious nefarious cream of investments.
Or, just skim through these people's insane collection of sector ETFs and pick out a portfolio of everything that looks sufficiently "we meet in a smokey room and decide your future". Some real winners are in there: Aerospace & Defense, Energy Exploration & Production, Pharmaceuticals, Oil & Gas Services, Media, Food & Beverages (read: Liquor!)...
Note of obvious: NEVER DO THIS!
Becks knows what's up.
But 46 is awesome, in a "never do this" kind of way.
21: If the stock has substantial value, you should almost certainly (unless there's some sort of tax penalty that would be involved) sell it and invest the proceeds in an Index Fund.
If it's only a few thousand dollars worth of stock, the commissions might be too high to make moving it to an index fund worthwhile.
34 - SAIC wasn't publicly traded until last year. It was a whole megillah involving the convoluted and somewhat bizarre employee ownership scheme cooked up by the founder, Bob Beyster, as a way to encourage retention and reward his friends. (The recent Vanity Fair article is not inaccurate, but also not entirely fair, and I think that some of its dudgeon was slightly misplaced, but this thread is probably not a useful spot to hash it out.)
The rule of thumb is that you should be more invested in bonds the older you get; unless you want to devote time to the stock market (like, any time whatsoever), you're probably best off getting a big cheap index fund and ignoring it until you retire.
Um, people...a fund described in 46 actually exists.
46 is great, but the Vice Fund has a rad-tastic logo.
The commission (and taxes, if you inherited it a while ago) point is a good one, too. If you have a medium-sized amount of money and want to think about it for a couple hours a year, Yale portfolio manager David Swensen's book is supposed to be quite good.
What you'd want to do to get a pure "evil index" is buy up a bunch of the S&P 500 index, and fund part of your purchase by shorting one of those cursed "Socially Responsible" funds. That way you'll effectively skim off only the returns on the evil corporations.
But there are a lot of corporations out there that are both evil and either stupid or unlucky. That company that spent all its energy on bribing Duke Cunningham is S.O.L. right now. Same deal with Neil Bush's educational computer game company, which wouldn't even be included in the evil fund.
Wait, why not do 46? Is it really bad investment advice? My strategy is puro 50, with some socially responsible stuff, but my prejudices about capitalism lead me to infer that Evil would be the right way to go.
Vice Fund has had a bad month, it seems. I think that foreign investment is very wise, although I don't know jack.
Also, for seriousness sake, Becks has the right idea. There are some great actively-managed mutual funds out there, but if you are going to go for an index just look for the lowest expenses and broadest coverage. In general, the best funds are Fidelity's Spartan funds (especially Total Market Index) with a minimum of $10,000 and the Vanguard funds Admiral class if you have more than $100,000 to invest per fund.
There are also some good broad ETFs, which I could look up again for you if you'd like. They have lower annual expenses, but you're going to incur brokerage costs from moving money in and out that you can probably avoid with funds by just placing your money with Fidelity or Vanguard. So the best choice depends on how often you are adding/removing money and how long this investment will last.
55 -- that does not mean too much; every investment has had a pretty bad month. ("every" is understood not to mean "every".) The VICEX's ups and downs seem to track the S & P pretty closely though if you invested in VICEX any time before about 2006 you would have a bit more money than if you had invested the same amount in VFINX -- I guess meaning the ups have been a little steeper and the downs not as steep. Anybody know how to link to a particular view of a chart in Google Finance?
It's not bad investment advice per se -- the Vice Fund has made a decent case that cigarettes, gambling, booze, and military contracting are both recession-proof and may be systemically mispriced due to various social concerns, and they've got decent results to back them up -- but managed funds tend to underperform index funds in the long term, and picking things at random tends to produce the sorts of results you'd expect from picking things at random. If you have a lot of money these concerns can be made to go away, but study after study shows that by far the best thing for the average investor to do is just buy a diversified, low-cost index fund. This is what Warren Buffett recommends, and for an old guy who voluntarily lives in Omaha, he knows what's up.
58: The managers of Vice fund do have a good point. Liquor, defense and tobacco firms have been some of the best returning stocks historically. I remember Phillip Morris (now Altria) was actually the best performing stock over the 20th century. My great-grandparents bought a bunch of it during the great depression and now have so many shares they give away big chunks to the grandkids for Christmas.
WrongShore, evil does not necessarily go hand in hand with corruption. Particularly gambling -- that's something that religious conservatives actually care about, so at any moment it could get thrown overboard, as happened last year in what Reason Magazine considers to be one of history's five greatest injustices.
Likewise, some companies can benefit from corruption while not doing anything particularly evil other than having horrible customer service. For example, the companies that have monopolies in non-destructive things like cable TV. Or the thousands of nonsensical congressional provisions that suddenly create nativist tariffs on things like billiard balls and dog racing, based purely on the strength of certain lobbyists.
A "corruption fund", rather than an "evil fund", would invest on the basis of who was most likely to be successful in getting favors from the government at taxpayer expense. Since this happens anyway, and we have a lot more sunshine and disclosure than we used to with no apparent effect on the actual amount of corruption, you could probably predict this pretty well.
Ned's idea would probably work better in a country like Germany where you could go through corporate tax forms and see the amount of bribes various companies were itemizing.
Jackmormon's right: Northrup Grumman canoes are great.
Vanguard also has socially-responsible index funds, combining smug self-righteousness with low, low fees. That's what I did, anyway, and the more people join me, the better I'll feel about my decision.
Just to be clear, since there's been some ambiguity in the thread: isn't it *uncontroversially* a terrible, terrible idea to have the majority of one's assets in a single stock? (Aside from odd cases of controlling one's own company, options in a start-up, etc., etc.) Sure, maybe you'll hit the jackpot, but if you're doing it to avoid brokerage costs, again: passive funds like Vanguard, etc. I was under the impression this wasn't a contested principle. JAC?
Off-topic but I so so envy X Trapnel's choice of handle. I wish I'd thought of that.
sined
Uncle Giles.
63 is more or less true. The (very) simplified reason is that the return on a group of stocks is the average of their total return, but the volitility of their return (or standard deviation) is less than the average volitility of each stock. This is easy enough to see, since each individual stock will go up or down like crazy for a bunch of reasons that the other stocks won't share (bad quarter, new product launch, change in management, just for the hell of it, etc.) so a portfolio of random stocks has a lot less chance of making big random moves than a single stock, while still keeping all the return.
Emperical studies have found that you need at least 20-30 randomly-chosen stocks to get the full volitility-lowering benefits of diversification, and even the most concentrated investors and funds (Warren Buffett, Janus Twenty, Oakmark Select, etc.) tend to hold at least that many different stocks.
Thanks JAC, Becks, zadfrack, snarkout, mcmc, combat wombat.
63: Wouldn't it depend on the company. For example, companies like Exxon are a safe bet because they are 1) trying to corner the market and 2) preparing to corner the next one. My father's an...he makes a lot of money working for Exxon, but he's currently a part of their "Green Team." (He's also an official "Hero of Chemistry," a title which never ceases to make me giggle.) My point is, since these mega-mega-companies have government clout and are preparing for a day when they won't, aren't they a safe bet? (Investment strategizing: turning leftists into corporate whores since cocaine in the '80s.)
nativist tariffs on things like billiard balls and dog racing
Drat, and I was planning on investing the profits from my tshirt empire in a good overseas dog racing fund. I guess I'll have to throw them away on drink.
67: Eggs, basket, etc. Enron employees thought they had a sure thing. (Also note: except for two letters, the names are the same. Spooky.) How do you know Exxon is preparing for the right future? If you're absolutely certain they're the best choice, and you're inclined to put all your money in their stock, put half your money in and diversify the rest.
But only if you're prepared to watch half your money go away.
Is demanding a return to the gold standard passé among modern cranks? Also, that man Roosevelt shouldn't be let near the White House again.
69: Actually, that's what I done. It's just at this point, I have so much ExxonMobil stock (split, split again, split again) that's been gifted to me, I have to believe the hype. (Plus, I know the work my dad does, and his response to "Whatever Happened to the Electric Car?" was "We bought it, improved it, and when it becomes financially viable, we'll 'invent' it again."
Dude, are you whitewashing your dad's record? It's "Who Killed the Electric Car?"
7: No. Not even close to correct.
We have a flat-to-regressive federal tax structure on earned income. I ran these numbers two years ago (2004 tax year).
Assuming:
- all income is ordinary income from wages and salary; and
- all federal taxes on income count, lumping what's called "income tax" with what's called "FICA" (which is a tax on income); and
- what's called the employer half really comes from the employee.
The marginal rate is about 38% from $30k to $70k, peaks at about 40% between about $70k and $90k, then drops to 28%. It goes up again to 35% for incomes above about $300k.
73: They want you to believe it's dead, so you'll stop looking. Sure enough, like that kid last month, it'll suddenly reappear...a decade older, with a trashy mustachio.
71: Apparently! Kevin Drum and Ted Barlow commented on its inclusion in Texas GOP platforms, but I just checked the 2006 platform and it seems to be gone, while such beauties as "We oppose a one world government" were retained.
74: I don't understand how this counteracts 7. Were you responding to something else? You are assuming all income is ordinary income from wages and salary --- I was suggesting that often this isn't the case at the high end. In particular, `incomes' are often structure precisely to avoid taxation of this sort. At least know people who do this, and my impression is that it is widespread. I don't have any hard data at all, as noted.
I realize in 77 that `income' is then, not, in a technical sense, income at all. but that's the point.
Sorry I was unclear, soubziquet. I rather telescoped 2 and your 7.
The question in 2: "isn't the tax rate the writer's proposing for the affluent more or less the same as the effective rate for those folks today? " gets the answer "No."
The writer was proposing:
under $100k, 10%
$100k to $1M, 15%
$1m to $2M, 45%
above $2M, 55%
Our current structure doesn't look like that. In part that's because, as you point out, there are ways of structuring things to avoid income taxes.
However, it's also because our nominal marginal rates (assumptions as above) look more like this:
under $100k, 40%
$100k to $300k, 28%
above $300k, 35%.
In other words, even if there were no ways to transform ordinary wages into capital gains or dividends or other favored categories, we'd still have a flat to regressive federal tax structure on income; the tax rates now would still be 10% to 20% lower on the (very) affluent than the writer is proposing. Even with a salary in the $300k-$500k range you'd now pay 35% rather than the writer's 45% - nearly a third more in taxes under the writer's proposal. And, as you point out, through the magic of accounting the very affluent end up with an effective overall rate I've seen reported in the media as nearer 15%. Neither the effective nor the nominal rate now is close to what the writer is proposing.
Would I vote for you? Throw in a case of 1995 Salon Blanc de Blancs, and I'll think about it.
Or Ned could just sell his stick and buy SPARKLY RAINBOW PONIES for LB and Clownae. If there's enough stock, he could buy ponies for everyone.
SEK, we need a new car, and Mr. B. occasionally toys with the idea of buying an old civic or bug or something and converting it to electric. Can your dad just sell us one of the mothballed ones? B/c Mr. B. never gets around to these clever projects of his, what with that cursed "having a job" and "having a kid" thing.
Hmm, pony! I wonder if that would cost less to run than a car....
Who killed the "http://i23.ebayimg.com/01/i/05/03/e6/9d_1_b.JPG">electric pony?
Hey, SEK, my dad's retired, but spent his whole career with Exxon - Where'd y'all grow up?
PS - My dad would've done a lot better had he not diversified his portfolio in the late 90s. Even so, he's always held on to enough Exxon that he's far wealthier now than we ever were when we were kids. His colleagues who sold off most of their company stock are now working elsewhere, despite having "retired."
None of which is to say that Exxon isn't pretty evil - as Texans have gained influence, the company has grown worse, and it wasn't exactly a progressive force in the 70s....
X. Trapnel is definitely right about one thing. Vanguard has low fees. I resent the fact that my 401(k) is being managed by Fidelity, because their fees are kind of high.
Fidelity's gift trust, however, is great. (You take the stocks that you want to give away, sell them to the trust, and bank the deduction in the current year. The proceeds are then invested and you get to give the money away over time. They do all the paperwork to make sure that the charities are legit.)
87: Yeah. A conversion. With all his free time.
PK can be his assistant. It'll be fathering and fun all in one!
79: Gotcha; that matches my (limited) knowledge of the marginal rates, too.
There may be an X. Trapnel, but I got this name before alameida.
No no, "before I got alameida".
Oh well, late to the party again. One thing to consider with actively managed funds (and this is a point that's made quite often in, for instance, Money magazine), is the problem of the herd instinct among fund managers. I've got 6 different actively managed funds in my 401k, and yet somehow I'm concentrated to the tune of 15% in the financial industry. Which is okay now, but under certain scenarios might be unpleasant.
Also, re: vice and corruption, take a gander at the basic chart for NEW on Yahoo Financial. Looks like that whole subprime lending/robbing poor widders and orphans thing can backfire occasionally.
Just remember Ned, if you do talk to a broker, you may be the "client", but he or she is really working for the bank, and is employed to sell you a product. Also, since you sound fairly risk averse, remember: NO margin or options, ever.