Essentially, we're not paying more than we were 2 years ago, but are
certainly having more deducted than we were on December 31, 2012. I am interested in your take on the bigger picture of where taxes
should/shouldn't be increased. I get from your blog that you're not happy about
the wealthy paying more and from this email I get that you're not happy about
the people making $6 an hour paying more, so what does that mean? What in your
eyes would be the solution to generating more revenue - in addition to
entitlement cuts (which I would guess would also affect your hourly workers).
I'm sincerely asking...
In reply to her letter I wrote:
Dearest,
Well. You ask me what time it is, I'll often try to describe how to make a
wrist watch. It's a very good question. And worthy of a good answer. We need
answers in America today and not rhetoric. We need some actions that solve problems instead
of just trying to assign blame.
So, first of all, I am certain I'm part conservative on this issue but also
part progressive. And I'm not against the wealthy paying more taxes. I'm very
much against the poor paying any more. But as you will see below . . . you and
your sibling are now among the "wealthy". Washington is not coming for just
Warren Buffet's money. They are coming for more of yours and everyone they can
get it from. The lingo about getting the rich is just b/s.
We do not have a revenue problem in this country. We have a spending
problem. And it's from entitlements and congress and the president basically
buying votes. And it has to stop. And I think every
body that is part of any entitlement program should step up and
participate. I will go for taxes. In equal measure. $1. 00 tax and $1.00
entitlement cuts.
When I was running for Congress, I quoted James Freeman Clarke very
often. He said "A statesman thinks of the next generation and a politician
thinks of the next election". I imagine there might be some statesmen in
Washington and Austin today. But I can't name one of them.
Bush "tax cuts for the rich". They were aiming at people making 72,000 a
year a more. That the very rich also benefited from that was an injustice.
Some of the cuts should have expired. many others shouldn't. However, as John
Kennedy once said . . ."a rising tide raises all the boats in the harbor". The
idea that if you let people keep more of their money they will squander it on
lavish lifestyles is a myth. Some might. Most will invest it or spend it. And
that makes an economy bigger and more prosperous and creates jobs.
Right now, the top 50% of taxpayers pay 97.75% of all the tax that's paid.
So the bottom 50% just pay 2.25%. It's also noteworthy, that the top 10% pay
70.47% of all the tax that's paid. And who is the top 10%? Anyone with an
income of $112,124 or more. I don't know what Kenneth makes. But I'm sure if
you were also employed, probably that would put you two in that top 10%
category. I would imagine with Emily as a nurse now, that she and Bill are in
the "top" 10% of earners. Katy and Vince are in the top 15%.
Those making between 66,193.00 and 112,124.00 pay 17% of all the taxes
paid. That is bothersome to me. It should be half that.
I'll be 63 in a few weeks. Which means I'm eligible for SS. So I can say
this. I would be perfectly happy to contribute to the cut and have the
government tell me that the rules just changed and I
can't retire until I'm 67. Or. 65, but the benefits will also be cut
30%. Now. This willingness by me means that I would have to sacrifice. I
would have to work longer. But so be it. Instead you have a bunch of baby
boomers and 70 year olds, sitting around whining about "they paid and now
should receive"? Baloney. These are hard times, and for the sake of a future
generation all should sacrifice. I happened to have paid 6 million for the hotel
5 years ago and it's worth less than 4 million today. I paid 1.5 million for a
motel in Missouri 4 years ago and ended up losing all of it. Times are tough.
They could be tougher. Or . . .I can kick the can on down the road and just let
Sophie and Vivi and Cade and Coleton and Trip make 60,000 a year someday and be
in a 80% tax bracket????? Or course you and Kenneth won't have any retirement
and will have to live with the girls to survive. But I'll be dead and not have
to deal with it?
Also, here's another novel idea. Zero Social security benefits to anyone
who has another source of income in excess of 24,000.00 a year. In other
words, if you happened to get "rich" during your life, and don't need the ss
income to survive, then you don't get it. It was, as originally planned, a
safety net. Make it a "safety net" again. Make it insurance. Instead, you have many people, who have incomes from investments that pay them 6 to
10,000 a month and then also get a Social security check on top. Many of my friends don't like to discuss this with me because they
believe they are due that money because they paid it in. I don't think that can apply today. Social Security is broke. In fact, the whole nation is really broke. And tough times demand tough decisions. It was set up as insurance. That's what we're going to have to go back to. You
pay and pay and pay for it and Hope you never need it.
Here's a novel idea that I've written to the president and congressmen, but
to which I've received no reply. The average couple retiring today, can expect
to have paid in $598,000.00 during their lifetime. However, they also expect
to only receive $556,000.00 (if the man lives to 82 and the woman to 85). How
about telling me that I can go on SS . . . OR . . . I can take a lump sum
payment of $300,000.00 and go away and not get any SS? There is a catch. I
must take that $300,000 and buy for cash a new home or condo for half the
amount. If I already have a home, I cannot sell it but only trade for
equivalent. This would give me a free home for the rest of my life. or, if I
already owned a home, a source of rental income for the rest of my life. I
would also have to buy a new US made automobile for cash and could not sell my
other but only gift to charity. Besides taking me off the retirement roll, it
would save the SS system 256,000.00. It would reduce the inventory of unsold
homes. it would put detroit back to work very busy. It would give thousands of people a free car so they could maybe get a job. And I'd be set for the
rest of my life. If I'm 50 to 60 years old, I could opt out immediately, stop
paying in, and get perhaps $200,000.00.
Now, I think everyone, top to bottom should pay something. I've found
over the years, that most things that don't cost anything, have no value.
However, I think if you're grossing as a family or single head of family,
something like 30,000 a year a reasonable rate might be 1%. And those "less
advantaged earner's, should pay a lesser% of SS tax. To think that someone
making 30,000 a year should contribute 7.5% of their income to a program that
will probably be busted when they reach retirement, is unjustifiable to me.
They should not pay the same % that your family pays from his check. Nor should you pay as much % as someone making 200,000 a year. Social security, like
sales tax, is a regressive tax that hits the poor the hardest. But they
should pay something for their "insurance" policy.
Next, you are right. Cutting entitlements across the board would affect my
workers. It might cut their food stamps. I'm not in favor of that. Nor
child care. I believe we should do everything possible to help anyone who gets a job
to stay on a job. I do however believe that there would be nothing wrong with
going back to a plan where food stamps goes for "food". Real food. As
recently as the time you were in elementary school, food stamps could be used
for meat (not meat by products). Potatoes (not chips). Orange juice (not High
C). Cheese (not grated or cans of Parmesan). In other words, it was for food
to feed your family and get over the hump and not starve. today you get a visa
card and the money is just put on the card and you can get what you want to
get. Of course, the rationale is that we've got to "destigmatize" being
poor? Baloney. California welfare receipients in 2010 (maybe 2011), had
over 2.5 million dollars used to make purchases in Hawaii and Las Vegas?
what's up with that? I'm not really sure it's legal, but often times, I see
people using their Lone Star cards to buy cigarettes.
How about drug testing of welfare? Uh-oh. We gotta be careful we don't
"stigmatize" them? Baloney.
How about cutting welfare benefits for more and more children. Anyone can make a mistake and get accidentally pregnant . . . or get inpregnated by a worthless, lazy bum. Ok. Learn your lesson. And we'll help you with the child's welfare and nutrition. But the second time, is half as much. And the third time is 1/3 as much. And the fourth time is zero. The fifth you even start having it reduced.
Also, legalize drug use and empty the prisons out and save hundreds of
billions. The US declared war on poverty, drugs, energy, and illiteracy. We
lost all of them. I'm NOT a drug user. I hate that anyone else does too. Most of them are losers and will die prematurely. But we cannot win this war. And the more money we throw at it, the more we fall behind. But make darn sure they do not EVER have the opportunity to get on the welfare rolls unless they are drug free. Keep it a crime to sell it, and catch the sellers and prosecute them. But just emptying out the prisons of the users would save billions.
Get us energy independent in the next four years and then get us the hell
out of the middle east and they'll stop terrorizing us and we'll NOT be sending
780 billion over there to build new palaces with, nor have to defend them.
That 780 billion (also called .78 trillion) would be pumped into our own
economy instead where we have abundant natural gas to fuel every vehicle in
America. (Note: I also have a plan for having us energy independent in four
years or less that would work but no one in Washington has replied to my suggestions on that either)
Give illegal immigrants a right to sign up and register and then return to
their own country and "buy" a visa to come back here and work for two years and
be a citizen. 1. We'd get their visa money instead of a coyote for bringing
them across. and 2. We'd make taxpayers and SS contributors out of them. We
might even offer free visas to people of higher education and degrees.
Back to the tax point.
Today if we were to increase the tax rates on the top 1% by an effective
rate of 200%, it would still not solve the problem. Not by half. The top 1%
of tax payers paid 79.7 billion in taxes last year. If you double their taxes
that would be 1.59 trillion. The budget is 3.82 trillion and the deficit alone
is 1.65 trillion. Doubling the top 1% would only reduce the deficit by half.
I think I sent this comparison to you before. Maybe not. Maybe I just put
it on my blog.
The current U.S. Tax revenue is $2,170,000,000,000 (that's just over two
trillion)
The fed budget (which is really a misnomer because Congress hasn't passed a
budget in two years) is $3,820,000,000,000. (almost 4 trillion)
that's new debt of about 1.65 trillion this year.
The national debt is presently $14,271,000,000,000 (over 14
trillion)
As part of the raising the debt ceiling last year, congress and the
president agreed to a whopping cut of $38,500,000,000 (that's billions)
So to make it easier to comprehend, let's remove 8 zeros from all the
numbers and pretend it's your family's budget?
You make $21,700.00 this year.
You spend $38,200.00 this year.
Which means you put on your credit card about $16,500.00
of course your credit card already had a balance on it of $142,710.00
So the two of your sit down and say "we gotta do something".
And you both haggle about what to cut and what to give up
and finally after a lot of shouting, you reach an agreement.
You decide that you won't buy the girls new halloween costumes this year
and you will save $38.50 for the year.
That's what Boehner and Reid and Obama wrangled out last year to raise the
debt ceiling. Wow! thanks guys.
So if you go back to seeing that the top 25% pay 87% of all the tax, you
can see that if you doubled the tax on everyone in the country that made more
than 66,193 per year, we would still be in the hole.
To solve the problem though, as painful as it would be for you and the kids
and your siblings, I would agree to say then raise the tax on the top 10% of
income earners by 50%. That would be everyone making $112,124 a year. If
they paid 20,000 this year, they'd pay 30,000 next year. And that would close
the deficit gap some. I'll work it out here:
Follow my math here:
The current tax income of the US Government is about 2.17 trillion.
The top 10% pay 1.53 trillion of that and the bottom 90% pay 610 billion of
that. . So raising the top 10% earners by 50% would generate 2.3 trillion and
with then, with the other 610 billion you'd have almost 3 trillion in
income. Small problem. We're still short .8 trillion. So, cut, PROMISE
and legislate that no budget could be unbalanced in the future except to fund
the cost of war or national defense.
Now you have to consider that entitlement programs today represent
62% of the federal budget (again, the term budget is
tongue-in-cheek since Congress has not passed a budget in two years)
So that means that of the 3.82 trillion the government will spend this
year, 2.36 trillion is in various entitlements.
Under my scenario above of raising the tax by 50% on the top 10% of income
earners, and leaving the bottom 90% alone, we're still at income of 3 trillion
and expenses of 3.82 trillion. That's a deficit of .82 trillion and we're not
even addressing paying back the national debt yet. So, we cut 1.32 trillion
from entitlements. And use .82 trillion (translated 820 billion) to balance the budget, and half a trillion to
begin paying off the national debt over the next 28 years. That math means
we'd slash entitlements across the board by 60%.
This would be VERY painful. To you and me and my other kids and grand
kids. And millions of American's.
But I would do it.
That's my answer. Pain. A lot of pain. But I'm getting old. And it
won't hurt me long. You have perhaps 50 more years to look forward to.
Other than the satisfaction of having the time to write you and dialogue, I
realize that this entire email is without any likelihood of happening. And
this makes me sad. For your family and the girls. It is not a bright
financial future that I'm leaving you. Congress will not act. The President
won't do anything on entitlements. Today they are 62% of the budget, and in
ten years, they'll be over 70% of the budget. I have no idea what the national
debt will be then. But it's got to be at least 20+ trillion. And all debts
have to be repaid. Someday. By Someone.
I read a wonderful book back when you were still in your mommy's tummy. It
was called A Time for Truth, by William Simon. He was Nixon's Secretary of the
Treasury. One line from the book stuck with me all these years. I've never
forgotten it. He said "The more you subsidize something the more you get of
it. The more you tax something the less you get of it."
Words so true. In this country we subsidize non-work and non-earning. We
subsidize having illegitimate pregnancies, and non productivity. We tax
savings, and we tax work and earnings. And, in fact, the harder you work the
more we'll tax you effectively.
Lastly, when you hear talk about making the "rich" pay their fair share. Be
clear about this. They aren't just talking about the Warren Buffets and Bill
Gates of the world. They are talking about you and your family and your sisters and their families. Also another significant point in today's discussion is that
Hollywood and the entertainment blogs have made out "rich" Americans as being
jet-setters who spend all their time in Cabo and fly around on their lear jets.
That's a myth. Some do. Most don't.
And lastly, please excuse me for "cut n paste". But in an excellent book
that I read years ago, the author's interviewed America's millionaires. What
they found was completely opposite to the perception:
7 Attributes Of High Net Worth Individuals
- They live well below their means: They may make a large
income, but they don’t live like it. They are, as Stanley says, “Frugal, Frugal,
Frugal”. They live in an older house, drive an older car and don’t spend a lot
of money on life’s luxuries (often because they don’t enjoy them). At an
interview they did of millionaires, one deca-millionaire when asked if he would
like an expensive glass of wine responded that he drinks only two things, scotch
and two kinds of beer – Bud and Free. For those wealthy that were married, they
almost always found that the spouses were also frugal. If one spouse is a
hyper-consumer, it is extremely difficult to end up with a high net worth.
- They allocate their time, money and energy efficiently in ways
conducive to building wealth: Wealth accumulators spend more of their
time in doing things that are conducive to creating wealth – budgeting, planning
and setting goals for their future. They work hard towards their goals, and are
more likely to be spending time planning their goals. Those who are high income
earners but that do not have a high net worth do not spend as much time in these
activities. In fact they found that PAWs (prodigious accumulators of wealth)
spent almost twice as much time every month in planning their investments as did
UAWs (underachieving accumulators of wealth).
- They believe that financial independence is more important than
displaying high social status: They don’t care about living in the
right neighborhood, having a big house, driving the newest cars or shopping at
the trendiest stores. These high net worth individuals care more about providing
for their own financial independence and work towards that goal.
- Their parents did not provide economic outpatient care: The
parents of these high net worth individuals did not subsidize their lifestyle,
or give them a bunch of money. They made their own way, working hard and
succeeding on their own terms. Children who receive economic outpatient care
(EOC) often are stripped of their motivation to work hard and achieve, and as a
result often do not become PAWs.
- Their adult children are economically self sufficient: The
children of high net worth individuals have been taught how to live a frugal
lifestyle, how to accumulate wealth, and often have been taught how to succeed
on their own without help from their parents. Because they don’t receive EOC,
and in general are self-sufficient, it allows their parents to accumulate more
and be better off later on.
- They are proficient in targeting market opportunities: The
high net worth are good at seeing opportunities and taking advantage of them.
They aren’t immune to the fear of failing that all of us have at times, but they
overcome their fear and act upon good opportunities when they see them.
- They chose the right occupation: Those who have a high net
worth almost always are doing something that they enjoy – and they work hard at
their chosen career. Just because you’re not an entrepreneur or a business owner
doesn’t mean you can’t be wealthy. You just have to choose a career that will
provide a reasonably decent income, and live in a way that is conducive to
building wealth. Find a career that you enjoy, work hard at it, and live
frugally – and you can build a large net worth.
references:
I intend soon to talk to you and your siblings and spouses about how to
invest in the future in things the government cannot take away from you. But be
aware and alert and prepared. Trim your sails for a head wind. I promise you
with all assurity, that it makes no difference which party is in power or the
white house
or in the Congress, they/we have created a monster vampire that can only go
on living and thriving by sucking the life blood out of the earners of the
governed. Can you imagine how you will feel to be 40 years old and perhaps being middle class and being in a 50% tax bracket. Get ready. You will see such tyranny.
In closing, though I"m sure not a Warren Buffet, I am an independent businessman trying to run and grow and prosper a business. If Washington would let me keep more of my money, I'd buy some furniture
with it. And a new washing machine. And some new tv's. I'd give my
co-workers a raise. And I might buy some new linens. And I'd save some for a
rainy day. But instead, I spend hours of each month planning and calculating
how to get my money out of their reach. And I'm not alone. I am not going to go on this way sweetie. It's robbery and tyranny and property confiscation.
I love you so much. I wish so much good for you. I wish the world would be a better place for you and your family to grow up in and raise my grand kids. Things do not look promising though for the future. As I said, 'trim your sails" and make plans for how to best adapt. A storm is coming.
Poppy
ps. there is a concept in reading the information about America's
millionaires that I hope you grasp. There is a BIG/MAJOR/SIGNIFICANT difference
in the rich who are high "net worth" rich, and the rich who are high
spenders. The first tend to build their communities and invest. The latter
squander and waste. I dated a couple of times, in Waco a lady whose ex-husband
was a surgeon. He made 800,000+ a year. He owned two trucks. Four
cars. Two airplanes and a mega house in Chimney Hill overlooking the lake.
They took fabulous European vacations and only shopped in Dallas at Neimans or
equivalent. And when they were divorced, she got $120,000.00 in cash and
$2,000 a month for two years. He got ALL the debt, because they "owned"
nothing. Every single thing they had was bought on credit. He was a big earner
and a big spender. I love the idea of taxing the spending of the rich. I
love luxury taxes. Those are not the people described in the book The Millionaire Next Door.
