Posted: Mon Jun 16, 2008 7:48 am Post subject: Re: Alternative to asphalt?
Thanks for the clarifications, Starvid. Always good to hear both sides of an argument. Thanks. _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
Posted: Mon Jun 16, 2008 2:56 pm Post subject: Re: Alternative to asphalt?
Starvid wrote:
....
We have had the same thing in Sweden, even worse on the wealth front. In the US the richest 1 % holds 30 % of all assets. In Sweden that's 40 %.
Why?
Because over the decades the socialist governments have squeezed the broad middle classes, eliminating middle class wealth while exempting the billionaires, as they would otherwise take all their money and leave. Not good for investments.
....
In a nutshell rich people cleverly avoid income taxes by simply not making a high income. Probably the most outrageous example of this would be Steve Jobs, who is a multi-billionaire, but legally his income is only $1 / year!
Rich people make MOST of their money on capital gains, NOT income from a salary.
Capital gains is taxed at a lower rate, about 30% or less.
Suppose you bought an asset and in 5 years you've made $5 million, average $1M/year. You only pay capital gains tax once, at the point of sell. You do NOT pay 30% every year on $1M of gain. It is not paid continuously every year. Your investments can appreciate in value, tax free, until it is sold. Income tax however is like compounding interest that works against you! This is HUGE.
That's the long and short of it. There's more too it of course. If becoming rich was easy, we can ALL be rich. Whenever I hear a liberal talk about "taxing the rich" and proposing raising income taxes I just shake my head in disbelief of people's ignorance. Raising income taxes actually hurt the middle class. BTW I am not proposing raising capital gains taxes. I believe that no matter how hard society tries, rich people will always outsmart the rest of society. So the best thing to do is just get comfortable with the fact that 10% of the wealthiest will always own 90% of all wealth.
Posted: Tue Jun 17, 2008 2:39 am Post subject: Re: Alternative to asphalt?
How and why high taxes hurt the middle class the most.
The lower classes earn very little, so they pay relatively no taxes net of the benefits they receive. The wealthy can choose how, when and where they choose to declare income from investments. Usually only when realized. Sometimes offshore. Always at the lowest possible rate.
So let's assume average (mean/median) income is $40.000, and average tax burden is 50% including direct and indirect taxes. Net income $20.000 per year.
Average cost of living will be at or close to $20.000 because that is what the average person can afford to pay net of taxes. So your average wage earner is living up to their net income leaving very little left-over for savings and investment.
Forget the wealthy. Say a two-income family earns $60.000 per year ($40.000 + $20.000), so their net income is $30.000, while the average living costs are still $20.000. They earn $10.000 more net that they can now spend on consumption or can save and invest.
Using 3% compound interest $10.000 per year in 20-years becomes $276,765 or equivalent to 13.8-years of average income net of inflation. Even if you tax interest income at 100% the sum comes to $200.000 or 10-years of income. Versus little or no savings for the average wage earner who after 20-years of working has next to nothing put away.
And each time the government ratchets up the tax rate to tax away that difference they just ensnare more tax payers in their net, so consigning them to work perpetually for little more than their average living costs with little or no savings to save or invest.
Meanwhile anyone who earns more than the average (mean/median) income has compounding interest AND possibly favorable tax treatment on capital gains or interest income. Of course, anyone earning $200.000 net per year when the average cost of living is $20.000 has that extra income to consume, while still leaving enough leftover to save and invest.
The only ones that benefit from high taxes are the lower class that pay less tax and receive more benefits net. The middle class disappears. While no matter how hard they try they cannot close the gap with the wealthy.
Ironically, in places like Canada the tax income bands are not adjusted for cost of living inflation, so perversely two kids can graduate from college, and find themselves in the highest marginal tax bracket in their first jobs before they have even had a chance to repay their student loans or put a downpayment on a house. Then they are paying the highest marginal tax rates, while saving to buy a house, making car payments and trying to start a young family.
Tax the rich indeed. More like tax your children's and grandchildren's future away! _________________ The organized state is a wonderful invention whereby everyone can live at someone else's expense.
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