Saturday, July 24, 2010

Politics on ActiveRain

Maybe I've gone too far this time, but I have made several comments on Lane Bailey's post about a potential 3.8% tax on real estate transactions. He was more fair than most on ActiveRain in his posting about the issue, though I disagree with his conclusion that this will have a major implication for the sale of luxury homes. It's a complicated tax (only applied if you pass certain earnings & profit-from-sale hurdles), that will probably effect less than 1% of transactions, and will only be paid by the very rich who make a profit from the sale of their residence or investment property.

Well, the discussion in the comments section became quite political and interesting, and I had to put my 2 cents in there. Well, maybe 6 cents, but I'm generous!

Here's a link to the whole thing. And here are my parts:

1. Perhaps it's only fair for the very richest among us to pay more taxes. I know that sounds crazy to some folks, but take into account these figures:

"the richest 1% of earners collected 8% of national income in 1973. "By 2006, the top 1% got nearly 23% of the pie, the highest proportion since 1929, " he writes. Moreover, the richest 1% now earns more than the bottom 50% of Americans. During almost exactly the same period, the pay gap between the top 100 CEOs and workers rose from 45 to 1 in 1970 to Himalayan proportions in 2006, reaching 1,723 to 1"

article here

It's obvious that the very rich pay most of the taxes....they have most of the money!

To claim that the rich are being fleeced by the government is a bit of a stretch though, given the massive movement of money from the middle class to the upper class over the past 30-40 years.

Also, when I first heard this "news" elsewhere, it came in an e-mail prefaced with this distinguishing message:

Under the new health care bill - did you know that all real estate transactions are now subject to a 3.8% Sales Tax? The bulk of these new taxes don't kick in until 2013 (presumably after Obamas re-election). You can thank Nancy, Harry and Barack and your local Democrat Congressman for this one. If you sell your $400,000 home, there will be a $15,200 tax. This bill is set to screw the retiring generation who often downsize their homes. Is this Hope & Change great or what? We can vote the bums out in November and demand that they eliminate the bill or at the very least defund it. Then in 2012 repeal it.
Oh, you weren't aware this was in the Obamacare bill? Guess what, you aren't alone. There are more than a few congressman that aren't aware of it either. AND, there are a few other surprises lurking.

Maybe it's just me, but I found that delivery to be off-putting, and a good example of how the "tea party" types will take something with a grain of truth and blow it up to giant proportions, to incite fear and worse.

Our Realtor Association manager replied to the e-mail with the following:

It is a hoax! Here is the NAR information.

Business Report
No 4.0% "Sales Tax" on Home Sales In Recently Enacted Health Reform Bill

Contrary to reports and newspaper articles circulating widely on the Internet, there is not a 4.0% "sales tax" or "transfer tax" on the sale of a home included in the recently signed health care reform bill. The analysis underlying these reports is incorrect and fails to take into account the interplay of the bill's provisions with already existing real estate tax laws that remain unchanged.

What was included in the health bill is a provision that imposes a new 3.8% Medicare tax for some high income households that have "net investment income." Any revenue collected by the tax is dedicated to the Medicare hospital insurance program. This new tax will only apply to households with Adjusted Gross Income (AGI) of more than $200,000 for individuals or more than $250,000 for married couples. Since capital gains are included in the definition of net investment income, an additional tax obligation might result from the sale of real property.

In the case of the sale of a principal residence, the existing $250,000/$500,000 exclusion from capital gains on the sale of a principal residence remains unchanged. Consequently, even when the AGI limits are met, the new tax would not be applied to all capital gains that result from the sale of a home. Rather, it would only apply to any home sale gain realized in excess of the $250K/$500K existing primary home exclusion that pushes the filer's AGI over the $200K/$250K adjusted gross income limit.

The new Medicare tax will not take effect until January 1, 2013.

For more information on the new Medicare tax, please consult NAR's Health Reform Q&A on this and other provisions of the new health reform law located at:

2. I came across an article that more clearly shows the disparity between the top 1% and the rest of us.

"Two-thirds of the nation’s total income gains from 2002 to 2007 flowed to the top 1 percent of U.S. households, and that top 1 percent held a larger share of income in 2007 than at any time since 1928, according to an analysis of newly released IRS data by economists Thomas Piketty and Emmanuel Saez.[1]

During those years, the Piketty-Saez data also show, the inflation-adjusted income of the top 1 percent of households grew more than ten times faster than the income of the bottom 90 percent of households."

3. I appreciate that our tax system is crazy with loopholes and special exemptions, etc. (mostly for the rich....and corporations), and I'd gladly trade that for a "fair tax" on consumption, but we are where we are.

I am pointing out the earnings disparity between the top 1% and the rest of us to show that when too much of our (collective) money is tied up in the hands of the very few, that is bad for the whole economy, it's unsustainable.

So do we just allow the poor to become poorer and the rich richer until.... how does that play out?

We have had as much of a free market as any country in the history of the world for the past 30 years, and we have proven that those policies don't work. Even Alan Greenspan has admitted this:

"he acknowledged that his libertarian view of markets and the financial world had not worked out so well. "You know," he told the legislators, "that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well." While Greenspan did defend his various decisions, he admitted that his faith in the ability of free and loosely-regulated markets to produce the best outcomes had been shaken: "I made a mistake in presuming that the self-interests of organizations, specifically banks and others, were such as that they were best capable of protecting their own shareholders and their equity in the firms.""

Like it or not, Capitalism requires regulations..... mortgage-backed securities anyone? Maybe some 40 to 1 derivatives with that?

You say: "the rich also pay a higher share of taxes than at any time since the Great Depression"

If you look at historical rates, you'll see that not only is this not true, we are near the lowest ever.

You say: "Teaching people to be dependent on the government for all of the important decisions is NOT teaching them to be independent or successful. "

That's patronizing, and I don't need the government to teach me how to live, I need a government that creates and maintains a stable economy so I can flourish on my own. Without regulations, Laissez-faire economics = Dickensian nightmare

Working class wages have been stagnant since the early 70's, while the very rich have amassed huge fortunes. Bill Gates and Warren Buffet are challenging the Forbes 400 Richest to donate half their net worth to charity. I wonder how that's going.

Friday, July 23, 2010

Tea Party and Taxes

USA Today had an article on tax rates recently:

Tax bills in 2009 at lowest level since 1950

And as long as we're looking back at the good ol' 1950's:

John Boehner's America

The rich paid 90% tax rate in the 1950's

Hey, our taxes aren't that bad!

Monday, July 19, 2010

See No Evil, for Glenn Beck

I just love Television, and they have a tune for you, the blinding Glenn Beck.

OK, so Rush is deaf, Glenn is going blind... if Sean starts getting hoarse, maybe folks will begin to question their "leaders"?