Wednesday, February 13, 2008

Tax the rich!!!

Tax the rich!!!

This is the battle-cry of the two remaining Democratic presidential candidates. Sounds good right?

I mean, think about it. Those damn richers make so much, and they're all evil. Every cent of their fortune is somehow stolen from us folks at the bottom. We need retribution! They make too much! They don't deserve it! KILL!

This little ditty is sung in many-a middle-class home. Should we blame them for thinking this way? No. I mean growing up I was always told that life isn't fair, and it isn't. But should we really be taxing the rich on general principle? I don't think so. There are so many loopholes in our much-too-extensive tax code for the rich. You know what I say? Stop bitching about it and fix it! I see the loopholes as a sort of built in, accidental anti-socialism device. But there is a serious injustice that the rich pay less than a lot of middle-class families do.

But what to do... What to do...

In a perfect world we wouldn't have the government taxing our money that we earn. But Ron Paul has no chance, so we can forget this.

How about the FairTax? I personally don't like it.

Taxes on consumption are regressive, but this is remedied by a tax pre-bate, making it a fairly progressive structure. It would most likely fall of near the top of the ladder and the middle-class would end up paying a bulk of the taxes.

The real reason I don't like it is admittedly a little selfish. I'm in college and due to student loans my net worth is in the red. I don't want to have to pay a 23% premium on my various retail purchases at this point in my life. Or ever really.

So what about the flat tax? A 10% federal flat tax on every earner's income. How about we sweeten the deal? Let's let everyone with an income lower than $35,000 pay no federal income taxes.

$0-$35,000: 0%

But wait, there's more. How about in the $35,000 to $80,000 bracket we only put that up to 5%

$0-$35,000: 0%
$35,001-$80,000: 5%

It gets better. Everything above $80,000 is taxed at 10%. No matter if you make $90,000 to $1.2 million.

Okay, so it's not a flat-tax anymore, but it's a nice compromise. Well hell, it's the only progressive tax I'd ever endorse.

What's that? You say it's not fair that someone can make more money than you and pay the same taxes? Suck it up and innovate. Work that brain of yours, find a way to better the world and make yourself a profit.

If you want to make millions but the corporate ladder is just too big, then quit your whining and do something productive. Don't just be jealous at the CEOs who make $38 million a year.

You say they're overpaid? Yeah they are. Why don't you buy some stock in the company and go to some stockholder conferences and express your concern.

Before we all cry out "tax the rich more" we need to be looking at all of the problems.

- The government needs to spend less. Yeah, this means cutting back on unnecessary programs, which includes a lot of wasteful social programs.

Before you go calling me a horrible person without a heart let me say this: I'm not against social programs for the truly needy, the truly disabled, or the truly sick. Medicare, Medicaid, Disability; I'm not against these. My father paid into the system his entire life and became medically disabled (the real kind, not the 'I slipped in Wal-Mart' kind). He's on disability. Anybody who pays into the system and can truly not work is entitled to the money they were forced to pay in. Medicare and Medicaid need to be managed more efficiently. Social security needs to be partially privatized. We need to stop electing people who are hemorrhaging our tax dollars away on pet projects and unnecessary wars.

- We need to stop with the jealousy.

It's an epidemic in this country. I'm a dirt poor 21 year old who's financing his college education. Have an image of me yet? Well, let me alter it. I've started up two business since I was 15. I detailed cars before I could drive. If you had never seen one of the cars I worked over you had never seen a clean car. I would rock the toothbrush and q-tips for hours to earn my money. I'm now a photographer who works very hard for my money. I spend hours fine tuning images so that families can have memories for years and years, and I earn every penny.

-We need to lower the income tax for corporations.

I know, it hurts me even to type it. But if we don't do something about companies moving over seas for the tax benefits we're going to be in deep trouble. I'm not talking about subsidies, I'm talking about the income tax rates on a federal level.

- We need to stop with the double taxation.

Retired people who are collecting on social security shouldn't have to pay taxes on their benefits even if they are still earning income after they retire.

- Don't start wars unless Congress votes for it.

Hopefully we can stop electing morons to run our country before we have to do this again.

- We need to scrap the party systems and vote for people.

Too much loyalty comes from political parties. Loyalty isn't a bad thing, but when people vote for their parties' candidate even when they completely disagree with their views it's going overboard. The two party system rips America apart and creates an environment that makes it very difficult to get important things done.


If you don't understand this one, go stick your head in a toilet, because that's where it belongs.

- We need less political correctness.

It's ridiculous and a waste of brain power to whine about somethign that's not PC.

- We need a more transparent government.

I hate to quote a trendy movie, but people shouldn't fear their governments, governments should fear their people. All the secrecy in the government is aimed at creating fear in order to incite mass loyalty.

- Let gay people have the same benefits as straight couples.

Whether you call it a marriage or a civil union, that's fine, but love is love, and if two HUMANS commit to each other for the rest of their lives then they deserve to have the same benefits as more politically correct couples.

- We need to respect peoples' private property and other personal rights.

Eminent domain needs to be struck down by the high courts. Just because a condo-complex will bring more tax revenue to a city than the row of small houses that sit on the land now doesn't give the city the right to seize the land and sell it to condo developers for a reduced price.

- Stop whining about people with guns.

I don't like guns, but I really don't trust the police to protect me. Strengthening gun control is fine, but radical liberals wanting all guns to be seized or destroyed need to realize that guns are here to stay, like it or not. Taking away guns from everybody isn't really taking away guns from everybody. Anybody worth their weight in cheesecloth can figure out that it wouldn't do a damn thing about guns within the gang, drug dealing, and general crime rings. It would just leave honest people defenseless.

- Stop worshiping celebrities.

Good God please stop caring about Paris Hilton's bajingo.

- Go to church

Any church. If not for the faith aspect, then for the therapeutic aspect. You don't have to believe in it to enjoy it.

There are many more reasons, but it 1:26 in the morning and I'm working on getting rid of a migraine.

But when it all comes down to it, as depressing as it is, change will not happen anytime soon (No matter what Barack Obama says).

The rich are always going to get richer, the politicians are always going to be greedy and corrupt, celebrities are always going to attract unnecessary attention, liberals are always going to hate conservatives, conservatives are always going to hate liberals, Rush Limbaugh is always going to be a fat artard, the government will always over-spend, people are always going to be jealous of people who have what they want, governments are always going to infringe on personal rights and be secretive, and people will always laugh at racial jokes in private but will always decry them in public.

What shall we do? You tell me. Leave a comment with your thoughts.

Monday, February 4, 2008

Invest young or have fun and do it later?

I have many friends, but only two or three that actually invest. I see this as a major problem. This is directed towards my friends and other young people that aren't investing.

Consider this:

Most of my friends on myspace are a year or two above or below my age and a good portion of them have a job.

So what are you making? How much do you work?

I'll assume you work for $7.00 an hour, 28 hours a week. That's $196 per week before taxes. You get paid once every two weeks. We now have $392 before taxes. Last time I was working I had 17% taken out of my paycheck.

392(1-.17) = 325.36

So if you're getting $325 every two weeks what do you have to pay?

I'll take these two into consideration. I wouldn't expect a 20 year old living with their parents to pay much more.

Gas: ~$30 per week ($60 for two weeks)
Phone: ~$50 per month ($25 allotted every two weeks)

So that's $85 that needs to be taken out of every pay check. That leaves you with $240. If you're like me you like a beer with dinner, so that's about $10 a week. You'll need fast-food allotments; $25 for two weeks. You'll also need blow money; $60.

This leaves you with $135 from every paycheck.

Now I have no idea what your spending habits are, this is just a rough estimation.

Say you took that $135 and put the $35 into a savings account (to have emergency money on hand) and the remaining $100 into a growth stock mutual fund.

So every paycheck you'd be building your savings account with emergency money and you'd be funding a retirement account.

So what can $100 turn into if it's not spent on pointless things? Well, let's see:

Say we put the $200 a month (from two paychecks) of investing money into a mutual fund that averages 8% (a pretty conservative fund considering the overall average of the market has been almost 11% since it was created).

Let's fit this into the future value of an annuity equation.

$200 a month at 8% interest for, oh, let's say, 10 years.

200 being the monthly payment, .006666666667 being the interest rate (8%) adjusted in monthly increments, 120 being the amount of months in 10 years.

200 x ((1+.006666666667)^120-1)/.006666666667 = 36589.21

That comes out to $36,589.21 you'll have in 10 years.

$24,000 in principal, which means your $200 a month has earned $12,589 in 10 years. That might not seem like much, but it's a very conservative estimate considering your income will most likely grow considerably throughout those 10 years, enabling you to put more into the investment.

Say after the ten years you've kept to your guns and not gone into debt for silly things like TVs and other toys, and have managed to stay away from new cars (the number one mistake that college graduates make is buying the new car right when they get a job because they "deserve it") and you want to start investing more heavily into your future.

Now we're going to be hitting the market more aggressively.

$1200 a month into a mutual fund averaging 10% for 10 more years. We use the same formula.

1200 x ((1+.008333333333)^120-1)/.008333333333 = 245813.97


Now include your previous investment that's been sitting in that same 8% fund for the past 10 years.

245,814 + (36589(1.08)^10) = $324,807

So you're 40 years old, have no debt other than a mortgage (unless you've managed to pay that down also!) and you've got a bitchin' emergency fund and $324,807 sitting there gathering that good ol' compound interest.

So you get a nice promotion and you keep sticking to your guns. You move all of your investments into that 10% fund and keep adding $2200 a month for 10 more years.

(324807(1.1)^10) + (2200 x (((1+.008333333333)^120-1)/.008333333333) = 1,293,124

That $1,293,124 at the ripe old age of 50.

You want to have $1.2 million when you're 50? We should all be so lucky. And if you want to retire at 60 and you let that $1.2 million compound at 10% for ten more years, you'll have $3,354,030. Without even adding anything for the last 10 years!

If you kept adding $2200 a month you'd have $3,804,688!

(If you upped the monthly payments to $3000 you'd have $3,968,565!)

Now let's tally up the amount you put into the investment.

The total principal if you invest for 10 years at $200 a month, 10 years at $1200 a month, and 20 more years at $2200 a month.

You would have put in a total of $432,000. That's an interest amount of almost $3.4 million dollars, all because you decided to start early and live like no one else so later you could live like no one else.

Say you plan on living to the age of 95. You've got a solid 35 years left. After you retire you could draw out $120,000 a year.

After today's capital gains tax (fancy way to say the government is stealing from your investment gains) of 15% you'll have approximately $102,000 before other federal, state and local taxes.

But the great thing is you could take out quite a bit more and still have your large nest-egg compounding in a safer, more conservative fund. There'll be plenty of money for you to live on, your healthcare, your funeral, and a little left over for donating or to give to your family.

My point is, Social Security isn't going to take care of you. You're going to have to start retiring sooner or later, and if it's later it'll be much harder to catch up. Buying stupid shit like new cars and other things is not going to help you in the long run.