Tag Archives: taxpayer

Congress Again Plays Robin Hood

Once again Congress is bribing some Americans using money stolen (okay taxed, but what’s the difference?) from other Americans. Democrats have decided they know best what cars their fellow citizens should be driving and want to manipulate the people’s behavior in their chosen direction. [On a side note, where is manipulate in the Constitution? I can’t find it.] Tuesday the House voted to provide $4 billion so that anyone who turns in a gas guzzler and buys a new car can get a $4500 rebate from Uncle Sam.

First, Democrats ripped off the shareholders and debt holders of GM and seized 83% ownership of General Motors using money they stole from the American taxpayer (well, actually the American taxpayer’s grandchildren, but that’s  another story) and now their trying to rescue our $50 billion they poured into a dead company by ‘stimulating’ GM’s sales with more stolen funds.

But the greatest travesty here is the injustice of these kinds of measures. If your neighbor buys a new car or truck this year and the new vehicle gets 10 mpg better than their previous one, they get $4500 of your money and mine toward the purchase, no other strings attached. If the new auto gets just 4-9 mpg better than the old one they still get $3500 from our crazy Uncle Sam. Many Americans (estimates are around 9 million) were already going to buy a car this year and will now get a nice bonus courtesy of their fellow Americans for doing something they were already going to do. The hope is that this legislation will generate more sales, but how many more and will those additional sales be worth it?

Who loses in the end? The same taxpaying citizens who always lose. Those who listened to the politicians, the talking heads, or more likely, their own common sense and got out of gas guzzling autos  in the last few years will once again be paying extra taxes so that others, who did not make good choices, can get a $4500 gift. Yet another example of Congress stealing from some and giving to others. Does no one see the injustice of a government behaving this way?

House passes cash for clunkers to boost new car sales – Jun. 9, 2009.

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Filed under Government Spending

Another Bail Out?

If you are at all like most people you’ve spent the past few months wondering who the Government is going to bail out next?” Well, Senator John Kerry (D-MA) has your answer and it is… wait for it – the U.S. Newspaper industry. It seems many of the nation’s most well known newspapers are in serious financial trouble. The New York Times is a reported $133 billion in debt and its subsidiary, the Boston Globe,  is expected to lose $85 million this year. Major daily papers in Seattle and Denver have been shut down completely and the LA Times, Chicago Tribune and many others are seeking bankruptcy protection.

Whether one is in favor or opposed to the financial and automotive bailouts by our Government (and I’ll admit, I go back and forth), there is little doubt that there are complex issues at play and it’s a tough question. Perhaps the experts are correct and a collapse of the financial system was imminent, and potentially catastrophic, had the government not stepped in. Perhaps there is more to be gained than lost by saving the U.S. auto industry, although I doubt it. But newspapers Senator Kerry? Really?

Apparently Mr. Kerry wasn’t listening on April 15th when hundreds of thousands of American citizens took to the streets at 800 tea parties around the country to demand that this government stop throwing money away, money it doesn’t have to begin with. Although the incompetent U.S. media (some of the same ones who apparently now need a bailout) tried to portray these peaceful rallies as anti-tax, the key issue for these concerned citizens was out-of-control spending. Now Senator Kerry wants Congress to consider spending even more.

Consider the political ramifications of such an action. Afterall, journalists although they rarely act like it in these partisan days, were once known as the Fourth Estate for their ability to provide one more check and balance on government. So, I ask the question that is obvious to everyone except John Kerry; how does a newspaper honestly report on a government that is subsidizing their very existence?

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Filed under Financial, Government, Media

How Much Does the Government Get?

Lately there has been a lot of discussion about the wealthy needing to pay more taxes. This always raises the question for me, why don’t the people doing all this talking make a donation to the welfare program of their choice if they feel so passionately about it? But, nope, they want to force others to do something they aren’t willing to do themselves. Then there’s the recent rash of the President’s nominees who were discovered to have not even met their minimum tax obligation, let alone paid any extra – they want to raise taxes on others, but they won’t even pay their own? Something seems wrong here.

But, I digress. The topic for today is how much does the government actually take from every dollar you or I earn, so let’s take a look. I will start with a nice round $100,000 in salary to make things easy. Now assuming you’re not self-employed, your employer will be paying 6.2% of your salary to Social Security and 1.45% to Medicare. That’s $7,650 above and beyond the $100,000 that your employer has to cough up in your name (keep that in mind the next time they turn you down for a raise – they could have paid you another $600 a month, but it went to the government). Of course, you have to match those contributions via Soc. Sec. and Medicare withholding, so that leaves you with $92,350.

Don’t get excited, we’re just getting started. Let’s move on to the big leagues – income tax. If you’re single and have no children to claim, the government will take a bite to the tune of $20,124 in income tax withholding (maybe they should call it hold-up instead of withholding) leaving you with $72,226. Next, your state will take a bite. In my state of Massachusetts that bite will cost you 5.3% or another $5,300 leaving you with $66,926. If you live in one of the major U.S. cities you’ll likely get hit with a city income tax as well, but we’ll leave that alone for now. So, to this point the government has received $40,724 and your clutching $66,926 of your hard earned money.

But, we’re not finished, not even close.  Here are a few more taxes most Americans pay and to generalize I’ve used the amounts I paid in 2008 as examples:

  • Property tax – $3,100
  • Communications (phone, cable, cell phone) -$138
  • Gasoline (average 35¢/gallon -18.4¢ goes to the feds, the rest to your state) – $263
  • Sales tax (assume 5% and $10,000 a year in purchases) – $500

There goes another $4,001 leaving you with $62,925.  But, there are still more taxes. Capital gains is a fun one; it’s where if you manage to save some of these after-tax dollars, and are brave enough to invest it, and are lucky enough to make a little profit, they have the audacity to take a percentage of that too! There are cigarette and alcohol taxes, travel taxes (many times 10% or more on hotels, airfare, rental cars, etc.), and the list goes on and on.

So, in the end your $100,000 salary nets you roughly $60,000 and your government rakes in $47,650. Seems like a pretty good deal for them since you did all the work. But, here’s the best part… You or I must find a way to pay our bills and save for retirement out of the $60,000. But, the government doesn’t bother with any of that; instead, they spend Trillions more than they take in resulting in a national debt that you will someday end up paying for. Better put some of that $60,000 aside just in case!

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Filed under Financial, Taxation

How Do You Define Excessive?

Not many Americans noticed, but this week the House of Representatives passed legislation giving the Treasury Secretary authority to regulate excessive pay at any company that takes government bailout funds. The fact that this legislation passed on April Fool’s Day, unfortunately, doesn’t make it a joke. No, it’s very, very real.

At first blush, you may take this legislation for entirely reasonable, after all, they are getting taxpayer money and we wouldn’t want them to waste it. But, there are so many problems with this action it’s hard to know where to begin. First, and most obvious, Congress doesn’t bother to define “excessive”. Gee, does anyone think that might be problematic? What a joke this government has become! And, I’m not picking on the Democrats, both parties are absolutely worthless. Pass a law that hinges on a totally ambiguous term like “excessive compensation” without bothering to define even the general parameters of your legislative intent behind the word “excessive.  Are they serious? Really?

The intent of the TARP money was to stabilize U.S. banks to prevent the economy from collapsing. To that end, it would be wise for a bank to keep the money until certain it has avoided any calamity. However, another problem with this action by the Congress is the incredible pressure it places on these financial institutions to pay the money back early, perhaps too early, in order to get out from under government control.

Many of the banks who took TARP funds are now expressing concern that with these compensation restrictions they will struggle to attract the best talent. Their competitors in the U.S. who didn’t take TARP funds and foreign banks, whose governments aren’t so short-sighted, will not face these same restrictions and will have a competitive advantage over the TARP recipients. I know what you’re thinking, “Who cares, they failed and now they’ll have to suffer the consequences”. Well, you better think again. As a taxpayer your money is on the line. Taking any action that hampers the competitiveness of the TARP recipients puts taxpayer money in further unnecessary jeopardy.

So in the end, we have yet another  poorly written law by an inept Congress which will restrict the ability of the banks to hire and/or retain the appropriate talent decreasing the likelihood of eventual repayment of the people’s money. And need I remind you, this government can hardly afford to waste any more of the people’s money.

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Filed under Financial, Government

Little Pink Houses For You and Me

In the latest round of pandering and vote-buying, John McCain has proposed that the U.S. Treasury buy up poorly performing mortgages and re-write them at lower principal values to allow the homeowner to keep their home.  What’s scariest about this is that Mr. McCain is the “fiscally conservative” candidate running in this election.  So, now the American voter who values fairness and prudent fiscal policy is left with no viable choice for President in this election.

Experts have estimated McCain’s program would cost $300 Billion; a hard number to swallow considering the government is $10 Trillion in debt already and headed into a period of declining tax revenues due to the recession.  But perhaps the most disturbing aspect of this is the utter lack of fairness.  Perhaps some specific examples will best illustrate.

Bill and Steve are both in the mid 30’s with young families and good jobs paying similar wages.  4 years ago both purchased homes.  Bill being of sound fiscal mind spent $300,000 on a 3 bedroom 1 and ½ bath home and put $60,000 down.  To find a house within his budget Bill had to go further into the suburbs than he wanted and so has a 25 mile one-way commute each day. He now has a 30 year fixed mortgage of $1500 per month and has never missed a payment.

Steve, on the other hand, wanted it all.  He bought a 5 bedroom, 3 bath house much closer to the city and in much better condition.  Of course this house cost much more than Bill’s, $600,000 to be exact.  To fund this purchase, Steve took advantage of a mortgage product that allowed him to put only $30,000 down and finance the house with an interest only mortgage for the first 3 years.  After that period the payments jumped to $4000 per month and Steve can no longer afford those payments.  He knew this would happen, but foolishly assumed his house would be worth more by now and he would be able to refinance – big mistake.

So, what happens now?  Bill’s house that he paid $300k for is now worth $210,000; he owes $235,000 and so is “upside down” $25,000.  But, Bill is making all his payments, his family is living comfortably if not lavishly and since he plans to be in the home for the next 30 or more years, what it’s worth today isn’t important.  Steve on the other hand is in a mess.  The house that he paid $600k for is now worth $420,000.  He owes $570,000, is “upside down” $150,000 and is missing payments.

Politicians of both parties are proposing we the taxpayer fix Steve’s problem for him by forcing the bank to “re-write the loan” (or as McCain proposes, have the Treasury buy the loan and re-write it).  They propose that since Steve’s house is only worth $420,000 that’s all he should have to pay for.  [Wouldn’t it be great if every time you paid too much for something the Magic Money Fairy came and refunded you the difference?]  Back in the real world, no one is proposing any help for Bill (not that he’s asking for any), they simply want him to keep paying his mortgage while as a taxpayer absorbing the $150,000 write-down on Steve’s house.

What just happened here?  Bill still lives in his humble home and still commutes 25 miles each way every day.  Meanwhile, Steve gets to keep a house he never should have bought and can’t afford.  He has a shorter commute, a better lifestyle, a more valuable asset when the market eventually turns around AND he gets his payments reduced at the expense of his fellow citizens.  Did I just fall down a rabbit hole?  Where’s Alice, ’cause I must be in Wonderland.

Americans must stop and think about what’s going on.  We must remember all of the little things we do in order to afford our homes.  Perhaps you drive an older car even though you’d love to buy a new one.  Maybe you and your family didn’t go on vacation this year because the money just wasn’t there.  Some of you might have decided against a renovation you were considering or not purchased a new flat-screen TV or any of a hundred other things.  Those Americans who pay their bills every month, deny themselves things they can’t afford, maintain a rainy day fund and generally employ sound fiscal policy are being taken advantage of in a grotesque and surprisingly out-in-the-open manner.

Our neighbors bought homes they couldn’t afford, they bought new cars, they went on vacation and bought the latest plasma TV.  Now the tab has come due for their excessive lifestyle and the politicians think those of us who have been responsible should pay it again.  Why not, we pay it every time, right?

Someone will undoubtedly comment, “What do you want to do throw them out in the street?”  No, of course not; no matter how irresponsible they have been, we must find a way to transition people into new living arrangements.  Some possible alternatives include:

–         Allow the foreclosure to move forward but require banks to delay eviction until a new residence can be found.

–         Re-write the loans in a way that makes them affordable today, but doesn’t saddle responsible taxpayers with other people’s debt.  For example, what if Steve’s loan from above was re-written so that he was making principal and interest payments on the $420,000 only for now.  The $150,000 the government is proposing to “write down” could instead be put on hold and come due in a 10 year balloon payment.  This way, the debt is still Steve’s, but he’s been provided a way out.  The bank won’t love it, but it’s got to be better for them than another foreclosure.

–         Maybe banks should set up separate real estate management firms, have these firms “buy” the homes out of foreclosure and then turn-around and rent the homes to the previous owner.  This way the individual gets to continue living there, the bank is clearing its balance sheet, the real estate management firm is generating cashflow and as an added bonus, the real estate market has less inventory sitting idle and driving down prices.

As a child, when I would complain about something being unfair, my mother would often reply, “Life isn’t fair”.  I’ve learned over the years that she was right, but c’mon, this is going TOO FAR!  Our politicians must stop assuming they can keep going to the well of fiscally responsible Americans (a well that has shrunk dramatically in recent years) every time they want to bail out an irresponsible group be they on Wall Street or across the street.

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Filed under Financial