Obama's debt reduction plan:

Forum adverts like this one are shown to any user who is not logged in. Join us by filling out a tiny 3 field form and you will get your own, free, dakka user account which gives a good range of benefits to you:

No adverts like this in the forums anymore.
Times and dates in your local timezone.
Full tracking of what you have read so you can skip to your first unread post, easily see what has changed since you last logged in, and easily see what is new at a glance.
Email notifications for threads you want to watch closely.
Being a part of the oldest wargaming community on the net.

If you are already a member then feel free to login now.

**halonachos**

Rented Tritium wrote:
halonachos wrote:Why does everyone assume that the poor are poor due to some sort of medical bills? There are people who are poor because they don't have a good paying job, there are poor people out there who are poor because they fethed up. There are rich people out there who are rich due to hard work and some of those rich people become poor because they feth up.

Not everyone is in debt because they are dieing or have some long term illness.

You left out all the categories that hurt your case. Some poor people are poor because they weren't born into the correct circumstances, some people are rich because they were.

Not everyone in debt is in debt because they have illness, and not everyone rich is rich because they worked hard

You HAD to see this coming as an argument, dude. Rich and poor are not actually tied to how much hard work you do. Once you look at a sufficiently large sample size, the only real indicator if wealth is the wealth of your parents. Hard work my eye.

Except that there are some people who are rich because of the work they did, Bill Cosby for example. Then of course there are those like Paris Hilton who are the exact opposite of it. We have people like Steve Jobbs and the founder of Ikea and other entrepreneurs who work on their idea and then make enough that they can retire and live a nice life. Then we also have poor people who become middle-class by working hard. You don't have to be poor and then become rich to be a success, you just have to become middle-class which is possible for most poor people. People can survive off of a less than 30k a year budget with multiple children, and people can raise their economic status. My family has only been "rich" for almost half a year and most of the time we were lower middle-class. But as Melissia said my dad got lucky that he was willing to work hard and study. Now he makes more than my college professors do.

**darkPrince010**

Well, let's say your dad ended up unlucky, with a condition or some series of events entirely not his own (Horrific car accident against an uninsured other vehicle, sued successfully over something trivial, medical issues not covered by insurance, etc.) putting him in debt of $X, with minimum interest payments of $Y per month. If he makes less than Y+ basic necessities per month, he has no way apart from outside help to escape his debt.

Was this your dad's fault? Did he feth up somewhere?

No. Examples like this happen all the time. For every anecdote you have of people like your father and his hard work, people like me have an anecdote of my mother-in-law getting fired from her $60K/year job due to whistleblowing illegal practices against her hospital she worked at. gak happens, and trying to claim that it doesn't affect financial security is patently false.

**dogma**

halonachos wrote:Why does everyone assume that the poor are poor due to some sort of medical bills? There are people who are poor because they don't have a good paying job, there are poor people out there who are poor because they fethed up. There are rich people out there who are rich due to hard work and some of those rich people become poor because they feth up.

Not everyone is in debt because they are dieing or have some long term illness.

And not being in debt does not mean you aren't poor, just like being a hard worker does not mean you are, or will be, rich or successful.

In any case, you're dodging the initial point, which is that the better off you are financially, the greater your general margin for error is regarding "life decisions" for lack of a better term.

**sebster**

Shadowseer_Kim wrote:This does not sound like much of a plan to me. Warren Buffet, while claiming the rich should be taxed more, takes every chance he gets to use the loopholes to pay less in taxes.

There is a massive difference between paying more tax, and making the slightest bit of difference to the federal deficit. Even someone with very deep pockets like Warren Buffet, could pay an extra 10 million dollars out of pure charity, and he'd reduce the federal deficit by 0.001%.

However, if the tax paid by the top 10% of the US was to increase by 5%, an extra $176 billion would be raised, reducing the 2010 federal deficit by about 15%.

Any money he promised to hand over himself would be a pointless, grandstanding gesture that achieved nothing material. But a tax increase across the top 10% of society would make a massive dent in the deficit.

If he honestly thought he should pay more, he would write a bigger check to the IRS. They never turn down a bigger tax payment. People are free to pay more in tax anytime they want.

#1 close all loopholes, and get rid of ALL deductions.

#2 12% income tax or whatever it would be across the board, for everyone that makes income through work, investments, etc, including all compensation.

So simple, someone with a 4th grade education could figure it out, and the "form" would fit on a post card.

Tax systems aren't complicated because you pay different rates of tax at different levels of income. That kind of thing takes up half a page.

Tax systems are complicated because it is very hard to work out exactly what someone's income was for the year. As an example, if I sell a table for more than I bought it for, it's likely a windfall gain and a bit of luck. But what if I sell a dozen such tables each month, and spend my days travelling about identifying tables that I can fix up and then sell on to other people.

Nor is it any kind of solution to say 'get rid of all deductions' - a supermarket buys in staplers for $3 a piece and sells them for $5 - buying in those staplers is a deduction that represents a cost of doing business. Ignoring that for tax purposes would be ridiculous.

Automatically Appended Next Post:

halonachos wrote:Why does everyone assume that the poor are poor due to some sort of medical bills? There are people who are poor because they don't have a good paying job, there are poor people out there who are poor because they fethed up. There are rich people out there who are rich due to hard work and some of those rich people become poor because they feth up.

Not everyone is in debt because they are dieing or have some long term illness.

The point wasn't about poverty but about bankruptcy. I picked the most common cause of bankruptcy in the US and that is outstanding medical bills (excepting the last couple of years in which the GFC has taken over).

Automatically Appended Next Post:

biccat wrote:Well, not always. You don't necessarily lose your house and car (under US law). A lot of bankruptcies aren't for stuff like a house and car (because those get repossessed/foreclosed on) but for unsecured debt.

The point remains, a guy fresh out of college could simply declare bankruptcy to wipe his debt, but still keep the asset he gained from incurring that debt - his knowledge.

I think he was talking about double taxation as it relates to corporate profits. They are taxed first as corporate profits (35%?) and then they're taxed again when distributed as dividends (15%).

That is an example of double dipping, and it blows my mind the US tolerates it (either the dividend should carrying a franking credit equal to the tax already paid, or there should be no corporate tax paid on profits set to be paid as dividends).

But that isn't what halonachos mentioned, he complained about corporate taxes and capital gains, two entirely distinct cash flows.

**Ouze**

Frazzled wrote:Its part of the problem with the Obama shift to government loans.

This is one of my favorite conservative talking points: that under Obama, the government "took over" the student loan business. I like it because it immediately reveals the poster as someone willing to repeat things they've heard other people say without having any knowledge at all of what the situation actually was or doing even the least bit of cursory googling.

Here's how it actually is. Prior to this change, the government offered guaranteed student loans. (Whether they should or not is a whole other thread). The idea behind this is that if Jimmy wants to go to college but is poor, he can get one of these loans no matter how crappy his credit is. He goes to Citibank or whatever, and gets a 10K loan at like 5% interest. Citibank gives him the 10K and collects the interest (5%) for the life of the loan, as well as the principal once Jimmy gets out of school and repayment starts. If Jimmy decides paying this 10K back is for the birds and defaults, then Citibank hands whatever is left on the 10K note back to the treasury and gets 100% of their money back (also keeping however much of the interest/pofits they've managed to get until Jimmy actually defaulted - in the case of subsidized loans, the government pays the interest). That's the guarantee - Citibank can't lose money on this. They have some minimal overhead for bookkeeping and such but it's pretty much free money that has no risk attached. Upon defaulting, point the government then enforces the terms of the loan by the usual methods - seizing tax refunds, generally - until they've been made whole as well.

At some point, it was realized that this was, in essence, welfare. You know, the kind you hate poor people getting? The whole idea of interest on a loan is to make loans profitable for banks, and the amount of interest is pinned to how risky the loan is, how much the bank stood to lose if you decided not to pay it back. But the banks in these loans had no risk whatsoever - they get to keep the interest, and if you bail, they get made whole by the taxpayer. It's 100% risk free money.

The changes that were made were that if you want a guaranteed student loan now, it's administered directly by the US Treasury. The interest collected on the loans now goes to the treasury, and they continue to do the enforcement in case of default; in short they take all the risks and they reap all the benefits. The banking industry can still offer student loans as much as they'd like to, but now they have to actually assume the risk that comes with defaulting since they own them. In short, they have to actually compete for customers free market style, just as they profess they wish they could (but are actually loathe to).

So, that's what actually happened. I'm sure it will be given all due weight by those who consider cutting welfare benefits to balance the budget to be "shared sacrifice" while decrying increasing taxes on the wealthiest 1% of Americans to balance the budget to be "class warfare".

So far as the rule to have made student loans nearly impossible to discharge via bankruptcy, that change was done during a large spate of people finishing school and then, right after graduation, declaring bankruptcy and then dumping all their obligations right at the start of their career. Don't hate the rules lawyer, hate the game, I guess.

edit 3x, man I can't spell

**sebster**

halonachos wrote:Except that there are some people who are rich because of the work they did, Bill Cosby for example. Then of course there are those like Paris Hilton who are the exact opposite of it. We have people like Steve Jobbs and the founder of Ikea and other entrepreneurs who work on their idea and then make enough that they can retire and live a nice life. Then we also have poor people who become middle-class by working hard. You don't have to be poor and then become rich to be a success, you just have to become middle-class which is possible for most poor people. People can survive off of a less than 30k a year budget with multiple children, and people can raise their economic status. My family has only been "rich" for almost half a year and most of the time we were lower middle-class. But as Melissia said my dad got lucky that he was willing to work hard and study. Now he makes more than my college professors do.

And what proportion of hard working people do you think become well to do?

Because it's very interesting to me that the US has the worst social mobility among all developed nations. A hard working person in the US finds it harder to climb up to the middle class because there are more obstacles there than elsewhere in the world.

**Kilkrazy**

I'm not understanding this double dipping concept.

If a company makes a profit, that belongs to the company, and is taxed (corporation tax).

If the company pays out a dividend, it has to pay another tax? Is that how it works?

Then presumably the recipient of the dividend pays income tax on it.

Why would companies ever pay a dividend?

**sebster**

Kilkrazy wrote:I'm not understanding this double dipping concept.

If a company makes a profit, that belongs to the company, and is taxed (corporation tax).

If the company pays out a dividend, it has to pay another tax? Is that how it works?

That's how it works, yeah.

It gets crazier when you consider two guys each earning $100,000. One guy owns his own company, and generated $100,000 profit through that. The other guy is just a professional earning a salary.

So the incorporated business pays company tax of 35%, then distributes the remaining $65,000, and pays 15% on that, leaving him with $55,250. Meanwhile the owner of the unincorporated company just declares the profit as personal income, and pays about $22,000, leaving him with $78,000.

Two guys making the same amount of money. Because of the inequalities in the US tax system one guy pays about twice the tax of the other guy. It's mad. And this is after Bush came in and fixed it. Seriously, before he reformed it the company owner got even more screwed.

Why would companies ever pay a dividend?

There isn't much of a reason, even ignoring tax, as I was saying earlier people prefer having the funds in the company than paid to them as dividends (that's why they put them in the company in the first place). Seriously, a company cum dividend of $1 will only lower by about 95c ex dividend. Which gets really weird, and makes me wonder why the most valuable companies in effect are the ones that only have capital growth, and no actual cash flow to the holder. I mean, it's not a ponzi scheme but it starts looking like one.

**Kilkrazy**

A person in the situation described probably would not incorporate their company, though, as there is no benefit in it.

**Frazzled**

Shadowseer_Kim wrote:This does not sound like much of a plan to me. Warren Buffet, while claiming the rich should be taxed more, takes every chance he gets to use the loopholes to pay less in taxes.

If he honestly thought he should pay more, he would write a bigger check to the IRS. They never turn down a bigger tax payment. People are free to pay more in tax anytime they want.

#1 close all loopholes, and get rid of ALL deductions.

#2 12% income tax or whatever it would be across the board, for everyone that makes income through work, investments, etc, including all compensation.

So simple, someone with a 4th grade education could figure it out, and the "form" would fit on a post card.

Its just this kind of thinking that eliminates the need for lobbyists. And where are our poor politicians going to get caompaign and contriibutions and stock tips from? PLease won't someone think of the children...er politicians?

Automatically Appended Next Post:

Ouze wrote:
Frazzled wrote:Its part of the problem with the Obama shift to government loans.

This is one of my favorite conservative talking points: that under Obama, the government "took over" the student loan business. I like it because it immediately reveals the poster as someone willing to repeat things they've heard other people say without having any knowledge at all of what the situation actually was or doing even the least bit of cursory googling.

Here's how it actually is. Prior to this change, the government offered guaranteed student loans. (Whether they should or not is a whole other thread). The idea behind this is that if Jimmy wants to go to college but is poor, he can get one of these loans no matter how crappy his credit is. He goes to Citibank or whatever, and gets a 10K loan at like 5% interest. Citibank gives him the 10K and collects the interest (5%) for the life of the loan, as well as the principal once Jimmy gets out of school and repayment starts. If Jimmy decides paying this 10K back is for the birds and defaults, then Citibank hands whatever is left on the 10K note back to the treasury and gets 100% of their money back (also keeping however much of the interest/pofits they've managed to get until Jimmy actually defaulted - in the case of subsidized loans, the government pays the interest). That's the guarantee - Citibank can't lose money on this. They have some minimal overhead for bookkeeping and such but it's pretty much free money that has no risk attached. Upon defaulting, point the government then enforces the terms of the loan by the usual methods - seizing tax refunds, generally - until they've been made whole as well.

At some point, it was realized that this was, in essence, welfare. You know, the kind you hate poor people getting? The whole idea of interest on a loan is to make loans profitable for banks, and the amount of interest is pinned to how risky the loan is, how much the bank stood to lose if you decided not to pay it back. But the banks in these loans had no risk whatsoever - they get to keep the interest, and if you bail, they get made whole by the taxpayer. It's 100% risk free money.

The changes that were made were that if you want a guaranteed student loan now, it's administered directly by the US Treasury. The interest collected on the loans now goes to the treasury, and they continue to do the enforcement in case of default; in short they take all the risks and they reap all the benefits. The banking industry can still offer student loans as much as they'd like to, but now they have to actually assume the risk that comes with defaulting since they own them. In short, they have to actually compete for customers free market style, just as they profess they wish they could (but are actually loathe to).

So, that's what actually happened. I'm sure it will be given all due weight by those who consider cutting welfare benefits to balance the budget to be "shared sacrifice" while decrying increasing taxes on the wealthiest 1% of Americans to balance the budget to be "class warfare".

So far as the rule to have made student loans nearly impossible to discharge via bankruptcy, that change was done during a large spate of people finishing school and then, right after graduation, declaring bankruptcy and then dumping all their obligations right at the start of their career. Don't hate the rules lawyer, hate the game, I guess.

edit 3x, man I can't spell

Wait, thats a conservative talking point? Can someone send me these talking points. I hate it when others steal my ideas.

Automatically Appended Next Post:

Kilkrazy wrote:A person in the situation described probably would not incorporate their company, though, as there is no benefit in it.

Its not quite that simple however.

Personal corps (the real evil) pay personal tax rates, yet the millionaire in question typically runs through their personal expenses. In this manner their absolute tax rate and total $ paid in taxes is usually lower than most of the employees. Back in ancient times I ran through many business and personal statements and was appalled at how little you could pay if you did it right.

**Ouze**

Frazzled wrote:Personal corps (the real evil) pay personal tax rates, yet the millionaire in question typically runs through their personal expenses. In this manner their absolute tax rate and total $ paid in taxes is usually lower than most of the employees. Back in ancient times I ran through many business and personal statements and was appalled at how little you could pay if you did it right.

How little, and using what techniques? I'm only familiar with the famous ones used by megacorps.

**Frazzled**

Ouze wrote:
Frazzled wrote:Personal corps (the real evil) pay personal tax rates, yet the millionaire in question typically runs through their personal expenses. In this manner their absolute tax rate and total $ paid in taxes is usually lower than most of the employees. Back in ancient times I ran through many business and personal statements and was appalled at how little you could pay if you did it right.

How little, and using what techniques? I'm only familiar with the famous ones used by megacorps.

At the time I was pulling the massive salary of $35K. I was reviewing personal financial statements and corp statements. You needed personal guarantees as the small business loans typicallyt required credit enhancement. Corp statements and tax statements had them making less money than me (and paying less taxes). Personal statements had them making ten times as much as me. Thinking back it still maddening, and my respect for "small business owners" is pretty nonexistent.

**CptJake**

sebster wrote:
Shadowseer_Kim wrote:This does not sound like much of a plan to me. Warren Buffet, while claiming the rich should be taxed more, takes every chance he gets to use the loopholes to pay less in taxes.

There is a massive difference between paying more tax, and making the slightest bit of difference to the federal deficit. Even someone with very deep pockets like Warren Buffet, could pay an extra 10 million dollars out of pure charity, and he'd reduce the federal deficit by 0.001%.

However, if the tax paid by the top 10% of the US was to increase by 5%, an extra $176 billion would be raised, reducing the 2010 federal deficit by about 15%.
Any money he promised to hand over himself would be a pointless, grandstanding gesture that achieved nothing material. But a tax increase across the top 10% of society would make a massive dent in the deficit.

Huge assumption there. You assume the Fed Gov't decreases spending at the same time it increases revenue. That has not been the case and I doubt the current administration would use an extra $176B to reduce deficit or even better pay down the debt.

**biccat**

sebster wrote:That is an example of double dipping, and it blows my mind the US tolerates it (either the dividend should carrying a franking credit equal to the tax already paid, or there should be no corporate tax paid on profits set to be paid as dividends).

But that isn't what halonachos mentioned, he complained about corporate taxes and capital gains, two entirely distinct cash flows.

Most people don't distinguish between dividends and capital gains taxes because they're the same rate. I'm assuming he meant dividends, not capital gains. However you're right, if he did mean capital gains (not dividends) then he's wrong on double taxation.

Note that the Bush tax cuts added the category of dividends, before that they were treated as ordinary income.

Kilkrazy wrote:A person in the situation described probably would not incorporate their company, though, as there is no benefit in it.

Well, there's a huge benefit to incorporation: limited liability. If you're unincorporated (DBA or General Partnership) then any acts that you take on behalf of the company you're personally liable for. So if you sign a loan as President of Bill's Plumbing Repair, you (Bill) are still personally liable on the debt. Similar pass-through liability exists for torts and negligence committed in the course of the plumbing repair business.

If you're incorporated then the corporation is a separate legal entity with it's own liability and the people directing the corporation (whether directors, shareholders, or officers) are not personally liable for the debts of the corporation, whether in contract, tort, or otherwise.

However, the US has realized the double-taxation problem in corporations and created a number of corporate-alternatives, including LLCs (Limited Liability Companies, which are one of the most common corporate structures). LLCs offer the same limited liability protection but also include what is known as "pass-through taxation." Basically, any income of the company is imputed to the owner of the corporation (or multiple owners according to their shares) who then pays personal tax on the profits, deducting the company expenses.

**Rented Tritium**

halonachos wrote:
Rented Tritium wrote:
halonachos wrote:Why does everyone assume that the poor are poor due to some sort of medical bills? There are people who are poor because they don't have a good paying job, there are poor people out there who are poor because they fethed up. There are rich people out there who are rich due to hard work and some of those rich people become poor because they feth up.

Not everyone is in debt because they are dieing or have some long term illness.

You left out all the categories that hurt your case. Some poor people are poor because they weren't born into the correct circumstances, some people are rich because they were.

Not everyone in debt is in debt because they have illness, and not everyone rich is rich because they worked hard

You HAD to see this coming as an argument, dude. Rich and poor are not actually tied to how much hard work you do. Once you look at a sufficiently large sample size, the only real indicator if wealth is the wealth of your parents. Hard work my eye.

Except that there are some people who are rich because of the work they did, Bill Cosby for example. Then of course there are those like Paris Hilton who are the exact opposite of it. We have people like Steve Jobbs and the founder of Ikea and other entrepreneurs who work on their idea and then make enough that they can retire and live a nice life. Then we also have poor people who become middle-class by working hard. You don't have to be poor and then become rich to be a success, you just have to become middle-class which is possible for most poor people. People can survive off of a less than 30k a year budget with multiple children, and people can raise their economic status. My family has only been "rich" for almost half a year and most of the time we were lower middle-class. But as Melissia said my dad got lucky that he was willing to work hard and study. Now he makes more than my college professors do.

I am not sure how you think listing a bunch of specific instances helps your argument. I never made any claims that no poor people are lazy and no rich people are awesome hard workers. My argument is all about the large numbers.

See, there are more than 10 people in the country. You can't set economic policy on what a handful of people you could think of are doing. You set it on enormous sets of data and studies with huge sample sizes and when you look at the numbers, people with rich parents do better on average to the extent that it is the strongest indicator of future wealth.

sebster wrote:
Rented Tritium wrote:I want someone to explain to me clearly how having a large national debt hurts us.

As in, I want someone to explain mechanically the bad things it does to us.

All the stuff about the US defaulting and being like Greece is absolute nonsense, the US is decades away from the point where people sensibly begin to predict that default will happen decades from then if there aren't changes in policy, but that doesn't mean there aren't negative consequences.

The first and most simple consequence is that you have to keep paying interest. Right now the US is paying about $200 billion a year in interest. That's a whole lot of money that could have been going towards something useful.

The other effect is called crowding out. Borrowings don't just emerge from the either, they're drawn from personal and corporate savings, both domestic and abroad. When the public sector is drawing those funds to provide for it's deficits, then that money isn't available for investment, and this hurts long term growth.

They are serious concerns,

Automatically Appended Next Post:

halonachos wrote:Your generalisation is also poor, not every single poor person is starving, works for a scrooge, and has a child missing a leg along with several other children. People can find ways to save money, and if a person becomes poor it is not my fault nor is it the fault of anyone else.

No, seriously, the poor save considerably less than the rich. This has been observed and tracked for just short of a hundred years by now. Go look up marginal consumption.

@AlmightyWalrus: Nobody cries when a rich person loses their income, nobody cried out when Michael Jackson went bankrupt. It seems that its only when the average joe goes bankrupt that anyone ever cares. So unless a rich person spends themselves into oblivion and you back them up then I don't want to hear from you.

There is a difference between spending all your money on a children's amusement park for private use and being unable to pay $400,000 in medical bills after you were ruled to have a 'pre-existing condition'.

Automatically Appended Next Post:

Frazzled wrote:Its interesting that sales taxes are a darling of certain conservative circles, whilst VAT taxes are a darling of more social governments.

It just goes to show the silliness inherent in these kinds of debates. The right loves to dream about replacing income tax with sales tax, to make all those horrible, horrible poor people their fair share. The left loves to dream about a VAT making sure that the rich will have to pay taxes because all their loopholes let them avoid income tax.

Both sides seem oblivious to the idea that setting tax policy based on spite and resentment is guaranteed to give stupid results.

Automatically Appended Next Post:

Frazzled wrote:You're right. If we followed proper economic theory, that cash would be dividended to its stockholders. International Capital Gains treatment, legal limitations, and realization we're in GR II are limiting that.

Studies of stock prices cum and ex dividend have shown that the market doesn't value $1 paid from the company as highly as it does a dollar retained in the company.

That is, the share price on the day of dividend payment might be $35, the day after the $1 dividend it is likely to drop not to $34 as most people assume, but to $34.05 or thereabouts, depending on the company.

The conclusion is that the market doesn't actually value dividend payments as highly as it does cash retained in the company.

Automatically Appended Next Post:

Rented Tritium wrote:If you go to a loan shark for a pile of money to spend on strippers, they can only harass you so much and bankruptcy is still an option, yet if you borrow for school, they own you.

That's kind of insane.

It seems to me kind of an inevitable consequence of any system that is willing to loan out huge amounts of money to students with no capital tied to the loan. I mean, otherwise most everyone would just wrack up a hundred thousand in student loans, finish their degree, declare bankruptcy and hand over the poker table and half packet of saltines they own, giggle and start afresh with a tertiary education and no debt.

Automatically Appended Next Post:

biccat wrote:Do you know what it means to guarantee a loan?

If so, why would you be surprised that the government would not allow them to be discharged in bankruptcy?

Pretty much. Thing is, if you declare bankruptcy normally then the things you bought that led to you bankruptcy like a car, house or failing business are taken off of you. You're left to start over with nothing. It's good that a person is able to start over from new, but there's no doubting that bankruptcy sucks.

But they can't take your college education off of you. It's stuck in your head. So normal bankruptcy disincentives just don't work, and so it needs different laws.

Automatically Appended Next Post:

halonachos wrote:Warran Buffet is a fraud at the least of the insults. The rich pay a capital gains tax and an income tax, their income tax rate is 35% while the capital gains tax is 15% on any profit they get from the stock market, note the money going into the market has already been taxed so the government is double dipping on this one.

That's not what double dipping means.

The US actually has double dipping, there is a real complaint there relating directly to dividend payment and income tax, where a single cash inflow is taxed twice as it is defined under two seperate pieces of legislation. That's what double dipping means.

Being taxed on dividends drawn out of a company, and then taxed on the growth in the asset value when you sell the stock is seeing two different cash inflows taxed in different ways. It isn't double dippling.

This is an excellent post. I would like to point out though that if you take out money for a wedding or something, you can still discharge with bankruptcy, so the very nature of an education does not preclude that. Would you need to put up some collateral for your student loan? Maybe yeah. That would kind of suck at first, but like I said before, the price of the cheaper schools would drop and the loans would get smaller over the longterm.

**Kilkrazy**

biccat wrote:
sebster wrote:That is an example of double dipping, and it blows my mind the US tolerates it (either the dividend should carrying a franking credit equal to the tax already paid, or there should be no corporate tax paid on profits set to be paid as dividends).

But that isn't what halonachos mentioned, he complained about corporate taxes and capital gains, two entirely distinct cash flows.

Most people don't distinguish between dividends and capital gains taxes because they're the same rate. I'm assuming he meant dividends, not capital gains. However you're right, if he did mean capital gains (not dividends) then he's wrong on double taxation.

Note that the Bush tax cuts added the category of dividends, before that they were treated as ordinary income.

Kilkrazy wrote:A person in the situation described probably would not incorporate their company, though, as there is no benefit in it.

Well, there's a huge benefit to incorporation: limited liability. If you're unincorporated (DBA or General Partnership) then any acts that you take on behalf of the company you're personally liable for. So if you sign a loan as President of Bill's Plumbing Repair, you (Bill) are still personally liable on the debt. Similar pass-through liability exists for torts and negligence committed in the course of the plumbing repair business.

If you're incorporated then the corporation is a separate legal entity with it's own liability and the people directing the corporation (whether directors, shareholders, or officers) are not personally liable for the debts of the corporation, whether in contract, tort, or otherwise.

However, the US has realized the double-taxation problem in corporations and created a number of corporate-alternatives, including LLCs (Limited Liability Companies, which are one of the most common corporate structures). LLCs offer the same limited liability protection but also include what is known as "pass-through taxation." Basically, any income of the company is imputed to the owner of the corporation (or multiple owners according to their shares) who then pays personal tax on the profits, deducting the company expenses.

Thanks for the info.

I studied UK company law during my management degree and was not aware how much things differ in the USA. Not hugely, it seems, though the accounting law may be different.

Presumably if someone chooses to incorporate their business the advantage of limited liability is worth the increase in taxes otherwise they would not do it.

**Frazzled**

Limited liability, and as noted its a Real World (TM) means to also run through a lot of personal expenses.

**Rented Tritium**

Yeah, it's the best of both worlds, but it also comes with some downsides from both.

**halonachos**

sebster wrote:

Automatically Appended Next Post:

halonachos wrote:Why does everyone assume that the poor are poor due to some sort of medical bills? There are people who are poor because they don't have a good paying job, there are poor people out there who are poor because they fethed up. There are rich people out there who are rich due to hard work and some of those rich people become poor because they feth up.

Not everyone is in debt because they are dieing or have some long term illness.

The point wasn't about poverty but about bankruptcy. I picked the most common cause of bankruptcy in the US and that is outstanding medical bills (excepting the last couple of years in which the GFC has taken over).

I wasn't talking about bankruptcy though.

Automatically Appended Next Post:

darkPrince010 wrote:Well, let's say your dad ended up unlucky, with a condition or some series of events entirely not his own (Horrific car accident against an uninsured other vehicle, sued successfully over something trivial, medical issues not covered by insurance, etc.) putting him in debt of $X, with minimum interest payments of $Y per month. If he makes less than Y+ basic necessities per month, he has no way apart from outside help to escape his debt.

Was this your dad's fault? Did he feth up somewhere?

No. Examples like this happen all the time. For every anecdote you have of people like your father and his hard work, people like me have an anecdote of my mother-in-law getting fired from her $60K/year job due to whistleblowing illegal practices against her hospital she worked at. gak happens, and trying to claim that it doesn't affect financial security is patently false.

Okay dude, you obviously have not read my previous posts at all. So let me make it easier for you to read.

People who are disabled and unable to work would get benefits. I said this in my first post, my reasoning was that the majority of people don't plan to disable themselves by choice. I hope you finally get it now that I made the text large and bold

From my first post:

halonachos wrote:All in all there are very few people who actually deserve their tax breaks, wounded veterans and people who are disabled deserve benefits because they most likely did not choose to become disabled.

**AlmightyWalrus**

halonachos wrote:
Okay dude, you obviously have not read my previous posts at all. So let me make it easier for you to read.

People who are disabled and unable to work would get benefits. I said this in my first post, my reasoning was that the majority of people don't plan to disable themselves by choice. I hope you finally get it now that I made the text large and bold

From my first post:

halonachos wrote:All in all there are very few people who actually deserve their tax breaks, wounded veterans and people who are disabled deserve benefits because they most likely did not choose to become disabled.

Dude, before slamming other people for not reading your posts, read the one you're responding to. Only one of the three examples he gave you had the person being fethed over being disabled by some illness.

**darkPrince010**

And you obviously didn't read mine:

Well, let's say your dad ended up unlucky, with a condition or some series of events entirely not his own (Horrific car accident against an uninsured other vehicle, sued successfully over something trivial, medical issues not covered by insurance, etc.)

While medical costs are the main reason for bancruptcy or financial destitution, they're by no means the only uncontrollable reason for bancruptcy/financial destitution.

What about foreclosures on a house due to your formerly-respectable bank making poor loan purchases and folding?

What about unpredictable natural disasters that destroy your home and property?

What about being fired and blacklisted for acting ethically within your profession?

Again, I reiterate to aid in reading comprehension: While medical costs are the main reason for bancruptcy or financial destitution, they're by no means the only uncontrollable reason for bancruptcy/financial destitution. You seem to assume we're arguing that medical events and disablity are the only reason for being poor. They're not, and to assume otherwise is to ignore countless research and articles proving that, overall (Meaning that your anecdotes aren't in sufficient number to outweigh statistical signficance), financial mobility has feth-all to do with your "hard work" and everything to do with who your parents were.

EDIT: @walrus: Lol. Ninja'd! But to be fair, the car accident could be vehicular damage and/or medical harm

**biccat**

darkPrince010 wrote:What about foreclosures on a house due to your formerly-respectable bank making poor loan purchases and folding?

I'm pretty confident in saying that this has happened in very few, if any, cases.

darkPrince010 wrote:What about unpredictable natural disasters that destroy your home and property?

Insurance. That's what it's for.

darkPrince010 wrote:What about being fired and blacklisted for acting ethically within your profession?

If your profession has an ethical responsibility then you sue your employer and look for an honest one who won't put you in a position where you will violate company policy by acting ethically. However, I'm reasonably sure that this is a red herring.

**darkPrince010**

Houses: There was a lot of problems with foreclosure during the banks fiasco when the recession started to hit.

Disasters: Whet if you can't afford insurance, if it's a choice between food and shelter or just an insured shelter?

Blacklisting: Nope. I have an anecdote of my mother-in-law having that exact scenario

The lawsuit barely covered court costs despite her winning it, and she hasn't been able to get anyone within her profession to even consider her as an employee (She has been applying at other jobs, to head off the inevitable "She's a lazy unemployed donkey-cave" line of bs)

Medical costs are the main reason for financial hardship, but they are not the only reason for financial hardship. I'm simply offering some examples of scenarios in which non-medical gak happens, and someone becomes poor as a result of it.

**biccat**

darkPrince010 wrote:Houses: There was a lot of problems with foreclosure during the banks fiasco when the recession started to hit.

Even if a bank is going under, most mortgages are still valuable assets, so someone else could buy it. Further, even when a bank does go under, that doesn't impair the buyer's title, nor does it affect the contract terms, including mortgage amount and interest rate.

I really can't see how a mortgage-holding bank "going under" would in any way negatively affect a person's mortgage. Maybe if the owner of the debt gets confusing and you don't remit payment, but that's a failure on the buyer's end, and there exists a remedy for it.

darkPrince010 wrote:Disasters: Whet if you can't afford insurance, if it's a choice between food and shelter or just an insured shelter?

Then you're already poor, so claiming it as a cause of poverty is tenuous.

darkPrince010 wrote:Blacklisting: Nope. I have an anecdote of my mother-in-law having that exact scenario The lawsuit barely covered court costs despite her winning it, and she hasn't been able to get anyone within her profession to even consider her as an employee

Depends on the profession and circumstances. Even assuming the truth of your allegation (fired for being ethical, blackballed for being ethical), an anecdote doesn't suggest that this is a particularly important or common occurrence. Nor does it prove that poverty necessarily follows (there are other professions out there).

darkPrince010 wrote:Medical costs are the main reason for financial hardship, but they are not the only reason for financial hardship. I'm simply offering some examples of scenarios in which non-medical gak happens, and someone becomes poor as a result of it.

I'm not disagreeing with this point. However, absent some life-altering injury or disability, povery tends to be a state of mind.

**darkPrince010**

Perhaps. I don't disagree that some people are poor because they don't apply themselves, but I also believe that many other people apply themselves all their lives and still remain within the poverty bracket.

**dogma**

CptJake wrote:
sebster wrote:
However, if the tax paid by the top 10% of the US was to increase by 5%, an extra $176 billion would be raised, reducing the 2010 federal deficit by about 15%.
Any money he promised to hand over himself would be a pointless, grandstanding gesture that achieved nothing material. But a tax increase across the top 10% of society would make a massive dent in the deficit.

Huge assumption there. You assume the Fed Gov't decreases spending at the same time it increases revenue. That has not been the case and I doubt the current administration would use an extra $176B to reduce deficit or even better pay down the debt.

That's not an assumption, its contextualization.

**halonachos**

darkPrince010 wrote:And you obviously didn't read mine:

Well, let's say your dad ended up unlucky, with a condition or some series of events entirely not his own (Horrific car accident against an uninsured other vehicle, sued successfully over something trivial, medical issues not covered by insurance, etc.)

I read your post, but I guess you forgot adding this little tid-bit at the end.

darkPrince010 wrote:he has no way apart from outside help to escape his debt.

I was replying to that part, seriously its bad when you forget what you wrote yourself. This very ending is what I was responding to, he would be getting outside help because he is then disabled and unable to work which means he would be getting help to pay off his debt.

As far as a person's house being destroyed, that's often covered under insurance policies. Things like car insurance, health insurance, and home insurance exist. If you say that the poor have no access to those policies then you're forgetting the main point. Your point was that people become poor because of the loss of a house or become ill. Chances they had a job if they're not poor and chances are that job provided health insurance and chances are they could afford home and auto insurance as well as life insurance.

Now we have major disasters created by things like hurricanes or forest fires, funds for that exist and people get that already. The federal government pays for natural disaster recovery if people say that they have lost something thanks to a disaster.

Now as far as whistle-blowing goes, the people who blow the whistles and lose their job can be compensated and if the first action was illegal enough(let's say something like Bernie Madoff) the offender has their assets frozen and can be taken to compensate people who have suffered from their wrongdoing through the legal process.

A person looses their house due to a bank failing, its called the FDIC and I'm sure that there are other federal measures that protect those who do lose their house.

The federal government does a lot to take care of people who get screwed over by somebody else.

**CptJake**

dogma wrote:
CptJake wrote:
sebster wrote:
However, if the tax paid by the top 10% of the US was to increase by 5%, an extra $176 billion would be raised, reducing the 2010 federal deficit by about 15%.
Any money he promised to hand over himself would be a pointless, grandstanding gesture that achieved nothing material. But a tax increase across the top 10% of society would make a massive dent in the deficit.

Huge assumption there. You assume the Fed Gov't decreases spending at the same time it increases revenue. That has not been the case and I doubt the current administration would use an extra $176B to reduce deficit or even better pay down the debt.

That's not an assumption, its contextualization.

Thanks for the attempt to correct me, but I chose the word I wanted.

Assumption: something taken for granted; a supposition. Synonyms: presupposition; hypothesis, conjecture, guess, postulate, theory.

I'll stick with it. I'm not a pedant and the definition meets my intent just fine.

**Melissia**

darkPrince010 wrote:Perhaps. I don't disagree that some people are poor because they don't apply themselves, but I also believe that many other people apply themselves all their lives and still remain within the poverty bracket.

Indeed. Quite a few people work their asses off rying to get ahead and not managing it because of limited resources. Just don't tell a republican that-- they'll call you a communist.

**alarmingrick**

Melissia wrote:
darkPrince010 wrote:Perhaps. I don't disagree that some people are poor because they don't apply themselves, but I also believe that many other people apply themselves all their lives and still remain within the poverty bracket.
Indeed. Quite a few people work their asses off rying to get ahead and not managing it because of limited resources. Just don't tell a republican that-- they'll call you a communist.

Wait, i thought you got called a Commie when you tried to fix it?

Edit:
My bad. You're a Socialist when you try to fix it!