There’s One For You, 19 For Me

When George (thanks for the correction, orthotox!)  wrote ‘Tax Man’, their marginal tax rate was 95% (1 for you, 19 for me). For every dollar they earned, they got to keep a nickle. (Not going to do the whole pound/pence thing).

Here’s another clue for you all: if you or I get taxed excessively, there’s nothing much we can do about it – the taxes come out of our paychecks, and, besides toying with the deductions and dependents, we’re pretty much stuck with it. BUT – if you’re George or John or Paul, guess what? You can move to America or some other country where they’ll let you keep more of your money. Which is what they did.

The moral of this story: Taxpayers will do things, sometimes extreme things like moving to another continent, to avoid taxes. The better off – in this case, the concepts apply to both the truly wealthy and the highly compensated – the more motivated and able you are to mitigate your tax burden. Keep this in mind as we revisit the concepts outlined in the last post. Continue reading “There’s One For You, 19 For Me”

Money – How Does That Work, Exactly?

Wealth versus a paycheck: different in kind, not just in degree – for whatever reason, this fundamental idea is both hard to grasp and difficult to apply for us humans. Yet, understanding it is key to understanding a lot of what goes on in politics and economic. So, here goes:

If you’ve ever earned a regular paycheck, you have no doubt noticed that the bottom line – take home pay – is less, sometimes a lot less, than your gross earning. There’s income tax withholding (fed and state), Social Security and maybe a retirement account. All us wage earners understand that the government gets its cut BEFORE we even get to buy any groceries or pay any rent,

Not so wealth, not so!

Let’s say I’m worth $100M (in my dreams!). What does that mean? Usually, it means I own a business or businesses, stock, land, and other investments. I might draw a paycheck, but, with few exceptions (famous athletes, actors, rock stars) the paycheck isn’t really material to my lifestyle – I’d live just as well if I didn’t get paid in the usual manner.

This living well without any (material) taxable income works in a number of ways. Chief among these are tax-free investments (municipal bonds, for example) and none-taxable benefits from the companies I own or trust funds I or my ancestors set up. In this example, let’s say my family has, over the years, built up a portfolio of  municipal bonds  worth $10M – they probably paid some taxes along the way to building this nest egg up, but that was long ago. Now, this investment yields, say, 3% – $300K per year. Also, my house(s) are paid for, my health care is taken care of from a trust fund, same with college costs, my business supply me with a car, I can discretely use the corporate jet for travel – in other words, that $300K is buying groceries and a good time. Everything else is covered.

In short, the wealthy person above is able to live like a king on just the tax-exempt interest on some municipal bonds. AND – pays no income tax.

Is this what really happens? Something a lot like this happens all the time. Sure, if I wanted to buy a new house or personal airplane, I might have to dip into the other $90M, and I might, if my tax people are incompetent, pay some capital gains tax. But, fundamentally, I don’t have to do anything or pay any taxes if I don’t want to.

About that other $90M – if things go well, it gets to stay invested and appreciates in value – again, in a tax-free way. Bill Gates, for example, didn’t pay any income tax on his investment in Microsoft as it went from a few thousand dollars in value up to $50B. Effectively, he ‘earned’ $50B tax-free. ONLY if he were so foolish as to take that $50B as income would he ever pay taxes on it. Same goes for other holders of appreciating investments. So, almost universally, the wealthy structure their money so that they have enough to live (very well) on without touching their capital investments – that way, they get richer and richer.

Finally, this arrangement is hardly accidental. From the Founding Fathers on down, our lawmakers were dominated by guys with large capital holding who wanted to make sure it stayed that way, and so the law favors holders of assets over earners of wages. This is not entirely a bad thing – making it better for people to start and run business and to think long-term about finances is good for the stability and prosperity of a society.

BUT – here’s the main point – taxing high wage earners, even people who pull down a million a year, is not touching the lives of the truly wealthy. They are playing a different game all together.

Ridiculously Wealthy Person Wonders About All the Fuss Over Taxable Income, Considers Having Some of His People Look Into It

Economic primer time: if you are ridiculously wealthy, you don’t have taxable income – you have wealth. That’s the very definition of wealthy – you HAVE money, you don’t need to EARN money any more. So – follow me carefully, here – if you are ridiculously wealthy, say, net worth of $50M or more, you ARE NOT GOING TO PAY TAXES ON TAXABLE INCOME. YOU DON’T EVEN HAVE TAXABLE INCOME (except maybe as a result of a hobby). RAISING INCOME TAX RATES WILL NOT AFFECT YOU. AT. ALL.

Conversely, if you actually work for a living and rely on taxable income to pay the bills, THEN changes in the income tax rate affect you.  So, if the ‘enemy’ is somebody making, say, $150K/yr, and you’d like revenge on them for doing somewhat better than you, then by all means raise the income tax rate. Just know that actual wealthy people are laughing at you.

Once again, the discussion of wealth is diverted AWAY from asset holders (the wealthy) to better compensated working people. Working people fearing, envying and attacking each other – man, that show just never gets old! The wealthy have had front row seats for generations in this country – but are never participants in the unpleasantness.

Music at Mass Review: 11/21/10

At Parish A this week. Feast of Christ the King. The first and last tunes were good traditional numbers – Crown Him With Many Crowns and  All Hail the Power of Jesus’ Name. These tunes not only are fairly musically interesting and have something to do with the feast being celebrated, but contain actual coherent theology – they assert things recognizable and understandable within the context of a Catholic Mass.

Not so the other hymns, not so!

Aside: when singing at Mass, I like my mysteries to be the mysteries of the faith – such as the mysteries of the Incarnation or of the Redemptive suffering of Christ. Not so much with the mystery being what in the world the lyrics of the songs could possibly trying to convey.  The test is that you can say, for example,  about the two hymns mentioned above that the mysteries are the Second Coming and the Kingship of Jesus and the Incarnation, and that the writers have tried to express those mysteries in poetry and song as best they could. But, as demonstrated in the songs below, that is not always the case – instead, we’re given lines that defy understanding as English words, let alone map to any coherently expressed theology.  Anyway:

Bernadette Farrell’s lyrics are almost as baffling as the popularity of her music. She penned a couple ditties that were employed as the offertory and communion songs. Let’s look at God Beyond All Names: Continue reading “Music at Mass Review: 11/21/10”

Zinman

Yesterday, was listening to some internet classical radio station. Beethoven’s 5th comes on – but: some unknown team of lunatics decided to

1. mix the recording so that the strings were about 6″ in front of your face;

2. record, evidently, in some sort of hyper-reverb chamber;

3. play at what I suppose was deemed to be a ‘grand’ tempo – sloooow.

Yikes. When I was 15, I decided to find out what this classical music stuff was all about. Other than by accident (such as the classical music included on  the 8-track demo tape my dad got with his new car in 1973-ish) I had almost no meaningful exposure to classical music. So I went to the public library and checked out the 5th on vinyl, because even I’d heard of the 5th. Von Karajan, Berlin Phil – AWESOME. I put the speakers to my primitive hand me down stereo facing each other about 2′ apart, put a pillow between them, and just spent HOURS listening to that LP. To this day, I can lean back, close my eyes, and pretty much play that version of the 5th back in my head

So this is a story of First Love.  And this recording on the radio was like seeing my Beatrice all dolled up by someone whose idea of cool is Malibu Barbie. NO!

Continue reading “Zinman”

Just War

Been thinking of how one would prudently apply the Church’s Just War teachings, and noticed something lacking in many people’s approach: Deciding if a war is just or not is like deciding to have heart transplant surgery, not like deciding to go to Disneyland. By this, I mean that the presumption should be that a reasonable person would do just about anything to avoid having to get a heart transplant, and only if there were overwhelming evidence that failure to get a transplant would be worse than getting one would it even rise to a decision point. Further, the potential transplant patient should acknowledge that, even if the operation is a complete success, he is still in for a long recovery, lots of pain, and a life that will never be the same.

On the other hand, going to Disneyland is fun. Continue reading “Just War”