History US tax rate history - A return to the glory days

[ParticleGrl]

Might? They surely will. As soon as the post-tax yields fall below the risk-free interest rate, the rational investor will sell.

Given the generally large spread between the risk-free rate and the annualized return of the market, capital gains would have to be substantially higher than 30% before that happens. The bigger concern is that a hike in capital gains would prompt a large scale sell-off as people dump their holdings before the tax increase.

As for bonds, the GM bailout has told the world "corporate bonds are for chumps". It used to be a bond meant you got paid back first. In the post-GM world, the government's buddies get paid back first. I don't give a hoot if those buddies are fat cats or union workers, because the salient point is that whoever it is, it isn't me.

Were you a GM bond holder? I was, and with the stake in new GM and the success of the IPO, I did much better then the other major bankruptcy that hit my bond portfolio (Worldcom) where I was paid back at about $0.33 on the dollar, and I didn't time the market very well. Right before the IPO, old GM bonds were trading at about 1/3 of their face value, so even if you liquidated instead of waiting on the equity stake, you'd fare about as well as the worldcom holders.

I don't think the restructuring was any worse for bondholders then any other bankruptcy proceeding, though I only have direct experience with those two.

 

[turbo]

I have lots of holdings in bonds, though more in mutual funds. Bonds might be more stable in the short-term, but over time stocks will do well or better, as long as you're not forced to cash out at an inopportune time. Still, both beat keeping your retirement money in savings accounts of any type unless they are structured with guaranteed returns, fixed-rate CDs.

 

[WhoWee]

The bigger concern is that a hike in capital gains would prompt a large scale sell-off as people dump their holdings before the tax increase.

This is my concern as well (IMO) the market is overpriced to begin - where will the funds be re-invested? Again IMO - we need to focus on a long term strategy to attract capital into direct investments in the US manufacturing base.

ParticleGrl - didn't you post something related to an analysis of the 10% Investment Tax Credit in the early 1980's - can't find it?

 

[WhoWee]

Were you a GM bond holder? I was, and with the stake in new GM and the success of the IPO, I did much better then the other major bankruptcy that hit my bond portfolio (Worldcom) where I was paid back at about $0.33 on the dollar, and I didn't time the market very well. Right before the IPO, old GM bonds were trading at about 1/3 of their face value, so even if you liquidated instead of waiting on the equity stake, you'd fare about as well as the worldcom holders.

I don't think the restructuring was any worse for bondholders then any other bankruptcy proceeding, though I only have direct experience with those two.

As you know, debt investors are typically willing to assume a lower return in exchange for greater security. You were fortunate in your example - my guess is you wouldn't have purchased the bonds if you knew the government would take actions (outside the normal range of bankruptcy procedure) that could have risked your investment?

 

[ParticleGrl]

As you know, debt investors are typically willing to assume a lower return in exchange for greater security. You were fortunate in your example - my guess is you wouldn't have purchased the bonds if you knew the government would take actions (outside the normal range of bankruptcy procedure) that could have risked your investment?

But taking action outside the normal range of bankruptcy procedure got me a better return. If I had correctly judged the risk of bankruptcy, I probably would not have purchased the bonds to begin with. I honestly thought most bondholders would vote for a debt-for-equity deal rather than push GM to bankruptcy, but I underestimated the number of people holding default swaps.

Once the company went bankrupt, I was happy to see a more favorable bankruptcy proceeding as it made my stake in the new company more valuable.

 

[turbo]

But taking action outside the normal range of bankruptcy procedure got me a better return. If I had correctly judged the risk of bankruptcy, I probably would not have purchased the bonds to begin with. I honestly thought most bondholders would vote for a debt-for-equity deal rather than push GM to bankruptcy, but I underestimated the number of people holding default swaps.

Once the company went bankrupt, I was happy to see a more favorable bankruptcy proceeding as it made my stake in the new company more valuable.

Taking such actions outside of the range of the cognoscenti is par for us normal folks. Sometimes you come out OK and sometimes you lose. With interest rates being flattened by the Fed since Greenspan, I'm happy to come out even or a little ahead. People who save in the US are being robbed as huge companies and banks are enjoying "free" money at our expense. I might as well have most of my savings stashed under my mattress.

 

[WhoWee]

But taking action outside the normal range of bankruptcy procedure got me a better return. If I had correctly judged the risk of bankruptcy, I probably would not have purchased the bonds to begin with. I honestly thought most bondholders would vote for a debt-for-equity deal rather than push GM to bankruptcy, but I underestimated the number of people holding default swaps.

Once the company went bankrupt, I was happy to see a more favorable bankruptcy proceeding as it made my stake in the new company more valuable.

I'm guessing you experienced nervous laughter at some point?

 

[Al68]

http://news.yahoo.com/obama-warns-against-short-term-deal-debt-limit-210135046.html" Must?

Regardless of whether or not you favor raising taxes, it's pretty delusional to think a Republican congress "must" do so. Or that they "must" raise the debt limit.

Does he think he's in charge of congress now? Or that Republicans have some obligation to enact his agenda? What on Earth is he thinking?

Republicans have no obligation to pass any law other than laws they approve of. Does the President not know this? If he has any desire to get the debt limit raised, I'd say he'd better start negotiating in good faith, given that the Republican congress can just adjourn and go home any time they wish.

 

[OmCheeto]

All of that is simply false, in any literal sense. That's what "fraudspeak" means. There is no non-fraudulent reason to word things the way you just did, even if we accept that non-literal speech can be non-fraudulent.

I think you should go into the Guinness Book of World Records for the most negatives in a single sentence.

fraudulent = not honest
literal = not metaphorical

ergo:

"There is no non not honest reason to word things the way you just did, even if we accept that non not metaphorical speech can be non not honest."

mathematically:


"There is - - - honest reason to word things the way you just did, even if we accept that - - metaphorical speech can be - - honest."

canceling the negatives we get:

"There is (a) sneaky reason to word things the way you just did, even if we accept that metaphorical speech can be true."



I will, or should I say, shall not be back for about a week, to respond, as I am very overdue, for a vacation. zzzzzzzzzzzzen...

 

[mege]

http://news.yahoo.com/obama-warns-against-short-term-deal-debt-limit-210135046.html" Must?

Regardless of whether or not you favor raising taxes, it's pretty delusional to think a Republican congress "must" do so. Or that they "must" raise the debt limit.

This is an unfortunate mindset among many Americans. It's much easier to get elected by giving people something than taking away something, even if it is for the greater good. The President is trying to give, perceptually, something for free by not raising taxes except on the wealthy. He doesn't want to get on the bad side of any special interest group that might have partial funding cut if congress did a major pass and cut lots of pork. I feel this politicalization of the process is what's put us in the economic spot we're in now. It would have been political suicide for Republicans to eliminate the sub-prime credits in the early part of 2000s - imagine the racist flavor the media would have put on that proposal!

(this is a big reason why I consider myself a conservative - to stop the snowball of policies that cannot be undone for political reasons until they self-destruct)

 

[WhoWee]

This is an unfortunate mindset among many Americans. It's much easier to get elected by giving people something than taking away something, even if it is for the greater good. The President is trying to give, perceptually, something for free by not raising taxes except on the wealthy. He doesn't want to get on the bad side of any special interest group that might have partial funding cut if congress did a major pass and cut lots of pork. I feel this politicalization of the process is what's put us in the economic spot we're in now. It would have been political suicide for Republicans to eliminate the sub-prime credits in the early part of 2000s - imagine the racist flavor the media would have put on that proposal!

(this is a big reason why I consider myself a conservative - to stop the snowball of policies that cannot be undone for political reasons until they self-destruct)

It is a mindset. I've had no less than 3 personal train wrecks land at my feet in the past 10 days. All 3 persons did the exact opposite of what I (and others) recommended - then had a full and total collapse. One of them took 100% of my time and effort over a 2 day period - after I resolved the conflict (and paid a hefty sum) the person became angry with me for laying out a plan that will prevent a similar situation in the future. They informed me I'm too controlling - that it wasn't their fault and that if I'd just given them what they wanted a few months ago - this situation would not have happened and it would have cost me less? Apparently, it was my fault for not "lending" them money - no questions asked.

 

[WhoWee]

It appears to me that the incessant drive towards lower taxation, which imo has helped to bring the US to its financial knees, is unprecedented in the modern context.

The drive for lower taxation always seem to focus on the wealthy - the truth be told - with nearly 50% of tax-eligible persons either not paying or actually receiving tax revenue - both parties are to blame. Does anyone even recall the President cut Social Security deductions this year - how did that make long term sense?

At the same time the argument can be made there has been an incessant drive towards higher spending - by both parties.

It's a child's game - I'll do it if you'll do it - if everyone does it nobody gets into trouble (IMO).

The national debt has reached $14Trillion - about a third in the past 3 years? The arguments that spending can't be cut without hurting people who most need help and only the wealthy should see a tax increase are nonsense - given the number of people exempt from federal taxation.

IMO - this debate reminds me of the retail store that raises prices before a big sale - it's incorrect.

 

[ParticleGrl]

The drive for lower taxation always seem to focus on the wealthy - the truth be told - with nearly 50% of tax-eligible persons either not paying or actually receiving tax revenue - both parties are to blame.

Not a true statement, as I've explained in the corporate jet thread. The real number is roughly 10% of people don't pay, and nearly entire demographic is the elderly and students, neither of whom are working full time.

 

[russ_watters]

Did you make that number up or do you have a source?

 

[OmCheeto]

The drive for lower taxation always seem to focus on the wealthy

Because they can afford it.

- the truth be told -

Who's truth?

with nearly 50% of tax-eligible persons either not paying or actually receiving tax revenue -

This is wrong according to the http://www.cbo.gov/ftpdocs/88xx/doc8885/EffectiveTaxRates.shtml". But you'll never convince me that they shouldn't be included. So we'll just have to disagree.)

both parties are to blame.

Actually, as I've pointed out on numerous occasions, we are to blame. We elected these people.

Does anyone even recall the President cut Social Security deductions this year - how did that make long term sense?

I recall it. I didn't agree with it. But it struck me as a political tit for tat move.

At the same time the argument can be made there has been an incessant drive towards higher spending - by both parties.

Twasn't true for nearly 20 years, as I've pointed out https://www.physicsforums.com/showpost.php?p=3032139&postcount=471". It's the sad shape of the American economy, IMHO, that is causing our grief now.

It's a child's game - I'll do it if you'll do it - if everyone does it nobody gets into trouble (IMO).

Yay! We are in agreement on something!

The national debt has reached $14Trillion - about a third in the past 3 years? The arguments that spending can't be cut without hurting people who most need help and only the wealthy should see a tax increase are nonsense - given the number of people exempt from federal taxation.

I liken the country to a human. Right now, she's a bit sick. And without proper medical care, she'll get sicker. I'd rather go into debt now, see her get better, and become a productive member of the world society, than watch her die, because I'm too ******* cheap.

IMO - this debate reminds me of the retail store that raises prices before a big sale - it's incorrect.

The debate reminds me of a bunch of monkeys, with most all the banana's in the hands of very few monkeys, while the spokesmonkey on TV tells the monkeys with very few banana's that we shouldn't force the monkeys with the banana's to share, because they earned those banana's fair and square. And we should ignore the fact that in the olden days, the monkeys with all the banana's had to share two or even three times as many banana's as they do now, and were still sitting on mountains of banana's.

 

[talk2glenn]

Did you make that number up or do you have a source?

Responding for her... This has been posted several times, but the same group of people continue to assert nonsense.

[PLAIN]http://www.cbo.gov/publications/collections/tax/2010/figure3.png

This is from 2007, and therefore accounts for changes due to the "Bush tax cuts" but not the temporary provisions in the stimulus. Looking only at the figures for individual income taxes, we see that the bottom 40% are negative payers - they receive a net credit. The middle quintile have an effective rate of about 3%, but it's not unreasonable to assume that it is skewed to the right.

Approximatley half of households in the United States either pay no or receive money from the individual income tax.

Figure from the CBO.

 

[OmCheeto]

Responding for her... This has been posted several times, but the same group of people continue to assert nonsense.

And we know who we are...

Semantic tomfoolery on both sides it is: All Federal vs Federal Individual taxes.

I seriously doubt a 16 yo making minimum wage, working 20 hours a week, would agree with you, knowing from what has been bandied around the press lately, that the money she's paying is going to be there when she retires in 80 years.*

*Given the incessant talk of raising the age of eligibility due to the country going broke and lifespans ballooning to unfathomable levels in the future.

 

[ParticleGrl]

The issue is that Whowee said that 50% of people don't pay taxes, which is nonsense. If he said 40% of people don't pay federal income tax, he would be closer to correct, though I think failing to include payroll taxes is silly. We should discuss total federal taxes with total federal spending. If you look at the chart talk2glenn posted, you see that including payroll taxes, even the bottom quintile is paying.

If you total all taxes, only about 10% of people aren't paying, and they are mostly students and the elderly, as I mentioned, with source, on post 44 of the corporate jets thread.

 

[WhoWee]

The issue is that Whowee said that 50% of people don't pay taxes, which is nonsense. If he said 40% of people don't pay federal income tax, he would be closer to correct, though I think failing to include payroll taxes is silly. We should discuss total federal taxes with total federal spending. If you look at the chart talk2glenn posted, you see that including payroll taxes, even the bottom quintile is paying.

If you total all taxes, only about 10% of people aren't paying, and they are mostly students and the elderly, as I mentioned, with source, on post 44 of the corporate jets thread.

Social Security is a retirement fund for your 40% - and even that is subsidized - isn't it? Medicare is an insurance program - also subsidized - isn't it? Who is most likely to depend on these benefits later in life?

We've been through this in countless threads - I stand by my post that nearly 50% of all persons eligible to pay federal income tax - either don't pay in or are refunded sums contributed or are in receipt of tax funds via re-distribution.

 

[talk2glenn]

We should discuss total federal taxes with total federal spending.

Total federal taxes paid by quintile, as a percentage of income:

Bottom 20%: 4.3%
Bottom 40%: 7.7%
Bottom 60%: 9.6%

Clearly, by the metric "share of all taxes paid", everybody participates. Whether this is a reasonable measure or not is, I suppose, its own discussion (didn't Russ just start a thread on that?).

However, for perspective:

Top 20%: 25.8%
Top 01%: 31.2%

And total taxes paid, by quintile and on average:

Bottom 20%: $1,200
Top 20%: $64,000
Top 1%: $543,400

In my opinion, this is arbitrarily close enough to "nothing" for political purposes, particularly when you consider the impact on voter behavior. Frankly, when somebody's effective annual share of federal spending is only a grand, and his share has been declining over time, its hard to expect him, rationally, to look critically at federal spending and revenue policies. And yes, I think this is intentional.