Daily Digest

Daily Digest 4/12 - On Taxing The Rich, Wages Lag Pace Of Inflation, Silver Is The New Gold

Tuesday, April 12, 2011, 9:52 AM
  • Taxing The Rich
  • The Post-Crash: Wall Street Won
  • Wages Lag Pace Of Inflation
  • Silver Is The New Gold For Investors
  • Silver Price "Will Hit $50 Before Correcting"
  • Run On Silver Has Coin Shops Scrambling
  • Discouraged Workers Stop Fed From Taking Comfort in Jobless Fall
  • Crude Oil and Liquids Capacity Additions: 2011-2015
  • Japan ups nuke crisis severity to match Chernobyl

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Economy

Taxing The Rich (jdargis)

Consider, for instance, the Fairness in Taxation Act introduced by Representative Jan Schakowsky, Democrat of Illinois, which would increase the top federal marginal income tax rate to 45 percent for married couples earning more than one million dollars a year and to 49 percent for billionaires, from the current rate of 35 percent.

Historically unprecedented? Hardly. The top marginal tax rate was 50 percent in the mid-1980s and even higher in the 1950s (as the chart shows).

The Post-Crash: Wall Street Won (jdargis)

So why is it so worried?

Wages Lag Pace Of Inflation (Alfredo E.)

Previous bouts of inflation usually have meant a wage-price spiral, as pay and prices chase each other upward. But now, paychecks are falling further and further behind. In the past three months, consumer prices have been rising at a 5.7 percent annual rate while average weekly wages have barely budged, increasing at only a 1.3 percent annual rate.

Silver Is The New Gold For Investors (Alfredo E.)

As is normally the case when the world's non-flat money (gold and silver) go for a gallop, experts everywhere are prepared to call prices to go higher still. So it is with silver. Now that it has gone though $US40 an ounce, $US50 an ounce should not be a problem for any number of reasons, according to the silver bugs.

Maybe so. What is certain is that at this sort of price, mining silver can be highly profitable.

Silver Price "Will Hit $50 Before Correcting" (Alfredo E.)

Silver Prices have risen primarily as a result of strong investment demand, according to figures released by GFMS this week. The Silver Price rose 78% last year, with demand for investment the primary driver, states the World Silver Survey 2011 – produced by GFMS for the Washington-based Silver Institute.

The survey reports that a net $5.6 billion was invested in Silver last year, almost twice the figure for 2009. Industrial and jewelry demand also grew.

Run On Silver Has Coin Shops Scrambling (Alfredo E.)

“We actually have people coming in with scales to weigh our silver pieces and our coin dealers are having to constantly restock and re-price,” said Janice Daniel, co-owner of Ole Cracker House Antique Mall in Ocala. “We even have out-of-state dealers coming in, hoping to replenish their depleted stocks.”

Discouraged Workers Stop Fed From Taking Comfort in Jobless Fall (SolidSwede)

Some 6.3 million people have been out of work and looking for a job for more than six months. The employment-to-population ratio is lower than it was when the recession ended as companies have been slow to add to payrolls. And big sources of hiring in the past -- government, health care and retailing -- may not be able to reprise that role in the future as lawmakers limit outlays and consumers curb spending.

Energy

Crude Oil and Liquids Capacity Additions: 2011-2015 (pinecarr)

Nonetheless, in the low case, net global productive capacity additions, after factoring in the decline of the resource base, is expected to drop though 2015 at an increasing pace. In the high case, an insignificant growth is modeled for 2015. Given the annual demand growth rate in the non-OECD of about 1.5 Mb/d, the modeled production growth rate in either case suggests that OPEC spare capacity will be trimmed over this time horizon.

Environment

Japan ups nuke crisis severity to match Chernobyl (Alfredo E.)

The higher rating is an open acknowledgement of what was widely understood already: The nuclear accident at the Fukushima Dai-ichi plant is the second-worst in history. It does not signal a worsening of the plant's status in recent days or any new health dangers.

Still, people living nearby who have endured a month of spewing radiation and frequent earthquakes said the change in status added to their unease despite government efforts to play down any notion that the crisis poses immediate health risks.

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14 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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Poet's picture
Poet
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Posts: 1891
Taxing The Poor To Give The Rich

Move aside, Robin Hood! It's time for Robin Geithner and Friar Bernanke...

Matt Taibbi Asks Why The Fed Gave $220 Million In Bailout Money To The Wives Of Two Morgan Stanley "Bigwigs"
"Christy and her pal Susan launched their investment initiative called Waterfall TALF. Neither seems to have any experience whatsoever in finance, beyond Susan's penchant for dabbling in thoroughbred racehorses. But with an upfront investment of $15 million, they quickly received $220 million in cash from the Fed, most of which they used to purchase student loans and commercial mortgages. The loans were set up so that Christy and Susan would keep 100 percent of any gains on the deals, while the Fed and the Treasury (read: the taxpayer) would eat 90 percent of the losses. Given out as part of a bailout program ostensibly designed to help ordinary people by kick-starting consumer lending, the deals were a classic heads-I-win, tails-you-lose investment."
http://www.zerohedge.com/article/matt-taibbi-asks-why-fed-gave-220-milli...

Poet

 

pinecarr's picture
pinecarr
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Aaw, Poet, I don't know why

Aaw, Poet, I don't know why that should bother me more than any other of the swindling going on with the bailouts.  But the thought of such blatant theft and screwing over of the American people makes me feel sick to my stomach.

Poet's picture
Poet
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Posts: 1891
All Of It Should Bother Us Deeply
pinecarr wrote:

Aaw, Poet, I don't know why that should bother me more than any other of the swindling going on with the bailouts.  But the thought of such blatant theft and screwing over of the American people makes me feel sick to my stomach.

Pinecarr

Maybe because we don't expect even the wives to be involved - just the sneaky oily snakes themselves, whom we've come to expect to do their darndest to cheat the system. Now wives, so what's next? Kids and lemonade stand scams?

Honestly, I think all of this stuff should bother us deeply. I'm actually surprised that the wacky, mentally unstable weirdos out there are still gunning for Democratic Congresswomen rather than Wall Street bankers.

Matt Taibbi isn't without controversy, but he's written quite a bit about the sheer rip-offs happening at the highest levels of power and finance. Each of the 4 articles linked below are just as fascinating and lurid to read.

Invasion of the Home Snatchers: Matt Taibbi on how foreclosure courts are helping big banks screw over homeowners
http://www.rollingstone.com/politics/news/matt-taibbi-courts-helping-ban...

Looting Main Street: How the nation's biggest banks are ripping off American cities with the same predatory deals that brought down Greece
http://www.rollingstone.com/politics/news/looting-main-street-20100331

Why Isn't Wall Street in Jail?: Financial crooks brought down the world's economy - but the feds are doing more to protect them than to prosecute them
http://www.rollingstone.com/politics/news/why-isnt-wall-street-in-jail-2...

The Great American Bubble Machine: From tech stocks to high gas prices, Goldman Sachs has engineered every major market manipulation since the Great Depression - and they're about to do it again
http://www.rollingstone.com/politics/news/the-great-american-bubble-mach...

People should be asking "Why is nothing being done?" I think ordinary Americans, conservative or liberal, can agree on that! This stuff is definitely sickening. A perversion of justice and fairness and the American way.

Poet

pinecarr's picture
pinecarr
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Thanks for the Taibbi links, Poet

Thanks for the links to the Matt Taibbi article, Poet.  Personally, I admire Taibbi for having the journalistic drive and courage to go where few journalists dare to go (except for maybe our own Davos:).  He is a voice of our times.

wmarsden's picture
wmarsden
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Posts: 38
Why income taxes don't work on the rich

I am a CPA/tax accountant and I'm frustrated by how little people understand about taxation of the rich

 

Here's the thing: the rich don't have much income!  If you're rich you don't HAVE a job.  Or if you do it's an artsy thing that makes $19K/year and makes you eligible for Commonwealth Care in MA.  That's because you don't NEED a job because you just WITHDRAW money when you want it.

 

There's a 0% tax bracket on long-term capital gains and qualified dividends, i.e., the things that trust funds kick off.  It's available - per Obama's request - to everyone making less than $250K.  There are NO TRUST FUNDS set up in America to kick off more than $250K in taxable income.  They'd just invest in munis above that.  Have you any idea how big a trust fund would have to be to kick off $250K in taxable income even without the muni trick?!?

 

My wealthiest clients are paying absolutely NOTHING in taxes on their income, for the simple reason that their income is quite modest.

 

The people who are "earning" more than $100K are the strivers, the professional people, the business builders, and the retirees taking lump sum distributions.  They aren't rich.  They happen to have a lot of money in their lives this year.  But it's not WEALTH.

 

The rich aren't working.  Therefore income tax does not touch them.

Denny Johnson's picture
Denny Johnson
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Posts: 348
wmarsden wrote: There's a 0%
wmarsden wrote:

There's a 0% tax bracket on long-term capital gains and qualified dividends i.e., the things that trust funds kick off.  It's available - per Obama's request - to everyone making less than $250K.  There are NO TRUST FUNDS set up in America to kick off more than $250K in taxable income.

It seems that you are saying that that one can earn up to $250 k in long term cap gains and qualified dividends tax free.

It is my understanding that it is only tax free to about $43,500, the top of the 15% bracket. I'd love to be wrong about this. Can you please clarify.

Doug's picture
Doug
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LDS canneries

A member of my local prep group forwarded this to us.  I realize it isn't attributed, but I have no reason to doubt its authenticity and it simply confirms what those on this site already know:

Quote:

 

Have you heard? 
 

 Prices at LDS canneries show inflation for food up between 11 and 49%

>> > Price increases on April 4th at the LDS canneries show inflation up
>> >between 11 and 49% for many basic food staples.  These rise in prices
>> >are a strong barometer for the overall economy since the LDS facilities
>> >are usually the last to raise prices for their communities, which
>> >provides food in bulk that they can collect through their vast
>> >networking operations.
>> >According to the new price list from April 4th, many food staples have
>> >increased by more than 20% since the last price list came out just 3
>> >months ago on January 3rd.
>> >Beans. Black 13.69%
>> >Beans, Pinto 12.13%
>> >Beans, White 11.88%
>> >Milk, Non Fat Dry 25.00%
>> >Rice 38.99%
>> >Sugar 33.81%
>> >Wheat, Red/White 44.54%
>> >Apple Slices 24.53%
>> >Carrots 21.31%
>> >Macaroni 40.25%
>> >Oats, Quick 48.90%
>> >Oats, Regular 49.19%
>> >Onions 21.60%
>> >Potato Flakes 33.33%
>> >Spaghetti 38.99%
>> >Beans, Refried 27.72%
>> >Cocoa Mix 40.69%
>> >Flour 29.70%
>> >Fruit Drink Mix 26.20%
>> >LDS churches and organizations have long been at the forefront in
>> >preparedness for families and communities.  As one of the wealthiest
>> >corporations in the world, their network of companies and church
>> >affiliations allow them access to cheaper food sources, and the capacity
>> >to store them for long periods of time through their canning facilities.
>> >As the government and Federal Reserve continues to tell the American
>> >people that inflation is low, and contained by their monetary policies,
>> >the real barometer of inflation in the economy comes from the grocers,
>> >markets, and institutions that deal with food sales and production, and
>> >must monitor prices daily as commodities continue to climb.
>> >The LDS's raising food prices at their canneries by 11 to 49% in just
>> >three months should be a serious wakeup call to all Americans on the
>> >true inflationary conditions that exist in our economy, and that we need
>> >to constantly look outside government reports for the true data
>> >affecting our spending and finances.
>> >Tags:
>> >Prices, LDS, Food, canneries, Inflation, commodities
> --
> "I predict future happiness for Americans if they can prevent the
> government
>  from wasting the labors of the people under the pretense of taking care
> of
>  them".
>  Thomas Jefferson
>

wmarsden's picture
wmarsden
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Posts: 38
There is a 15% tax bracket,

There is a 15% tax bracket, but it refers to TAXABLE income, not Gross Income. 

And if there is some small amount of tax generated, then you can start to use like the Foreign Tax Credits or Business Credits that are carrying over, being unable to be used until a tax liabiity is generated, or the $1,000 per child credit.

 

I recently had two families come in at the same time.  They both earned the same, around $125K, they both had kids and mortgages.  The one who earned it through self-employment paid around $11K in taxes.  The one whose $130K was from trust fund earnings had a tax of $0.

 

You're correct, though, there are some scenarios where the trust fund will start be be taxed at 15%.

VeganDB12's picture
VeganDB12
Status: Platinum Member (Online)
Joined: Jul 18 2008
Posts: 731
I think what I am realizing

I think what I am realizing here is that all this tax law discussion is irrelevant, pitting middle class against poor while the rich (those who are wealthy enough that they do not need to work and have substantial assets, etc....) will carry on unscathed. This whole debate about federal tax rates for those above and belove 250k per year is more class warfare being provoked by the elites and TPTB. Is that right? I have to go to my 60 hour a week job now, excuse me while I play my part......Yell

otoh, I am lucky to be working....

 

jerry_lee's picture
jerry_lee
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Posts: 126
LDS Cannery Inflation link to article

Here you go, Doug. Looks like a reliable source. Thanks for posting the info.

 

http://www.ldsliving.com/story/64148-prices-at-lds-canneries-show-food-i...

Poet's picture
Poet
Status: Diamond Member (Offline)
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Posts: 1891
Passive Income...
wmarsden wrote:

The rich aren't working.  Therefore income tax does not touch them.

WMarsden

So passive income is taxed at a lower rate... and if it's all passive income, then they're good - even with the Alternative Minimum Tax? I'm reminded of what Richard Kiyosaki wrote, that the rich write the tax laws...

Poet

sjdavis's picture
sjdavis
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Posts: 78
wmarsden wrote: The people
wmarsden wrote:

The people who are "earning" more than $100K are the strivers, the professional people, the business builders, and the retirees taking lump sum distributions.  They aren't rich.  They happen to have a lot of money in their lives this year.  But it's not WEALTH.

I think it's important to distinguish between "rich" and "wealthy."  Chris Rock put it best when describing Shaq (Shaquille O'neal)... paraphrasing, he said, "Shaq's rich, but not wealthy.  The guy signing his check is wealthy."

I like your approach to discussing the difference between taxing income and taxing gains.  A very good argument could be made that people working, building and employing to EARN their capital should be taxed much much less, while those that simply hit withdraw should be taxed much more.

Neither would solve our insolvency problem, but it should be obvious that tax policy is not the solution to insolvency.  Tax policy should be about fairness in relation to a countries priorities.

danrhino's picture
danrhino
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Posts: 4
Carried Interest

Consider this from Wikipedia

 

Taxation of carried interest

[edit] United States

Because the manager is compensated with a profits interest in the fund, the bulk of its income from the fund is taxed, not as compensation for services, but as a return on investment. Typically, when a partner receives a profits interest (commonly referred to as a "carried interest"), the partner is not taxed upon receipt, due to the difficulty of ascertaining the present value of an interest in future profits.[3] Instead, the partner is taxed as the partnership earns income. In the case of a hedge fund, this means that the partner defers taxation on the income that the hedge fund earns, which is typically ordinary income (or possibly short-term capital gains), due to the nature of the investments most hedge funds make. Private equity funds, however, typically invest on a longer horizon, with the result that income earned by the funds is long-term capital gain, taxable to individuals at a maximum 15% rate. Because the 20% profits share typically is the bulk of the manager’s compensation and because this compensation can reach, in the case of the most successful funds, enormous figures, concern has been raised, both in Congress and in the media, that managers are taking advantage of tax loopholes to receive what is effectively a salary without paying the ordinary 35% marginal income tax rates that an average person would have to pay on such income. To address this concern, Congressman Sander M. Levin introduced H.R. 2834, which would eliminate the ability of persons performing investment adviser or similar services to partnerships to receive capital gains tax treatment on their income. [4] However, the Treasury Department has suggested, both in testimony before the Senate Finance Committee[5] and in public speaking engagements,[6] that altering the tax treatment of a single industry raises tax policy concerns, and that changing the way partnerships in general are taxed is something that should only be done after careful consideration of the potential impact.

Congressman Charles B. Rangel included a revised version of H.R. 2834 as part of the "Mother of All Tax Reform" and the 2007 House extenders package. A line item on taxing carried interest at ordinary income rates was included in the Obama Administration's 2008 Budget Blueprint.[7] On April 2, 2009, Congressman Levin introduced a new and substantially revised version of the carried interest legislation as H.R. 1935.[8]

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