2 Trillion dollaor hole in public pensions - Another pyramid scheme

[Zebo]

What about hedge fund manager loophole whereby 100% of salary is taxed at 15%. Or someone like me a small businessman who's C Corp bylaws are written as such to pay any and all medical expenses pre tax including Celtic indemnity plan, all deductibles, all medicine, gym membership and whatnot not to mention other fringe benefits. You're not telling whole story. I worked W2 for years and somehow do better and pay less today all 100% legit.

Edit: My bad you didn't miss it. And you agree it's a travesty so are we really in disagreement? I don'think so

 

[Jhhnn]

Nice attempt at obfuscation, Fern. the simple fact that the top 1&#37; share of income rose from <9% to nearly 23% over the period in question tells the real story. The rest is just smoke and mirrors.

If allowed to continue, where do you think this trend will lead us?

 

[Modular]

Perhaps the perspective of a tax professional and academic can add some insight into this....



Snip

Edit: Cliffs Jhhnn is wrong or misguided.

Fern

Very well thought out and written response. It shows the puppeteering of "facts" for what they are.

Also, cliffs are not necessary. Everyone should take the time to read this.

 

[Zebo]

Couple things Fern missed.

1. The employer/CEO is NOT given the stock, they must PAY for it. The price is equal to the FMV of the stock at the time of grant. If/when stock is just given (or even a grant) for less than the FMV it is immediately taxable as wages and goes on a W-2 - it is treated the same as receiving cash.

True, But corps loan Quid pro quo like Execs money to buy an option exercise essentially morphing into compensation. How you can deny this? Why else would they take such paltry salaries?

2. The top corporate rate is 35&#37; (except for a little bubble that is higher so as to make the corp rate a flat 35% - i.e., they are recapturing the lower brackets), the top individual rate is 35%. So, if a CEO is paid $1 million how much does the government make?

The answer is zero. The corp gets to reduce it's taxes by $350k ($1M x 35%). The CEO pays in $350K. This nets the gov zero.

However, for ISO's the corp gets NO deduction. The CEO pays 15%. So, ISO's are a good deal for the gov, they net out $150K.

If corp is stupid enough to show a profit that's their problem. Laws are written to make money and buy corporate jets and country club memberships and pay employees preferably in options. GS only made 1 Billion. Rest lavished on execs a lot of it tax free.

 

[Fern]

Nice attempt at obfuscation, Fern. the simple fact that the top 1&#37; share of income rose from <9% to nearly 23% over the period in question tells the real story. The rest is just smoke and mirrors.

If allowed to continue, where do you think this trend will lead us?

Not smoke and mirors but demonstrable facts.

Also, your real complaint seems to be the vast acumulation of wealth by a few. If so, you're focusing on the wrong statistics. Wealth does not always = taxable income. You can be extremely wealthy yet have a modest taxable income.

In any case, if your complaints is about accummulation of wealth the solution is not high income taxes. High income taxes disincentivize productivity and drive money/capital away.

The solution is going back to a stiff estate/gift tax regime.

Historically, the US developed it's tax policy upon the (theoretical) basis that low income taxes encouraged people to be productive, and so we let those who are productive enjoy the fruits of labor.

OTOH, upon their death we taxed their estates heavily. That's when the US stepped in and took it's revenue. And by doing so, we would prevent the development of an 'aristocracy' like Europe has.

Unfortunately, we have been steadily moving in the opposite direction, higher income taxes and lower estate/gift taxes vis-a-vis a pile of exemptions and loopholes.

Fern

 

[1prophet]

A few things need to be made clear. First, about deductions. The envy crowd cries about all the deductions the rich have that the middle and poor dont. Well, no shit. They have more. If the middle and poor had qualifying assets, they, too, could (and WOUD!) take those deductions. So, red herring rebuttal.

Next, about SS. Of course its true they dont pay SS taxes on income above the limit; however, they also get a limited amount when they claim it. And why shouldnt they? Why is someone who paid in $50,000 over a lifetime more entitled to their SS than someone who paid $500,000? So yet another red herring rebuttal.

And lastly, the shipping out of production. Let me give you a hypothetical scenario that mirrors real life. Lets say youre a small business owner who has invented a widget. Let's say market trials show stong interest in your widget. Now, you have two choices (basically). Just to use round numbers for the argument's sake, lets say you discover a manufacturing plant here in the USA that will make your widgets, and it will cost you 60% of your cost to make. So, you sell your widget at $1, and it costs you $.60 right off the top. Next, you discover you can have your widget made in Mexico. But, it will only cost 15% of your cost to make.

I know offshoring is a very emotional issue for people. But I seriously doubt most people would pass up that kind of profit margin (read: money in THEIR pocket. Food on THIER table. Lifestyle for THEIR family.) in order to not offshore. Sure, maybe most on this board even would say that in a post. But at the end of the day, we all want a better life for ourselves and our family. And if it affected us directly having a net profit of $24,000/year vs $90,000/yr, I highly doubt most people would take the former.


Youre arguments are dubious at best, and lack real honesty. But rage on man if it makes you feel better.

And likewise you would sell those widgets to those Mexicans at a reduced cost in proportion to their income?

Rhetorical question I know because the only way you can make real money is to have those dirty mexicans built those widgets at a much lower cost in a plant with limited Environmental, Safety, and Labor laws if any, conditions you or your family would never agree to, then turn around and sell them to Americans because only they can afford them.

But now years later those fat profit margins are more and more fleeting because less and less Americans can afford your widget and some competitor decides he can make it in China cheaper than in Mexico, and those Americans who had decent paying jobs and could afford to spend some of their disposable income on your widget struggle to make ends meet because someone like yourself decided they were overpaid and redundant.

So what can you do but move your company to China were costs are less and also cheapen the quality of your product in order to keep your fat profit margins but still be able to sell your once mighty but tarnished widget to lower income Americans

But it's all OK as long as you or your family got yours since you were one of the smarter ones who overinflated the value of the company and stock just before you sold it because deep down you knew the gravy train was coming to the end, let everyone else fend for themselves.

You as well as many in America have been brainwashed into worshiping the quarterly dividend also known as disease number 2 of the five deadly diseases of management, yet you think nothing is wrong because you contracted disease number 1 first, Lack of constancy of purpose.

So you tell yourself that your only purpose is profit at the expense of everything else, because you now follow the erroneous but popular mantra the only purpose of a business is profit, therefore justifying whatever you do in the name of quick and hopefully high profits in the short term not caring about the long term ramifications since the only one that matters is yourself.

For the love of money is the root of all evil

 

[Fern]

Couple things Fern missed.

1. The employer/CEO is NOT given the stock, they must PAY for it. The price is equal to the FMV of the stock at the time of grant. If/when stock is just given (or even a grant) for less than the FMV it is immediately taxable as wages and goes on a W-2 - it is treated the same as receiving cash.

True, But corps loan Quid pro quo like Execs money to buy an option exercise essentially morphing into compensation. How you can deny this? Why else would they take such paltry salaries?

I'm not sure what you're trying to say.

I've never seen a corp loan money to an exec for stock options etc. But if they did, they are required by section 7872 of the Internal Revenue Code (i.e., tax law) to charge interest at a FMV rate (no low interest rate loans allowed).

If corp is stupid enough to show a profit that's their problem. Laws are written to make money and buy corporate jets and country club memberships and pay employees preferably in options. GS only made 1 Billion. Rest lavished on execs a lot of it tax free.

Country club memberships have been taxable compensation to execs (and a non-deductible expense) for many years now.

I've already explained why stock options are not the evil thing some make out. The exec must buy the stock at the FMV and hold it for at least a year to get LT cap gain treatment. I.e., it's the exact same thing any of us can do - buy stock at FMV and hold for a year and any gain is taxed as LTCG.

There is only one possible benefit - the FMV of the stock is determined when the ISO is granted (of course, what other date would you possibly use?). So, if the stock goes up between grant and excercise they'll benefit. Of course, we can all also do that too. It's no different than getting a call option on stock.

Also note that ISO's cost the company no cash at all.

Yes, it's nice to be an exec. When they travel it's 1st class, luxurious hotels and meals are generally not taxable to them. (But the company has to pay tax on 1/2 value of such meals). However, the IRS does have rules about being too extravagant and can tax that stuff. But you don't often see that except for closely held corporations.

Fern

 

[blackangst1]

Perhaps the perspective of a tax professional and academic can add some insight into this....



------------snipped-------------


Fern

Fern, thank you very much for that explaination. I learned a few things.

 

[BlahBlahYouToo]

Besides the politicians, the primary culprits are the public-employee unions, which have used their growing power to dramatically enhance pension benefits. They curry favor with sympathetic politicians, lavishing them with large donations and manning campaign phone banks. They also engage in full-court-press lobbying at all levels of state and local government.

i hate unions. and people.

 

[BlahBlahYouToo]

They are not "modest pensions", that's the problem. Did you not read the article?

The article didn't even mention the cost of the gold-plated HC insurance they also receive.

Fern

This thing is sounding like it's going to lead to a GM/Chrysler style collapse.

 

[blackangst1]

For the love of money is the root of all evil

If youre going to quote scripture to make your point, at least quote it correctly:

For the love of money is the root of ALL KINDS of evil.