Rob Paris Blog

Rob writes about news, economics, politics and other things

Posts Tagged Taxes

A response to the comments on Daily Finance: Social Security COLA

Oct 16

Posted by robparis in General | 7 Comments

A response to the comments on Daily Finance

The comment I posted on Daily Finance mentioning my recent post on the Social Security COLA has received a lot of comments. I won’t be responding to every comment, but I think it’s fair to group the comments into three types:

  • ad hominem (abusive and circumstantial): the fallacy of attacking the character or circumstances of an individual who is advancing a statement or an argument instead of trying to disprove the truth of the statement or the soundness of the argument. Often the argument is characterized simply as a personal attack.
  • argumentum ad misericordiam (argument from pity or misery) the fallacy committed when pity or a related emotion such as sympathy or compassion is appealed to for the sake of getting a conclusion accepted.
  • actual coherent arguments – these arguments I appreciate and will respond to

The ad hominem attacks criticized me as a person, instead of arguing about what I said. I won’t bother responding to each of these attacks. Additionally, they were frequently misspelled – disiably for disability, diaphers for diapers, and my favorite, retarted for retarded. I’m sure most of these were typos and nothing more, but amusing none the less.

Examples of ad hominem:

linda said…
ROB, your evidently not retirement age, so that is why your thinking that way. just wait til your retirement age and then you will not be talking like that.

cynthia Flanagan said…
you sound like a lazy un-employed stiff…a baby who never knew hard work..

jerry said…
You probably voted for Obama & are on a disiably. Above the neck that is. One day you will be in the seniors place & then you can relate to your pass mistakes

ycav4424 said…
Rob is probably somebody’s snot nosed kid that has snuck onto their daddy’s computer to rile up people just for fun before he changes his wet bed sheets again so he can sleep dry for awhile.

MO said…
Once an idiot, always an idiot. I’m 66 yrs. old and worked all my life to get something I deserve. When you retire in a few years after you get out of your diaphers, are you going to turn down SS? Go crawl back under your rock you moron.

d r heller said…
rob and all the other imbeciles who have that type of attitude have to be living off their parents and have no concept what it is to be a retiree!

Mary said…
You are an jack ass.

gary said…
A LOT of folks here believe you are an asshole for making that remark. So it’s probably true. Have a nice day asshole!

Tom said…
Rob enjoys making idiot comments to see the reactions he gets…

EL said…
DUMB ROB, WAIT UNTIL YOU RETIRE, OR ARE YOU ONE OF THE LAZY ONES ON WELFARE?

ANDY said…
AREU RETARTED, OR AN ILLEGAL IMMIGRANT…

Les said…
What a dumb ass!!!!! I bet you still live with your mother. I hope you get sick and can’t work.

Slightly better than the ad hominem attacks, are the argumentum ad misericordiam. These arguments appeal to pity and sympathy to win an argument.

Examples of argumentum ad misericordiam:

lvn said…
At the senior complex I live in everyone got a letter stating…”due to the downturn in the economy there will be no more surplus food bags delivered to seniors.” 90% of the seniors here depend on that food to last them till the next SS check. At times (too many)cans were dented and once the soup can was not only caved in and rusted but expired 3 1/2 years prior. Weevils and bread smashed beyond recognition and 99% of all other foodstuffs were expired. Yet, if farmers were to give the animals this digusting food, government agencies would be down on them right away. Had one woman say she knew there were bugs and rancid food, but even the dog food she used to buy was too expensive now.

mary myers-agati said…
MY rent will go up next year and so will many other things food and other necessities. I am slowley going blind and cant afford surgery.

Susan said…
SAY THAT WHEN YOU RETIRE ASSHOLE AND YOU GET THE SAME AMOUNT OF MONEY EVERY YEAR… I TAKE CARE OF MY MOTHER WHO HAS ALZHEIMER’S. MAYBE WHEN YOU RETIRE, THERE WON’T BE ANY SOCIAL SECURITY LEFT, WHO YOU GONNA CRY TO THEN???

EL said…
SS IS NOT ENOUGH FOR HALF OF THE PEOPLE ON IT. SOMETIMES WE CAN T EVEN GET OUR MEDICINE

Finally come the actual coherent arguments. I will respond to these. Most people who tried to use coherent arguments had their comments voted down. If it wasn’t vicious or sympathetic, it just isn’t made for the Internet.

Bruce said…
If we happen to receive the $250 stimulus adjustment proposed by the President, please remember: this is a GIFT; you did nothing to EARN it; it is not now or in the future an ENTITLEMENT.

Bruce – The government is unproductive. It isn’t producing any of the ‘gift’ it gives you. It needs to raise money using its only three methods, inflation, taxation or borrowing. None of these are good. Since the money the government is gifting is taken by force from everybody else, it is not so much a gift, as it is theft.

Akela said…
So Rob, are you ready for YOUR parents, and or grandparents to move into your home with you?? I hope so ..

Akela – My parents saved throughout their lives so that they could be self-sufficient when they retired. If, for whatever reason, they were unable to provide for themselves, I would take them in without hesitation.

cruisedoc said…
…Payments need to be adjusted for inflation for obvious reasons. However, when their is no inflation, or negative inflation (deflation) as their is this year, then there is no rational argument for an increase. There should be no COL increase when the COL doesn’t increase. If I were on SS I would just be glad that I get it when the COL goes up and don’t get it decreased when the COL goes down. It’s kind of like getting your cake and eating it too. I think America is fair w/ seniors, after all, they paid in pennies on the dollar for what they get out; now they should in turn be fair and be thankful that it is tied to the inflation rate.

For making a coherent argument, cruisedoc had his comment voted down with mine.

Jenine said…
You just need attention. What a very ignorant remark to make. Some of these seniors get checks for less than $200 a month. Did you realize that before you mouthed off? Can you live on $187.00 a month? NO. Before you make comments without all the facts you should look and listen. Back when these people started working they made less than $1.00 a day!! Most states now the minimum hourly wage is $7.00 an hour. You should apologize to those people. You expect a raise and they deserve every one they get.

Jenine – Social Security (assuming it must exist), should serve as a supplemental income source, not as the single income source. I can’t live on $187 per month, and for that reason, I am saving money each month. So I can provide for myself. I don’t expect SS to provide me benefits when I’m older. Social Security has created a moral hazard where people have become entirely reliant on Social Security and can expect large increases. Once this system is in place, people feel little need to save and provide for themselves. Social Security is a self-perpetuating moral hazard.

Then came the group of attacks explaining that SS needs to be raised because the cost of living has gone up and the private sector has been increasing wages.

redconvoy said…
They need the increase to live. You can’t live on the same thing year after year with the cost of living going up and their Medicare premiums. So where ever you work, maybe you shouldn’t have a raise. See how you could live on your same salary year after year!

Teresa said…
Why would you say such a thing. Doesn’t cost of living go up each year. How do you expect people to survive if the cost of living goes up every year but yet the income does not go up.. mmmm If you know a trick please fill us fixed income ppl in. We would love to know how to do that.

BEAR said…
TELL ME SOMETHING BOY, DO YOU GET A COST OF LIVING RAISE OR ANY TYPE OF RAISE.

Sue said…
Last year I got a 3 cent raise. After 3 years with the company. The SS crowd needs to realize that those of us PAYING for them are having a hard time. I will never retire.

These arguments fail to note that many large companies in the private sector did not receive raises for two years. In fact, many companies are having pay cuts across the board. See the articles from Time and CNN. Of course, there are also the millions of people who received 100% pay cuts in the past 18 months. Sue made a similar argument, and accordingly, had her comment voted down.

I appreciate constructive criticism and other feedback on my article. However, it seems that most commenters prefer to just complain. If you have an opinion about my writing, please use a valid argument. Don’t just make personal attacks and pleas for pity.

For all of the people making constructive arguments, both for and against me, thank you.

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Social Security COLA

Oct 10

Posted by robparis in General | 18 Comments

The Social Security COLA is one tough drink to swallow. That’s why it’s being forced down our throats.

Every year since 1975, Social Security recipients have received a cost of living adjustment. According to the official website of the Social Security Administration,

Legislation enacted in 1973 provides for automatic cost-of-living adjustments, or COLAs. With COLAs, Social Security and Supplemental Security Income (SSI) benefits keep pace with inflation.

The same site goes on to say,

The Social Security Act specifies a formula for determining each COLA. In general, a COLA is equal to the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the next. If there is no increase, there is no COLA.

The COLA has added up over the years. The following chart shows the annual COLA and the value of $100 in Social Security payments in constant 1975 dollars. A $100 payment in 1974 has increased four-fold, now valued at $407.

Social Security Cola

According to the Social Security Administration, the COLA is given to ensure that people dependent on Social Security are able to maintain their standard of living. Accordingly, the claim is made that, “If there is no increase, there is no COLA.” That’s their statement and they’re sticking to it. Instead of giving a COLA, Oregon Congressman Peter DeFazio is proposing a one-time payment of $250 in 2010. This one-time payment ignores the $250 one-time payment to Social Security recipients paid as part of the American Recovery and Reinvestment Act of 2009. DeFazio’s new payment is suggested in H.R.3597 – Emergency Senior Citizens Relief Act of 2009. Emergency relief? Will $250 make such a difference that this should be qualified as an Emergency? No. Emergency is just the default first word of any new legislation.

To pay these 50 million Social Security recipients, the legislation is proposing an increased Social Security payroll tax. The tax will include incomes between $250,000 and $359,000 in 2010, instead of the regular, first $106,800. This is another tax on the productive, to pay the unproductive.

According to 68 year old Vermont Senator Bernie Sanders who introduced similar legislation to the Senate.

The bottom line is that seniors deserve a fair increase in benefits to keep up with these added costs and economic hardships

Since in 2009 there is expected deflation of 1.5%, Social Security payments should be cut. In order to maintain the standard of living, Social Security recipients should receive a 1.5% reduction in payments. Instead, they’ll receive no reduction and a one-time two-time stimulus of $250. This is legal.

According to Section 215(i)(1)(B) of the Social Security Act

the term “cost-of-living computation quarter” means a base quarter, as defined in subparagraph (A)(i), with respect to which the applicable increase percentage is greater than zero; except that there shall be no cost-of-living computation quarter in any calendar year if in the year prior to such year a law has been enacted providing a general benefit increase under this title or if in such prior year such a general benefit increase becomes effective

It’s only a matter of time before we see the third one-time Social Security stimulus.

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Baseline budgeting

Aug 31

Posted by robparis in General | No Comments

“The previous budget serves merely as a baseline; the only question in any given year is how much spending will increase. Once created, no spending program is ever eliminated. The cycle goes on and on, with different administrations and different people in Congress.” – Ron Paul

“I object strenuously to the term “baseline budget.” In Washington, this means that the previous year’s spending levels represent only a baseline starting point. Both parties accept that each new budget will spend more than the last, the only issue being how much more. If Republicans offer a budget that grows federal spending by 3%, while Democrats seek 6% growth, Republicans trumpet that they are the party of smaller government! But expanding the government slower than some would like is not the same as reducing it.” - Ron Paul

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Home buyer tax credit

Aug 27

Posted by robparis in General | 2 Comments

If the price of a good is too high, and supply increases, the price of the good will decrease to lower the supply. If the price doesn’t decrease fast enough, government will force it down.

Enter First-Time Home Buyer Tax Credit

Ignoring Bastiat’s That Which is Seen, and That Which is Not Seen and the broken window fallacy. Ignoring time preference and the expediting of future goods to increase immediate demand with disregard for future demand.

The first-time home buyer tax credit seems like a great idea.

The American Recovery and Reinvestment Act of 2009 authorizes a tax credit of up to $8,000 for qualified first-time home buyers purchasing a principal residence on or after January 1, 2009 and before December 1, 2009.

This should read:

The American Recovery Theft and Reinvestment Destruction Act of 2009 authorizes a tax credit the theft of up to $8,000 for qualified first-time home buyers anybody who’s salary is low enough and has not owned a principal residence for three years who plans on purchasing a principal residence on or after January 1, 2009 and before December 1, 2009 on into the future.

Let’s read the FAQs.
Some of these FAQs have been shortened.

Question 2:

Q. What is the definition of a first-time home buyer?
A. The law defines “first-time home buyer” as a buyer who has not owned a principal residence during the three-year period prior to the purchase.

No, a first time home-buyer isn’t somebody who is buying a home for the first time. It’s just somebody who hasn’t bought a home in a few years.

Question 4:

Q. Are there any income limits for claiming the tax credit?
A. Yes. The income limit for single taxpayers is $75,000; the limit is $150,000 for married taxpayers filing a joint return.

This isn’t a problem with the FAQ, more with the program. Is the purpose to put people in homes or to stimulate the economy (Although it won’t work either way)? If the purpose is to put people into homes, then this would stimulate another unsustainable housing boom. If the people can’t afford homes, they should rent. Otherwise, they’ll be taking loans and defaulting. We know how that story ends. If, however, the purpose of this plan is to stimulate the economy through home-building, why put an income cap?

Question 11:

Q. I read that the tax credit is “refundable.” What does that mean?
A. The fact that the credit is refundable means that the home buyer credit can be claimed even if the taxpayer has little or no federal income tax liability to offset. Typically this involves the government sending the taxpayer a check for a portion or even all of the amount of the refundable tax credit.

For example, if a qualified home buyer expected, notwithstanding the tax credit, federal income tax liability of $5,000 and had tax withholding of $4,000 for the year, then without the tax credit the taxpayer would owe the IRS $1,000 on April 15th. Suppose now that the taxpayer qualified for the $8,000 home buyer tax credit. As a result, the taxpayer would receive a check for $7,000 ($8,000 minus the $1,000 owed).

A tax credit is a credit against taxes paid or payable. If taxes aren’t being paid, and the credit is still given, it’s not a tax credit. It’s a check for $8,000. Call this what it is.

Question 16:

Q. I am not a U.S. citizen. Can I claim the tax credit?
A. Maybe. Anyone who is not a nonresident alien (as defined by the IRS), who has not owned a principal residence in the previous three years and who meets the income limits test may claim the tax credit for a qualified home purchase. The IRS provides a definition of “nonresident alien” in IRS Publication 519.

Sure, why not, it’s a free for all! This adds a little more support to the idea that it isn’t about putting people in homes, it’s about boosting the home-builders. Accordingly, the salary cap should be removed. (Again, I don’t believe this tax credit will work, but to be consistent with the idea behind the program, this is what should be done)

Question 17:

Q. Is a tax credit the same as a tax deduction?
A. No. A tax credit is a dollar-for-dollar reduction in what the taxpayer owes. That means that a taxpayer who owes $8,000 in income taxes and who receives an $8,000 tax credit would owe nothing to the IRS.

It is true that a tax credit is not the same as a tax deduction. However, the First Time Home-Buyer “Tax-Credit” is not a dollar-for-dollar reduction of what the taxpayer owes. See question 11. Regardless of what a taxpayer owes, it’s an $8,000 check.

Question 21:

Q. If I’m qualified for the tax credit and buy a home in 2009, can I apply the tax credit against my 2008 tax return?
A. Yes. The law allows taxpayers to choose (“elect”) to treat qualified home purchases in 2009 as if the purchase occurred on December 31, 2008.

It’s not like the government follows Generally Accepted Accounting Principles (GAAP) anyway. It doesn’t matter when the home is bought, just do whatever gets the most money.

Question 22:

Q.For a home purchase in 2009, can I choose whether to treat the purchase as occurring in 2008 or 2009, depending on in which year my credit amount is the largest?
A. Yes. If the applicable income phaseout would reduce your home buyer tax credit amount in 2009 and a larger credit would be available using the 2008 MAGI amounts, then you can choose the year that yields the largest credit amount.

In case we didn’t answer this well enough in the previous question. Yes, it’s true, we don’t follow GAAP. If we did, our federal debt wouldn’t be 10 trillion, it would be $65.5 trillion. Oh, and that’s before all of the money we spent this year.

The rule seems to be, that if a group is productive, they follow GAAP. If the group is the government or certain recipients of government aid, they follow whatever works best.

I can’t wait to see what they come up with next!

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Thomas Jefferson on Religion

Aug 26

Posted by robparis in General | No Comments

Remember Thomas Jefferson?

“…that the impious presumption of legislature and ruler, civil as well as ecclesiastical, who, being themselves but fallible and uninspired men, have assumed dominion over the faith of others, setting up their own opinions and modes of thinking as the only true and infallible, and as such endeavoring to impose them on others, hath established and maintained false religions over the greatest part of the world and through all time: That to compel a man to furnish contributions of money for the propagation of opinions which he disbelieves and abhors, is sinful and tyrannical.”*

I guess not.

Let’s sit back down while our sinful and tyrannical leaders do what’s best for us. /s

* for the rest of the text, see here.

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The complicated US tax code… or a bunch of liars

Apr 7

Posted by robparis in General | No Comments

Five Obama appointees incorrectly filed their taxes. Ironically, none of these errors were in the form of an overpayment. They never are.

There are two possibilities. Either these appointees intentionally underpaid their taxes, or they accidentally misfiled them.

I’m going to take the high road and assume that all five tax problems were accidental. However, these are smart, college-educated professionals and politicians. They should be able to understand the tax code. Not only were they unable to understand it, like most government documents, they wouldn’t even be able to read the whole thing. According to Florida Congressman Connie Mack, “Our current tax code is over 17,000 pages long and over 60% of Americans pay someone else to do their taxes for them.” According to Virginia Congressman Bob Goodlatte, “The tax law has grown from 11,400 words in 1914, to seven million words today.” Congressman Goodlatte has also claimed that, “American taxpayers spend $200 billion and 5.4 billion hours working to comply with federal taxes each year, more than it takes to produce every car, truck, and van in the US.”

There is something wrong with this system.

While many of these tax filing errors were likely mistakes (especially Ms. Killefer and Ms. Sebelius), they happened nonetheless. Between these five appointees, there were twelve problems filing taxes. I believe that the underlying issue isn’t dishonesty, but an overly complicated tax system. If the same people who oversee the tax code can’t understand and comply with it, there’s a problem. It’s time to reform the tax code.


Tim Geithner
Tim Geithner was selected to be Treasury Secretary of the United States, a position that includes overseeing the bloated beast itself, the IRS. It was quickly discovered that Mr. Geithner owed $42,702 in back taxes for various reasons including:

  • Failure to pay Social Security and Medicare taxes while employed by the International Monetary Fund
  • Illegally claiming that his children’s summer camp was a dependent care expense
  • Employing an individual who lacked legal immigration status

Tom Daschle
Tom Daschle was considered for Secretary of Health and Human Services until it was discovered that he owed $140,167 in taxes. Mr. Daschle’s offenses include:

  • Failure to declare a limousine and chauffeur as taxable benefits (over $250,000 worth)
  • Undeclared income ($83,333) from InterMedia Partners earned in 2007
  • Declaring tax deductions of $14,963 for unapproved charitable organizations

Nancy Killefer
Nancy Killefer was considered for Chief Performance Officer before her past tax complications were unearthed. Although Ms. Killefer had already resolved her $946.69 tax problem, she joined the list of Obama appointees who withdrew their candidacy due to tax issues. Ms. Killefer’s offence was:

  • Failure to pay unemployment compensation to an employee in 2005

Ron Kirk
Ron Kirk was selected as United States Trade Representative on March 18 despite his $9,975 tax issue. Mr. Kirk’s offences include:

  • Failure to declare compensation for speeches worth $37,750
  • Illegally declaring three seasons of Dallas Mavericks season tickets as qualifying entertainment expenses (without completing the required documentation)

Kathleen Sebelius
Kathleen Sebelius was the second appointee for Secretary of Health and Human Services to have tax problems. Ms. Sebelius’s back taxes amounted to $7,918 for offenses including:

  • Declaring three charitable contributions without receiving proper documentation
  • Filing mortgage interest deductions after selling a home
  • Declaring business expenses without having sufficient documentation

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Numbers without context can be confusing

Apr 3

Posted by robparis in General | No Comments

I think it was second grade. It might have been third. At some point we all learned about big numbers. We learned that there are thousands. A million is a thousand thousand. A billion is a thousand million. And finally (for practical purposes), a trillion is a thousand billion.

As we got older, it’s something we remembered because we’d see the numbers frequently. We all knew the difference. I could easily spend a thousand dollars. Somebody with a million dollars was rich. Somebody with a billion dollars was super rich. I didn’t know any billionaires, most of us didn’t. $1 billion was so much money that we wouldn’t even be able to spend it all. Then there were the trillions. That was a number reserved for government. Nobody was worth a trillion. No family was worth a trillion. No company was worth a trillion. In 1980, the total debt of the US government wasn’t even a trillion… although 30 years later it’s well over 10 trillion.

The point is, we know what the numbers mean. But when they’re used out of context, on purpose or not, it’s easy to miss the point.

Tricky numbers

A few recent examples of numbers out of context are AIG bonuses, bank repayments and earmarks. All three of these have made big news, but they’re really minor details.

AIG
The government has given AIG somewhere around $180 billion. The bonuses at AIG, regardless of whether they should have been given out, totaled $165 million. So 165/180 means that almost 92% of the bailout money was given out as bonuses. That seems like a misuse of taxpayer money. Something we should all be upset about. Wait… 165/180,000 means that less than .1% of the bailout money was given as bonuses. Right or wrong, .1% means that this shouldn’t be the biggest issue. Don’t worry, after weeks of media attention 9 of the top 10 AIG execs gave the bonuses back.

Bank repayments
Want a bailout? Everybody’s doing it. The government created a $700 billion bailout fund (among other bailouts). According to the Associated Press, yesterday,

“Five banks have repaid millions of dollars they received from the government’s $700 billion financial bailout pot, the Obama administration said Thursday.

The Treasury Department, which oversees the bailout program, said the banks returned a total of $353 million.”

So the banks have already repaid 50% (373/700) of the bailout plan. It looks like the government’s illegal, colossal blunder might have actually worked. No. Again, that’s 373/700,000. That means .05% of the money has been repaid. That’s not news. If I borrowed $100 from you, it’s the equivalent of me repaying you one nickel. It’s not a start, it’s not symbolic. It’s an insult as much as anything else.

Earmarks
Earmarks. Horrible, horrible earmarks. Anytime a discussion about government spending comes up, somebody undoubtedly complains about earmarks. Don’t get me wrong, I think earmarks should be cut (along with 90% of government spending), but this isn’t as big an issue as the media makes it out to be. In 2005, $27.3 billion of the $2.4 trillion (the government spends in trillions now) was spent on pork. That’s around 1.1%. In 2006, around $29 billion of the $2.66 trillion spent by government was pork. Again around 1.1%. Yes, it’s an issue. No, it’s not THE issue. It should be discussed and eliminated, but it should not be the focus of the media or the linchpin of a government spending argument.

Whether it’s AIG, bank repayments or earmarks, it’s all relative. What I mean, is that one number is relative to the next. $1 million is a big number if you compare it to $2. But it’s insignificant when you compare it to $1 trillion. The next time the media spouts some numbers and makes a huge deal out of it, think about what it relates to.

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