October 17, 2005

Preying on the Poor

A happy poor person (HPP) is about to file their taxes. Most of the money is probably from the Earned Income Credit. Sure hope they don’t get audited (getting the EIC gives you a higher chance of being audited . . . thanks to Bill Clinton, though, he was just protecting the EIC from being abolished). More on that later.

HPP gets money back every year and this year is no different. H&R Block advertizes how great they are and they do it specifically to the people getting refunds, the people qualifying for the EIC, people making less than $30,000. Jackson Hewitt does the same thing but I see H&R Block all over the place. So, HPP comes in and “Good news . . . you’re getting a refund!!!” How much? $5000, but, there are some fees. $40 to file your taxes. Oh, did you want that money as soon as possible? Don’t want to wait the 14 days to get you money? Okay, we’ll loan you the money. It’s called a Refund Anticipation Loan. How much? About $100, but in your case probably closer to $200. So, about 4 percent for a 2 week loan!!!! You’d be better off borowing the money from Tony Soprano. Okay, so now you’re down only $240 so you’re still getting back over $4000 and that’s a lot of money. Let me guess, you don’t have a checking account to cash this check. No problem!! Go to a check cashing place and get it cashed for another couple of bucks. And guess what? H&R Block has a deal with the check cashing places and makes money off that too.

See, now that’s thinking. Whenever I think about starting a business I think about how to appeal to the high end . . . custom wood work, custom web sites, custom database this or that all to people that have the money to spend on the best of the best. H&R Block went the other way and targets the poor.

A capitalist would say H&R Block is providing a “much needed service”. I say hookers provide a much needed service too but I still think prostitution should be against the law. And don’t get me started about pimps and drug dealers.

Oh yeah, and President Bush wants to put Socal Security money into the hands of people who don’t understand what they’re loosing when they get these short term loans (ever hear of a “pay day loan” . . . another drug dealer). I wonder what company will come along and provide a much needed service for them.

Sheldon

October 13, 2005

Calculating Taxes

One very important lesson I learned is that every income level has it’s own tax percentage. It’s hard to explain without an example. If your income is less than $29,050 you are taxed at 15%. $29,051 to $70,350 the tax is 25%. So I thought that someone making $30,000 would be screwed because they’d pay such a high tax rate compared to the person making $29,000. But that’s not the way it works. If you make $30,000, here is how to calculate tax:

$7,150
x 10%
——–
$715 — Everyone pays this amount for the first $7150 they earn

$29,050
– 7150
———
$21,900
x .15
———
$3285

$30,000
- 29,050
———-
$950
x .25
———–
$238

Taxes due: $715 + $3285 + $238 = $4238

Tax rate of: 14.1%

So, the only people who really pay the entire percentage of their tax bracket are the extremely poor (who pay the entire 10%) and the very rich (where the richer they are the closer to a straight 35% they pay). Of course, I would argue that the very rich are taxed at about the same percentage as someone making $60,000. A tax is a tax is a tax and Social Security’s 12% only applies to the first $90,000 and is barely a blip to the very rich.

Oh, and did I mention that the capital gains tax is only 15%? That’s where the filthy rich get most of their money.

I got the tax rates from http://en.wikipedia.org/wiki/JGTRRA which talks about is the Jobs and Growth Tax Relief Reconciliation Act of 2003. Here’s another interesting link:

http://en.wikipedia.org/wiki/Income_tax

Sheldon

October 11, 2005

Social Security

I’ve been reading a book called “Perfectly Legal”. It’s a great book. The only problem is with how mad I get while I’m reading it.

Check this:

We all pay Social Security tax. It’s supposed to be for our retirement. For some reason, it’s in trouble and the government needs to either cut benefits or raise the tax *again* (same scare happened in 1980). Right now, the tax is over 6% and really over 12% since your employer has to pay half (mmm, I wonder if I would make more money if my employer didn’t have to pay that 6%?). If I’m paying into a fund then why wouldn’t my money be there when I’m ready to retire?

Okay, the government uses the Social Security money for things other than Social Security. Also, if the government doesn’t invest that money it will stay stagnant in time. Say I pay $2000 in SS taxes in 2000. Not invested that $2000 is still $2000 but it’s even less because in 2040 $2000 is only $400 in 2040 dollars. So, somehow because of inflation and poor investments Social Security is in trouble . . . so, we should get to keep it and invest it ourselves. Remind me about the Global Crossing story and see if that “invest in the company . . . you could be rich . . . pensions are for chumps” story reminds you of George’s “invest it yourself” story.

I was off track. So, we all get taxed about 6% (or 12%) for SS. Oh, and, after $85,000 of income, there is no 6% tax. So, someone who makes $90,000 per year (living large) pays a little more than $5000 in SS tax. Guess how much Bill Gates pays in SS tax? Yep, A little more than $5000 (maybe less if his tax people can show his income is less than $85,000 . . . and that probably wouldn’t trigger an audit).

You say that SS is to support us later on and blah blah blah. I say it’s a tax. I don’t get to choose how much I get back or when so I say it’s a tax like every other tax. Except that, really, it’s a tax break for the rich. $5000 to a guy who make a million a year is nothing. Now, 6% of a million *is* something just like 6% of $50,000 is something. The guy making $50,000 may be in the 25% income tax bracket and Bill Gates may be in the 35% tax bracket but keep in mind the little tax break Bill gets for all that money past $85,000.

Okay, some of my numbers are off but you get the point. Check out Wikipedia:

http://en.wikipedia.org/wiki/Income_tax

http://en.wikipedia.org/wiki/JGTRRA

Sheldon

September 30, 2005

Flat Tax

If I ever complain about taxes to people, they always say something like, “yeah well, I think there should be a flat sales tax”. The first problem is, up until that flat tax is initiated, people will buy a bunch of new stuff and won’t buy anything else again for years. That will be a problem. Okay, ignore that. What about poor people? Are we going to tax them too? Right now they pay nothing or very little and presumably they’ll be paying more with a flat tax than they do now. Maybe that’s good? The middle class didn’t have to pay income tax at first and now, 70 something years later the middle class is paying almost half of all taxes (I made the “half” part up but it’s true that the middle class didn’t pay much 70 years ago). Maybe it’s only fair for “poor” people to start paying for the freedom we all enjoy (I say “poor” because a lot of poor people have two car garages, more than a few kids and big screen TV’s . . . there’s a difference between poor in the US and really poor).

Okay you say, lets not burden poor people with the tax they can’t pay in the first place. So, what is “poor”? Is that defined by, I don’t know, income? OH NO!!! Can’t be by income because then the flat tax wouldn’t be so flat anymore. So, in this flat sales tax system, how to we avoid taxing the poor?

I think a flat tax would make poor people poorer and rich people richer (about the same way it works now). Did I mention that with a flat tax you wouldn’t be taxed on investments . . . you know, property and stock? Those sound familiar? Poor people know all about owning property.

What am I missing?

Sheldon