Housing Bubble
Beginning: Decision makers in our Federal Government decided that housing needed to be cheap enough so that anyone could afford a home. They took steps to make/keep interest rates low and made mortgages easy to access.
Result: A huge buildup of new homes and many people were able to take out bigger mortgages than they otherwise could have or would have.
Problem: Eventually a day came when families started to face difficulty making their mortgage payment and the value of houses and the homebuilding industry came to a rather screeching halt.
Education Bubble
Beginning: Decision makers in our Federal Government decided that education needed to be cheap enough so that anyone could go to college. They took steps to keep student loan interest rates low and made students loans and financial aid easy to access.
Result: Large increases in college attendance, colleges across the nation expand admission, and people who would otherwise not have gone to college for a Bachelor's degree were able to. At the same time student loan debt skyrockets and people who otherwise would not have taken on debt at the age of 18-25 end up saddling themselves with tens of thousands of dollars in obligations.
Problem: The value of the Bachelor's degree has fallen immensely. It's become a requirement, not a luxury, and a graduate degree or some professional certification is required to stand out in many fields and industries. In a slow economy, many students are not rewarded for their educations and end up un- or under-employed after graduation.
Several articles in the Wall Street Journal, among other places, have pointed to a worrisome shortage of skilled, experienced labor. Hiring recruiters for licensed electricians and other similar trade workers are having trouble filling any or all of certain positions. These are jobs that won't be shipped overseas, like electricians, plumbers, train engineers, high-precision manufacturing operators, among many others.
Is it possible that the costs of post-secondary education has fallen so much, and enough young men and women have chosen college instead of trade school or the job market, that it's created a vacuum of talent in these skilled labor industries?
If student loans and financial aid were more difficult to obtain, it would raise the cost of college and make the prospect of skilled labor more attractive. The other, and more likely, option to create an adequate supply of qualified men and women for skilled labor positions is that the compensation for these jobs increases so much that the opportunity outweighs the benefits of going to college.
Is college too cheap?
Sunday, December 11, 2011
Thursday, November 03, 2011
Quick Thoughts on Occupy Oakland
So last night and this morning I've been on Twitter seeing a steady stream of updates and pictures from the latest #OccupyOakland happenenings. To name a few, protesters threw rocks at the windows of a Whole Foods and sending shoppers ducking for cover within, spray paint plastered all over private and public property, graffiti and homemade signs proclaiming support for communism and down with capitalism. I'd post some examples, but it's too hard to find one without an F-bomb spray painted all over it.
My first thoughts, and if you have answers or suggestions help me out, because I'm a bit awed:
My first thoughts, and if you have answers or suggestions help me out, because I'm a bit awed:
- What part of Peaceable Assembly involves hate graffiti and rock throwing?
- In the name of Freedom you deliberately take away the freedoms of others? Busting up a store and making random shoppers run for cover is the proper way to express your freedom?
- So you think Capitalism is bad... you'd rather fire up the Communism machine where no one gets to make their own decisions? Everything you hate about the Government and crony capitalism gets infinitely worse in the central planning of Communism.
- And no one's busting up the Men's Wearhouse because it has a sign out front proclaiming, "We Stand with the 99%." That's the smartest store owner ever, if a 8.5x11" sign is all it takes to keep your windows and store inventory out of the path of wreckage.
- Also, the #Occupy protesters are praising stores for closing in support of the #GeneralStrike. They might be supporting you... but if it was my store, I'd be closing to prevent my employees and customers from getting injured in the middle of your temper tantrum.
I'd love to think and write more about this... but in the words of @JayBilas, "I gotta go to work!" Leave me some comments, let me know if I'm in left field or on target.
Wednesday, October 26, 2011
"Abolish the Tax Code" Myth
Hermain Cain's 9-9-9 - Taxable Income multiplied by 9%
Rick Perry's 20% Flat Tax - Taxable Income multiplied by 20%
Obama's Millionaire Surtax - Taxable Income in Excess of $1MM multiplied by 55%
Do you see the common theme? Before you can ever calculate the taxes owed, you must know taxable income. This is what complicates every tax discussion. It's not the calculation of the tax that's difficult, it is figuring out what is Taxable Income?
And not all types of income are earned equally. Most often income is used to describe Wage Income, the amount shown on your W-2. Other types include Capital Gains, Interest and Dividends, Passthrough Income, Alimony, among others.
Even if we abolish all deductions, to "broaden the tax base, and lower the rates," we still need to decide if Grandma's Interest Income should be taxed at the same rate as Barack Obama's book royalties. Or if Warren Buffett's stock dividends should be taxed at the same rate as Albert Pujols' home run bonuses.
If you're thinking, "let's just call it all income. Anytime you get money, that's income, pay your fair share." Does it include money you receive for college scholarships? When you sell stock, are you taxed on 100% of the sales price including the amount you paid? What if your boss gives you a car and free rent in a house instead of cash, does that mean you have no income?
I kept a print copy of the Tax Code at my desk when I worked in public accounting and prepared tax returns. Trust me, it's big. And that doesn't even begin to count the Regulations, Court Cases, Publications, Form Instructions, Committee Reports, etc that you have to read in order to understand what the Code itself means.
No Presidential Administration will take office and make the tax code disappear. Or if they do, they're going to replace it with something that looks, smells, and feels exactly like a tax code, but happens to go by a different acronym.
My point is this: a discussion about taxes will never be cut and dried, black and white. We need to stop expecting our leaders to deliver a 15 word tax code that will solve our every loving problem. They can't do it. If they're telling you they can, be skeptical.
Rick Perry's 20% Flat Tax - Taxable Income multiplied by 20%
Obama's Millionaire Surtax - Taxable Income in Excess of $1MM multiplied by 55%
Do you see the common theme? Before you can ever calculate the taxes owed, you must know taxable income. This is what complicates every tax discussion. It's not the calculation of the tax that's difficult, it is figuring out what is Taxable Income?
And not all types of income are earned equally. Most often income is used to describe Wage Income, the amount shown on your W-2. Other types include Capital Gains, Interest and Dividends, Passthrough Income, Alimony, among others.
Even if we abolish all deductions, to "broaden the tax base, and lower the rates," we still need to decide if Grandma's Interest Income should be taxed at the same rate as Barack Obama's book royalties. Or if Warren Buffett's stock dividends should be taxed at the same rate as Albert Pujols' home run bonuses.
If you're thinking, "let's just call it all income. Anytime you get money, that's income, pay your fair share." Does it include money you receive for college scholarships? When you sell stock, are you taxed on 100% of the sales price including the amount you paid? What if your boss gives you a car and free rent in a house instead of cash, does that mean you have no income?
I kept a print copy of the Tax Code at my desk when I worked in public accounting and prepared tax returns. Trust me, it's big. And that doesn't even begin to count the Regulations, Court Cases, Publications, Form Instructions, Committee Reports, etc that you have to read in order to understand what the Code itself means.
No Presidential Administration will take office and make the tax code disappear. Or if they do, they're going to replace it with something that looks, smells, and feels exactly like a tax code, but happens to go by a different acronym.
My point is this: a discussion about taxes will never be cut and dried, black and white. We need to stop expecting our leaders to deliver a 15 word tax code that will solve our every loving problem. They can't do it. If they're telling you they can, be skeptical.
Friday, July 01, 2011
Millionaires & Billionaires
The president has spoken at length recently, and throughout his Presidency, about the need to raise revenues by taxing the "millionaires and billionaires." In the paragraphs that follow, I'd like to point out a few things that make this statement much more complicated than the President implies.
Simply enough, a millionaire is someone whose Net Worth is $1 Million or more. Net Worth is a function of your Assets (things of value: cash, stocks, property, business ownership) less your Liabilities (debts, mortgages). If you have a million dollars cash and no debt, you are a millionaire.
When you look at an individual tax return, however, at no point does the Form 1040 ask about your balance sheet. The form is blind to the value of your assets or the sum of your debts. It only cares about your Income. Assets and Income are related, yet far from the same thing. From the example above, you have a million in assets but if it's all sitting in stacks of cash under your mattress you have $0 in taxable income. If your million is in a bank savings account earning 1%, your taxable income would be $10,000 (prior to any exemptions or deductions allowed by the tax code).
On the flip side, some tax returns might show huge amounts of income without any net worth at all. It's possible for an individual to have $1,000,000 in taxable income without having a penny to their name. This happens because taxable income is not necessarily equal to the amount of cash coming in. If someone forgives your debt, you may have taxable income, but you did not receive cash. Also a person might make a million, but has no Net Worth either through large borrowing or lavish spending. This person is not a millionaire per our definition above, but shows a high taxable income.
So whose taxes does the President want to raise, the high earners with no net worth? What about the people who have a million in the bank through savings and frugality but still only make 75K a year, surely it's not right for them pay taxes at an elevated rate.
I guess the point I'm trying to make is that we shouldn't carelessly throw around terms like "millionaires and billionaires" without thinking about what the words actually mean. And after thinking about it, I'm not exactly sure whose taxes President Obama is hoping to raise.
Simply enough, a millionaire is someone whose Net Worth is $1 Million or more. Net Worth is a function of your Assets (things of value: cash, stocks, property, business ownership) less your Liabilities (debts, mortgages). If you have a million dollars cash and no debt, you are a millionaire.
When you look at an individual tax return, however, at no point does the Form 1040 ask about your balance sheet. The form is blind to the value of your assets or the sum of your debts. It only cares about your Income. Assets and Income are related, yet far from the same thing. From the example above, you have a million in assets but if it's all sitting in stacks of cash under your mattress you have $0 in taxable income. If your million is in a bank savings account earning 1%, your taxable income would be $10,000 (prior to any exemptions or deductions allowed by the tax code).
On the flip side, some tax returns might show huge amounts of income without any net worth at all. It's possible for an individual to have $1,000,000 in taxable income without having a penny to their name. This happens because taxable income is not necessarily equal to the amount of cash coming in. If someone forgives your debt, you may have taxable income, but you did not receive cash. Also a person might make a million, but has no Net Worth either through large borrowing or lavish spending. This person is not a millionaire per our definition above, but shows a high taxable income.
So whose taxes does the President want to raise, the high earners with no net worth? What about the people who have a million in the bank through savings and frugality but still only make 75K a year, surely it's not right for them pay taxes at an elevated rate.
I guess the point I'm trying to make is that we shouldn't carelessly throw around terms like "millionaires and billionaires" without thinking about what the words actually mean. And after thinking about it, I'm not exactly sure whose taxes President Obama is hoping to raise.
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