Things just keep getting rougher for average citizens in Europe. Some have faced government seizure of accounts to help fund government operations and requirements that they explain withdrawals to their banks. Now, the European Central Bank (ECB) is imposing a negative interest rate on banks for their deposits. So, you can keep your money under your mattress or put it in a bank where the bank will use it to earn money while charging you for the pleasure. This is of course the central bank which directly relates to individual banks as opposed to individual depositors. Those banks will now pay to park their money and those costs will be passed along to depositors. Banks are likely going to try to hide the fact that the interest rate is now negative through fees and other measures.
The ECB cut the rate on its deposit facility for banks from 0 percent to minus 0.10 percent. It also cut its main interest rate to from 0.25 percent to 0.15 percent as well as cutting the rate on its marginal lending facility by 35 basis points to 0.4 percent from 0.75 percent.
It is an interesting situation where banks will now be treated as solely a safe place for holding your money but you will pay for the service as a fee. Much like the airlines where aspects of what was once viewed as the basic service are being converted into fees, banks will now be treated as akin to a safety deposit box. However, unlike airlines or safety deposit boxes, the banks are making money off the deposits. It is a fundamental change in function of banks.
I have long been critical of the tax increases and measures in Europe that will likely have displacement impacts on investments and movement of citizens and businesses. In this case, I would expect people to look for alternatives from Internet banks to foreign banks.
Karen: During the conversations about guns, I thought you said you were from Alaska. Maybe it’s just an Alaska of the mind. Don’t bother telling me where you’re located, I’ll Alaska later. 🙂
And sorry I misunderstood you when you said the rich were being taxed into oblivion. I understand that this is a subject you feel strongly about, but when you engage in histrionics, it can be misconstrued. So, as I understand it, by oblivion, you didn’t mean “out of existence”, you meant that the rich would be reduced to scurrying around like rodents during the Age of Dinosaurs. Is that right?
As for tax rates, obviously the tax rates were quite high during the Eisenhower years, something like 90% for the top income brackets. The wealthy managed to keep getting richer with no problem. What’s taking place now, is instead of increasing taxes 5% every two years on top income earners, Republican neo-cons want to reduce them by at least that amount. The injustice in that is that they require a greater proportion of social services than the rest of us. They own more property, so the military budget is devoted proportionally more to serving thier interests. Same thing with the roads, courts, and police. More and more often, the philosophy is, as best exemplified by Walmart, let the middle class pick up the tab. There’s a trend, alright, and you’re missing it entirely.
The top earners didn’t pay anything close to 90% during the Clinton era when the debt was eliminated. During that time, the economy was chugging along like never before.
BTW, you know what goes a long ways toward creating the debt? Deficit spending. Obama has reduced the deficit more than any President in memory. Know who was the biggest deficit spender? Reagan, who racked up debt like a drunken sailor with a stolen credit card.
Know who loves debt? The wealthy. The very people for whom you’re wringing your hands, gnashing your teeth, and rending your garments so much over. The ones with the resources to purchase the bonds that our debt creates. The bond market is a rather specialized market, where only the wealthy can usual play and they will do anything to keep it in place, including ruining an economy or two. Alan Greenspan never looked more nervous than when the debt was eliminated.
Negative central bank interest rate? Japan’s central bank is no doubt upset that they didn’t think of this first.
But of course. Raise taxes on the rich and it will start a trend. An unstoppable trend. Never ending. Uncontrollable. Why unstoppable, you ask?
Because we are a nation of IDIOTS to listen to this twaddle.
Oh, and here is a Forbes analysis on Warren Buffet:
http://www.forbes.com/sites/realspin/2012/11/30/buffetts-billions-cant-buy-him-exemption-from-his-tax-averse-past/
He changed his views quite markedly. One must consider that we have 50 years of documents illustrating his views that contrast with his current assertion that taxes do not affect investment behavior.
He may be kind, but if he thinks the rich should pay more taxes, then why doesn’t he? No one forces his CPAs to use any deductions at all. He could completely abstain. In fact, he could also contribute more than his taxable amount, which could go towards paying down the debt.
RTC:
I am not from Alaska. I’ve never said I live in Alaska. I’ve lived in multiple state, but I’m in CA. Why am I not qualified to criticize a tax and spend philosophy?
But out of curiosity, why is no one in Alaska qualified to criticize government wasteful spending and frequently raising taxes?
I said “if we tax the rich into oblivion, what would happen?” I did not say they were an extinct species.
What I am trying to explain is that too few project trends out into the future. Let’s say, for example, that we increase taxes by 5% on the rich every 2 years. Well, project that forward. At some point we’ll get to 75% . . . 95%. No one seems to realize there is a trend. If we blow past $16 trillion in debt and keep going, at what point will we lose our international credit rating and default on our interest payments? When will we default on all those bonds we issued? What about the retirees who invested in those bonds.
Cause and effect. We shouldn’t be all mach and no vector.
Nick – hahahahaha! I think I’m more popular with the Word Press filter.
John – When people romanticize socialism, I think of two examples. The first is when the pilgrims arrived, they temporarily enacted a company store where everyone had equal shares. If anyone hunted game, it was divided equally among everyone. If no one hunted game, he still got a share. Here’s what happened: they were ill prepared for winter, people were starving, and those who hunted to feed their starving family had only a tiny portion left after dividing it up, and those who were just disinclined to work or hunt still got that equal share. So people got fed up and quit trying. They got angry when able bodied men just sat there and got the same share as those who were trying. The rub was not providing for the sick or hurt, but for the able bodied, and the impossibility of seeing any result of their work. When they ended that phase, which was only intended to be temporary, the colony flourished.
The other example is a government union employee. He can sit there at his desk and twiddle his fingers, and he gets paid the same as if he busts his butt all day. So guess how hard he works? That is why a recent expose discovered that 8 VA salaried cardiologists had the same combined caseload of a single private practice cardiologist. The private practice doctor saw a result from his hard work, and worked harder. But not so for the VA doctors, so they worked 1/8 of his workload.
I support social programs that help people in hard times, the disabled, etc. But I’ve known people who grew up in the USSR. They are shocked that people in the US keep trying to emulate what led to the privations in the Soviet Union. And yet we hear talk all the time that there should be no rich, no big companies, everyone should make the same, income inequality, entry level minimum wage jobs should support a middle class lifestyle, employers rob their employees, etc. We’ve all heard this rhetoric before – in the USSR, for example, before the stale government bread lines.
We need more opportunities in this country, not less. We wouldn’t have so many able-bodied men and women on Welfare in the first place if our economy was booming again.
Karen: You’re hilarious today. Someone from Alaska explaining “tax and spend”. That’s rich, considering Alaska receives something like $1.65 in federal funding for every dollar it sends to Washington. Please, do go on.
But first, “If we keep taxing the rich into oblivion, what will happen?”
Tax the rich into oblivion? Only an absolute fool would believe that the wealthy are anywhere near becoming an endangered species. I don’t consider you to be an absolute fool. If it weren’t for the fact that you live in Alaska, I would suspect that you’re being paid to shill here.
But, for the sake of argument, let’s assume that you do believe what you’re claiming, that the rich are being taxed into oblivion. You know who disagrees with you? The investors who are putting the dozen or so hi-rises in New York City – New York City!? with apartments starting around $90 million. That’s the low end. Those investors seem to know a thing or two about the state of wealth in this country.
You know who else disagrees with you? Warren Buffet, who thinks the wealthy in this country should pay more in taxes. In case you think Warren Buffet is some kindly old avuncular Gampa, handing out hundred dollar bills to children in the street, guess again. The man’s a shark, who will throw nasty uppercuts and sockdolager roundabouts as a way of negotiating his interests in any investment he makes. He also realizes that America is not a collection of individuals, each of whom possesses a choice between good and bad, but a society with responsibilities and obligations – if it wants to be moral. George H.W. Bush understood that too, when he declared Reaganomics was voodoo. Given a choice between believing you and kindly old Warren Buffet, I’ll side with Mr. Buffet
Trickle down doesn’t work. Not even the men mixing the kool-aid can make the numbers work. But, ohhhh, so tasty.
RTC wrote: “You know who else disagrees with you? Warren Buffet [sic], who thinks the wealthy in this country should pay more in taxes.”
Warren Buffett has fooled you. If he was honest about this, he would pay himself a more typical salary. By paying himself less than he pays his own secretary, he avoids payroll taxes and pays about half as much in federal taxes than he otherwise would. It is very easy for a person to say yeah, I should pay more taxes, but if he isn’t paying more taxes by at least honestly paying himself a salary typical of someone doing his job, then I don’t trust what he has to say.
Paul – no kidding!
What proof do you have that trickle down does not work?
Karen, “Your idea of tax policy sickens me. I can’t understand how anyone can think as you do.” You are Satan. You are Lucifer. Now, work harder so I can collect my disability, unemployment, food stamps and social security.
Investment tax rates have fluctuated over the years. When the economy has boomed, it has supported rates close to or equal to earned income rates. When the economy lags, the idea is that lower investment rates encourage pumping investment money into a flagging economy. There is debate on either side for raising and lowering investment tax rates. One must also consider how it can affect retirees, who do compose part of this class.
The bottom line is that increasing taxes in a flagging economy is usually a bad idea. If we simplified the tax code, equalizing all tax rates could be an option to be debated.
http://www.nytimes.com/2012/01/20/business/investment-income-hasnt-always-had-tax-advantages.html?pagewanted=all&_r=0
I understand there is valid debate for and against a flat tax.
I have several problems with the current system:
1) It’s a beast of a tax code. We need CPAs to do our taxes correctly and even then the laws can be so complicated that they can still make a mistake.
2) It creates an “us and them” mentality, where voters consistently vote for higher taxes for “other people” with no end in sight. They want to give all the tax hikes to others but want to be the only ones with the tax cuts and deductions.
I would love to make the tax code simple and straightforward. Whether it’s a straight across the board flat tax, or just a simpler system.
Karen – when the IRS helpline screws up the tax code and then cannot be held responsible for giving bad advice, you know there is a serious problem with the code.
The Constitution and Communist Manifesto are different unless you believe they are the same. To fund welfare, public school/college, food stamps, ACA, affirmative action, rent control, Medicare, social services, SBA, HUD, HHS, student loans, quotas, etc., etc., you have to believe that the Constitution prescribes control of the economy and redistribution exactly as the Communist Manifesto does. “From each according to his ability, to each according to his need.” Did James Madison or Thomas Jefferson write that?
Redistribution of wealth, in any form, is unconstitutional. The government has the power to tax for governmental operations, not redistribution. In the Constitution, Thomas Jefferson and the Founders provided Americans the right to private property in all forms. This right includes money, personal property and moveable property which is “admitted before the establishment of government.” Private property cannot be taken from one man to be given to another as it would then be public property.
The government cannot tax one man to pay for another man’s tuition, direct payments, food, affirmative action, social services, rent control, Medicare or any financially beneficial item.
The Constitution was written with certain “understandings.” One of which was that a man’s property was his and that taxation was to fund legitimate governmental operations – not to take money from one man to give it to another, by any means or method. Also entirely understood was that charity was noble and the private charity industry was viable and vigorous.
Jefferson on communism and the right to private property:
“That, on the principle of a communion of property, small societies may exist in habits of virtue, order, industry, and peace, and consequently in a state of as much happiness as Heaven has been pleased to deal out to imperfect humanity, I can readily conceive, and indeed, have seen its proofs in various small societies which have been constituted on that principle. But I do not feel authorized to conclude from these that an extended society, like that of the United States or of an individual State, could be governed happily on the same principle.” –Thomas Jefferson to Cornelius Camden Blatchly, 1822. ME 15:399
“A right of property in moveable things is admitted before the establishment of government. A separate property in lands, not till after that establishment. The right to moveables is acknowledged by all the hordes of Indians surrounding us. Yet by no one of them has a separate property in lands been yielded to individuals. He who plants a field keeps possession till he has gathered the produce, after which one has as good a right as another to occupy it. Government must be established and laws provided, before lands can be separately appropriated, and their owner protected in his possession. Till then, the property is in the body of the nation, and they, or their chief as trustee, must grant them to individuals, and determine the conditions of the grant.” –Thomas Jefferson: Batture at New Orleans, 1812. ME 18:45
John, you do realize, don’t you, that you just contradicted what Mike Appleton wrote? He wrote, “The primary function of all taxation is redistribution.” How can his statement be reconciled with our Constitution?
davidm
Your idea of tax policy sickens me. I cannot comprehend how anyone can think as you do.
Good day.
blockquote>feynman
davidm
Your idea of tax policy sickens me. I cannot comprehend how anyone can think as you do.
Good day. That is not very open-minded of you. I can understand your thinking, I just do not agree with it.
At least it’s honest if they disclose. No puffing to gt you to invest your money and then absconding with it.on
davidm
The rich will still be allowed to vote. They just won’t be allowed to funnel money to elected officials.
See that man bagging groceries? He has one vote. See David Koch in that limo? He has one vote. No problem.
Mike A – isn’t that the crux of the problem – people cannot agree on where and how much to spend our money! 🙂
david:
People remodel all the time.
Here in CA, it is common to buy a dated, 50’s bungalow with no architectural value and do a tear down to replace it with a sleek, energy efficient, structure.
It’s YOUR property and YOUR money to do with what YOU want.
Romney spends his own money, not yours. When Obama sets records for the most lavish vacations, he spends OUR money. At least Bush had working vacations based at his Texas ranch, where he’d go running or bicycling. He just worked out of his home. The Obamas go to Martha’s Vineyard, HI, Spain, Paris. The rest of us get 2 weeks a year and are lucky. They spend a HUGE amount of time in lavish vacations, shutting entire towns down.
David.
I reject the idea that dividends, interest, and capital gains should be taxed at a different rate. Period. All revenue coming into a household should be taxed at a progressive rate.
I agree that all income should be taxed. but I reject a progressive rate. And by that, I mean ALL income.
feynman wrote: “I reject the idea that dividends, interest, and capital gains should be taxed at a different rate. Period.”
Why? What reasoning do you have? Why the “Period”?
I think the economy does better when capital gains is not taxed at all. When a person takes their money and uses it to invest in new ideas and innovations, in a business that hires other people, creating jobs, and creating products that people choose voluntarily to spend their money one, that benefits all society much more than taking their hard earned money away from them.
When a wealthy person invests money, we should acknowledge that the money had been taxed previously. Income earned by that investment should not be taxed again, but allowed to be received and hopefully reinvested in similar successful business enterprises. After all, he could have lost it all. We should reward wise choices and success. We should encourage him to invest his money in business ventures that help the economy. It does the society less good if he just squanders that money on expensive vacations or buying fancy cars and boats. Let’s encourage him to make good investments, meaning more jobs and higher wages.
david:
Our politicians are supposed to represent ALL of us, not just half of us, or 75%, or 99%. 100%.
And our government has been bought and sold by the unions, not just the big corporations.
Democrats killed a bill in the Senate that would have allowed the firing of the union employees responsible for the VA scandal, that lead to many DEATHS.
That is what you get for hiring union government workers. Unfireable people, even when they essentially murder someone. Shredding their health records to make them wait 9 months for an appointment, just to make your turnaround fraudulently look good, while they die waiting, is murder, in my book.
Darren:
You are so right.
When tax season rolls around, we all see those commercials about tax preparers that say, “Don’t pay more than you have to,” or “We can save you money.” That’s just considered common sense.
Unless you are rich. And then, if your CPA has used every legal means to save you money, suddenly you are greedy, or a bad person.
It’s laudable to save on taxes if you’re middle class, but condemnable if you’re wealthy.
But few seem to take a moment and say, wait, that’s what all of us do. Save money on taxes. Why do we pass these tax rates and laws if you’re still going to be castigated if you follow them?
You’ll do know that the United States was founded by tax evaders. 🙂