Showing posts with label income. Show all posts
Showing posts with label income. Show all posts

Monday, April 13, 2009

Taxes (some interesting information)


By Paul Kedrosky · Sunday, April 12, 2009

As I grouchily finish up on taxes, some fascinating semi-historical tax tidbits from the NYT's estimable David Leonhardt:

What’s much less known is that those old confiscatory [tax] rates were not as sweeping as they sound. They applied to only the richest of the rich, because yesterday’s tax code, unlike today’s, had separate marginal tax rates for the truly wealthy and the merely affluent. For a married couple in 1960, for example, the 38 percent tax bracket started at $20,000, which is about $145,000 in today’s terms. The top bracket of 91 percent began at $400,000, which is the equivalent of nearly $3 million now. Some of the old brackets are truly stunning: in 1935, Franklin D. Roosevelt raised the top rate to 79 percent, from 63 percent, and raised the income level that qualified for that rate to $5 million (about $75 million today) from $1 million. As the economist Bruce Bartlett has noted, that 79 percent rate apparently applied to only one person in the entire country, John D. Rockefeller.

Today, by contrast, the very well off and the superwealthy are lumped together. The top bracket last year started at $357,700. Any income above that — whether it was the 400,000th dollar earned by a surgeon or the 40 millionth earned by a Wall Street titan — was taxed the same, at 35 percent. This change is especially striking, because there is so much more income at the top of the distribution now than there was in the past.Today a tax rate for the very top earners would apply to a far larger portion of the nation’s income than it would have years ago.




4.12.09: THE WAY WE LIVE NOW

Richly Undeserved

Published: April 10, 2009

This is not the easiest time to be rich. Not so long ago, the image of American wealth was a heroic one, embodied by figures like Bill Gates and Jack Welch. Today it tends toward the corrupt or at least the hapless: Bernie Madoff, the traders at A.I.G., the former Lehman Brothers chief executive mocked on Capitol Hill, the General Motorschief executive fired by the White House.

The economic problems of the wealthy have tracked pretty closely with their image problems.Stocks are way down, and the waning days of the 2009 tax season offer reason for one more headache: taxes on the rich won’t stay this low for very much longer. In 2011 the Bush tax cuts will expire, and President Obama plans to also close various loopholes. As Peter Orszag, Obama’s budget director, delicately says of the rich, “We are asking them to pitch in a bit more.” The current moment has the feel of an inflection point for the American wealthy, like the stock-market crash of 1929 or the election of Ronald Reagan in 1980.

But inflection points can be misleading. Even on the rare occasions when they occur, they often bring about less change than at first it seems. The mere fact of change is so startling that the magnitude of that change can become exaggerated. So it is with Obama’s approach to the wealthy, especially on taxes. His agenda is a bold one in many ways. Yet his tax code would still look more kindly on wealth than Nixon’s, Kennedy’s, Eisenhower’s or that of any other president from F.D.R. to Carter. And only part of the reason for this is widely understood.

It’s well known that tax rates on top incomes used to be far higher than they are today. The top marginal rate hovered around 90 percent in the 1940s, ’50s and early ’60s. Reagan ultimately reduced it to 28 percent, and it is now 35 percent. Obama would raise it to 39.6 percent, where it was under Bill Clinton.

What’s much less known is that those old confiscatory rates were not as sweeping as they sound. They applied to only the richest of the rich, because yesterday’s tax code, unlike today’s, had separate marginal tax rates for the truly wealthy and the merely affluent. For a married couple in 1960, for example, the 38 percent tax bracket started at $20,000, which is about $145,000 in today’s terms. The top bracket of 91 percent began at $400,000, which is the equivalent of nearly $3 million now. Some of the old brackets are truly stunning: in 1935, Franklin D. Roosevelt raised the top rate to 79 percent, from 63 percent, and raised the income level that qualified for that rate to $5 million (about $75 million today) from $1 million. As the economist Bruce Bartlett has noted, that 79 percent rate apparently applied to only one person in the entire country, John D. Rockefeller.

Today, by contrast, the very well off and the superwealthy are lumped together. The top bracket last year started at $357,700. Any income above that — whether it was the 400,000th dollar earned by a surgeon or the 40 millionth earned by a Wall Street titan — was taxed the same, at 35 percent. This change is especially striking, because there is so much more income at the top of the distribution now than there was in the past. Today a tax rate for the very top earners would apply to a far larger portion of the nation’s income than it would have years ago.

No one in the Obama administration or Congress has suggested taking rates back to their sky-high pre-Reagan levels. But a tax code that drew a sharper distinction between the upper middle class and the extremely wealthy, while keeping its top rate below, say, 50 percent, seems more conceivable. Last year, the House of Representatives passed a surtax on incomes above $1 million to pay for G.I. benefits. (It went nowhere in the Senate, where — relevantly or not — many members would be affected by such a tax.) Gene Sperling, now a top Treasury Department official, once raised a similar idea, to shore upSocial Security.

The argument against such increases is not insignificant. Conservative economists say that higher tax rates could damage the economy and ultimately be self-defeating, because they would give the rich an incentive to shift their pay into stock or other investments that are taxed less. And to some degree, such shifting would surely happen.

But one economic lesson of the last couple of decades is that these responses are fairly modest. An academic study of the Clinton tax increases found that they caused corporate executives to exercise some stock options earlier than they otherwise would have. But the increases had no noticeable long-term effect. The executives didn’t ask to be paid entirely in stock, and the economy boomed. Increasing taxes on the rich, in other words, has some unintended consequences, but it mainly has the intended ones: it raises revenue and reduces inequality. That study was written by Austan Goolsbee, a University of Chicagoprofessor who later became the first economic adviser to a Senate candidate named Barack Obama.

Given the opposition that some of Obama’s existing tax proposals have encountered, no grand new proposals are likely anytime soon. But there is a basic economic reality that will force taxes onto the agenda well beyond this year’s budget fight. The federal government simply isn’t raising enough money to pay for its obligations, Medicare being the biggest. Neither political party has yet come up with a plan to close the gap. Although a tax code that made finer distinctions would not close the gap all by itself, every dollar helps.

For 30 years, the debate over taxes has been shaped by a faith that a flatter code is always better. There is little reason to believe that and every reason to believe that tax brackets, as well as tax rates, should be part of the coming debate.

David Leonhardt is an economics columnist for The Times and a staff writer for the magazine.






Saturday, April 4, 2009

3 Blind Mice (What is business and the Big 3) or Lost in Space

Do you remember that nursery rhyme growing up?





Have you considered how can the blind lead the blind. If the leader has no idea where they are going then what? 

Remember the Hyundai assurance plan – loose you job they will pay for 6 months?

  • Now GM is saying they will do 8
  • Form is saying they will do 12
  • I have to wonder what Chrysler will say 

On one level I appreciate what they are doing and yet on another I have to ask myself is this not more enabling behavior?

  • Is this designed to help people or is it a race to the bottom?
  • Is this the altruistic auto maker helping the consumer or another copy cat marketing plan to exploit the consumer and more cars? 

How about this for a brilliant idea – manufacture cars people want instead of making a car and convincing the consumer to by. I drive a Ford and yet many in my family on both sides were diehard GM people. Why, because of our experiences with the respective brands – I have driven GM and was not impressed with their design aesthetics back them – very clumsy.  As a business owner I remember talking with a few of my friends, fellow Dartmouth Exec Business Alum and peers joking about the fact that given a chance we could turn these companies around and yet we know they would not retain us to do so because what we would require and the changes we would make would be deemed to radical on an institutional level and radical organizational level.  Any yet I know that neither I nor my friends will get a call or an email requesting our services. 

Here is the lie that has been taught for years – the purpose of business is to make money – talk about ego and entitlement issues – WRONG!!!!!!!!!!  Want to know the purpose of business – to provide a quality good or service to the end user what enhances the value and quality of their life in such a way they are willing to pay you for it! In my prime I had almost 10 people full and part time working for me and have at times like this had to contract down to me yet never was it about what the client/customer could do for me – rather what they needed. Bottom line is this simple truth of which we lost sight – a business exists to provide a needed good or service to solve a real consumer problem. 

  • With all of this is mind and looking at the current financial problems in society – what is the answer?
  • Also, with the advent of the digital age and the eminent demise of the industrial age how had the business model changed?

Sunday, March 22, 2009

How to sabotage your business

I have not been feeling well the past few days – between my allergies, weather, and other issues have not been myself and have not been resting well. While recovering this topic has whirled around in my head.

As many of you know ethics and morals are my thing – just because something is legal does not make it moral or ethical and I believe because so many have lost sight of this. Without trust no business can be conducted. In fact trust is the basis on which all business is built at all levels and when it no longer is present business cannot and will not exist.

  • What is the quickest way to build your sustainable business – establish trust and credibility
  • What is the most effective way to decimate your business – erode trust

This post begins a series on exploring the various ways to destroy trust and credibility thus any hopes of your running or growing a profitable and successful business

  • Childlike immature unprofessional behavior
  • Betrayal and failing to keep your promises
  • Lack of respect
  • Dishonesty (lying) this includes misdirection
  • Avoidance
  • Stealing/theft
  • Being defensive, critical and/or argumentative
  • Being self-absorbed and/or self-centered
  • Not accepting responsibility for your behaviors
  • Control/power struggles
  • Over estimating yourself (having to high an opinion of your value)
  • Poor listening skills
  • Not listening to the needs of your clients, suppliers, or employers

These topics may be organized slightly differently as each are explored – however it is important to understand regardless of your ability – if your business or services are views as a detriment to anyone you are doing business with – client, supplier, employee, employer due to their negative impact then those relationships will be terminated. Do not worry I will continue to scatter tech updates, reviews and related posts.

Before I begin I have a question – do you think this series will be helpful to you as a business owner?













Monday, November 17, 2008

Selecting clients


Thoughts Comments

Did you realize that just as your clients select you, you should also select your clients? Its true and just like you may occasionally have a bad employee (a poor investment) so might you have a bad client (also a poor investment) whose relationship needs to be terminated.

Any relationship is an investment of your time, intellect, mental, spiritual and financial resources and just like any other investment you want it to grow and mature. Any investment starting out needs you to grow and nurture and pay special attention to it yet over time as they mature this relationship should grow into one that benefits both parties not just the client. In cases where the relationship remains excessively one sided, reverses, or become a drain to your resources then like any good broker you have to make a call as to whether the investment was a wise decision and in some cases it is not.

There are some tell tail signs you can look for when make your decision as to whether to do business with a person or a company

  • How do they speak of their other vendors?
  • How do they treat their employees?
  • What do their employees say about them?
  • Do they treat others as if they are beneath them?
  • How is their business organized?
  • How do they make business decision?
  • What sort of ethics do they use?
  • What does your gut tell you?

Fact is while it is more the exception then the rule some business just is not worth it or the price – taking a job for example that pays $140 when you cost if $200 does not make sense and this too is a factor. So you must also have a great working understanding of your business

  • What are your margins?
  • What is your rate?
  • What is your per job break even point?
  • How mature is your business?
  • What sort of reputation do you have?
  • Do you have the intellectual or financial capital and/or good will to perform the job?

Running a business is not for everyone especially the delusional or the faint of heart. You must know yourself well, understand your business and know what your strengths and weakness are – only when you have a high level working understanding of these things can you make educated business decisions.

With that in mind are you ready to manage your investments properly?

Cooperative Economics

Thoughts Comments



Have you ever stopped to think what would happen if a group of business owners decided to support and source from each other. Lets say your going rate was $100/hr. Lets say there are 500 people in the group. Lets say over the course of the year each person agreed to purchase 1 hour of time – the month did not matter so long as within 12 months you did it. Lets say only 20% agreed to do it because that is all that needs the service. You only spent $100 but that business got a cash influx of $12,500 they did not have before – a little over $1,000/mo.

Do you think that would make the difference between a business staying in and going out of business? In some cases yes, it could cover their rent, their utilities, their insurance and in some cases their taxes and yet something so simple to do and so rarely do we do it – why?

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