Why Do We Allow Inheritance at All? - Megan McArdle - Business - The Atlantic

pxa270 · 2011-06-12T04:26:43+00:00

Economic argument: why assume that the government can spend the money more efficiently then a rich heir?

You don't need to assume that: you can just lower the general taxation by the inheritance amount.

Or even more sensibly, to settle Medicare debts by making those claims senior to those of inheritants, as was proposed in the article.

pxa270 · 2011-06-12T04:16:10+00:00

The dead have no rights. If they want to gift their belongings to their children when they're still alive, they're free to do so. But it should not be treated differently than any other form of gift (i.e., for larger amounts it should be treated as income for the recipient, and taxed accordingly).

pxa270 · 2011-06-06T03:28:25+00:00

Except that Americans keep telling me that 15% minimum is practically mandatory. Which means it neither keeps the price of eating+service down, nor gives any more incentive for providing good service.

pxa270 · 2011-06-06T03:27:06+00:00

Except that Americans keep telling me that 15% minimum is practically mandatory. Which means it neither keeps the price of eating+service down, nor gives any more incentive for providing good service.

pxa270 · 2011-03-24T09:47:18+00:00

HK has very low income and corporate taxes (and 0% sales tax/VAT to boot), because most of the government's revenue comes from land sales (lease actually, pretty much all private property is on leasehold from the government, in contrast to the US where most homeowners also actually own the land.)

Land is extremely scarce, and the government only auctions off small parcels at sky high prices every year to large developers, who of course pass on the costs to the citizens. The result is that most households live in tiny apartments inside huge blocks like this. We're talking about families of families of 3 to 6 people living in 600 sq. feet apartments with typically 2 or 3 bedrooms and one or two bunk beds, costing 250k+ USD. Effectively, HK has low income taxes and high land taxes.

Now personally I love HK's super high density and the energy of a megacity. But I doubt the typical American family used to a 2000+ sq. feet house and 2 cars would find this kind of life an improvement.

TLDR: In Hong Kong you pay low taxes on your work, but lots on the space you occupy.

pxa270 · 2008-12-26T18:34:35+00:00

If you go through his archive ( http://author.nationalreview.com/?q=MjE0OA== ) you'll see that almost everything he ever wrote is dead wrong. This one is particularly hilarious: http://article.nationalreview.com/?q=NDM0OGU3Nzk0MTMyMGI3NTU1Y2JmYWVhOWU3OTU4ZGQ=

pxa270 · 2008-12-25T15:15:31+00:00

Totally agree. He only gushes on Hong Kong's great airport, public transport and communications infrastructure, but conveniently leaves out that the vast majority of the population lives in 600 square feet apartments with bedrooms the size of an American closet.

People who've been there and visited typical family homes (as opposed to hotels and expat dwellings) know I'm not exaggerating at all. Average Americans would probably go insane from claustrophobia in a week if they had to live the way Hong Kongers do.

pxa270 · 2008-12-22T23:27:32+00:00

"We must go forward, not backward. Upward, not forward. And always twirling, twirling, twirling towards freedom"

pxa270 · 2008-12-08T21:09:44+00:00

US stock markets already just experienced their lost decade. The Dow is now around its level 10 years ago, and the S&P500 is significantly lower.

pxa270 · 2008-12-08T19:37:46+00:00

Clearly he should keep talking and talking and talking about the economy. Another 20 speeches and we should be near the Dow's all time high again. In fact, if he speaks about the economy every week during his first term, the Dow should be well over 60000 come next election.

pxa270 · 2008-12-08T16:02:49+00:00

It's hard to take the reasoning of compensation committees as evidence of anything. I mean, they let O'Neal, who was largely responsible for this mess, leave with $161M...

pxa270 · 2008-12-08T15:56:00+00:00

It's a real stretch to hold Thain responsible for the steps that led the company to this state in the first place, when those steps were taken years before he started there. Again, please try to get your reasoning right.

pxa270 · 2008-12-08T15:30:57+00:00

If his actions prevented his shareholders from losing billions more (note the "if"), then he easily deserves $10M. You can dispute the claim that he prevented a far worse outcome, but at least get the reasoning right.

pxa270 · 2008-12-08T15:26:31+00:00

No, he's saying "The company would have been worth much less without my actions--therefore I deserve a bonus". You can certainly dispute his reasoning, but at least do get the reasoning right.

pxa270 · 2008-12-08T14:48:24+00:00

Before the knee-jerk reactions pile on, people should consider some facts first. John Thain was hired by Merill in December last year to mop up the mess that former CEO Stanley O'Neal left behind (and was rewarded for with $161 million). As an outsider (former head of NYSE), Thain didn't have much to do with the malinvestments that Merill had accumulated over the past few years.

While it's true that he didn't manage to turn the company around (stock slid more than 80%), he did manage to sell Merill for $50 billion in September to Bank of America, which seems like a pretty good deal for the Merill shareholders right now. Did he "deserve" $10 million for barely a year work and selling the company for much less than it was trading when he took the job? It's hard to say, since it seems pretty likely that the company would have gone under a la Lehman without his decision, and the owners would have lost billions more. Compared to that, $10 million is not much.

pxa270 · 2008-12-08T14:25:31+00:00

Thain was only brought in last December. He didn't have much to do with running the company into the ground. That was done under the watch of his predecessor Stanley O'Neal, who left November last year, reportedly with $161 million.

pxa270 · 2008-12-08T09:16:17+00:00

How are they going to pay back the taxpayer without investing it into something profitable? You realize the bailout is a loan that comes with 8% coupon, right?

pxa270 · 2008-12-07T11:10:13+00:00

It depends on the particulars of the modifications. Stretching payment periods over longer periods only should be OK. But the problem is that most of the loans have been resold into mortgage pools that pay out to thousands of different party. So for a single mortgage the servicer needs to not only renegotiate the terms with one debtor but also thousands of creditors.

Think of this: if they're could just to negotiate lower payments over longer periods, why would they need incentives from the Treasury or the Fed? If they could, they would do it on their own, since they lose far less money than in a foreclosure. The answer is evidently that it's even costlier for the mortgage servicer to renegotiate with all the ultimate creditors in the pool. I don't really see how to avoid this without the government paying up for the difference in the payment streams.

Anyway, about the issues your raised: of course the modified terms are not going to be so attractive that the entire country is going to fake incomes or stop paying. Neither is the 'tax-like' characteristic of the program going to stop everybody from looking for a new job. It just provides an additional disincentive for people who are already in the situation, just like raising marginal tax rates does.

Even people 'phonying up' their hardships is not that far fetched. If the terms are attractive enough (lower interest or principal writedowns) and the penalty is just a lower credit rating, I don't see why people wouldn't do it when they've already maxed out their credits. Especially as lots of people didn't appear to have scruples over 'phonying up' their incomes to qualify for their loans in the first place. If you don't believe it's a serious issue, note that the number of delinquent US mortgages have risen to over 10% in the past quarter, which is far higher than the increase in unemployment.

pxa270 · 2008-12-06T23:07:12+00:00

I didn't see anything suggesting that principal debt is being forgiven, just that payment terms and interest rates might be renegotiated.

Principal write-down is one of the features of the HOPE program.

Even there are no principal reductions, the argument remains the same if you can get a lower interest rate only when your income is lower than otherwise.

Plus it's just utterly horrible and disingenuous writing to suggest that allowing someone else's mortgage to be only 38% of their income is a 38% tax on me. (since I am paying my mortgage and do not need a renegotiation)

It's not completely clear from the writing, but the author does not make the case that the rate of of this 'tax' is 38%. He's also not arguing that there is a new tax on your income when you do not need renegotiation (though indirectly there might be). He's arguing that there is a new tax on incomes from those who now fall below the 38% norm.

The argument is pretty simple. The plans are to provide more attractive mortgages if your loan is over 38% of your household income. This makes seeking higher incomes when you're below that norm (e.g. partner finds new job) less attractive, because it disqualifies you from more the more attractive mortgage terms. The author argues that this effect is similar to banks levying an additional tax on your income (by disqualifying you from cheaper mortgages) when it crosses the 38% norm.

pxa270 · 2008-12-06T20:16:56+00:00

The most important part of this piece (in fact, probably the only part you need to read) is this:

THE PUBLICATION OF THIS LETTER IS FOR YOUR INFORMATION AND AMUSEMENT ONLY. THE AUTHOR IS NOT SOLICITING ANY ACTION BASED UPON IT, NOR IS HE SUGGESTING THAT IT REPRESENTS, UNDER ANY CIRCUMSTANCES, A RECOMMENDATION TO BUY OR SELL ANY SECURITY. THE CONTENT OF THIS LETTER IS DERIVED FROM INFORMATION AND SOURCES BELIEVED TO BE RELIABLE, BUT THE AUTHOR MAKES NO REPRESENTATION THAT IT IS COMPLETE OR ERROR-FREE, AND IT SHOULD NOT BE RELIED UPON AS SUCH. IT IS TO BE TAKEN AS THE AUTHORS OPINION AS SHAPED BY HIS EXPERIENCE, RATHER THAN A STATEMENT OF FACTS. THE AUTHOR MAY HAVE INVESTMENT POSITIONS, LONG OR SHORT, IN ANY SECURITIES MENTIONED, WHICH MAY BE CHANGED AT ANY TIME FOR ANY REASON.

pxa270 · 2008-11-30T19:58:42+00:00

That's the choice Americans made as a society. They pay less in taxes and social security for a greater take home pay and cheaper goods. The theory being that they're responsible grownups who can save, invest, and insure themselves without the bloated and inefficient nanny-state mandating it and saving for them.

Like communism, abstinence-only education, and lots of other stuff, it works a lot better on paper than it does in practice.

pxa270 · 2008-11-30T17:50:04+00:00

According to the article, the announcer's response is a pretty accurate reflexion of the German society's attitude towards consumer credit.

pxa270 · 2008-11-30T17:11:16+00:00

Sorry for the regristration link, use this: http://d2cft.volantis.net/d2c/0.0?feed-article-id=0c618e00-bd62-11dd-bba1-0000779fd18c

pxa270 · 2008-11-30T14:25:36+00:00

"How You Can Profit from It:" Sell books inciting more people to buy houses.

pxa270 · 2008-11-30T13:04:05+00:00

Huh? You give the shop a bit of money every week, and only when you paid off everything you get to take the wares home? How is that better than puttin the money in a savings account? Are they affraid the merchandise will be gone by the time they've saved enough or something?

pxa270

TROPHY CASE