Open Thread for Tuesday, April 15, 2014

Talk amongst yourselves about whatever you like. If you have trouble thinking of a topic, here are some suggestions to get you started:

  • Tax Day. The WSJ provides a look at where all that money goes. Meanwhile, I have a question: How many of you actually wait until today? We paid ours last month… (This is really, truly a case of me trying to suggest a topic that will interest others, because as you know, paying taxes bores me rather than getting me worked up. I’ve always been reconciled to the fact that there’s a price for living in civilization.)
  • Boston bombing, one year later. Here’s coverage of the anniversary from The Boston Globe, which won a Pulitzer yesterday for its coverage of the Tsarnaevs’ attack.
  • Ukraine starts military operations to retake areas seized by pro-Russian forces. And the world watches with bated breath.

63 thoughts on “Open Thread for Tuesday, April 15, 2014

  1. Doug Ross

    Taxes prepared last month, payment sent today. I now pay more in federal income tax than I made in salary when I was the sole breadwinner for a family of five 15 years ago. But I get so much more for my money. I wish I could donate more to the efficient government.

    1. Brad Warthen Post author

      Yes, and before I got laid off, I paid several times as much as I my total salary when I was starting out with a young family.

      That’s the way it works.

      I’d much, much, MUCH rather still being paying that much in taxes than what I’m paying now. Believe me, this is worse. And I will never, never, NEVER understand someone who is making enough to pay a lot more in taxes and complains about it. Never.

      1. Doug Ross

        What percentage of your salary would you have to pay in taxes before you complained? I assume it is somewhere below 100%? Between federal, state, property, double FICA and Medicare (self employed), sales tax, etc. my percentage is somewhere around 40-45%. I wouldn’t complain if it was closer to 33%.

        1. Doug Ross

          And for me it’s not the amount I pay but what value I get in return. It’s like paying double for a broken down car.

          When the IRS announced last week that they sent out $4 billion in fraudulent refunds, it made me realize just how broken the system is. There shouldn’t be any refunds, ever. There shouldn’t be deductions, exemptions, loopholes. Take a percentage and be done with it. I shouldn’t have to pay someone several hundred dollars to figure out my taxes.

          Oh, and I also got to pay $600 for a business license to Richland County – a place where I don’t work and where I don’t have any customers. Try and decipher the document that determines your business license fee sometime…

        2. Brad Warthen Post author

          Yeah, it would be less than 100 percent. Beyond that, I can’t say. I don’t think in terms of numbers. I would never be able to quantify my feelings in terms of 45 percent is too much, 33 percent is not.

          Believing you’re paying too much is an emotion, an attitude. Emotions can’t be quantified. At least, mine can’t.

          1. Brad Warthen Post author

            I’ve always thought it sort of ridiculous when a doctor asks me to classify my pain on a scale from one to ten. Whatever I say is going to be arbitrary. And my 3 is not going to the same as the 3 of the last 100 patients he’s asked that of. My temperature is quantifiable. My pain is not, unless you’re measuring my brain waves or something to determine it, and I wouldn’t put a lot of stock in the precision of that…

          2. Doug Ross

            If you go to a restaurant and want a steak, do you order it regardless of the price? Would you pay $45 for a Ruth’s Chris filet? I wouldn’t… not when I can get an equal steak at Texas Roadhouse for $18.

            1. Doug Ross

              “Believing you’re paying too much is an emotion, an attitude. ”

              No, it isn’t. It is a result of a thought process that assigns a value to something as compared to other things. You don’t pay sticker price for a car do you? You don’t stay at the Ritz Carlton if you are just as satisfied with the Hampton Inn.

              There is a point where you would say “My taxes are too high”. Your number may be higher than mine – but it’s not based on emotion, it’s based on perceived value. An assessment of a number of variables.

            2. Brad Warthen Post author

              But I couldn’t begin to tell you what that number is.

              As for the Ruth’s Chris steak — no, I would not. Because I hear that they cook all of their steaks with butter, to which I am very much allergic.

              If I had all the money in the world, though, I would still probably live fairly economically. Even if I were a multi-billionaire, I don’t think I’d spend $300,000 on a sports car or something. That would just seem wrong to me — like skipping stones on the ocean with gold coins. Maybe I didn’t need the money, but somebody in the world could have used it. I’d be too conscious of that.

              Of course, I do eat breakfast every weekday at the Capital City Club. But I’ve done the math. It’s cheaper than if I ate at Lizard’s Thicket. So I don’t feel like I’m splurging…

  2. Kathryn Fenner

    The mathematician who revised our withholding last year to eliminate a refund somehow did not calculate well enough. We got our sizable refund a few days ago. I guess theory is his strong suit, not real life numbers.

  3. Norm Ivey

    I like paying taxes. Really. I file as soon as I can–usually in February, even if we owe. It gives me a sense of participation–like voting. It helps that we more often get a refund that make payments, but even when we do have to pay, I do it early.

    When I was filing this year’s taxes, I discovered an error in last year’s taxes, so we ended up with two refunds. Paid off the new heat pump with this year’s refund. We got the amended refund yesterday. We’re buying a new floor for the kitchen.

  4. Silence

    I filed an extension last week, but I am getting a little more of a refund than I usually like.
    Like Doug, I am paying more in taxes this year than I made in salary 15 years ago, about 50% more, to be exact. For this, I count myself lucky to be employed and earning a good living.

    1. bud

      Getting a large refund is illogical. The most sensible approach to federal income taxes is to plan on paying the largest amount possible WITHOUT incurring a penalty. It may not be possible to be that precise so perhaps breaking about even is the most practical. But these folks who brag about their huge refunds are delusional.

      1. Silence

        bud, you are 100% right. Ideally you’d pay as much as you could without a penalty, or barring that, hit it spot on so you don’t get a refund, and don’t owe. Since most people can’t save, they like getting a big fat refund check, though. It is bad business to make the government an interest-free loan all year….

      2. Norm Ivey

        My refund depends on how I’ve done on ebay during the year. It can fluctuate pretty broadly. In a bad year, I end up paying a few hundred. I get larger refunds in the years I’ve done well. I don’t figure those funds into our budget–we do what we want with it.

          1. Norm Ivey

            I’ve done a little bit of everything in the collectible arena in the past–I’ve been on it since 1998. Now it’s almost entirely Viewmaster reels with a few other 3D and optical toys thrown into the mix. It’s my niche. Username is rustymustydustystuff.

  5. Brad Warthen Post author

    I’ve noticed a weird anomaly. If I’ve had a really bad year financially, I end up having to pay. The rest of the time, especially when I’m flush, I end up getting big refunds. Both in spite of the fact that I try hard to make it come out about right, with maybe a small refund. But I almost never achieve that.

    Example — in 1987, I took a huge pay cut (25 percent) to come to Columbia. That’s how much I wanted to come here, and even more wanted to get out of Kansas. It took me a couple of years of Tom McLean giving me aggressive raises for me to get back up to what I had been making before I came here. On top of that, as the first manager from a Knight Ridder paper, I came here to a paper that had NO history of moving managers from far away — all the bosses here were home-grown. So there was no budget for moving expenses. Tom tried to help out by paying me starting a week before I arrived, but I still had to pay most of my moving expenses, which cleaned out my skimpy savings account.

    So we arrived here with nothing in the bank, and a much smaller salary than before, to feed four growing children (the fifth hadn’t arrived yet). Nothing went right financially that year.

    And it was the first year in my life that I actually had to PAY at the end of the year. I attributed this to Reagan’s tax “reform,” which went into effect that year.

    Later, when I was making four times as much, I always got a refund…

    1. Brad Warthen Post author

      I was trying to come up with a gif that expresses just how uninterested I am in my taxes, but failed.

      I went looking for the video clip from the first episode of “The Office” when Tim describes his job and ends with “… and I’m boring myself.” But couldn’t find it. Best I could do was this clip of him talking about the nightlife in Slough…

            1. Doug Ross

              Libertarians pay plenty more than the minimum. Can you identify any Libertarian who does not want to pay any taxes?

              Liberals and statists just want to make sure productive people’s earnings are redistributed in a manner that makes them feel like they are doing something. Taking credit for the idea versus the actual contribution.

  6. Doug Ross

    How is it possible to have a flat tax for Social Security and Medicare but it wouldn’t work for Federal Income tax? Start it at some multiple of the poverty level with no cap and be done with filing taxes. Fraud would be drastically reduced.

  7. bud

    The regressive aspect of FICA is one thing that needs addressing. But the most offensive part of the tax code is the lower rates for things like carried interest and capital gains.

    1. Phillip

      The other day you quoted an item about Russia now spending more of its GDP on defense than the US, with what I took to be an implication that this should be a worrisome thing, along with a comment about our spending a lower percentage of GDP on defense than in some time, etc.

      To think of things another way, however, looking at the WSJ chart you linked to here, I see that out of every $100 of my tax bill, the biggest amount goes to defense, some $23, whereas only $1.32 goes to education. If the news about Russia’s military expenditures means anything, it’s that perhaps they are finally surpassing our level of a ridiculous state of imbalance, of skewed priorities. If they are being stupider than us, it’s cause for celebration, not worry. But we’re not far behind, if the chart of “where my tax dollars go” is any indication.

      1. Doug Ross

        As long as Americans keep voting for people like Lindsey Graham and John McCain, the imbalance in spending will exist. Why can’t we lead the world by example instead of by force?

      2. Brad Warthen Post author

        Phillip, education is not and should not be a federal function. Most education spending goes on at the state and local levels, where it belongs. That there is any education spending at all on that level is remarkable.

        The military, meanwhile, is a core function of government at the federal level.

        So that’s a rather pointless comparison.

      3. Brad Warthen Post author

        Oh, and while I don’t recall doing any hand-wringing in that post, since you mention it, the increase in Russian military spending IS a worrisome thing — not in terms of implications regarding what WE should be doing in that area, but in terms of what it tells us about Putin’s intentions.

        Wouldn’t you agree?

  8. Silence

    From today’s WSJ: New York City Mayor Bill de Blasio, who, with wife, Chirlane McCray, reported $165,047 in adjusted gross income. Mr. de Blasio’s effective federal tax rate was 8.3%;
    That’s a pretty good trick.

  9. Phillip

    Brad, education may be primarily a responsibility at the state and local levels, but included in that number at the federal level are such things as Head Start, school meal programs, and the cost of the subsidy on student loan programs. But let’s accept your point as it pertains to a comparison of defense spending vs. federal education spending. What about transportation? 23 cents of my tax dollar for defense but two pennies for an essential component of our infrastructure?

    I agree that the increase in Russian military spending is worrisome and I too wonder about “what it tells us about Putin’s intentions.” But that link between the way a nation orders its spending priorities and what that ordering tells us about a country’s values cuts both ways, in the eyes of much of the world, particularly those who live in countries not named America, Russia, or China. A country that spends as big a chunk of its resources on the military at the expense of other needs as the US does, that spends nearly as much as the rest of the planet combined, is making a statement to the world about its values, whether it admits it or not.

    1. Brad Warthen Post author

      Ahh… apparently you’re referring to residents of freeloader nations, who sneer at us and regard us as barbarians for providing the security umbrella that makes it possible for them to remain safe while being total slackers with regard to defense spending themselves…

      I understand there are quite a few of those among our European friends.

  10. Dave Crockett

    I don’t enjoy paying taxes but I’ve normally tried to deal with the task as expeditiously as possible.

    My biggest problem in recent years is that while I get my 1099 info (state retirement) promptly, my modest Merrill Lynch investment account info comes later and later each year. This year, I was told by ML to hold off on filing until at least mid-March, lest I have to file an amended return because they hadn’t finalized my information.

    And that increasing delay and the size of my tax documentation is probably an indication of part of the problem with the tax code.

    On a combined AGI (including investments, retirement, consulting income and parttime work by spouse) of about $90K, my total package for federal and state filing came to more than 90 pages this year! The vast majority of that was the Form 8949 information necessary to complete Schedule D (investment capital gains and losses). Thank goodness TurboTax lets me pull down the raw information from Merrill Lynch and other sources electronically.

    To the best of my knowledge and ability, my wife and I have always filed timely, truthful, complete and accurate returns every year based on the questions TurboTax asks and the information provided by outside sources. But I couldn’t begin to tell you whether all the calculations are correct or what they even mean! How could anyone possibly complete that much paperwork by hand accurately? And why is it necessary complete that much paperwork for bottom line refunds of $273 federal and $27 state?

    I don’t support a ‘flat tax’ (though it is tempting), but this annual ritual is really getting old. I can see why some folks just take their chances and don’t file at all. Something has to change.

    1. Silence

      Dave, you might be trading a little too much if your schedule D is that extensive! Try buy and hold…

      My brokerage (Fidelity) 1099’s also came very late this year, I think the delay is due to federally mandated reporting changes though, not through any laziness or intentional delay on the part of the brokerages.

      1. Dave Crockett

        Silence, you may well be right.

        I just have to take it on faith that my broker is doing right by me. The portfolio has done reasonably well in its recovery since the 2008 debacle. But I have also to confess that the intricacies of managing it as my broker tries to explain it are sometimes beyond my college-educated, 60-year-old brain. So I’m left with faith…

        1. Silence

          Dave – your broker may be doing a fine job for you, but some brokers “churn” their client portfolios to generate additional commissions. This isn’t as big a deal with deep discount brokers, because commissions have generally gotten a lot lower. I’m completely convinced though, that most people would do best avoiding individual stocks entirely, and investing in passive (index) funds. People are sometimes their own worst enemies.

          Once in the dear dead days beyond recall, an out of town visitor was being shown the wonders of the New York financial district. When hsi party arrived at the Battery, one of his guides indicated some handsome ships riding at anchor. He said, “Look, there are the bankers’ and brokers’ yachts.”
          “Where are the customers’ yachts?” asked the naive visitor.
          -ancient story

        2. Doug Ross

          It’s amazing to me that Americans accept an $11 billon dollar agency tasked with managing a tax code that exceeds 75,000 pages and supports an even larger tax preparation, tax law, tax enforcement infrastructure THAT PRODUCES NOTHING! Imagine if all those resources were focused on business productivity, technology development, etc.

        3. Kathryn Fenner

          Studies show that a market basket mutual fund will outperform any stock picker in two years. Choose a few index funds and rebalance periodically (like a year or so). Done.

          1. Doug Ross

            Some people do better than index funds by paying attention to what’s going on. There are people who make money in the market whether it’s going up or down. Knowledge + risk acceptance = bigger rewards.

            1. Silence

              Two years was not what I’d seen, but the ability to outperform the market (as measured by the S&P 500 index) over the long term is very rare, especially when you factor in taxes, management fees and costs of actively trading. Almost nobody can win over a decade or two, and unfortunately it’s very hard to pick the “winners” who will outperform in advance. Peter Lynch did it, Warren Buffet did it, Bill Gross did it, but eventually the market catches up with them, or they become victims of their own success. Eventually the portfolio gets too large and makes it hard to perform.

            2. Brad Warthen Post author

              Just wait until I get my time machine. Then, you’re going to see some stock picking.

              First, just because it’s the financial thing I kick myself over most, I’ll go back and set e-trade to exercise all of my stock options the moment Knight Ridder hits 80. That was the peak, before the precipitous plunge that quickly made all my options worthless. I once did the sums in my head and calculated that would have been worth six figures to me — exercising them all at that exact instant. And then I immediately made myself stop thinking about it.

              That would have given me some capital to act upon a hunch I had in the middle part of the last decade. It was the very first mention I saw anywhere of YouTube, and I immediately thought, THAT is awesome and it’s going to be huge, and I wish I had some money to invest in it.

              After those two things, my strategy would basically be a matter of going a little bit into the future and looking up all the recent stunning success stories in the market, then going back and investing heavily in them.

              It would be great to go back and invest at the beginning in IBM and Polaroid and Apple and Microsoft and so forth (and in the case of, say, Polaroid, I’d know exactly when to get out), but I think transferring the wealth into the past, and persuading my past self (or someone) to make the investment and let it ride for as long as I said would be really hard to manage. The hardest part being the transference of the wealth back in time in a way that would be negotiable, and that wouldn’t arouse suspicion and get me locked up in the past…

            3. Doug Ross

              I agree… it was the “two years” that I questioned. Plenty of people beat the index returns for two years. Two decades, no.

            4. Dave Crockett

              The only time my ‘picking’ really paid off was back in Nov. 2000 when I bought ten shares of Apple for $11.60 a pop ($116 total). They’ve split once, paid dividends for the first time only this year, but are presently worth just over $10,000. And that’s down from the high in October 2012.

  11. Kathryn Fenner

    People with inside information do better. This does not necessarily mean “insiders” with illegal tips, just those with better information because they know how many trucks are picking stuff up, and the like.

    The monkey with darts repeatedly beat the top fund managers in the WSJ test.

    1. Silence

      Inside information (legal or illegal) is probably the only way to consistently “beat” the market while actively trading. Otherwise, making short term speculations is just that, speculation. People who buy and hold over long periods generally do very well, though, provided they are diversified properly and aren’t “all in” for Lehman Bros, or Enron.

    2. Brad Warthen Post author

      Speaking of the monkey with darts…

      It’s apparently from last year, but I just saw it for the first time today — have you ever seen the Adobe ad about the big comeback of encyclopedias? It’s awesome. An excited sales guy sees huge consumer demand for encyclopedias. He runs in and tells the boss, who says “We’re back!” and puts in an enormous print order for more encyclopedias. Tremendous activity across oceans and continents. Wood pulp stock goes way up…

      And in the end — SPOILER ALERT — you see a baby tapping ceaselessly on a “buy now” button on an encyclopedia ad on an iPad…

  12. Doug Ross

    Wondering how those who think the Citizens United decision was a terrible thing feel about ex-Mayor Bloombergs announcement that he will spend $50 million dollars to influence policy on gun control? That’s bad for America, right? One man should not be able to spend as much money as he wants to influence government. He should be limited in how he wants to use his resources. Am I right?

    1. Brad Warthen Post author

      I don’t know what I think about that, which is why I didn’t write anything after the ruling the other day.

      Generally speaking, I tend to want strict reporting requirements. Let people spend what they like, but make sure everybody knows who is doing the spending, and for what.

      1. Doug Ross

        If I want to support a political candidate with my money, what business is it of anyone else? I can vote in secrecy, why can’t I donate in secrecy?

        Could it be because too many politicians are willing to trading votes and influence for their own personal gain? Hmmm… you’d think we’d have that figured out by now by electing people who aren’t unethical.

    2. Silence

      Hmm, so we have a powerful billionaire, using his vast fortune to subvert our constitutional rights.

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