[Rhodes22-list] Tax Advice? 401k's

[Bill Effros]

Rik,

Let's say the rich guy earns $1,000,000 a year, and the poor guy earns 
$50,000.  When all is said and done under the current system, each pays 
20% of his income in taxes -- $10,000 for the poor guy.  $200,000 for 
the rich guy.

Now we switch to a flat 20% VAT.

The poor guy spends $60,000 a year (using credit cards to make ends 
meet).  His tax goes from $10,000 a year to $12,000 a year.

The rich guy can't buy enough Beamers to spend more than $500,000 a 
year.  His tax goes from $200,000 a year to $100,000 a year.  But 
luckily, there are plenty of poor guys making up the difference, so the 
scheme is revenue neutral as far as the government is concerned.

VAT is a good deal for the rich guys, and a poor deal for the poor guys.

But hey!  A lot of the really rich people around here actually do roll 
around in 2 year old Chevys and 4 year old Buicks.  It's only the 
"nouveau riche" who buy Ferraris.

Bill Effros

Rik Sandberg wrote:
> Bill,
>
> Hmmm ..... I suppose it would be possible for the rich to pay 
> less,.... but only if they want to spend money like a poor person. 
> Seems to me, the sales tax on that new Mercedes or Beemer is likely to 
> be *just a bit* higher than the sales tax on that 2 year old Chevy. 
> 'Course, I could be wrong, maybe all the rich people will start buying 
> 2 year old Chevys (cough cough) ..... Ya think??
>
> Rik
>
> Bill Effros wrote:
>> Could be.  It's seductive.  Although I think the people with less 
>> will catch on to the fact that they will pay more, and the rich will 
>> pay less if this is enacted.
>>
>> Bill Effros
>>
>> Joseph Hadzima wrote:
>>> Howdy Bill:
>>>  
>>> I'm thinking that we'll have a national sales tax for the government 
>>> to get back income last through the 401K, and IRA programs.  It's so 
>>> easy to sell too!  Everyone thinks a sales tax will get the "rich", 
>>> when it will actually touch everyone!  It also won;t sound like 
>>> we're taxing people on fixed income, but we will.
>>>
>>> HADZ (a.k.a. joe)
>>>  
>>>
>>> ----- Original Message ----
>>> From: Bill Effros <bill at effros.com>
>>> To: The Rhodes 22 mail list <rhodes22-list at rhodes22.org>
>>> Sent: Sunday, November 12, 2006 12:17:56 PM
>>> Subject: Re: [Rhodes22-list] Tax Advice? 401k's
>>>
>>>
>>> Rummy,
>>>
>>> Slim, of course, must contribute both sides of his 401K.
>>>
>>> I, too, put aside as much money as possible for reinvestment while 
>>> others bought Hummers.  This is central to any retirement strategy.
>>>
>>> By not having money in 401ks I was able to make investments, using 
>>> money that had never been taxed, in things that never will be taxed.
>>>
>>> My security comes from investments that are not subject to future 
>>> taxes.
>>>
>>> I believe the huge debt that has been incurred will be paid by all 
>>> segments of the society, not just the young.  Inflation and 
>>> increased taxes on 401k distributions will force older people to pay 
>>> for some of the things they awarded themselves at earlier times.
>>>
>>> (Philip--this is what I mean when I say taxes are always about 
>>> redistributing wealth.  The young will take this back from the old.)
>>>
>>> Bill Effros
>>>
>>> R22RumRunner at aol.com wrote:
>>>  
>>>> Bill,
>>>> One aspect of the 401k that you have forgotten is that many 
>>>> employers match  their employee contributions up to a certain 
>>>> percentage. This to me is free  money. This also happens to be one 
>>>> of the few ways that many people, including  my wife and I, are 
>>>> able to accumulate a small fortune over a long period of  time. I 
>>>> am not a financial wiz, nor do I want to be one. I have found 
>>>> better  ways to use my time. Drinking and sailing come to mind.
>>>> We have been putting the maximum amount allowed by law into the 
>>>> 401k for  the past twenty one years. It was hard when we saw 
>>>> friends and co-workers  driving fancy vehicles, buying new homes 
>>>> and we drove used vehicles and had  modest living quarters. Many of 
>>>> these people today have no savings, still owe on  a second or third 
>>>> mortgage and have car loans that would choke a horse.
>>>> We look at our current nest egg and other investments and we're 
>>>> looking at  a good chunk of change. Odds are that we will never 
>>>> spend the principal and it  will only continue to grow.
>>>> I am strongly in favor of 401k's, especially for a long term 
>>>> investment.  It's called security.
>>>>  
>>>> Rummy
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>>>>       
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