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

Herb Parsons hparsons at parsonsys.com
Mon Nov 13 01:31:01 EST 2006


Bill,

That's overly simplistic, and not a fair representation.

We don't know what a pure sales tax system would look like. If we go to a system where mortgage and rent are tax free (somewhat duplicating our current mortgage tax exemption, but extending it to renters), medical expenses are tax fee (somewhat duplicating our medical expense write offs), and food purchases are tax free (duplicating what many states do on sales tax) then that throws your calculations in a different light.

Of course, that means that some of the "poor" in this country would see a tax increase, as they have to pay taxes on their game systems, video systems, cars, and booze. But then, I don't have a problem with that.
 

Herb Parsons

S/V O'Jure
1976 O'Day 25
Lake Grapevine, N TX

S/V Reve de Papa
1971 Coronado 35
Lake Pontchartrain, Louisiana Coast 

>>> bill at effros.com 11/12/2006 9:08:03 pm >>>
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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