Tag Archives: capitalism

Every Business is the Same.

Unless you work for a non profit, you know the routine — business has one motive – to make a profit (eventually.) Business is a mathematical equation which pits the variables of humans against an improbable outcome measured by quarterly earnings and loss. What goes up must come down, despite the general theory of relativity not being related to business, it’s still quite relevant.

It doesn’t matter what product or service you sell, how much it cures a rare disease or makes the sky rain tar,  if you’re in business, you must decrease costs and sell, sell, sell, and compete against others who are your mortal enemies due to deciding to work for a company names X instead of Y, and you have to be so sure why you’re better and why you are the best (despite your products/services known shortcomings) and you all must drink so much of the kool-aid you get a stomach ache and end up in the hospital for gulping down too damn much of the saccharine, chemically-endowed beverage. Drink up. Continue reading Every Business is the Same.

10 Tax Breaks That Only The Rich Enjoy

Ahh, what’s that smell? American Greed?

We 99%ers love to call out the 1%. Some get to the 1% with hard work and luck, but many are placed there due to being born into privilege and likely a sizable inheritance. Others weasel their way into wealth. Few can get there in a way that wouldn’t make some “kooobaya-type god”scream mercy. Regardless of how the 1% made it to the top of the fiscal food chain, they can enjoy a whole host of benefits staying there — private jets, beautiful women, more beautiful women, houses, yachts, and — last but not least — some really tricky tax breaks so they can just keep accumulating more and more wealth!

Here are 10 tax breaks that only the super rich enjoy. Read ’em and weep.

  1. Income Tax, Smincome Tax
    The rich don’t need your stinkin’ income. CEOs can come out and say they’re going to take a $1 salary and the masses think that they’re being just so damn humble and giving. Not so. While us lowly folk have to work and get paid salary to do things like eat and have a roof over our heads and pay for our kids piano lessons, the rich can take their heaping savings and put it into investments that compound over time. Good thing these folks are not actually earning any income because that means they can enjoy 0% tax rates on all of their capital gains. The best us lowly folk can do is attempt to put together an investment plan that eventually provides us with enough dividends and capital gains to also take out our money tax free, even if we never have an army of beautiful girls/men and/or private jets (source)
  2. Taxes Are for Losers (AKA Poor People)
    Some rich folk work in fields like investment banking, private equity management, or real estate partnerships. Not only do they get paid a lot off the bat for these roles in terms of total compensation, their pay is not in the form of that same lowly income you and I see deposited into our bank accounts every few weeks. These modern-day royals get to be paid in a “carried interest” which is – somehow – usually taxed as a capital gain instead of ordinary income. That means these richies are paying 20% taxes to the federal government on all of their earnings. Even Mitt Romney managed to pay 15% taxes for his great service to our country as head of Bain Capital (yea, aren’t you glad he didn’t become our president?) (source)
  3. Home is Where the Cash Is
    The government wants to encourage home ownership because this means the country is more stable, generally speaking. Thus, big brother provides tax incentives for home owners of all wealth levels (as long as you can afford a house.) However, the best writeoffs go to the super rich. The mortgage interest deduction lets taxpayers who itemize deduct the interest they pay on their home mortgages. The way the program is set up, the more expensive the home and the higher the homeowner’s tax bracket, the bigger that subsidy is. (source)”Less than one-third of taxpayers are able to take advantage of the deduction—it is restricted to those who itemize their deductions, a group that skews toward the upper end of the income distribution. Also, the benefit is tied to the marginal tax rate of the taxpayer and so has higher value to those with higher income. For households making above $200,000 a year, the average benefit is $1,784 a year in tax savings. For households earning $65,000 a year, the deduction generally yields less than $200 in tax savings.”  (source)
  4. That Foggy Definition of Charity the Rich Love
    Oh, what wonder, a 1%-er is donating something to charity. That’s great, if genuinely done to help an organization, but often the reason for donation is not exactly out of good will. It’s horrible to say but many charities are corporate scams. Seriously. Let’s take a look at Walmart. The Waltons, owners of Walmart, are using “Jackie O” trusts to both give money to charity AND pass on money to future generations without paying estate taxes. Oh, and did I mention they’re doing this all through their own charity, The Walton Family Foundation? This is perhaps more disturbing than the other tax loopholes because wealth dynasties are why inequality is cemented into American culture. (source)What’s more, “generally, you can deduct the fair market value of property you donate to charity if you’ve owned it for more than one year and the property is used to further the charity’s tax-exempt function. Thus, the appreciation in value is untaxed forever. The tax law limits the annual deduction for gifts of appreciated property to 30 percent of AGI, but that still provides a gaping tax loophole.” (source)
  5. Beam Me Up and Around and Around Scotty
    Geez, private jets are just so damn expensive. But how else are the rich supposed to get from point A to point B? Not with the underlings, by god. There is a special subsidy for corporate jets which cost taxpayers $3 billion a year. Yes, a common tax trick and CEO perk is to pay for private jets under the guise of security (because what if a poor average flight attendant accidentally spilled coffee on their Prada suit during a turbulent flight???) If a benefit is classified as for security purposes the CEO will pay a reduced tax bill or no tax at all on the bene. (source)
  6. Mooooooooooooooooooooooooooooo. Mooo. Mooooney
    I feel like we should just let this tax write off slide for the sheer fact of it being so ridiculous. JK. This will make you want to go tip some cows. In states like New Jersey, Florida, Texas, Iowa, Colorado, Alabama and more, farmers can take a tax deduction for their service feeding our great nation. That is, even farmers that aren’t farmers at all. According to an article in The Nation, that’s what Michael Dell did with his second home—a suburban ranch in Austin. Because he hunted there periodically and maintained a “well-managed deer herd,” he was able to reduce the property’s 2005 market value from $71.4 million to an agricultural value of $290,000. That saved Dell—but cost Texas—$1.2 million. Florida has a well-known “rent a cow” program (I kid you not.) What is this cow business? To qualify for the tax writeoff, Florida requires a couple of cows or a herd of goats, which don’t have to be on the property all the time. So you have wealthy people paying next to nothing on property tax because they own lots of acres and can afford to rent a few cows.  (source)
  7. John Edwards and Newt Gingrich Walked into a Bar (and didn’t pay any tax)
    This one is a doosey and surprise surprise it involves politicians again. Slime of the earth. Payroll taxes are supposed to be paid on income from work, with social security payroll tax paid on the first $113k in earnings (as of 2013) and medicare payroll tax paid on all earnings. Except S corporations, which are made up of a partnership of self-employed type folks, don’t need to qualify all their earnings as payroll, and thus it doesn’t need to be taxed. This one gets a bit complicated to explain, so just check out this writeup to get the full picture of how dishonest richies can get away with legal tax loopholes that only benefit the 1% (source)

    • Newt Gingrich: In 2010, Gingrich Holdings, Inc and Gingrich Productions paid Newt Gingrich$444,327 in wage income while declaring $2.4 million as profits of the S corp. This allowed Speaker Gingrich to avoid $69,000 in Medicare payroll taxes. [Wall Street Journal Market Watch, 1/23/2012]
    • John Edwards: Senator Edwards earned $26.9 million from his work as a trial lawyer in 1995. He paid himself a salary of $360,000 each year for four years and took the rest as distributions from his S corp. This saved Senator Edwards an estimated $600,000 in payroll taxes. [New York Times, 7/10/2004]
  8. Selling a House and Paying Taxes?  Yea, Right.
    Even average American homeowners can take $250,000 of their home price increase tax free ($500,000 for married homeowners) which is a pretty good deal after years of fixing broken air conditioning systems and having termite genocide parties. But the real tax benefit for housing is only available to the super rich (surprise!) A 1031 Exchange, also called a like-kind exchange, enables real estate investors to trade the equity in one property to another property of equal or more value without having to pay taxes (yes, you heard me right.) The taxes will need to be paid eventually, but the investor, in the meantime, gets to reallocate their portfolio and you can still take a depreciation tax write-off on your properties that are being exchanged. There’s no limit to how many times you can do a 1031 exchange. Since the rich are doing this with their real estate investment property (you can’t do this with personal property, sorry 99%), when they do sell it eventually they’ll sell at the capital gains rate. (source)
  9. Tax Breaks (i.e. Itemization) Seriously Favors the Rich
    There are many different tax deductions available to take. But, of course, in order to take a deduction, you must itemize your taxes. While itemizing makes financial sense for high-income Americans, it does not for low ones. This means that deductions are mostly utilized by the rich. Only about one-third of Americans itemize their deductions, and they are mostly the well off. In 2010, only 29.3% of those making between $30,000 and $50,000 itemized, but 96.8% of those making $250,000-plus did. (source)
  10. One Home is Just Not Enough
    Speaking of itemized deductions, owners of two homes get to write the mortgage of their second one off as well, as long as they itemize. It turns out this tax benefit isn’t for folks who own tiny little vacation bungalows by the shore or middle-class lakeside cabins. Nope, the main benefactors are the super wealthy. Just to rub salt in the wound of us reg’ies, rich folk can DEDUCT THE INTEREST PAID ON THEIR LUXURY YACHTS (fyi that clink-clanking you hear is the sound of me kicking all the buckets in the world.) As long as these boats are equipped with sleeping quarters, a kitchen and a toliet they can deduct the mortgage debt on these “homes.” (source)

 

Is Capitalism Evil?

I’m a little late to the table on this question, but is Capitalism evil? My boyfriend and I watched the Michael Moore film Capitalism a few days ago and have been arguing since. My boyfriend believes the whole capitalism is evil argument, while I’m torn. It is a system based on greed and greed ultimately equals corruption (because that’s just the way people are), however it’s the best system I know. That’s not saying it’s the right way to have an economy.

If my boyfriend had his way, he’d live in a real communist society. One where everyone really gets exactly the same. His happiness will never come from material goods. He could live in a cardboard box and be perfectly happy as long as he had the freedom to live as he chooses and more importantly that he knows everyone else is equally compensated.

I, on the other hand, live my life squeezing out pennies from my salary, negotiating for higher pay, working long hours at two jobs to earn as much income in as little time so I can put it into the stock market and other less risky savings vehicles and have compound interest hopefully work it’s magic for the future. It’s not that I need a lot of money to be happy… I more so need a lot of money to feel comfortable. Maybe that’s the evils of capitalism telling their story.

My boyfriend likes to compare Hitler killing all the Jews to capitalism, because in a capitalist society you have the super rich and then everyone else is poor, and there’s very little in between. As a Jew, I kind of take offense to this argument. I don’t think it’s the same thing at all. In Capitalism, everyone DOES have a chance to succeed. Not everyone will. Some people do have an unfair advantage. But no one is taking masses of people and killing them in gas chambers. The comparison is unexcusable.

But — I’m not sure where I stand on the whole capitalism thing. If I knew that I could make less money but have stability over the years (a pension, enough to buy a house, live a decent life, take vacations every few years) then maybe I wouldn’t be so set in supporting capitalism. The only way I can see living that life is through capitalism now. Even if I’m able to sock away $50k per year after tax for the rest of my life, it will take me 20 years to become a millionaire. I’ll be 46. That’s not so bad, but that also means that I will need to keep renting an apartment with roommates, will need to keep working two jobs with one of them being for a large corporation that can afford to pay a 6 figure contractor salary, and I’ll have to sacrifice much of my life for work.

At least with the stock market there’s the chance that those 20 years can be shorter, or that I can save less each year and through compound interest have my million or two million in retirement. I know I won’t have a pension. I don’t know how much social security will be around by the time I retire. I can’t lead a comfortable life unless I know I can save money and have it grow.

Ok, so the biggest argument in the movie that I can say my boyfriend and I agree on is that politicians shouldn’t be allowed to be funded by private corporations. That really is just asking for corruption. It doesn’t even help the small businesses because the only companies who can afford to have major influence are the ones who are already super rich.

But I don’t want to live in a communist society. I like making money. It seems that’s the only thing I’m passionate about these days. I don’t even like spending money anymore. The more I make, the less I want to spend, because I’m able to start saving thousands of dollars a year. My goal this year is for my networth to go from $50k to $100k. And what’s amazing is that it’s possible. I’m one of the lucky ones, sure, but I’m still working two jobs. I’m still finding out what my skills are and applying them to roles where I can make a decent wage. I still know that I can lose my job at any second, so I have a sizable emergency fund, and I don’t have debts so if I need to cut back on my spending I could feasibly live off $1,000 a month. I wouldn’t get to save any more, but I wouldn’t be losing money. I wouldn’t be evicted.

Maybe I can’t understand yet because I don’t have a family. I’m sure it’s a lot harder with kids. I have so much freedom as a single person to say I can live on $1k a month. But that’s why I believe in spending your 20s earning as much as possible and saving as much as possible. Living as cheaply as possible. Work hard now, play later. Hope the stock market doesn’t completely crash. That’s my motto. Does that make me a capitalist? Eh, I guess so. Will my boyfriend ever understand? I think not.

Is Materialism the Devil Incarnate?

My fondest memories of childhood involve spending hours in the dressing room at the mall, with my mother bringing in yet another outfit to try on, then leaving each store with a few bags in hand, filled with my purchases for the day.

This is capitalism at its finest.

Are humans born innately greedy? Not all of us want to possess lavishly adorned lifestyles, but accumulating something provides a security blanket, plus something to show to lure in our partners.

My boyfriend has no desire to be rich or to buy new things (except the occasional expensive tech gadget). He wants to save up enough money so he can quit working, live on a commune, meditate, stare off into the mountains, and I’ll admit his lack of motivation to achieve materialistic wealth drives me nuts. Why? Because I am a materialistic person. I was raised that way.

Of course I can change. I can be happy with nothing or very little. I don’t need a new pair of shoes, but lord knows I want them.

All of this, dear readers, is in response to a post over at Get Rich Slowly entitled: 84 Year Old Social Worker Saves $1.4 Million.. The woman was frugal, but only because she didn’t care about fancy possessions. She paid for her house in cash. She drove a 30 year old car. She didn’t care about having the latest and greatest. Those who grew up during the Great Depression tend to live this way. Case in point, my boyfriend’s grandparents, who horde everything they’ve ever obtained, have a house that’s falling apart, drive cars that should be breaking down… any… minute… barely use any electricity, and while I don’t know for a fact, I’d bet they’re worth a small fortune. They worked. They didn’t spend. They saved.

That leads me to a related topic: Dubai. What on earth does Dubai have to do with all of this, you ask? I read a very interesting (and very long) article last night titled “The Dark Side of Dubai” – a controversial opinion piece published in The Independent. Don’t let it’s novel-length scare you, it’s worth reading from top to finish.

Dubai – at least from this writers point of view – is capitalism (minus the democracy) at its worst. Those who are rich become very rich, those who are poor are indebted and end up in jail or are basically unwilling indentured servants. Dubai is a surreal city that has been built to be an adult playground. The party capital of the middle eastern world, no longer an oxy-moron. Shopping malls and hotels piercing the sky. Luxury at its finest.

While Dubai may be an extreme case — if the article is true — this type of upper class gets richer and lower class gets poorer has been going on for decades. Even as I write this, I have workers being paid $2 per hour on the otherside of the world completing projects for me. When it comes down to it, capitalism is about cutting costs as much as possible so those who have can have more, and those who have not never shall have. It’s a vicious cycle. Democracy helps swing the pendulum in the direction of “fairness.” Human rights groups protest cruelty to citizens of the world. People who are hurt by people who don’t want to drive 30 year old cars.

Granted there are many shades of gray when it comes to greed. But we’re all guilty of it. If we weren’t greedy, our society as we know it would collapse. We need greed so jobs can exist. So innovation can occur. Buy now, go into debt, pay later, and on and on.

I’m not caught up in the debt cycle, fortunately, but still feel this strong urge to spend. I drive past the day laborers every day on my way to work – who are likely illegal immigrants from Mexico waiting around for a job. Loitering. They are free not to do this (the main difference between America and Dubai here) but still… when people are hungry, when their families are hungry, they need the work. So they wait. I drive past the hordes of men who look to my car waiting to see if I will stop with a job. I head off to my cushy office and middle class-paying job where I’ll never work as hard as they would between dawn and dusk. I accept my greed, feel uncomfortable spending time with people lacking this greed (my boyfriend) and those who are extremely greedy and superficial (those who just want to make money to buy the world).

I am afraid that the horrors of Dubai and the greed that built the city are within my cultural DNA. I’ll save and I’ll spend, and I’ll use the resources of the world to get ahead. And I wonder if that is so terrible – when so many people out there do this without stopping to think that this whole equation might be wrong.

Who Needs $90 Wine?

Apparently the price of wine heavily influences how much people enjoy it. A team of researchers at Stanford and CalTech set out to prove this, and gave testers two glasses of wine to try. One was a “$90” glass of wine, and the other a “$10” glass of wine. What the subjects didn’t know was that these two glasses of wine were actually identical.

“Specifically, the researchers found that with the higher priced wines, more blood and oxygen is sent to a part of the brain called the medial orbitofrontal cortex, whose activity reflects pleasure,” reports CNET.

Britney Spears, Lindsey Lohan, Paris Hilton, and the Destruction of America

When I was little, and when I was not so little, all I dreamed about was being a celebrity. It was the end all of success. As a celebrity, you’d be praised for being unique (albeit slightly unique), and everyone would love you.

Fast forward to a reality check… those celebs that find themselves on the covers of the gossip rags often once were the same ones that I’d envy, except their lives and careers had spilled sour.

Poor Britney Spears. She certainly has some kind of mental condition, and it’s obvious that it’s not helped by being smothered by Paparazzi everywhere she goes. Her family (that is, parents and sibling) are apparently not the most stable bunch, but Britney made it big with some spunk and rock hard abs. Could she sing? Well, not really. She could hit the right notes and had a voice that you couldn’t forget, for better or worse. But Britney had what we all wanted… innocence with a serving of sex appeal. Even if we hated her music, we wanted to be Britney… or like Britney. Same goes for Lindsey Lohan. We saw both of these girls when they actually were young and innocent (well, so they’d like us to believe). And then… well, they’ve grown up in the spotlight, and it seems that spotlight was just a bit too bright.

It’s unfortunate, but I think we need celebrities like that to use for public floggings, as otherwise the rest of us minions would think that their lives were perfect because they were rich. Apparently, money doesn’t heal all wounds. Sometimes it’s pouring fuel on an already painful flame.

I feel for Britney and Lindsey. They feel like it’s part of their job and their image to go out and party. To be a young celebrity in Hollywood. Only when drugs enter into the picture, you lose control. I’ve seen friends get eaten up by drugs, and it certainly is just as much a problem in Hollywood… where celebrities have enough money to overdose daily on the most gourmet offerings of the latest designer drug batch.

But who could blame them for needing that rush? If as Americans we hold celebrities on the top of the totem pole of what we wish we could be (which I assume is the case for other people too, since celebrities are still featured on the covers of magazines, and talking about celebrities has made stars of once-Internet-nobodies like Perez Hilton, those GoFugYourself girls, etc) then once you’ve made it to stardom… what’s left? Better party it up when the going’s good.

Not all celebrities turn into psychotic drug addicts, of course, but those that do surely get the most press. Is it good for their careers? If they can make a sober comeback, possibly. Everyone wants to root for the fallen celebrity, despite how much he or she may make fun of this person. If a celebrity truly falls from their divine status and cannot return, then that pops the fantasy of flawed perfection.

Truth is… Britney, Lindsey… they’re just human. Sure they happened to have been born with extra lovely looks, and with some luck and being in the right place at the right time, they guaranteed themselves a future in show business.

It’s funny how easy it is to forget that what they do is their JOB. Sure it’s a pretty awesome job that pays well, but so is being the CEO of your own corporation, or a successful venture capitalist. The job comes with a lot of negatives as well. Privacy? Forget it. You’re working around the clock as a celebrity. From the moment you leave your house to the second you shut the door and close the curtains.

Accepting this changes my extreme, almost obsessive desire to become famous. Or, now I’d like to become famous for writing something brilliant… doing something interesting… but I don’t know if I’d want to be so (un)fortunate to be one of Hollywood’s young actresses. If you’ve got one life to live, there’s not perfect way to live it. If you’re rich, you have nothing to work for. You’ve been raised on attention, so you need to work for the attention. Look at Paris Hilton. She doesn’t need to work, but she does because without work she’d be just like any other NY socialite.

A few months ago I spent some time with my grandmother who lives in Las Vegas. At breakfast one morning, she spent some time complaining about Hollywood today, saying that everyone these days is ugly. I went through a list of celebrities and she said they’re all ugly (except she liked Halle Berry for some reason). Anyway, I know the idea of “beauty” has changed over time, because a lot of these actor and actresses she found ugly happened to be my personal idea of aesthetic perfection. Still, I get her point — beauty is no longer about health and youth exactly. Sometimes people admire the beauty of those who do lots of coke because Kate Moss chic is unbearably still in.

And all of that makes us, the American public, especially the female half of that, spend oodles of money trying to make ourselves look like these people who have lots of money. It’s a vicious cycle of consumerism that is at the heart of America. Capitalism would still exist without celebrity, but what would it look like?

I’m not sure of the answer. In college, I took a class called the “sociology of celebrity” and it was by far the best class in my four years at school. Dissecting celebrity culture, both from the side of the everyman and the celebrity, is understanding America.

I actually read the entire textbook from cover to cover…