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Powered by LifeTypeI haven't looked at how much time it took us to do taxes this year - I thought we were doing pretty well, time-wise, until we blew 8 hours or so today finishing them off (or is it them finishing us off, I'm not sure which...)
I noticed a number of places where the strange, complicated math formulas to figure out different values seem to be kind of odd (ie. not just complicated, but don't calculate in the intuitive way for people at different incomes, etc.) The child credit is biased against self-employed people for some reason, where you can hit a cap relatively quickly, where if you work at a regular company, the cap is much higher (and at least for one guy (with a relatively low salary as a teacher with lots of kids) I asked, impossible to hit - he actually didn't know there was a cap).
There is also a minimum to getting the child credit, which I hadn't realized. Once you have three kids, then that limit is mostly removed (though you have to work at the calculations to figure out how much you actually get), but with only one or two kids, you can actually earn too little and not get any tax credits for your children. One could argue that if you are earning small amounts of money (or at least have a small adjusted gross income) that perhaps you can't afford lots of kids, and so shouldn't have the tax credit to motivate you, but I don't know how much people think about the tax credit when thinking about having another child or not.
Another interesting thing that happened this year, though I suspect it is mostly our "fault" due to not giving as much, is that though we earned a little over half what we earned last year, the actual tax rate is higher this year due to the self-employment chunk being bigger. Last year, we were in the 15% bracket, and "actual" taxes were 9%. This year, we're in the 10% bracket, but actual taxes are 13%. I am defining "actual tax" as taxes paid divided by gross income. (actually, I didn't do the calculation this year, taxact happened to point out that I was paying a higher tax rate than last year, I guess just to cheer me up) But, the numbers sound right for last year, when I did do that calculation, and I'm pretty sure I used straight gross income.
TaxAct also pointed out that 13% of my taxes went to pay for other people's social security and medicare, etc. 9% went towards the US defense fund. And then the rest of the categories (probably about 8) were all small percentages. Just gives you a warm, fuzzy feeling, doesn't it?
The 94% line up with the
As far as only spending the money we have, that's not really a good idea as a universal principal. I don't know if you or Heather took out any student loans for your degrees or not, but spending money one does not have on a college degree is often a wise course of action. I don't know if you paid cash for your house or not, but taking out a mortgage for a house is also often a wise course of action (although not always, as we have seen over the past year). Most small business need to spend money they don't have in order to get off the ground.
Even spending money one does not have for a car is often a wise course of action. Policy decisions made over decades means that having a car if often necessary to hold a job. If one cannot pay cash for a car, then the benefits of spending money one does not have on a car (having a job) often outweigh the negatives (needing to pay interest on the loan, having an asset that only depreciates, etc.)
Since the rest of the world is still willing to loan our government money at extraordinarily low interest rates, the benefits of the federal government spending money we don't have (keeping this recession from becoming a depression, investing in a sane health care system to save huge amounts of money in the long run, investing in the infrastructure that will allow for long term economic growth, etc) will far outweigh the negatives (paying interest on debt, the need to raise tax rates to what we had during the 1980's and 90's, etc.)
Chip, the rest of the world is beginning to be unwilling to lend us their capital because they are beginning to see that we will never pay it back.
The fesd health care spending is purely either consumptive or aimed at violating patient privacy.
You left out a few negatives of the feds' current spending policies like the destruction of our currency and the crowding out of investment by new private sector agents who would actually create economic value for the capital spent.
Sorry Stephan, the mean commenting system seems to not like Swiss commenters, or at least you, since you seem to run into more trouble than the average person. I suspect that you might have used a troublesome < sign, which I hadn't (until this morning, when describing the problem to someone at church) figured out a solution to. I'll have to try out my idea to see if I can make it work properly, without letting the hackers post nasty stuff. For now, the solution is to type < whenever you want a < sign.
Chip: I don't know where taxact got their numbers, hadn't gotten that far in thinking about it.
One reason I think that starving the beast would be a good idea is that it works in NH. They have the second lowest taxes in the country, and I have yet to figure out what services they don't provide that Pennsylvania does. When I lived in the city, we had free trash pickup, but now I pay for that, and that was the only item I had thought of.
I suspect that NH didn't get the way it was by thinking about starving the beast, and it is probably much harder to decrease spending, since every politician has their favorite projects to spend it on.
I think it'd be great to reduce spending on defense. We waste so much money in so many areas of defense. As a federal contractor, I've seen insanely expensive items being bought by the government. I have no idea why the system is setup to require the government to buy stuff only from federal contractors, who can then jack up the price 3 to 4 times what it would cost if I walked down to Target. I assume the system was created in order to cut down on the money being given to friends of government employees, but the system they setup is really, really bad.
Heather did have a loan, I didn't. We have had mortgages for our houses, we paid the first one off in five years, and hope to have a similar number for the second, though it might end up longer if we actually get good tenants at the old house (which we might be getting new ones this week...). I don't expect to ever get a loan for a car. We went without a car for quite a while, certainly in the city you don't need a car, and Pittsburgh isn't exactly known for its good public transportation. I have wondered if we'll ever have two cars, probably not now that I am home; though I did recently meet a guy who also thought one car was perfectly fine for a family, and he takes it to work each day...
As far as government spending keeping us out of a depression, I don't think that is a wise idea. We're pretty far from a depression, and the gazillions of dollars they spent of my money is astronomical, and a complete waste of money. It makes sense in terms of the big government folks finally had an excuse to pour money into lots of projects that they've always tried to do before, but unable to do so, and unfortunately, now folks have believed that throwing money around will actually do some good. And given that it has been said that "all economists" thought it was a good idea, and promptly a whole bunch of economists wrote a letter saying they all thought it was crazy, shows to me that the money spent was a political decision, and not an economical one.
Phil, the idea that the US government won't pay back it's loans is ludicrous. Just a couple of months ago, we were borrowing money at a negative interest rate (which means people and countries were so desperate to loan the US government money that they were willing to buy treasury bills at auction knowing that they would not get 100% of their principle back. To do that when one knows there is no possibility of reward means you are also pretty darn sure that there is no risk) One year Treasury bills are paying .6% right now. If the rest of the world had any reservation about loaning us money, the auctions for T bills would result in much higher interest rates than that. If it just takes a .6% return to crowd out investment in the private sector, that's hardly the government's fault.
I have no idea what your comment about health care spending means.
Jon, the state of NH and PA are so completely different that it is hard to compare them. The services that are needed in a tiny state are vastly different than those required in a large state with two major urban areas.
I know you readily admit to not paying attention to the news, but where did you hear that "all economists" thought the stimulus was a good idea? The consensus of economists was that the stimulus package was too small, but of course no academic position is ever unanimous. I certainly believe that the stimulus package was too small. Economic stimulus = spending money, so of course the stimulus is going to fund projects that have already been on the drawing table. Yes, the politics have changed but the impetus for stimulus is economic.
It also does not make any sense to talk about astronomical federal spending unless you are relating it to a percentage of GDP. Sure it's a lot of money, but even with the stimulus package and the increased spending in Obama's budget proposal, our government still will spend less as a percent of GDP than many industrialized countries. And it is far from a complete waste of money.
I go back and forth on the question of whether we are going to enter a depression or not, but if the government had not intervened, as imperfectly as they did, with the banks, then I think we would already be there.
The "all economists" quote came from the 20/20 videos I linked to the other day.
Little snippets, and so it possible that they were taken out of context, if you have links to the longer versions, I'd be interested to see what the people "really" believe, and why they think this is the best path.
It is crazy (to me) that you think it wasn't big enough. I suppose that is probably true in one sense - the current amount of money won't fix anything, so obviously more money is the solution.
As far as being in a depression - certainly you can't think that the money being spent now is instantly affecting anything, right? The bank money only recently actually happened right, so any current differences are only a result of perception, right?
On another topic, I woke up this morning realizing that I calculated the self-employment tax incorrectly, and I'll fix the calculation now (though that highlights part of my point - that the tax rules are so confusing, it is close to impossible to be sure that one actually calculated it correctly).
Note to any readers following along by email-only - you probably didn't get Phil's comment either, since the commenting system was offended by my comment about discriminating against Swiss commenters, and blocked Phil to prove a point.
Hrm - I went to check the taxact estimates, and they've changed, so presumably someone else noticed something looked wrong.
National Defense $1,268.00 19%
Veterans and Foreign Affairs $267.00 4%
Medicaid, Food Stamps, and Related Programs $868.00 13%
Unemployment and Social Services $400.00 6%
Social Security, Medicare, and Other Retirement $2,536.00 38%
Interest Payments $601.00 9%
Law Enforcement and General Government $133.00 2%
Physical, Human, and Community Development $601.00 9%
Why I went back to check the rates is that I think part of the issue is what Dad-o mentioned in the very first comment: that the social security tax is a flat tax, and it seems to me that the defense "tax" is not?
Another thing I woke up thinking about is that "Dad-o" said about it hurting people with low incomes more - presumably I am not being included in the "low income" bucket, though I find it humorous that I qualify for free health-care - I guess that is the up-side of the politicians thinking that "rich" people earn 250,000 or whatever the number is.
A business guy from CMU directed me to this guy's interpretation of current events. I've never heard of him, so I don't know who he is or how much he knows, but the reporter seems to think he knows what he is talking about.
"Much of it doesn't have any short-term stimulus. If you raise research and development, I don't see how it's going to short-run stimulate the economy. You don't have excess unemployed labor in the scientific community, in the research community, or in the wind power creation community, or in the health sector. So I don't see that this will stimulate the economy, but it will raise the debt and lead to inefficient spending and a lot of problems"
And: "There is also the more fundamental question of whether one dollar of government spending can produce one and a half dollars of economic output, as the administration claims."
I think that's a rather odd division of percentages—why, for example, are Law Enforcement and General Government lumped together? And if you really want to get an idea of how much money is spent on social services, you should put together at least four of those categories. National defense spending doesn't look so bad at 19% when you compare it to 66% social spending.
In addition, national defense is obviously a most important function of the national government, whereas social programs arguably are not. Some social programs are perhaps done better on a national scale, but there would certainly be disagreements as to which ones, and most I would venture to say would be more efficiently handled at the state and local level. I don't know what's in the Unemployment category listed above, but I know from experience that unemployment compensation is handled at the state level, and that payments are lower in Florida than in Massachusetts for the very good reason that it costs more to live in Massachusetts than in Florida.
Not that any of this excuses government waste, whether in the military or anywhere else.
Chip: It's not people and countries who are buying all the debt. It's the federal reserve. So yeah, technically we'll pay back the debt, but only by being zimbabwe.
Phil - can you explain what you mean?
Jon, NH has higher average property tax rates than PA does.