Page 5 of 5 FirstFirst ... 345
Results 101 to 117 of 117

Thread: 'proof' the US Middle Class is Radically Shrinking

  1. #101
    God/dess threlayer's Avatar
    Joined
    Aug 2003
    Location
    Syracuse
    Posts
    5,921
    Thanks
    369
    Thanked 419 Times in 290 Posts
    My Mood
    Fine

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    A progressive marginal rate tax system with almost no 'exceptions' would more reflect ability to pay. But rates should start out very low on the bottom end and should not go too high, say 50% at the top end. Inheritance tax should also be progressive and should have provisions for passing on farm or range lands to family members. People who inherit too much very often get themselves and others in trouble because often they have no sense of the real value of effort. Just my dreams of a more equitable system. None of this has any chance at all of occurring, so you don't need to feel obligated to debate it.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  2. #102
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    ^^^ it's an 'equitable' system from ONE point of view. However, that point of view is NOT the one held by the framers of the US Constitution - who originally called for an apportioned 'head tax' collecting equal DOLLARS from every citizen. The original framers of the US Constitution would have arguably held the position that conducting a war / defending the country, enforcing federal laws domestically, interring federal criminals domestically, etc. are of equal benefit to all Americans both rich and poor ... thus all Americans both rich and poor should contribute to paying their cost.

    The progressive system of rising tax rates, under ideal conditions and perfect human ethics, would distribute costs in accordance with each American's ability to pay. This is not something that the framers of the US constitution supported and comes straight from the socialist mantra "from each according to his ability' ... but that's beside the point. The actual issue is that in the 'real world' those at the low end of the scale will pay little or nothing, those at the high end of the scale will pay little in percentage terms thanks to their de-facto 'partnership' with the gov't, and those in the middle will pay a lot in percentage terms.

    In 'real world' terms, imagine what would happen in CA, NY, IL, NJ etc. right now if tax free municipal bonds were suddenly abolished !!! Do you suppose that welfare recipients and state employees would be content receiving state issued IOU's ( which are arguably an alternate form of currency printed by the individual states ) ? Because without the tax free feature, nobody in their right mind is going to be willing to loan additional money to these states at anything short of a 'subprime' interest rate ... which these states simply cannot afford to pay.

  3. #103
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    ^^^ Well first of all the states could issue bonds free from state and local taxation. Without the Federal exemption, the issuers would have to issue bonds at higher interest rates increasing the burden on THEIR taxpayers. Which when you think about it, is as it should be.

    It would get very sticky with bonds already issued. Lawyers would have field day if the Feds turned around and said already issued bonds were no longer tax free. Assuming they could get away with it, the states and other issuing bodies might be forced to make up the difference or might be forced to exchange the old now "taxable" bonds for new issues at higher rates. I don't know. It seems like something tailor made for the Supreme Court to sort out. We need an expert on Constitutional, contract, tax and bond law

  4. #104
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    ^^^ well, my larger point of course was that the cozy arrangement between federal and state politicians being able to finance profilgate deficit spending, and very rich Americans being able to earn a respectable interest rate on a 'guaranteed' investment without being subject to federal, state, and local income taxes on those interest earnings is an arrangement that is absolutely entrenched in modern day reality. The politicians don't want to change it. The very rich don't want to see it changed. And the legal complexities of attempting any such change ... which in theory could be dealt with in the same way as GM / Chrysler bondholders were dealt with ( i.e. damn the constitutional and contract law - you lose you greedy bastards ! ) ... will serve as a convenient excuse for preserving the status quo.

    With the status quo on tax free muni bonds preserved, if the already scheduled increase from 36% to 40% ( not counting up to 9% state + 3% local ) ordinary income tax rate plus an increase from 15% to 20% on capital gains taxes for the rich goes into effect, those very same rich will undoubtedly opt to collect 4-5-6% in tax free interest earnings from muni bonds instead of 6-8-10% fully taxable ( at a combined 50%+ rate ) interest earnings from corporate bonds or riskier taxable capital gains ( at a combined 24%+ rate ) on stock and/or mutual fund shares.

    And the rich and middle class alike can legally take advantage of the muni bond tax shelter if they can meet one simple condition ... coughing up the $50,000 to $100,000 sticker price to purchase a single bond. Not surprisingly, the number of middle class muni bond buyers is extremely small ! So the de-facto result is that on an announced marginal federal income tax rate of 40% the rich will pay zero taxes on savings invested in muni bonds, while on an announced marginal federal income tax rate of 33% the middle class will pay 33% on savings invested elsewhere !

  5. #105
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    I'll also add this new tidbit ... an older tax shelter is now making a comeback for the rich !

    (snip)U.S. life insurance sales rose 7 percent in the three months ended June 30, the second straight quarter of growth, as clients returned to buying policies after a slump last year.

    Sales in the first half of 2010 climbed 9 percent, according to the trade group Limra International in a statement today. Whole life insurance, which offers a death benefit and a savings feature, posted the biggest gain, rising 23 percent in the second quarter. Products with death benefit guarantees gained 5 percent in the first six months of this year. "(snip)

    Essentially, whole life or universal life policies are allowed to accrue capital gains and interest earnings de-facto tax-free - and without the gov't rule limitations / penalties or potential future Social Security check reductions that apply to money put into Roth IRA's to similarly avoid tax on capital gains and interest earnings.

    from

    these life insurance policies are more in the middle class price range ... but few people know they (still) exist.

  6. #106
    God/dess threlayer's Avatar
    Joined
    Aug 2003
    Location
    Syracuse
    Posts
    5,921
    Thanks
    369
    Thanked 419 Times in 290 Posts
    My Mood
    Fine

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Quote Originally Posted by Melonie View Post
    ^^^ it's an 'equitable' system from ONE point of view. However, that point of view is NOT the one held by the framers of the US Constitution - who originally called for an apportioned 'head tax' collecting equal DOLLARS from every citizen. The original framers of the US Constitution would have arguably held the position that conducting a war / defending the country, enforcing federal laws domestically, interring federal criminals domestically, etc. are of equal benefit to all Americans both rich and poor ... thus all Americans both rich and poor should contribute to paying their cost.
    Richer people have A LOT MORE to protect, so the basis of that argument is invalid.

    Quote Originally Posted by Melonie View Post
    The progressive system of rising tax rates, under ideal conditions and perfect human ethics, would distribute costs in accordance with each American's ability to pay. This is not something that the framers of the US constitution supported and comes straight from the socialist mantra "from each according to his ability' ... but that's beside the point. The actual issue is that in the 'real world' those at the low end of the scale will pay little or nothing, those at the high end of the scale will pay little in percentage terms thanks to their de-facto 'partnership' with the gov't, and those in the middle will pay a lot in percentage terms.
    First thought was stated like a rich person who wants all others to pay for his/her portion. Second thought just stated the de facto, with no improvements. I'm always for improvements.

    Quote Originally Posted by Melonie View Post
    In 'real world' terms, imagine what would happen in CA, NY, IL, NJ etc. right now if tax free municipal bonds were suddenly abolished !!! Do you suppose that welfare recipients and state employees would be content receiving state issued IOU's ( which are arguably an alternate form of currency printed by the individual states ) ? Because without the tax free feature, nobody in their right mind is going to be willing to loan additional money to these states at anything short of a 'subprime' interest rate ... which these states simply cannot afford to pay.
    It;s the fed promoting certain economic benefits to a certain segment. Nothing new there. If were talking about 'fixing' the tax system to monimize preferences, we'll have talk about making a LOT of changes. Everything needs to be on the table, even your favorites, etc. That's the only 'precondition.'
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  7. #107
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Quote Originally Posted by Melonie View Post
    ^^^ it's an 'equitable' system from ONE point of view. However, that point of view is NOT the one held by the framers of the US Constitution - who originally called for an apportioned 'head tax' collecting equal DOLLARS from every citizen. The original framers of the US Constitution would have arguably held the position that conducting a war / defending the country, enforcing federal laws domestically, interring federal criminals domestically, etc. are of equal benefit to all Americans both rich and poor ... thus all Americans both rich and poor should contribute to paying their cost.pay.
    No they wouldn't. After the US government was established, the government raised money through tariffs, which meant that only Americans who bought imported products paid taxes. An additional tax to whiskey was added, which caused a rebellion that was put down by the US government. There was never a head tax.

    Melonie,

    When you got divorced, did you give all of your possessions to your ex-husband? According to the framers of the Constitution, a woman's property was under the control of her husband. Do you ever vote? The framers of the Constitution didn't intend for women to vote.

  8. The Following User Says Thank You to eagle2 For This Useful Post:


  9. #108
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Quote Originally Posted by Melonie View Post

    With the status quo on tax free muni bonds preserved, if the already scheduled increase from 36% to 40% ( not counting up to 9% state + 3% local ) ordinary income tax rate plus an increase from 15% to 20% on capital gains taxes for the rich goes into effect, those very same rich will undoubtedly opt to collect 4-5-6% in tax free interest earnings from muni bonds instead of 6-8-10% fully taxable ( at a combined 50%+ rate ) interest earnings from corporate bonds or riskier taxable capital gains ( at a combined 24%+ rate ) on stock and/or mutual fund shares.

    And the rich and middle class alike can legally take advantage of the muni bond tax shelter if they can meet one simple condition ... coughing up the $50,000 to $100,000 sticker price to purchase a single bond. Not surprisingly, the number of middle class muni bond buyers is extremely small ! So the de-facto result is that on an announced marginal federal income tax rate of 40% the rich will pay zero taxes on savings invested in muni bonds, while on an announced marginal federal income tax rate of 33% the middle class will pay 33% on savings invested elsewhere !
    There are plenty of mutual funds that invest in tax-exempt muni bonds that require far less than $50,000 to invest.

  10. The Following User Says Thank You to eagle2 For This Useful Post:


  11. #109
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    working backwards ...

    There are plenty of mutual funds that invest in tax-exempt muni bonds that require far less than $50,000 to invest
    ^^^ of course there are ... and recently mutual funds have been created that only deal in the muni bonds of particular high tax rate states like CA and NY to preserve the exemption from state and local taxes as well as federal. But by one means or another all of these funds 'subtract' management fees from the actual earnings of the underlying muni bonds. Per Yahoo Finance, the average front end sales load for this category of funds is 3.45%, the average back end sales load for this category of funds is 2.53%, and the total expense ratio is 1.02%. These expenses are NOT trivial in an environment where 'average' bond yields are in the 3-4% ballpark - and by definition this category of funds must purchase a wide spectrum of state muni bonds which results in low 'average' yields. In contrast, a 'rich' investor is able to purchase particular muni bonds with higher than average yields - which in some recent cases can pay 7%+ ... with a zero expense ratio and with front / back end load limited to the bond broker's commission.

    So yes a 'middle class' investor who lacks the $50k - $100k required for a direct bond purchase can 'get a taste' via buying muni bond mutual fund shares, but they can't get anywhere near the same 'bang for the buck' that a 'rich' investor can via a direct bond purchase. Arguably, any 'middle class' investor who purchases tax free muni bond shares yielding an average of 3-4% , while incurring a 3.45% front end load plus a 1.02% expense ratio, will literally be losing money during the first year of ownership ! Meanwhile any 'rich' investor who purchases a specific $50,000 7% tax free muni bond will see a first year return of well over 6% !


    After the US government was established, the government raised money through tariffs, which meant that only Americans who bought imported products paid taxes. An additional tax to whiskey was added, which caused a rebellion that was put down by the US government. There was never a head tax.
    1798 - congress institutes a 'federal' property tax on land, houses ( and slaves ) to fund a buildup of the US navy in response to British and French naval threats. This was the genesis of federal and state 'property' taxes ... which in ante-bellum days was literally a 'head' tax ( on black heads) !

    1813 - congress institutes a direct apportioned 'head' tax to help fund the war effort ... with the proviso that the tax would self-destruct within a year of the war coming to an end. However, most states elected to pay the federal government their apportioned 'head' tax ( assessed based on X dollars in tax per state citizen ) by other means besides actually attempting to collect X dollars from every state citizen. These other means included borrowing / bond issuance, new printing of state currency, substitution of property tax revenues etc. - and arguably constituted the first instance of 'sleight of hand' state budget manipulations which are now as commonplace as they are outrageous !


    Arguably, the extensive reliance of the federal gov't on high import tariffs was a major underlying cause of the Civil War ... a situation which actually reared its ugly head as early as 1828-1832 with Calhoun's threat of South Carolina's state nullification and secession from the union over high import tariffs ( which arguably subsidized northern state manufacturers and penalized southern state raw material producers / exporters ). Thus your statement that only Americans who purchased imported products paid tariffs is technically true but highly misleading since in 1832 EVERY American paid 40% higher prices for products whether they were imported with a 40% tariff added to the 'international' price or manufactured in a northern state with a 40% markup applied to the 'international' price !!! In the former case the federal gov't pocketed 40% in tax revenues, and in the latter case northern state fat cats pocketed 40% in what today would be called windfall profits. In both cases, non-manufacturer southern states experienced reduced raw material sales and 'exports' as higher prices forced American consumers to purchase fewer overall goods requiring their raw materials.

    In the larger context of this thread, high tariffs meant that rich, middle class and poor alike were forced to pay a 'stealth' tax via higher than necessary prices being charged on items they consumed ... whether imported or domestically produced. Gov't benefitted from high tariffs via actual tariff tax revenue collection on imported goods. Domestic fat cat manufacturers benefitted from high tariffs by the windfall profits the tariff protection from lower priced foreign competition made possible. And the extremely well paid workers employed by those fat cat manufacturers benefitted as well ! Arguably history is now beginning to repeat itself i.e. the recent imposition of high tariffs on Chinese tires benefits both US gov't tax revenues stemming from imported tires - and benefits the profitability of Goodyear / Firestone etc. as well as benefits the highly paid Goodyear / Firestone union workers - at the expense of rich, middle class, and poor Americans alike being forced to pay higher than necessary prices when they need to replace tires !

    Back to historical analysis - this high import tariff / resulting high domestic prices controversy escalated from 1828 to 1832 into actual nullification of the federal tariff laws and threats of secession ... which in turn led to President Jackson's 1932 Nullification Proclamation deeming secession by a state to be a 'revolutionary act' and the sending of federal troops into southern cities to, among other things, assure that southern states were actually collecting tariffs on imported foreign goods !!! See This got a bit ugly, but fortunately by 1833 set in motion a series of tariff reduction compromises rather than a direct confrontation between the federal gov't ( increasingly dominated by northern states and their fat cat manufacturers / bankers ) and southern states.

    Everybody was more or less content under these tariff reduction compromises until a deep recession 'panic' of 1857 caused tariff tax revenues to fall off a cliff. This lead to calls by northern state politicians to reinstate high tariff rates as a means of restoring lost tax revenues - which in turn triggered off all of the same nullification / secession objections by southern states that Calhoun had first raised ~30 years earlier. Obviously, this time around, no compromise was reached !!!

    For whatever reason, US history books seem to totally discount the issue of high tariffs and their disproportionate negative economic effects on southern states - as well as earlier incursions by federal troops into southern cities to enforce the collection of high tariffs on foreign imports that southern state gov'ts had nullified ... as well as to suppress 'voluntary' secession by those southern states - when discussing Civil War history. The principle of nullification first set into motion by John C. Calhoun ... see ... was a major precursor to the Civil War, and is increasing in importance again today as new high federal taxes are being imposed which arguably unduly burden certain states while arguably unduly benefitting certain other states.

    As an aside, I find it highly interesting that history so often tends to repeat itself ! There indeed appears to be some truth to the old adage about 'those who fail / refuse to learn from history' ...

    And of course the basic lesson from tariffs is that the resulting higher prices for ALL merchandise subject to tariffs, whether domestic with inflated prices or imported with prices actually increased by tariff collection, lightly impacts the 'poor', falls heaviest upon the 'middle class', and may even benefit the 'rich'. Even today this is arguably true for tires in that 'poor' people who don't have jobs don't wear out as many tires, in that the proportionate price increase the 'rich' must pay for tariff affected tires to fit a Rolls Royce is less than the proportionate price increase the 'middle class' must pay for tires to fit a Honda or Chevy etc. ( relative to the car's value or the owner's income). Also it is the 'rich' who stand to benefit from their more profitable investments in Goodyear / Firestone stocks and bonds. By the same token today's ethanol tariffs achieve the same effect in that the 'poor' who don't have jobs don't need to purchase as much higher priced ethanol blend gasoline, in that the more expensive ethanol blend gasoline purchases by the 'rich' owner of a Rolls Royce are not proportionately higher than the more expensive ethanol blend gasoline purchases by a middle class owner for their Honda or Chevy ( relative to the car's value or the owner's income), etc. And again it is the 'rich' who benefit financially from the production tax credits granted to US ethanol producer partnerships in which they can invest ( at a cost of ~$1,000,000 per partnership share ).


    When you got divorced, did you give all of your possessions to your ex-husband? According to the framers of the Constitution, a woman's property was under the control of her husband. Do you ever vote? The framers of the Constitution didn't intend for women to vote.
    When I got divorced I essentially wound up being given all of my husband's 'debts' for repayment - since we had few joint assets that were actually paid for, and since his actual reported income was so miniscule that creditors couldn't garnish his wages. That wouldn't have happened per the framers of the Constitution !

    As to voting, I'd still subscribe to the original Constitutional vision that only Americans who actually have 'skin in the game' should be allowed to vote - for the simple reason that when Americans who are net recipients of tax money collected from other Americans are allowed to vote for imposing increased taxes upon others to fund increased benefits for themselves it arguably constitutes 'tyranny of the majority'. Coincidentally, the very same 'tyranny of the majority' was the exact point raised by John C. Calhoun all those years ago when northern state voters were able to extract increased financial 'benefits' from southern state voters via the imposition of high tariffs !!!

    PS I won't be voting from way south of the border ( although I could legally cast an absentee ballot). As an ex-pat 'resident' of the state of New York, what's the point of wasting the stamp ? Where NY is concerned, it is guaranteed that the gov't benefit collecting 'poor' plus the gov't paycheck collecting public sector workers will win their vote to increase taxes on other NY'er's in order to continue / increase their own gov't benefit checks and paychecks ! Many of NY's 'rich' will also vote for increased tax rates since in real world terms their muni bonds, green energy partnership tax credits, and other ( quasi ) legal tax shelters will allow them to avoid ever having to actually pay those increased tax rates. Circling back on topic, this intra-state 'tyranny of the majority' is indeed contributing to a shrinkage of the 'middle class' population in the state of New York ... although few former New Yorkers decide to relocate as far outside the state as I have.


    ~
    Last edited by Melonie; 08-29-2010 at 07:40 AM.

  12. #110
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Quote Originally Posted by Melonie View Post
    working backwards ...



    ^^^ of course there are ... and recently mutual funds have been created that only deal in the muni bonds of particular high tax rate states like CA and NY to preserve the exemption from state and local taxes as well as federal. But by one means or another all of these funds 'subtract' management fees from the actual earnings of the underlying muni bonds. Per Yahoo Finance, the average front end sales load for this category of funds is 3.45%, the average back end sales load for this category of funds is 2.53%, and the total expense ratio is 1.02%. These expenses are NOT trivial in an environment where 'average' bond yields are in the 3-4% ballpark - and by definition this category of funds must purchase a wide spectrum of state muni bonds which results in low 'average' yields. In contrast, a 'rich' investor is able to purchase particular muni bonds with higher than average yields - which in some recent cases can pay 7%+ ... with a zero expense ratio and with front / back end load limited to the bond broker's commission.

    So yes a 'middle class' investor who lacks the $50k - $100k required for a direct bond purchase can 'get a taste' via buying muni bond mutual fund shares, but they can't get anywhere near the same 'bang for the buck' that a 'rich' investor can via a direct bond purchase. Arguably, any 'middle class' investor who purchases tax free muni bond shares yielding an average of 3-4% , while incurring a 3.45% front end load plus a 1.02% expense ratio, will literally be losing money during the first year of ownership ! Meanwhile any 'rich' investor who purchases a specific $50,000 7% tax free muni bond will see a first year return of well over 6% !
    I just looked up the expense for Vanguard's CA tax exempt fund. The expense is .20%.

    https://personal.vanguard.com/us/fun...FundIntExt=INT

  13. #111
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    ^^^ yup, true enough ... this particular Vanguard CA muni bond fund does have an expense ratio of only 0.2% ... but on the other hand ( and probably due to a lower degree of active management equating to the fund's low expense ratio ) this fund also only has a 2.73% SEC yield.

    The point remains that a 'rich' investor able to directly select and purchase an individual muni bond for the added cost of a broker's fee is always going to do better than a 'middle class' investor who buys mutual fund shares ... in the case of CA I was quickly able to locate a muni bond offering which pays 6.63% but with a ~$50,000 price tag per bond.

    Also, in the case of California muni bonds, both the mutual fund managers and the 'rich' direct bond owners now have to worry about the possibility of receiving their bond interest payments in the form of CA state issued IOU's instead of US dollars ! Probably no worries in the long run though because, as discussed in my earlier post, the odds are good that a new federal bailout package will wind up using federal taxpayer money collected in Texas or Alaska or Wyoming to make the interest payments on California's muni bonds and thus avoid a default !

    ~
    Last edited by Melonie; 08-29-2010 at 01:38 PM.

  14. #112
    God/dess
    Joined
    Sep 2006
    Posts
    7,964
    Thanks
    6,155
    Thanked 10,183 Times in 4,602 Posts

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    The YTD return for this fund is 7.1% which is an excellent return. It's average return since inception is 5.15%.

    https://personal.vanguard.com/us/fun...&sortorder=asc

  15. #113
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    ^^^ technically true, but only 2.73% of that amount comes from dividend payments. The rest comes from a ( temporary ) increase in market muni bond prices vs face value which is the direct result of increased purchasing of California tax free muni bonds by 'rich' Californians positioning themselves to avoid actually having to pay even higher federal + state income taxes and tax on non-tax exempt business income / stock capital gains and / or bond interest earnings that are due to arrive on January 1st.

    Actually, a more important question is where did the 'rich' Califonians 'pull' their investment money away from in order to redirect it toward the purchase of muni bonds. A few possibilities are that they closed down a failing business operation and sold off the remaining assets ( eliminating some existing jobs in the process) , or they sold off taxable bonds issued by corporations to fund their modernization / expansion ( thus making modernization / expansion more difficult and more expensive thus costing future jobs ), or perhaps they simply sold some common stock shares ( which in the aggregate reduces the value of 'ordinary' American's retirement accounts ).

    Again, tax free muni bonds really only benefit two parties ... the 'rich' bond buyers and the gov't borrow and spenders. And circling back on topic, in terms of total tax dollars required to make interest payments and principal repayments on muni bonds, the primary source will be ... must be ... 'middle class' state taxpayers.

  16. #114
    God/dess threlayer's Avatar
    Joined
    Aug 2003
    Location
    Syracuse
    Posts
    5,921
    Thanks
    369
    Thanked 419 Times in 290 Posts
    My Mood
    Fine

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Quote Originally Posted by Melonie View Post
    ...
    The point remains that a 'rich' investor able to directly select and purchase an individual muni bond for the added cost of a broker's fee is always going to do better than a 'middle class' investor who buys mutual fund shares ... in the case of CA I was quickly able to locate a muni bond offering which pays 6.63% but with a ~$50,000 price tag per bond.
    Purchasing a few muni bonds is,anymore, not unlike purchasing a few stocks. That lack of diversity, ande to an extent lower liquidity, makes individual bond funds impractical for many, probably only for the very wealthy. They may do it anyhow, ignoring that risk, or out of a sense of being known as a 'generous' rich person. The really wealthy probably have relatively little to fear financially, and they often don't really know what to do with their wealth anyway.
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

  17. #115
    Banned Eric Stoner's Avatar
    Joined
    Oct 2006
    Location
    NYC
    Posts
    5,150
    Thanks
    1,261
    Thanked 1,430 Times in 888 Posts

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Quote Originally Posted by threlayer View Post
    Purchasing a few muni bonds is,anymore, not unlike purchasing a few stocks. That lack of diversity, ande to an extent lower liquidity, makes individual bond funds impractical for many, probably only for the very wealthy. They may do it anyhow, ignoring that risk, or out of a sense of being known as a 'generous' rich person. The really wealthy probably have relatively little to fear financially, and they often don't really know what to do with their wealth anyway.
    What are you talking about ? This is far from the type of posting you are capable of ? Perhaps you might like to re-read, edit and correct it ? I'm tempted to ask if you were drunk when you wrote it. Looks like it.

    Mel and Eagle were referring to Mutual Funds that invest in bonds including triple tax free municipal bonds. Said bonds are typically beyond the reach of the typical middle class investor because they often have minimum face values of at least $50,000. Sometimes MORE.

    "Lower liquidity" ? Do you even have a clue as to what you are talking about ? Muni bonds are bought and sold every day, just like Treasuries. Same thing for shares in a bond fund.

    Are you seriously claiming that rich people buy Muni bonds to be known as "generous" ? Like they were making a charitable contribution ?

    One thing you are right about is that the super rich are weathering this recession very nicely indeed. So what ? They usually do.

    What do you think they ought to do with their wealth ? Besides give some to you of course.
    Last edited by Eric Stoner; 09-01-2010 at 06:10 AM.

  18. #116
    Banned Melonie's Avatar
    Joined
    Jul 2002
    Location
    way south of the border
    Posts
    25,932
    Thanks
    612
    Thanked 10,563 Times in 4,646 Posts
    Blog Entries
    3
    My Mood
    Cynical

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    Purchasing a few muni bonds is,anymore, not unlike purchasing a few stocks
    Actually, the only stock that I can think of that remotely approaches the 'minimum' buy in price hurdle of muni bonds is Berkshire Hathaway A ... which today was priced at $ 118,000 PER SHARE. In virtually every other case, the per share price of stocks is in the tens of dollars ... occasionally in the hundreds of dollars ... such that 'middle class' investors can usually afford to buy a block of 100 shares at a reasonable commission / expense. In contrast, the LOW end price tag on new muni bonds is $50,000. Many new bonds come in $100,000 minimum denominations. And existing bonds written when interest rates were higher now have a market price that is substantially higher than their 'new issue' $50k or $100k price tag. Thus 'middle class' investors can seldom pony up the amount of dollars necessary to directly purchase muni bonds.

    Now shares of mutual funds consisting of a portfolio of different muni bonds are a different story. They typically have minimum direct buy-in's of as little as $3,000, and brokers can buy 100 share blocks with individual share price in the 10 to 20 dollar ballpark. But as noted in an earlier post, between the front load at purchase, the management fees while owned, and the back load at eventual sale, the effective tax free return on these mutual funds is far lower than on the bonds themselves.

    Also, for those rich buyers of individual muni bonds, many also come with 'insurance against default' ( provided by a 3rd party such as AIG with premiums paid by the bond issuing gov't entity ). This is usually not the case with muni bonds purchased for mutual fund portfolios ( who seek the highest interest rates to compete with other similar mutual funds ) thus mutual fund share owners face default risk if any of the bond issuing gov't entities file for bankruptcy.


    What do you think they ought to do with their wealth ?
    well, if the 'rich' chose to invest in a speculative business venture it might A. create new jobs, B. create some real wealth, and C. create some gov't tax revenue. When they invest in muni bonds, it D. deprives speculative business ventures of needed capital ( making what capital they can find more expensive ), E. deprives gov't of tax revenues, and F. makes it possible for state and local gov't entities to continue sending out bloated gov't employee paychecks / retirement checks without having to raise taxes immediately ( but will eventually require that taxes be raised even higher in future years to cover both principal and interest payments on the muni bonds ).

    In case the point doesn't appear obvious, muni bonds transfer wealth FROM 'middle class' taxpayers who must pay high tax rates on their fully taxable incomes and investments TO 'rich' investors who can afford to invest $50,000+ a whack in tax-free income producing muni bonds !

  19. #117
    God/dess threlayer's Avatar
    Joined
    Aug 2003
    Location
    Syracuse
    Posts
    5,921
    Thanks
    369
    Thanked 419 Times in 290 Posts
    My Mood
    Fine

    Default Re: 'proof' the US Middle Class is Radically Shrinking

    I was talking lack of diversity for those only able to buy a few munis. The other stuff was just to clarify the above statement.

    (never been drunk in my life, and never will, as if that has anything to do with anything here

    i might correct a few typos, or might not

    not interested in getting into anyone else's wallet

    thanks for your interest, I mean concern, keep your interest)
    I loved going to strip clubs; I actually made some friends there. Now things are different for the clubs and for me. As a result I am not as happy.

    Customers are not entitled to grope, disrespect, or rob strippers. This is their job, not their hobby, and they all need income. Clubs are not just some erotic show for guys to view while drinking.

    NOTE: anything I post here, outside of a direct quote, is my opinion only, which I am entitled to. Take it for what you estimate it is worth.

Page 5 of 5 FirstFirst ... 345

Similar Threads

  1. The Middle Class Game Is Up ...
    By Melonie in forum Dollar Den
    Replies: 15
    Last Post: 05-12-2010, 08:02 AM
  2. 'middle class' now pinching pennies ...
    By Melonie in forum Dollar Den
    Replies: 1
    Last Post: 11-18-2007, 06:13 AM
  3. Replies: 3
    Last Post: 06-03-2007, 05:58 AM
  4. Future of the Middle Class ...
    By Melonie in forum Dollar Den
    Replies: 3
    Last Post: 04-25-2007, 05:55 PM
  5. The shrinking middle class in the U.S.
    By PhaedrusZ in forum Dollar Den
    Replies: 3
    Last Post: 07-25-2006, 08:00 AM

Bookmarks

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •