In reply to tester (Forum Supporter) :
That's a really good point, although you could also argue that bonds have been a loosing proposition for the past 30+ years. If I was defending the "your age in bonds" allocation I'd say it's definitely more about short term preservation of capital rather than even long term preservation.
From: https://www.longtermtrends.net/stocks-vs-bonds/
This morning's news. This should be a fun time.
Global Stagflation Warning
The World Bank yesterday raised the risk of a global recession, warning economies may face a 1970s-like period of stagflation, characterized by slow economic growth and rising prices. The organization lowered its global growth forecast for this year to 2.9%, down from 5.7% in 2021. Growth is expected to hover around that figure through 2024, the bank said, citing disrupted human activity, trade, and investments due to pandemic lockdowns and Russia's invasion of Ukraine. Read the report here.
Today's environment of high inflation, weak growth, and supply-chain disturbances draws parallels with the 1970s, when stagflation (see 101) required increases in interest rates in major economies, which then triggered financial crises in emerging markets and developing economies. Still, there are differences now, including a stronger US dollar and stronger balance sheets at major financial institutions.
The World Bank advised policymakers to avoid export bans and subsidies, instead focusing on accelerated debt relief and cushioning a spike in oil and food prices.
Container spot prices are falling fast.
https://www.freightwaves.com/news/us-import-demand-drops-off-a-cliff
Well, that is some good news... except for the reason...
Toyman! said:This morning's news. This should be a fun time.
Global Stagflation Warning
Keynesian economists: *surprised Pikachu face*
In reply to aircooled :
Not an Economist (NAE?) but I think examples of lowered demand are what we want to see, and can expect more of. If we weren't seeing lowered demand after a couple of rate hikes that would mean that even more tightening would be necessary, which would be even worse.
Do examples like this mean we're headed to a soft landing, a recession, or stagflation? I don't think we'll know except in hindsight.
Inflation update! Note: I'm going to track CPI (Consumer Price Index), Core CPI (CPI minus the volitile food and energy categories) and PCE/CPE (Personal Consumption Expenditures, which the FED uses for it's 2% target). BLS releases CPI mid-month and CPE comes out at the end of the month.
May CPI YOY: 8.6% vs. 7.6% in April
May Core CPI YOY: 6.0% vs. 6.3% in April
April PCE YOY: 4.9% vs. 5.2% in March
BLS source data: https://www.bls.gov/cpi/
Survey of about 1k consumers asking their feelings about inflation: https://www.washingtonpost.com/business/2022/06/09/inflation-worse-poll-americans/
Inflation update! Note: I'm going to track CPI (Consumer Price Index), Core CPI (CPI minus the volatile food and energy categories) and Core PCE/CPE (Personal Consumption Expenditures minus volatile food and energy, which the FED uses for it's 2% target). BLS releases CPI mid-month and PCE/CPE comes out at the end of the month.
May CPI YOY: 8.6% vs. 7.6% in April
May Core CPI YOY: 6.0% vs. 6.3% in April
May PCE/CPE YOY: 4.7% vs 4.9% in April
===========================
PCE/CPE data from the BEA: https://www.bea.gov/data/personal-consumption-expenditures-price-index-excluding-food-and-energy
Some commentary: https://www.reuters.com/markets/us/us-inflation-data-offer-no-quick-relief-fed-hint-peak-2022-06-30/
Do you know what (and when) they use to reset I bond rates?
Robbie (Forum Supporter) said:Do you know what (and when) they use to reset I bond rates?
Had to look this one up:
We set the inflation rate every six months (on the first business day of May and on the first business day of November), based on changes in the non-seasonally adjusted Consumer Price Index for all Urban Consumers (CPI-U) for all items, including food and energy.
However, the change is applied to your bond every six months from the bond's issue date. (The dates for these changes might not be May 1 and November 1.) When does my bond change rates?
From: https://www.treasurydirect.gov/indiv/research/indepth/ibonds/res_ibonds_iratesandterms.htm
IIRC you can only buy $10k per person, per year?
Looks like there are signs of widespread price gouging in another industry, ocean shipping:
https://www.vox.com/recode/23188853/inflation-antitrust-ocean-shipping-biden-expensive
https://www.nytimes.com/2022/05/04/business/shipping-container-shortage.html
Depending on which direction you're sending stuff in and how, trans-pacific shipping costs have increased 1 or 2 orders of magnitude since the pandemic 
Boost_Crazy said:In reply to frenchyd :
Frenchyd, there are many aspects of a flat tax that I find appealing, but your proposal will not do what you think it will do. First, 2% is way, way under the average income tax rate. It would mean dramatic cuts and shrinkage of the federal government to a fraction of it's current size. That's too much for even most small federal government advocates. For comparison's sake, the the average net income tax rate is around 13%. So giving you the benefit of the doubt that 2% was just an example and you want to keep the government the same size, you need need everyone to pay a flat tax of 13%. But here is an example of current net tax rates (2019 numbers)...
All taxpayers 13.29%
Top 1% 25.57%
Top 5% 21.98%
Top 10% 19.89%
Top 25% 16.73%
Top 50% 14.55%
Bottom 50% 3.54%
So your proposal just about quadruples the federal taxes for the bottom 50% of earners, and cuts the taxes of the top 1% in half. Moreover, your proposal is on money spent, not income. High income earners don't spend all of their money. Lower income earners not only spend all of their money, but often borrow to make purchases. So they will be taxed on more than they even make!
This is one of the cleanest arguments against the flat tax in this thread, and I appreciate it. However, I think it is too simplistic, and overlooks a lot.
There is no need to match the income tax percentage RATE. What needs to be matched is the REVENUES COLLECTED. I know that sounds like splitting hairs, but it's really not...
In order to assess the viability of the idea, an analysis would have to be made of consumer spending, not government spending. Once overall purchasing trends are understood, a percentage can be applied to THAT to generate the needed revenues.
Obviously, wealthy people spend much more money than poor people. So, a flat tax generates an automatic increased load on the wealthy, simply because they spend more. It doesn't translate as a percentage. It translates as gross revenue.
Wealthy people don't ever pay 25.57% on their income. That's the highest bracket, but their actual average taxes are less (because they pay smaller percentages on the smaller brackets). More importantly, they ONLY pay tax on their TAXABLE income. After deductions, etc, this is not a very large percentage of their gross income. In a flat tax scenario, they would be paying tax on ALL of their purchases, not just the small percentage deemed "taxable income".
You mentioned borrowing... High income earners borrow lots of money for purchases too! Buy a boat? Pay a federal sales tax. Buy a Lear jet? Pay a federal sales tax. Regardless of whether it is borrowed money or not.
It's also possible a flat sales tax would apply to more industries. Frenchy mentioned stocks (don't think this would work, and capital gains are already taxed for every sale, but the idea is on the table). Sales tax on medical treatments? Foreign exports? Real estate? Raw goods? Services? There are a lot of question marks...
It's easy to offer relief to lower income earners. Just define some essentials (like food) that are not taxable.
I am also a fan of how a flat sales tax would enable capturing tax revenue from illegal activities. Organized crime doesn't pay any income tax. But they generate $2.7 trillion dollars in revenue. Wouldn't it be fantastic to be able to collect taxes on all of their purchases?
Tourists (who pay no US income taxes) would help pay for the costs of running our country with every purchase. This would bring in revenue from people who are currently not taxpayers.
Another by-product... a whole LOT of very intelligent people (like accountants, CPAs, IRS workers, and the bookkeeping staff of every company in the country) who are currently burning energy trying to calculate tax rates, or plan tax strategies would no longer be needed for these routines. Their talents and energy could be diverted to other productive enterprises.
I am not qualified to calculate how the math would actually work. I have no idea if 2 or 3% would work, or if it would need to be 13%. But I know it's not as simple as taking the average income tax percentage and applying it to everyone.
My opinion is that aversion to federal flat sales tax ideas is much more driven by politics than by math. When people say "OMG, the poor will pay more in taxes!", LOTS of poor people run to the polls to vote against it. When people say "OMG, wealthy people won't have any deductions!", LOTS of wealthy people flex their political muscles to exert pressure against it.
I like the idea. I think it has merit. Just don't know about the details.
SV reX said:Wealthy people don't ever pay 25.57% on their income. That's the highest bracket, but their actual average taxes are less (because they pay smaller percentages on the smaller brackets).
Thats average amount paid.
The highest bracket is 37%
Single brackets from 2021 for example:
I think flat tax is a ridiculous concept. Brackets are better, but also dumb.
A simple algebraic equation could condense that chart into 1 line.
In reply to ProDarwin :
Gotcha. That's why I'm not an accountant. Lol!
It still only applies to taxable income.
In reply to ProDarwin :
Honest question...
How does that equate to an average of 27.57%?
That math on a $600K income would be $186,072.25 in taxes, or 31.01%.
That math on a $5 million income would be $1,814,072.25 in taxes, or 36.28%.
SV reX said:My opinion is that aversion to federal flat sales tax ideas is much more driven by politics than by math. When people say "OMG, the poor will pay more in taxes!", LOTS of poor people run to the polls to vote against it. When people say "OMG, wealthy people won't have any deductions!", LOTS of wealthy people flex their political muscles to exert pressure against it.
I like the idea. I think it has merit. Just don't know about the details.
You can ignore the politics but that won't keep the math from hitting the poor like a ton of bricks - by a flat tax you appear to mean universal sales taxes, and when you're making minimum wage or anything close to it, sales taxes are just like another layer of income tax because you're spending approximately all of your income on basic necessities. As income goes up, the percentage you need to spend on basic necessities decreases - and I'd expect the percentage of income that ever gets spent decreases as well.
Flat income taxes are theoretically fair if you only look at income, but practically regressive if you again consider the percentage of income taken up by basic living necessities - it's a lot easier to pay, say 20% of $10k per month than 20% of $2k per month and afford basic necessities at the same time. The more you make the less relevant your tax burden is to your lifestyle.
Personally I'd like to see sales taxes minimized or eliminated, especially on basic living necessities, with sharply progressive income tax brackets. The rich these days are making such insane, mind-boggling amounts of money they can easily afford it. I would have income tax hit 100% at the 7-digit per year mark and come with a free very special attention package from tax authorities, there is no remotely legitimate reason for anyone to make such amounts of money - that can pretty much always be traced back to either board-level in-group shenanigans (AKA executive pay), something related to IP industry regulatory capture (celebrities) or something related to advertising (top athletes, celebrities again) which is another industry that needs to be greatly reigned in for the good of society IMO...
In reply to GameboyRMH :
SV reX said:It's easy to offer relief to lower income earners. Just define some essentials (like food) that are not taxable.
You skipped this part. We just said the same thing.
It doesn't have to be a burden to the poor.
GameboyRMH said:
I would have income tax hit 100% at the 7-digit per year mark and come with a free very special attention package from tax authorities, there is no remotely legitimate reason for anyone to make such amounts of money [...]
Why should that be up to anyone except the parties involved to decide?
SV reX said:In reply to GameboyRMH :
SV reX said:It's easy to offer relief to lower income earners. Just define some essentials (like food) that are not taxable.
You skipped this part. We just said the same thing.
It doesn't have to be a burden to the poor.
You'd have to exclude more than just food to avoid making it a burden on the poor - things like fuel/transportation, telecoms, and utilities would have to be included for starters.
By the time you've massaged a sales-tax-based system to avoid crushing the poor, you've just built a *different* highly complicated tax system that only manages to put professional tax system hackers out of work because the only thing rich people would need to do to achieve maximum tax savings is minimize their home-country spending, which is why I don't see it as worthwhile.
Duke said:GameboyRMH said:
I would have income tax hit 100% at the 7-digit per year mark and come with a free very special attention package from tax authorities, there is no remotely legitimate reason for anyone to make such amounts of money [...]Why should that be up to anyone except the parties involved to decide?
I immediately followed with the types of collusive and destructive economic activity that can lead to extreme pay that does not appear to be based on work or anything resembling productivity, whether you see those activities or extreme levels of inequality as actually harmful might be getting too political...
In reply to GameboyRMH :
I didn't say "just food".
You are kinda taking exactly the political position I described. You are making judgement on the idea without any discussion or consideration of the details.
SV reX said:In reply to ProDarwin :
Honest question...
How does that equate to an average of 27.57%?
That math on a $600K income would be $186,072.25 in taxes, or 31.01%.
That math on a $5 million income would be $1,814,072.25 in taxes, or 36.28%.
I don't have the math in front of me, but I suspect very few salaries are in excess of $600k. Its usually a $300k+ salary plus stock or other "growth". Stock gets held >1yr and is then only taxed as long term capital gains, which is a much lower rate. Investments grow, rental properties increase, etc.
The "top 1%" income threshold is like $8-900k, but I suspect that is measured differently.
Its like all the people complaining about Bezos and Musk "making" $50 billion last year. They didn't make $50 billion in income, their stock increased in value.
SV reX said:In reply to GameboyRMH :
I didn't say "just food".
You are kinda taking exactly the political position I described. You are making judgement on the idea without any discussion or consideration of the details.
I have actually considered it in detail when I first heard of it more than a decade ago, and I have heard of the idea of excluding certain items or even bottom income brackets from it to avoid harshly taxing the poor - in the end it just incentivizes anyone wealthy enough to travel to spend as much of their time and money as possible outside of the jurisdiction where it is implemented. I don't see a way around that issue.
I'll also admit that the moral/ethical/political side of me doesn't like the idea of an effectively regressive tax system at all, even with measures in place to alleviate the issue for the lowest earners, so when I see a system that has this as one of its few standout features I consider it a negative attribute.
Duke said:GameboyRMH said:
I would have income tax hit 100% at the 7-digit per year mark and come with a free very special attention package from tax authorities, there is no remotely legitimate reason for anyone to make such amounts of money [...]Why should that be up to anyone except the parties involved to decide?
I've noticed that the threshold for "egregious incomes that warrant punishment" are consistently more than how much the person complaining makes.
What about the person that has accumulated unrealized value throughout their whole life...maybe they've been building up a business or maybe they've been working on an invention or maybe they've been producing some type of art, say song writing, and they've finally come up with a hit song.
Decades and decades of effort have quietly been put in and now they're cashing out by selling their business or selling their patent or selling the copyright to their song so they've got a one time annual income of one million, five million, whatever.
I guess we're supposed to say berk you, that's too much money, let's confiscate it by charging 100% tax.
Why would anybody bother to work hard in a world like that...where would great businesses and innovations and beautiful art come from?
RX Reven' said:
I've noticed that the threshold for "egregious incomes that warrant punishment" are consistently more than how much the person complaining makes.What about the person that has accumulated unrealized value throughout their whole life...maybe they've been building up a business or maybe they've been working on an invention or maybe they've been producing some type of art, say song writing, and they've finally come up with a hit song.
Decades and decades of effort have quietly been put in and now they're cashing out by selling their business or selling their patent or selling the copyright to their song so they've got a one time annual income of one million, five million, whatever.
I guess we're supposed to say berk you, that's too much money, let's confiscate it by charging 100% tax.
Why would anybody bother to work hard in a world like that...where would great businesses and innovations and beautiful art come from?
Should be easy enough to work around with a different pay structure - the inventor or songwriter could receive royalties rather than a one-time lump sum to remain in a more reasonable tax bracket for example. The business owner could pay themselves income over time so that they're not so dependent on the sale of the business - this should also encourage longer-term investments and sustainable business growth rather than spinning up startups to sell into a tech megacorp's killzone for example.
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