Some thoughts on debt

Paying off a house mortgage as quickly as possible seems like a no-brainer. Even at my relatively low interest rate, after discounting for a mortgage interest tax deduction I get a minimum 4.5% "return" (a savings actually) on extra principal payments. That's an almost guaranteed rate, with no capital gains taxes and no paperwork (just enter a bigger number into the bill-pay software). I can't get that good of a return / (risk + hassle) anywhere else. This assumes a person has no other debt.

A typical financial advisor would advise against this strategy in favor of the stock market (especially for a tax-deferred retirement account), but their thinking conveniently leaves risk out of the equation. Stocks could return zero % or less on average between now and when you need the money.

 

Log in or Sign up to hide all adverts.

Whaaa? The interest write-off simply means that you don't have to pay taxes on the money that you lose to interest. As long as tax rates are less than 100%, that will never save you money. If my interest is $100 then I don't have to pay taxes on that $100...but the $100 is still gone. I would be much better off if I had the $100 and simply paid the tax on it.

 

Log in or Sign up to hide all adverts.

Agreed. It is much better to have your home paid off, and take the money one would spend on a mortgage, and put it into a safe investment. It will always make more money than the amount of taxes involved.

 

Log in or Sign up to hide all adverts.

Well if true then national loyalty makes no sense.

Control/management of land has to be implemented somehow, it is a question of method. Brainwashing the peons into believing in ownership is nonsense though.

The internet provides a new method of distributing information worldwide and is therefore a new option. If we are going to have globalization shouldn't everyone in the world know about planned obsolescence and that economists can't do grammar school algebra?

http://www.sabhlokcity.com/lists/india_policy/2001/Mar/msg00024.html

Of course if you never try you will never get anything done.

psik

 

I think that for one to analyze the situation properly, one needs to consider all the factors and all the scenarios separately and then put them together and compare each combination.

First of all, you have to consider the following variables:

• PV of house
• FV of house
• mortgage's interest rate
• market rate (interest rate you can get elsewhere, through an investment for instance)
• amount of principal payments
• number of payments
• cashflows
• total assets and total liabilities
• taxes involved (both increases and decreases)
• depreciation of the house- reconciliation with taxes included (FIT asset? FIT liability?
• risk of investments with similar return

Then, after you get all those numbers, you have to create scenarios in order to analyze the profitability of each option. For instance, do all the calculations for a mortgage payable within 20 years. Then do another one for 5 years. What is the net present value of each? When do you get positive cashflows? Could you invest the positive cashflow and get a better return if you "save" money from the mortgage (that could be the situation if the market rate of return is higher then the mortgage interest rate)? But what is the risk in this scenario?

Etc.....


You have one hour to calculate, startttiiiiiiiing..... NOW!

Please Register or Log in to view the hidden image!

 

National loyalty doesn't make sense for a lot of reasons. That explains why large corporations have none. Patriotism is for suckers.

What is your suggestion for an alternative? Prior to ownership, the method was warfare.

There is some brainwashing going on, but ownership does have advantages.

 

Not if that $100 drops you into a lower tax bracket. Suppose you make $150,150 per year, and so are at the very bottom of the 28% tax bracket. Without the write-off, you pay $42,000 in taxes. With the $100 write-off, you're at the top of the 25% tax bracket, and so pay 25% of $150,050, or $37,512. So the $100 write-off saves you almost $4500.

That example is kind of extreme, but you get the idea.

 

LOLOL you Americans are so screwy. For fuk sake make one peon in your government pull out a fuking calculator and calculate graduated taxation.

I.E up to 48000 you are taxed 15%(or whatever), on the next 39000 dollars income - 20%, on the next 50000 - 25%.

SO:

48000 X .85 + 39000 X .80 + 50000 X.75 = tax owed on $137000 income.

Still tax brackets and no need to donate 100 bucks to Al Queda. Retirement savings still help.

 

Yeah, moving $1 into a new tax bracket does not result in a big jump or decline in taxes, except on that $1.

 

Whoops, I did screw up the calculation. I guess you can surmise what my tax bracket is from that...

 

Taxes in the US don't work that way. In fact, I've never heard of any country where the taxes work that way. When you move into a new tax bracket you only pay the higher tax rate on your earning above what it took to move you into that bracket. Suppose the taxes are 25% up to $30,000 and then 28% above $30,000. If you make $30,150, then you pay 25% on the first $30,000 and 28% on the last $150. Have you ever actually paid taxes?

 

Nasor, et al are correct - I am amazed to see Quad in such a gross error. He usually is 100% correct on the fact (Perhaps not on what they mean, from my POV

Please Register or Log in to view the hidden image!

)

Under some conditions he can be right, but only when considering the state taxes also. For example, years ago (have no idea what is true now) Maryland did not require you to file any return at an income level of "R" or less, but if you filed and were in the lowest bracket, the tax was linear (while still in that first bracket) on all income above "L." Strange to tell, R > L say by "D." Thus, you could earn {L + D -1 } < R, not file and pay no state tax by not filing; however, if your earned {L + D}, only one dollar more, you had to file and pay taxes on D at the lowest bracket rate.

The rational behind this was that it cost the state money to process each return, (in the "pre-computer" era) more than the tax you would pay on income of L+D, so it saved the state money for your not to file, compared to filing and paying only a small amount. (If you earned only slightly more than L and hated the state, it was legal to file, and pay with a few bags of pennies someone had to count.)

Being "too clever" hit me one year. Back then, much of the money I saved was in CDs etc that were held in my children's names* (lower IRS tax rate than mine). I was careful to calculate what they would earn. Make it slightly less than "R" so there would be no need to file any MD tax return for them. With CDs you knew in advance what they would earn. One of banks one year, declared a small "Christmas bonus" on their CDs - pissed me off to say the least.

Please Register or Log in to view the hidden image!

(I was tempted to buy my next CD from that "bonus paying" bank with bags of pennies!)

The IRS caught onto the trick of parking your savings in your Kids name and made it taxed at the parents rate, but I did get the benefit for about 15 years. - I keep records to show that more than the money in their CDs was indeed spent on things that a parent is not legally obligated to do. For example, my kids paid for their own braces, dance lessons, trips to Europe, etc. (from "their" CD funds, of course

Please Register or Log in to view the hidden image!

)Their college expenses finally exhaused all their CD savings, strangely just as I had expected! -I.e. they all graduated broke, but debt free!)
-------------------
*My last child was born in October (more good tax deduction planing - the two months "safety margin" I allowed for wife to get pregnate were not needed.) and I admit it did seem strange that a child only 2.5 months old had earned so much, had to pay taxes to the IRS, etc.!

 

Yeah, no more posting before breakfast for me...

 

I was thinking of an upper limit on land ownership so the rich couldn't drive prices up. But we have to deal with the economic power games that we have so mandatory accounting so kids understand the game before they get out of highschool would be a considerable improvement.

It is like the schools are designed to produce a fresh supply of dummies each year.

psik

 

Many parts of South America were given by Spanish and Portugese Kings to a few families and even today great expanses are still held off the market (in part because their decendents do not agree on what todo with these tracks and in part because rural land has very low taxes (I paid about $7/ year on a little more than 100 acres here in Brazil when I had cattle farm).

Chavez last week confiscated 16 very large land blocks that were just being held with no productive use and divided them into to lots. (The poor have no land in most countries of South America and no way to ever get any. In Brazil the "MST" (movement sem terra) has invaded many farms that are productive, killed some cattle (eaten them) blocked roads, even invaded the congress, breaking the glass doors etc to enter. - All in the name of "land reform."

There has been a great deal of "land reform" with the government buying farms and subdividing them. MST does not want the poor unproductive land (and when they get ownership of individual lots, most sell it within a few years as they are not truely farmers, but homeless urban persons, so it soon is re-concentrated again into a few hands.)

Chavez is trying a different approach. - The new settlers do not own the land, can not sell it. -It is now the state's land, but they can use it, if they do so productively. If not, some one less will be granted the use of it.

Unlike the foreign oil companies that "owned the oil" a few years back, (pre nationalization), the former land owners are not being compensated, even with bonds promissing payments. In Chavez's view - unlike the oil companies they just inheritied the land and did nothing to improve it, so deserve no compensation. - It is all part of his "new socialism" also called "21st century socialism." Why he is so popular - overwhelmingly elected in elections that Jimmy Carter and all foreign observers have called "free and fair." etc.

 

Even better would be an upper limit on net worth and/or income. The limits should be high enough that a person can have a yacht, but not ten yachts.

I think that is pretty much the plan. Business wants corporate robots who will recycle their pay right back into the system. That's why most kids are not taught how to avoid financial scams, balance a checkbook, etc.

 

Great idea! Can you still do this if you keep the records you describe?

 

To SamCDkey et al:

Did you see th BBC special (part of the week long series on India) "Silk Trade Slaves"? To make it more personal it focused on one 12 year old boy whose grandmother sold him at about 9 years of age (when his mother died) to a owner of a silk factory for the equivalent of 12 British pounds. The original owner of this boy (and several others later) had sold him to others and when the BBC went to his work place, which employeed more than 1000 of the these "debt slaves" working at looms making the fine silk sarais, he was taken to the local govenment official (sort of a mayor) who had denied that any "debt slaves" existed in his district. Confronted with the boy, who told how is wages did not cover the cost of his food and he could never pay back the debt (working 12 hours per day- the standard shift, 7 days/week) and even had to beg for part of his food etc, never went to school, etc. the "mayor" told the factory owner to release him from the debt and that boy is now in school, learning to write, but still begging for his food after school. There are still 10s of thousands like him in "bonded servitude" working 84 hours/week in the silk factories of that district alone.

Something for you to think about Sam, next time your maid brings one of your silk saries back to your room, freshly cleaned and pressed, if you are not too busy pointing out the defects in the USA on your computer.

 

I think a limit on land ownership is all that's necessary since everyone has to live somewhere. A large percentage of people's income goes to pay for housing and a lot of that goes to banks as interest. So changing that would alter the system fundamentally without letting the government stick its fingers into everything. The government is just a bunch of people, it isn't any better than the rich.

A lot of people are motivated by ego tripping bullsh!t. John Travolta owns 5 jets. If that turns him on it's OK with me.

psik

 

If you just had a limit on land ownership I don't think much would change. A lot of the super-rich don't own much land. As far as I know, Bill Gates owns less than 10 acres (his main house is on about 2 acres). And if they wanted more space, they'd just build upward.

A maximum income of, say, $US 1 million per year, would dramatically alter society, I think for the better.