Monday, June 23, 2008

Hating Politics, Revised

Yesterday I mentioned what a blatant mistake Minnesota Governor Tim Pawlenty made while speaking on behalf of the John McCain for President Campaign to Wolf Blitzer during Late Edition on CNN. I just found the transcript and wanted to post the exact text of that transcript (courtesy CNN transcripts):

Obama "also doesn't want to address, very clearly, the AMT, and he wants to boost capital gains taxes from 15 percent to almost double that. So if you have an IRA or a 401(k), which a lot of middle Americans do, and you go to retire or use that money, you're going to pay almost double the rate in taxation."

I encourage anyone with an interest in responsible media, responsible politicians and a well-informed American public to contact CNN's Late Edition by going to and looking for "Contact Us" on the left side of the screen. Also, please contact the McCain campaign at, which lists a mailing address, phone number and email submission form. If you find any other ways to get in contact with the campaign, Pawlenty himself or CNN, please let me know.

Sunday, June 22, 2008

This makes me hate politics

I consider myself something of a political junkie and I have enjoyed following the 2008 Presidential Campaign during the last several months. At the same time, I hate many parts of politics and political coverage. It pains me to hear cable news anchors claim one candidate is in some kind of elevated position over his opponent if he has a 2-point lead in a poll with a margin of error of 4.5%, with 10% still undecided and the election (the only poll that matters) several months away. It pains me when Hillary Clinton blatantly panders for votes by saying that the overwhelming consensus in the economic community is that suspending the federal gas tax will not lower gas prices is "elitist talk." It generally pains me when candidates in general pander to isolationist sentiments by blasting free trade agreements and globalization in general without acknowledging the wonderful effects of globalization for nearly every American.

I was watching CNN today and heard Minnesota Governor Tim Pawlenty, a national co-chairman for the McCain campaign, talking about John McCain's and Barack Obama's plans for taxes. He criticized Obama's plan to raise capital gains taxes, saying anyone with a 401(k) account or IRA would be negatively affected. This is simply not true, bull, crap, whatever you want to call it. The whole point of these accounts (as surely the governor of a state should know) is that they are tax deferred, with withdrawals after age 59 1/2 being taxed as regular income. Capital gains taxes in no way affect 401(k) accounts or IRAs, but Pawlenty's blatant lie only serves to breed fear about Obama's plan (which may actually be a worse plan, but it should be debated with actual facts).

Thursday, June 19, 2008

Homelessness and Taxes, Part II

I've been on vacation recently and haven't had the chance to blog, but ran across this YouTube video recently that ties in almost perfectly to my last post. It is definitely a joke and a pretty ridiculous one at that, but the guy raises the same point I did a week-and-a-half ago: homeless people who collect "donations" from other people do not have to pay federal income tax on that money.

It got me thinking about how it is otherwise nearly impossible to make any kind of person-to-person transaction without tax implications being involved. Earn money from a job, get taxed (often twice). Own a home, get taxed. Buy food, get taxed. Buy any other good, get taxed more. Own the company that collects the money I just spent on the good, get taxed. Earn pitiful interest on a savings account, get taxed. Etc. Etc.

Aside from the "gift" exception (which is why homeless people don't have to pay taxes), I know married people can trade assets freely, plus when someone dies they can leave a pretty decent-sized estate without being taxed (I think the max is around $2 million, but don't quote me on that). Also, services in this country generally don't get taxed, at least not with a sales tax like tangible goods. However, service providers still pay regular income tax (plus Medicare, Social Security....).

This is how I started thinking of some homeless people: service providers. Those that came to mind specifically included homeless street musicians and poets, who I often see pulling in the biggest tips/donations. Of course, if these service providers were running a legit business their tips would be subject to federal income tax (info from the IRS). At the same time, I'm sure plenty of people out there who receive tips don't include them in their taxable income, so it is hard to single out these homeless tip-earners.

Monday, June 9, 2008

Homelessness and taxes

Jim over at Blueprint for Financial Prosperity had an interesting post recently on homelessness and giving money to panhandlers. I find this is always a good subject for discussion in the college town where I live, where you can almost always see panhandlers on our main street. My policy is not to give money directly to panhandlers.

The post referenced a local tv investigation on one panhandler in particular, which "exposed" that she in fact went home to her family in a house each night. I'm not completely sure how I feel about the tv piece, though I was interested to see the reporter estimate the young woman could earn about $26,000 tax-free each year. I did a little checking with the IRS on gift taxes and saw that the reporter was correct: panhandlers don't have to pay any federal income taxes from the "gifts" they receive from strangers, according to my read. While I'm not sure panhandlers focus on the tax benefits of their "jobs," I think they might just take the cake for legally avoided all income taxes.

Saturday, June 7, 2008

Annual Credit Report

I checked my annual credit report last night, courtesy of the federal government through I encourage everyone to check it regularly. The website allows you to access your report annually from each of the three major credit reporting agencies: Equifax, Experian and TransUnion. My approach is to space out my requests, so that I can view one credit report about every four months. Last night, I got my TransUnion report, after their was a problem getting my Experian report (I'm not completely sure what the problem was, but I'll try it again in a few months). Everything looked fine on the report, which was good to see. I was somewhat surprised that TransUnion includes information on the credit cards on which I'm only an authorized user. I don't believe my last report mentioned that information.

Friday, June 6, 2008

I'm stupid

In light of the plummeting stock market today (S&P 500 down 3.09%), I thought I might pick up some more stock at a potential bargain. Specifically, I was going to add some Bank of America (ticker symbol: BAC, down about 4.66% today). I already held a position with BAC and was going to add to it, but when I checked my brokerage account online today, it showed no BAC. I was a little confused until I looked at my execution history and realized that instead of buying more shares of BAC and doubling my position a couple weeks ago, I actually sold all my shares. Whoops. I felt kind of stupid, though the transaction didn't involve too many shares or too much money. Plus, it was actually a better move to sell than buy, since the share price has gone down about $3 since then. I'm not a big stock trader by any means and I view any trading I do as mainly an educational experience, so hopefully I learned something from this.

Ed McMahon Could Lose his House

I was just watching Larry King and saw Ed McMahon talking about his struggles to save his home from foreclosure. I am definitely not interested in the "celebrity" aspect of this (the guy apparently lives near Britney Spears, whom I would not care less about) and I am far too young to remember McMahon's prime, but I thought his situation presented a telling look at the state of real estate in the United States. The above article mentions he took on a $4.8 million mortgage in 2005 and the same day took another $300,000 loan on the house. It also mentioned he bought the house in the early 1990s and that the home is on the market for $6.25 million, though on Larry King, they said the home was listed for around $5.75 million. Also on Larry King, McMahon mentioned that the house had not sold during the 1.5 years it has been on the market. Undoubtedly, the trouble getting the home sold is a function of at least: a)the tiny market for multimillion-dollar houses at anytime b)the poor market for real estate nationwide and c)the especially poor market in California.

Initially when I saw the mortgage value of $4.8 million and the list price at $5.75, I wondered why they wouldn't just lower the price closer to 4.8 to be able to pay off the loan. However, I think there are a few reasons it's not that simple. First, you have to figure real estate commissions and transaction costs. I have little knowledge in this area, especially when it comes to celebrity mansions, but I understand the typical seller's commission is 6%. Unfortunately for the McMahon's, 6% of $5.75 million is a whopping $345,000, not to mention other (huge) closing costs. Also, there was no mention of the $300,000 loan on Larry King. Additionally, there is a decent chance of capital gains on the house in excess of $500,000 (the exemption for married couples), considering he bought it in the early 90s. Perhaps unlike some others, McMahon's cashflow troubles does not surprise me that much. It doesn't matter the person or the situation- everyone is quite capable of spending more than they earn or have in the bank. Couple that with a huge financial liability (like a $5.1 million one) backed by a recently depreciating and illiquid asset, and you can have financial disaster, no matter who you are.