Archive for January, 2009

Does Anyone Pay Taxes?

January 30, 2009

I’m starting to think I’m the only sucker out there paying taxes.  If two of Obama’s cabinet picks, who are supposed to be our leaders, don’t pay taxes, does anyone else?  Is it strange that the working class pays their taxes, but these elite individuals end up owing thousands of dollars?

Today, it was announced that Tom Daschle, the appointed Health and Human Services head, paid over $125,000 in back taxes right before he was nominated to the position.

That is a LOT of money for someone to just claim that they “didn’t know they had to pay taxes on it.”  In fact, that’s two years worth of my salary.

It’s amazing to me that I got assessed a $68 penalty last year for my wife underpaying her estimated taxes for her 1099 work (about $3,000), but Daschle was able to get away with not paying $125,000 of taxes from 2005 to 2007.  Tim Geithner, our new head of the IRS, got away with not paying over $30,000 in taxes over 5 years.

Does it look like we need a review of the IRS policies?  Why do I get assessed penalties, and these guys get away with not paying taxes for years?  As taxpayers, we should be pissed about this!  How can our leaders cheat and steal and then expect us to be the ones who uphold the moral values of our country?

It just disgusts me that most of us work hard and play by the rules and struggle to get by, while our leaders feel like they’re above the law.  Wouldn’t you or I go to jail for owing $125,000 in taxes?  Why will Daschle just get a slap on his wrist?  The divide between the rulers and the masses is growing larger every day.  Will we ever push back?  Or will we just keep bending over and taking it?

Source:  Reuters

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Barry Bonds and Civil Liberties?

January 30, 2009

The Federal Government flexed it’s muscles again yesterday, sending 20 IRS and FBI agents to raid the home of Greg Anderson’s Mother-in-law for a “tax investigation.”  Anderson is the ex-trainer of Barry Bonds, and he has already spent over a year in jail for refusing to testify against Bonds.  This is a blatant attempt by the Feds to bully Anderson to get him to testify.

I can’t believe this is not getting more publicity.  Maybe it’s because people are sick and tired of the Bonds case, but this is a great example of how the Federal Government can violate our freedom and civil liberties.  The worst part is that I haven’t seen one media outlet criticize the government in this case!  How can you sit back and call out the government’s Gestapo tactics!

This can happen to anyone!  If the government wants to come after you, all they need is a “tax investigation” and they can come and raid your home and seize your property!

One of the key reasons for the American Revolution was that the British soldiers were being stationed in people’s homes, invading the liberty and freedom of the Colonists.  These kinds of actions and tactics were exactly what the Constitution and our Founding Fathers were against.

It is absolutely ridiculous that our tax dollars are being used to fund this witch hunt against Bonds.  Don’t they have better uses for our money?

Where were these agents at new Treasury Secretary Tim Geithner’s home?  He didn’t pay $30,000 in taxes!  What about the fraud that has been committed by the Wall Street investment firms and rating agencies?  What about the subprime lenders?  Why are they spending so much time going after Bonds, when every CEO of every big bank should be put in jail for fraud?

I never thought I’d be defending Barry Bonds, but the government is going about this all wrong.  They are violating the basic principles of this country and getting away with it.  A dangerous precedent is being set, where the government can search your home and seize your property for no reason at all.  We need to demand that our right to freedom and liberty is not put in danger by the big government, police state we live in now.

Source:  ESPN

Obama is Smarter Than This

January 29, 2009

Today, the New York State Comptroller announced that Wall Street doled out over $18 billion in bonuses last year, which was the sixth highest amount in history.

While this is a result of greed and a lack of judgement by the Wall Street companies, I can not believe that President Obama had come out and called their actions “shameful.”

You know what think is shameful?  Obama and the Senate passing the TARP plan without any debate or hard questions.  They just let it breeze through, accusing the House of not looking at the bigger picture when they voted against it.

Now they are all up in arms about it?  What did they expect to happen?  They just assumed that there would be some provision that prevented Wall Street from using taxpayer money for bonuses.  While there might have been a clause in there, did they investigate how it would be enforced?

Did anyone really think that the government would be able to control how Wall Street used the money?  I find it hard to take Obama’s criticism seriously when he posed such little resistance to the TARP to begin with.  You made the bed, now sleep in it.

This is yet another example of why government intervention is such a horrible idea.  Their actions are not well thought out and then they complain when their haphazard ideas blow up in their face.  Issues like this make government look inept and incapable of holding Wall Street accountable.

Rather than going for this TARP money back, the government should be investigating all these big banks, hedge funds, and ratings agencies for fraud.  Only if there are real consequences for their actions, will the Wall Street firms actually respect the demands of regulators and the government.

Source:  Businessweek

The Taxpayer Revolt

January 27, 2009

This year is going to be tough on everyone.  To make matters worse, this year, the state of California is going to be issuing IOUs instead of refund checks because they are broke. I rely on the money back from the state to offset the money I owe to the IRS.  You think the IRS will take my California IOU?

I know I shouldn’t be loaning the government money all year and expect a refund.  However, my wife works as a 1099 consultant, and normally, I end up owing about $1,000 to the IRS, so it all evens out.  A friend of mine has an accountant and does the same thing, so I don’t think I’m too far off.

So now, instead of a net zero situation or owing $1,000, I’m going to have to put almost $3,000 out of my pocket to the Federal Government, and hope that my IOU from the state gets fulfilled.  That’s exactly the kind of extra burden I need this year.  Thanks a lot, Arnold.

How many people across the country are in the same situation?  How many other people are strapped for cash and now will have to go further into debt to pay off these unexpected taxes?

An even bigger problem with the whole system is that my taxes are going to fund all these bailouts.  Why should I have to be burdened with thousands of dollars of taxes, when it is going to something I do not believe in?  It’s not just me either.  The majority of the population is against the bailouts, yet we all keep having to pay into the system.

At what point are we going to have enough?  It’s one thing to pay taxes that go to your local school or to a state project where you will see the direct benefit of the taxes.  It’s another when your tax dollars were donated to big banks and no one has any idea of where it went.

A main reason of the American Revolution was “no taxation without representation.”  Could this be any more true in the current environment?  The American Public is saying one thing, but the government is acting on its own.  At what point do we say that enough is enough?

It won’t take a whole lot more government intervention to make the current situation a lot worse.  At what point will the American Taxpayer start to revolt?  When will be our Boston Tea Party?  At this point in time, the last thing we need is the government wasting our tax dollars.  They would be much better served staying in our pockets so we can pay off debts or buy more things to support our economy.

More Reasons the Bailout was a Bad Idea

January 27, 2009

As if we didn’t have enough reasons to show us the TARP bailout has been an utter distaster, a few more popped up this morning that aren’t as obvious.

The first is that the headlines all read this morning that Citigroup was buying a $50 million plane with taxpayer money.  It turns out that it really ordered the plane in 2005 and that using it would cut costs for the company.  They also were financing it by selling other planes.  Now, they’ll still have to spend millions of taxpayer dollars cancelling the order.

This is exactly the kind of double standard that is set up by the bailouts.  You can’t spend any money to improve your business because if you do, you are wasting money.  I’m not sure how much efficiency this plane would gain Citi, but $50 million is only .014% of the $350 billion they can’t find.

So now, in the eyes of the public, the reason we can’t find the bailout money is because of wasteful companies buying private jets.  This is the scapegoat the new administration needs so they can place the blame on the companies,  not the failed policies the new Treasury Secretary promoted.

This leads us to another example of the failure of the bailout.  This morning, Tim Geithner, the new Treasury Secretary mentioned above, placed new rules against lobbying for TARP funds.

Wasn’t it just a few months ago that the Treasury basically forced the largest banks in the nation to take the TARP funds?  If they did not want them, why would they lobby for them?  Maybe Geithner’s new rules prevent the banks from lobbying against getting government money.  You will have to take it, no questions asked.

Again, a great example of the new administration showing how they’re cracking down on lobbying and adding transparency (that was said with sarcasm, by the way).  This is just political grandstanding and fooling the public into thinking real “change” is happening.

These lobbying rules will also have no effect on the lobbying efforts that are going on for the new stimulus package though.  That one has politicians and lobbyists lined up, trying to get money for any projects within their districts.

Also, these rules have the unintended consequence of encouraging closed door, secret meetings like the one Bank of America had with the Treasury.  By outlawing lobbying, the banks will go to more secretive and shadier tactics.  

The whole idea of bailouts and the TARP were horrible from the start.  The House had it right the first time, when they voted against it.  Now we are living in a world where we, the people, have to just live with this garbage day after day.  

A President who really promotes change would have assessed the situation with unbiased eyes, realized how the TARP is not working, and had an action plan ready to go day one.  Instead, Obama’s team is saying it will take months to get up and running and just adding more crap on top of the stinking TARP.  We need real fixes, not patch jobs on what was a horrible idea from the start.

The Myth of Pent-Up Demand

January 22, 2009

Over the last two days, I’ve been involved in three conversations where the person I was talking to said that people aren’t spending money because they’re scared and because of how the media is portraying this financial crisis.

Is that what everyone thinks?  That if the media was saying “go spend money” they’d go out and do it again?

I think it’s a bigger problem than that.  The economy has been supported by consumer spending for years, and now, the consumers have finally run out of money.  As the bubble grew, their sources of disposable income grew.  First, it was credit cards, allowing people to buy what they wanted and worry about paying for it later.  The last straw was using their homes as ATMs, allowing them to cash out paper gains to buy big ticket items like flat screen televisions, dirt bikes, quads, and toy haulers.

When two-thirds of your economy relies on consumers to spend money, this was inevitable.  Instead of developing sustaining industries, we shipped all our production overseas so people could buy more stuff.  Now we’re paying the price.

I really don’t see any way of this turning around either.  Things are going to have to change dramatically and our need for instant gratification is going to have to be replaced with thrift and savings.  It’s not like all of a sudden, a switch is going to flip and people are going to start using their credit cards again.  They are probably maxed out to begin with.  They won’t be able to fuel their purchases with their home’s equity either.

All of the fixes the government has tried so far have done nothing to help this problem either.  It’s our fault for making bad decisions, but they’re more than willing to throw billions at the banks for even worse decisions.

Our consumer based economy is failing, and we’re going to have to adjust our economy and our standards of living in order to come out of this ahead.  People aren’t spending money because they are already in too much debt, or they don’t want to go further into debt.  The media and this “pent-up demand” have nothing to do with it.

Already Tired of Obama’s Changes

January 21, 2009

Yesterday was a very important day in American history, don’t get me wrong.  Having a black president is amazing, and it happened a lot sooner than anyone thought it would.  This should be an event that is celebrated as an example of American diversity and open-mindedness.

However, Obama ran on a platform of “change” and so far, it all sounds like a lot more of the same.  The changes he wants to make is just to add to existing programs that already aren’t working.

His speech yesterday called for developing sources of alternative energy, lowering the cost of healthcare, and bettering our education system.

While these are great goals for the country, I wonder why we all believe that the Federal Government is best suited to fix all that ails us.  We can all agree that the current systems are horribly inefficient and do not accomplish what they are supposed to do.  Why should we trust that bureaucrats tweaking the current models is the best way to go?  Who made politicians experts in these fields overnight?

First, if we are to truly to explore forms of alternative energy, we need the government and lobbyists to get out of the way and let the market take over.  There is no reason every new home built should not have solar panels or that new electric car companies should not be emerging.  However, the regulations in place stifle competition and the innovation that made America the great manufacturer it once was.

The big oil and car makers have created a competitive advantage to keep the same cars on the road.  How have we not innovated the basic gas engine in 90 years?  Finally, solar and wind power are gaining ground, but because we are demanding it, not because government is pushing for it.  Let market forces and demands of consumers dictate our energy policy, not lobbyists for companies that stand to profit from one specific alternative energy source.

Second, the only way we are going to bring down the cost of healthcare is to start paying for it ourselves.  I’m not talking about co-pays and premiums, I’m talking about doctor visits, prescriptions, and other routine health services.  We also need to turn health coverage back into health insurance, just as Ron Paul has suggested.  Insurance is for disasters, not going to the doctor for a cold.

Currently, the government or big healthcare corporations pay for doctors, drugs and treatments.  We only pay into the system, but we do not make any direct payments.  This completely distorts the costs because a third party is making the payments.  They have no sense of value and “bang for their buck.”  They have set up payment structures and just collect money.  They do not try to control costs for the patients as long as they make money.

Think about what happens when  you go to a body shop for your car.  The first question they ask is if it’s going through insurance or not.  If it is, they crank up the price, and if you aren’t, they usually have a lower price.  Why can’t we see the same thing is happening with our healthcare?

In order to provide “universal healthcare” we need to make it affordable to everyone, not having government foot the bill for the current cost of care.  Insurance could be purchased based on your needs which would be for catastrophes.  The rest could be set aside in pre-tax health savings accounts.

Also, you should be able to purchase malpractice insurance before you undergo any procedure.  That way, everyone is not paying for someone else’s malpractice suit.  You only pay if you are undergoing surgery or another treatment.  It makes more sense than raising everyone’s cost for one case.

The system would be put back in the hands of doctors and patients, not big corporations, accountants and lawyers.

Finally, the same needs to be done for our Department of Education.  We need to get rid of it.  How does an office of bureaucrats in Washington know what’s best for the education of children in your neighborhood?  Why do we pay taxes for education into a huge pot and not know what projects it is going to?  Why do we teach our students to be good test takers and not free thinkers?

People think of education in this country as a right, and not the priviledge it really is.  Also, it’s not free.  We pay taxes that go towards education.  However, those taxes go to pay Department of Education employees and other expenses that have nothing to do with teaching kids.  Why not pay those taxes as fees to your local school?  Wouldn’t the money go directly to the school your children are attending?  It would also be much more efficient because there wouldn’t be so many layers.

We need to get rid of state mandated tests as well.  The No Child Left Behind Act sounded like a good idea, but the entire year is built in preparation of a standardized test.  Rather than raising “thinkers,” we develop good test takers.  How are we supposed to compete in the global economy if they are just learning test questions and not the fundamental subjects behind them?

Obama might have great intentions, but his efforts are destined to fail.  Central planning has not and will not work.  I know he won’t, but he needs to impart on a real path of change, one where the government gets out of the way and lets the market work.  If this is the change we all voted for, it’s not going to change anything.  Instead, we’re going to need a revolution.

Spiraling into the Abyss

January 17, 2009

The government’s bailout spiral continued yesterday, with Bank of America getting it’s own special bailout deal, Congress allowing the second $300 billion of the TARP to be released, and Congress unveiling the Obama $825 billion stimulus package.

The circumstances behind the Bank of America deal was remarkable.  CEO Ken Lewis said the company was fine and didn’t need any TARP money.  Then they met in secret in mid-December with the Treasury and basically told the government that they needed their own bailout, or else they would not be able to complete the Merrill Lynch deal.  Then, almost a month later, they announce that they got their deal.  As a publicly traded company, I have no idea how they got away with this.  That is material information, that directly effects their share price.  Millions of investors were duped into thinking their company was safe, when behind closed doors, they were clamoring for taxpayer money.  Can you say, “lawsuit?”

The terms of the B of A bailout are crazy as well.  They get a $20 billion direct infusion, and they are only responsible for the first 10 percent of the Merrill losses.  The government will shield the company from the rest of the losses, which could amount to over $100 billion!  This is all on top of the TARP money they have already received.

When are all the bailouts going to stop?  The problem with all these direct infusions is that it is like a dog chasing it’s tail.  As more losses mount from the banks’ bad bets, the more money they need.  It’s an endless cycle.  I’ve been reading a lot of articles about deflation, and they all call it the “death spiral,” but I think the current direction of the Federal Government is the real death spiral.

In retrospect, the original TARP plan looks much better than the one Paulson single-handedly enacted.  The TARP was meant to buy the troubled assets off of the banks’ books, allowing them to basically clear themselves of all the bad debt they are still strapped with.  By directly putting money into banks, it allowed them to pad their balance sheets, but didn’t rid them of bad assets.  Now, as the assets cause more and more losses, we are having to give out more and more money.  It could take trillions to finally get it to balance out, and it looks like our government will do anything and everything to save the banking industry.

The government and the big banks have us believing that our economy and banking industry are one in the same.  They aren’t.  If the banks fail, our economy won’t stop.  There would be some pain as a new system emerges, but eventually a new model would have arisen.  Maybe this is showing us that fractional reserve banking isn’t the best idea, and that a Central Bank, like the Federal Reserve, can cause huge booms and bigger busts.  At what point do we look at the system and realize that it is too broken to fix?

Instead, our government is willing to pump trillions of taxpayer dollars into these banks, trying to prop up the failed model.  Also, with all these bailouts and backstops (like the FDIC), we are inviting banks to make bad investments because they know the Federal Government will be there to save them.

At what point is enough enough?  There are already signs that a private lending industry could be forming.  The Carlisle Group supposedly has over $40 billion in cash they are waiting to put to use.  If big banks won’t lend, high-net worth individuals and private firms will eventually fill the void.  They will lend at interest rates that will allow them to account for the risk they are taking, not one that is artificially set by the Federal Reserve.  Instead of encouarging this kind of competition, the government instead is focusing it’s efforts and our money trying to bring a corpse back to life.

The Case for $350 Billion – New York Times Style

January 14, 2009

Here’s a very interesting “News Analysis” from the NY Times that reads more like a big government propaganda piece than an actual analysis.  It makes the case for giving banks more money, and how the TARP plan so far has pretty much done it’s job.

I started reading it, and a couple of paragraphs really got me going.  Here’s the first one:

The most glaring example that the banking system needs even more help is Citigroup. Though it already has received $45 billion from the Treasury, it is in such dire straits that it is breaking itself into parts

Huh?  That’s why the banking system needs to get fixed?  So what if it is breaking itself up?  It got into this mess by comingling their investment banking and commercial banking.  If they have to break up, then at least they can separate their good units from the ones that are strapped with bad debt and underperforming assets.  That’s a good thing!

Here’s another gem:

Even some of the bailout program’s harshest critics acknowledge that things most likely would be even worse without it, and that the bailout had accomplished its most important goal, which was to prevent a complete collapse of the financial system.

However, they don’t name any names or quote anyone here.  It’s just what these “news analysts” want to say.  You can’t definitively say that we’re better off after the bailout.  Maybe the banks are better, but you and me?  We’re still screwed.  The financial collapse didn’t happen overnight like it would have without a bailout.  Instead, we’re making it happen over months, and dragging the process out, leading to more hardship for all of us.

And here’s some pure comedy:

Regulators require banks to keep a healthy cushion of capital. But this time around, the banks are struggling to plug their deepening holes. Private investors are scarce. For all but a small group of healthy banks, bankers and analysts say, the government may be the only investor left.

Obviously, the authors of the article have no idea of how the US banking system works at all.  The first line is a dead give away.  Healthy cushion of capital?  You mean that 10% of all the money they loan out?  Fractional reserve banking does not require that much of a cushion.

This is an article full of stuff, but little substance.  It reads like an article trying to dumb down things enough to sway people to the views of the author, and it is not very persuasive.  The more I read the NY Times, the more I realize how their “analysis” is really written with a pro big government stance.  Please go out and educate yourself and read other sources of news and learn about our consumer based economy and our sham of a banking system.  Then you won’t be swayed by propaganda from news agencies like the New York Times.

An Honest Mistake? Puh-lease!

January 14, 2009

After finding out about all of Treasury Secretary appointee Tim Geithner’s unpaid taxes yesterday, all of these so-called tax experts are now rushing to his defense.  Read about it in the NY Times.

The experts claim that Geithner made an “honest mistake” and that many international employees make the same mistake.  So, from that, I understand there are a lot of idiots working for international companies.

Seriously, if you or I get a paycheck without ANY taxes deducted we know that we have to pay something.  We might not know the exact form, but we all know what a 1099 is and that means we are responsible for paying our taxes.

To claim that this is an honest mistake is just saying, “most people don’t get caught.”

And it’s not like this was only for one year.  This was from 2001-2004.  That’s four years worth of tax returns where Geithner AND his crappy accountant missed this.  It wasn’t for a small amount either!  Maybe $34,000 isn’t a lot of money to Geithner, but for most of us, it’s a pretty big amount.

Also, he had some of the penalties waived by the IRS!  Imagine if this had happened to you or me.  We don’t pay our taxes for 4 years and then tell them, “it was an honest mistake,” you think they’re going to say, “oh, that’s ok, we’ll waive the penalties”?

All the excuses just reek of elitism.  “Oh, it’s not that much” and “it’s just an honest mistake” and “so many INTERNATIONAL workers make the same mistake” don’t sit well with me.  The officials of our Country should be honorable and have moral values.  Instead, Geithner is already a crook.  If he had fessed up and taken responsiblity and resigned, he and Obama would still have their dignity.  Instead, it’s just another sign of how messed up our government really is.