My name has the perfect number of characters.
Niall Ferguson: “Welcome to Obama’s America: nearly half the population is not represented on a taxable return—almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50-50 nation—half of us paying the taxes, the other half receiving the benefits.”
Journalist: It is true that 46 percent of households did not pay federal income tax in 2011. It is not true that they pay no taxes. Federal income taxes account barely account for half of federal taxes, and much less of total taxes, if you count the state and local level. Many of those other taxes can be regressive. If you take all taxes into account, our system is barely progressive at all.
But why do almost half of all households pay no federal income tax? Because they don’t have much money to tax. Here’s the breakdown from the nonpartisan Tax Policy Center. Half of these households are simply too poor — they make under $20,000 — to have any liability. Another quarter are retirees on tax-exempt Social Security benefits. The remaining households have no liability because of tax expenditures like the earned-income tax credit or the child credit.
In other words, the poor, the old, and children. Not exactly the “50-50 nation” of makers and takers — or “lucky duckies” — that Ferguson imagines.”
It’s interesting that Wells Fargo and Bank of America do not rip off their employees with high fees in their 401k plans, and, in fact, Bank of America offers Vanguard institutional index funds. However, if you are unlucky enough to work for a company where the 401k is administered by Wells Fargo or Bank of America/Merrill Lynch, then they need to gouge you and make profit for their investors and likely give you many “great” choices of actively managed funds with high expense ratios in the 1-2% range. There’s a fiduciary somewhere that’s solving this problem. He might be lost in the woods.
Click the link to see the profiles of the billionaires who have signed the Giving Pledge. However, you might be astonished to see a man’s name, Charles Feeney, who has assets of only $5 million. Why should he be on the list?
I first heard of Feeney because of his colossal gifts to my alma mater, Cornell University. When you click the “+” to see more information about him, then you will see that his foundation has assets of over $2 billion. I am no accountant or wealth management expert, but I believe it is significant when a rich person transfers almost all his wealth to a foundation versus a trust. What is also astonishing is that if you look at his foundation’s 990 (an IRS document that foundations must create yearly), then you will see that his foundation gave over $350 million in 2010. It’s true that since Feeney is quite old, 81, he probably wants to see his wealth distributed before he dies. But it’s nice to see when an extremely rich person actually uses his money to solve or alleviate human problems. It is very easy to be cynical about charitable giving because of the favorable tax treatment. I understand Warren Buffet’s argument that his skills are more useful at earning Berkshire Hathaway (and himself) more money than at running a foundation and distributing money. But there comes a point when the money has to be spent. When is that time? Is it now?
(On a side note, I do not think it is true that there needs to be more capital for technological innovation in the United States. However, perhaps it is true that there needs to be more capital inflows to developing countries, so that younger people will start creating strong institutions that will provide a foundation for innovation?)
Update: In a recent New York Times story, Feeney says he aims his foundation will spend all of its money by 2016. And perhaps most impressive is that he registered his foundation in Bermuda, which allowed him to remain anonymous for many years. However, it also prevented him from taking income tax deductions for his contributions. Compare this type of thinking with the thinking of Mitt Romney and other tax-dodgers.
In other words, Barack Obama and his franchise are emulating the Clinton’s, and are speaking not to voters, but to potential post-election patrons. That’s what their policy goals are organized around. So when you hear someone talking about how politicians just want to be reelected, roll your eyes. When you hear an argument about the best message or policy framework to use for reelection, stop listening. That’s not what politicians really care about. Elections in many ways are just like regular season games in basketball – they are worth winning, but it’s not worth risking an injury. The reason Obama won’t prosecute bankers, or run anything but a very mild sort of populism, is because he’s not really talking to voters. He just wants to be slightly more appealing than Romney. He’s really talking to the people who made Bill and Hillary Clinton a very wealthy couple, his future prospective clients. We don’t call it bribery, but that’s what it is. Bill Clinton made a lot of money when he signed the bill deregulating derivatives and repealed Glass-Steagall. The payout just came later, in the form of speaking fees from elite banks and their allies.
Ironically, Clinton has come to express regret about deregulating derivatives. He has not given the money back.”
— Naked Capitalism, one of the best blogs on the internet.
========================================================================== Rank Name US$ B $ Chg. % Chg YtD % Top 20 ========================================================================== Top 20 Total $676.3 n/a n/a 100% -------------------------------------------------------------------------- 1 Carlos Slim Helu $68.4 -135.1M 11.0% 10.11% 2 William Henry Gates III $62.1 -335.5M 10.6% 9.18% 3 Warren E Buffett $44.3 +533.1M 3.6% 6.55% 4 Ingvar Kamprad $42.7 +264.3M 15.0% 6.31% ==========================================================================