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Yeah, but at the same time, the cheap money era bid up housing prices. Health care, higher education, food and many of the other expenses of the working/middle/choose your term seam to be increasing at a greater rate than income (for the same class).
I don't have statistic or links or so on, but my cut feeling is that quality of life my many metrics is declining even when the chosen economic metrics seem positive.
Both things can be true. Companies hired a lot when rates were excessively low, but there were also covid money making programs being utilized too.Quote:
Originally Posted by J. Barron DeJong
At the same time, the investors and moneyed classes were making money in the market and buying up real estate w near zero interest loans
I want to be clear that I agree that there is an issue with the major economic inequality in this country, I just don’t believe at all that that’s due to the Fed being too loose with monetary policy since the Great Recession.Quote:
Originally Posted by Foggy_Goggles
Regarding house prices, yes low rates cause prices to rise, but that’s (partially) because they were becoming easier to afford because of those low rates:
Attachment 485161
Health care has been increasing, but the cost curve has actually bent down, and by more than anyone was predicting when Obamacare was passed. (Sorry, can’t find that chart, but saw it a week or two ago.)
I think a major part of wealth inequality is due to policy outside the Fed though: income tax cuts favoring high earners, tax breaks, low capital gains tax, joke of an estate tax, etc.
For the Fed’s part though, I wish they would err on the side of too low vs. too high rates to err on the side of maximizing employment vs. minimizing (and often undershooting) their (arguably too low) inflation target.
Regarding inflation in general: Service inflation increases at a faster pace than Goods inflation in a wealth country because domestic service workers become higher and higher paid, and unlike manufacturing, that labor can’t as easily be substituted with technology or by importing from lower wage countries, so areas like education are going to see higher than average inflation, though even higher education has (I believe) been seeing a slowdown.
Edit: shit like this (currently making it’s way thru congress), done over and over again, is the driver of inequality:
Attachment 485164
Yes, a faster growing economy is good for profits, and being able to borrow for less is good for profits.Quote:
Originally Posted by bfree
But trying to keep the stock market low by having more people unemployed, and wages suppressed seems like the wrong way to go about trying to reduce inequality to me.
I would not trust a guy who charges a 420 every month to take care of my money. For obvious reasons. (U assume you left the dollar sign out on purpose.)Quote:
Originally Posted by fastfred
If you have a bunch of cash lying around and want to take advantage of the charitable deduction, you can put a big chunk in a donor-advised charitable fund one year, take the deduction and any other itemized deductions you have, and then make your contributions from the fund every year until you empty it.Quote:
Originally Posted by bfree
Boots with bootstraps are more accessible in low interest environments.
The mean effective tax for the 25 richest Americans for the years 2014 to 2018 was 15.8% (Propublica)
2018 really helped their average with an effective rate of 13.3%
Shifting to corporate tax. In 2021 19 of the Fortune 100 companies, despite being profitable, claimed little to no taxes. Here are some sample effective tax rate percentages Amazon 6.1 Exxon 2.8 Ford 1.0 UPS 9.9 Nike 5.9 GM .2 AT&T -4.1 (Cap20)
For the year 2022 The S&P 100 US Fed average was 17.1% and their average when including international taxes was 23.84%
This means that many of in this thread have paid higher effective rates than the ultra wealthy, and those of you with businesses have paid higher effective rates than many of Americas largest corporations.
How does this affect our conversation on the wealth gap?
Thanks JBD, I think we probably agree on most thinks. That said I think that that generically talks about income is possibly skewed by high income. And how that I think about it, wealth inequality is probably not really the issue I'm interested in.
I actually don't have a problem with the rich getting richer is the rising tide floated all boats. Socioeconomically, I think more and more people just ain't makin' it. And if it were my circus, the conversation would be highlighted on the stereotypical family a 4 with 2 working adults and what we as a society want life to look like for them. In the short term, tax and fiscal policy seem like they could address this.
Don't these two statements somewhat contradict each other? If tax cuts for the rich are fire, something like a fraudulently low interest rate seems like gasoline to allow those already well off to increase leverage to create more means to make lots of $. Add the items you mentioned (tax cuts) and they are not only getting tax benefits for income and "normal" investments but also for the extremely lucrative ones like derivatives which most common folk don't even consider playing.Quote:
Originally Posted by J. Barron DeJong
Well, that was incoherent. You did nothing to address the presumption that low rates are meaningfully better for those who have money than those who don’t, in spite of calling them fraudulent.Quote:
Originally Posted by Shaaarrrp
What axe you grindin here?
Don’t forget that low rates bring houses, cars, etc into the reach of more people. And it’s a grade A bitch to find margin when you’re bouncing against a hard lower bound of zero percent.
Maybe if "more people" includes the same people buying more houses. More people getting outbid for one house is kind of the opposite.
Basket of goods makes inflation malleable. So 2018/2019 it got a mallet. Then Treasury and the Fed could've propped up long rates by buying long term/selling short term in 2020 and reduced the RE bubble, inflation, and the illiquidity of golden handcuffs. But POTUS was combover deep in RE debt and needed to refi. So.
The fact that low rates are generally advantageous for the middle class vs not being able to get a loan does not change my belief that abnormally low interest rates largely increase wealth inequality.Quote:
Originally Posted by Mustonen
The person who is able to buy their first home because of a low interest loan is still losing ground vs the person who can get the same rate to buy a second or third property or play some other lucrative investment.
To me, there is a big difference between an economy allowing low rate loans to buy a primary house/car or start a small business vs allowing the same rates for extremely rich or large companies to play derivatives and purchase investments. Additionally, because these players have the ability and means to create tax sheltering, the inequality is amplified. That's true even if your average joe can now buy the house and car they deem necessary for a nice life.
Yeah…. I don’t see the low rate environment tipping the scales toward the wealthy such that it plays a big role in driving wealth inequality. High rates benefit those who have money. Low rates benefit those who don’t. Allowing individuals to leverage is a thing, but that’s risky and is as likely to trim the bold as it is to create new winners.
Maybe another data point: I follow a number of progressive/left-leaning economist (as well as some center-right, and some libertarian leaning), and have been doing it for going on fifteen years now.
In that time I’ve seen the left leaning economists advocate for all sorts of measures to reduce inequality and help the less fortunate. Not once have I seen one suggest that higher rates would be a way to do it. And of the ones who have said anything about current Fed rates, they’re all concerned that the Fed is waiting too long to start cutting.
If you do not already, pony up for a decent CPA to take a look at your finances and taxes. Yes, it'll cost you some cash but unless you're in prison, you should come out net positive and be better positioned in the future. I used to do this every few years in my late twenties/early 30's and I was always glad I did. Now my wife and I use a CFP and a tax accountant but that's mainly because I'm not particularly financially literate and I'm also lazy. But it's still definitely net positive.
To the peeps up thread, try not to think about how many times you're being taxed on every dollar. It might make you a Republican.
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I've been using a CPA for a few years now although our taxes are reasonably straight forward. There's a big gap in my understanding of when and why to bring in a tax accountant. Sure, complexity of your tax situations matters. Same with the amount of money involved. But what are the finer points?Quote:
Originally Posted by The Reverend Floater
Not just for taxes but also large financial decisions. Easier to pay less tax by structuring decisions advantageously in regards to tax code. That's when CPAs can help with the finer points.
Your accountant charges you $420 a month to keep the books on a business that does well into 7 figures of revenue? Isn’t that like what you charge for a light bulb? Maybe you just found someone good and cheap, or maybe your money man is scamming from you. Aren’t you doing the exact thing you accuse clients of doing, wanting to pay bargains basement prices and get a good work product.Quote:
Originally Posted by fastfred
Maybe 420 is code for an unmentionable amount of weed in some sort of barter system.
I'm hardly qualified to answer but it definitely became more positive once I had a side revenue stream, an LLC, a property to maintain and then, of course, kids. That is to say, the more complicated your 'books' are, the more a good CPA can likely serve you.Quote:
Originally Posted by huckbucket
The other thing I've always appreciated was the willingness to not only do, but also teach. I am fortunate in that even in my younger, low income days, my then CPA was willing to explain the "why" behind everything he did. This was super valuable and helped me to make better decisions as it pertained to my assets and liabilities--even when they were not much more than a mortgage, an old, beat up truck and credit card.
I tell my wife I'd like to mandate that our daughters at least minor in finance. For better or (likely) worse, it really does make the world go round and there's no way they wouldn't benefit from it. I wish finance was more than just a few classes on the way to my undergrad degree.
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Thanks. To make matters worse, my financial advisor (not CPA or attorney) helps me to position my investments and purchases relative to tax liability too. I suppose the "when" guidance is to weight the savings against the cost of the service. But the "who" question is driven by matching the complexity of the situation to the expert.Quote:
Originally Posted by Conundrum
Lol my shit is tightQuote:
Originally Posted by neufox47
Phoning in million dollar remodels from hilton head this morning
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Don't need the title to know tax code. If your FA is good, good. Would be worth asking them if getting a CPA or attorney on board your team is worth it. Easy intro to a legal firm is to have them write your will. It costs more than pulling a form off the internet but then you have an intro to the firm and they know you when you might need them. Most firms that do estate planning have real estate expertise there too. These are not people you need to retain or use more than once a year for taxes (CPA) but the upfront cost is worth the relationship you gain when you really do need some tax or legal advice. Finding someone new in a rush is harder than dialing someone you know from the contacts in your cell phone.Quote:
Originally Posted by huckbucket
I toured a chartered accountant around HBM for a buddy, numbers guy bought me lunchnabeer told me to take the CPP early at age 60 on one of the chair rides
2 1/2 hrs to do my taxes with free online service from IRS.gov
1040 SR I've intentionally structured my finances so I need 5 documents to do my taxes in my retirement years
that may change slightly when I hit mandatory withdrawals but I have a few years before then