Are you the 9.9%?

[CardsFan]

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Originally Posted by athena53 One hope is the growth of Co-Op programs- Dad was in an early one in Engineering at the University of Cincinnati. You went to school the entire first year but then alternated quarters between your co-op job and school. The co-op job was typically with the same employer your whole academic career. The university would actually receive feedback and monitor your progress. Responsibilities increased every time you returned for another work quarter. Back then it paid well enough that you could fund your education with the work income if you were frugal (and especially if your co-op job enabled you to live with your parents). Most of the Engineers I graduated with accepted a permanent offer with the co-op employer. Even if they didn't, they were highly marketable given their work experience. So- it's one route for people who want to minimize student debt. It got our family onto the "college track".

As the product of an Engineering Co-op program (Northeastern '78) I have long touted the benefits, and never understood why more schools (particularly those with technical programs) have not taken this approach. It was the only way I could afford a quality education without having any student debt.

I wonder sometimes if the problem is the competition offers "free money" with no work to be done. Just your promise to pay it back. Sometime. In the future. Maybe.

[mrWinter]

If it's at all possible to keep this thread from going off the rails, I'd like to suggest that we pull back a little from the straw man arguments here like Amethyst and Mdlrth are putting forth (you guys aren't jerks, we're just getting a little far afield here IMO). The Atlantic article is not proposing any 1984 style solutions, nor does it anywhere argue that a loving family is an unfair advantage that should be corrected somehow, let's not bring in other articles that may be saying that.

To clarify what the article is criticizing and in answer to what some others have asked about what the Atlantic article proposes as solutions (for those who didn't get through the admittedly long read), I think the majority of it boils down to ending tax breaks of various kinds that go far disproportionately to the wealthy. Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans, home mortgage interest deductions, lower tax rates on capital gains, 529 savings, etc. These are all breaks that in theory every citizen can benefit from, but in reality only the wealthy are able to make use of. And because all these benefits are based on percentages, the more money you have that falls into these categories the more you benefit. On the surface sounds fair (because anyone could take advantage of them), and incentivizing the right behavior, but in reality ends up only helping exactly the people who don't need help.

A similar argument has been made in the past against Bernie Sander's proposal for free college for everyone. Sounds great, fair, and equalizing, but in reality, since college admissions are already tilted heavily toward wealthy students, it would only go further to take more money from the pot and give it to the wealthier section of Americans, most of whom were going to go to college anyway.

Just like home-mortgage interest deductions may have sounded like a great idea, but many didn't consider that many people can't save enough for a down payment to ever buy a home in the first place, and they are likely the ones who need the greater breaks and/or incentives to get into home ownership, or that the people who will be deducting the most money and getting the biggest tax break, are those with literal mansions. Not to mention the fact that vacation homes have been allowed to qualify for a deduction too. Also of note, any boat big enough to have a bathroom on it can qualify as a second home so there are millionaires deducting interest on 1 million dollars of their home, as well as another 100,000 of their yacht, and they are getting the biggest tax break. These people aren't evil, and they need not feel guilt, (hell I plan to be one of them and I'm sure many on this forum are), they are operating in their best interest and the best interest of their family given the incentives presented to them. The argument is just that maybe it's best for the economy and society as a whole if these aren't the people the government is giving the biggest tax breaks to.

Other suggested solutions include changing regressive payroll tax system (interesting implications for Social Security, more straight forward for medicare). Also possibly lowering the estate tax limit, suggesting that wealth should be earned more by individuals rather than gifted by parents.

[ExFlyBoy5]

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Originally Posted by mrWinter I think the majority of it boils down to ending tax breaks of various kinds that go far disproportionately to the wealthy. Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans, home mortgage interest deductions, lower tax rates on capital gains, 529 savings, etc. These are all breaks that in theory every citizen can benefit from, but in reality only the wealthy are able to make use of.

I am an early retiree. I was an ENLISTED dude in the military and not wealthy by stretch of the mind or even in the most liberal calculations. BUT....I have "taken advantage" of several of the tax breaks you mention. I can also show you 100+ folks who I served with (also enlisted) that got generous tax breaks...such as the earned-income-credit. So, your assertion that these tax breaks are only taken by the wealthy is just not correct.

[mrWinter]

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Originally Posted by ExFlyBoy5 I am an early retiree. I was an ENLISTED dude in the military and not wealthy by stretch of the mind or even in the most liberal calculations. BUT....I have "taken advantage" of several of the tax breaks you mention. I can also show you 100+ folks who I served with (also enlisted) that got generous tax breaks...such as the earned-income-credit. So, your assertion that these tax breaks are only taken by the wealthy is just not correct.

Yeah you are right, I shouldn't have stated it that way. I shouldn't have said only the wealthy take advantage of those breaks, and instead said the wealthy get to take advantage of them, and do so disproportionately compared to the rest of the population.

[RunningBum]

mrWinter, now you are getting into policy and law changes, and few if any of us have ability to make those kind of changes. About all we can do is work to elect officials that favor those changes, and (edit: ) you can read for yourself what the author says about the last election. But even the author admits it's the 0.1% who have the money to actually influence elections. I don't want to venture any more into politics so I'll stop.

And if that's the author's point, why get into calling us a toxic part of the problem and taking other potshots?

Edit to add: One more point I wanted to make/ask, you aren't seriously telling us to bypass those benefits, are you? I'm not going to be the lone sucker who doesn't take fair advantage of tax breaks. Change the rules if you don't want me to have them, but don't tell me to not use them when I can be pretty certain others will continue to.

[LOL!]

Are there equivalent education tax breaks for families that do not have children and for families that don't send their 17-24 year-olds to college? Last I checked not everyone in that age group goes to college and even if many do, a lot of them never graduate.

I believe that for every $2,000 tax break that a family received to pay for college, colleges simply raised the price by $2,000. I think much of the extra inflation in college education pricing has come from these tax breaks.

You know, the law of unintended consequences.

And I have paid for 3 college educations: My own and those of my children.

[Mdlerth]

Regardless of whether:

• the article's reasoning is wisdom or foolishness; or
• the author is intellectually sharp or indolent; or
• its underlying postulate that inequality = bad even has merit;

its predictable conclusion comes down to The Money Grab.

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Originally Posted by mrWinter To clarify what the article is criticizing and in answer to what some others have asked about what the Atlantic article proposes as solutions (for those who didn't get through the admittedly long read), I think the majority of it boils down to ending tax breaks of various kinds...

Sure sounds like The Money Grab to me.

[Dtail]

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Originally Posted by RunningBum Edit to add: One more point I wanted to make/ask, you aren't seriously telling us to bypass those benefits, are you? I'm not going to be the lone sucker who doesn't take fair advantage of tax breaks. Change the rules if you don't want me to have them, but don't tell me to not use them when I can be pretty certain others will continue to.

Exactly. OTOH, some on this site are against the usage of irrevocable trusts to minimize LTC costs, plus to a much lesser extent the management of MAGI for ACA subsidies.
Change the rules, otherwise.......

[pb4uski]

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Originally Posted by mrWinter .....I think the majority of it boils down to ending tax breaks of various kinds that go far disproportionately to the wealthy. Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans, home mortgage interest deductions, lower tax rates on capital gains, 529 savings, etc. These are all breaks that in theory every citizen can benefit from, but in reality only the wealthy are able to make use of. And because all these benefits are based on percentages, the more money you have that falls into these categories the more you benefit. On the surface sounds fair (because anyone could take advantage of them), and incentivizing the right behavior, but in reality ends up only helping exactly the people who don't need help. ....

All true, but at the end of the day all these incentives do is to reduce the overall taxes of those who utilize them so the net impact is simply to incentivize the wealthy to invest and spend their money in certain ways, but the wealthy still pay more in tax than those who can't benefit from those incentives, so I don't see what the problem is.

So in the author's view if we got rid of all these incentives and made a corresponding reduction to tax rates so the net taxes collected from 'the wealthy" was the same then all would be ok? If so, then perhaps in interesting idea... if not, then a definite money grab.

[iloveyoga]

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Originally Posted by Aerides . Getting a "good" job without a degree - today - is harder than it was 30,40,50 years ago. I don't let articles tell me how I should feel. I know for myself what it took, and where I benefited from my starting position. But if I was 20 today.. would I get that nice salaried starting position in a Fortune500 co with no degree? I doubt it.

This is how I got my start - working at a large insurance/financial services company.

[mpeirce]

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Originally Posted by jollystomper As long as people are people, there will ALWAYS be this type of economic divide. To what degree people believe it is unfair is a matter of personal judgement, which will always have personal bias.

Reading that article just reinforces my belief that there are many folks who are terribly embarrassed that humans behave the way we do. They want us to change to conform to their view of fairness and equality. And we just don't.

[HtownRose]

"Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans..."

I would love to see the advantage of employer-sponsored health insurance go away - it's the only reason I'm working so I'd retire as soon as it went into effect!

But I don't understand the idea that only the rich benefit from tax breaks on them - without the tax breaks, wouldn't most employers either discontinue offering health insurance, or stop subsidizing it, leaving the employees, many if not most of whom are not rich, to pay much more for health insurance?

[NYEXPAT]

I thought this was a poll. But, for the record I am in the 9.9%. Unlike most here, I had to spend a lot of money on wine and women and retire at 34 to get here!

[NW-Bound]

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Originally Posted by Amethyst ... Heck, being born a Caucasian (even, like me, a female Caucasian in a working-class family where the water heater was turned off between showers to save money) is a significant, unfair, unearned advantage...

Eh, when RV'ing I turn off the water heater between showers to conserve propane.

Maybe I should look into doing the same at home with the electric water heater.

[jollystomper]

In regards to a college education, while many say things are harder about college these days, I think it is worth pointing out that there are many things about college that are easier than 40 years ago. A few things come to mind are technology to leverage ones workload, a wider range of majors to choose from, much better academic and non-academic facilities. GPA trends are higher. Of course, one can debate if these also fall into the category of "it is not what you have, it is what you do with it" when it comes to leveraging these items to take the best advantage of them, for a path beyond college.

[HI Bill]

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Originally Posted by Amethyst I fail to see how our hard work, refusing to get into trouble, and LBYM ethics (even when the "means" were barely enough to get by) constitute something "toxic," as the article's opening lines have it.

I completely agree. I was not born with a golden spoon in my mouth, I was born (fortunately), to parents who loved me. My dad was the sole breadwinner, an elementary school teacher. We had a VW bus and bug, but rented a house in a poor, small community. It wasn't until my mom started teaching after I went off to school, that our financial lot improved at all. My dad committed to paying for my college, but when I was ready to start, his savings weren't there yet. So I went to community college. This was the stroke of good fortune that helped me catch up in my rather deficient math skills. I started with algebra, then pre-calc, then 3 semesters of calc...but I digress. My parent's influence, support, and their paying for most of my college helped me start off on the right foot. As I finished college debt-free (not a fancy, ivy-league college, but an inexpensive, practically oriented state college), I was unemployed for 6 weeks, while looking for a job. That was my only period of unemployment in the past 27 years. Since then, I've LBYM, never going into debt, except for two car purchases, and three condo purchases. I've never received a day of unemployment pay, nor a day of welfare. I've only paid interest to a credit card company on one month for one card. I've made choices to save, invest, and grow my money, rather than work the rest of my life. I'm proud that through the combination of my 'accident of birth', hard work, a lot of luck, and a lot of judgement, has allowed me to make it to the top 9.9% (more like top 5%). I owe no one apologies for this. My coworkers with similar or better education and pay are still working, 1 to 2 decades past the age 53 that I'll be next year, when I plan to retire. It's all about choices. Oh, and not having lots of kids helped!

[HI Bill]

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Originally Posted by NW-Bound Maybe I should look into doing the same at home with the electric water heater.

It's called a water heater timer. I have mine set to automatically turn the water heater on for 2 hours in the morning, and 2 in the evening. The other 20 hours a day, it's off.

[aja8888]

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Originally Posted by NW-Bound Eh, when RV'ing I turn off the water heater between showers to conserve propane. Maybe I should look into doing the same at home with the electric water heater.

Why not install a 55-gallon polyethylene drum on your roof and plumb the water heater input to it to preheat the water going into the water heater? Or just remove the water heater and use the hot water from the drum?

[ERD50]

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Originally Posted by mrWinter If it's at all possible to keep this thread from going off the rails, ... I think the majority of it boils down to ending tax breaks of various kinds that go far disproportionately to the wealthy. Things that sounds good on paper but end up being welfare for the rich. For example, tax breaks on employer-sponsored health plans, home mortgage interest deductions, lower tax rates on capital gains, 529 savings, etc. These are all breaks that in theory every citizen can benefit from, but in reality only the wealthy are able to make use of. ....

I'm against just about all 'carve outs' and subsides/incentives, but your argument appears to be pretty hollow when we throw some facts against it:

https://www.ntu.org/foundation/page/...s-income-taxes

The top 10% in AGI paid over 70% of all the Federal Income Tax paid by everyone. I'm not even sure if they adjust for people who receive credits (negative FIT).

I know, FIT isn't the only tax collected, but it's a big chunk. And 10% paying 70% doesn't exactly sound like they've done a great job at gaming the system.

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.... Other suggested solutions include changing regressive payroll tax system ....

I don't think SS can be legitimately described as 'regressive'. True, you are not paying after a certain income point in the year, but you receive no credits either. And the payout is very 'progressive', so the buy-in is as well.

-ERD50

[ERD50]

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Originally Posted by HNL Bill It's called a water heater timer. I have mine set to automatically turn the water heater on for 2 hours in the morning, and 2 in the evening. The other 20 hours a day, it's off.

Ironically, a water heater comment had to pass the "HOT BUTTON" warning ...

But I was going to say (carefully now), that the timer probably isn't saving you much (if at all). Modern electric water heaters are well insulated, they lose very little heat when they are idle. The major cost is raising the water temperature in the first place.

Also, even though it may be 'off', it's still losing heat, and that will be made up when the timer kicks back in. But it might not even lose enough heat during the idle time to cycle the heat back on anyhow.

The only actual difference is that if it is set for 130F, and lets say it comes on at 125F, then, if (big if) it would have dropped to say 120F during the timer off time, then the average temperature is 125F (130:120), whereas the average temperature w/o a timer would be 127.5F (130:125). And the rate of heat loss would be slightly higher at a 127.5F average temperature than it would at 125F average temperature. Emphasis on slightly. Like, maybe immeasurable?

-ERD50