President Obama’s budget, to be released next week, will limit how much wealthy individuals – like Mitt Romney – can keep in IRAs and other retirement accounts.
The proposal would save around $9 billion over a decade, a senior administration official said, while also bringing more fairness to the tax code.
The senior administration official said that wealthy taxpayers can currently “accumulate many millions of dollars in these accounts, substantially more than is needed to fund reasonable levels of retirement saving.”
Under the plan, a taxpayer’s tax-preferred retirement account, like an IRA, could not finance more than $205,000 per year of retirement – or right around $3 million this year.
It'll just be "The Rich" this time around. Next time, it will be "The Wealthy", then it will be You.
When you print money, the money does not flow evenly into the economic system. It stays essentially in the financial service industry and among people that have access to these funds, mostly well-to-do people. It does not go to the worker. I just mentioned that it doesn't flow evenly into the system.
Now from time to time it will lift the NASDAQ like between 1997 and March 2000. Then it lifted home prices in the U.S. until 2007. Then it lifted the commodity prices in 2008 until July 2008 when the global economy was already in recession. More recently it has lifted selected emerging economies, stock markets in Indonesia, Philippines, Thailand, up four times from 2009 lows and now the U.S.
So we are creating bubbles and bubbles and bubbles. This bubble will come to an end. My concern is that we are going to have a systemic crisis where it is going to be very difficult to hide. Even in gold, it will be difficult to hide.
The Higher Education Bubble gets closer and closer to its inevitable burst. Consider this:
Student loans continue to trend up as a component of overall debt, and those same loans rocket up (as all other forms of debt drop) as they increase in frequency as being delinquent.
The chart on the right shouldn't be too much of a surprise, as more and more college-aged kids are unemployed, have been forced to drop out, or are under-employed. No big shocker that those student loans are getting paid last, if at all. The chart on the left is more troublesome in my eyes, as student loan debt is not forgiven in bankruptcy proceedings (not yet, anyway). Folks have saved more money, paid down debt, refinanced/renegotiated terms, and have otherwise gotten on the right track when it comes to non-student loan debt.
At some point, the other shoe is going to drop. Remember, something that can't go on forever, won't.
The only "surprise" will be when the bubble actually bursts, and the MSM will wring their hands and wonder how this happened.
The next financial market meltdown may already be brewing: not in the housing market, this time, but in municipal bonds. Greedy bankers, opportunistic politicians and hobbled regulators are putting a time bomb in the muni market that could set off another devastating crash.
California is leading the way.
It is starting out innocently enough. Looking to expand a number of aging school facilities but loath to raise the taxes necessary to pay for it, California cities have opted to fund school construction projects with capital appreciation bonds, which allow school districts to borrow money now while putting off payments for decades. It sounds like a great deal, but it has one major drawback: The interest rates involved push the eventual price tag to many times the original amount—sometimes as much as ten times more. The New York Times has the story:
And in the most expensive case yet, the Poway Unified School District borrowed $105 million to finish modernizing older school buildings, which local property owners will be paying off until four decades from now at an eventual cost of nearly $1 billion. Because payments on the bond do not start for 20 years, current school board members faced little risk of resistance from property owners. [...]
In 2009, as the housing market crash drove down tax revenues for schools and state education financing was cut, California lifted its requirement that long-term bonds be paid off at approximately the same rate each year, opening the door for bonds that delay payments for 20 years.
This is irresponsibility on steroids, but it represents a dream come true for crony capitalists and Wall Street I-bankers. Fat fees, enormous interest, and the taxpayers won’t even know what hit them when the whopping bills come due.
Treasury Secretary Timothy Geithner says the government has begun borrowing from the federal employee pension fund to keep operating without surpassing its debt limit.
Geithner says in a letter to congressional leaders that the move will free up $156 billion in borrowing authority while Congress debates increasing the $16.4 trillion debt limit.
The government reached its borrowing limit on Dec. 31, but began using bookkeeping maneuvers to keep from surpassing it. Geithner has told congressional leaders that Treasury expects to exhaust those measures by mid-February to early March.
When and how will those funds get repaid, Mr. Geithner?
The latest action has been taken by other Treasury secretaries and will not put in jeopardy any monthly pension payments. Geithner said he will replace the funds removed from the pension account after the borrowing limit is raised.
So what happens if the debt ceiling doesn't get bumped up?
Instead of robbing Peter to pay Paul, why not do something radical, and cut back on spending a tad?
On Tuesday, California released a report that revealed state tax revenues have plummeted even further below Gov. Jerry Brown’s (D) estimates, even after residents voted to increase taxes via Proposition 30 in November’s elections.
At the end of November, “taxes were 3% short in the fiscal year that started in July,” which is “a gap of $936 million.” The state was 0.7% short a month before.
But the report found that tax revenues were below estimates nearly across the board, as total “year-to-date revenues are $936 million below the initial forecast.”
According to the report, personal income tax revenues were “$827 million below the month’s forecast of $4.387 billion.” Sales and use tax receipts “were $9 million below the month’s forecast of $1.601 billion” and the year-to-date sales tax revenue was $8 million below forecast.
Not surprisingly, corporate tax revenues were also down, $175 million below the month’s estimate and year-to-date corporate tax revenues were $441 below estimate.
Hard to believe that when tax rates go up, revenues go down. It's almost as if the high-income earners find places to put their money that wind up lowering their overall tax bill, or something. Or they pack up and move to another State.
Way to go, California Democrats! Soon, all that will be left there are deadbeats and "takers".
The White House says President Barack Obama supports a measure that would exempt U.S. Olympians from taxes on their prizes.
Press secretary Jay Carney said Monday that Obama would do "everything we can to support our athletes," including signing into law legislation introduced by Republican Sen. Marco Rubio of Florida. Rubio wants Americans who win medals to keep all of the prizes the U.S. Olympic Committee awards to winners.
Olympians who earn gold medals receive a $25,000 prize, silver winners get $15,000 and bronze winners pick up $10,000.
Sure, it's fine to forgive the taxes on winning a medal(s) to those athletes who don't have multi-million dollar endorsements (or high-paying "day" jobs, like Kobe), but why give professional, sponsor-endorsed athletes a free ride? Shouldn't they be willing to pay a few dollars out of their deep pockets to help balance the budget?
Since we are writing specific legislation for the Olympic athletes, can't we just include a qualifier that anyone earning over an amount (say $250,000, maybe?) still are required to be taxed at the highest rate possible?
So Parliament approved a very unpopular austerity bill (which got them a second IMF bailout), and the citizens lit the Country on fire.
Cinemas, cafes, shops and banks were set ablaze in central Athens as black-masked protesters fought riot police outside parliament.
State television reported the violence spread to the tourist islands of Corfu and Crete, the northern city of Thessaloniki and towns in central Greece. Shops were looted in the capital where police said 34 buildings were ablaze.
Prime Minister Lucas Papademos denounced the worst breakdown of order since 2008 when violence gripped Greece for weeks after police shot a 15-year-old schoolboy.
"Vandalism, violence and destruction have no place in a democratic country and won't be tolerated," he told parliament as it prepared to vote on the new 130 billion euro bailout to save Greece from a chaotic bankruptcy.
Papademos told lawmakers shortly before they voted that they would be gravely mistaken if they rejected the package that demands deep pay, pension and job cuts, as this would threaten Greece's place in the European mainstream.
"It would be a huge historical injustice if the country from which European culture sprang ... reached bankruptcy and was led, due to one more mistake, to national isolation and national despair," he said.
The chaos outside parliament showed how tough it will be to implement the measures. A Reuters photographer saw buildings in Athens engulfed in flames and huge plumes of smoke rose in the night sky.
"We are facing destruction. Our country, our home, has become ripe for burning, the centre of Athens is in flames. We cannot allow populism to burn our country down," conservative lawmaker Costis Hatzidakis told parliament.
So it appears Greece has won a major battle, but might end up losing the war. If the folks are lighting the Country ablaze tonight, I can't imagine many will be showing up for work tomorrow. This is what happens when more people take from the Government, than give to it.