Entries Tagged 'Government' ↓

Word of The Day—Unearned Income—How the Wealthy Avoid Paying Taxes

The Rich and The Not-Rich

In my previous post on “Earned” vs. “Unearned Income”, I  concluded that the IRS keeps Americans at the bottom and the middle of the income scale from achieving their “American Dreams” by use of “limits” on contributions, and “carry over deductions” .

As proof,  I’m going to show about two examples of IRS tax credits for charitable giving that serve to keep the Not-Wealthy down.

Then I’ll reveal how the wealthy avoid paying taxes on their unearned incomes. Because, in actuality, today there are only two social classes left in the U.S. – The Rich and The Not-Rich.

The Not-Rich are workers: the Rich are investors and inheritors.

I will show that workers, including self-employed professionals and small busines owners, earn lower incomes, while being taxed at significantly higher tax rates on their earnings than investors.

Why? Because the IRS limits the amounts that workers can use their”earned” or “unearned income” to obtain tax credits (i.e., deductions from gross income) on their taxes.

Meanwhile, IRS tax shelters on “unearned income” (i.e,. investments and inhertiances) by the rich are making them even richer.

Ways The IRS Holds the Not-Wealthy Down

The IRS allows those who make “earned income” only very small portion of the the huge amounts of untaxed income granted to wealthier taxpayers who make “unearned income” from their inheritances and investments.

The IRS calls tax loopholes for the not-wealthy “Deductions” or “Credits”.  “Earned income” ensures that workers will rarely be able to progress up the ladder to become wealthy after they are taxed. Here’s why:

Read some of the instructions in IRS manuals or on its web site. You’ll see the word “LIMITS”.

Like traffic signs they’ll blare at you! You’ll also see the phrase “CARRY OVER” combined with this word “LIMITS“.

I first became aware of limits on tax credits for middle class earned-income workers when I got a 20 percent homeowners’ credit for my first-time mortgage on a condo.

Every tax year there would be a limit on how much money I could claim credits for. Every year I had to carry over money until the next tax year. Over ten years of payments, I never even got close to getting 20 percent deductions on my taxes! Continue reading →

How Micro Economists Could Crush Covid-19

For over a century macroeconomists have dominated the field of Economics in the Western World. I predict this is going to change in this century and that microeconomics will make a come-back.

The sub-field of microconomics itself was actually founded decades earlier than the sub-field of macroeconomics by a Cambridge College professor in England named Alfred Marshall.

In the late 19th century, Alfred Marshall wrote his famous book, Principles of Economics, and in his classrooom Marshall taught microeconomics to his students.

Marshall invented the field of microeconomics in reaction to the popularity of Karl Marx’s book, Das Kapital, a book that was critical of the capitalism that Adam Smith had advocated in Smith’s earlier book, the Wealth of Nations, published in 1776, the year of the American Revolution.

Marshall’s microeconomics teachings shunned the simple arithmetic examples that Karl Marx relied on to support Marx’s theories that rich people were cheating the factory workers who had made them rich. Fast forward to the next century!

In the early 1930’s, the United States fell into a GREAT DEPRESSION, far worse than any we have seen since.

That’s when Lord John Maynard Keynes, a student of Alfred Marshall’s at Cambridge, created and taught the sub-field of macroeconomics.

Keynes overcame Marshall’s reluctance to use arithmetic by using a form of mathematics called ‘calculus’ to support Keynes’ theories. Keynes’ theories became the mainstream thinking of the economists during the Great Depression and afterwards.

Meanwhile in the mid-twentieth century, conservative followers of Adam Smith’s economics at the University of Chicago economics department were still using simple arithmetic just like Karl Marx had done.

For almost a hundred years now Lord Keynes’ flashy macroeconomics and ‘econometrics’, along with President Franklin Roosevelts’ “New Deal”, were considered successes that saved the U.S. Economy in the mid-twentieth century.

Nevertheless a minority of conservative economists on both the West and East Coasts of this country at Stanford University, University of Virginia and other Southern colleges, and George Mason University near Washington, D.C. published books which challenged the ideas of the Keynesian economists.

Some of these minority economists’ arguments were quite credible, others weren’t.

I know because I created numerous back-of-the-book indexes for all kinds of economics professors for over twenty-five years in the late 20th century: Keynesian liberals, Chicago conservatives, and ultra-conservative libertarians.

Macroeconomics and Microeconomics – The Differences

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Book Review – The 10 Rules of Successful Nations

Ruchir Sharma is the author of The 10 Rules of Successful Nations (2020). He is Chief Global Strategist and head of Emerging Markets Equity Team at Morgan Stanley Investment Management.

Sharma is a young man who manages $20 billion of assets, and already has two other books out: Breakout Nations: In Pursuit of the next Economics Miracles (2012) and The Rise and Fall of Nations: Forces of Change in a Post-Crisis World (2016)

Interviewed by Fareed Zakaria this past week, Sharma announced that when the COVID Crisis is contained, we, the United States, will not be among the top ten successful nations on his list—or even anywhere near it.

Given that Sharma’s first rule for a successful nation is “They fight population decline,” it isn’t surprising that we won’t be great again when this pandemic cools down.

It’s obvious that we are not fighting our population decline in the face of COVID-19. We are at the very top of the losers, with many of us gone and the health of millions of others diminishing every day more rapidly.

The Successful Nations

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