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Local opinion columnists

New taxes in a new economy

By From page A7 | January 08, 2013

I usually don’t pay much attention to tax matters unless something really dramatic is going on. Well, it is right now.

For everyone who receives W2 income, the FICA – Social Security – tax will be 2 percent more. That’s just the first of lots of new taxes. Think of it this way: Suppose you’re a retired citizen who had been in the habit of putting his or her money in the bank. You’ve earned a few extra bucks by babysitting for the neighbor’s children.

You don’t earn much, but it’s been building up over the years. But starting a couple of years ago, the interest rate the bank has been paying you is not much above zero – that’s nothing. Assuming you get a W2 for your occasional work – and I realize that not everyone does – an extra few dollars will be taken out of your check. They also raised the level at which you must pay Social Security tax, which might easily come to an extra several thousand dollars a year.

Sure, we have a staggering deficit and something must be done about it. But this basketful of new taxes is at odds with what the Federal Reserve has been trying to do for the past several years. What good does a ZIRP do – that’s a Zero Interest Rate Policy – if the IRS or Congress is sucking more money from you than you might be saving with the extra-low rates on your purchases?

Interesting, isn’t it, that even with these near historically low mortgage rates, the housing market has shown just the smallest whisper of a recovery? There are several reasons for this.

The zoom that we experienced in the early 2000s fed on itself. Even with lower prices and much lower interest rates, the frenzy to own a new home isn’t there. Next, banks are simply not loaning money with the same looseness that they were before the bank and housing crash. In fact, the standards have become so tough that even a well-qualified borrower may be out of luck. That could be someone with an annual income of more than $80,000, a credit score over 700, 30 percent down and a fair appraisal.

There’s yet another reason for the listless economy. The unemployment figure has hovered just under or over 8 percent, almost double what it was for the past 100 years – with the major exception of the Depression – with no good solution in sight. Actually, the economy may be worse that it appears.

Not all companies are laying off workers because business is bad. Many companies are doing their best to automate work previously done by men or women. The kind of automation being introduced is not the type you’re familiar with. Picture the paint room in an automobile assembly plant. Ten or 20 years ago, you might have had six or eight arms spraying the final coat after the primer had been applied. Now, just one arm is programmed to do all the work in half the time. Fewer workers to guide the arms – in fact, none at all.

There was a story on the Allison Diesel – formerly, I believe,  owned by General Motors – and the speed with which locomotives were assembled with only one or two workers in sight. It was staggering. I predict, modestly, that that particular company, along with Cummins or Caterpillar, are downsizing for good even as their production goes up.

We’re living in a new economy.

Bud Stevenson, a stockbroker, lives in Fairfield. Reach him at [email protected]

Bud Stevenson

Bud Stevenson


Discussion | 26 comments

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  • G-ManJanuary 07, 2013 - 11:11 pm

    Yes Buddy an interest rate near zero is just about nothing...your perception and grasping of the facts is akin to laser guided missle...oh.,and if someone has an 80K income..a 700 FICA and a good appraisal they're getting the loan..at least in Pittsburgh..

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  • Nils CarlsonJanuary 08, 2013 - 5:29 am

    Yep, you hit the nail on the head..More taxes are coming with Obamacare and all of the other things the state of California will want us to pay for..Just the beginning with the 2%..

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  • JBDragonJanuary 08, 2013 - 12:36 pm

    That tax increase in the so called rich did nothing for anyone! There's not that many rich people. At best it pays for 8 day of Government. That's is it!!! Yet Obama made it sound like it was the solution for all the problems. We don't have a tax problem, we have a out of control government spending problem. You know what this bill that was just signed did? It brings in $1 for every $42 the Government spends. Can anyone run their household like that? Of course not. Obama and the Democrats want to spend even more. When you want to increase taxes on the so called evil oil company's, they don't pay it, YOU do! It doesn't effect the rich at all with higher gas prices, it effects the middle class and poor!!! It's really yet another tax on you! Some goes with every other company. All you really do is hurt yourself with higher prices for products, which again effect the poor far, far more then the rich. Obama care is just starting to kick in. Wait until that's fully running in a few years. In 10 it'll be like going to the DMV, well actually worse!

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  • rlw895January 08, 2013 - 1:14 pm

    I don't think Obama ever claimed the recent tax increase was all that was needed. McConnell said "we're finished with tax increases," not Obama. Of course, what McConnell meant is balancing the budget the rest of the way comes from spending cuts. But where? No one will say. The cuts proposed so far might be another $1 of that $42. No, the best way to solve the deficit is to recover and grow the economy, and you don't do that by taking money out of the pockets of the 98% who spend most of what they have, stimulating the economy. The 2% is more likely to take a tax cut to their Cayman Islands savings account rather than spend it. The next best way to solve the deficit is to stop that flow of money to the Caymans by making our taxing system more progressive (i.e., even more focused on high income and wealth). This country has created an economy that has led to immense income and wealth for some people, then we refuse to tax that income and wealth to help the economy. And it’s not like we will be setting new precedents by having a more progressive tax system; we had one for 35 years after World War II and did very well. The top 1% then took in about 10% of the national income, compared to 20% today. It's time to plow some of that back into the economy and leave the 98% to create the demand for products that will cause the economy to take off.

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  • Mr PracticalJanuary 08, 2013 - 4:17 pm

    rlw, the top 1 percent of earners pay approximately 37 percent of all federal income tax. Not sure how you can say we refuse to tax wealth. Obama may not have overtly said that taxing the wealthy was a pancea, but he certainly implied it to get people to the polls. He did say, and I quote, "At some point you've made too much money."

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  • Danny BuntinJanuary 08, 2013 - 5:46 pm

    Mr P, when they have most of it, it makes since that they would pay more - even though the % rate is lower then yours or mine. To me it is backwards, trading labor for money should be taxed at 35%. Just my opinion.

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  • Danny BuntinJanuary 08, 2013 - 5:51 pm

    DR Snafu: "To me it is backwards, trading labor for money should be taxed at 35%. Just my opinion." Should read: To me it is backwards, trading labor for money should be taxed at less then 15%. While earned interest/dividend should be taxed at greater then 35%. Just my opinion.

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  • Mr. PracticalJanuary 08, 2013 - 6:48 pm

    Wouldn't that discourage saving and investing for the average Joe?

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  • Danny BuntinJanuary 08, 2013 - 7:47 pm

    I do not think so. What else would they do with it? Put it in one of those high yield (1.8%) CD's? It is still the best deal in town while sitting on your behind.

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  • rlw895January 09, 2013 - 12:02 pm

    MrP: Misquote. What he actually said was "I do think at a certain point you've made enough money." Isn't it interesting how some people like to misquote that line? I wonder why? It's "bad" enough as it is, don't you think? But if you’re willing to give him a break, there is truth in what he was trying to say. When it comes to income tax, of course the top 1% is going to pay a lot. It's a progressive system. My point, and Obama's, is the utility of the last dollar earned by someone making $millions is a lot less than the last dollar earned by someone making $thousands. And it harms the economy so much less to tax that millionth dollar that it's the best way to go. And don't forget that because of payroll taxes and other regressive taxes, there is a lot more balance when you look at total taxation and not just the income tax.

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  • rlw895January 09, 2013 - 12:07 pm

    And don't forget "you didn't build that." If only Obama has said what he meant, which is "you didn't build that ALONE." This country worships wealth, and we provide the infrastructure for wealth creadtion. It's only right that the people who benefit from that the most pay for it the most. It's not like our tax system is confiscatory. Wealthy people will always keep a lot of what the earn. Does it really matter that the millionth dollar is taxed at 50% rather than 40%?

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  • Mr. PracticalJanuary 09, 2013 - 12:14 pm

    It's semantics. Either way it's unacceptable from the leader of a country that is based on free enterprise. It's politicing at its worse. Simply pandering to the largest voting bloc. I will never agree that a progressive tax system is appropriate or needed. Tax rates should be flat with some exemptions/credits/deductions that would benefit lower incomes.

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  • rlw895January 09, 2013 - 5:09 pm

    MrP: Yes, it's semantics, which is the meaning of words or expressions. And you think that's unimportant? You misquote Obama and it's no big deal. Obama misspeaks, and you don't care what he was trying to say. OK, you've established more than once that you don't believe in progressive taxes. You don't care about the recent pronounced trend in this country for wealth and income to concentrate at the top. It's time to raise the drawbridge and keep the peons out. You probably don't want to explain WHY you don't believe progressive taxes are appropriate or needed, but I couldn't disagree more. It's the only way we are going to get a balanced budget while not abandoning everybody not already in the top few percent of income and wealth. Progressive taxation is as American as apple pie. Even Adam Smith believed in progressive taxation for a free enterprise capitalist system to survive and thrive.

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  • Mr. PracticalJanuary 09, 2013 - 5:49 pm

    rlw, my misquote and what Obama said have no difference in meaning, so yes, in this case it's unimportant. Either way it was inappropriate and scary.

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  • rlw895January 09, 2013 - 8:43 pm

    MrP: Just get it right next time. "Too much" and "enough" perhaps mean the same thing to you, but not to very many other people.

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  • Mr. PracticalJanuary 10, 2013 - 6:36 am

    I disagree. Enough and too much are virtually the same thing in this scenario. If "enough" is $250,000 per year (which seems to be Obama's threshhold) than by definition, $250,001 per year is "too much." I don't believe anyone in their right mind would consider that the two words have different meanings in that context.

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  • rlw895January 10, 2013 - 8:00 am

    MrP: OK then, "more than enough" does not mean "too much." But let's not argue. If someone says "and I quote," he should make a special effort to get it right. Perhaps we can at least agree on that.

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  • Mr. PracticalJanuary 10, 2013 - 8:07 am

    I don't disagree. In my defense, I probably remembered it based on what he meant rather than what he actually said.

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  • rlw895January 10, 2013 - 10:40 am

    It's not what he said and it's not what he meant. But let's leave it be. So now explain why you don't believe in progressive income taxes and that somehow they are inconsistent with a free market economy. We're not talking about communism here.

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  • Mr. PracticalJanuary 10, 2013 - 12:09 pm

    I never said that a progressive tax system was inconsistant with free enterprise. I said Obama's comment was. I've said many times in the past that he problem with the current tax code is that it's so polluted with exemptions, rules, dedutions, etc... that it is unintelligable and unrepairable. A flat tax with basic exemptions benefiting lower incomes would work fine. It also reduces the IRS budget to next to nothing and gets rid of the $365 billion in annual uncollected taxes.

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  • rlw895January 10, 2013 - 8:42 pm

    Well, I'm glad we cleared that up;-). If Obama really said "too much," I would agree with you. Obama's comments were in the context of justifying his proposal to increase the tax rate on income over $250K by, what, 4%? You'd think he was proposing confiscatory taxes on anything more than subsistence income. Context matters. As for tax simplification, if that's what you want, then we can do it without having a flat tax. I'm all for that. But it will be difficult with the "dark forces" of special interests and lobbyists who worked long and hard for all those special goodies. They stoke the fires of division so Democrats and Republican tax reformers can't even sit in the same room together. I blame the Republicans mostly for that because they have sold out. But the Democrats are falling prey too.

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  • I have been rereading....January 08, 2013 - 8:40 pm

    A most excellent book....Vile Acts of Evil by Mike Kirchubel, I suggest you ALL READ IT. We can all Yada Yada Yada, Dilly Dally and Blather On Ad infinitum but accomplish NOTHING, till the true causes of the problems are identified. Which are...1. The Federal Reserve is PRIVATELY owned by the International Bankers and does not serve the interests of the American people....2. The United States should issue its own currency through our Treasury Dept and the quantity of Money should be closely regulated.....3. Each state should set up a Bank modeled on the North Dakota system, (these banks could be used to capitalize the re-industrialization of the country).....4. We need to be energy independent, no more wars for oil, no more need for the Petro dollar, drill and refine our own oil and check out technologies such as the new hybrid diesel/electric Volkswagen that gets 70 miles to the gallon, research suppressed technologies....5. Address the break down of the American Family, too many 1 parent households and out of wedlock births...6. The Federal Government should only do what is listed in the Constitution, get rid of Departments such as Education and devolve power back to the States, the States should nullify Unconstitutional Federal Laws and Statutes, this would greastly cut down the pork barrel spending.....7. Many of the elements of the FBI, CIA, FEMA, DHS, NSA, DARPA, ATF, DEA, STATE DEPT, DEFENSE DEPT, JUSTICE DEPT ect...Do not work for the American people, they work for the International Bankers (these Bankers have set up every war since Napoleon)....8. Do not go to war for these bankers, our military/industrial complex is controlled by these Bankers, these bankes funded and nutured the rise of Communism and Radical Islam and put in place repeated FALSE FLAGS to get the US to participate in their wars....9. Do not go global, get out of the UN, BIS, IMF, CFR, Trilateral Commission ect..10. Control Immigration, we can not have the country Balkanized remember "We are all in this together"....11. Americans are too Greedy we have too much stuff and entertainment, we each should concentrate on what we need, instead of what we want, we do not have to go into credit card debt to buy all the electronic toys from China ect., consider reimposing tariffs. 12. This is scary, but???consider Temporarily Nationalizing the in country Assets of the International Corporations, they have too much power, control what we have "span of control" over within US borders..13. We are a Representative Republic, if all the candidates we can vote for have been pre-selected (both Dem and Repub), by the Bankers and the Money Powers, nothing will change, we DO NEED clean money elections and no Black box voting, go back to paper ballots. I may add more to this later. Does anyone else want to type up such a list, please do, did I forget anything? I am sure that I did. PS You can not give away the Goodies if you can not pay for them.

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  • StrJanuary 08, 2013 - 9:07 pm

    14. Realize that the Media is controlled by these International Bankers, they "set" the public perspective through lies and omissions. We are all under Mind Kontrol(sic isn't it). We are all spied on all the time, your e-mails, Facebooks, Googles, Phone Conversations are all captured recorded and stored, Echelon, Total Information Awarness Programs,MK-Ultra programs. Flouride in the water is part of this. High Fructose Sugar, artifical flavors and sweeteners, hydrongenated oils, Chemtrailing, Psychotronic weapons,the flicker rates of your TVs, all are used to induce "mind states". We are all under a "Mind Control Grid" which is rapidly tightening...15. Realize that the Stock Markets, Commodity/Future Markets, Oil Markets, Derivatives Markets, Interest rates, Bullion markets, Insurance Markets, Media Markets, Central Banks down thru local banks ect..(Did I forget anything?) are all controlled by these International Bankers.

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  • Mike KirchubelJanuary 13, 2013 - 9:20 am

    Great thread, guys. STR, I'm glad you are finally reading that book.

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  • StRJanuary 13, 2013 - 11:29 am

    One thing NOT mentioned in most books is that naturally the Money supply needs to be increased as a function of population growth. This aspect would need to be considered as part of the control function if we did get rid of the Fed. Of course now the Fed/Private banks/US Government is creating money out of nothing at an ever increasing rate and charging the tax payers the interest, and giving much of it to foreign banks (thru TARP bailouts ect) this can all be avoided by our own US Treasury Dept issuing our own money. Michael KISS, please state simply the MAIN THESIS of your book. What are the main points you would like a reader to remember and act upon via our Representatives.

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  • Some Books to ReadJanuary 13, 2013 - 11:40 am

    Web of Debt by Ellen Brown........No more National Debt by Bill Still.......Vile Acts of Evil by Mike Kirchubel. If a person reads all of these you will get a good understanding of what is going on with US Monetary Policy. Mike's book is the best one in recording the evolution of the Criminal/Fed system in a well explained chronological order. BUT both political parties are played for what they can get accomplished by the International Bankers, especially now...both parties Republican and Democrat are not to be trusted to return the money issuing power to our own Treasury Dept.

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