Thursday, November 29, 2012

Buffett to the Rescue

Warren Buffett may be my new favorite bazillionaire. IF he wasn't already. He just gets it, and even if I am still skeptical on his pledge to the Gates Foundation, he knows how to talk the talk.

Just read his Op-ed piece in the New York Times from a few days ago. And it's not about his secretary. Discuss.

Monday, November 26, 2012

Fiscal Cliff, and What's next

Happy Thanksgiving and Black Friday. Instead of Cyber Mondaying, take some time to educate yourself about the state of the economy.

First thing's first. I often get asked "what's this fiscal cliff everyone is talking about."

If you already know, bear with me.

The basics:

When times are economically good (like the 90's, and early 2000s) we (the government) has lots of tax revenues, so it can technically cut taxes (makes people happy) and spend all kinds of money on programs and defense and all that good stuff (makes government happy). When times are not so good (like the last couple years) we (government)  don't have enough money to keep paying for all those things we used to, but its the government, and it is really hard (read SLOW) to change our spending habits. So we over-extend, rack up debt, and get in financial trouble.  Recessions happen, people lose their jobs, markets crash. People's pensions get cut in half.

Enter year end 2012. Here is what happens on New Years:

  1. Bush Era Tax Cuts expire at year end.  (ESTATE TAX GOES BACK TO $1 million)
  2. Payroll tax cuts go away, Alternative minimum tax changes, other tax breaks go away.
  3. Budget Control Act of 2011 (remember the Debt Ceiling?) automatic spending cuts kick in. 
  4. Obamacare taxes take effect (increases capital gains tax, dividends tax)


These, amongst others, are the forces pushing the economy and nation up to a "fiscal" cliff.  The general concept is taxes go up and government spending gets automatically cut. The question is what happens when, and if, we go over the aforementioned "cliff."

The Republicans don't want to raise taxes (although they are wavering in their anti-tax pledge) and want "entitlement program" reforms, and the Democrats want to raise taxes and keep their "entitlement programs" (read Obamacare, social security, etc.)

If we go over the cliff, the markets should crash, unemployment should rise again, and we should  have another recession. Or would we?

The last few years have been lean, no question (unless you are one of these kids). These economic reforms sure seem like an anti-stimulus package. But is this what the country needs? We might just cut our deficit, clean up entitlement programs, cut the pork, and prevent having to do this all over again a few years down the road. Tough call. I don't think anyone can honestly say they want to pay more taxes, but a good many don't want to see our debt hamstring the next generation either.  Hopefully they meet in the middle. 

Take Away:

Ok, what does this mean for you and I. If you work in a government funded agency, (for example, scientific research funded by government dollars) you better hope these entitlement cuts don't come down: your job might be at risk. If you are one of the millions of retired Americans who did everything right, saved and maxed out your pension, you better hope the forces in Congress do not push us over the cliff. If your portfolio is still in tact after 2008, it likely cannot handle another huge hit. 

No one knows what is going to happen. However, many people are taking advantage of the current estate and gift tax exemption levels, as well as cashing in on the current, likely lower capital gains rates.  I don't think the estate tax will revert back to $1 million: that just hurts too many people. I do, however, feel the Obamacare taxes on dividends and capital gains will come into effect. Any financial planning based on the fiscal cliff fears is really a gamble, much like investing in the stock market (unless you have insider information, of course).

We have about a month to go. Time to place your bets. 

Wednesday, November 7, 2012


Thanks for everyone who participated in our poll. Turns out, Jill Stein of the Green party was the overwhelming choice of our readers. The Harvard educated internal medicine doctor, twice arrested on her campaign trail (once in Texas for trying to aid the protesters of the Keystone XL pipeline) did not do as well nationally, however.

With the election over, the stock market in free fall (except the firearms and marijuana stocks, interestingly), and the "fiscal cliff" discussions approaching, there will be lots to talk about in the coming weeks.

Stay tuned, and stay classy.

Tuesday, November 6, 2012

Election day.

Big day, America.  This election is the most important of our lifetimes...How often have you heard that?

In reality, there is a whole lot on the table, at least if you believe the talk.

Women's rights, social programs, healthcare, "jobs", the direction of energy development, how we will address our national debt, and everyone's favorite, TAXES are all up for grabs. Not to mention the future of the Supreme Court, and the fallout that can happen if appointments go one way or the other.

But on taxes..

Obama Basics:

Extends Bush tax cuts, except for individuals over $200k and families over $250k/year. Capital gains and invesetment income taxed harder, Obamacare tax built into capital gains, increased dividends tax, potential limits on itemized deductions.

Take away: wealthy tax payers and those with substantial investment portfolios are going to pay more tax. Middle class largely spared.

Romney Basics:

Extends Bush tax cuts for everybody, cut rates an additional 20%,  if you are under $200k you pay no capital gains/dividend/interest taxes, repeal the estate tax. Pays for it by getting rid of "loophole deductions," which we are not sure what those are.

Take away: wealthy tax payers and those with substantial investment portfolios will make out like bandits. Everyone else pays their "fair share," with the middle class coming out about the same and the poor not getting much extra relief.

I found an interesting calculator that will tell you how each candidate's tax plan will affect your bottom line. Try it for yourself, here. No idea if it is accurate, just a fun tool. Interesting to see what happens at lower incomes, and extreme upper incomes, though (start at $500k, then keep going up. See a trend?)

I don't really care who, or what you believe in or support, and I will not tell you who to vote for. Mainly, because neither candidate has chosen to request an endorsement from

Also, while you are here, vote in our scientific straw poll on the right.

Just go vote. It is your right and your duty.  Then lets talk. About taxes.