Can All the Rich Folks...PLEASE STAND UP.

Did you all read Warren Buffet's op-ed for the NYT? I <3 him...genuinely I do. I am definitely a proponent of taxing the rich heavier...not merely because the U.S. is broke and our economy and deficit both need some serious help, but just off of principle man...they can afford it.

Buffet acknowledged that his effective tax rate for 2010 was 17.4%. GTFOH. That means only 17.4% of his billions went to the government. While there are middle class Americans making much less than him paying 25% or more of their income to taxes. How is this possible you ask?

Well yes, Buffet is part of the highest tax bracket (35%), however, the tax breaks for the wealthy are just that plentiful that he went from 35% of his income to actually only paying 17.4% of his income. This is expressly why rich people should have to pay higher taxes. They can afford better tax professionals, sift money into legal tax shelters, and ultimately come out on top. It makes me sick.

Now Warren argues that increasing taxes to individuals grossing more than $1million would create additional revenue for the U.S. without impacting their lifestyle. Agreed. He also argues that lower capital gains tax rates do not "increase investment," they merely give rich folks another tax break. He said, and I quote, "People invest to make money, and potential taxes have never scared them off." Agreed. He also argues that lower tax rates correlate to lower job creation. I'm not quite sure I get that one but because I love the man...AGREED.

Well two days later, guess who agreed he would be willing to pay higher taxes...THE DONALD. lol. Although he agreed he would pay higher taxes, he disagreed that Warren Buffet's philosophy will work. He argues (along with many economists) that increasing taxes on the rich will hugely affect the business climate. Wealthy businessmen will move to other countries (and take their businesses with them) to avoid the taxes. As we all know this would negatively affect the job market andddd ultimately be bad for everyone.

I get that philosophy but I wonder if THAT many wealthy businessmen would leave. I don't really think so. Lol It seems like such a hassle to pick up and do all of that just because you have to give the government $5 and you've got $5,000. But Donald says these folks are business machines, all they do is think money, and for them, that'd be enough. Of course no one is willing to call their bluff so alas we have this never ending argument on taxing the rich. Blah-se blah-se.

What do you all think?

Debt Ceiling Vote: This is getting ugly

As most of you have probably heard, there's this huge debt ceiling deal going on right now in Washington. Specifically, back in January we realized that the debt ceiling needed to be raised because by May 2011 the U.S. would pass the legal borrowing limit of $14.294 trillion (we passed it on May 16). A short term solution was to move some money around to pay our bills. But now...we need a long term solution...legislation to increase the debt ceiling. If this doesn't happen it would would be quite horrible for the U.S. economy and also possibly reduce the U.S.'s S&P credit rating. A reduction in the credit rating would mean that the U.S. would incur higher borrowing rates (because they'd seem like a less reliable borrower; it's pretty much the same thing as if your credit score dropped). The bad part for us is that if the U.S. incurs higher borrowing rates, that will mean higher borrowing rates for me and you. Here's where we will most likely be impacted:

1) Credit Card rates will increase - although most credit card rates are tied to the prime rate which probably won't increase, credit card companies may raise the margin rate tied to the prime rate. So instead of your interest being the prime rate + 10% you may be seeing new rates of the prime rate + 11 or 12%. The good thing I guess is that your credit card providers are required by law to let you know about any interest increases 45 days before the change.

2) Slightly higher mortgage rates - for anyone looking for a home right now, you may want to pay close attention to this. Although the rates may not raise more than 0.2%, no one wants a higher mortgage rate. For current homeowners, your rate wouldn't be impacted until it's reset.

3) Student loans may undergo even higher increases than currently planned - student loan rates are already scheduled to increase from 3.4 % to 6.8% for federal loans. This would become even higher if the debt ceiling legislation is not passed. And for private loans that could mean interest rates out of the WAZOO! We know how they will take you for everything you own.

4) Slightly  higher car loan rates - of course as soon as car financiers feel the pinch of the increased loan rates they will pass it on to consumers. This increase is thought to only be about 1% though which does not make a huge dent in a car payment. It is still something to keep in mind if you're in the market for a new car.

5) Money market and savings account returns see NOTHING - unfortunately the current returns on your savings and money market accounts will stay the same. Yes, we'll have to pay more interest but they won't have to pay us anything extra. Just the way the cookie crumbles.

6) Investment portfolios - this is going to be something you'll want to watch closely as it will have all sorts of impacts if this legislation doesn't pass. For one, people will start to sell their stocks and bonds, decreasing stock prices. Corporate earnings will fall as interest rates on corporate debt increases and in turn make investment in companies look less attractive - another hit to the stock market. Lastly we'll also be hit by a loss of confidence in investments and any impact to our current economic environment, especially anything portraying it as more uncertain will negatively impact stocks and bonds.

Now why can't Congress get this done:

As always, Congress can't agree on anything! The House refuses to pass a debt ceiling bill that won't cut enough spending. Obama has vowed to veto any bill that only extends the debt ceiling in the short term. The Republicans are threatening to filibuster. There's all of kinds of disfunctionality going on here. And the worst part is...if this doesn't get solved by tomorrow, August 2nd...the U.S. is officially BROKE. And you can prepare for your grandparents, great aunts and uncles to not receive their social security checks until the U.S. gets some money to pay its bills.

Lord have mercy. 

Take a look at the actual budget amendment bill here