On Wednesday 10 July 2002 09:55, Trei, Peter wrote:
So, to the subject of the original question: I don't think taking up US citizenship, then retiring abroad, makes a hell of a lot of sense from a tax point of view, unless the Social Security payments are important...
I wouldn't figure SS payments into my calculations unless I were to retire in the next few years. As the SS crunch looms nearer, watch for payments to people outside the US to go on the chopping block. Not that I expect to get anything from SS myself regardless of whether I stay in the US. 29 years until retirement, even if the age isn't pushed back again. SRF -- Steve Furlong Computer Condottiere Have GNU, Will Travel Vote Idiotarian --- it's easier than thinking
On Thursday, July 11, 2002, at 08:09 AM, Steve Furlong wrote:
On Wednesday 10 July 2002 09:55, Trei, Peter wrote:
So, to the subject of the original question: I don't think taking up US citizenship, then retiring abroad, makes a hell of a lot of sense from a tax point of view, unless the Social Security payments are important...
I wouldn't figure SS payments into my calculations unless I were to retire in the next few years. As the SS crunch looms nearer, watch for payments to people outside the US to go on the chopping block.
Not that I expect to get anything from SS myself regardless of whether I stay in the US. 29 years until retirement, even if the age isn't pushed back again.
As everyone should know by now, and probably does, the Social Security scheme in the U.S. is nothing more than a large Ponzi scheme. Payroll taxes, amounting to about 15% of income up to some level (ratcheted upwards every few years), go straight into the General Fund, where the 34%-39% top tax rate funds and all of the other taxes go into. The General Fund (not its official name...it may not have one) issues the SS Geheimstatssecuritatwelfarefund an "IOU" for the trillions owed by the General Fund to the SS G. Those IOUs are not even computed as part of the national debt. (!!) Talk about using Enron accounting! The national debt is now estimated to be around $5 trillion, or about $67,000 per family. But this figure fails to account for two very important additional indebtednesses: first, the SS IOUs, and second, the "unsecured liabilities" that the U.S.G. has taken on due to 50 years of legislation. These unsecured liabilities include the rising pensions costs of our enormous military forces (no separate fund established), the loan guarantees to hundreds of unions and private retirement funds, and vast amounts of indebtedness for "guarantees" made to other nations, other organizations. A friend of mine was an insurance industry expert. Some years ago he showed me the calculations of what the _actual_ indebtedness of the U.S. government is, based on accepted, standard accounting practices (as opposed to the Ponzi scheme accounting practices most governments use). Based on legal, contractual agreements, the national debt at the time he showed me the figures (circa 1990) was $20 trillion ($20 x 10^12). Dividing by about 100 million households in the U.S., this is $200,000 per household. This of course exceeds by a wide margin the entire asset value of most households. We owe more than we have. Which is typical of situations where people pay, as but one example, to have young black girls living in their own places with no job and no husband, just watching "Oprah" and having more babies and with the costs of this destructive nonproductiveness paid for the Ponzi way: "Just put it on my credit card!" Or when $9 billion a year is given to Israel/Egypt (we give Israel $5 billion a year to keep their economy and their stalags running, so we cut a deal with Sadat to give almost as much to Egypt to keep their Swiss bank accounts filling up), we pay for it by just saying "Charge it!" Charge it...some future generation will pay. Our political system is set up to avoid hard decisions and simply to push tough decisions further out into the future. This is why more than $20 trillion is now part of our legal obligation. (BTW, the old chestnut that "we just owe it to ourselves, so what's the big deal" doesn't fly. For lots of reasons I'm sure intelligent folks can figure out.) Things get much, much worse when we look at the retirement of the Baby Boomers, the leading edge of which is set to start collecting SS and other benefits in about 6-7 years (not counting folks who retired early). The full impact of this wave will hit around 2020, when things get really squirrelly. (Things could get squirrelly even earlier, should high interest rates come back. The offiicial national debt of $5-6 trillion is quite a bit higher than the ND was in the early 80s, when 14% interest rates were a real problem. If we see 10-15% rates again, with a national debt of $6 trillion, it'll be "Katie, bar the door!") Much of the income of the high earners, the productive engineers and others who make up for the Doritos-eating welfare breeders, is already taxed doubly or even triply. (No time for a rant, but corporate earnings are taxed at 40-50%, when corporate income taxes and payroll and other taxes are added up, then the dividends and capital gains paid out are taxed _again_ at 30-40%. And then there are the property taxes, the school taxes, the energy taxes, the sales taxes, and all the rest. In about 15-18 years things are going to get real ugly in this country. Each high worth taxpayer (a subset of those estimated 100 million taxpaying households, most of whom pay much less in taxes than high worth taxpayers do) will have as his share of the national debt something like $800,000 (by my calculations, admittedly iffy). This is the lump sum they would have to pay to pay the credit card bills, not even counting the 50% tax rates on their current incomes to fund current Ponzi payments. Any way we cut it, America has been "charging it" for too long, with too many handouts to foreigners to buy their loyalty, with too many incentives for people to "go on disability" or "accept 80% early retirement" or just sit at home and breed. What we haven't paid for with cumulative taxes approaching 70% of real earnings (ask me for details of my situation sometime), we have simply charged on our credit card. The chickens will come home to roost. Just as the biggest companies, like Enron, K-Mart, Worldcom, are now the biggest bankruptcies in history, I see the odds as pretty good that the U.S. will effectively default on the promises it has made that it cannot possibly keep. The U.S. empire may go down in history as the largest financial collapse ever. --Tim May, Citizen-unit of of the once free United States " The tree of liberty must be refreshed from time to time with the blood of patriots & tyrants. "--Thomas Jefferson, 1787
On Thursday 11 July 2002 13:32, Tim May wrote: (Regarding SS and other USG liabilities)
Charge it...some future generation will pay.
I hope not. Addressing only the SS issue and not other USG debt, I'm attempting to organize a nation-wide grassroots movement. On a to-be-announced "F-day", every member of the movement will kill a designated old fart, one who has long since taken back out of SS anything s/he put into the system and is now subsisting solely on SS checks and other welfare. Bonus points for killing an old fart who has taken much more out of the system than he put in and yet was loudly agitating for an increase in benefits to help "the greatest generation, who gave so much for their country". Old farts who are still working or who are living on saved assets are exempt. I'd prefer a system which simply cut off benefits once a person's own "contributions" had been exhausted (sort of like, you know, a personal retirement account) but that seems to be a non-option. (I'd _really_ prefer a system where each person was responsible for his own late-life well-being, but that kind of talk just gets you thrown in the loony bin these days.) Anyone interested in the F-day movement might also be interested in L-day (for lawyers) and CP-day (for career politicians). Web sites forthcoming. SRF -- Steve Furlong Computer Condottiere Have GNU, Will Travel Vote Idiotarian --- it's easier than thinking
Tim describes how US national debt may be as high as US$200k / household. Now some interesting question related questions are: - who is that debt owed to? - what proportion of current year US tax revenues go to service that debt? some of the debt may not be being serviced (no interest paid and just left to increase -- eg pensions etc, but this just makes the problem worse as the future debt will grow faster with no interest paid). Some completely back of the envelope calculation: if the average US household has an annual income of US$50k, and the interest rate on the US national debt is 5%, that interest payments represent 20% of the average US households gross income. But isn't 20% fairly close to what the average household's direct tax rate? How close is the US to reaching a standstill where 100% of collectible tax revenue goes to fund debt service, and all current spending comes from increased future debt? Adam
On Friday, July 12, 2002, at 12:13 PM, Adam Back wrote:
Tim describes how US national debt may be as high as US$200k / household.
Now some interesting question related questions are:
- who is that debt owed to?
A partial list (not in any particular order, especially not necessarily in order of amount of overall indebtness): * holders of U.S. Treasury bonds, T-bills, and other U.S. Treasury-backed instruments * pensions for government employees (other than the parts of government which opted out, a provision not offered to any non-government folks!). Notably, military pensions, which have been getting more and more lucrative. * the "default fraction" (estimated) of loan guarantees and loan insurance for programs like the Student Loan Guaranty program, mortgages for vets and other favored persons, etc. (Note that we are _not_ including the overall loan amount, only the fraction that is very likely to be a debt to the government...actuarial and risk assessors have pretty good models.) (By the way, as an aside, this practice of co-signing for a loan, of agreeing to be the repayer of last resort, is humorously called "suicide with a fountain pen.") * Social Security. A massive overhang, not carried on the books. * promises made to other governments to keep their coffers full in exchange for siding with the U.S., or not blowing up as many of our airliners, or not launching rusting nukes at us, or not sending millions of immigrants to our shores (These promises could in fact be broken. And they should be. The U.S. should pull its troops out of Europe--57 years after the end of WW II--and out of South Korea and of course out of the Mideast. Israel, Egypt, Jordan, and all of the other basket cases should be cut off. If Jews in America want to keep bailing out Israel's economy, fine. But none of my money or anyone else's should be coerced out of them.)
- what proportion of current year US tax revenues go to service that debt?
Between 20 and 35 %, depending on the cost of money, smoothed over several years. This is only for the officially counted part of the debt.
some of the debt may not be being serviced (no interest paid and just left to increase -- eg pensions etc, but this just makes the problem worse as the future debt will grow faster with no interest paid).
This is the same reason to vote against _most_ bond issues. While there are legitimate uses of debt, and for spreading repayments over the useful lifetime of a school, prison, or whatever, too often a bond issue is advertised as not costing the taxpayer. This results in building that is not needed, or in outright fraud. (As in many countries, where bonds and lotteries are set up to build nuclear reactors in the jungle that are never really intended to be started up.)
Some completely back of the envelope calculation: if the average US household has an annual income of US$50k, and the interest rate on the US national debt is 5%, that interest payments represent 20% of the average US households gross income. But isn't 20% fairly close to what the average household's direct tax rate?
Don't forget corporate taxes. The official national debt is $67K per household (100 million households). 5% of that is $3350, which is about 6.7% of the $50K per year figure you cite. Which is about 33% of the 20% tax figure you cite. If one computes the _true_ national debt, the one I talked about, then the numbers are roughly as you describe. The actual national debt is as if every household were paying for a second $200K house on top of the one they now live in or rent. (And despite the figures on current home prices, which are at the margin, the average household does not pay for a $200K mortgage.) Looking at the demographics of the work force, as the "pig in the python" of the Boomers move into retirement, their earning contribution to income taxes will drop sharply. Will it be made up by having skilled younger people, Hispanics, Taiwanese, Indians, etc. paying these costs? Personally, I doubt it. I don't think the 20-year-old kids of today are going to have the job skills to make the backbreaking payments necessary. Nor should they. Why should they be indentured servants to a generation which just said "Charge it!"
How close is the US to reaching a standstill where 100% of collectible tax revenue goes to fund debt service, and all current spending comes from increased future debt?
If unfunded liabilities are counted, which they should be, we are approaching that point now. (By not counting them, we are setting up a future where those 20-year-olds are paying 80% of their income in taxes. I don't think that's viable, for multiple reasons.) By the way, there are already many countries in the world already in the situation where all of the tax revenues go into servicing the national debt, and where that debt is still compounding annually. --Tim May "How we burned in the prison camps later thinking: What would things have been like if every security operative, when he went out at night to make an arrest, had been uncertain whether he would return alive?" --Alexander Solzhenitzyn, Gulag Archipelago
- who is that debt owed to?
You never, ever, collect debt from one that has a bigger gun than you do. 'debt' as a notion has meaning only between equal parties. Everything's OK and taken care for, no need for panic or doomsday predictions. ===== end (of original message) Y-a*h*o-o (yes, they scan for this) spam follows: Sign up for SBC Yahoo! Dial - First Month Free http://sbc.yahoo.com
- who is that debt owed to?
You never, ever, collect debt from one that has a bigger gun than you do. 'debt' as a notion has meaning only between equal parties. Everything's OK and taken care for, no need for panic or doomsday predictions. ===== end (of original message) Y-a*h*o-o (yes, they scan for this) spam follows: Sign up for SBC Yahoo! Dial - First Month Free http://sbc.yahoo.com
Bear in mind that the holders of US debts do not want the debts paid, only the interest, and in fact want both to increase as they have consistently since the US government went into hock. A prime reason holders of US debt fear other countries defaulting on their debt is that that might become a promising political campaign in the US where debt of all kinds are glorified and where unpaid debts are the greatest sins so long as the debts are owed by the USG and credit card, family home and car, debtors. Gigantic debts by well to do are signs of accomplishment and no wealthy person wants to be large-debt-free. Instead what is wanted is a top-notch credit rating, that is desirable to be an debtor who can call for whatever is needed at the moment without expending the small amount of cash on hand, which is called pocket change. The biggest debtors are the super rich, and their combined debts exceed that of the US Government. Such debts are customarily called investments purchased with borrowed money or other forms of investments. These superwealthy schemes based on superimpositions are very large Ponzi schemes, nearly all of which rely up government underwriting either by permissable law or by assurance of bail-out -- not surprisingly as a last resort to claim national security is at stake, or even less surprising, require war to thin the complainers of small debts and to boost war industry replenishment of large fortunes. Nothing peculiar about the US doing this, for it is what governments were invented for: to assure continued well-being for the favored while promising a chicken in every for the starving and promising as well that the starving must work for the chicken freely stolen by the wealthy. Capitalism didn't begin this dreadful state of affairs, it merely copied more brazen versions and cloaked its intentions with simulated democracy, sometimes smirkingly called free market forces by its beneficiaries. Getting the small debtors to lust after Wall Street is nothing compared to getting them drunk with patriotism so they'll send their idiot off-spring to kill those hungry like themselves while George slurps Hagen-Daas from Condi's navel. The key to success is getting the really smart hungry people to feed your mind and gut and wipe your ass while believing like national security teams they are really in charge. How do you do that? The successful claim it was hard work and luck, and anyone can do it. Haw. Haw. Haw.
On Friday, July 12, 2002, at 04:16 PM, John Young wrote:
Bear in mind that the holders of US debts do not want the debts paid, only the interest, and in fact want both to increase as they have consistently since the US government went into hock.
Most such debts have finite lifetimes. For example, the 10-year Treasury note, which is currently the de facto standard. At the end of 10 years, it's done with, period. The principal is repaid (unless the debt was of the kind that pays an interest rate and a principal reduction part). Now the debt holders may well buy other instruments, and usually do, but it isn't an especially accurate or useful model to say "holders of US debts paid, only the interest."
Gigantic debts by well to do are signs of accomplishment and no wealthy person wants to be large-debt-free.
I know many wealth people, and this is not so. (*) Most of them have no significant large debts. Many of them have mortgages on houses, because of the way the IRS subsidizes mortgages over other kinds of debts. "Net worth" is this: assets minus debts. This is why "high net worth individuals" are so characterized. (* The high net worth individuals I know range from people with several billion in assets, down to tens of millions (I believe, but most don't say publically or to me), and on down to the few millions or less.)
The biggest debtors are the super rich, and their combined debts exceed that of the US Government. Such debts are customarily called investments purchased with borrowed money or other forms of investments.
Current margin requirements are about 50%. When stocks or other assets drop, margin calls result. Bernie Ebbers got a big one a year or two ago on Worldcom. I've known folks who have gotten margin calls, and it isn't pretty. Most folks I know, the wealthy ones, tend to keep their margin debts at a small fraction of the allowable maximum. --Tim May, Occupied America "They that give up essential liberty to obtain a little temporary safety deserve neither liberty nor safety." -- Benjamin Franklin, 1759.
participants (5)
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Adam Back -
John Young -
Morlock Elloi -
Steve Furlong -
Tim May