Updated on 10.16.11

Reader Mailbag: Occupation

Trent Hamm

What’s inside? Here are the questions answered in today’s reader mailbag, boiled down to five word summaries. Click on the number to jump straight down to the question.
1. Student making ends meet
2. Roth and regular 401(k)s
3. Difficult career choice
4. Does frugality hurt the economy?
5. File or shred?
6. When should we combine finances?
7. Cost basis choice
8. Buying things and fulfillment
9. Budgeting challenges
10. Selling The Simple Dollar

A lot of people have written me in the last week asking me what I think of the Occupy Wall Street movement and other similar events.

My opinion of it is not too different than my opinion of the Tea Party movement. It’s great to see people politically involved. I think that both have some worthwhile things to say. I think that both are often undermined by the more extreme end of the people involved. I’m a bit distrustful of the people who are organizing these events, both Tea Party rallies and Occupy events.

Most importantly, I think what they’re both saying comes from the same essential source of frustration and unhappiness, and both sides would benefit by sitting down together, figuring out what issues they both support (and there are more than you might think), and fighting for those issues, because if you put the political muscle of both groups together, that would be a tremendous force.

Q1: Student making ends meet
I’m a graduate student getting my PhD in public health. By the time I get out, I’ll probably have 80k in student loan debt. I have two credit cards that have probably a total of $6500 on them (some of which is undergraduate tuition from when I was young and stupid). I have a car debt of 7k. It’s a lot of debt. It freaks me out at how much debt it is, so I try not to think about it. I don’t know what’s going to happen in terms of paying things off, but I guess my question is more of how to become more frugal with my current lifestyle so that it doesn’t get any worse than it has to be.

I currently work 20 hours per week at a cancer institute. It doesn’t pay a lot of money, but it has a 50% tuition benefit for my school, which helps, and my boss is the most amazing mentor I could have ever asked for. I also pick up work here and there doing patient simulation for med and nursing students. I make about $1200 a month, and supplement that with about $500 per month of student loans so that I can pay my bills and buy food for me and my dog.

I would consider myself pretty frugal in most areas except for food. I buy clothes at thrift and discount stores, I like activities that don’t cost money like hiking and running, and I try to keep my expenses relatively low. Food is difficult for me. I’m recovering from an eating disorder and food is a tricky subject full of a lot of emotions that I’m trying to navigate better. I need to eat out less, but since I feel extremely poor all the time, I justify food as needed outlets for socialization, stress reduction, and because it takes less time from my already crazy life of school and work than preparing 3 meals. Regardless of the justifications, I want to get better at eating in, but at this point, more frugality feels like such pinching, it gets to me mentally and I end up spending money just to alleviate the feeling of deprivation.

With my schedule and the demands on my time, it’s not feasible for me to work more or to find a second job. Other than the food, I’m already pretty budget friendly, and don’t really know where to get better. I guess I just feel depressed about it because when I read the readers in your mailbag, they all seem so much further ahead in their financial fitness than I do, I feel overwhelmed. I don’t have a 401k, my emergency savings is student loan-based, I can’t seem to feel like I’m making progress. Any suggestions you have, or perspectives, would be much appreciated.
– Anna

There are two words in your note that stand out from everything else – “graduate student.” That statement alone implies a minimal income and a lot of time absorbed into your studies, which aren’t paying off in terms of dollars and cents right now.

Ideally, they will. The biggest reason to get an advanced degree is to improve one’s earning potential, right? Well, the years spent in your studies for such a degree are themselves an investment. You are foregoing income right now for increased income later on.

In other words, if you’re living frugally as a graduate student, I really wouldn’t worry about the other stuff. Focus instead on getting that degree and building the connections you’ll need for your post-degree career path. That’s when you’ll start seeing the proceeds from this hard work and that’s when you can focus on things like retirement plans and so on.

Q2: Roth and regular 401(k)s
My employer offers a regular 401k and a Roth 401k. I currently contribute to both (6% and 2% respectively). My employer contributes 4% as well. Being in the 25% tax bracket, should I lower my contributions to the regular 401k in favor of the Roth 401k, with the thought that taxes will go up in the future? Also, since I have a Roth 401k, do I really need a Roth IRA now? I don’t see the advantage of having both currently. I’m paying off student loans and I don’t make enough to max out the 401k let alone an IRA. If I were to switch to a different job that didn’t provide a Roth 401k, I could roll it over into a Roth IRA at that time. Regarding the forced distributions at age 70, that’s 39 years down the road for me so I’m not concerned about that either and I would assume I could roll the Roth 401k into a Roth IRA at that time anyway. Is there an advantage to having a Roth IRA that I’m missing?

– Jeff

Choosing between a Roth 401(k) and a regular 401(k) is essentially a choice based on, as you say, where you think tax rates are going in the future. If you think they’re going to go up for your income level, then the Roth is the better choice.

As to whether you need an additional Roth IRA beyond these things, it really depends on your overall picture. If you’re saving 15% of your salary for retirement in your Roth 401(k), you probably don’t need it.

There’s no reason not to diversify a little, though, to hedge your bets when it comes to taxes, but if I were you, I’d be putting more into the Roth 401(k) than the regular one.

Q3: Difficult career choice
I am 33, newly married, no children, owner of a condo with 29 years to go and have a 6 figure salary with great benefits as a graphic designer. Lately I’ve been struggling with the fact that I have been working in this same field for 10 years and I’m yearning for more. I feel like it’s now or never to take the leap or else I am just going to stay in this field. I have been dabbling as a makeup artist for the past 2 years and have been doing great shoots for major companies which allows me to make an extra income but not consistently due to me having full time. Recently I got asked if I want to be a key assistant for a makeup artist in an agency. From the artist, I can learn more and be on set as his #1 assistant whenever he gets booked. It’s hard work, on foot all the time, early call times and basically I am the bottom feeder starting from zero. I will be quitting my secure full time job to a freelancer life, basically relying on the makeup artist’s job flow as well as hussling myself for jobs. My husband has a job but I make more at this point but if I do quit, I can get on his insurance. I do want babies soon but I’ll have to wait if I do the MUA atleast for 3 years. I do have over 8 months of emergency fund, and I will be staying till I get my bonus next year which will be a good chunk. Is this unrealistic? Should I not just go for it to see if I will succeed in that field? If I crash and burn, I can always go back to my graphic design field if anyone is hiring but I am scared I am jepordizingmy future for myself and for my future kids. Steve Jobs’ Stanford speech hit me hard.

– Richard

Life is too short to spend it in a career path you’re unhappy with, and money isn’t the ultimate answer to everything.

Sit down and figure out if you can financially make this move. What would you have to change in your lives to make this work? Is that realistic?

If it is, go for it. If you don’t, you’ll find yourself regretting this opportunity for a very long time.

Q4: Does frugality hurt the economy?
I am writing to get your opinion on something that I’ve been thinking about for a few weeks now. I used to go out every week and pick up at least 5-6 new dvds, video games, comic books, etc. to the point where I couldn’t even keep up with using them. I remember you making a post about the fullfillment curve. I’d say I was somewhere around a 6. I also used to go out to eat 2 or 3 times a week.

In the past year, I’ve switched jobs, and am now making a little over double what I was at my last job. I have also cut way back on my spending. I’d say in the past year, I’ve bought maybe 4 new things, total. I rarely go out to eat, and I also bring my own lunch to work. I’ve been living as frugally as possible and saving all of my money.

Here’s the question though: Aren’t my actions having a negative impact on the economy?
– Adam

No. You’re just putting your money into a different place.

For example, if you’re bringing your lunch to work instead of eating out, you’re putting more money into the grocery store and less money into restaurants.

If you’re finding yourself with more money at the end of the month, you’re probably doing something with it. For example, if you’re keeping it in a savings account, you’re helping capitalize the bank that it’s deposited with. Even if you’re burying it in a jar in your backyard, you’re removing money from the supply and helping to curb inflation.

Your choices are not hurting the economy at all. Whether they’re helping the economy is a different discussion, but I don’t think they’re hurting the economy one bit.

Q5: File or shred?
I try to reduce as much clutter as possible in my life but one of those things I get stuck on when managing personal finance is quite characteristic of those of us born in the 20th century with 20th century parents and living in a 21st century world. The question is this: is there any merit to saving paper copies of bills that various loan and utility companies send even though I pay them all online? I’ve requested most to be paper free but some still send me them and I feel too paranoid like what if I need it at some point to throw them away? Should I start a time consuming filing system them or shred?

– Jenny

I still keep a year or two of any printed bills that I receive, just in case an issue comes up. I store such bills in a “2011” folder box. At the end of the year, I’ll put it into storage and chuck the “2009” box.

I don’t really worry about organization within those boxes. I just focus on making sure all the bills are actually in the box where they belong.

It’s a decent system. The only use I’ve found for it, though, is when I’ve been trying to figure out whether I’ve improved things year over year in terms of energy improvements and the like.

Q6: When should we combine finances?
My boyfriend and I have started to go through your 31 steps and think they can help us get on the road to being financially secure. The question I have is this: since we’ll be working as a couple, is there a point where we should be combining our goals & either planning for them together or prioritizing them or something?

– Lily

The point at which you should start combining goals is the point at which you’ve started combining your lives, which it sounds like you have.

Is this a long term committed relationship? Do you anticipate being together for the long haul and making this relationship legally and/or religiously binding?

If the answer there is yes, then you should be combining your goals. If you hesitate, then you have another question to think about before asking yourself about combining goals.

Q7: Cost basis choice
Today I received a letter from a mutual fund company telling me that I need to choose a Cost Basis Method to meet an IRS requirement. I honestly have no idea which one to pick; is one better than the others, overall, or is it really dependent on each individual investor? My choices are: First In First Out, Last In First out, High Cost First Out, Low Cost First Out, Loss/Gain Utilization, Specific Lot ID, and Average Cost. My funds default method is Average Cost.

– Richard

It’s dependent on each individual investor, but for most investors, it doesn’t make a huge difference.

The only situation where it would make a difference is if you’re wanting to minimize taxes one year in exchange for more taxable income in another year. This might happen if your income is widely variable. For example, I might want to choose “High Cost First Out” for my investments because I’d be likely to make a partial withdrawal during a year when my income was low, so a capital loss might be a big help on my taxes that year.

For most people, all of this is very hard to predict, so unless you have a lot of money tied up here, I’d stick with the “average cost” basis.

Q8: Buying things and fulfillment
I was curious whether you think that there are actually people out there who are truly fulfilled with owning the yacht/porsche/fine cigars/fine wines/dining out/more jewelry/huge house/servants? My sister lives in Hong Kong and has quite a few friends who got relocated to Dubai for work. She told me that her friends have told her “Dubai is SOOO cheap! Porsches are SO cheap!” and these friends are capable of living “very well” while not being extremely high paid (they are not CEOs).

That just got me thinking, “But are they really happy, and why do I always want to insist that materialistic people cannot be happy?” What do you think? Can a materialistic person be happy, and if not, why not? Why is reading a library book so darned great? why is it that it’s the “free walk on a trail or park” or “working in one’s garden” that brings happiness, and not really the 54” flatscreen TV? And if it’s really that darned simple, why do so many people not realize it? I never hear about my friends of friends who live simply or decided to live simply (I do read about it online, true); I only hear about friends of friends who “got that promotion” or somebody who is “thinking about buying a boat/porsche/joining a golf club.”
– Jeff

I know that there are people out there who get at least some degree of fulfillment from material purchases. Their lives are, in large part, based around keeping up with or keeping ahead of the people on their block. They really want to be seen as very affluent people – they get a lot of fulfillment from that and they’re willing to spend money for it.

The problem is that it’s never sustainable. There’s always someone new to compete with. There’s always someone with more money than you. There’s always someone that has something better than you. If you tie your fulfillment into this type of competition, it becomes a never-ending money pit and one that you can never consistently win.

The best fulfillment is one that comes from within. It doesn’t have to be sustainable because it’s tied directly to what you choose, not what other people do.

Q9: Budgeting challenges
I just finished graduate school and started my first job. I make $165,000 per year and after paying my rent and a loan from my employer, I have around $5000/month left. Starting in January I will begin contributing $6,000 a semester towards my younger brother’s education. I have around $50,000 in student loans (at 6.8% with a minimum payment of $400/month) and $21,000 in credit card debt. About $14,000 of that is charged interest and the rest is interest free until next September. I already have $3,000 set aside as an emergency/tuition fund (so when I pay his tuition in January, I’ll no longer have an emergency fund).

My current plan is to save $1,000/month for my brother’s tuition, make minimum payments on my student loans, pay down my credit cards as fast as I can ($500-$1000/month), and put off contributing to my 401k (which my employer does not match) until the end of next year when I’m out of credit card debt. Is this the right plan? The other problem I’m having is that I’m terrified of not having cash in the bank, so I’m leaning heavily on my zero-interest credit card (and making minimum payments) instead of paying with cash. I’m worried that after working so hard to pay down the interest-accruing cards, I’m going to be in the same situation next year with the zero-interest card. Any advice?
– Monica

This sounds like the best plan given your situation and constraints. Unfortunately, you’re correct in that by the time you get the other obstacles out of your financial path, that zero interest credit card is going to raise its ugly head.

My solution, honestly, would be to move that zero-interest balance around to other zero-interest offers over the next year or two until you can start to eliminate it. The reason for this isn’t to keep you from having to pay it, but to keep you from having to pay a lot of interest.

Until you’ve eliminated all of that credit card debt, though, I’d keep living reasonably lean and I’d focus on getting rid of that debt as rapidly as I could, focusing on the highest interest debt as the top priority.

Q10: Selling The Simple Dollar
Have you ever considered selling the site? I know that other blogs with similar levels of popularity to yours have sold for very nice money in the recent past.

– Shane

I’ve considered selling the site mostly because the elements I don’t like about running The Simple Dollar (talking to advertisers, doing server work, etc.) are the ones that a new owner would have to deal with, not me.

If I could come up with the right deal that simply left me alone to do what I enjoy doing – which is to write – I’d strongly consider it.

I’d want to keep writing about personal finance, of course, either as a hired writer or by starting a new site.

Got any questions? Email them to me or leave them in the comments and I’ll attempt to answer them in a future mailbag (which, by way of full disclosure, may also get re-posted on other websites that pick up my blog). However, I do receive hundreds of questions per week, so I may not necessarily be able to answer yours.

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  1. Finance Nerd says:

    @Q2 — One thing to consider — the 4% employer match is put into the equivalent of a Traditional IRA, because they can’t put the match into a Roth vehicle, at least not yet. So you are effectively putting 10% into traditional, and 2% into Roth.

    If you are concerned about your tax rate being higher when you retire, putting more into the Roth would make sense. Remember to consider the sum of your contributions AND the matching when thinking this through. If you switched the amounts, you would be putting 6% into each, although this would cost you some money out of pocket today, since you can’t deduct the Roth contributions.

    I do agree with Trent, if you aren’t maxing out the 401(k), there is little reason to separately do an IRA.

  2. Katie says:

    Please, do tell us what issues they both support and how working towards those issues will allow both movements to actually accomplish their core goals.

  3. Finance Nerd says:

    @Q5 — for utilities, I only keep the most recent, or maybe the most recent 2 or 3. Any payment you make on a utility should be reflected on the next statement, so as long as the balance is right, I can think of no great reason to hold on to older ones.

  4. Finance Nerd says:

    @Q7 — I would consider specific lot ID, because it effectively lets you do all of the other ones on ad hoc basis as needed.

    For example, if you have some losses elsewhere, and want to take gains to offset them, you could select a low cost lot for that sale. In a different year, if you need some losses to offset gains, you could select a high cost lot.

    Most people probably won’t hassle with all of the details, so average cost is fine for most. But if you do want to do something different, I think specific lot gives you the most flexibility.

  5. AnnJo says:

    @Q7, I agree with Finance Nerd. Specific lot ID allows you to choose which shares you are selling at the time of the sale, so if you are selling during a year in which you have other capital gains income, you can choose a lot where you’ve sustained a loss, and vice versa. Before you choose that route, check your online account info and/or with your broker to make sure it’s not too cumbersome to identify your lots. With my broker it’s easy, but I’m not sure if that’s true for all of them. Obviously, if your investment is small, it’s not worth the hassle; just go with average cost in that case.

  6. Michele says:

    The only paper bills I keep are the ones necessary for tax purposes…and those I keep for 7 years. Everything else is shredded and either tossed or composted.

  7. valleycat1 says:

    Q8 – Trent is correct that fulfillment comes from within, but I disagree with his continued tying that to the amount of material goods one possesses & his assertion that anyone who’s got a lot of stuff is totally materialistic and always striving for more and will never truly be content.

    As one high profile example, it appears that Bill & Melinda Gates are quite happy and have found a good balance between enjoying the fruits of his efforts with no apology and giving back to the world through their Foundation.

  8. mjd says:

    @Q2: Another thing to consider is what you expect your income to be in retirement. I don’t expect our income to be anywhere near as high as it is now (we make good money now, but got a late start), so I fully expect to be in a couple of tax brackets lower when we finally retire. Even if taxes do go up I expect the percentage we’ll be paying will be less.

    Just another factor to think about. :-)

  9. John says:

    While obscure, if you ever need to prove a past address at a certain time frame for unclaimed funds… it is nice to have a utility bill or two around going back several years. Most states require that you prove the address they have on file for the lost money. If you forgot about $100 at a bank in college in 1994, it would pay to have something showing that address. :)

  10. Steven says:

    Q8) You see, Trent, you just keep using the analogy that people who spend money are only doing so as a way of competing with other people. That’s wrong. Sure, there are a lot of people who are buying for the purpose of fitting in or keeping up, but there are also people who just buy what they want because they can afford it.

    I’ll tell you something. If I could afford a Porsche, I’d have one. If I could afford designer clothes, I’d have them. If I could afford nights out on the town, I’d be doing it. If a person can afford these things, why wouldn’t they want to have them?

    Just because you don’t personally find value or enjoyment in these things doesn’t mean other people don’t. When I’m out clothes shopping (like I was yesterday) I’m not thinking about anything other than whether or not what I’m buying looks good on me, and if it’ll be something I get a lot of use from. Even if it happens to be an expensive sweater like the one I ended up buying, I have my doubts that anyone really cares how much it cost. If it looks terrible, how expensive it was doesn’t really matter.

    I’m not exactly sure where I’m going with this story, but from where I’m sitting (my gf says I have expensive taste), I spend a lot of money on certain things because I like nice things. I don’t like nice things because of what other people think, but because they’re better quality, last longer, get more use than something cheap, and isn’t as well made, etc.

    The assumption you continue to make about people who spend their money on things you don’t value as being in a constant competition with their neighbors is wrong. Some people just like nice things, and find satisfaction in quality.

  11. Courtney20 says:

    Q3: I read “I am 33……I do want babies soon” and was going to tell you to make the career choice that puts you in the best spot for that as soon as possible. And then I saw the name at the end of the question is Richard. So, if that’s not a typographical error, then I’d say go for the makeup job – it sounds like it will make you happier, and you are not fighting a biological clock like I presumed from earlier in the question.

  12. Andrew says:

    Trent–there is so much that is wrong about your answer to Q. 4–“does frugality hurt the economy” –that I am at a loss as to where to start.

    Just look up “consumer demand” or better yet, take a course in macroeconomics.

  13. valleycat1 says:

    Q8 – I would also add that it doesn’t really matter to me whether other people who have a lot of stuff are happy or not, or in debt to their eyeballs or not. I’ve made peace with myself about what I’ve got and what I make and how I spend my money and what my debt level may be.

  14. Adam P says:

    Trent, your answer to Q8 is so full of generalities and judgement that it’s really off putting.

    We ALL get that you do not value expensive clothes, cars (unless it’s a new Prius then you break all your rules to get it and justify it), and luxuries in general.

    But please STOP insisting that every person/majority of persons who does get fulfillment and joy out of luxuries are just spending money because they want to keep up with the Joneses.

    Internal fulfillment rather than buying something to keep up with your neighbors (or what have you) is a great thought.

    Judging everyone who buys a Porsche as doing it to look rich rather than because they possibly love to drive a German sports car is AWFUL. Please. Stop. Doing. It.

  15. Johanna says:

    Q8: Trent, you’re still saving for your dream house in the country, aren’t you? That’s a material purchase. Are you planning on making that purchase because you want people to think of you as an affluent person with a house in the country, or because living in a house in the country is something that you’ll enjoy?

  16. Johanna says:

    Q2: Allow me to do my imitation of a broken record: If you’re paying more than $0 in income taxes right now, it’s almost always a good idea to have a big chunk of your retirement savings in a non-Roth retirement account. This is true even if you think “taxes will go up.”

    Also: I’m surprised to see no mention of the main advantage of an IRA over a 401(k), which is the broader range of investment options. But if you’re happy with the options available to you with the 401(k), there’s no reason not to stick with that.

  17. Finance Nerd says:

    @ #16 —

    Can you please clarify your first paragraph? Are you talking about hedging your bets, or something different?

    As to your second paragraph, you are right, and I should have included that in my response as well. If the OP does not like the investment options, he should consider maxing out the IRA instead, and then put the rest that he can afford into the company one, assuming this lets him take full advantage of the match, and subject to the splitting between traditional and Roth I already described.

  18. Johanna says:

    @#17: I’m talking about the same thing I always talk about every time this question comes up: Not wasting your standard deduction, personal exemption, and any tax brackets that are lower than your marginal rate is now.

  19. kristine says:

    Adam. I agree. My daughter has been going with a boy for a couple fo years- they have a mansion, a few cars (porches and other delights), a private golf course, wooded trails, volleybal court, pool, and entertainmnet studio. Because they can afford it, and enjoy it. We rent, have two 10+ year old cars, are teachers and live a very modest life. Yet when we are at PTA meetings together (we are in the same school district), or talking about our kids- there is little to no difference between us. They are gracious, and grateful for what they have, and host a lot of the teenage parties. Their house is the “happening spot”. But their son will come and hang out with us in our no AC or cold home, and watch the 13inch TV with my daughter, and make cupcakes. They are so wealthy, that they have no need at all to try and keep up with anyone. I do not judge them, and they do not judge us- we have mutual respect for our concientious parenting and different life choices-that we have each found fulfilling and in line with our values. I used to be prejudiced against the rich. But the differences are so much smaller than you think. So they spend their money- why not? And who sees the balance sheets of others- to see if they are wanna-bes or truly rich? Is it even any of my business to try and figure out how much dinerdo backs up the lifestyle? No. I have learned not make assumptions.

  20. Josh says:


    I can’t answer specifically what Johanna is thinking, but one thing people fail to mention is that you even in traditional 401(k)’s you might still be able to pay 0% tax on the way out, or at least, significantly less tax. You should fund traditional accounts at least minimally with enough to pull out the standard deduction year, which you won’t be taxed on. I hope to pull out enough each year to get through the lowest tax bracket probably, and then cover any other expenses with my roth tax-free beyond on that.

    I’m hoping to have a balance between roth and traditional that will minimize my tax burden.

  21. sjw says:

    If I had the money, I’d go to nicer restaurants. Yes, I can make a good meal at home, but there are some skills (and facilities) I lack.

    If I had the money, I’d buy more art. There was a stunning sculpture at a local fair the other day ($1400). I want to have it so I can look at it daily.

    I’m not in competition (though I prefer original art). There are some things I just like having.

  22. Finance Nerd says:

    @ #18 — Got it, thanks. Your “broken record” just wasn’t registering.

    Our company just added a Roth option (for 2012), and at the presentations last week they stressed that putting some into both was a good way to hedge your bets about future tax rates, so that was what was in my mind and I couldn’t remember any other arguments for or against.

  23. Finance Nerd says:

    @ #20 — thanks for the additional clarification. One thing to consider, which I mentioned in my first comment, is that any matching you get, at least for now, will be done in a traditional “bucket.” So, even if you go all-in on a Roth 401(k), to the extent you have matching, you will be generating Traditional assets and their attendant benefits.

    Unless the law changes, and maybe it will, companies can’t put matching money into a Roth account, because there is no provision for employer matching in that type of account. For traditional 401(k)s, there are two limits — one for ee contributions, and one for total contributions. For Roth, there is only one limit, for ee contributions. Maybe as these plans grow in acceptance, they will enable matching for Roths as well.

  24. Sara says:

    Q2: The conventional wisdom is to contribute enough to the 401(k) to get the company match, then max out your Roth IRA, and if you still want to save more than that, contribute more to your 401(k). The reason for this order is that the company match is like free money, but the IRA gives you a lot more flexibility with your investments than a 401(k). A Roth IRA is preferred over a traditional IRA because it has less strict withdrawal rules — for example, you can withdraw your Roth IRA contributions at any time without penalty. Even if you like the investment options in your 401(k) now, they could change in the future, so you’re probably better off with an IRA.

    There is no absolute answer to how much you should be contributing to pre-tax vs. post-tax accounts. That depends entirely on what you think your income tax bracket will be in retirement, which depends on overall tax rates as well as your retirement income. Trent firmly believes that income tax rates will skyrocket for all brackets in the next 20 or 30 years, so he always advises people to use a Roth IRA and/or Roth 401(k), but he may or may not be right. A lot of people split their retirement contributions between pre-tax and post-tax accounts to diversify, in a sense, so that they are not counting entirely on a specific tax situation when they retire.

  25. Adam P says:

    Great thoughts kristine and sjw. My dad wears frumpy jeans, faded shirts, drives a beat up old pick up truck daily…he doesn’t care what anyone thinks of his wealth or perceived lack of wealth. Yet he loves to race his custom built Porsche on the track and fly his 8 seater plane (he has a pilot’s license)…tinker with the Ferrari he co-owns with my grandpa in his garage, etc.

    He has money (mostly from his parents), spends on some things he loves, and does not give a darn about what his neighbours or friends think about his money. He’s not in competition with anyone and can afford what he buys/does. Does Trent think this particular sort of Millionaire Next Door type man like my dad is mythical?

  26. Johanna says:

    @#23: Good point about the employer contribution being non-Roth. It may be that for the original poster, focusing on the Roth is the way to go. But for other people who are reading this and thinking about their own situations, Trent’s advice that “the Roth is the better choice” is at best incomplete.

  27. jackowick says:

    @Stephen (#10) Don’t forget that these are generalizations and not everything said here does apply 100% across every situation. I’m totally with you on the fact that there are things I “like” to do with buying. But as he says,

    “If you tie your fulfillment into this type of competition, it becomes a never-ending money pit and one that you can never consistently win.”

    IF is a big word. I have friends who buy all the newest tech all the time, but it’s not to show it off, it’s because it’s what they enjoy, and they tear it apart. I have a friend who collects sneakers. While some say that’s ridiculous, almost all of his shoes have steadily appreciated.

    And to go big, I had a friend who loved to buy very expensive clothes. But then I realized she only had a few outfits. She had the thinnest closet I have ever seen for women’s clothing, and it’s because she went “big” but made sure to wear the stuffing out of it.

    People love to flare up on here, and we need a little more “I see your point, but not everyone is in the same situation” discussion. And that’s why I love and agree with Trent’s comment on the OWS and TP groups. There’s more in common than people want to admit. We love to polarize and isolate each other instead of sharing and discussing.

  28. Dee says:

    Q1: Anna who eats out

    Instead of cutting back on eating out, focus on reducing how much it costs you when you do. The typical tips should work, and hopefully prevent you from feeling deprived while allowing you to continue doing something you enjoy:
    -Go to happy hours or eat our for lunch when meals are cheaper.
    -Get coupons/groupons/etc.
    -Skip drinks (even soda), dessert and appetizers sometimes.

    I didn’t really like Trent’s answer to you. Sure, grad work will hopefully lead to a higher paying job—but it may not. So don’t just keep living as though a payday is headed your way. Trying to cut your eating out (which is one of the few things left you enjoy, apparently) isn’t going to last long so don’t try that. Just try and minimize the damage.

  29. Dee says:

    Q9: Monica (makes $165k, has lots of debt)

    My question is, why are you paying your younger brother’s tuition? It’s a nice thing to do, but can you afford it? You have enough debt on your own. I would reexamine that choice, especially since you just started your first job. It’s not ideal, but it’s not the worst thing in the world for your brother to take on his own loans so you can sort our your financial problems.

  30. HonestB says:

    Yes, I’d say frugality hurts the economy. It’s called the paradox of thrift, it’s an issue that economists have been dealing with for decades.

    No, that doesn’t mean you shouldn’t be frugal. Your individual choices don’t add up to that much, one way or another (unless you’re the CEO of Goldman Sachs or something). What we need are public policy choices that encourage those with large amounts of hoarded cash (mainly corporations) to go out and spend it (such as creating inflation, which Trent bizarrely seems to think is a bad thing when we’re in a downturn like this one, but at least some economists think might help).

  31. Steve says:

    @#17 (Q2) I agree with Johanna. We have a progressive income tax structure in this country, and have since the income tax was first introduced. The first dollars of income are taxed at 0% (between the standard deduction and personal exemption). Then it slowly goes up from there. Even if you are in the 10% bracket now, if you put ALL of your retirement money into Roth accounts, then you are throwing away money paying taxes on money now, that you could have put into a tax-deferred account and paid zero taxes on in the future.

    @Q7 isn’t it true that if you use the average basis method, you are locked into that method for that position (meaning, specific stock or mutual fund) as long as you own it? For that reason alone I have always chosen “specific lot ID” even when I chose the specific lot according to the FIFO method.

  32. Finance Nerd says:

    @ #31 — Thanks for the follow-up. I wasn’t disagreeing with Johanna, merely asking her to explain so I (and others) could understand what she was saying.

  33. Ryan says:

    To help with the broken record analogy, and to possibly give a reference point for Johanna in the future:

    Under the current US tax setup, based on the 2011 brackets for a married couple, the first $19,000 of taxable income per year is taxed at 0%. Why is this? Because the current standard deduction for married couples is $11,600, and the personal exemption is $3,700 each.

    So, if you can set it up so you take out exactly $19,000 per year from a traditional retirement vehicle, you will avoid taxes on it both NOW and LATER.

    Furthermore, the next $17,000 in our example above is taxed at 10%. So, if you are in the 25% bracket at the moment, and you set up a plan so that you will be taking out exactly $36,000 from your traditional retirement IRA/401k, you will owe a total of $1,700, for an effective tax rate of less than 5%.

    There are also many other circumstances that must be considered. As time goes on, tax policies will change: the amount of the standard deductions and marginal rates might influence this analysis. Also, personal details in each case will have an effect: a family whose itemized deductions exceed the $11,400 allotted will see their numbers increase. Finally, matching contributions from companies in 401k’s are automatically placed in traditional accounts.

  34. jim says:

    Q1 : I like Trents response here. Anna, you shouldn’t be concerned with having a pile of money right now. You’re a grad student. Your money comes later. Minimizing your debt is a smart move but don’t kill yourself. You’re already working and being frugal and thats good. Don’t worry that others are doing better than you financially, your time will come. Your education puts you ahead of 98-99% of the population.

    Q8 : Yes of course people can find fulfillment with ‘things’. Trent seems very biased or very one sided in his view of this topic and he generalizes too much. But of course Trents point is valid for many people, buying ‘stuff’ is often unnecessary and many people should care less about what their neighbors think about the brand of car they drive.

  35. jim says:

    #33, In addition to Ryan’s point if you’re over 65 years old then you get an extra $1100 per spouse (or $1400 for a single filer) added to the standard deduction. So for a typical retired couple thats an extra $2200 in tax free income.

    Add it all up you’ve got over $20,000 of tax free income with just standard deduction and exemptions. If you have a retirement nest egg and draw out 4% a year then that means you could accumulate $500,000 in retirement savings (todays dollars) pull out 4% a year and pay 0% tax on it.

  36. MattJ says:

    #35 jim (and others)

    Are these examples assuming no Social Security income?

  37. jim says:

    MattJ. Social security is not taxed unless your income from other sources exceeds specific thresholds. So if you make $20,000 from SS and have $20,000 from your IRA/401k then you’d still pay $0 income tax.

    If you have a very high social security income and/or higher non-SS income then you could hit a point where a % of your SS is taxed. At max up to 85% of SS is taxed. But even if SS is taxed, it still makes sense to take advantage of the standard deduction.

    Whether SS is high or not and taxed or not you still want to take advantage of the tax free status of your standard deduction and exemptions and plan to have a certain minimum amount of your retirement income be taxable.

  38. PawPrint says:

    I thought the income level for taxing social security is $25,000 for a single person and $32,000 on a joint return. So if you had $20K from SS and withdrew $20K from your IRA, wouldn’t you pay taxes on your social security?

  39. SwingCheese says:

    Q8: If I’m reading your question correctly, you’re asking if a materialistic person can ever be happy. In my mind, someone who is materialistic is wholly consumed with obtaining material goods. This sort of person need not be wealthy – they just tend to judge other people by the goods they have, with those who have a lot of goods being superior to those who do not. These sorts of people, I think, are missing out on several other dimensions of what makes a good life, and no, I don’t believe they are truly happy. They are generally rather unfulfilled because, as Trent pointed out, there are always going to be others who have more.

    But, simply having wealth does not make a person materialistic. I think one of the above commenters referred to Bill and Melinda Gates. I’d say that they are not particularly materialistic, given that a good chunk of their time is spent with their foundation trying to help causes they find worthwhile. They have goals beyond the accumulation of stuff.

    Framed in this sort of viewpoint, it would follow that simply because one is wealthy and/or may have “good stuff”, they are not inherently materialistic. I have a friend who, along with her husband, makes far more money than my husband and I do. Are they materialistic? Well, they do have more (and different) stuff than we do. I wouldn’t say that they are unhappy with their stuff. They spend their discretionary income on some stuff, we spend ours on other stuff, and simply because we have less of it to spend is in no way an indication of our moral superiority.

  40. jim says:

    #38 Pawprint, they actually take 1/2 the social security plus your other gross income and if that total exceeds the $25k or $32k (single or married) limits then they start to tax part of the SS. But they don’t tax it all at once, they phase in the amount of SS that is taxed. So for example if you are married and have $20k from SS and $25k from other income then thats 1/2 of 20k + 25k = 35k You’re $3000 above the limit. So then $1500 of your SS would be taxable.

    They tax half the amount you’re over the limit till you hit a maximum ($9k for single or $12k for married) then 85% of the next $9k/$12k until you hit an amount equal to 85% of your SS check..

  41. moom says:

    Yeah, some people actually enjoy sailing their boat, driving their Porsche, or playing golf…

  42. deRuiter says:

    “…if you put the political muscle of both groups together, that would be a tremendous force.” Trent, you don’t seem to have grasped that the Tea Party is comprised of law abiding, clean (check out any field where a Tea party meeting was held, clean as a whistle) Conservatives and the Occupy movement is ultra Left wing, so there is no possibility of combining them. Trent, perhaps you do not understand that the Tea Party stands for self reliance, smaller government, lower taxes to spur economic development, less burdonsome regulations to increase economic development. The Occupy movement is Marxist / Communist / Leftist and is bent on redistribution of wealth (taking from the producers and giving to the non productive / lazy),increasing the size of government, increasing government regulations in order to hobble industry and provide more (non productive) givernment workers to drain the lifeblood from the productive (private) section of the american economy. It is naieve to even think of these two groups “combining.”

  43. Golfing Girl says:

    I can’t believe no one is chiming in on your question. If I had a dollar for every person who got burned financially by a boyfriend or girlfriend because they combined finances, I’d be rich. Yes, he probably is a stand up guy, but honestly, until you are married, it could get really, really ugly if you combine finances and it doesn’t work out. Until you are at a minimum engaged, but preferably married or very close to the date, I would not combine them.

    For the record, I’m not bitter and haven’t been burned by anyone, and am happily married, but I have read countless posts on financial message boards on this topic and don’t want to read yours one day.

  44. Jonathan says:

    deRuiter (#42) – It is clear which direction your bias is in regards to this topic. I don’t fault you for that. I feel just as strongly about my perspective, which is entirely opposite of yours. Initially I flinched at the suggestion that the Occupy movement might have anything in common with the tea party movement.

    Trent is right though. Both groups want to see change in our government. While the philosophies and methods are wildly different there are likely some things that both groups could agree on and work towards. Of course the political climate in this country is likely too polarized for that to happen. It seems that the term bi-partisan is the most taboo term in Washington these days. Until we learn to work together on the things we do agree on I’m afraid we’ll never see any of the real changes in the government that either side want to see.

  45. Johanna says:

    @Jonathan (#44): I have the same question as Katie way up at #2: On what issues do you see the occupiers and the tea partiers finding common ground? (And what do you suggest that they do on issues where they can’t find common ground?)

  46. Jonathan says:


    I honestly don’t know enough about the Occupy movement to come up with a list of where they might share common ground with tea partiers. I think that both sides (as well as republicans/democrats, conservatives/liberals, and all other “opposing” groups) would be well served by finding those areas where they have common ground and focus on those areas, rather than focusing on their differences.

    Consider the example of two roomates who both want to re-do the living room in their apartment. They both want a new tv, but disagree on everything else. Would they be better off standing their ground and refusing to do anything until the other side gave in to what they wanted? Or would they benefit from identifying that they both wanted a new TV and start there?

  47. Katie says:

    Consider the example of two roomates who both want to re-do the living room in their apartment. They both want a new tv, but disagree on everything else. Would they be better off standing their ground and refusing to do anything until the other side gave in to what they wanted? Or would they benefit from identifying that they both wanted a new TV and start there?

    Depends on if they wanted the other things more than they wanted the TV, which is then there only potential bargaining chip.

  48. Katie says:

    Also, note that the Tea Partiers and the Occupy folks are not, in fact, roommates. They’re two separate groups who apparently should work together because, apparently, they’re the only people in this country who have political opinions or something and it’s somehow easier to tell them to get together and figure it out than it is to figure out who they agree with, why, and what action we, as a country, should be taking.

  49. Johanna says:

    @Jonathan: If you don’t know enough about the Occupy folks to answer the question, then answer it for a pair of opposing groups that you do know enough about. On what issues would you say that Republicans and Democrats, for example, can find common ground? And what about people who are neither Republicans nor Democrats who have a different position?

    As for whether it’s a good idea to focus on the areas where you have common ground, it depends what those areas are. Maybe you can get people who disagree on everything else to agree that kittens are cute and apple pie is tasty, but we’re facing problems in the world that are not going to be solved by focusing on kittens and apple pie.

  50. Courtney20 says:

    Congrats, deRuiter – you have swallowed what the Tea Party/far-Right want you to believe about the OWS movement hook, line, and sinker.

    No, it is not about left versus right. It’s not really even about rich versus poor. It’s about plutocracy versus democracy. It’s about the 1% not explicitly HAVING the wealth, but the fact that they then use it to lobby against the interests of the other 99% who are not fortunate enough to be able to buy lobbyists and politicians. I don’t care if someone makes a bazillion dollars, or buys 18 Porsches or a dozen houses in the Hamptons. I do care when someone makes a bazillion dollars and lobbies against affordable health care. I do care when we give the banks bailouts and then they turn around and use OUR money to lobby against OUR interests. I do care that corporations are deemed ‘too big to fail’ but all the little people, individually, can fail left and right and it’s just because they’re [lazy/jealous/choose any other adjective]. I DO care that this crazy country has decided that corporations are ‘people’ and money is ‘free speech.’

    The ideal of a representative democracy is supposed to be one person = one vote. Instead, we have turned into a plutocracy where it is, in effect, one dollar = one vote. And the 99% of us don’t have enough dollars to vote against the 1% who do. THAT is what OWS is about.

  51. Jonathan says:

    Let me just put it this way. If the opposing groups in this country can’t find a single issue they agree on (and I’m not talking about kittens and apple pie), then I believe that we are in serious trouble.

  52. Johanna says:

    We may very well be in serious trouble anyway. But even if they can find one or two issues they agree on, so what? How does that help them deal with all the other issues where they don’t agree?

  53. jim says:

    I don’t see ANY common ground between the teabaggers and the occupy groups. None. Both sides are upset about the economy and unhappy with the direction our government is taking. But thats the end of the similarities. They are almost completely opposite in direction as far as what they think the real causes of the problem are and what they want for solutions.

    Furthermore I don’t think either group is really centrally organized and I don’t think all people on both sides are consistently in agreement on agenda or goals.

  54. Brittany says:

    The problem is that even when opposing group can find something they agree on, the solutions might be so very different that it doesn’t matter.

    Take for example the pro-life and pro-choice camps. Most will agree that we need to reduce the number of unintended pregnancies, which would reduce the need for abortion, the issue of contention.

    Many in the pro-choice camp would advocate for better sex ed for teenagers and for widely available, low-cost contraception for all.

    However, (not all, but many) in the pro-life camp are also incredibly religious/conservative when it comes to sex education and advocate that abstinence should be taught to teenagers (which the “comprehensive sex ed” crowd would argue is not effective). Many pro-life religious groups also oppose many modern contraception methods (preventing using them as a solution for reducing unplanned pregnancy).

    We’ve found the common ground… but what is the common solution? It’s much more elusive.

  55. Johanna says:

    At the risk of opening this can of worms…

    “Take for example the pro-life and pro-choice camps. Most will agree that we need to reduce the number of unintended pregnancies”

    Maybe most people on both sides will agree with that, but judging by their actions, I don’t think reducing the number of unplanned pregnancies is a high priority for either side. From what I see, those on the pro-life side seem to spend far more effort restricting access to abortion than trying to reduce the need for it. And I think most people on the pro-choice side will acknowledge that even with the best sex ed and contraception in the world, there are still going to be a lot of unplanned pregnancies, because sometimes people are just irresponsible. And even irresponsible people deserve the right to make their own reproductive choices.

  56. kristine says:

    Johanna- excellent example of how finding common ground does not simply solve the hot button discrepancy, or even bring the 2 camps closer on the disputed point.

  57. Aaron says:

    Occupy Wall Street and the Tea Party both share several things in common:

    Both are anti-bailout
    Both are against heavy US involvement in conflicts such as Iraq (admittedly not necessarily a major issue for either)
    Both are in favor of some flavor of significant campaign finance reform

    I’d also be willing to bet that Tea Partiers would be in favor of regulations preventing revolving door of policy makers/elected officials becoming lobbyists and back again.

    There are issues they could work together on, and some of these issues would be game changers if they could put aside their differences. Significant campaign finance reform has the potential to change politics to the core.

    With that said, I seriously doubt it would ever happen. Both groups fundamentally reject even what is considered basic fact by the other side. Not to debate the merits of Fox News, but the Tea Party overwhelmingly seek their news almost exclusively from them deriding what they call the mainstream media for their liberal bias, where most of the OWS crowd openly deride the entire Fox News organization as corporate shills. Consequently, neither side can even agree what is factual even down to what should often be obvious to all parties involved. How can both sides agree 2+2=4 if they can’t agree that 1+1=2?

  58. AnnJo says:

    You can only be 100% certain that opposing interests/ideologies will not reach common ground in one situation – and that is when they won’t try. Having participated in several hundred negotiations between bitterly hostile contending individuals over the past thirty years, there is no other way to know which pairs will settle their differences and which won’t. Seemingly impossible cases settle, and seemingly straightforward ones don’t.

    That being said, any common ground between groups demanding bigger government and groups demanding smaller government is going to be a pretty uncomfortable and rocky territory, with one side or the other ultimately losing its footing and coming to a bad end.

    While in theory Tea Partiers and OWS groups could probably agree on some goals like making government more effective at its identified tasks, making it more accountable for its expenditures, punishing fraud, etc., the interest groups aligned on both sides will make it hard to do any of those things – between government unions on the left and federal contractors on both the left and right, there’s practically no means of actually implementing policies to accomplish those goals – too many people’s pocketbooks would take a direct hit from ANY real improvement in government management.

  59. Brittany says:

    I agree, Johanna, and this is exactly the issue with finding so-called “common ground” in these cases. Having common ground does not insure having common solutions (or even seeing the common ground as a priority).

    All three issues Aaron listed are “common ground” between Tea Party and Occupy. But there paradigms are so drastically different that even if they agree on some of the problems, this doesn’t help at all with finding a common solution. This is especially prominent between these two groups, as they often have polar-opposite approaches for common problems (The solution is less government! No, the solution is more government! Etc.)

  60. AnnJo says:

    As for who the Occupy Wall Street people really are, I don’t know, but according to Douglas Schoen, a Democratic pollster, whose office conducted 200 random interviews with them:

    “Our research shows clearly that the movement doesn’t represent unemployed America and is not ideologically diverse. Rather, it comprises an unrepresentative segment of the electorate that believes in radical redistribution of wealth, civil disobedience and, in some instances, violence. Half (52%) have participated in a political movement before, virtually all (98%) say they would support civil disobedience to achieve their goals, and nearly one-third (31%) would support violence to advance their agenda.”

    He also says: “What binds a large majority of the protesters together—regardless of age, socioeconomic status or education—is a deep commitment to left-wing policies: opposition to free-market capitalism and support for radical redistribution of wealth, intense regulation of the private sector, and protectionist policies to keep American jobs from going overseas.”

    It would certainly be a challenge to bring people with these beliefs to the table with the Tea Party. If this pollster’s data are accurate, Trent’s theory may be over-optimistic.

  61. Michelle says:

    I can’t tell you how refreshing it is to hear another person say that they see the similarities between the Tea Party and the OWS movement. As someone who went to EARLY tea party meetings and who is just thrilled to see the OWS movement take off, I definitely see the similarities.

    Yes, there are folks in OWS who want communism and people in the tea party who want a government that stays out of people’s lives except when it suits them.

    People in OWS, regardless of their specific political leanings, want big corporations and government collusion with these corporations gone. Some tea partiers are also quite fed up with government corruption. Both sides are disgusted with the federal reserve.

    I’m fairly certain there are a few original tea party folks out there marching right now. :-)

  62. Johanna says:

    @AnnJo: It sounds like Schoen drew his sample from those actually present at the protests, is that right? I guess it doesn’t surprise me at all that the protesters themselves aren’t a representative cross section of those who support the movement as a whole. I, for example, wholeheartedly agree with the OWS principles (as outlined by Courtney20 above), but I’m staying far away from the actual protests, because I’m not really interested in getting arrested for being caught in the wrong place at the wrong time.

    I wonder whether the people who took part in the early Tea Party activities are representative of all those who identify with the Tea Party today.

  63. Annie says:

    I agree with Steven, Trent everytime you come across a person with material wealth you judge them immediately and say they are trying to keep up with the joneses. I think you are insulting people when you do this. There are average money makers that save money to buy a nice car because they like driving it, it’s not necessarily to compete with you or show they are rich. You make statements that make me wonder if you are jealous of others that have more. You are quick to jump to conclusions. You admire people that have money but don’t have nice things, strange. I personally am not frugal a 100%, like steven i like to splurge on nice clothes, cars, even home decor. I don’t want to decorate my house with dollar store flowers so i got to pier one and buy things that I like, not becasue i am competing with my neighbors but because i like it and i want to enjoy it. I have a friend who is a PHD that has never brought clothes from retail shops but at goodwill and other places for cheap prices, she never judges me and thinks oh that Annie is wasting money on nice things trying to be somebody. You really need to take a step back and realize that the world will be a boring place to live if they didn’t make BMW, Porches, Astin Martin, 10 bedroom homes, 24K gold, diamonds, etc.. why are we put on earth to better our lives and live productively and enjoy the fruits of the earth. You make it look like your destiny is all about living frugally and not being materialistic. Living below your means for the rest of your life is not cool with me. splurge once in awhile.

  64. Johanna says:

    @AnnJo: I was looking for more information on the survey you mentioned, and I found an article by Azi Paybarah that shows the raw survey data. According to that, only a tiny fraction of the respondents (on the order of 4-6%) say anything at all about supporting radical redistribution of wealth, opposing the capitalist system, or even opposing income inequality. How Schoen concludes from this that a “large majority” of the protesters are bound together by “deep commitment” to these issues is beyond me.

  65. AnnJo says:

    @Johanna, the raw survey data state that 70% want greater government regulation of the U.S. economy, 77% say we need to raise taxes on the wealthiest Americans and 65% agree that “government has a moral responsibility to guarantee health care, college education and a secure retirement to everyone – no matter what the cost.” The survey respondents may be so ignorant that they don’t realize that the latter goal might require a redistribution of wealth, but it would, so I think it’s fair to say that they would support that.

    Anyone who’s interested can read the raw data at Douglas E. Schoen LLC’s website. Johanna is correct that only 4% volunteer radical redistribution of wealth and another 4% volunteer dissolution of our representative democracy/capitalist system as answers to the open-ended question of what they would like the Occupy Wall Street movement to achieve (while 8% who don’t know are apparently just there for the party), but in view of the answers to other questions, those goals are within the comfort zone of most of them.

  66. Katie says:

    Universal health care is incompatible with a representative democracy? Fascinating.

  67. Johanna says:

    Favoring higher taxes on the wealthiest Americans and increased regulation of the banking sector (which was specifically singled out in that question) are hardly radical positions, and hardly imply an opposition to all of capitalism and representative democracy. What’s more, 36% of respondents say that “we need to raise taxes on everybody,” which means that at most 41% of the protesters favor higher taxes on only the wealthiest Americans (and some of them might favor raising taxes on most people – not just the wealthiest, but not everybody).

    The “government has a moral responsibility to guarantee…” question is to my mind a trick question. It’s a very specific statement, designed to elicit a response based on emotion, before people have a chance to really think about it and say “Well, except…” For example, I don’t think government has a moral responsibility to provide a college education to people who don’t want a college education, or who aren’t willing to put in the required study time. But I might not have thought of that in the few seconds after I was asked the question.

    Also, the survey document on Schoen’s website includes the phrase “no matter what the cost” in that question, whereas the document in Paybarah’s story does not. Somebody is being dishonest (or mistaken) about what the protesters were actually asked.

  68. Riki says:

    Is universal health care really considered redistribution of wealth?

    And if so . . . doesn’t that imply that only wealthy people deserve adequate health care?

  69. AnnJo says:

    Riki, universal health care means some people get health care at the expense of other people. The Occupy Wall Street protesters mostly believe that the people who should pay for everyone else’s care are “the wealthy.” Clearly that is a redistribution of wealth, regardless of its desirability. It implies nothing about who deserves health care to admit that a specific method of paying for it is what it is.

    I find the question of who “deserves” adequate health care impossible to answer. I don’t know if anybody “deserves” a consumer good just because they want it or need it, or even because they can afford to pay for it. Economics doesn’t much deal in who “deserves” what. To get answers to that question you have to go to philosophy, religion or gut instinct. You and I might come up with different answers to that without making either of us stupid, heartless or evil.

    Does someone who needs $5 million dollars of highly specialized trauma care and lifetime nursing care due to injuries in a car crash “deserve” it? If it was a three-time convicted drunk driver driving a stolen car the wrong way on the freeway eluding police, whose crash also killed a whole family? If it was a busy soccer mom whose already been ticketed three times for not wearing her seatbelt, and again wasn’t wearing it? Regardless, in our society they will get it, even without universal health care.

    Does the soccer mom “deserve” to be able to take her kids into the doctor and demand antibiotics every time they get a sniffle? With universal health care, she will. Without it, she might think twice. Of course, she might also think twice when one of them develops fever, nausea and a stiff neck. There’s no easy answer.

    And, yes, the kind of health care that is meant by “universal health care” IS a consumer good. The health care that involves going out for a walk every morning, choosing broccoli instead of potato chips, cleaning the kitchen counters thoroughly, buckling one’s seatbelt, etc., has always been universally available. The kind that involves doctors, prescriptions, etc., is a consumer good.

    One Occupy Wall Street article I read quoted a young protester whose $5,500 lap-top had been stolen. $5,500 will buy a lot of basic health insurance for a young person. If he has chosen the lap-top over two years of health insurance coverage, does he “deserve” for me as a taxpayer to pay for his medical bills, just because I’ve accumulated some wealth by never buying $5,500 lap-tops or similar luxury goods? My gut instinct says No.

  70. AnnJo says:

    Does it concern any of the bigger government advocates that the AVERAGE compensation for a federal employee is over $126,000 a year? Is their AVERAGE work really more difficult, demanding and important than the average journeyman plumber (about $50,000 a year), lawyer ($120,000), or nurse ($70,000). Can we afford to expand an employment sector that compensates its employees at such elevated levels, no matter how much we tax “the wealthy”?

  71. Katie says:

    Riki, universal health care means some people get health care at the expense of other people. The Occupy Wall Street protesters mostly believe that the people who should pay for everyone else’s care are “the wealthy.”

    As opposed to people wracking up medical bills and then being forced to declare bankruptcy, which is really healthy for society as a whole and has no ripple effects on the rest of the economy.

    Economics doesn’t much deal in who “deserves” what. To get answers to that question you have to go to philosophy, religion or gut instinct.

    And also: public policy, which is a lot of what people are addressing here, including both the Tea Partiers and the Occupy folks (in opposite directions). And if you’re going to say that somehow “economics” should be the beginning and end of the government’s inquiry, you’re espousing a political philosophy of your own; it’s hardly obvious that that’s the right one and everyone should just accept it.


    One Occupy Wall Street article I read quoted a young protester whose $5,500 lap-top had been stolen. $5,500 will buy a lot of basic health insurance for a young person.

    This is just bizarre to me that you would jump to these assumptions. Is it really that strange to think that someone might be protesting despite – perhaps – HAVING health insurance and a job? Stunningly, some people do do things that aren’t in their immediate self-interest. Or might have bought a laptop while they had health insurance and a job and then lost both? Or might have received the laptop as a gift? Or might not in fact be healthy and thus not able to obtain private health insurance for $5,000?

    All of this, of course, ignores the fact that one anecdotal example has very little to do with overarching policy. Most uninsured people in this country do not have $5,000 laptops.

    You can justify anything if you twist your assumptions in that direction. That doesn’t mean you should.

  72. Katie says:

    Does it concern any of the bigger government advocates that the AVERAGE compensation for a federal employee is over $126,000 a year?

    Citation needed.

  73. Katie says:

    (In fact, a USA Today article that’s the first result on Google says that the average federal salary is about $67k a year. That seems like a plausible number; $125k does not. Federal judges themselves make about $160k, which is the same as a first year lawyer at large law firms, for instance. It sounds like the $125K number – to the extent it means anything – is based on some estimation of what benefits are worth.)

  74. Johanna says:

    If Mr. $5500 Laptop did indeed buy the laptop himself as a luxury item (as opposed to needing it for work, say), I’d be willing to bet that he’s paying quite a lot in taxes himself. So you can stop fretting that “you as a taxpayer” are subsidizing his supposedly lavish and irresponsible lifestyle.

  75. MattJ says:

    #68 Riki

    Is universal health care really considered redistribution of wealth?

    If you tax one segment of society to pay for health care for all, then obviously what’s happening is redistribution of wealth.

    And if so . . . doesn’t that imply that only wealthy people deserve adequate health care?

    You’re skipping several steps of the argument here. Is redistribution of wealth bad? (It seems that you believe that it is, but I’m not sure you would maintain that opinion if you really thought about it) If wealth redistribution is bad, is it worse than living in a society where some people have more access to health care than others? etc…

    AnnJo is right about what people ‘deserve’ not being the right question to answer. For example: How do you feel about the rights of children to have a family? Don’t all children ‘deserve’ a home with a family? And if so, why doesn’t the government ensure that there are no orphans, or foster children?

    We decided long ago on universal access to K-12 education, universal access to food, universal retirement pension, and universal access to shelter. (People without access to these things are the exception in this country)

    What you’ll notice about these things, is that ‘universal’ in these cases gives us a minimum standard, with public schools being a pretty good (comparitively) standard, Social Security being not-so-bad, food stamps providing a lower minimum standard, and public housing/homeless shelters even worse than that. That’s because the money necessary to provide everyone with ‘universal K-12 education’ to the standard that, say, Sasha and Malia Obama are receiving would cost a lot more money than the education you and I received. Moreso if we expected every person to sleep in shelter to the standard that the President’s family is accustomed to.

    Universal Health Care would not be nearly so politically contentious (to me, anyway) if the ‘minimum standard’ was set at some lower level in the same way our other government-distributed universal benefits are – for instance, tax money could provide health care to everyone up to the standards of medical technology that’s 5 or 10 (or whatever) years old. This would be incredibly cheap – fewer tests to run, fewer available drugs, fewer extremely expensive procedures. If you want the latest medical procedures, you must pay for them yourself, just like if you want your kids to go to the fancy private school or if you want to live in a mansion or retire with more than a Social Security check for a pension.

    Politically, of course, an idea like this is a non-starter. The pro-universal health care folks would argue that it doesn’t solve the fairness problem, (true!) while the anti folks would just argue that the 5-10 year gap I propose would inevitably shrink as people demand not to die due to curable conditions (also true!)

  76. Johanna says:

    The phrase used by Schoen (and repeated by AnnJo) is “radical redistribution of wealth.” There are all kinds of things government can spend money on that have redistributionist effects. Are all of these “radical”? If so, then we’re pretty radical already, I’d say.

  77. MattJ says:

    I read the article about the thieves ransacking the OWS protests, and the young lady that lost her $5000 computer.

    I can only hope that the thieves were wearing monocles during the act, so that caught, they could attempt to pin the theft on the 1%.

  78. jim says:

    Everything our government does could be twisted into ‘redistribution of wealth’. I mean I don’t have kids in school but my tax dollars are paying for someone elses education. So thats ‘redistribution of wealth’ isn’t it? WHy should I pay for your stupid kids? Who said that learning to read is a ‘right’? Lets call it a ‘consumer good’ and assume that kids in 2nd grade are spoiled and pampered so I can feel upset about paying for their learning.

    Our society isn’t setup up as a ala carte pay as you go system where everyone pays a itemized price for the services they use themselves. It can’t be and never will be. Obviously everyone is paying for things they don’t use themself. Our government already pays about 1/2 of the healthcare costs in teh US via medicare, medicaid and Veterans.

    Health insurance is redistribution of wealth too isn’t it? That evil insurance company is confiscating your monthly premium, pocketing 30% of the money for their grossly inept bureaucracy and inflated CEO salary and profits and then giving the remaining 70% to lazy sick people! You should be outraged!

  79. MattJ says:

    #78 jim:

    Health insurance is redistribution of wealth too isn’t it? That evil insurance company is confiscating your monthly premium, pocketing 30% of the money for their grossly inept bureaucracy and inflated CEO salary and profits and then giving the remaining 70% to lazy sick people! You should be outraged!

    Generally, when person or organization ‘A’ offers a service for a price, and person or organization ‘B’ pays the price for the service, we call that ‘commerce’.

    We call it redistribution of wealth when ‘A’ forces ‘B’ to hand over money so that ‘C’ has access to a service.

    When ‘B’ hands over the money to ‘C’ without the need for enforcement from ‘A’, we call it ‘charity’.

    And yes, almost everything the government (any government) does is redistribution of wealth in some form or another.

  80. jim says:

    AnnJo said: “Does it concern any of the bigger government advocates that the AVERAGE compensation for a federal employee is over $126,000 a year?”

    Katie is right, that $126k is NOT factual.

    It doesn’t even stand up to common sense critique.

    Federal employees do have average wages that are higher than the general population. But federal employees are higher educated, more likely to have professional degrees and primarily white collar jobs.

    If you do an apples to apples comparison between government workers and private workers then government workers are paid LOWER salaries.
    THe office of personnel management did apples to apples and according to Factcheck “In the 2009 report, OPM found that federal workers were paid on average 22.13 percent less (Table 4) than their private-sector counterparts.”

    I thought it was common knowledge that governemnt workers are paid less.

  81. Finance Nerd says:

    @ #72 — There is an article on bloomberg today that cites this information. I would post a link but then my post would be stuck in moderation and never show up. If you search for “Top income in US is Washington DC” you will find the article.

    That said, your comment in #73 is correct — the article makes it clear that this number includes benefits.

  82. Katie says:

    I can say that I personally, when taking a federal job right out of law school, made literally $100k less than I would have in the private sector. There were other non-monetary compensations, but yeah.

    Also, I find it funny that people want the people who are, say, investigating whether their drinking water is safe or ensuring that terrorists don’t make it onto airplanes with bombs to be low paid and in terrible working conditions. That seems . . . interesting to me.

  83. jim says:

    Rebranding all government services as “redistribution of wealth” is clever marketing meant to cast government in the role of evil communism villain.

    Does it concern any of the bigger business advocates that the AVERAGE compensation for a CEO is over $11 million a year?

  84. Riki says:

    MattJ — actually, I fully support “redistribution of wealth”, if universal health care falls under that category.

    But I’m a Canadian. And I come from an affluent, child-free home so my partner and I definitely pay our fair share of taxes. But here’s the difference: I don’t see paying taxes as taking away my wealth. Rather, I see it as a contribution to my great country. I will gladly pay taxes if it means my fellow Canadians receive equal access to health care and education and (insert important service here).

    I think having citizens working together can accomplish a whole lot more than leaving individuals to fend for themselves.

  85. MattJ says:

    #84 Riki

    MattJ — actually, I fully support “redistribution of wealth”, if universal health care falls under that category.

    I had a feeling that you would.

    But here’s the difference: I don’t see paying taxes as taking away my wealth. Rather, I see it as a contribution to my great country.

    You are of course free to look at your contributions to your contry however you like, but paying taxes clearly subtracts from the amount of wealth you would otherwise have.

    I will gladly pay taxes if it means my fellow Canadians receive equal access to health care and education and (insert important service here).

    Do Canadians receive equal access to health care and educution, pensions, shelter, and food? I think your country is terribly unequal, (not so much as mine!) but I will understand if you don’t want to pay even more than you already do to really even things out. How do you feel about the inequality between Canadians and Africans?

    I think having citizens working together can accomplish a whole lot more than leaving individuals to fend for themselves.

    I think the phrase ‘can accomplish’ works for me in your statement. On the other hand, it’s amazing what an individual ‘can accomplish’ in the presence of rewards for excellence. One would hope that by now, everyone realizes that a balance must be struck, and we’re really arguing over fine-tuning at the margins.

  86. Courtney20 says:

    “universal health care means some people get health care at the expense of other people” – and a public highway system means that some people get access to roads at the expense of other people, and a public library system means that some people get access to books at the expense of other people, and public K-12 education means that some people get access to learning at the expense of other people, and municipal water/sewer means that some people get access to clean water at the expense of people…

    You call it “redistribution of wealth” whereas I call it contributing to living in a civilized society.

  87. Katie says:

    You are of course free to look at your contributions to your contry however you like, but paying taxes clearly subtracts from the amount of wealth you would otherwise have.

    Except that you have no idea how much wealth you’d have if you (and people in your position) didn’t pay taxes. For instance, having to hire private security forces takes a lot of cash. Having to pay for every cent of your and your children’s education takes a lot of cash. Etc.

    Yeah, if you personally didn’t have to pay taxes, you’d have more wealth. If society generally didn’t make places like you personally, the jury is out. I don’t notice an awful lot of wealth generation going on in Somalia – or rather, not in any way that anyone wants to encourage.

    Yeah, yeah, a “balance must be struck” and we’re “fine-tuning,” but that doesn’t mean that characterizing all taxation as wealth redistribution isn’t, simply, wrong and harmful rhetoric that perpetuates simplistic thinking.

  88. Katie says:

    Uh, that should read “didn’t make people like you pay taxes” – I have no idea why I ended up typing what I did.

  89. MattJ says:

    #83 jim:

    Rebranding all government services as “redistribution of wealth” is clever marketing meant to cast government in the role of evil communism villain.

    Government services that rely on funding from progressive tax systems are ‘redistribution of wealth’ – that’s the entire point of progressive taxation. I’m sorry if stating the plain fact outright messes with your battlespace preparation.

    If it makes you feel any better, government rent-seeking by crony capitalists is also ‘redistribution of wealth’, often in the other direction.

    Does it concern any of the bigger business advocates that the AVERAGE compensation for a CEO is over $11 million a year?

    First of all, I’ll paraphrase you: that $11 million is NOT factual. It doesn’t even stand up to common sense critique.

    You should include the universe of companies you’re talking about. The $126k figure is apparently true if we’re including all compensation, not just salary. Your value for ‘average’ CEO pay matches up to what I understand is an accurate value for CEO pay for the largest 500 companies in the country. Of course, these 500 men and women are going to make much more than the 10,000 CEOs at the next 10,000 companies.

    I’m not sure I qualify as a ‘bigger business’ advocate so much as a ‘smaller government’ advocate, but I’ll just say that multi-million dollar CEO compensation bothers me approximately as much as multi-million dollar compensation for sports and entertainment figures. I don’t really get worked up over it, but it’s kind of striking to me that the OWS folks haven’t considered occupying, say… Hollywood.

  90. MattJ says:

    #87 Katie

    Except that you have no idea how much wealth you’d have if you didn’t pay taxes.

    On the contrary, I’m very aware of how little I would have if nobody paid taxes. Idealogues may wish to distort their opponents arguments into support for “North Korea” or “Somalia”, but I do not.

    Yeah, yeah, a “balance must be struck” and we’re “fine-tuning,” but that doesn’t mean that characterizing all taxation as wealth redistribution isn’t, simply, wrong and harmful rhetoric that perpetuates simplistic thinking.

    Just to be clear: I’m making no such characterization about all taxation. Progressive taxation is wealth redistribution. That some people use the phrase wealth redistribution as a red flag to point and scream “communist” doesn’t change the fact that it is wealth redistribution, of the kind that majorities in democratic countries often support.

  91. Johanna says:

    @MattJ: Sports and entertainment figures didn’t drive the nation’s economy off a cliff, have to get bailed out with taxpayer money, and then complain that they should get to do the whole thing all over again. As far as I know, sports and entertainment figures aren’t lobbying Congress to stack the deck in their favor to let them make more and more and more money and have more and more and more power.

    Plus, anyone who’s seriously bothered by sports and entertainment figures’ multimillion-dollar compensation can choose not to follow sports or watch movies. It’s a lot harder to get by in this world without a bank account.

  92. Finance Nerd says:

    @#91 Johanna — sorry, but I completely disagree. How many cities and counties are struggling financially because of footing the bill for athletic stadiums? I know the city I live in is looking at laying off firefighters and policemen because they have to cut somewhere and the stadium fund can’t legally be cut.

    And people can avoid going to the games, but they can’t avoid paying for them, because they are typically financed by sales taxes on EVERYONE, not just ticket sales.

    I have been to one NFL game in my life but I pay an extra 1% in sales tax to fund a stadium so that millionaire athletes have a place to play.

    Granted, the owners benefit from this too, but so do the athletes, all at the expense of everyday citizens.

    P.S. MLB has regularly lobbied Congress for an antitrust exemption so that no one can compete with them, and they are the only major sport that has that provision, so sports figures clearly do lobby Congress to stack the deck in their favor.

  93. Finance Nerd says:

    Sorry, MLB = Major League Baseball, in case that wasn’t clear.

  94. Katie says:

    Matt J, except progressive taxation policies are also part of an attempt to create a stable society. When you look, historically, at societies where people are starving in the streets and don’t have any opportunities because of their income level it often turned out pretty poorly for the elite too. You can argue about how much an individual benefits from progressive taxation policies in comparison to how much they pay, but everyone does benefit from not having starving people in the streets with no recourse.

  95. Johanna says:

    @Finance Nerd: Point taken. Still, what you describe sounds like small potatoes compared with the influence of the financial sector. And even if it’s not, I don’t buy the “if you’re not simultaneously upset about everything I say you should be upset about, you’re a hypocrite” argument. People have to start somewhere.

  96. Finance Nerd says:

    @ Johanna — I don’t disagree, just providing some context on the “athletes and entertainers issue.”

    If you live in a city large enough for professional sports, you quickly see how much the teams hold the city hostage in exchange for better stadiums and other deals, all the while threatening to leave for another city if their demands aren’t met.

  97. MattJ says:

    #91 Johanna:

    Is the issue ‘fairness’, or ‘revenge’, I wonder? Did Johnny Depp earn his $300 million for his role as Captain Jack Sparrow? I think he did, but I wonder how it squares up with OWS ideology.

    1) Of the 500 CEOs that Jim is talking about, how many are responsible for driving the nation’s economy off a cliff?

    2) How many of them had their company bailed out?

    3) What about the 1%

    4) OWS proposed solution to this problem appears to be to give the government even more power (and money). Is it the case that the government bears no responsibility for driving the nation’s economy off a cliff?

    As far as I know, sports and entertainment figures aren’t lobbying Congress to stack the deck in their favor to let them make more and more and more money and have more and more and more power

    As far as you know? How much do you know about the sweetheart deals that sports and entertainment industries and stars get from the government?

    Needless to say, your property or sales taxes will (likely they already have) go up when the local team owner pays off your city council to build the team a new stadium. That’s taxation at the expense of the poor, because, after all, he needs his money to recruit that free agent next year.

  98. MattJ says:

    #94 Katie

    Matt J, except progressive taxation policies are also part of an attempt to create a stable society.

    Katie, I don’t understand why you’re still arguing with me. Is there some way you think the two of us disagree on that point?

    #95 Johanna:

    “if you’re not simultaneously upset about everything I say you should be upset about, you’re a hypocrite”

    You put that sentence in quotes. Did someone actually write that?

    People have to start somewhere.


    The Tea Party thinks the problem is that the incompent and corrupt government has too much power. They want to devolve that power back to the citizenry, which OWS-types say will result in corporations getting more power.

    OWS thinks that the problem is that incompetent and corrupt corporations have too much power. They want to (as nearly as I can tell) give more power to the government to use in order to better control corporations. Tea Party types would say that this just gives corporations more incentive to capture rents via sweetheart government deals.

    I think they’re both right.

  99. Katie says:

    Matt J., if you’re not arguing that progressive taxation policies are not necessarily per se wealth redistribution, than I don’t disagree with you.

  100. MattJ says:

    #99 Katie:

    Matt J., if you’re not arguing that progressive taxation policies are not necessarily per se wealth redistribution, than I don’t disagree with you.

    Well, that’s a lot of negatives :/ After parsing it, I still disagree, I guess.

    I do still claim that progressive tax policies are wealth redistribution – that’s their entire purpose – to take from those who have a lot and provide for those who have a little. If you disagree with that, please tell me how.

    But you’re not arguing that they are not wealth redistribution, at least as nearly as I can see.

    Instead, your arguments seem intended to convince me that progressive tax policies are not necessarily bad, and on that we do agree.

    Progressive tax policies redistribute wealth, and that’s a good thing, to a point. We almost certainly disagree on how much progressiveness or how high the (progressive or not) tax base should be, but that’s the balance that must be struck, as we were discussing earlier. Where the balance should lie is hardly worth the two of us arguing over.

  101. MattJ says:

    #99 Katie:

    Ok, I got rid of an even number of ‘negatives’, and I get this:

    if you’re arguing that progressive taxation policies are per se wealth redistribution, than I agree with you

    I guess we do agree?

  102. Katie says:

    Sorry, Matt, I overnegated. But I’m guessing you knew that and had fun parsing so that’s good.

    I mean, from the outset, I will admit I don’t really care on a personal level if something is wealth redistribution. Whatever. I don’t even really care if it’s radical wealth redistribution. I’m fine with that too. I do, however, have a problem with people characterizing things as wealth redistribution or radical wealth redistribution when they aren’t, because that type of argument is usually used as a bogeyman to make normal policies look extreme.

    That said, I continue to think it’s fallacious to think that progressive taxation is inherently wealth redistribution. Because to a certain extent, progressive taxation policies that ensure a stable society also ultimately increase the wealth of people who were, initially, being taxed more. This is largely conceptual – we can’t look at a dollar of tax money and determine whether it does that in a particular case – but I think it’s important to remember when we think about how taxes work in society.

  103. jim says:

    I’m sure glad this blog steers clear of political topics. /sarcasm

  104. jim says:

    MattJ… Touche. ;)

  105. jim says:

    p.s. I should be clear that touche was about the $11 million CEO pay. I should have specified it was for the S&P500 CEO’s. My bad.

  106. MattJ says:

    #103-105 Jim:

    Well, the commenters kind of run this blog – at least, the comments are where the action is. So Trent can’t actually steer us clear of politics unless he decides to start policing the comments.

    The final bit of Trent’s intro worries me, actually:

    because if you put the political muscle of both groups together, that would be a tremendous force.

    I see the the political muscle of those two groups, such as it is, pulling the country in opposite directions. That’s pretty troubling, if you think they’re as strong as Trent apparently does. It remains to be seen whether OWS has any clout – they seem too disorganized for that to be the case, and their message isn’t at all clear to me, though I’ve tried to capture it above.

  107. valleycat1 says:

    For those of you (including Matt 106) still unclear about what OWS is about, check out the business insider website for a lengthy post, this is what the wall street protesters are angry about, with a ton of illuminating charts from a wide variety of sources.

  108. MattJ says:

    #107 valleycat1:

    I’ve seen the business insider post before, but I went back to it to see if it had what I was looking for – it doesn’t.

    What policy changes is OWS pursuing? It’s interesting that they’re mad about some of the things that everyone should be mad about, but what proposals do they have to fix any of those things?

  109. AnnJo says:

    Katie, you’ve said you want redistribution of wealth, so instead of trying to pretend we’ll all think it’s something else if you don’t use those words, just defend it for what it is.

    Johanna, not only did I not “repeatedly” use the term “radical distribution of wealth”, I never used it once. All three times the phrase appeared in my comments, it was clearly identified as a quote from Schoen’s poll.

    As MattJ writes, all programs for the redistribution of wealth must strike a balance.

    On the one hand, they have to meet the essential needs of those whom most of society regards with sympathy and charitable impulses. I don’t know anyone from any point on the political spectrum who wants children, the helpless elderly or disabled, the victims of catastrophic personal or community events, to starve, freeze or bleed to death. On a purely theoretical level, I believe none of those people have an “entitlement” to my income or property, but it bothers me not at all to help provide for them. The farther you get from such people as recipients, the more resistance you’ll get from me and many others, probably even including advocates for income redistribution at some point.

    On the other hand, you don’t want to destroy the goose that lays the golden eggs. Creators of excess wealth (aka businesses) span the spectrum from the very good at and very in love with what they do to the barely marginal on competence and/or commitment. The very good and in love ones can probably handle a heavier tax burden with no drop-off in wealth creation, but the rest, who are the majority – not so much.

    Personally, I’m in the marginal category. I’m reasonably good at what I do, good enough to create at least enough excess wealth to keep six other people in the middle class and off the welfare rolls, but I’m far from in love with it, and every time I get notice of another increase in my gross revenues tax or unemployment tax rate (even though I’ve never laid off an employee), or read another harangue against profits or business people, my interest in continuing my part in the whole process of wealth creation decreases.

    I’ve got enough for my own reasonable comfort. Do I really owe those other six people a duty to keep working when I don’t particularly enjoy it and am constantly insulted for doing it, or should I turn their care over to folks like Katie and Riki, who get warm fuzzy feelings paying taxes for the support of the needy?

    I personally know several business people who have simply decided to close businesses since 2009 rather than put the extra effort and capital into them that it would have taken to ride out the current economic woes. They each laid off between one and 23 employees in doing so. While every one had slightly different motives and circumstances, every one also talked about their dismay at the health reform law, their discouragement at the constant expectation that just because they could carry their current loads, they should be expected to carry whatever additional loads politicians choose to pile on them.

    Government doesn’t know how to grow the fruit or the wheat, or milk a cow for butter, or bake the pie; it thinks that because it can decide how to cut it, it has all the power it needs. I disagree.

  110. Johanna says:

    @AnnJo: It sounds like you’re assuming that you’re the only one who can give jobs to those six people. What makes you think you’re so special?

    If there’s sufficient demand for whatever it is that you and your employees do, then somebody else will step in and take your place if you close up shop. If there’s not sufficient demand for what you do, then why are you still doing it?

    No, of course you don’t owe it to your employees to stay in business if whatever benefits you gain from working are no longer worth the effort to you. Why would you? Do your employees realize that you view them as charity cases?

  111. Katie says:

    Also, of course, it sounds like your friends who closed their businesses did so because of the recession. The one that most people think could have been greatly limited through more progressive spending and taxation policies. Thus benefiting the business owners,* and being my entire point about progressive taxation not being purely redistributive. So there’s that.

    * Maybe not the particular business owners you know who are apparently Just Not That Into It. Nothing convinces me that’s particularly representative.

  112. AnnJo says:

    Katie, since the recession increased the amount of effort and capital they would have had to put into their businesses it certainly played a part, but the real reason is your asterisk – they just were not into it enough to overcome the discouragement and los of confidence in the future that progressive policies caused them.

    I think you are mistaken about “most people” thinking that the recession could have been greatly limited by even more government spending and progressive taxation.

    I guess we’ll see next year. In 2008 I switched from a three-year lease renewal to a one year, and I’ve already told my landlord my next lease renewal will be six month one, leaving me the option to shut the doors in December 2012. He said he completely understood, but if I vacate, he’ll likely end up in bankruptcy unless the commercial market picks up considerably by then, something neither of us expects.

    Johanna, I don’t view my employees as charity cases; they work for their pay and give good value in return for it. However, none of them is anxious to be out in the job market at this time. The last one I hired had been unemployed for over six months.

    You are mistaken that if there is demand for a service or product, someone will supply it. The mediator between supply and demand is price, and government can price anything out of the reach of demand or drive the demand-supply connection into a black market. That can be seen easily in the case, for example, for household domestics in this country. There are plenty of middle class families that would LOVE some household help, and plenty of people of limited education and skills who would be much better off if they could live in a comfortable middle class home and earn a modest income in exchange for washing dishes, doing laundry, etc. But current minimum wage, overtime pay requirements and payroll taxes have closed down most of that market and driven the rest underground.

    In the employment market as a whole, government has driven the “price” of employees artificially higher, dampening demand and/or driving it under the table.

    Until recently, it had never occurred to me that intelligent people could believe it’s just no big deal if small business owners are driven from the economy or that government policies could not have that effect.

    It’s hugely ironic that the people who are bringing that about think that they are in opposition to BIG business. The policies they advocate are a leading cause of the concentration of business activity in fewer and fewer hands.

    If you have to maintain a highly specialized HR department to administer all the federal and state (and sometimes local) mandates on pay, hours, hiring, training, discipline, tax collection, child support collection, leave policies, etc., and highly specialized tax and legal compliance departments to figure out and deal with the multiple layers upon layers of federal and state OSHA, EPA, EEOC, Treasury, SEC, banking, etc., etc., regulations, it stands to reason you’re not going to be able to do that as a small business.

    Twenty-five years ago, if I’d been asked to join the board of a small local bank, I’d have been honored. Today I wouldn’t trust they could afford to hire enough lawyers to keep me out of jail no matter how ethically I tried to handle my duties. Joining the board of Bank of America would seem by comparison quite safe.

  113. Johanna says:

    Are you seriously arguing that people should be allowed to effectively sell themselves into slavery in exchange for the opportunity to live in a middle-class home?

    I’ll spell it out for you: When people are desperate enough that doing things like that (or selling their kidneys, or pulling their children out of school and putting them to work in the factories…) seems like a good idea, that’s a problem that needs to be addressed. Sweeping the problem under the rug by giving others free rein to exploit their desperation is not the solution.

    Same goes for regulations on business. If providing your employees with decent pay and working conditions means your business can’t make a profit, then as far as I’m concerned, your business does not need to exist. Crying “But I’m a small business owner/job creator/wealth creator!” is not going to find much sympathy with me.

    That’s not to say I think there’s no such thing as a bad regulation. Obviously, you know far more than I do about the regulations you have to comply with, and I’m sure I could be convinced that there are some specific ones that are unnecessary or that do more harm than good. But the arguments you’re giving now – against *all* regulations, up to and including minimum wage – are just nonsense.

  114. MattJ says:

    #112 AnnJo:

    Where you stand on regulations prohibiting the reestablishment of slavery, organ sales, and putting children to work in factories?

    I find your arguments less nonsensical than Johanna does, but I may withdraw my support if I find out you are, in fact, in favor of the reestablishement of, let’s say, any two of these three atrocities.

  115. jim says:

    MattJ, While Trent can’t keep us from talking politics he could refrain from starting the discussion by raising topics like comparing teabaggers and OWS. He has claimed to want to keep this blog apolitical but he keeps discussing political topics.

    I agree OWS is not well defined. Typically the far left protesters fail to deliver a clear message. But what they lack in clear messages they more than make up for in large paper mache puppets and hemp products.
    I think the teabaggers and OWS protesters are the far fringes. A larger minority subscribe to the same ideas. But altogether we’re talking 10% or so on either end. It could influence the mainstream parties some but thats about it.

    The two groups are in disagreement in general and very unlikely to ever combine forces.

    I don’t think I really disagree with anything you’ve said, other than the semantics of the term ‘wealth redistribution’. I think that term is generally viewed as synonymous with ‘unjust theft’ so using that language is a bit inflammatory and biased, (even though its not technically incorrect). But.. thats just my opinion.

  116. MattJ says:

    #115 jim:

    MattJ, While Trent can’t keep us from talking politics he could refrain from starting the discussion by raising topics like comparing teabaggers and OWS. He has claimed to want to keep this blog apolitical but he keeps discussing political topics.

    Think of how many page views he’s gotten just from those of us who are still engaged in the conversation. He didn’t have to take a strong stand that might alienate some of his readers, but he mentioned it and now many of us are still coming back to this page because (to refer to a great xkcd.com comic) someone is wrong on the internet!

    The two groups are in disagreement in general and very unlikely to ever combine forces.


  117. jim says:

    AnnJo, the IRS has not raised corporate taxes. Unemployment tax rates are probably up maybe 0.5-1% depending on location. What are the onerous government costs that are supposedly putting you out of business? I don’t see any. Maybe you are talking about changes specific to your state. My state hasn’t had any changes that would cost business more than 0.5%.

    Who is ‘constantly’ insulting you? Do random srangers spit in your face cause you run a shop or something??

  118. AnnJo says:

    Johanna, are you seriously saying that a job as a household domestic is the equivalent of slavery? My mother worked as a household domestic for a few years before she advanced to a clothing factory floor during the Depression, and she certainly didn’t consider herself a slave, nor did the domestics later hired herself consider themselves her slaves, but they remained close and respected friends for years.

    MattJ. I would have thought you understood that striving to identify clearly and honestly the harmful consequences of a policy is not the same thing as arguing for 100% reversal of it or denying that it may have some desirable effects. As for where I stand on the three items you mentioned:
    1. Reestablishment of slavery. Against.
    2. Organ sales. I can see some advantages to this under tightly regulated conditions, but am doubtful it could be done right, so if it must be a straight-up Aye or Nay, it’s Nay. (By the way, we already to this to some degree but only on a volunteer basis with marrow donor banks. I signed up for this 25 years ago, and had to sign a waiver as to potentially dangerous though low-probability consequences up to and including my death. If I were called to donate, would it be wrong to compensate me for that risk, say by providing a life insurance policy for my family? The banks suffer from a deficiency of donors in certain minority groups. Would it be wrong to try to reverse that with sign-up and donation bonuses, even though there is some risk? Honestly, I don’t think so.)
    3. Children working in factories. What age? Now that people are “children” up to age 26 for some purposes, I have to ask. I can see a place for trade school internships for youngsters over, say, 16, in factories with good safety records and reasonable supervision, and/or their own family’s business. Is it better for a 16 year old high school drop-out to sleep until noon and hang out at the street corner trying to figure out how to get in trouble, or to work in a factory? For the kids in my family, I’d prefer the latter.

    As should be obvious from 2 and 3 above, I don’t consider all regulation inherently wrong, but I do consider a lot of it poorly thought out, producing unintended consequences, counterproductive to its stated goals, or purely reactionary (driven by emotional impulses).

    A traffic light at a busy intersection is a good idea, but at every intersection on a lightly traveled country road, it’s stupid. A lot of business regulation today is like having ill-timed lights at every possible crossing of vehicle, pedestrian, cow or garter snake.

    As I pointed out above, a lot of the regulations being imposed on businesses today are having the unintended consequence of concentrating business activity in larger and larger entities. Not only can those larger entities hire HR and compliance departments, but they can and will hire lobbyists.

    And those who imagine somehow regulating lobbying and influence out of existence are dreaming. When 525 publicly elected people control some $6 trillion dollars, the idea that it is possible to keep them from all influence is simply laughable.

  119. Johanna says:

    “Johanna, are you seriously saying that a job as a household domestic is the equivalent of slavery?”

    Without minimum wage, overtime pay, and guaranteed time off? Yes, I am seriously saying that. At least, I’m saying that it could be.

  120. AnnJo says:

    Jim, .5% of what?

    I was referring to a state gross receipts tax; it’s gone up 20% in the last year. The total rate is ony 1.8%, but since it’s on gross receipts, if you’re on slim margins due to the current economy, it can capture a large percentage of what otherwise would have been your profits.

    My unemployment tax rate has gone up 300% with the addition of a “social cost” rate due to high unemployment. This has increased my per employee unemployment tax to nearly $100 a month. In other words, I pay higher unemployment insurance rates even though I’ve never laid off an employee, because other businesses have laid off theirs. No good deed goes unpunished.

    As for the insults, I thought I had taken that line out before hitting the submit button, but I feel insulted every time I hear politicians and protesters rant about how, on the one year out of every seven to ten that I’m “rich” becaue I earn X amount of dollars, I don’t pay my “fair share” in taxes, or use ‘profit’ as if it’s a dirty word. My thin skin alone, however, is obviously not a basis for policy decisions, which is why I tried to take that out.

  121. jim says:

    AnnJo, can you cite specific regulations that you think are overly burdensome on businesses? Hard to know what you’re really talking about without an example of it. I really don’t think our government is driving small businesses under. I’m sorry.. no.

  122. jim says:

    AnnJo, OK it sounds like your state raised taxes in your state for businesses in your state. Consider moving? Or maybe lobbying in your state rather than complaining on the interwebs?

    The following may come across as accusational but I don’t mean it that way. I’m sincerely curious cause I don’t understand how this adds up…

    Raising taxes 20% so they are now 1.8% means they went from 1.5% to 1.8%.. right? (or do I misunderstand) What kind of business are you in that your profit margin is significantly impacted by 0.3% of gross?? Is it feasible to raise prices 0.3%? How much has the recession impacted your sales? It would seem to me that the recession would generally have a much more signification impact on a business than such government regulations.

  123. AnnJo says:

    Jim, if you wanted to open a business in my area and hire one employee, you would need to complete 27 forms in the first year, all but 4 of which require the payment of a fee, a tax, or both. And that’s assuming your business requires no special permits, licenses or bonds, such as you would need if you wanted to decorate people’s living rooms, drive a cab, clean gutters, install a flower bed, or sell cookies or bottled water in the ferry holding lines.

    Any business that involves food handling, child care, home attendant care, etc., involves many additional layers.

    An aside: When I went to public grade school in a poor Caribbean country, housewives near the school supplemented their incomes feeding lunch to school children by arrangement with their parents. (As I remember it, it was 25 cents for a plate of rice and beans and a glass of reconstituted dry milk but it was a lot better than the school lunch where the rice was always mush and there were only a few beans in the soupy sauce.) Anyone who tried to set up a little business like that here today would find it literally impossible. A home kitchen, no matter how clean, would never pass the health inspections, city zoning officers would descend in force, and the forms avalanche would bury the business effort before it could lift its head.

    One of the forms you’d fill out for your new business is a New Hire report to the State; if it turns out your employee owes child support, you will have 13 – 16 additional forms and at least 12 payments to make during the year.

    If your employee quits, even if he/she honestly reports it was a voluntary quit and not a lay-off, you will be filling out forms and calling the unemployment agency multiple times to make sure that your state experience rating is not erroneously charged for it as a lay-off. Miss any of those forms or calls, and you will be charged the higher rates, with no recourse.

    If your employee claims a work-related injury, even if it is due to a condition that existed prior to your hire of him/her, or a bad weekend on the ski slopes, you will be devoting a significant part of your future for the next several years to dealing with that. Same with a claim of any form of discrimination.

    Filing any one of these forms late can result in a penalty that is sometimes a multiple of the amount you’re late in paying. Filling them out wrong can have even graver consequences.

    Subsequent years will involve almost the same number of forms. (If you keep the same employee through several years, you can reduce your forms volume by two per year.)

    You will be required to post visibly in your establishment anywhere between five and 15 notices to customers or employees. Failure to do so can result in fines.

    If your employees handle any toxic or dangerous products, even such commonplace items as household cleaners, bleach, ladders, or ergonomically poor office chairs, you may be required to take training classes, maintain special records, obtain inspections, or otherwise devote sustained time and attention to these matters.

    Chances are good you will not be allowed to smoke in your own office or allow your employees, customers or clients to do so.

    I could go on for pages.

    Now all of these rules and regulations offer some benefits, so whether they are just burdensome but necessary or “overburdensome” depends on what tradeoffs you are willing to accept. If the goal for instance is perfect safety at any cost, then of course they are not overburdensome; in fact, they are not burdensome enough, since we still suffer workplace injuries and deaths. By that standard, we should keep regulating until there are no more workplace injuries. Of course, that will only happen when there are no more workplaces, but so be it.

    As Johanna says, it is better for a business not to exist at all, and for a worker to have no job at all, than a job that fails to meet some desired standard. I actually agree.

    The only question becomes, what is the standard? Johanna might (I only say “might” – I don’t know) say that unless a domestic worker gets paid minimum wage for all hours “on the job” including the time she’s “on call” such as during the night when the kids are asleep but might wake up and need a glass of water, and overtime for any such hours over 40 a week, and a reasonable number of breaks at regular intervals during the day when the worker is truly free of any demands, then it’s better if that worker doesn’t work, even if the available option is living in a public housing project collecting welfare. To me, that seems like a lose-lose situation.

  124. MattJ says:

    #118 AnnJo:

    MattJ. I would have thought you understood that striving to identify clearly and honestly the harmful consequences of a policy is not the same thing as arguing for 100% reversal of it or denying that it may have some desirable effects.

    Then you thought correctly.

    As for where I stand on the three items you mentioned:

    I’m glad to see you hold a reasonable position on these three subjects. It’s good to see that you agree with Johanna that “Sweeping the problem under the rug by giving others free rein to exploit their desperation is not the solution.”

    No free rein to exploit people through slavery, or allow children to be pulled from school and sent to the factories.

    It’s good to know that there are some topics that OWS sympathizers and Tea Party sympathizers can agree on!

  125. jim says:


    Most of that sounds like a bit of paper work that may be an annoyance but is mostly rooted in very legitimate needs. It shouldn’t be enough to ruin a small business. I understand grumbling about it. Who likes to fill out forms? But I don’t see any of that ruining any business.

    27 forms sounds like a lot. That could be streamlined probably. Have you complained to your local / state government or suggested an improvement? WHat are the 23 separate fees and taxes for exactly? But OK so you have to spend half an afternoon filling out forms (much of which I assume is redundant basic information like your address, name etc). It could be streamlined but at worst you waste some time doing busy work. Its done once and then you’re done.

    Yes we do need to regulate food handling, we do need to make sure contractors are bonded, we have to do background checks on child care workers, we do need to make sure toxic materials are handled properly, we do need to send separate checks for child support, etc. What do you think the alternative for all those things are?

    Not being able to smoke in a place of business is the result of society wanting that and not the government being mean to small businesses. If society was 90% smokers we would probably not have such a rule. Smokers are a minority and they get outvoted by nonsmokers who don’t like smoking. Thats democracy in action. Sometimes you get outvoted. I’m not allowed to drink whisky at work. Same basic principal. (I am an ex-smoker, so I know how it feels to be treated like a leper)

    If an employee files a workers comp. claim then of course the business owner has to do stuff. Whats the alternative? If its an fake claim then thats a “crappy employee” caused problem, not a “government being mean to you” problem. Part of business is dealing with crappy employees who do stuff like filing unwarranted complaints.

    What do you really think the alternative and better solution to all that stuff you list is?

  126. Johanna says:

    Well, how is “on call” time treated (and compensated) for people in other lines of work? I see no obvious reason why it should be any different for domestic workers.

    As for overtime pay, if a domestic worker isn’t being allowed ample time off to pursue her own interests and relationships outside of work – if she’s basically signing her life over to her employer, at least temporarily – then of course she should be compensated accordingly. Her middle-class employers can choose between paying her overtime, using her services for just 40 hours a week (or less), or not hiring her at all. I fail to see why this is a problem.

  127. AnnJo says:

    Jim, granted that the three state payroll tax forms and one federal payroll tax form I fill out four times a year aren’t as complicated as the corporate tax return I fill out once a year, all together they are definitely more than a “half and afternoon” “done once and then you’re done.”

    “What do you think the alternative for all those things are?”

    Well, for one thing, why do I, just because I have a business, have to serve as a free collection service for the government on the taxes and child support my employees owe? Federal tax withholding did not come into being until more than 30 years after imposition of the income tax. And why the pretense that I as the employer pay any part of Social Security and Medicare. The employee effectively pays all of it, and should pay it as a bill like any other. I don’t pay my employees’ mortgage or car insurance, why their taxes or unemployment insurance? (OK, I know the reason is that it would create massively greater resistance to taxes if people understood what they were really paying, but since when is deception a valid basis for government policy?)

    In some states, employers can buy private workers comp insurance. The government worker’s comp agency gets more money for more claims, whether true or fake. A private insurer would have an incentive that the state agency doesn’t to actually investigate claims and prosecute the fake ones. As it is now, an employee filing a fake claim may not win, but has nothing to lose, since there is virtually no chance the employee will be prosecuted for attempted fraud.

    For decades, electrical wiring has been judged and certified as safe by a private entity (you know those UL stickers on things)? Companies like CarFax, Consumer Reports, Yelp, and many others exist in the spaces left by government for judging and certifying goods and services. In the absence of a lot of government regulations, there would be a huge market for private businesses to step up and provide that service, and they would all be far more motivated than government can possibly be to do it effectively.

    Obviously, this would not work for every conceivable activity. I have no problem with licensing/testing of people providing specialized services like electrical, plumbing, medical, 18-wheeler driving, etc., that have grave safety and public health factors associated with them. But where licensing is done to restrict trade rather than for safety purposes, as in taxi licenses, it could go.

    Anyway, the point is that there are many alternative solutions, many of which would actually accomplish the desired goals better as well as more directly, honestly and inexpensively.

  128. AnnJo says:

    Johanna, middle class employers have chosen not to hire. So it’s only a problem for them because their lives are more harried, and for the prospective worker who would have been better off with a job not quite up to your standards but better than everything else available to him or her. I can see how that’s not a problem for you.

  129. MattJ says:

    AnnJo: It appears Jim finds the number of forms you must fill out, and the amount of effort you go through to ensure that you don’t run yourself afoul of government employment law to be not that big of a deal. If you’re unhappy with it, perhaps one day you’ll do as Johanna suggests and allow your business to cease to exist. Then, a larger business with the resources to hire a staff of HR personel and employment lawyers can capture your market share of whatever field it is in which you work.

    I mean, you, as a business owner, spending your time learning employment law and making sure you get all of your i’s dotted and t’s crossed is incredibly inefficient. Much better, it seems, for all industries to be taken over by companies big enough to have paid experts who are up-to-date on employment law. Bigger companies can cope much easier with ever-shifting regulations, and it’s even easier for the largest companies, as they often have the power to help the government write the laws in ways that make it even easier on them.

    For instance, there was that time that Mattel was selling toys made in China that had lead in them, and the government responded with a new regulation requiring all toys to be tested for lead in third-party labs. Mattel helped the government write that rule by showing them how much better it would be for Mattel to be able to test in their own labs, rather than independent labs.

    On the other hand, if your business, AnnJo, is making toys, then it only makes sense that you should have to pay to have your products tested in third-party labs, despite the fact that you’ve never used lead in them (never been caught, I mean!) Meanwhile, are we supposed to just trust you that your company manufactures toy blocks with only wood and oil-based paint? I mean, the wood may be from an actual tree, and the paint has, of course, already been certified as lead-free when it was manufactured, but what part of all toys must be independently tested is hard to understand?

    If you have a problem with the new rules, maybe you should consider selling out to a more responsible company who can afford to follow the rules, and one who recognizes how important they are. Like Mattel.

  130. Johanna says:

    @AnnJo: So what are the “right” set of standards to apply to domestic service jobs? It sounds like you would not be in favor of employers being allowed to offer jobs where the employee works 16 hours a day, 7 days a week (and is “on call” for the remaining time) and in exchange receives a salary that coincidentally is exactly equal to what the employer charges for room and board – is that right? But why not, if employment on those terms would be better than anything else available to the prospective worker? What part of the argument that you’re making does not apply to jobs of that sort?

  131. Katie says:

    Ann Jo, I agree that there’s not really a good reason to regulate or require licensing where there’s not a good justification for it. That said, I’ve heard plenty of other liberals arguing the same thing, so I’m not sure this is something we can reasonably pin on supporters of the Occupy movement (which is the topic under discussion). I was under the impression that it was industry groups and their lobbies that were propping up most of those licensing requirements and that, as a general rule, nobody else is organized enough willing to expend the money to fight against them so they more or else slip through unchallenged.

    I think we’re in agreement that where there are compelling safety issues (and the like) something like Yelp – which is known for hiding negative reviews of companies who advertise and the like – isn’t going to cut it.

  132. AnnJo says:

    MattJ @129, exactly my point: The hyper-regulatory climate is concentrating business activity in fewer and fewer hands, something the Occupy Wall Street people claim they don’t want to see done (at least in the private sector; clearly they want more power concentrated in fewer hands in the public sector).

    I am 98% certain much of your comment was tongue-in-cheek, but there are plenty of folks who would say exactly the same thing with complete seriousness. I’m waiting on the 2012 elections to tell me how many, before deciding whether to allow my business to cease to exist.

  133. jim says:

    Yes you do have to file taxes quarterly as a business and that requires state and federal forms. Yes we all do have to file taxes and filing taxes requires filling out forms. I don’t think that falls into the category of excessive regulation. Its just filing your taxes. You might be annoyed about the principal of payroll witholding but thats hardly enough to claim the government is ruining you with all its excessive burdens.

    Have you considered hiring a CPA? Yes that costs money. But you can either do it yourself and complain on the interweb or… pay someone else to do it. I don’t expect you to be a tax expert, but you could try hiring one.

    Could child support payment be handled differently? Maybe. How? Whats your alternative answer? WHy is writing a separate check once a month to divert to child support that much of a unbearable horror to you? I mean… its a check and a form. Nobody should have to do it. Everyone should just voluntarily pay their child support, but that doesn’t happen. Would you prefer that your tax dollars are used to police it and setup a new government bureau to do collections of child support? Or is having an employer write a check once a month a better all around solution? Whats your solution to the problem of deadbeat dads?? Find em and throw em in jails and spend our tax dollars on the police and prison cells? Whats the better answer?

    I still don’t see how any of this adds up to anything more than filing out a few forms and wasting a few hours. Thats part of business. Thats part of adhering to rules and laws. SOme of those forms are annoying. Sometimes government isn’t fun to deal with. Sometimes its a pain as a business owner. OK. We can’t just privatize it all and we can’t abolish all the laws to keep you from having to file forms.

    Bigger companies will always have a competitive edge over you. The Walmarts of the world aren’t going to beat you because they have better experts on government regulation. They will beat you cause they have lower prices due to large volume purchasing. You can blame the government but no matter what you can’t beat the Walmarts prices even if we got rid of all the government forms you spend a few hours dealing with.

  134. AnnJo says:

    Jim, the government could handle collections of taxes and child support the same way I handle collctions of my receivables. Send a bill. If the debtor doesn’t pay, hire a collection agency. If that doesn’t work, sue and get a judgment. The vast majority of bills will have been paid by this point, but for the few remaining, issue a writ of garnishment to the debtors bank, if they have one, or employer. When you issue a writ, you pay (actually the debtor pays) a modest fee to the innocent bank or employer for having to go to the trouble of withholding pay and transmitting it. Which is only right, since it’s not their fault the debtor defaulted.

    Or they could just pay employers a modest fee to serve as collection agencies in the first place. There is no reason why the burden of serving as tax and child support collectors, which is a social need, should be foisted on one particular group within society, with everyone else getting a free ride. I recognize that it is EASIER to use business owners to do this job, but it is no more our job than it is the job of poeple who’s first name starts with a J, like you, Jim.

  135. jim says:

    Frankly I”m baffled that you would think having government police and collect child support would be a better idea. You’re railing against government intrusion and waste and your answer is more government bureaucracy and inevitable waste?

    a) you write a check.


    b) government sends a bill (equivalent cost of you writing that check). People don’t pay. Government builds police system to pursue deadbeats. Govt hires people to do paperwork and police it. Courts handle judgments against deadbeat. Collection agencies are hired which then use shady tactic, fail to get the money and then over charge the government. Government has to police collection agencies. Etc. etc.

    How is a) worse overall than b)? Choice A) seems infinitely more efficient and better choice overall.

    Why do businesses collect sales tax? Maybe we should have the government bill people then collect it on the honor system and then throw people in jail if they don’t pay it?

    You as the business owner are involved in the paying of child support simply cause you’re the source of the money. You’re the source of the money so yes you obviously have more to do with it than randomly selected people whos’ name starts with J. Of course you’re not to ‘blame’ for any of it, but having you deduct the money is the most efficient and effective way to handle the problem.

    Compensating the business with a nominal fee seems reasonable. I’d say $5/month should cover it writing a check. I think it would be fair to charge the employee that $5. Or just consider it a part of doing business like reasonable people would.

    Frankly you are whining about nothing. The fact that you might have to write one extra check once a month for probably 5-10% of the labor force… thats nothing.

  136. AnnJo says:

    Jim, if you think the standard by which impositions on citizens by government should be measured is “efficiency” then we will simply have to agree to disagree.

    Since that is your standard, knowing a little more about your subject is unlikely to change your mind, but let me help you understand what I’m “whining” about.

    What you may not know is that the failure to properly collect and account for an employee’s child support obligation makes it the employer’s personal obligation, and s/he can also be sued by any employee who is fired, for whom collection is handled, on a claim of retaliatory termination. At a minimum, the fired employee improves his/her chance of collecting unemployment insurance on the employer’s nickel.

    Deadbeat parents, not surprisingly, tend to be irresponsible in other areas of their lives, including employment, so they lie, submit false paperwork to get out from under their obligations, and often quit when the state catches up to them or have to be fired for poor performance anyway. But once the state starts collection, that employer is at the state’s mercy for years to come.

    Not that you would care, since it is “efficient” from the government’s standpoint, but I know one business owner who closed her restaurant more than eight years ago. She still has to respond to several demands per year by her state’s child support office for proof that she correctly paid her former employees’ child support obligations, at the risk of having to pay them out of her own pocket if she cannot offer adequate proof. At the moment, the state is claiming she owes $11,000+, although once all the paperwork is in, that claim will hopefully be resolved. At one point the claim was over $40,000.

    Her restaurant closed because after minimum wage laws were applied to her wait staff (who, with tips, already earned an average of over $45,000 a year), she could no longer run it profitably – nor could anyone else. The business whose sale was to have been her retirement was unsalable.

    This former business owner has has to pay nearly $200 a month for EIGHT YEARS for a storage unit to store her payroll files (her restaurant averaged about 200 new hires/rehires per year for nearly 20 years), and spends several days a year of uncompensated time searching for and responding to these demands. But, as you say, “thats (sic) nothing.”

    Since she was a business owner, I doubt you care at the devastation of her life and the many years of grueling work she put in that were lost, but you might have some sympathy for her former employees:

    Ironically, her business was one that offered the best chance of employment to marginally capable people – prisoners on work-release, the developmentally delayed, high school drop-outs – who coincidentally are highly likely to be deadbeat parents (not all were dads). (She got lots of awards from various community groups for her willingness to hire the hard-to-place.) After selling the land and building (for 45% of what had been paid for them 20 years before), a facility that used to have a payroll of about 100 at any one time now employs five.

    But, as you say, that’s nothing.

    I’m really enjoying the stories now coming out of the Occupy X-City movement about logistical problems, sanitation concerns, theft of food supplies and donations, conflicts with neighbors, exiling of founders, etc., all the management problems businesses have to deal with – and the Occupants don’t even have to worry about doing it legally, reporting and paying taxes, and getting permits! Too bad there’s nobody around them who can help them turn this teachable moment into some real wisdom.

  137. Johanna says:

    jim, don’t you get it? Government action isn’t intrusive when it happens to other people.

  138. AnnJo says:

    Johanna, would you seriously consider it LESS intrusive to have the government involve your employer in your domestic squabbles than deal with you directly? I’m sure most child support obligors prefer to have collections handled more discreetly and hate having their employers brought into it.

  139. Johanna says:

    I really have no idea – it’s hard for me to imagine myself in that position. But why should I care whether a deadbeat parent gets his feelings hurt?

  140. AnnJo says:

    Johanna, do you seriously believe only “deadbeat parents” face government intrusion into their employment relations? If so, you know little about the subject.

  141. Johanna says:

    Deadbeat parents was what we were talking about. (And you used the phrase yourself, so the scare quotes are unnecessary.) Why do you keep changing the subject?

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