Don’t Believe in Easy Ways Out


I read a commentary from a syndicated columnist attempting to explain the rationale behind the habitually unemployed.  These aren’t people who are simply out of work for a short period of time and draw unemployment, or even those who have been diligently looking for a job for a long time but have not been able to find any.  These are people who choose to stay unemployed, never seriously looking for employment.

She began by comparing the habitually unemployed to the millionaire CEO who “refuses to get out of bed for less than $6 million.”  After all, if the people at the top won’t work unless they are well compensated, why should the people in the working class get up and go to work when they can get enough through unemployment?  It is definitely true that if you add in the costs of clothes, gas, and other work-related expenses, that unemployment check may start looking better and better.  From a purely economic viewpoint, staying on unemployment can make sense.

There are also always excuses.  No one has the hours I want.  Why should they get a job across town or move to a different city?  I don’t want to work in that industry.  They are paying less than they did at my last job.

As I’ve discussed previously in this blog, those who succeed in a Capitalist society are almost always those who have filled a need people have, and done so in a manner they could afford.  While there may be a few bad apples – and these normally don’t stay in business very long – most people who do well are providing goods and services of value to people, and charging a fair price for those services.  (Think about it – in most transactions do you fell like the company you are buying the thing or service from is ripping you off?)

Part of Capitalism, however, is that people are motivated, for their own sakes, to try to fulfill the needs of others.  The minimum an individual must do is to provide enough useful goods and services to others to gain enough income to take care of themselves.   In the past people had been motivated by 1) a sense of responsibility and 2) the need to do so to avoid starving or otherwise suffering.

Part of making Capitalism work also is for those whom are able to do so to help those who are not able to take care of themselves.  Ideally this would mainly be through families, churches, private individuals, and private organizations since these people are closest to the people and need and therefore best able to determine how best to fill those needs.  In extreme cases, some government programs might also be needed, but these must be extremely limited and targeted since waste and abuse will always result and the bigger the program, the bigger the waste.

Many are now taking advantage of these programs, choosing to stay home and take a check rather than find work or start a business.  Many may even work odd jobs or sell things part-time without reporting it for extra income while they’re taking unemployment.

If this sounds like you and you think you’re getting away with something realize that first of all, you are stealing, and some of those that you are stealing from are your children and grandchildren.  With our national debt ever increasing, they will be the ones paying for your stealing, with interest.  Your friends who go to work each day are also paying for it – there is no big government pot of money that magically appears.  It all comes from somewhere.

Secondly, you are really hurting yourself in a lot of ways by “getting away with things.”  While it may seem like you are doing better by collecting unemployment that you would be working, you are limiting your chances of ever working into a better paying job, or perhaps any job again.  It takes experience and showing that you can do good work to move up in a company.  In addition, a lot of companies are eliminating individuals from consideration if they have been unemployed for a long time.  While this may seem unfair on the surface, would you want to hire someone who chose to sit on unemployment for a couple of years and not seriously look for a job?

You are also causing a decline in society as a whole.  By not putting in at least enough to pay for yourself, you are reducing the amount of wealth available for everyone.  If enough people do this, the standard of living for the whole society will decline rapidly.  Think of a “searching through the garbage for your next meal” kind of scenario if things remain on their current course.

Thirdly, by taking advantage of these programs, you are hurting those who really need them.  Both because the amount of wealth available will be less, and because people will not believe that they are truly in need of help if a lot of people are taking advantage of the system.  This will mean it will be a lot more difficult to qualify, and the benefits of the programs will be cut.

Finally, you are affecting your mental state.  While you may think it doesn’t bother you, it has to hurt your pride to be taking handouts from others when you could provide for yourself.  You are probably starting to feel a sense of entitlement, but you probably also have a voice deep in side that is telling you that you are stealing.  You are probably also feeling less important, and the truth is, if you are not using your abilities to the fullest, you are wasting your life.

I realize that most of the people reading this are those who are working and will say, “Amen.”  Others I’m sure will dismiss it or perhaps write a nasty comment back with every excuse in the book about how I “just don’t understand.”  I’m hoping though that at least one person who is wrongly living off of the system will decide to make a change.  Or at least a few people will work to change things by ending the programs that allow such behavior to continue and will take personal responsibility for helping those who are in need.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Picture Credits: Maggie Molloy, Website http://www.maggiemolloy.com

Tired of Filing Taxes?


Since we have recently completed another tax filing season, I thought it was a good time to speak again about the Fair Tax.   For those who don’t know, the Fair Tax is a national sales tax that replaces all other Federal taxes (income taxes, corporate taxes, Social Security taxes, etc…).  The Fair Tax is prevented from being regressive through use of a “prebate,” which is a sum of money paid to each citizen at the beginning of the year to cover a portion of the taxes.  For example, if the Fair Tax is set at 20%, and the prebate is $10,000 per person, the first $50,000 of income would be tax free (because one would pay $10,000 in taxes if one spent $50,000 but receive $10,000 from the prebate).

There are several advantages to the Fair Tax over the existing taxes:

1.  It is very simple, with no filing requirements.  People just pay the tax as they buy things – never fill out a form or pay an accountant again.

2.  It rewards savings and earning money and penalizes spending.  The current system rewards behavior that gets people in trouble – borrowing and spending – and penalizes saving, investing, and working.

3.   It removes the need for all of the tax-advantaged accounts.  No more IRAs, Medical Savings Accounts, etc… and all of the book-keeping that goes with it.

4.  You receive your whole paycheck – no more having Mr. FICO take out his share before your get your money.

Obviously there are some concerns about a consumption tax.  People are always afraid of a new tax since they’re afraid it will be added but the old tax will remain.   You also might be wondering about the size of the sales tax.  Here are the answers to some common questions:

Q:  How high will the sales tax be?

A:  If revenues were to remain the same, a tax rate of about 23% would be needed.  Remember though that you would get your whole paycheck (including the 15% taken out for income taxes and the 9% or so taken out for Social Security and Medicare.  In addition, because there would be no corporate taxes, prices of things would be expected to drop.  In fact, if you include a reduction in expenses since companies would no longer need to hire legions of accountants for tax compliance and strategy, things might actually cost a lot less.

Q:  Isn’t a sales tax regressive?

A:  No, not the Fair Tax.  Because of the prefund, you can make it as progressive as you would like.

Q:  What would keep us from ending up with both the sales tax and the income tax?

A:  Of course this is a possibility, but it is all based on the people you elect.  The income tax could also be raised to 90%.  If you don’t want higher taxes, vote for people who will cut the size of government.  Besides, there is currently talk of enactment of a Value Added Tax to raise more money (since they can’t justify raising income taxes anymore), which would be worse than a sales tax.  The Fair Tax would only be paid when new goods are sold.  A VAT would be added to each step of the manufacturing process.

Q:  How can we get the Fair Tax enacted?

A:  It will take time because it is a big change.  If you are interested, write to your representatives and let them know you are interested in the Fair Tax.  Also, tell your friends and have them write.  If enough people talk to their representatives, we can get this done.

WRITE TO YOUR SENATORS AND REPRESENTATIVE ON APRIL 23rd AND ASK THEM TO PASS THE FAIR TAX.  If enough people write at once it will make a bigger impact.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

The Bank of Mom and Dad (MAD)


In order to help teach our children about banking and saving, we started what we called The Bank of MAD, which stands for “The Bank of Mom and Dad.”  Each of our children were given a passbook. As they made deposits we credited them in their pass-books and each month (or when they were interested) we credited interest.  This bank pays 5% interest for all funds deposited into it.  (Sorry, the bank isn’t accepting any new depositors.)

This resulted in a very interesting micro-economy in our household.  As our children would do various jobs around the house, I would pay them from the money I kept in my dresser.  They then would typically deposit the money into the Bank of MAD, at which point I would put the money back into my dresser.   Eventually they started skipping the cash step and just started writing the deposit into their pass-books when they did a job.

I started to wonder if this is really what it was like in the real economy, where you work for a company, so they write you a check, which you then deposit in the bank.  You then write a check to pay your bills, and the money goes back into their account.  While you may not be paying your boss directly, there is probably some sort of circular path the money takes.

Eventually they would decide to buy something, at which point I would typically put it on a debit card and deduct the money from the Bank of MAD account.  The only time I had to go to the real bank to get more cash was when one of them made a run on the bank and decided to cash everything out.

My son also said he wanted to tell his friends about the Bank of MAD.  Actually, I told him they could work out an arbitrage scheme, where they would borrow money on a 30 year loan at 3.75% and put it in the Bank of MAD at 5%.  Unfortunately, as I stated earlier, the Bank of MAD isn’t taking any new depositors.

The other thing I noticed is that my son at times wanted to save every dime and not spend anything, then at other times he would want to withdraw everything to buy something.  I’ve tried to work with him to get him to save some, spend some, and give some.  It is probably better that he makes his mistakes now, though, rather than when he is out on his own.

Please contact me via vtsioriginal@yahoo.com or leave a comment.

Follow me on Twitter to get news about new articles and find out what I’m investing in.  @SmallIvy_SI

Disclaimer: This blog is not meant to give financial planning or tax advice.  It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA.  All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.

Picture Credits: Marc Garrido i Puig, Website http://www.garridos.cat , downloaded from stock.xchng

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