Tax talk is taxing

It seems recently the change in presidency has caused an overabundance of unsolicited opinion offerings from all corners.  Round these parts, the predominant opinion is that the people (i.e. mostly upper middle class) are mad because they believe they are going to have to pay more taxes.  This prospect has them lamenting the seating of Obama as president as well as the collection of ‘tax and spend’ democrats in the legislature.

 

I tend to avoid engaging the opinion givers as to why people shouldn’t pay more taxes.  In general if your country has to take loans in record amounts to keep the doors open while the economy is growing, I’d say not enough taxes are being paid.  So then the real discussion should become one of either what aspects of government do you want to decrease/eliminate or who should pay the extra taxes to balance the budget.

 

 Historically, I have engaged some of those who say, “I pay way too much tax.”  The responses have included: if you give people more money (have them pay less taxes) they will invest it and put others to work, the taxes paid and benefits received are so disproportionate it’s not fair to me, taxing higher earners is a disincentive for people to take risks and succeed, and taxing more allows the government to grow and we need a smaller government that doesn’t try to solve everyone’s problems and shortcomings.

 

While there is most definitely some merit in these points of view, I think many of them fly in the face of economic and psychological fundamentals.  I can respect a person who has thought through their stance and investigated the validity of their opinion and could site some objective source who adds to the plausibility of their point of view.  However what I think has happened in many cases is the people lamenting their possible tax burden are almost completely motivated by self-interest.  Everyone is entitled to want to keep more of the money they make but at least be forthright in your motives.  The conservative entertainment business (Limbaugh, Hannity, O’Rielly, etc) is very effective at producing half-baked theories and semi-lies as to why paying fewer taxes is better for everything and there are far too many that use their fodder to mask their own greed.

 

If someone thinks paying more taxes (in normal economic times) will adversely impact the long-term well-being of our country, then I think the person needs to suggest ways of decreasing government expenses.  So I get that people don’t want to pay more taxes, but what is it our government is doing we need to stop?

 

Typically, the people who believe they pay too many taxes will site the amount of money spent on welfare and/or in general on people who are too lazy to work.  I get the impression it really, really bothers some people that they work hard and pay a lot of taxes and some of those taxes are going to people who could work but would rather live a subsistence existence off of government income.

 

I really have no idea of how much total money is being spent on welfare nor do I know how realistic it is that people can survive off of government handouts.  If I decided to stop working what sort of life could I have living off the government?  I have no idea.   As a percentage of the total population, I guess I can’t imagine there are too many people that are conscientiously choosing to live a meager existence off of government handouts.  While there are no doubt millions out there and making these people work would decrease government spending, I can’t imagine you are going to solve trillion dollar deficits by making some people who are ill-equipped and unmotivated either to work or starve.

 

So let’s assume you could solve 10% of the deficit problem by making people work who can work, what do we cut to get the other 90% we need?  I am not sure many in the ‘I’m paying too much in taxes crowd’ get past this point.  Many, I would guess, probably support the Iraq effort and probably wouldn’t start by going after corporate breaks because if the corporations get breaks, they will hire more people.  So here’s a little FYI – if you want to tell me you aren’t paying enough taxes, let me know what you want to specifically cut, how much the cut will save, and what long-term impact the cut will have.  The other option is you can identify who other than you should pay more taxes and what impact that will have.

 

Let’s be clear, I don’t want to give the government any more of my money than I have to. I think they waste for too much of it.  However, I am not afraid to pay more taxes if it will mean the country is a better place for my children.  Leaving them with a huge debt, a huge liability with medical care for the larger older population and an environment destroyed by deregulation (done to increase commerce so as to hire more people and expand the tax base) isn’t just.  I sacrifice all the time for my children and think many would and so maybe we need to think longer term and take some lumps now.

 

I do think there are ways the government should/could decrease spending to improve the long-term prospects for the country.  The Iraq war was not a good idea. I am against throwing money at the Halliburtons and their ilk.  I think corporate friendly policies can tend to consolidate wealth which is bad in the long-term.  I think our legislative process is far too strongly influenced by the self-interest of those who pay campaign contributions and lobbyists and too little by what’s in the best interest of our country in the long run.  I think if you iron out of few of these things and we collectively pay more taxes and sacrifice our current standard of living it should benefit the country our children inherit.

Belt tightening

Contributions at the parish have nose-dived.  Many expected there would be an eventual decline but the severity and suddenness of the drop caught us a little off guard.  The situation does force a rethinking of what is essential to a parish and what isn’t.  It also forces a discussion on what the needs of parish are at this point in time.

 

So we have been asked to put our ministry activity on a grid.  On one axis of the grid is the need of the ministry for the parish and on the other is the quality of that ministry.  A final element to the evaluation is to assign how much each ministry costs.  The goal is to fund or provide resources to the activities with the highest need and eliminate those that are costly and are needed as much.

 

It seems easy enough but the process largely depends on perceptions and there is an element of turf protection as well.  Ideally, we will have a constructive dialogue and assess how we can become an even more efficient parish.

 

In addition to this exercise, we are also doing what most other companies are doing, freezing pay, looking at potential staff reductions, decreasing benefits, and freezing expenses as much as possible.  The problem we may face is that we will come to realize that what we are providing is needed more now than it has been for a few years, and by cutting, we won’t be able to help those who need it.

 

There has been some discussion on how we might approach both assessing and maximizing our potential income but realize in doing to we may come across as being oblivious or unsympathetic to the difficult financial realities confronting our donors.  

 

Of dire concern to me is what is down the road.  If our giving decreases by 8% this year from last year, will it take four years to get back to where we were last year?  Typically income has increased by a little less than 2% per year and so assuming economic things get righted, will people start giving dramatically more (back to their ’07 amounts) or will they start the 2%?

 

In the end I think we are going to have to fundamentally rethink the way we do business around here.  I’ll keep you updated if I’m still employed.

Dollar God

It’s all the more apparent to me that our true religion is money.  What we are selling here at the church isn’t being bought as much because more and more people worship money.

I guess I thought maybe there would be a realization after the investment crash that worshipping money isn’t ‘all that.’  I guess I would think that when people started to see there investment house of cards start to fall that maybe it would get them to consider investing on a more lasting and even eternal basis.  I think we are going the opposite direction quickly.  We are all spending more time worshipping money to rebuild the house.

In the midst of all this, I start thinking about the priests and prophets of our money religion and can’t help but conclude they are decidedly ineffective.
 
If these money priests and prophets are honest, they would say they really have no idea where the markets are going.  I’m not talking about saying whether a stock or the market will be up or down tomorrow or next month, they should just use all those fancy computers with six or seven flat screen monitors to figure out whether the market is over valued or under valued on six or twelve month basis. 

They take people’s money and tell them they have the knowledge and information to outperform the market (they don’t tell people to buy a risk appropriate collection of index funds do they?).  The real irritating thing about these priests and profits of the real religion in America is that there’s at least five different layers and none of them is adding any value as far as I can tell. 

You got your local investment advisor guy who gets his investment recommendations from some local/regional/section manager who gets his advise from some national guy who recommends products who are management by investment strategists overseen by corporate investment managers and they are all getting a little slice of the pie under the premise they are going to do better than the index funds. 

Is your collection of known and unknown advisors treating you well?  With all those layers of people making their livelihoods off the premise that they know where, when and how to invest you sure would have to believe that someone along the line would maybe have a sense for when the market might be overvalued.  What value do they add if they can’t predict on 12 month basis the probability that the market is under or over valued?  Anyone get the advice to move money to cash?  “Buy and hold quality investments, invest in the long-term, you’ll lose if you try to time the market, blah, blah, blah.”

The good news for all you, my many readers, is that you will probably get to enjoy this blog until 2038 when I can finally afford to retire although given the growth of money worship, I bet if I set up shop as money priest, maybe it would be sooner.

 

Flat screens project a new reality

I read the news this week from Best Buy about their decreased profits and their CEO saying that it’s a changed reality.  From what I read I concluded that Best Buy has determined that people aren’t going to be able or willing to buy the big flat screen for quite awhile.

I got the sense that he maybe was saying that the economic growth and apparent propersity over the last several years was fueled in part by people spending a lot of money they didn’t have and those days are gone forever (or at least a long time).   Many have lost the means to buy a flat screen and others with the means are maybe looking at their retirement, nest egg, college savings plan statements and concluding that they will have to put more money in these places because it’s 35% less than it was a few months back.

I wonder too if there aren’t a few people that have started to rethink what’s truly important and what isn’t.  There’s quite a few out there, I suspect that maybe thought a flat screen wasn’t such a bad idea and but then saw the all the turmoil caused by greed and modified their perspective.  Maybe they now thinking – I really don’t want to be grouped with this large group of people who were blinded by the belief that they can have it all now.  

The banks went for high returns because the bankers were going for big bonuses and the people were going for big houses and big toys and the government overseers were too busy playing solitaire and didn’t want to do anything to dampen the pre-election economy especially when we got a war on.  

Maybe Brad Anderson, the Best Buy CEO, has realized some people have seen what has transpired and the overwhelming greed and self-interest that fabricated the house of cards economy we had and have concluded there is a lot to be said for a simpler lifestyle.  He knows maybe quite a few people out there aren’t going to be as tempted as they once were with his adult toy store.  Many have concluded that a flat screen might add some minor value to their life but it isn’t important to them.

Seems the Pope has also concluded that times are a changing.   He was hoping that this economic downturn will be an opportunity to get reacquinted with the fundament joy that Christmas offers that has nothing to do with the material.   I think he’s right.  I think people are modifying there perspectives.  It’s a probably going to be a bummer for the flat screen and electronic retailors, but realizing Christ is the reason for Christmas and every other day, is worth the cost.

 

Constrained Maximization

Given the finite quantity of fossil fuels, I am amazed at how inefficient we are at some things.  As I child, I always thought it would be so much more efficient if we only had 15 different types of cars and trucks.  You could work to perfect models and minimize maintenance and maximize efficiency.  The different types of spare parts, mechanics, and dealerships would be far less and it would make selecting a car so much easier. 

I realize that limiting the type of cars runs against to our capitalistic culture and economy.  I also realize that if there were not sufficient competition, the limited car theory, would lead to fewer jobs, crappier cars, and a smaller economy.  However, if you could insure competition, there would be such a huge savings in the use non-renewable resources.

We don’t have enough oil to go around and so you’d think we would become collectively outraged at things that waste oil and resources but I think we are a long way from that point.  We don’t scoff at the person forever driving around an inefficient vehicle like a big truck without any passengers or payload.  No one is apparently appalled at NASCAR’s wasting gas by having extemely inefficient cars run around and around.

One thing that has started bothering me more and more is the amount of waste in packaging.  Maybe as Halloween creeps closer and I see more and more candy circulating in small bags, and begin to wonder more and more if there isn’t a better way.  There are ten M&M’s in a little bag, that is part of a bigger bag, that was part of a box, that was stacked on a pallet.  What if we just sold M&M’s in bulk?  You bring your own vessel (bag, glass jar, M&M dispenser) to the store and fill it up and you only pay for the M&Ms and not the added paper/plastic/printing/cardboard/wood necessary in the bite-sized Halloween packing version.  You’d have to think it’d be way cheaper and there would be a lot energy saved in the process.

My problems with packaging do not stop with M&Ms – there is cheese (or I should say a cheese product) wrapped in plastic individually, there are chewy granola bars packed in a wrapper that is too big and put in a box that’s way to big all to make us feel like we are getting more for our money when if fact we are getting less, and there are boxes of ¾ full cereal.

One final issue I have with wasting resources is mailing.  I was at the cable store last week and there was a guy in there mad because the cable company sent him what amounted to junk mail.  He was arguing it was a waste and he doesn’t want to pay for it.  The customer service rep insisted he wasn’t paying for it.  He countered by asking who is paying for it then?  The ensuing heated conversation highlighted an inability of the customer service rep to understand consumers pay all the costs for what a company does even though it might not be itemized on their bill.

I remember this conversation as I went through my mail and pushed most of it into the throw away without opening pile.  Sure, my credit card company isn’t charging me the $1 it costs me to send an offer for something, but I am certainly paying for it one way or another.  Obviously, the credit card companies must make more than it costs but this can only mean they are charging too much.

Chainsaw happiness by default

Back when I started high school, it was encouraged that you take a typing class so that you were equipped to effectively complete all the papers you would have complete during the remainder of your academic career.  I heeded to the pressure and took typing class.  I regret it somewhat because it was the lowest grade I ever received and I probably could have more efficiently picked up the skills by spending time practicing by myself. 

There are several lasting memories from that class.  One is that our grade was based on how fast we could accurately type and on how accurately we reformatted/typed a lengthy paper.  I did okay with typing speed but no so great with accuracy.  I wasn’t alone. As the end of class approached, I should have done what many students did, and dropped the class.  They picked up the typing skills but didn’t wreck their GPA in the process.

The second vivid memory I have from the class is that the standard page margins were one inch on the top and left, three-quarters of and inch on the right, and a half inch on the bottom.  I am not sure how are why these were the standards, but that’s what they were.

Now leap forward several decades and what is the norm?  Well according to Bill Gates and his Microsoft programming lackeys, the answer is 1.25 on the left and about an inch the rest of the way around the page.  I guess I will have to admit it is a little easier to read a page with shorter lines.  But compare the global cost of additional paper with the nearly insignificant benefit of greater ease in readying and, as any salvation economist who is worth his salt would tell you, there are telltale signs of a conspiracy.

Where is Microsoft based?  Washington.  Where do they harvest a ton of trees?  Washington.  I think the only reasonable conclusion is that some lumberjacks called Bill one day and very subtly hinted that they have sharpened axes and chainsaws and know where his family lives.  Bill quickly concluded supporting the paper industry by making a change to the default page margins was probably a good thing to do.

Insofar as I am fairly certain lumberjacks do not read this blog, I am encouraging you to change the default margins on your word processor and do your part in decreasing paper consumption.

 

Optimal Capital Structure

I have been taking a class in finance this semester and the current topic is optimizing the capital structure of an organization.  The class strategy basically involves how much debt, stock, and preferred stock a company should have so that its cost of capital is as low as possible.  In that there is a tax advantage to having debt, the correct combination typically involves assessing how much debt will cause a company to be viewed as risky because at that point all of their sources of capital can get more costly.

So I was trying to figure out if there was any correlation between this corporate strategy and anything I would apply to my job in the church.  We don’t pay taxes and so from that perspective there is not advantage in debt.  I wondered then what is the advantage of debt since a large number of church’s have debt there must be some advantage, right?  Is having a new something (building) worth being only able to use 85% of the contributions for the next 30 years?  Would you be better off using the existing facilities and saving some to meet the costs up front?

Then I started thinking about the other side of the equation, how much cash should a church amass if any?  Obviously, you want to make sure you are going to meet your payroll obligations and can pay the heating bills.  But how much should be kept in reserve?  People don’t give their money so that it can be piled up in some bank somewhere and yet they don’t want their church to have to beg the bank for money to pay bills if the contributions don’t come in as they were forecasted.  Where is there an appropriate balance between having faith and being prudent? 

I think we are trying to get three months worth of expenses saved before we try to spend 100% of what we collect.  Our parish is near this point and so the question has now become what should we do if money accumulates over this three month’s expense threshold?  You have to be careful when you choose to increase your expenses because the trends show that expenses increase faster than contributions for most years to begin with.  So if you add a recurring expense that expense will grow faster than the contributions that pay for it.

My final thought was wondering how much a parish should give.  Some parishes take their 10 percent tithe and give it to other organizations.  They are ‘setting and example’ for parishioners to use.  I guess this might make sense but I guess it might make more sense to let the parishioners give money to the organizations themselves since you are re-giving their contributions in the first place. I suspect that most parishioners who give to the church give to other causes and to give more of their money to other organizations seems like it’s redundant.

Signal to Noise

I have been thinking about the value of things and putting them in the context of signal (things that have the most value) to noise (things that have lower or no value or can actually have negative value).  The evaluation I have been doing started with thinking about what happens at church.  So given the vast and numerous activities which of these have the greatest value and which do not?  Maybe more importantly which activities diminish the value of other activities.

More specifically, I was asked to work on a policy for when the parish should allow someone or some group to solicit restricted gifts.  Let’s say I want to install a statue and think I can find people to write contribute for this and so can I do this or not.  When should this be allowed and who and how does this decision get made. 

After some analysis I linked the solicitation of restricted gifts to fundraising activity in general.  Fundraising is essentially asking for money for a specific purpose and so whether you are selling cookies or asking for a contribution for a statue, you are largely doing the same thing.

As I started to think about how fundraising decisions should be made and establishing a basis for why they should or should not be allowed, I started thinking about whether much of this activity isn’t noise.  No doubt these activities benefit many groups and many people but do they represent a harmful introduction of commercial and material activity into a place that should be mostly about spirit.  Shouldn’t we be a shelter for the rampant and stress inducing commerce everywhere else in our world?

Does hosting a sale or having a second collection nearly every week inhibit our mission of spiritual development? In what ways do these things add value and in what ways do the diminish the value?

As I thought about this reality, I started thinking about a very similar parallel in my life.  How much of my time and energy go into commerce and detract from time spent developing relationships?  What is the signal in my life and what is the noise?  Maybe I need to establish some policies for my own decision-making to ensure I am not spending too much time “fundraising” at the expense of what’s most important.

Screw it

I need a decent car.  I am tired of my car and everything it represents.  I need a nice car.  I work hard and life is short.  You can’t go driving around a piece of crap in this city and expect any amount of respect from even the lowly.  I have to have a decent ride.  I am an educated person.  I’ve worked without a break to generate varying amounts of income since I was in sixth grade – I deserve a larger slice of pie.

I don’t participate in the so-called American dream on so many levels the least I can do is lease of respectable car.  Lease rates are seem low – come up with a little front end scratch and drive a nice, respectable car for three years.  I’d have way more dignity.  People would respect me more. There would be a far brighter light shining down the highway of life.

Then again, maybe I am shooting too low.  My whole life I have lived a budget existence and now it’s time to worry about numbero uno.  I am going to test drive a BMW, a Cadillac Escalade, and a Lexus. And I am going to sign up for a three year lease on the car that best gives me a distinct sense of self-worth and importance.  I am leaving right now and I am going to start my test drive at the Lexus dealership on Highway 12 and I am going to work my way down 394 until I get to the Jaguar dealership on Washington Ave.  Give me a pen and the keys, I’ll sign, I swear I will.

Screw this. Screw eating real and metaphorical meals of peanut butter sandwiches and ramin noodles. 

I need to foist the economy and do my part.  If I do my part to repair the economy, I got to believe that my income will eventually increase to the point where I can swing the $700/month lease payment.  Someone has got to be courageous and willing to take a chance.

Screw it all and screw Eddie Vedder whose song will not leave my head…

It’s a mystery to me
we have a greed
with which we have agreed

You think you have to want
more than you need
until you have it all you won’t be free

society, you’re a crazy breed
I hope you’re not lonely without me

When you want more than you have
you think you need
and when you think more than you want
your thoughts begin to bleed

I think I need to find a bigger place
’cause when you have more than you think
you need more space

society, you’re a crazy breed
I hope you’re not lonely without me
society, crazy and deep
I hope you’re not lonely without me

there’s those thinking more or less less is more
but if less is more how you’re keeping score?
Means for every point you make
your level drops
kinda like its starting from the top
you can’t do that…

society, you’re a crazy breed
I hope you’re not lonely without me
society, crazy and deep
I hope you’re not lonely without me

society, have mercy on me
I hope you’re not angry if I disagree
society, crazy and deep
I hope you’re not lonely without me

I saved $510 on a faucet…

I saved $510 on a faucet…imagine how much I could save on a war.

I went to Lowe’s last night to get a furnace filter and decided to get a bathroom faucet since we have one that has been dripping for some time.  The bad news was I didn’t find the furnace filter I needed but the good news was I saved at least $510 on a bathroom faucet.

I saw the one I really liked and it was going for $538.  It was really nice and there were many others that were between that price and $300.  I liked a lot of them but decided I just needed a way to get the water from my pipes into the sink and be able to mix the hot and cold to the right temperature.  Turns out Lowe’s had a huge number of other options.  I ended up getting one on sale for $29.  I am confident it will regulate the flow of water from my pipes to the sink as well as allow the user to adjust the temperature. 

On the way home I was listening to the radio and there was a interview with a Nobel prize winning economist.  He was talking about the true cost of the war in Iraq.  According to his conservative calculations, he put the figure at $3 trillion.  This is a lot more than typically sited figures but I thought about it and numbers beyond a billion get pretty abstract unless you tie them to alternative realities or boil them down to a family or individual level.

Here’s a little quick math – let’s assume the number $3 trillion is write or will be right before Iraq is financially independent (hard to imagine but try it).  If there are 250 million Americans that would mean for every billion spent, we each would have to pay $4.  So a trillion is a thousand billions so each of us owes $12,000 for a $3 trillion war.  There are five people in my family so that’s $60,000 to me.  

Now if someone came to me and asked for $60,000 and said they needed it to fight terrorism.  I’d say $60,000 is a lot of money, how are you going to make me $60,000 safer?  I not necessarily against the idea of spending money to be safe and free but I’d want to make sure there is a sound strategy in place and that the $60,000 is going to be spent wisely and not wasted.

I guess my fear is that we bought the most expensive $538 faucet and what’s worse is that it isn’t regulating water to the sink very well.  Moreover consider all the threats to the American way of life and the American standard of living, what problems are going unaddressed because we spent $3 trillion on a war in Iraq? 

What if we said the best way to project ourselves is to substantially increase our spying activity and maybe spend some money on controlling who can get walk into the United States over the Mexican border (I am not against undocumented workers but it seems odd that we are “fighting terrorism” and yet any number of terrorists could be crossing the Mexican border to eventually do as they please.  Did you hear the story about the guy in Vegas with the caster beans who died of ricin poison?  So what’s to stop someone from walking across the Mexican border, buying some caster beans, baking up some ricin, and throwing into the air conditioning system of a big building?).

So you undertake these two projects and maybe you have $2.5 trillion to decrease our dependency on oil, improve the quality of education (and improve our competitiveness in the world economy), decrease the gigantic and rapidly growing federal debt, improve the solvency with the social security and Medicare programs, maybe help people keep their homes, and maybe spend some money on fixing bridges and other infrastructure.