SS today

The projections are that social security benefits will be reduced starting in 2032 unless changes are made. This same thing happened in 1983 when the fund was only weeks away from reducing benefits. President Reagan joined up with Speaker Tip O Neal to solve the problem for the next 75 years. First, they raised the SS payroll tax from 5.4% to 6.2% where it remains today. They raised the full retirement age from 65 to 67 for people who were born before 1960. They started taxing 50% of SS benefits for upper income people. They brought all federal employees and those working for non-profits under social security. Their plan only made it 50 years instead of the 75 they projected. The president and congress could get together today and come up with similar solutions.

Obamacare cost

There are 28 million uninsured Americans and this year Obamacare is losing 5 million who will most likely add to the uninsured number. Most people on Obamacare are in the Silver Plan which offers subsidies on monthly premium payments and cost sharing to help with annual deductibles. Even low-income families are faced with a maximum of $3,500 per year out of pocket. Many choose to go without insurance since they can sign up for Obamacare after they get sick. Many other uninsured just go to the emergency room for regular health problems. Most people are unaware that the average person on Obamacare pays $16,000 per year out of pocket and for a family that rises to $21,000. This is surprising to many people because all of the information about Obamacare talks about the monthly premium and rarely mentions the annual deductible. Also, most people have health insurance through their employer and their cost is relatively low.

Income gap

Free market capitalism is the most successful type of government ever created. It gives the freedom to be all you can be. Each person will excel based on their life’s experience which by definition means there will be as many outcomes as there are people. From a worldly standpoint some will be more successful than others which means you will not have equal results. Over time some will amass large fortunes while others will have very little. At some point those who have will, either by choice or by law, take steps to spread the wealth around. The US has reached this point and the time has come to reduce the gap between the haves and the have nots. The vast majority of people are in the low and lower middle-income group and they need a safety net and a leg up. Like President Clinton said, welfare should be a helping hand and not a way of life. There is a need for a way to transfer wealth and there are several ways to accomplish this. One is to change the laws that allow the rich to pass on their estate to their heirs without cost. Looking from the other side the country needs to create new high paying jobs with benefits. Using the new technology along with AI the new jobs will be more productive which leads to higher wages. As the country goes through the process of re-industrialization leading to increased productivity the stage is set to close the gap.

Tariff rates

Tariffs between Europe and the US can be seen in simple ways by picking one item like cars. Tariffs do not include the VAT which in Europe ranges from 16% to 27%. Prior to Trump Europe charged 10% tariff on US import while the US charged 2.5%. Adding the VAT meant that the US paid in Germany 29% including the 19% VAT while the US only charged 2.5% on European imports. Today the rules are quite different. The US now charges 15% tariff while Europe charges zero percent but they keep the VAT. In other words, the import tax between Europe and the US is basically reciprocal.

Border crossings

Looking back many agree that Biden/Harris loss was caused by the immigration policy. During Obama’s two terms the migrant population grew by 1.7 million and in Trump’s first term the population declined by 1.5 million. Under Biden there was a net increase of 8.5 million migrants not counting got a ways and including 425,000 with criminal convictions and 222,000 with pending criminal charges. During Biden’s first year, Fox News had a reporter on the southern border using a drone to film large caravans of migrants crossing into the country but the rest of the news media ignored the problem. Then in the spring of 2022 the governor of Texas began to send migrants to cities in the north and the press then started covering the border. At first the northern cities welcomed these migrants but in time they changed their view. As the migrants caused a shortage in apartments, overloading schools and medical facilities the locals started to question the sanctuary city policy. New York City had a change of heart. Mayor Eric Adams' stance evolved significantly from initially welcoming asylum-seekers to taking a much stricter approach, particularly focusing on deporting migrants accused of crimes and working with the federal government.

Walmart

When citizens cry out that the rich should pay more taxes that is countered with the fact that the top one percent of wage earners pay 40% of all income tax but this is misleading. The rich do pay a disproportionate amount of income tax but many rich have very little taxable income. This is because most of their income comes not from wages but from assets. The children of Sam Walton do not earn wages and thus do not pay income tax. They live off of dividends from their Walmart stock where they pay capital gains tax and pass on their assets tax free to their heirs when they die. The four children of Sam Walton own 4 billion shares of Walmart stock valued at $250 billion. The Walmart dividend is 75 cents per share or $3 billion per year to the four children. They never touch the principal and it passes tax free to their children when the die. An investor who bought Walmart stock in 1972 for $1,000 would have $11.3 million today and if they died this would pass tax free to their heirs. This is because capital gains tax only come into play when the asset is sold. At death it has a stepped-up basis and escapes income tax. They skirt the estate tax by transferring ownership to trusts. The top one percent owns $55 trillion in assets and the government collected only $32 billion in estate tax last year.

Stepped up basis

The major financial result of 50 years of globalization was the movement of wealth up the food chain. The statistics showing the inequities in wealth and income distribution overwhelmingly confirm that there is a serious problem. It is now to the point where young people are beginning to see socialism as a way to redistribute wealth. While the progressive income tax system tries to equalize things by taxing income, this will not work because the super-rich derive their income not from wages but from assets. There are a number of ways to get at wealth created by assets. One is to tax unrealized capital gains. When an asset increases in value there is no tax until it is sold. So, a rich person just holds on to the asset until they die at which time it gets a stepped-up value at the time of death. Uncle Harry bought 100,000 shares of Amazon stock in 2000 at $6 per share and he died last week with his stock worth $65 million. That stock now passes to his heirs with zero income tax and zero estate tax. It the law required that people sell appreciated stock at the end of each year, this loophole would not exist and Harry’s heirs would not be able to start the whole process over again, to pass on to their heirs.