Your Take Column

Every Friday morning I post a “Your Take” article in which I share my opinion on a particular subject and ask for yours. While I hope readers always share their thoughts, Your Take is more like the start to a conversation, a kick-off if you will, rather than an article in the traditional sense. I hope that you share your opinions about some of these subjects as I’m always interested to hear other people’s perspectives.


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Your Take: Do You Get a Flu Shots?

Influenza VaccineI get a flu shot every year. I visit my doctor, pay my $10-15 or whatever it is, and get my shot in the arm. In some years, out of convenience, I get it at Costco or some other place, but generally it’s with my regular doctor and it’s not really a big deal. A few days of soreness in the arm and I’m on my way.

You’ve probably read all the news that this year’s flu season is going to be a particularly nasty one. I have a few friends who have already come down with it and having gotten the flu in the past, I know it sucks. You feel heavy, everything hurts, and you sleep all day but never feel rested. I get a shot because I figure it’s ten bucks to have a pretty good chance of avoiding it.

I also know people who never get the flu shot, in part because they say they never get the flu. That strikes me as a pretty bad reason but I’m not in the business of trying to convince people to get flu shots so I usually just let it go. In all the times I’ve driven, I’ve only ever once gotten into an accident (someone ran a red light) but I wear a seat belt each time. But it’s all a matter of personal choice and I don’t judge, I am, however, curious why some people get a shot and others don’t.

I get it because I would rather pay $10 for a 50% chance at avoiding a flu that knocks me out for 4-5 days. That’s my logic and I know that the flu shot isn’t 100% protection, so I peg it at 50%. It’s probably higher but at 50% it’s still worth it to me. Heck, I’d pay $100 for a 50% chance to avoid 4-5 days of suck.

Do you get flu shots? Why or why not?

(photo: scelera)

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Your Take: WSJ’s Image of the American Taxpayer

Sad Rich People

So the Wall Street Journal ran an article earlier in the year, just after the fiscal cliff was “averted” and the American Taxpayer Relief Act was passed, in which they talked about how much your taxes will go up. I don’t read the WSJ all that often but I was a little surprised how out of touch they were with this graphic.

Let’s see who the WSJ chose as their “example people.” The first person in the top right is a single parent with two children who makes… $260,000 a year. To the right you’ll see a retired couple who makes $180,000 a year. In the lower left there’s a single person who makes $230,000 and then you have the family of six (!!!) making $650,000.

Surprisingly out of touch with real life… what do you think when you see this?

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Your Take: Ending Employer Health Care Tax Deductions

No one should go without health careIt’s the new year and, given the results of the fiscal cliff negotiations, I thought this item from NPR’s six policies economists love but people hate was worth discussing. Here’s the item:

End the tax deduction companies get for providing health-care to employees. Neither employees nor employers pay taxes on workplace health insurance benefits. That encourages fancier insurance coverage, driving up usage and, therefore, health costs overall. Eliminating the deduction will drive up costs for people with workplace healthcare, but makes the health-care market fairer.

The story goes that many years ago, when wages were fixed, employers started offering health benefits to their employees as a way to increase compensation without increasing actual pay. You pay a little but the employer pays much more but gets a deduction against revenue. The argument in favor of this policy is that it’s important for people to know what they’re getting (which was partially addressed in the health care reform law and now benefits are listed on your paystub, though you don’t pay taxes on it) and that you start avoiding “Cadillac” coverage simply because businesses can write off the cost.

(click here to continue reading…)

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Your Take: Holiday Travel Plans This Year

Traffic JamI was reading that 40% of residents in the Washington D.C. area plan on traveling for the holidays, not surprising given the presence of the federal government, and 90% of the 2.3 million people in the area plan on leaving by car. AAA’s annual survey reported these results earlier this week and given how many cars are in the area (the D.C. beltway is always a mess), It’s guaranteed to be some massive gridlock as people bolt.

We’re going to be staying put with family visiting us. We swap out travel time with cooking time but I think that’s a fair trade. I enjoy cooking more than I enjoy sitting in traffic or taking my shoes off at the airport so it’s all good here.

How do you plan on traveling? By car, train, boat, or airplane? And far will you be traveling? I’m curious who will be traveling the farthest or the most this year!

(Photo: Andreas)

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Your Take: Doing Anything Because of the Fiscal Cliff?

Taxes Form 1040As we near the end of 2012, the fiscal cliff is becoming bigger and bigger news. If nothing’s done, taxes will go up for everyone and we’ll have another fine example of politicians being politicians. Remember, this was something completely man-made. They did this in the debt ceiling debate because they figured that something this drastic would never actually happen. It would be severe enough to spur politicians to agreement and it appears, as the days pass, that they underestimated their ability to recognize great pain.

Unfortunately for everyone else, there really isn’t much that we can do about it. When you combine the uncertainty of a deal getting done and the certainty of tax rates going up, I’ve been mostly on the sidelines in terms of changing anything specific. I have sold stock holdings I’ve had for several years but the logic behind them has been mostly housekeeping, not taxes. A few of those holdings I sold because I wanted to capture those gains (and harvest as many losses as I can) since taxes on long term capital gains will almost certainly go up, deal or not.

Other than that, I haven’t done much of anything else. Have you done anything because of the fiscal cliff?

(Photo: aidanmorgan)

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Your Take: $250,000 vs. $500,000 vs. What Is Rich?

CurrencyHere’s an interesting question that popped up in my head as a result of Warren Buffett’s op-ed last week – should the bar for “high income” be at $250,000, $500,000, or some higher value? Should the bar be at a dollar amount relative to median income or should it be a calculated based on how many taxpayers it would capture?

In 2008, 4.3 million tax returns had an AGI above $200,000. That represents 3% of the total returns that year. Median income for 2008 was $52,029, or approximately one fourth of that figure.

My feeling is that we should probably tie our tax returns more to the median income, rather than calculating approximately how many people it will affect. I think $250,000 and $500,000 are simply nice round numbers people like to use but the reality is that very few people make over $200,000. 3%. Three people out of a hundred earned more than $200,000 in 2008 (granted, I know things can be deferred and there are other games to play but let’s keep it simple).

This makes me wonder… does it matter? There will be so few people, percentage-wise, that are affected if the bar were set at $250,000 compared to $500,000 that I hope this isn’t a sticking point!

What do you think? Where do you think the bar should be?

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Your Take: Warren Buffett’s Proposal – Minimum Tax for the Wealthy

TaxesWarren Buffett wrote an op-ed piece in the New York Times on Sunday in which he argued that there should be a minimum tax for the wealthy. His argument for a minimum tax hinged on a variety of reasons but the first one stuck out for me (the wealth gap reason is another powerful one) – most people don’t decide whether or not to invest in something based on the tax rate. An investment is either good or it’s bad. How it is taxed, or how much of it is taxed, only comes into play at the margins. I’m by no means wealthy but when I approach an investment the first thought isn’t – do I want to do this because my long term capital gains rate may go up from 15% to 20% next year? Do I want to do this because it’s taxed at ordinary income tax rates instead of long term capital gains rates? It’s probably not what you do either. Taxes play a role but it’s often to help determine what I invest in, not whether or not I invest.

I pick stocks with qualified dividends because I know those dividends will be taxed at 15% instead of my marginal rate, which is much higher. If long term capital gains rates disappeared tomorrow, I’d still invest in dividend stocks. For some of my savings, I’d rather take a yield of 3-4% of dividends taxed at 25% than have them sit in a 0.9% savings account taxed at 25%. I know there is greater risk in stocks, over savings accounts, but there’s also greater gains. The lower rate does impact how much I invest but that’s really at the margins. I suspect most wealthy people aren’t really spending that much time playing with dividend stocks yielding a few percent. :)

What is Buffett proposing? A minimum tax on income above a certain amount – 30% of taxable income between $1 – $10 million and 35% on amounts above that. No need to muss or fuss about deductions and whatnot, just a simple rule that all income above $1 million is taxed at a certain amount. He’d also like to extend the Bush tax cuts for everyone making under $500,000 (up from President Obama’s line at $250,000). I like the simplicity of the rule and I think the goal is reasonable – try to bring in revenues of 18.5% of GDP while spending 21% of GDP (I’m not a government budget expert so I don’t know how reasonable those % figures are).

Finally, I really enjoy reading everything Buffett writes. I enjoy his humor and how simple he makes things when explaining it. If you aren’t a regular reader of his shareholder letters, do try reading a few.

What do you think of this plan?

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Your Take: Legalize Marijuana?

Medical MarijuanaNow that we’re past election season and all the fun Your Takes associated with that, I wanted to revisit an NPR piece on six policies economists love but politicians hate. Several of the six policies have made appearances on a Your Take but I wanted to jump to the juicy one next – should we be legalizing marijuana? Medicinal marijuana is already legal (or effectively decriminalized) in nineteen states. As it stands right now, the federal government has cannabis as a Schedule I drug – the same classification as heroin and LSD.

Here’s the policy that economists would love:

Six: Legalize marijuana. Stop spending so much trying to put pot users and dealers in jail — it costs a lot of money to catch them, prosecute them, and then put them up in jail. Criminalizing drugs also drives drug prices up, making gang leaders rich.

The argument is that marijuana is not as dangerous as other drugs, certainly not as dangerous as heroin and LSD. The money we currently spend on drug law enforcement could be used for other purposes. We would be able to generate more tax revenue if we taxed the sale of marijuana and we’d also be able to make it safer by regulating it, as we do with nicotine. Lastly, with it being legal, it would be cheaper and it would take all the criminality out of the economics. Cheaper marijuana means lower profits for dealers and less motivation for the crimes that are associated with it.

While nothing is ever as simple as that, I think legalizing it (especially when cigarettes are legal) is a sensible idea.

What do you think?

(Photo: caveman_02223)

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