The Housing Bubble

It IS a toothpick!

“We’re smoking dog shit!?”

‘I’m in a band, too, man. I’m a lead singer, man.’

‘That’s hip, man.’

‘We play everything from Santana to El Chicano, man.’

‘The AtomicWorkers™ Advocacy Group are the experts in our field. We’ve successfully handled over 2,000+ claims for former civilian workers and their families from the Rocky Flats, Grand Junction, Nevada Test Site, DOE/AEC National Labs including Los Alamos, Lawrence Livermore, Sandia ABQ, Brookhaven, Savannah River, Hanford and other DOE facilities’

http://www.atomicworkers.com/?gclid=CLG3-d7c_scCFUdqfgodr_oM1Q

‘By the time the plant 16 miles northwest of Denver was shut down in 1989, its environmental legacy included plutonium fires in 1957 and 1969 that wafted toxic smoke over the metro area. Leaking barrels of radioactive waste and other small accidents had contaminated downstream communities to the south and east.’

‘Now, nearly 25 years after the shutdown, most of Rocky Flats is considered safe, and the vast open spaces at its edge are among the few large areas still available for development on the west side of metro Denver. A massive residential and commercial development called Candelas is underway.’

‘Now, the mostly empty acreage at Rocky Flats forms a stunning backdrop for bordering residential development, including the 2,000-acre Candelas neighborhood in west Arvada, about 1.3 miles south of where the plant once stood. It could one day have more than 4,000 homes — priced from $300,000 to $1 million — developers’ literature says.’

“What really horrifies me is that they’re building houses around Rocky Flats, and nobody even knows what it was,” said artist Jeff Gipe, who now divides his time between Colorado and Brooklyn.’

http://www.denverpost.com/news/ci_25095991/former-rocky-flats-site-stirs-concerns-some-neighbors

Isn’t radiation cumulative? I may skip this one.

This is going on in my Community. We have an area that is contaminated from the tailings of a uranium mine that was around in the 1890s.

The developer refers to the designated radon laden hot spots as “natural occurring rock”. There was a State funded study done on the area in 1997 and the conclusion of the entity that authored a final report was that the area should never be used for development.

However, the developer continues his move forward.

It feels like I am involved in a sort of whack-a-mole game with the clowns that always try to deviate from the Town ordinances and develop around here. Knock down one right here and another springs up over there.

Sigh.

“What really horrifies me is that they’re building houses around Rocky Flats, and nobody even knows what it was,” said artist Jeff Gipe, who now divides his time between Colorado and Brooklyn.’

Given that so many have moved here that isn’t surprising.

Good article on Uravan, a former uranium mining town in Colorado, that had to be evacuated a couple decades ago.

http://www.newyorker.com/magazine/2010/09/13/the-uranium-widows

That Washington State landslide which killed 43 people last year was in an area well known to locals as being unstable. They built on and around it anyway:

https://en.wikipedia.org/wiki/2014_Oso_mudslide#Controversy

These houses in the middle of nowhere are investment vehicles. If you can just get someone to sign on the dotted line to promise to pay, then that promise to pay is turned into a de facto government security when it’s sold to or insured by the government. With a healthy profit for the middlemen.

The person who promised to pay? Well, perhaps they can sell the house for more. But unlikely they’ll make an actual profit, considering maintenance and interest (carrying) costs.

“They built on and around it anyway: …”

Is that legal?

Developers around San Diego play the same game…i.e. build on an old landslide, which typically doesn’t turn out to be a problem until a couple of decades later when half of some poor sap’s backyard subsides by 20 feet.

CRATER!!!

News 8 - La Jolla Collapse: Massive Landslide Destroys Homes
Uploaded on Oct 4, 2007

Dozens of city workers remained at site of a landslide Thursday morning, monitoring the area for signs of fresh slippage and keeping evacuated residents from returning home.

“…happening for some time.”

The reporter says this as though talking about a few weeks, months or years. In reality, the Mt. Soledad landslide has played out over the course of geologic time — i.e. far longer than the history of modern real estate development in the area.

San Diego is a city with a long history of corrupt real estate developers.

Geologists Say La Jolla Landslide is No Surprise
Thursday, October 4, 2007
By Ed Joyce / Capital Public Radio and KPBS Public Broadcasting
Aired 4/19/09
(Photo: A landslide has caused a massive, approximately 200′ x 240′, sinkhole to open up and tear apart the pavement of Soledad Mountain Road, destroying two homes and forcing the evacuation of at least 100 others. Kent Horner/Getty Images.)

The landslide on Mount Soledad Mountain Road in La Jolla is an event geologists say is part of a continuing pattern over many decades or millions of years. KPBS Environmental Reporter Ed Joyce tells us the hillside has a history, a long history of activity.

San Diego City Geologist Rob Hawke describes the slide area this way.

Hawke: We’ve had past failures in the area. This one seems to be where we’ve got some geologic conditions that allowed a large block of land to slide off the side of the hill, much like a book off a tilting bookshelf.

Dr. Pat Abbott, emeritus professor of Geology from San Diego State University agrees. He says it’s a bad area for homes.

Abbott: So you have a highly unstable situation here. Weak rocks, slanted up the same as the hillside with gravity pulling on them. There’s no geologic surprises here. The only surprise is why would you build here to begin with.
…

“…over many decades or millions of years.”

It amazes me that an NPR reporter could confound ‘many decades’ with ‘millions of years.’ The respective time spans are not at all similar.

Got stoopid?

could confound ‘many decades’ with ‘millions of years.’ The respective time spans are not at all similar

Kind of like the people who can’t comprehend that burning/releasing hundreds of millions of years of stored carbon over a couple of centuries is gonna mess with our ecosystem. The respective time spans are not at all similar.

“…burning/releasing hundreds of millions of years of stored carbon over a couple of centuries is gonna mess with our ecosystem.”

Not a good analogy, sorry.

Not much of a counter-argument. Sorry.

named “Fester”.

Funny!

+1

One thing that really stood out in my UK trip was the dearth of traffic lights or even stop signs (actually, I don’t recall seeing a single stop sign while I was there).

Also “intersections” were very rare. It was roundabouts everywhere. Upon returning to the USA I find waiting at red lights to be irritating.

Anyway, they can do it now without automation. The one big advantage I could see for long commutes in self driving cars is that you can work in your car while it drives you to the office.

Theoretically, we wouldn’t have stoplights if all cars were computer driven.

Computer cars auto-negotiating intersections is the same as Yield or Stop. That’s fine as long as traffic isn’t too heavy. At some volume a stoplight is more efficient by moving whole packs through at a time. I think you’d see traffic lights become part-time and volume activated.

Hopefully all these computer driven cars will have a sensor that tells them I am driving a vintage truck, so they get out of the way!

No, you don’t even need the cars to stop. Have you ever been to a figure-8 race? The cars will be spaced out enough prior to the intersection that they will cross through each other without stopping at all, in-between cars. It will be freaky as a passenger (much as it was for me, the first time I experienced a British roundabout at highway speeds).

It will be freaky as a passenger

They won’t notice, they’ll be texting.

“Theoretically, we wouldn’t have stoplights if all cars were computer driven. The cars would communicate with each other, slowing down or speeding up as needed, allowing them to pass through intersections without stopping.”

Sounds like you expect computers to soon be smarter than people. The future may prove me wrong, but statements like yours strike me as an example of the proverbial ‘pie in the sky.’

“They won’t notice, they’ll be texting.”

And it will be legal for them to text, as computer motorists will be smart enough to text without succumbing to distracted driver’s syndrome.

“Computers will make lane changes and merges much smoother and avoid heavy brake usage by other cars — that’s what slows the pack down and triggers congestion.”

I’m already doing that, but unfortunately the other maroons on the road aren’t cooperating.

“…what slows the pack down and triggers congestion.”

Silly me. Here I had thought all these years that what triggered congestion was too many cars per mile of roadway. But with computerized vehicles, that problem will vanish, as we will all be sitting at home or traveling on vacation while our robots drive to work for us and carry out our work duties after arriving in half the time it would have taken us to drive to work in the olden daze.

Computer driven cars are already beating race car drivers.

Robots take the chequered flag: Watch the self driving racing car that can beat a human driver

It could be bad news for professional race car drivers - a self driving car has beaten one of their ranks for the first time.
Researchers at Stanford have been working with Audi to develop a high speed self driving car.
The team has designed an Audi TTS dubbed ‘Shelley’ which has been programmed to race on its own at speeds above 120 mph at Thunderhill Raceway Park in Northern California.
In its latest test, it was pitted against David Vodden, the racetrack CEO and amateur touring class champion - and was faster by 0.4 of a second.

Read more: http://www.dailymail.co.uk/sciencetech/article-2959134/Robots-chequered-flag-Watch-self-driving-racing-car-beat-human-driver-sometimes.html#ixzz3m3bnnGGo
Follow us: @MailOnline on Twitter | DailyMail on Facebook

You can’t scale up a limited amount of driving experience for a small number of computer-driven cars to how a large transportation system populated by computer-driven cars would function. The Law of Rare Events kicks in when many, many trips take place with a small risk of bad outcomes on each.

“…a self driving car has beaten one of their ranks for the first time.”

It should be no problem for robot cars to beat human opponents given the human driver’s everpresent subconscious distraction of a fear of death.

I meant the wizards at the Fed. As for those here, I can only speak for myself.

I didn’t think you meant to cast aspersions, just clarifying. I think most here are quite smart!

The most accurate predictions are those which “predict” something which is already true but not widely known.

From your mouth to Gods ears. If we get those kinds of rates again I will have so much interest money, I will not know where to throw it. I would be willing to lock it up for life if that was available.

“…in a couple of years,…7% on ten year notes.”

It’s only one data point, but you might consider how long it took long-term (e.g. 10-year T-bond) yields to rise from similar, though higher, levels to current ones back in the early 1950s to above 7% yields. The data back to April 1953 are available here.

Q1. What was the last time before the post-2008 period back to 1953 when the 10-year T-bond yield was as low as its current 2.215% level?

A1. Never.

Q2. How long did it take the 10-year T-bond yield to get from its lowest level from 1953 through 1980 up to 7%?

A2. The lowest level between 1953 and 1980 was 2.29% in April 1954. The first time after that the 10-year yield crossed over the 7% level was in 1969, which was apparently 15 years later.

Q3. When should we expect to again see 7% yields if the timing of rate increases in the present episode resembles that in the 1954-1969 period?

A4. I know this time is different, but a similar current timing to the previous episode of transitioning from cyclical-low rates to over 7% would take us out past at least 2030.

I guess not every country is capable of a bailout operation comparable to the calm, orderly Wall Street bailout of 2008-2015 (so far)?

International Business Times
China Stock Market Crash Handling Is ‘Sloppy,’ Goldman Sachs CEO Says
By Bruce Wright @bctw on September 17 2015 9:24 AM EDT
Goldman Sachs chairman and CEO Lloyd Blankfein is shown speaking at the inaugural Goldman Sachs 10,000 Women/U.S. State Department Entrepreneurship Program for women in the Middle East and Northern Africa, March 9, 2015, in Washington, D.C. Blankfein had some choice words Wednesday for how China has handled its stock market meltdown. Nicholas Kamm/AFP/Getty Images

The way China has handled its stock market meltdown has been “sloppy” and “ham-handed,” according to the most senior official in a leading American investment firm. In particular, China’s devaluation of its currency, the yuan, as well as state-funded share buying in an effort to reverse its sagging economy, hasn’t been quite as efficacious as the country may have planned for it to be, said Lloyd Blankfein, the chairman and chief executive officer of Goldman Sachs Group, the Wall Street Journal reported.

“They don’t have a lot of experience in this market stuff,” Blankfein told the newspaper Wednesday, but at least Chinese officials do “know what the problems are,” he added. If China can update its markets to modern-day standards, it should be able to overcome the formidable “execution issues” facing the country’s economy, Blankfein added.

The pointed criticism of China’s economy and stock market meltdown, which started in late August when Asian currencies, commodities and shares plummeted to record lows, causing a negative ripple effect across the world’s stock markets, came one day after China’s stocks fell even further Tuesday, CNNMoney reported.
…

“All science is actually useless.”

That’s a tad extreme. The assumption didn’t pan out is all.

The assumption didn’t pan out is all

And of course I could post a ton of quotes from and links to countless scientific articles and from wikipedia saying the opposite (because the scientific consensus disagrees with your position), and you would respond that “they” are distorting what really happened, for their own ends.

So again, we would be faced with a worldwide conspiracy in which most scientists are willing participants.

Those shifty scientists with their fancy numbers. They’re manipulating us all to make themselves fabulously wealthy. It’s disgusting.

“So again, we would be faced with a worldwide conspiracy in which most scientists are willing participants.”

When it comes to Global Warming it’s not most scientists, only 0.3 percent.

“The definition Cook used to get his consensus was weak, the climatologists said. Only 41 out of the 11,944 published climate studies examined by Cook explicitly stated that mankind caused most of the warming since 1950 — meaning the actual consensus is 0.3 percent.”

When it comes to Global Warming it’s not most scientists, only 0.3 percent.

It’s not 97%. It’s almost 98%. Two different surveys.

The false methodology deniers use the fight the 97% can be found here.

97% global warming consensus meets resistance from scientific denialism
The robust climate consensus faces resistance from conspiracy theories, cherry picking, and misrepresentations

http://www.theguardian.com/environment/climate-consensus-97-per-cent/2013/may/28/global-warming-consensus-climate-denialism-characteristics

The Survey’s methodology found here.:

Survey finds 97% of climate science papers agree warming is man-made

http://www.theguardian.com/environment/climate-consensus-97-per-cent/2013/may/16/climate-change-scienceofclimatechange

Our team of citizen science volunteers at Skeptical Science has published a new survey in the journal Environmental Research Letters of over 12,000 peer-reviewed climate science papers, as the Guardian reports today. This is the most comprehensive survey of its kind, and the inspiration of this blog’s name: Climate Consensus – the 97%.

….The survey

In 2004, Naomi Oreskes performed a survey of 928 peer-reviewed climate papers published between 1993 and 2003, finding none that rejected the human cause of global warming. We decided that it was time to expand upon Oreskes’ work by performing a keyword search of peer-reviewed scientific journal publications for the terms ‘global warming’ and ‘global climate change’ between the years 1991 and 2011.
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…..Our team agreed upon definitions of categories to put the papers in: explicit or implicit endorsement of human-caused global warming, no opinion, and implicit or explicit rejection or minimization of the human influence, and began the long process of rating over 12,000 abstracts.

We decided from the start to take a conservative approach in our ratings. For example, a study which takes it for granted that global warming will continue for the foreseeable future could easily be put into the implicit endorsement category; there is no reason to expect global warming to continue indefinitely unless humans are causing it. However, unless an abstract included language about the cause of the warming, we categorized it as ‘no opinion’.

Each paper was rated by at least two people, and a dozen volunteers completed most of the 24,000 ratings. The volunteers were a very internationally diverse group. Team members’ home countries included Australia, USA, Canada, UK, New Zealand, Germany, Finland, and Italy.

We also decided that asking the scientists to rate their own papers would be the ideal way to check our results. Who knows what the papers say better than the authors who wrote them? We received responses from 1,200 scientists who rated a total of over 2,100 papers. Unlike our team’s ratings that only considered the summary of each paper presented in the abstract, the scientists considered the entire paper in the self-ratings.
The results

Based on our abstract ratings, we found that just over 4,000 papers took a position on the cause of global warming, 97.1% of which endorsed human-caused global warming. In the scientist self-ratings, nearly 1,400 papers were rated as taking a position, 97.2% of which endorsed human-caused global warming. Many papers captured in our literature search simply investigated an issue related to climate change without taking a position on its cause.

Our survey found that the consensus has grown slowly over time, and reached about 98% as of 2011. Our results are also consistent with several previous surveys finding a 97% consensus amongst climate experts on the human cause of global warming.

“97.1% of which endorsed human-caused global warming”

How many stated that mankind caused most of the warming since 1950?

With most of the warming being 0.8 degrees in the last 150 years and none except for the recently doctored numbers in the last 15 years.

Did humans cause some of that 0.8 degrees? Sure but so did dogs. Any climate scientist worth his salt that has seen a dog leave a steaming pile in the winter would have to say dogs contribute to global warming.

In fact I would bet if you sent out a questionnaire that simply asked…Do dogs contribute to global warming? If answering honestly 98% would have to say yes.

But Dog Made Global Warming wouldn’t allow you to wage a war on coal or grease the skids for a carbon tax.

…Do dogs contribute to global warming? If answering honestly 98% would have to say yes.

Use your common sense comparing dogs to man’s complicity in climate change.

The science is there but so is the common sense:

How could earth’s population increasing over 600% in the same 150 years of Earth’s massive industrialization and fossil-fuel polluting period not strongly affect earth’s thin and delicate atmosphere? Dogs would be in this category?

Most climate deniers defy science and common sense.

no denying Lola’s an expert on steaming piles.

no denying Lola’s an expert on steaming piles.

That’s how I can call you out so effectively and so often Clubber.

(Now that was funny.)

Another one of Lola’s steaming piles.

Stick with the data my friend.

Seattle, WA Housing Prices Fall 5% YoY

http://www.zillow.com/seattle-wa-98107/home-values/

That’s still 5-7 times annual income for most areas in the greater seattle area.

That’s right. And 3x over long term historic price trend.

Housing prices have a long way to fall. A very long way to fall.

Just curious, are you in Chicago proper or the surrounding suburbs?

Northwest burbs.

+1 on your post Ben.
I am reminded of the great quote from - yes - Rush Limbaugh - and the nature of the comment is very true for those with power - it is not the money so much as the power these folks are after in my opinion.

Rush quote: “Liberals like Gates and Buffet and their ilk protect their wealth by wrapping themselves in pretense, pretending to oppose the very thing that matters to them most - wealth and power.”

But a recession after a 280% increase in house prices is a different matter.

IDK. The 280% increase was only in Rio in 7 years. Less in Sao Paulo and much, much less in the entire country.

But even in Rio that 280% price increase might not hugely magnify much any Recession imo. The housing bust might work out differently here imo.

This is not the USA. There are no HELOCS in Brazil, no home equity loans, a required 25% down minimum on mortgages, hardly any flipping and if the average stay in a home in USA is 6 years? I’d guess Brazil’s is well over 20 years in a home because a home in Brazil is the “family asset” to be passed down oftentimes generations and about 80% own their homes outright. It’s a far different culture on homes. There will be very few underwater imo because the turnover during the bubble was nothing like the USA and I’d guess the average down payment was around 40-50%.

So acknowledging the above situation, why would a recession be much worse in Brazil because some cities in Brazil were in a big housing bubble and the rest of the country maybe in a smaller one?

‘low-information voters’

And from a Trump supporter. My how things have changed.

… and based on his performance at last night’s debate, Trump is a low-information candidate, I’m afraid. Complexity appears to flummox him, which surprises me, you’d think some of this business deals are multi-layered and multi-faceted…

‘low-information’

Ditto, “right” WPA?

The complexity flummox meme won’t work. He’s got 10 billion reasons for people to think he’s smart.

Trump seemed a bit weak last night. Like he was in over his head when it came to almost any issue. He took a few good punches, too, without much of a comeback, but perhaps it was his strategy to take a few a not lash out at his attacker, as he usual does.

For the first time, it looked like his schtick might not last the entire campaign season.

So have we reached “Peak Trump?”

Trump seemed a bit weak last night.

Physically way out of shape - red faced and sweating. Faded badly the last hour and even complained about standing 3 hours.

Came out swinging hard though. Smartest 110 IQ dude I ever saw at his level. The dude’s a gem!

I don’t have time for a thorough answer, but my support of Trump stems from his refusal to be bought, for his focus on American jobs, and for his willingness to at least entertain some form of public health care for all. If that’s where Trump’s heart is — and stays — , I think that’s more valuable than acing all the quizzes.

The thing I like about Trump is that he says Obamacare has “gotta go” and the he’d replace it with “something terrific for everyone”. And “cheaper too”.

That so cool he’d replace the ACA with something “terrific for everyone and cheaper too”. I mean one less thing right?

And that “Hillary Clinton is the “Worst Secretary of State in American history”. Which shows Trump actually knows Hillary was worse than Christian Herter and Robert Lansing.

The dude’s got a real grasp of history and policy.

She will have to work some hours for food also. And shoes.

Do donkeys get horseshoes?

Here’s what is in style.

http://shop.chimacumtack.com/Donkey-Road-Boots-Donkeyroadboots.htm

Finally! Road boots for your mini donkey. Made like the mini horse road boots these are sized just for mini donkeys and mules.

Driving boots have soles made from spray on truck bed liner and are for used while driving.

Yes, except that higher interest rates will also make it more difficult for developers to build (thus limiting supply). If rents crater, it will be because the economy sucks and we have massive job losses again. Not because of interest rates.

Rental_Fraud,

SFR contractors could shutter operations for 20 years and there still wouldn’t be a shortage of housing.

You don’t know my friend…. you just don’t know.

Won’t higher interest rates create more demand for rentals, as people won’t qualify for mortgages? I’d say that the best time to rent is when everyone else is buying.

Employment is a much bigger driver for rents and home prices than interest rates.

If the job market sucks, people aren’t renting, or buying, they are trying to minimize expenses (and so they double up with friends, move back in with mom and dad, etc.). If people are doing well, they want their own space, and regardless of whether it is ownership, or renting, it drives the cost of housing higher.

Nonsense.

It is supply that drives prices. And housing supply is massive at 25 million excess empty and defaulted houses and housing demand is at 20 year lows.

Get it right.

Data my friend…. study the data.

Riviera Beach, FL Housing Prices Crater 9% YoY

http://www.zillow.com/riviera-beach-fl/home-values/

In addition to them there are probably tens of millions of retired people who never worked for the government.

poll some 50 yr olds
your parents had pensions
current workers get 401k

Boy, there has to be some brass plaque somewhere along Wall Street honoring the guy(s) who thought up the 401K idea.

Think of it. A steady stream of money each month coming in from workers all over the Country deposited into accounts controlled by various fund managers. You get to choose between 8-10 tightly controlled ways to “invest” your hard earned wages and the Wall Street guys get to do pretty much whatever they want with it until you retire.

And they get to do this for thirty to forty years and charge you various fees for the privilege of investing your money or moving it around.

You may of course cash out but you’ll have to quit your job first and your portfolio will lose over 50% of its “value” after various fees and taxes are applied. You might be able to borrow some of it if you fit certain perimeters at a “nominal” 4-5% interest rate.

You can park the money on the sidelines. However, in most cases (if you read the small print in the agreement) the people overseeing your investment can “sweep” your account and continue to play in the casino with your retirement monies.

Jump you f……s, indeed.

I find the idea that a Democrat’s Treasury estimate is off by 10x laughable. Really? Don’t you think Obama’s Treasury would have an incentive to make this number as high as possible?

Remind me who his biggest campaign donors were and who is going to donate to his presidential library and then I can answer that question.

Remind me how many wall street scam artists were thrown in jail.

Remind me how ACA still allows massive profits for the insurance companies.

And for data fun, in 2011, the average tax rate of various income earners was:

Top 1%: 23.5%
1-5%: 17.7%
5-10%: 12.8%
10-25%: 9.7%
25-50%: 7%
50-100%: 3.1%

The Buffett example of him paying a lower tax rate than his secretary is not indicative of “normal”, and is entirely due to capital gains tax treatment. The top 1% pay a higher percentage of their income than everyone else (as you would expect).

The ONLY reason the numbers are skewed downward is due to capital gains tax rates.

So, let’s hit that head on, shall we?

Here is my suggestion:

1. Make all income the same, and lower the marginal rates. HOWEVER, for capital investments, you get to increase your basis with inflation (thus reducing how much declarable income you have the longer you hold the investment).

What this means is that for investment managers, they still get capital gains, but since they have no basis, 100% of it is taxed just like ordinary income.

If you have basis, then you have reduced gain depending on how long you have held the investment.

I know, I know, CPAs are going to get rich doing basis calculations in a partnership setting, but this scheme would fairly adjust taxation, IMHO.

Now, what other loopholes need solving?

Are you a complete moron? We just did.

Jeb 2016! lola@lola

And for data fun, in 2011, the average tax rate of various income earners was:

But…

Poor Families Pay Double The State And Local Tax Rate As The Rich: Study

http://www.ibtimes.com/poor-families-pay-double-state-local-tax-rate-rich-study-1782956

…the poorest 20 percent of households pay on average more than twice the effective state and local tax rate (10.9 percent) as the richest 1 percent of taxpayers (5.4 percent).

TEP researchers say the incongruity derives from state and local governments’ reliance on sales, excise and property taxes rather than on more progressively structured income taxes that increase rates on higher earnings. They argue that the tax disconnect is helping create the largest wealth gap between the rich and middle class that has ever been recorded in American history.

“In recent years, multiple studies have revealed the growing chasm between the wealthy and everyone else,” Matt Gardner, executive director of ITEP, said. “Upside-down state tax systems didn’t cause the growing income divide, but they certainly exacerbate the problem. State policymakers shouldn’t wring their hands or ignore the problem. The

Housing Lola…. Housing.

New Rochelle, Westchester Co. NY Housing Prices Plummet 14% YoY

http://www.zillow.com/new-rochelle-ny/home-values/

Stay on topic, we were talking about all these “loopholes” that only the 1% are able to access.

Only the capital gain “loophole” isn’t really a loophole at all–it’s kind of basic policy. You don’t need to hire an accountant to find it.

Seriously CalifoH20? Capital Gain taxes is the only “loophole” to close?

I think you need to look up the definition of “loophole”.

“loopholes” that only the 1% are able to access.

Like these?

10 Accounting Tricks the 1% Use to Dodge the Taxman

http://www.accounting-degree.org/accounting-tricks/

It’s a sad fact that most of the methods used by the top 1% to evade the taxman are, if not moral, at least allowed within the letter of the law. Hold onto your purse strings as we list the 10 dirtiest accounting tricks the rich use to keep their cash.

1. Real Estate Borrowing
2. Life-Insurance Borrowing
3. Payments in Kind
4. Incorporating
5. Shell Trust Funds
6. Evading the Estate Tax
7. Avoiding Capital Gains Tax
8. Equity Swaps
9. Shell Companies
10. Tax Havens

Now we’re talking. Ain’t Google grand?

Get rid of all of em…Although I would take offense with #1…if you own a piece of real estate, and you borrow money against it and pay interest, shouldn’t that interest be deducted from the rental income? I don’t see how this is a “trick”.

It’s not a “trick” because if you borrow more than your cash equity in the property, you are not allowed to spend the money that you borrow without taking away the interest deduction. It’s called “debt tracing” of a debt financed distribution. You are required by law to only use that money for other investment purposes in order to maintain the investment interest deduction.

In other words, you can’t borrow money against the appreciation in a property and then buy a boat and deduct the interest on the loan. It doesn’t work that way.

I’m surprised they didn’t make 1031 Exchanges a topic…this is a HUGE one…they should have started there.

if you own a piece of real estate, and you borrow money against it and pay interest, shouldn’t that interest be deducted from the rental income? I don’t see how this is a “trick”.

I’m not a real estate guy but I’d say it should be deductible if the borrowed money is used to improve the rental property of the loan.

If the borrowed money is used to buy a new property why should the interest be deductible on a different property? (If it can be.)

Brasil

Here are ten more to add to your list. There are a lot more.

1. income splitting
2. $850,000 capital gains deduction
3. share pass through in kind
4. refundable tax credits for qualified activities
5. research and development tax credits
6. key employee life insurance with csv
7. interest and penalty forgiveness
8. 90% or more qualified, 100% deduction
9. non taxable court ordered settlement to earn income
10. eligible dividends up to $41,000

But, Rio, you know we’ll never see these loopholes closed, right? You know why?

1. They are tucked away in obscure parts of the tax code, and as such, it is hard to get a populist fervor going against them; and
2. They are favorite loopholes of people like the Clintons:

http://www.bloomberg.com/news/articles/2014-06-17/wealthy-clintons-use-trusts-to-limit-estate-tax-they-back

It is much easier (and less costly to those in power) to rally their base for those rich b*stards on Wall Street to pay more in tax through closing of the carried interest loophole.

Although mark my words, if there is such legislation (closing the carried interest tax treatment loophole), you will see significant efforts from two lobbies to get exemptions, or limitations on the loophole closing (which efforts might even be successful):

1. Real Estate–since everyone has a cousin who is the “sweat equity” in some real estate deal, and developers (recipients of carried interest as well) are favorite backers of ALL politicians starting from local levels; and
2. Venture Capital–since VC’s major funding comes from places like CA, MA and NY (Democratic states) and people can make the argument that VCs create jobs and it’s bad policy to increase taxes on investment activity that creates jobs.

So, we’ll be left with closing the loophole for Hedge Funds (guys who only buy and sell stock)–and most of them don’t care anyway, since many of them only hold positions for a millisecond and don’t generate capital gains anyway.

And everyone can celebrate a victory. Hooray!

The interest should also be deductible if you use the loan to purchase the property (which is why it stays deductible if you use it to purchase a different investment property). You just can’t deduct the interest if you use the money for consumption.

Reagan’s tax reform closed that loophole–he took away interest deductions on money borrowed for consumption.

I used to do my own taxes. I no longer do my own taxes.

I would like to have the tax code stripped down so much that I can do my own taxes again. That would be awesome.

The interest should also be deductible if you use the loan to purchase the property (which is why it stays deductible if you use it to purchase a different investment property).

Why deductible to buy a different property? Taxpayers should subsidize investors buying different properties from where the loan is originated? Why?

The interest should also be deductible if you use the loan to purchase the property

But again, why is it deductible to buy a different property? Should taxpayers subsidize investors buying different properties other than from which the loan was originated from?

If so, why?

“And for data fun, in 2011, the average tax rate of various income earners was:”

The percentages you posted are quite misleading without mentioning overall compensation. A 23.5% tax rate on $10,000,000 ($2,350,000 in taxes paid) sounds a heckuva lot sweeter than a 3.2% tax rate on $30,000 (a mere $960 in taxes).

The law is that interest paid on debt used for investing is tax deductible.

Whether the debt is used to buy one property or another is not really relevant.

Let’s say that instead of securing a loan on one property, you have the loan secured by a pool of properties. This is common for property REITs. Just because you can’t tie the loan to an individual property doesn’t make the interest any less deductible.

If you want to remove that deduction, fine, but it should be gone EVERYWHERE (including corporations who deduct the interest from their bond offerings).

The percentages you posted are quite misleading without mentioning overall compensation. A 23.5% tax rate on $10,000,000 ($2,350,000 in taxes paid) sounds a heckuva lot sweeter than a 3.2% tax rate on $30,000 (a mere $960 in taxes).

Yes, but PB, the whole uproar is because Buffett says he pays a lower RATE than his secretary.

A progressive tax system is that you pay a higher and higher rate the more you make…of course you end up with more money at the end of the day if you make more. Unless, of course, if you want to turn the US into a socialist paradise, where no one can earn more than the next guy.

BTW, the highest 1% starts WAY lower than $10MM.

If the person making $10MM is doing so with ordinary income, they are going to be paying a lot more than 23.5%.