Tagged: money

Net Worth Fighting For

U.S. Income Tax Brackets Over The Past Century

Did the onerous income taxes of the 1950s and ’60s affect the behavior of big-money boxers?  The Atlantic’s Henry Fetter believes so, as he explains in his recent article:

The 1950s was the era of the 90 percent top marginal tax rate, and by the end of that decade live gate receipts for top championship fights were supplemented by the proceeds from closed circuit telecasts to movie theaters. A second fight in one tax year would yield very little additional income, hardly worth the risk of losing the title. And so, the three fights between Floyd Patterson and Ingemar Johansson stretched over three years (1959-1961); the two between Patterson and Sonny Liston over two years (1962-1963), as was also true for the two bouts between Liston and Cassius Clay (Muhammad Ali) (1964-1965). Then, the Tax Reform Act of 1964 cut the top marginal tax rate to 70 percent effective in 1965. The result: two heavyweight title fights in 1965, and five in 1966. You can look it up.

The theory makes perfect sense, and yes, you read that right: back in the ’50s, the marginal rate of the uppermost individual Federal income tax bracket was indeed an incredible 90%!  In other words, after making a certain amount of money, nine out of ten of your hard-earned dollars went straight to the man.  If I had a demotivational font, I’d use it here to type “Ouch!”

In 1965, the top tax rate fell to 70%, and it stayed there until Reagan swaggered into the joint and knocked everyone on their asses.  By the end of his second term, as he gave a parting high five to Bush, he’d gutted the upper bracket to a millionaire-friendly 28% on all earnings over $160,000 – in today’s dollars!  Trickle down, baby!

Three decades later, the Gipper is long gone, but the tax code legacy of Reaganomics lives on.  To illustrate, Weather Sealed’s infographic team charted the historical U.S. income tax brackets for singles, adjusted for inflation, from 1910 to present:

U.S. Individual Income Tax Brackets, 1910-2010

U.S. Individual Income Tax Brackets, 1910-2010. Click to see it big!

The colors indicate the marginal tax rate: black for low, red in the middle, and yellow for high.  The horizontal axis is the tax year, and the vertical represents taxable income, log-scale, normalized to 2010 dollars with the Bureau Of Labor Statistics’ monthly CPI-U figures.  The bracket data comes from The Tax Foundation and the IRS, and the effects of Social Security, capital gains, AMT, and other tax varieties are not included.

Do you know a wealthy someone who’s afflicted by a habitual carping about their income taxes?  Get him or her near a computer, pull up this graph, point them towards the brilliant yellow-orange brackets that run from the Great Depression ’til the Reagan-Bush tag team, and they shall be healed!

State Tax Tweak Show

An Assortment Of Income Tax Oddities

1040 FormThey say that when life gives you lemons, make lemonade.  So what do you do when life gives you an IRS 1040?  Make IRS 1040-ade?  I tried, and there’s no such thing, goddammit!

Up ’til a month ago, I felt the same way about state taxes.  Then, whilst I drifted upon the stupefying boilerplate sea of California’s 540 form, the phrases “false imprisonment” and “Ottoman Turkish Empire” bubbled to the surface.  What were they doing there?

It turns out that each state tweaks the tax code – by adjusting the Federal rules with their own credits and deductions – to help the less fortunate and foster positive behavior, amongst other reasons.  By California law, income specifically excludes compensation for false imprisonment and reparations to those oppressed by the Ottoman Empire between 1915 and 1923.  Whoa.

Intrigued, I combed the other states’ 2009-tax-year forms for such oddities – and found dozens!  Please, take a look at the best of them below!  For your convenience, I’ve linked the excerpts back to the source.  Each appears as it did originally, no Photoshopping.

Click here to read more →

Storing Your Value

Old-School Wealth Management

Suppose that you snapped.  It might have been the blood-red 401k statement that arrived in yesterday’s mail.  Or that last year, you paid your broker $10,000 to lose $100,000.  Or, perhaps, that while everyone else, by government largesse, refinanced houses, replaced clunkers, and recouped bad investments, you received nothing!  Except for a letter from the tax man.

Some Benjamin Franklins.

Some Benjamin Franklins.

So you went online, made a few phone calls, and faxed your John Hancock here and there.  And, lickety split, there’s a pile of $100 bills in the middle of the living room floor.  You cashed out!  Now, what to do next?

You considered the drastic options: the Insane Vegas Weekend, purchasing a yacht, giving it all to charity, etc.  However, that’s not you — it’d be best to keep a few bucks around to handle the obligations and save the rest for a rainy day.

Which means that your slug of cash needs a safe, secure hiding place. You could squirrel it away in the house — beneath the floorboards, inside a wall, under a mattress, etc.  But them thieves done seen all the TV crime dramas, and they know the usual stashes.  Besides, if your humble abode burns to the ground, your nest egg will go up in smoke, too.  Major bummer!

For the ultimate in cash protection, we need look no further than the masters of liquid wealth, the venerable Pirates.  A quick consult with Parakeet Pete yields the following solution:

Bury your booty in a hole, matey!

Which sounds like a fine idea, but there’s one important, missing detail:  What to bury, exactly?  The $100 bills?  The equivalent in gold?  Or something else?  What is the best store of value?

To help you determine the answer, I’ve created a table that details some of the most likely materials, including the price per pound, the quantity that’s worth $1,000,000, what to bury it in, and the pros and cons of each:

Stuff That You Might Put In Your Hole

Material Value Per Pound Size Of $1,000,000 Bury In Pros Cons
Wheat $0.09 190,000
subterranean silo never hungry bulky, mildew, mice, locusts
Moonshine $0.13 160,000
7gal stills
corked clay jugs many lovely banjo solos blindness
Gasoline $0.49 320,000
underground tank Peak Oil, baby! fumes, third degree burns
Ammo $2.10 525,000
surplus ammo cans gun owners need you you need owners with matching gun
Vodka $7.80 1,800,000
Russian-proof bear boxes the Bloody Mary requires V8 and Worcestershire
Jerky $18 27 tons duct-taped lawn bags infinite lifespan everything stinks like jerky
Cigarettes $57 7 pallets basement of abandoned 7-11 captive market nicotine stains
Guns $60 2,500
water-tight firearm lockers reinforces Alpha Dog image ATF raids, terrorism indictment
Silver $270 3,700
rolling plastic totes Werewolves begone! not Gold
Caviar $2,400 1,100
Arctic tundra endear yourself to power elite must ice or eat within 3 hours
CPUs $6,000 4,000
sealed anti-static tray light weight, inert, brainy loses half of value every two years
Cocaine $9,000 50 kilos legs of faux llama keepsakes world-wide demand unstable customers, Scarface
Gold $16,500 275 bars,
100g each
treasure chest time-tested currency metal detectors, confiscation
$100 Bills $45,000 43″ stack mason jars backed by U.S. Government worthless beyond Thunderdome
Diamonds $175,000 black velvet
vault with lasers and trip wires profit, intrigue, girl’s best friend low utility, De Beers assassins
Plutonium $2,000,000 1.3 inch
argon-filled, lead-lined bunker ultra-compact CIA, critical mass, death by inhalation

Hope that helps!

ObDisclaimer: I am not a financial advisor, and this is not financial advice.  All prices approximately USD as of October 1, 2009.  Burying your life savings in a hole may incur risks, including, but not limited to, mold, worms, plunderers, and loss of map and/or principal.  Underground balance is not FDIC-insured.

Coins Of Wrath

Quarters, dimes, and nickels, and worthless copper-clad discs of zinc.

Quarters, dimes, nickels, and worthless copper-clad discs of zinc.

I must confess that I am an unintentional change hoarder.  When I pay for something, I prefer to use a round amount of bills, sparing everyone the infuriating experience of myself canvassing my pocket detritus for the proper amount of miscellaneous change.  The resulting coins steadily accumulate, and come the sooner of laundry time, or whenever their weight begins to pull down my pants, they find themselves indefinitely interred to the Coin Bin.

In my house, the Coin Bin is an old canner – one of those big, squat, speckle-painted metal pots that grandma used to boil and seal jam jars.  Its robust steel construction provides a secure, heavy-duty home for my money.  But after a year or so of accumulation, even the canner begins to strain at its welds, and it’s time to transform the coins back into their more virile paper cousins.

And therein lies the complication.

Years Ago, when Yours Truly was a Boy, you could ride a Mule into the local Savings and Loan, place your Coin Bin on the Counter, and Instruct the Teller to give you an Equivalent Amount of Useful Money.  Teller would Forthwith pour contents of Coin Bin into the magical Coin Counting Machine, which, via the Miracle of Recently-Invented Technology, would Sort, Count, and Tally the Amount.  At which point, Teller would hand you a Stack Of Bills, feed a Carrot to your Mule, bid you Good Day, and you were Done.  In Five Minutes, For Free.

Contrast that with today, where no financial type in my vicinity will even admit to owning a proper Coin Counting Machine, much less one I can use for free.  Yes, yes, there’s CoinStar, which does exactly what I want.  Except that it charges seven percent of my hard-earned cash - highway robbery, considering that my bank should offer me the service gratis.  What do I look like, some kind of sap?

Most banks will, however, take coins in rolls.  But isn’t saving all that muss and fuss worth the seven-percent CoinStar fee?   It depends upon the denomination of coin that you’re talking about.   With a bit of practice, you can probably roll a coin per second.  That’s $900 in quarters per hour, $360 in dimes, $180 in nickels, and a mere $36 in pennies, with corresponding 7-percent CoinStar fees of $63, $25.20, $12.60, and $2.52, respectively.  At an effective earning rate of $63 per hour, I’ll roll quarters all day.  And depending upon my social calendar, I might consider bundling up the dimes and nickels.  When it comes to the pennies, however, pardon my ego, but I’m proud to say that an hour of my time is worth more than two dollars and fifty two cents!  Yours is too!

It’s best to leave the pennies loose, for use as dry fill, as ballast for the boat, or preferably, for administration to the CoinStar machine as grinding punishment for its collusion with the anti-free-coin-counting cabal.