Did you see this? Researchers have determined that two-year-old chimpanzees and two-year-old humans are essentially intellectual equals. So, why are we humans building computers and traveling in space while chimps are foraging for food and swinging from trees?
Because chimps are wiser? Maybe. But, the researchers attributed it to one area where the children were slightly more capable than the chimps. The children were better at patterning the behavior of others.
Give them each a lidded clear plastic jar with cookies inside and they’ll handle it similarly. They’ll hold it, turn it, bite it, and bang it on the floor, to no avail, of course. Then, if someone sits down with them, unscrews the top, takes a cookie, eats it, then puts the lid back on, their reactions are quite different. The child (once it stops whining, “MY cookie!”) is soon trying to unscrew the lid, and usually eventually succeeds. The chimp still holds it, turns it, bites it, and bangs it on the floor.
So, we humans have a greater capability than our closest relatives (we’re talking species here) to learn from others.
But, we don’t use this capability nearly as much as we could. Examples?
In its broadest sense, we don’t learn what we should from history. If we did, we wouldn’t keep repeating it (even after we’ve studied it).
On an individual level, it’s worse. We often don’t even pay attention. When we do, we don’t really listen. And, when we do listen, we are usually quick to discount the information coming to us.
One example I’ve experienced – raising those supposedly readily taught children. The single greatest disappointment in my stint as a parent has been (and still is) my inability to shelter my kids from most of the typical mistakes, pains and anguish of growing up. Part of this was the teacher, I’m sure. But, most of it, I really think, is because they, like all of us, weren’t very good at taking guidance.
A close second in the disappointment category is my own learning. I wish I had listened more to my parents, my bosses and coworkers, my spouse, my kids, and my many other well-meaning would-be teachers. As I gradually became aware of this deficiency over the years, I have tried to be better at seeing, hearing, feeling and understanding the many forms of learning coming my way. I still avoid or miss or ignore a lot, I’m sure, but I’m trying.
In that vein, I’ll be entering retirement one of these days. This may well be as difficult in some ways as growing up, maybe worse as it evolves into growing old. So, I have a request, especially of all of you who are already retired.
What are some of the common mistakes we soon-to-be-retired should try to avoid? What are some lessons you’ve learned – things you wish you had been told earlier? Or, things you did know, and are glad you did?
We’ll send a little gift to everyone who responds, and a medium gift to the best of the bunch. Just click “Comment” below. If you don’t want your name posted with your comment, or you don’t want even your comment posted, just say so. I’ll be out the next couple of weeks, but will look them over when I return and will let you know what I learned.
Larry Halverson: I've Been Thinking
Larry Halverson, CFA, Managing Director of MEMBERS Capital Advisors, Inc., is a veteran of more than 35 years in the financial services industry. Links: SUBSCRIBE TO: I've Been Thinking | 
|
Friday, September 14, 2007
Friday, September 7, 2007
Here’s a retirement issue for you – income taxes.
First, a caveat. None of the following should be considered tax advice. If you need such advice, consult a tax expert.
If you do, you may find that many of these “experts” are expecting the next administration and congress to push through increases in personal income tax rates. The reasons – to shrink the ballooning deficit and spread the income tax load more fairly.
They may well succeed in raising the tax rates. But, I’m afraid they won’t get what they want.
First, I’m not at all sure higher taxes would reduce the deficit. This year’s deficit is now estimated to be $158 billion – a big number, but only 1.2% of GDP, and $217 billion LESS than the annual deficit before the most recent round of tax CUTS. (All numbers courtesy of the U. S. Treasury.)
Why? I assume it is similar to the effect of raising taxes on cigarettes or gasoline. It reduces their attractiveness. Taxing income more makes it less attractive, too, whether that income is from labor or investments. So, people and companies have less incentive to seek maximum pre-tax income. One way they evidence this is by deferring making changes in their investments because deferring gains taxes is more important at higher rates. Another is by aggressively seeking ways to shelter income from the higher taxes, like domiciling in lower tax locations. And, even if everything else stays the same, higher taxes mean lower after-tax income, which itself is a drag on a nation’s economy.
This impact of high or increased taxes is hard to refute. Ireland and some Eastern European countries are recent vivid examples of the positive effects lowered taxes can have on an economy as well as on the government’s total tax receipts. So, maybe we don’t want to raise the overall tax load on our economy. But, why not make it more equitable – raise the rates on the highest incomes and lower them on the other end?
This is probably doable. But, we need to be careful. We don’t want to disincentivize our most productive citizens, which make up a large part of the highest paid, or incentivize our biggest tax payers (productive or not) to relocate. Besides, we’re already getting a much higher proportion of our income tax receipts from the higher income groups than in years past. But, not by raising tax rates.
We’ve raised income tax receipts from the wealthy through other changes in the tax code, like allowing fewer deductions, or through the lack of changes, like not indexing the Alternative Minimum Tax to inflation. Our top tax rate was 70% in 1980, and the Treasury was getting 19% of its individual income tax receipts from the highest paid 1% of taxpayers. It was getting fully 49% of its receipts from the top 10% of income earners. The other 90% of its citizens paid in only about half of the total income tax receipts.
By 2004, we had cut our top tax rate in half – to 35%. But, even with these lower rates, we collected 36% (up from 19%) of tax receipts from the highest earning 1% of the population, and 68% (up from 49%) from the top 10%. I’m not sure we can push this much farther without killing or scaring off these geese that are laying all those golden eggs for the rest of us.
So, I’m not expecting lower income tax rates on my “middle income” in retirement. Nor am I hoping for higher rates on those with higher incomes. I’d say let’s not tamper with success, and focus instead on spending those tax receipts in ways that provide the most benefits, especially for our currently least productive citizens.
If you do, you may find that many of these “experts” are expecting the next administration and congress to push through increases in personal income tax rates. The reasons – to shrink the ballooning deficit and spread the income tax load more fairly.
They may well succeed in raising the tax rates. But, I’m afraid they won’t get what they want.
First, I’m not at all sure higher taxes would reduce the deficit. This year’s deficit is now estimated to be $158 billion – a big number, but only 1.2% of GDP, and $217 billion LESS than the annual deficit before the most recent round of tax CUTS. (All numbers courtesy of the U. S. Treasury.)
Why? I assume it is similar to the effect of raising taxes on cigarettes or gasoline. It reduces their attractiveness. Taxing income more makes it less attractive, too, whether that income is from labor or investments. So, people and companies have less incentive to seek maximum pre-tax income. One way they evidence this is by deferring making changes in their investments because deferring gains taxes is more important at higher rates. Another is by aggressively seeking ways to shelter income from the higher taxes, like domiciling in lower tax locations. And, even if everything else stays the same, higher taxes mean lower after-tax income, which itself is a drag on a nation’s economy.
This impact of high or increased taxes is hard to refute. Ireland and some Eastern European countries are recent vivid examples of the positive effects lowered taxes can have on an economy as well as on the government’s total tax receipts. So, maybe we don’t want to raise the overall tax load on our economy. But, why not make it more equitable – raise the rates on the highest incomes and lower them on the other end?
This is probably doable. But, we need to be careful. We don’t want to disincentivize our most productive citizens, which make up a large part of the highest paid, or incentivize our biggest tax payers (productive or not) to relocate. Besides, we’re already getting a much higher proportion of our income tax receipts from the higher income groups than in years past. But, not by raising tax rates.
We’ve raised income tax receipts from the wealthy through other changes in the tax code, like allowing fewer deductions, or through the lack of changes, like not indexing the Alternative Minimum Tax to inflation. Our top tax rate was 70% in 1980, and the Treasury was getting 19% of its individual income tax receipts from the highest paid 1% of taxpayers. It was getting fully 49% of its receipts from the top 10% of income earners. The other 90% of its citizens paid in only about half of the total income tax receipts.
By 2004, we had cut our top tax rate in half – to 35%. But, even with these lower rates, we collected 36% (up from 19%) of tax receipts from the highest earning 1% of the population, and 68% (up from 49%) from the top 10%. I’m not sure we can push this much farther without killing or scaring off these geese that are laying all those golden eggs for the rest of us.
So, I’m not expecting lower income tax rates on my “middle income” in retirement. Nor am I hoping for higher rates on those with higher incomes. I’d say let’s not tamper with success, and focus instead on spending those tax receipts in ways that provide the most benefits, especially for our currently least productive citizens.
Subscribe to:
Posts (Atom)
