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Stephen St Marie

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    • Of course, we all are influenced by different tax rates we face on different forms of behavior. Not only in our investment decisions, but also in our every-day purchases. We face high taxes on purchases of alcohol and cigarettes. We face incentives, in the form of deferral of taxes, to save through individual retirement accounts. Our leaders -- whom we elect -- set up such programs because they think we will be better off if we buy less alcohol and cigarettes, and if we put more of our earnings in savings for our retirement. The idea of using the tax code to influence us to make better decisions is not new. But the extent to which Congress has gotten into the business of building explicit behavioral incentives into the code has increased in recent years. Now, many people like us readers of Humble Dollar are trying to figure out what is the best way to take advantage of all those special tax incentives. I, too, have money in a traditional IRA, and I have moved some to a Roth IRA. But not all, for doing so would put me in a high tax bracket now just to avoid a high tax bracket later. Would that be smart? Probably not. The answer depends on anticipating future tax rate schedules. We all want to take advantage of special incentives when they benefit us. But we have to be careful about what lies at the other end of those incentive programs. Trying to outsmart (or just out-guess) the next Congress is a difficult game.

      Post: Driven by Taxes

      Link to comment from July 20, 2024

    • A problem with overcoming the narrative of doomsday scenarios or other strange investment ideas is that there is usually a grain of truth in the center of them. It is true that the US government has debased our currency through inflation year after year. Milton Friedman pointed this out years ago, and yet it continues, just a few percent every year. It is true that the Social Security program was originally designed to provide a small pension amount and that over many years our generous legislators have increased payouts faster than taxes to support them with the result that the program teeters on the edge. It is true that many companies have difficulties that may result in future stock value declines. All these things are true. And almost everybody can report a true example of "if I had only sold" or "if I had only bought." These things are not good reasons to bet on an American collapse or a total collapse of the world economy. The best way forward is to save, invest, and repeat. Our markets, with all their flaws, are the best and the most reliable. Save, invest, repeat.

      Post: Don’t Trust Your Gut

      Link to comment from December 28, 2023

    • I have to agree about seeing things and places. By complete surprise, this year I came upon the hometown of John Witherspoon in Scotland. There is a plaque on a wall, and not much else. Signer of the US Declaration of Independence. Not part of our plan, but a thrill even so.

      Post: Seeing It for Myself

      Link to comment from October 25, 2023

    • Interesting that purchasing this car cost nearly as much as your first house in 1981. But the dollars then were more valuable than today's dollars. Gradually, over time, the value of dollars has declined through what we call "inflation." The Consumer Price Index, which is our best measure of the value of dollars (though still an imperfect measure), increased from 94 at the end of 1981 to 296.797 at the end of 2022. A 1981 home purchase of $46,000, would require about $145,000 of today's dollars of diminished value. Or, taken the other way, a car that cost about $44,000 at the end of 2022 would be equivalent to about $14,000 back in 1981. Of course, nothing stays the same over 40 years. But those numbers give us a sense of how much the value of our currency has declined over 40 years.

      Post: Driving Me Crazy

      Link to comment from March 15, 2023

    • Public employee unions may be part of the problem, but they are not the whole problem. Full disclosure: I am a state employee, and one day, if I am so lucky as to live long enough, I will receive a generous and guaranteed pension from my state (not New Hampshire, by the way). I also am an economist who understands the nature of risk and the time value of money. Public employee unions work to get the best deal for their members. Of course they do, just like everyone else does. Why don't public employee unions demand higher salaries? Heck, I could make more as an employee of an investor-owned firm. Why, instead do public employees (through the unions that represent them) they settle for lower salaries accompanied by more generous pensions? Salaries immediate; they are visible. Higher salaries cost real money right now, money that would appear in this year's budget and would have to be raised now, either from taxes from deficit finance, or, even worse, from cutting some other expenditure. None of these options is very palatable to the representatives of the treasury. The other alternative is to skip high current salaries and provide something that does not need to be financed now, like maybe the promise of a more generous pension. Its cost will accrue now, but will be financed and paid later. Of course, the cost is still there, but the state can provide more benefits now by postponing some of today's costs to be collected later. Why, why, you ask, does the state not provide an accrual budget, one that recognizes the costs of those promises now? Why did the City Manager of Portsmouth New Hampshire not provide information to the City Councilors back when we was signing those contracts? Most likely he did -- if they asked for it. Don't blame the union, blame the people you elected, the ones pretending to be shocked, shocked!, at the ballooning pension requirements. They voted to approve the contracts. In this case it is the Portsmouth NH City Council. But it could be any local or state board. They agreed to the terms. Did they not understand them? Did they not ask questions? Better yet, who voted for these people anyway? Did they ask questions? Did they demand to know whether employee costs in the budget represent the full present and future costs? Maybe the blame should be shared by the people who elected the representatives, yes, the voters, who want services now but would object if the costs were paid now.

      Post: Kick the Can

      Link to comment from April 10, 2021

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