Friday, May 30, 2008

Tuesday News Round Up



I really have no good personal finance news to share on this drab, rainy spring day. It's kind of a cranky, "crap, I didn't know it was that bad," sort of a day. Did you see any positive stories today? If so, let me know. 'Cause all I saw today was this:

A British paper is claiming the U.S. is in "the Great Depression of 2008" and cites some alarming statistics about the use of food stamps as support. Read it here. OK, it's just one article, but these types of stories are becoming very prevalent.

The Wall Street Journal points out that the credit crunch is now affecting our savings accounts! What! That's a blow to this savvy saver! It makes me feel like there are no good decisions to be made. I think my Emigrant Direct account is no longer keeping up with inflation. Grrr...

The New York Times says the average consumer is carrying $9,000 in credit card debt from month to month. (That can't be right, can it?)

And Fortune is freaking out about the proposed new finance regulations and the mess on Wall Street. (Don't worry if it's over your head, nothing's likely to happen very soon.)

We're so grumpy-pants we're even hating on SATC today.

Will Summer please get here soon so we can return to sunshine and happiness?

Wednesday, May 28, 2008

California--A Nice Place To Visit But I Wouldn't Want To Live There



Went out to the Bay Area for my niece's wedding. Great trip, had fun, glad to be home given the price of houses and a wee bit of overcrowding. Seems that I am not the only one glad to be out as outlined in this article at MarketMinder.com. Enjoy--if you can.



California Hates the Poor



10/5/2007 |



California hates the poor. At least the Golden State certainly seems to act that way, given the way it treats its lower-income residents.




But wait—isn’t California known as one of the most socially progressive states, spending billions of dollars on social programs and public assistance for low-income residents each year? Indeed! Yet Californian legislators uphold a policy choking off precious dollars that could go to residents needing it most. That wacky policy is the Golden State’s tax structure.




California boasts the most punitive state income tax system in the entire Union. (Not so fast New Jersey, Hawaii, Iowa, and Oregon! Though you’re all nearly as bad.) With so much wealth in the state, you might not feel much immediate sympathy for those paying the lion’s share of the state taxes. After all, California’s got Hollywood movie stars, celebutants, and Dot-Com-mega-billionaires! Make them pay! Folks tend to forget California has millions of souls—the vast majority are Average Joes.




Let’s examine the current tax structure. California income taxes kick in at a modest 1% rate for annual income up to $6,622. Not too bad—$6,622 seems a small amount to hit up for income tax, but 1% isn’t that much. But, California’s highest tax bracket of 9.3% (the highest in the nation) begins at the affluent, wallet-busting, Bentley-driving sum of $43,468.




I’ll repeat that. California imposes the nation’s highest state income tax level of 9.3% on residents earning more than $43,468. Some perspective: In 2004, the US Census reported California’s median income was $51,185—higher than America’s median income of $44,648. Translation: If you’re “middle class,” California wants 9.3% of your income. It’s a shakedown for your lunch money.




Meanwhile, nearby states Washington, Nevada, and Texas charge no state income tax at all. Arizona starts its highest tax bracket at $150,000 where residents pay 4.57%—less than half California’s top rate. It’s hardly surprising these states are some of America’s fastest growing states. In 2006, Arizona’s and Nevada’s populations swelled over 4 times faster than California’s.




If you’re a Californian with a nice retirement savings, where would you retire? California wants a hefty portion of your retirement income every year, whereas nearby Washington and Nevada want none. Add to the equation the far lower cost of living in those states, and relocating seems like a no brainer. So, folks leave and California ends up with none of their income, property, or sales tax revenue.




Those poor souls remaining in California end up with less money to fund public schools, build new roads, pay for social programs and so on. All thanks to politicians ignoring fundamental economic principles and placing too heavy a burden on its working residents and businesses.




When a state places too heavy a tax burden on its citizens or businesses, the government stifles consumer spending, business investment, and actually ends up collecting far less tax revenue. A government can maximize its tax revenue at an optimal point. Tax too much and folks don’t see much of a reason to get out of bed in the morning. Mrs. Entrepreneur fails to see the upside in launching her cutting-edge new business idea. Less business activity means less tax revenue. The Laffer Curve (shown here http://upload.wikimedia.org/wikipedia/commons/4/47/Laffer_Curve.png) demonstrates the concept.




If prohibitive taxation makes a difference between US states, one could also apply the concept to countries. When a nation imposes high hurdles for new business development and wealth creation, the prospect of strong economic growth becomes increasingly remote. Conversely, if a country slashes corporate tax rates to spur economic activity, all other factors remaining constant, that’s bullish for growth.




Take Ireland for example. The Emerald Isle slashed its corporate tax rate to 12.5%—one of the lowest rates in the developed world.




Selected Corporate Tax Rates by Country




Ireland 12.5%
Netherlands 25.5%
United Kingdom 30.0%
China 33.0%
Belgium 33.9%
France 34.4%
Germany 38.6%
USA 39.5%
Japan 39.5%


Much to the chagrin of France and other EU heavyweights, economic growth in Ireland is soaring! After all, entrepreneurs and existing businesses only need two very simple elements to justify a venture: profit and human capital. Ireland has an educated, English-speaking work force and a corporate tax rate low enough to entice entrepreneurs from around the globe. Ireland will likely attract business activity, people, and tax revenue other countries will miss out on. It shouldn’t be much surprise, then, that Irish GDP growth is expected to more than double the EU’s average. Erin go bragh!




Eastern Bloc countries are also joining the low-tax party. Estonia, Latvia, Russia, Ukraine, Slovakia, Romania, Georgia, and Macedonia all successfully introduced low flat tax structures in recent years. These moves now pressure Western European countries to either become more competitive with their business climates or face a hemorrhaging economic growth towards their neighbors with cheap labor and more welcoming tax structures.




With one of the largest gross domestic products in the world, one could only dream of the economic boom resulting from slashed California tax rates (not to mention falling federal tax rates). With the Irelands and Nevadas out there, Uncle Sam and the Golden State better act fast. Their poor depend on it.




Tuesday, May 27, 2008

Construction Update



You know, everyone tells you must add an extra 10% on top of your estimate on any construction project to get the final cost.


Of course, my bathroom remodel is going poorly and it’s sucking up my 10% overage.


There was some concrete under the tile in the bathroom that’s coming down. Unfortunately, to get an even surface on the wall, the concrete has to be removed. Don’t ask me why in the 1950’s they put up concrete halfway up the walls, but they did. All the extra labor hopefully will not be a huge amount more, but I have a feeling it will cost me another 20% on top of the estimate.


I wanted to have a special countertop cut for me so I can have a shelf over the toilet, just like I had in the original bathroom. However, it has a 10-day lead time for the order, which would mean I’d be out of my apartment for over almost 2 months. The contractor thinks he can get me a light grey granite countertop cut in the same shape out of scrap material from his usual granite supplier. It will only cost me $100 more but will take 3 days instead of 10. Is that worth it to me? You bet. It’s been over a month since I’ve slept at home and I’m cranky.


But things got a lot worse. The contractor had a drywall guy come in and they put in the ceiling piece early in the week. They came back the next day and the tub was full of water and the new piece was soaked. Apparently, there’s another leak coming from the unit above mine. ARGH.


I don’t know how all this is going to play out, but why do I feel like it’s going to cost me more money and time, no matter what happens?



Monday, May 26, 2008

2008 Basic Allowance for Housing Rates Forthcoming



It's that time of year again! No, not the holiday season, but the month or so where military personnel and their families are anxiously tapping their toes waiting for the release of the next year's housing allowance figures. According to the Pentagon site, the 2008 BAH figures will be available in "mid-December." Historical data suggests this will probably be December 14 or December 17.
I suspect in many areas of the country, BAH rates will either level off or drop. There seems to have been a huge increase in BAH rates nationwide in 2005, and in many areas that appears to have been too much, such that rates have either flattened or fallen in the past two years. The trend will probably continue.
BAH rates are determined by an annual survey of properties in a given military housing area, and by determining the median housing costs (rent, utilities, and renters insurance) for servicemembers based on the type of housing they *should* have based on their paygrade and family size. Basically that means more modest housing for junior enlisted and more substantial housing for senior enlisted and officers, as well as more substantial housing for servicemembers with dependents. A single E3 has more modest housing needs than an E7 with a wife and three children.
What happens if you live in an area where the BAH rates will drop from 2007 to 2008? You will be covered by "rate protection." Rate protection means you will receive the higher of the BAH you are entitled to on January 1, 2008, or the BAH you were entitled to on December 31, 2007. In other words, if you see that your BAH is expected to drop $200 per month between 2007 and 2008, provided you don't lose BAH eligibility for some reason, you will keep seeing the 2007 rate. However, if you move into the area from another duty station, you will receive the new (and lower) BAH rate. If the BAH annual survey has done its job properly, though, you shouldn't be paying too much out of pocket for housing expenses.

Sunday, May 25, 2008

Your Summer Share: It's Not Too Late!



For most of those who have summer rentals in the Hamptons, this weekend marks the official start of the summer. The summer season has begun, with the roads out to East Egg already getting jammed.





But if you totally forgot to set up a summer share, you're in luck. It's not too late. Our friends over at Gridskipper report that there are a lot of properties in the Hamptons still available:





A cursory search this morning on various brokerage websites shows the following rental availability in East Hampton alone: Prudential Douglas Elliman, 1,481 listings; Corcoran, 768 listings; and Brown Harris Stevens, 671 listings. Counting for some overlap, that's still a serious glut.





Hamptons Rental Watch: It's a Renters' Market [Gridskipper]



Saturday, May 24, 2008

Deliver Us From Human Resources



Somebody over at Tower Perrin doesn't have enough to do as evidenced by this 'study.' I struggled through it but not sure I can draw any conclusions except that Mexican companies have the greatest percentage of 'engaged' employees. From what I saw in Mexico they are engaged because they just feel damn lucky just to have a job.



Interesting remarks about Japan as well. Well, interesting if you are in Human Resources.



On the 'road to engagement?' What is that?



Read on and figure out your own conclusion. Please share any insight because I'm not sure I get this. Or even want to.



Few workers are 'engaged' at work and most want more from execs
Sunday October 21, 10:28 am ET
By Andrea Coombes

Just 1 in 5 workers are 'engaged' -- and most want more from executives





SAN FRANCISCO (MarketWatch) -- Only 21% of workers worldwide are "engaged" -- that's human-resource-speak for ready to expend some extra effort at work -- while 38% are either disenchanted or disengaged, according to a new survey.

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