Tax revenue as a percentage of GDP

[Charcoal Filtered]

Johnny and his $10K in debt has 9 houses paying him rent income, enough positive cash flow to pay his credit card payment. Or he could have 8 houses.

So you are saying that the real estate market is never overpriced?

 

[Ed O]

It would not matter what it was used for. The bottom line is cost/benefit.

I see "what it was used for" as another way of saying "cost/benefit". Maybe you guys aren't disagreeing

Ed O.

 

[Charcoal Filtered]

I see "what it was used for" as another way of saying "cost/benefit". Maybe you guys aren't disagreeing

Ed O.

It seems to me that Denny disagrees because he is labeling luxury items as always being a bad "what it is used for". I also showed how paying 100k on one house would have been better than putting 10k down on ten houses.

To put it in the form as his example:

Two Johnny's must live in a home and that home loan requires 10k down and home value is 300k. Home prices are at all time high and they have 100k.

First Johnny sees that there is a big risk for a housing downturn and puts 100k down on his house. A year later, the housing market collapses and his house is now worth 200k. His payments are lower than if he would have only paid 10K down and has positive equity in his property dispite losing money on his investment.

Second Johnny puts 10k into his primary residence and buys 9 other properties, puttting 10k down. After one year, he still loses the same 100k equity in his house, his payments are higher, and owes more since he is paying interest on 90k more per year compounded. The first year his rentals provided a positive cash flow and he could make payments. However, he still loses 90k in equity X 9 per house equalling 810k debt. His tenants see the decrease in housing value, foreclosures, etc and the rental market also goes south. Johnny can only charge 2/3 of what he originally got in rent and now must find other money to pay his mortgages.

 

[Denny Crane]

It seems to me that Denny disagrees because he is labeling luxury items as always being a bad "what it is used for". I also showed how paying 100k on one house would have been better than putting 10k down on ten houses.

To put it in the form as his example:

Two Johnny's must live in a home and that home loan requires 10k down and home value is 300k. Home prices are at all time high and they have 100k.

First Johnny sees that there is a big risk for a housing downturn and puts 100k down on his house. A year later, the housing market collapses and his house is now worth 200k. His payments are lower than if he would have only paid 10K down and has positive equity in his property dispite losing money on his investment.

Second Johnny puts 10k into his primary residence and buys 9 other properties, puttting 10k down. After one year, he still loses the same 100k equity in his house, his payments are higher, and owes more since he is paying interest on 90k more per year compounded. The first year his rentals provided a positive cash flow and he could make payments. However, he still loses 90k in equity X 9 per house equalling 810k debt. His tenants see the decrease in housing value, foreclosures, etc and the rental market also goes south. Johnny can only charge 2/3 of what he originally got in rent and now must find other money to pay his mortgages.

If he bought 10 houses for $300K each and they fell in value to $100K each, at the end of 30 years, he'll own $1M worth of houses outright.

 

[MARIS61]

If GDP is $100 and the rich get 50% of it, there's $50 left for everyone else. If GDP is $1000 and the rich get 50% of it, there's $500 left for everyone else. That $500 divided among the rest of us sure makes it easier to be middle class than splitting $50 among us.

That sounds nice, but that's not how the rich roll.

If it was, we'd ALL be rich by now.

This is how it really works:

If GDP is $100 the rich take 99.999999% of it, there's less than $.01 left for everyone else. If GDP is $1000 the rich take 99.999999% of it, there's $.10 left for everyone else. There is no significant improvement in the average American's standard of living that corelates to the rise of the GDP. America has been re-designed to prevent the American Dream from being attainable to all but a select few.

 

[MARIS61]

If he bought 10 houses for $300K each and they fell in value to $100K each, at the end of 30 years, he'll own $1M worth of houses outright.

Only if you help him make his mortgage payments for 30 years, as falling rents won't support that Ponzi scheme.

He'll most likely lose all 10 homes to the bank.

 

[MARIS61]

It has always killed me that if you tax a person making 10K a year 19% and someone making 1M a year 19%, it will be the guy making 10K a year complaining.

$1900 vs $190,000

Thanks for your contribution $1900 guy. Is there anything else the government can do for you?

In the real world the rich guy often ends up paying less (often pays no tax at all) total than the poor guy due to the wonderful world of write-offs, credits, exemptions, tax shelters, depreciation...

19% to a guy making 10k means no health ins, or maybe he'll have to give up his kids for adoption because he can't feed them.

19% to a guy making 1mil per yr means if he has the worst cpa in the world, he'll still take home $810,000 a year. No significant change in his lifestyle will be necessary.

America is known around the world as a tax haven for the rich. Most other indutrial countries tax the wealthy more severely.

Britain used to, and likely still does, take 50% from the wealthy. That's why 3 of the Beatles moved to America, to shield their wealth. The fact that Paul McCartney stayed in his homeland and willingly paid his fair share to support it is why the Queen knighted Paul and not the other three.

 

[Charcoal Filtered]

Only if you help him make his mortgage payments for 30 years, as falling rents won't support that Ponzi scheme.

He'll most likely lose all 10 homes to the bank.

Thanks for reading the entire post.

Denny, as I posted previously, the rent income decreased 2/3. Johnny #2 has to supplement this with income from another source.

If you are truly this bad at math, I have a condo in Chicago you may be interested in.

 

[Charcoal Filtered]

19% to a guy making 10k means no health ins, or maybe he'll have to give up his kids for adoption because he can't feed them.

To the guy making 10k, Obama made health insurance possible. I am also believe that if you have a kid, it is your responsibility to provide for them.

19% to a guy making 1mil per yr means if he has the worst cpa in the world, he'll still take home $810,000 a year. No significant change in his lifestyle will be necessary.

I am all for closing loopholes, but am not a fan of the government re-distributing wealth on such a large scale. It seems as if you are assuming the 10k guy and the 1M guy worked the same and deserve the same.

 

[Denny Crane]

Thanks for reading the entire post.

Denny, as I posted previously, the rent income decreased 2/3. Johnny #2 has to supplement this with income from another source.

If you are truly this bad at math, I have a condo in Chicago you may be interested in.

Just because some investments go bad doesn't mean that borrowing for the purpose of leverage is a bad idea as well.

 

[maxiep]

A link with an interesting graph and further support of Hauser's Law

http://mercatus.org/publication/reality-isnt-negotiable-government-cant-raise-more-19-taxes-long

 

[Charcoal Filtered]

Just because some investments go bad doesn't mean that borrowing for the purpose of leverage is a bad idea as well.

And did I ever say that?

My claim was that before the housing boom, buying multiple houses was a great idea.

My other claim was that at the peak of the boom, it was a bad idea.

 

[Charcoal Filtered]

A link with an interesting graph and further support of Hauser's Law

http://mercatus.org/publication/reality-isnt-negotiable-government-cant-raise-more-19-taxes-long

Sorry for the derailment and will try to get back on the topic of the thread.

Hauser's law makes sense. Would like to see how it applies to other countries.

 

[hasoos]

Of course it matters what the money you borrow is used for. Companies borrow all the time to purchase new plants and equipment. With the intent to make a lot more in sales than the equipment loan payments cost, of course.

If you had $100K in the bank, would you think it better to buy one $100K house for cash, or 10x $100K houses with $10K down each?

On the other hand, if you run up your credit card going to the movies, all you have is a debt payment and nothing to show for it.

That is the exact type of thinking that got us into the mortgatge crisis. Way to go tex.

 

[blazerboy30]

That is the exact type of thinking that got us into the mortgatge crisis. Way to go tex.

Way to not understand the "mortgage crisis", tex.