I’m not a tax accountant, nor do I play one on TV, but I recently learned that something I took for granted for decades should have been tracked, for decades.
Good info, Bob. Got me thinking about being more careful about our RMDs.
I have some thoughts.
The fact that any individual would have to make a scientific research project out simply paying the correct amount of taxes reveals the "scheme of complexity" that cleverly robs us of our resources and TIME.
The invention of the 401k as replacement for a pension may be one the greatest cons since the invention of the blood sucking home mortgage. Most people have no clue about how either one works and how much they are paying in hidden fees and interest payments.
My Dad worked for a single company for most of his life after returning from WWII. It was in many ways a benevolent outfit. He was paid decently. They accommodated him in several ways as he had to care for an ailing wife. And he had a pension.
As he approached retirement, the owners sold the company to a company that sold it again...and again. Somewhere, that pension evaporated. Poof.
Fortunately there was a government program that helped out - but only to the tune of 50% of what the original retirement plan had promised.
A society that liked people, cared about people, valued people...honored their elders...would have a national pension plan as well as a national health care plan. But our society puts shareholders and executives above the people who actually produce the goods and services.
It is another form of feudalism. Wrapped up in the idea of "The American Dream". Which ultimately is a nightmare for most.
And a national education plan that recognizes the need to be globally competitive by tapping the enormous pool of talent that is held back by a lack of funding and commitment.
I wrote about some of this previously. I had an economics professor in my MBA program who impressed upon the class that the primary purpose of a business ("and don't let anyone tell you differently") is to maximize shareholder wealth. That's stuck with me for 40+ years. However, so has the realization that treating employees well and being environmentally responsible is good for business.
All of this stuff amounts to a curriculum of lessons in unintended consequences, and the legislative application of Newton's 3rd Law (for every action, there's an equal and opposite reaction). Corporate execs have been incentivized to put short term profits over long-term growth, and stock buybacks have increased the value of even longer term incentives.
If we ever get out of the mess the current madministration is making, I hope government can get back to solving real problems and incentivizing things that lead to real, sustained growth. A better educated middle class can be more productive, and rewarded commensurately, so their wealth builds and they can afford to buy the goods and services that make the shareholders wealthy. Similarly, social welfare programs and healthcare can be designed to keep people productive and healthy so they make more than they take. Building wealth is not a zero sum game, although it's often treated as such.
I've wandered away from your point, I think, but I think there's an opportunity here that's being overlooked.
I like the word "stakeholders". In my perfect economic scheme every board would be independently led (not the CEO) and would have employees (union) also on that board.
ESOPs would be standard procedure. Wages of the top officers would reflect a reasonable ratio to the workers who actual make the thing live.
I'm a retired business guy who loves business competition. I worked for two companies that were relatively benevolent. The one that used ideas from the bottom up and offered stock ownership to even the person who cleaned the bathrooms was enormously successful. Our P&Ls were consistently things of beauty. And there was a sense of "we are all in this together". The positive peer pressure was palpable. And everyone went home with more than a paycheck and a good retirement plan. They walked in that front door with pride.
I like the word "stakeholders" too. The same professor explained that term as well, as covering shareholders, employees, customers, suppliers, etc. Can you tell that I liked him? He gave an assignment to analyze a business case once, and when he was handing back the graded papers, he said that on very rare occasions, he finds a paper so well written that he had to grade it as 10.0. He didn't say whose it was, and maybe he was lying, but mine had a 10.0 on it. I liked him even more after that!
What you've outlined, I think, are means to the end. What's missing in business is the realization that it's good business to treat people fairly and give them ownership (literal and figurative).
I just had an exchange with my Senator (actually, more likely a chatbot) where I said, "If I could offer one piece of advice, it would be to reframe the argument from a social safety net concept to an investment strategy. For Republicans, it's very easy to push back against "giveaways," but not so easy to push back against returns on investment ('Give a man a fish...Teach a man to fish...') or cost avoidance (prevention vs. restoration)." I think the same applies to business.
I'm not sure how much concern there is for shareholders any more until you own enough to require being listed on the annual filing reports. Much more of the profits go the share repurchase than to the dividends that benefit small investors.
Your point about the need for graduate level research projects is indicative of the problem with having lawyers and accountants write legislation at the behest of donors and lobbyists. Even programs that are prima facia beneficial contain clauses and exceptions that can render them useless or even harmful.
Thanks, Dave. Somewhere along the way, I started to put a spreadsheet together that might have helped me catch it, but I set it aside for "later." It turns out that I only had one year where I put after-tax money (federal) in my account. But I didn't realize that the years that I put pre-tax money (federal) was after tax in NJ. My wife has more that's after-tax (federal), but she hasn't taken any distributions yet, so hers will be fine. Too bad my name's not "Trump." Taxes wouldn't be a problem at all.
As always, Bob, I am exceptionally impressed with the aggressiveness and acuity of your mind when you decide to look into something. And so I was happy to trip along with you on this latest trip into taxation Wonderland.
But I have absolutely no capacity, and therefore no interest, in replicating your thoughtful and diligent exploration of your status. Whatever mathematical aptitude I was born with vanished very early in my lifetime. As a result, I have become abjectly dependent upon both the knowledgeability and the trustworthiness of a host of advisors along the way. I just pray to God that they have paid as much attention to my affairs as you have paid to yours!
Good info, Bob. Got me thinking about being more careful about our RMDs.
I have some thoughts.
The fact that any individual would have to make a scientific research project out simply paying the correct amount of taxes reveals the "scheme of complexity" that cleverly robs us of our resources and TIME.
The invention of the 401k as replacement for a pension may be one the greatest cons since the invention of the blood sucking home mortgage. Most people have no clue about how either one works and how much they are paying in hidden fees and interest payments.
My Dad worked for a single company for most of his life after returning from WWII. It was in many ways a benevolent outfit. He was paid decently. They accommodated him in several ways as he had to care for an ailing wife. And he had a pension.
As he approached retirement, the owners sold the company to a company that sold it again...and again. Somewhere, that pension evaporated. Poof.
Fortunately there was a government program that helped out - but only to the tune of 50% of what the original retirement plan had promised.
A society that liked people, cared about people, valued people...honored their elders...would have a national pension plan as well as a national health care plan. But our society puts shareholders and executives above the people who actually produce the goods and services.
It is another form of feudalism. Wrapped up in the idea of "The American Dream". Which ultimately is a nightmare for most.
And a national education plan that recognizes the need to be globally competitive by tapping the enormous pool of talent that is held back by a lack of funding and commitment.
JMO. Thanks for the article.
I wrote about some of this previously. I had an economics professor in my MBA program who impressed upon the class that the primary purpose of a business ("and don't let anyone tell you differently") is to maximize shareholder wealth. That's stuck with me for 40+ years. However, so has the realization that treating employees well and being environmentally responsible is good for business.
All of this stuff amounts to a curriculum of lessons in unintended consequences, and the legislative application of Newton's 3rd Law (for every action, there's an equal and opposite reaction). Corporate execs have been incentivized to put short term profits over long-term growth, and stock buybacks have increased the value of even longer term incentives.
If we ever get out of the mess the current madministration is making, I hope government can get back to solving real problems and incentivizing things that lead to real, sustained growth. A better educated middle class can be more productive, and rewarded commensurately, so their wealth builds and they can afford to buy the goods and services that make the shareholders wealthy. Similarly, social welfare programs and healthcare can be designed to keep people productive and healthy so they make more than they take. Building wealth is not a zero sum game, although it's often treated as such.
I've wandered away from your point, I think, but I think there's an opportunity here that's being overlooked.
A BIG opportunity! Agreed.
I like the word "stakeholders". In my perfect economic scheme every board would be independently led (not the CEO) and would have employees (union) also on that board.
ESOPs would be standard procedure. Wages of the top officers would reflect a reasonable ratio to the workers who actual make the thing live.
I'm a retired business guy who loves business competition. I worked for two companies that were relatively benevolent. The one that used ideas from the bottom up and offered stock ownership to even the person who cleaned the bathrooms was enormously successful. Our P&Ls were consistently things of beauty. And there was a sense of "we are all in this together". The positive peer pressure was palpable. And everyone went home with more than a paycheck and a good retirement plan. They walked in that front door with pride.
I like the word "stakeholders" too. The same professor explained that term as well, as covering shareholders, employees, customers, suppliers, etc. Can you tell that I liked him? He gave an assignment to analyze a business case once, and when he was handing back the graded papers, he said that on very rare occasions, he finds a paper so well written that he had to grade it as 10.0. He didn't say whose it was, and maybe he was lying, but mine had a 10.0 on it. I liked him even more after that!
What you've outlined, I think, are means to the end. What's missing in business is the realization that it's good business to treat people fairly and give them ownership (literal and figurative).
I just had an exchange with my Senator (actually, more likely a chatbot) where I said, "If I could offer one piece of advice, it would be to reframe the argument from a social safety net concept to an investment strategy. For Republicans, it's very easy to push back against "giveaways," but not so easy to push back against returns on investment ('Give a man a fish...Teach a man to fish...') or cost avoidance (prevention vs. restoration)." I think the same applies to business.
I'm not sure how much concern there is for shareholders any more until you own enough to require being listed on the annual filing reports. Much more of the profits go the share repurchase than to the dividends that benefit small investors.
Your point about the need for graduate level research projects is indicative of the problem with having lawyers and accountants write legislation at the behest of donors and lobbyists. Even programs that are prima facia beneficial contain clauses and exceptions that can render them useless or even harmful.
Good article Bob. Thankfully I learned about basis early enough in the game to avoid most of the damage.
Thanks, Dave. Somewhere along the way, I started to put a spreadsheet together that might have helped me catch it, but I set it aside for "later." It turns out that I only had one year where I put after-tax money (federal) in my account. But I didn't realize that the years that I put pre-tax money (federal) was after tax in NJ. My wife has more that's after-tax (federal), but she hasn't taken any distributions yet, so hers will be fine. Too bad my name's not "Trump." Taxes wouldn't be a problem at all.
And at the unfettered rate Trump’s coup is rolling along, you won’t even have to worry about the problem of voting any more, either. 🫤
As always, Bob, I am exceptionally impressed with the aggressiveness and acuity of your mind when you decide to look into something. And so I was happy to trip along with you on this latest trip into taxation Wonderland.
But I have absolutely no capacity, and therefore no interest, in replicating your thoughtful and diligent exploration of your status. Whatever mathematical aptitude I was born with vanished very early in my lifetime. As a result, I have become abjectly dependent upon both the knowledgeability and the trustworthiness of a host of advisors along the way. I just pray to God that they have paid as much attention to my affairs as you have paid to yours!
Thanks, Eliot! I'm ever mindful of a corollary to the adage, "He who represents himself has a fool for a client."