Financial Rants: True Money Stories That Drive Me Crazy Part II

With the popularity of part I, and the ease of writing it as well, I decided to field another set of financial rants.  Here’s what’s driving me crazy in the world of money these days.

Pay to Play:

We are looking into Mrs.C. becoming a licensed real estate agent.  There are some significant benefits to this move that would go along with our real estate investing plan, which I will go into in another article.  Anyways while researching this I find out that the class costs $285, the test costs $76, and the license for 3 years from the state costs $88, so all in right around $450 to become a real estate agent, not bad. We would also probably buy a study guide or two like Real Estate License Exams For Dummies.

Then to become a Realtor, you have to join the local, state, and national board of Realtors.  For year 1 the cost is just under $900 followed by $500 a year, every single year to keep your membership in good standing.  To work as a real estate agent you must work under a real estate broker, and most brokers require their real estate agents to become Realtors by paying this yearly fee.  This still may be worth pursuing, but this is certainly a ridiculous hindrance, similar to forced unionization.

Price of Convenience:

I was working on a fairly large plumbing project recently at our rental house in which I switched out 1/2″ CPVC piping for 3/4″ PVC to allow for more water volume.  I planned out everything I needed, bought the supplies and subsequently made 4 more trips to Lowe’s or Home Depot. (I think it’s a requirement for every DIY job.)  At Lowe’s the price for a 10 foot length of 3/4″ pipe is around $2.  The price for a 5 foot length is like $1.80, so obviously the price per foot is a better deal for the 10 footers.  I ended up being closer to Home Depot on my last trip and I only needed another foot of pipe.  Home Depot charges around $2 for a 10 foot section just like Lowe’s.  The next size down is a 2 foot section that they also charge $2 for.  Insanity, they are charging 5 times the price for the convenience of it being pre-cut.  Always buy in bulk.  What is crazy to me is that it has to be cheaper to ship the 2 foot sections because they can be palletized easier and are much easier to transport around. It takes nothing to cut them.  I always have a saw in my car for situations like this and have often cut boards and pipes in the Lowe’s or Home Depot parking lot.

Burning Money

I work in nuclear power and am pro-nuclear power, but I’m extremely disappointed in what has happened at Vogtle.  Vogtle started building units 3 and 4 in 2008. I was there in 2009 while they were moving dirt around. I returned to Vogtle this past fall and it is still no where near done a decade later.  Plants across the world are routinely built in under 5 years.

These plants are several years behind schedule and cost overruns have propelled them into a total cost of over $12.5 Billion a unit.  10 years and 25 Billion and NO power generated.  There is no excuse for how poorly this project was managed. The problems here have certainly caused other utilities to take pause on plans of building new units. It’s a shame because nuclear power CAN be a cheap inexpensive source of carbon free power, but it doesn’t work if the costs and time to build are doubled. At least Vogtle will be completed.  At VC Summer they halfway built 2 units and now due to the same cost overruns and schedule delays that plagued Vogtle, they have officially shut down the project and it looks like those units will never be completed.

Straight Up Theft:

All taxation is theft, but there are different forms of theft that have differing degrees of severity.  Our Federal government is primarily funded by an income tax, that was originally sold as only a tax on the super wealthy that the common man would never pay.  Make no mistake if a wealth tax is instituted on the 0.1% within 2 generations it will be charged on 50% of the people.  So Elizabeth Warren is declaring that she wants to institute a wealth tax on all households worth over $50 million of 2% and on all households worth over $1 billion of 3%.  This is so outrageous for multiple reasons.

For starters this is pure direct theft.  At least with the income tax you know ahead of time that if you have income it will be stolen according to a particular set of rules and you can choose to a large degree how much income you have.  For a wealth tax like this you can’t make any choices, it will be stolen from you.

Second of all the Federal Government currently has no power or authority to know what assets any of us actually have. Giving them the power to tax wealth also explicitly gives them the power to know exactly what each individuals wealth is.  This is not something they have a right to, which is also why I advise people who are on certain assistance programs to formulate plans to get off of them, because when on those social programs the government uses it as a reason to have access to what your assets are.

Third, asset values also change dramatically year to year and many assets are not easy to appraise.  Take our President for instance, he claims a large part of his net worth is his brand name “Trump”.  Beyond brand names and trademarks, intellectual property, real estate, privately held companies, and sole proprietorships are almost impossible to put a value on each year, without requiring an entirely new industry of wealth appraisal to be formed, creating a massive dead weight loss on the economy.

Fourth: Such a tax would cause the collapse of many businesses and the destruction of family/founder control of publicly traded companies.  Let’s say that Bob runs a capital intensive small business worth $50 million that operates on slim margins.  He employs 500 people and himself earns a healthy $500,000 a year when all is said and done, of course he pays half of that to taxes.  Now Elizabeth Warren charges him a 2% tax on assets or $1 million.  His only options are to take on debt, sell ownership of his company, or gut his business and lay off people and reduce next years income.

Another example would be Jeff Bezos who is worth roughly $140 Billion, with virtually all of his wealth due to ownership of Amazon shares. Amazon has extraordinarily thin margins and pays no dividends (income) to shareholders. He is paid an $80,000 a year salary.  For him to have any liquid assets he has to sell ownership of Amazon. Bezos would have to sell  $4.2 billion of Amazon stock in order to pay this wealth tax bill.  Over time his ownership would erode substantially and such large sales would tank the stock price of large publicly traded companies.

What would happen if this actually passed?  Every single high net worth individual would move out of the U.S.  Every single one.  They would take millions of jobs with them.  Some would move to Canada, some to Mexico, some overseas.   You can see this happen with high income earners who move out of New York and California. A yearly tax on wealth will absolutely cause a great migration, if not an armed insurrection.  If you think that’s dramatic, what would you do if someone came into your home right now stole your phone, computer, TV, emptied your bank account and drove off with your car because those were your liquid assets? I gotta believe that physical violence would be on the table.  I think it is extremely likely that such a tax could lead to, and rightfully so, an armed rebellion.

If your goal is greater wealth equality then stop creating generations of people with no marketable skills and no idea how to balance a budget, save money, do their taxes, or much less build substantial wealth.  Require microeconomics in every grade in school at a minimum from 8th grade to 12th grade. Stop subsidizing writing blank checks requiring no collateral to teenagers for hundreds of thousands of dollars to study liberal arts at an out of state private school. There isn’t a finite pie.  The only way for Steve to win is not for Bob to lose.  We can only hope that someone emerges from the Democrat field who does not believe in straight out theft.

That’s about all the rants I have for a day,  what’s driving you crazy these days?