Bankruptcy? In Germany??

[GRG55]

So much for Germany bailing out the whole of Europe.

News that petrolheads won't want to accept...especially coming on the weekend of the German Formula 1 race...

Nurburgring applies for bankruptcy?

Bad news for fans of the Green Hell as financial trouble looms…

In what possibly only James May would describe as good news, the state-owned company that runs the Nurburgring is making noises about applying for bankruptcy.

The legendary 14 mile public track in Germany – a large poster of which festoons the lift to the Top Gear office – has been in financial trouble for some time, but today confirmed that its request for help from the European Commission was unlikely to be approved in the short term.

According the Rhein Zeitung newspaper in Germany, the company running the complex (which included an ill-fated leisure add-on) is now around 413 million Euros in debt.

The state premier of the Rhineland Palatinate government said: “with greatest probability, bankruptcy would be applied for at the end of the month due to lack of liquidity.”...

[jk]

Re: Bankruptcy? In Germany??

cause?
looks like a bit of gov't sponsored hubris during the credit bubble years.


"The downfall began in 2004, when grandiose plans to build an entertainment park on the Nürburgring’s premises took shape. Viewed by purists as blasphemy, the plot was supported by Rhineland-Palatia’s Social Democrat government. Shady investors promised to pump funds into the project, but the money never came in. But so far, the state government has invested more than €500 million (more than $610 million) in the complex—a spending spree the European Union now wants to put to an end. Without the government subsidies, the Nürburgring can’t pay the hundreds of millions owed to the banks."

http://blog.caranddriver.com/nurburg...-nordschleife/

[dcarrigg]

Re: Bankruptcy? In Germany??

cause?
looks like a bit of gov't sponsored hubris during the credit bubble years.


"The downfall began in 2004, when grandiose plans to build an entertainment park on the Nürburgring’s premises took shape. Viewed by purists as blasphemy, the plot was supported by Rhineland-Palatia’s Social Democrat government. Shady investors promised to pump funds into the project, but the money never came in. But so far, the state government has invested more than €500 million (more than $610 million) in the complex—a spending spree the European Union now wants to put to an end. Without the government subsidies, the Nürburgring can’t pay the hundreds of millions owed to the banks."

http://blog.caranddriver.com/nurburg...-nordschleife/

The policy goal is to eliminate the middle class worldwide. Germany and Japan will be the last to fall, but they will not stop the policy prescription. You only have to let wealth trickle down to the rabble when you fear them. 1919-1991. It's the end of history. Nobody fears the middle class. It's time to gut them. Worldwide you see it. More money for subsistence welfare programs. More wealth inequality. More relative tax burden for the middle. Instead of rolling the Caymans like Reagan did Grenada, bankers get "Get Out of Jail Free" cards.

[LazyBoy]

Re: Bankruptcy? In Germany??

The policy goal is to eliminate the middle class worldwide.

Many times I've been tempted to profess my love for your posts, dc.

But "goal"? I have no doubt that it's the result and probably inevitable at this point. But do you really see policy makers sitting around saying "How can we crush the middle class today? Mwahaha!" Isn't it more likely the endgame of a bunch of guys playing "How can I accumulate even more wealth?".

[jk]

Re: Bankruptcy? In Germany??

Many times I've been tempted to profess my love for your posts, dc.

But "goal"? I have no doubt that it's the result and probably inevitable at this point. But do you really see policy makers sitting around saying "How can we crush the middle class today? Mwahaha!" Isn't it more likely the endgame of a bunch of guys playing "How can I accumulate even more wealth?".

i went through the same thought process, but ultimately it boils down to the same thing. enough social safety net -food stamps, etc- to keep the bulk of people from plotting revolution. then the elite maximize wealth. the middle class is the only repository of wealth not in the hands of the elites, so they must expropriate the middle class.

[astonas]

Re: Bankruptcy? In Germany??

The policy goal is to eliminate the middle class worldwide. Germany and Japan will be the last to fall, but they will not stop the policy prescription. You only have to let wealth trickle down to the rabble when you fear them. 1919-1991. It's the end of history. Nobody fears the middle class. It's time to gut them. Worldwide you see it. More money for subsistence welfare programs. More wealth inequality. More relative tax burden for the middle. Instead of rolling the Caymans like Reagan did Grenada, bankers get "Get Out of Jail Free" cards.

For those like me who don't like to look at a graph without being sure it isn't misleading, I thought I'd post another snippet from the same article, to clarify.

That’s a line for every year from 1913 onward, sized and colored by the tax burden: the amount of tax due relative to the long-term average at each income level. Above-average burdens appear thick and red and below-average thin and blue. We adjusted everything forinflation to ensure an apples-to-apples comparison, with the caveat that the effects of Social Security, Medicare, and other taxes are not included. The underlying data comes from The Tax Foundation, IRS, and Bureau of Labor Statistics, and is the same information we used in last year’s bracket graph, updated for 2011.

Thanks for posting, DC. Very powerful.

[GRG55]

Re: Bankruptcy? In Germany??

The policy goal is to eliminate the middle class worldwide. Germany and Japan will be the last to fall, but they will not stop the policy prescription. You only have to let wealth trickle down to the rabble when you fear them. 1919-1991. It's the end of history. Nobody fears the middle class. It's time to gut them. Worldwide you see it. More money for subsistence welfare programs. More wealth inequality. More relative tax burden for the middle. Instead of rolling the Caymans like Reagan did Grenada, bankers get "Get Out of Jail Free" cards.

It might be a bit simpler and much less of a conspiracy than you state.

The reason the middle class taxes rise more is because there aren't enough rich people. You could tax all of the rich of 100% of their income, and I doubt it would be more than a fraction of the taxes the USA Federal and State governments have imposed over the past 40 years on the majority of citizens in the USA...who by definition are (were?) the middle class.

And through most of that time I believe it would be difficult to argue that the middle class weren't the primary beneficiary of the programs those taxes sponsored...

[BadJuju]

Re: Bankruptcy? In Germany??

Isn't it true that most of the wealth is held by the top 10%, though?

So taxing the rich would ultimately mean more income for the government compared to levying taxes on the middle and lower classes.

http://www.huffingtonpost.com/2012/0...n_1687015.html

"

By contrast, the share of total net worth held by the weathiest 1 percent of American households continued rising, hitting 34.5 percent in 2010. The top 10 percent's share was 74.5 percent."

[GRG55]

Re: Bankruptcy? In Germany??

Isn't it true that most of the wealth is held by the top 10%, though?

So taxing the rich would ultimately mean more income for the government compared to levying taxes on the middle and lower classes.

http://www.huffingtonpost.com/2012/0...n_1687015.html

"

By contrast, the share of total net worth held by the weathiest 1 percent of American households continued rising, hitting 34.5 percent in 2010. The top 10 percent's share was 74.5 percent."

Since when did the tax system tax "wealth"? Even middle class wealth?

Doesn't it mostly tax income?

[jk]

Re: Bankruptcy? In Germany??

It might be a bit simpler and much less of a conspiracy than you state.

The reason the middle class taxes rise more is because there aren't enough rich people. You could tax all of the rich of 100% of their income, and I doubt it would be more than a fraction of the taxes the USA Federal and State governments have imposed over the past 40 years on the majority of citizens in the USA...who by definition are (were?) the middle class.

And through most of that time I believe it would be difficult to argue that the middle class weren't the primary beneficiary of the programs those taxes sponsored...

here's one discussion of the issue- i would add the caveat that the discussion focuses on ordinary income, while the wealthy make more of their money as dividends and capital gains. should dividends and capital gains be taxed more heavily? otoh, one could argue that neither should be taxed at all- dividends because the corporations paying them have already been taxed on that income, capital gains because they are for the most part just inflation. the other problem with these discussions is that they tend to ignore social security tax, which is the biggest tax bite for low earners.




Soak Wealth, Not Income?
bruce krasting

Two big problems America faces are that there is not enough tax revenue, and income is skewed to the top 10%. These issues will define the 2012 election. Obama wants to lower the taxes that middle-income earners pay at the expense of those bastards who are in the lofty top 10% of income. Romney wants to lower taxes across the board, but his plan heavily favors the shit heels that are at the top of the pile. This chart compares the two candidate's proposals:
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The Congressional Budget Office (CBO) wrote on this topic last week, presenting the following chart to describe what is happening:
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The CBO used the actual IRS tax data from 2009, so this info is an accurate description of who made what and what taxes were paid. The results confirm the problem. The top 20% of income earners make 51% of all income. This same group pays fully 68% of all Federal tax dollars.

So who are these “fat cats” who are on top of the income pile and how much are they making? The results are surprising, the following shows the incomes for those in the top 20%:

81st to 90th percentile = $137,500


91st to 95th percentile = $175,800


96th to 99th percentile = $271,800


Top 1 percent = $1,219,700

So who are these "wealthy" people in America?

Nearly half of those “rich folks” are a husband and wife who each make $65,000 a year. I understand that there are plenty of folks who don’t earn this much, but if those same people think that the households that bring in $132k a year are “rich”, they are wrong. The people in this group are not fat cats, they are not rich and they are not bastards. This is your Dr., Dentist, accountant, small business owner. This group is what fuels the economy. Take half their income away and you have a big fall.

If you’re wondering who fits into this income group (91st to 95th percentile) consider that every Senator and Congressman is in this bracket.

We get up to the stratosphere of income when household income averages $272,000 a year (96 -99%). The folks in this group have nothing to complain about; they are doing fine. But I ask the question, “Are they truly getting rich?”

Then you get to the top of the pile. The average salary for the top 1% is a whopping $1,220,000. So the reality is that the top 1% includes:

- Damn near every pro athlete.

- Any face that you see on the silver screen.

- The bozos you see on TV every day (including the “names” on CNBC).

- Paul Krugman (His book sales this year will make him a 1%er.)

- Mitt Romney. But we shouldn’t forget that Obama is also in the 1% group. In 2010 the Prez made nearly five times the average income of those top 1% earners.


Now lets see who is paying federal income taxes. This chart from the CBO report includes transfers from the federal government:
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- The negative tax rates for the bottom 40% (minus 9.3% for the lowest quintile, and minus 2.6% for the second lowest quintile) includes payments of Social Security, Medicare/Medicaid and other government transfers.

- The middle 20% has an average income of $64,000 but pays only an average of 1.3% in Federal taxes.

- Those who make $93.5k (the fourth highest quintile) are still only paying 4.6% of their income in federal taxes, on average.

- The highest 20% of income earners pay 13.4% of their income on average. The breakdown of tax rates among this group are:
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Many people are advocating raising taxes on people who are making the "big bucks".

What would happen if there was a giant increase in taxes? Assume that those "fat cats" that earned more than $250k had to pay 50% in income taxes and the “super rich” (top 1%) had to pay 75% of their income in Federal taxes. Would that solve the problem?

The answer is yes and no.

If taxes had been 50% for the 96-99% group and 75% for the top 1% in 2009, it would have generated addition tax revenues of $770B. A very big chunk of change. Projected deficits as far as the eye can see are in excess of $1 Trillion. Raising taxes on the top 5% would eliminate three-quarters of the shortfall. This result would be close enough to a balanced approach to take most of the budget pressure off of the table.

If we truly sock it to those with high current incomes, we can solve one problem. But another one is created. If we raise income taxes to levels that now exist in France, the result will be that 5% of the working population will be paying 80% of all income taxes!

A large percentage of American’s might like an outcome like this. A manageable deficit; paid for by soaking the rich. I’m sorry to tell them that it won’t work. A plan where 5% pay 80% is not going to work. A plan that sucked $3/4 of a trillion of income out of the economy would result in a near immediate depression.

I look at the information provided by the CBO and conclude that there is no way out of the revenue hole the country is in by raisingincome taxes. While tax increases are part of the fix, cutting expenses has to provide the heavy lifting. But that is a joke, as there are very few places to cut expenses without also cutting entitlements. So cutting expenses is another political dead end.

There is no combination of cutting expenses and raising income taxes that would actually be effective. There is an additional option.

The only alternative is a wealth tax. Anyone who has a net worth over $5m (or $20m, or chose a number) has to pay 1% (or 2%) of that amount, every year. It would be like a death tax, except you paid it while you were alive. Think - pre-paid estate taxes.

Warren Buffett is always complaining that he doesn’t pay enough in taxes. The guy has a net worth of about $40b. If there was a 2% wealth tax he would have to cough up an extra $800m a year. That would shut him up quick; it would also solve all the fiscal problems. Bill Gates would be forced to come up with an extra $1.2B. The Walton family would have to pony up $1.6B. And the good old Koch brothers would toss in a $1b.

If a 2% wealth tax was applied to everyone who had a net worth in excess of $5m it would add up to about $700B a year. That’s just about the right amount to get the budget to where it starts to make sense. This tax increase would not come out of current income, therefore the consequences to the economy would be muted versus a similar sized income tax increase.

Hopefully, I've convinced some readers that raising income taxes is a dead end. It may sound like a politically “smart” thing to say, but it doesn’t mean spit when shown in the light. Taxing income does not get the job done without too many adverse consequences. Only a wealth tax can make a dent.

I’m amazed that Team Obama has not proposed a tax on America’s wealthy. They must have concluded that there is no other option to balance the books. Maybe Buffett is blowing smoke in Obama’s ears. He should be. Buffett is going to get fleeced if something like this were to happen.


Note: I doubt we will hear talk of a wealth tax before the election. It would be very bad for Obama’s fund raising efforts if he brought it up. That does not mean he will not propose this if he is re-elected. I don’t see another away around the budget problems.
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http://brucekrasting.blogspot.fr/201...ot-income.html

[BadJuju]

Re: Bankruptcy? In Germany??

Since when did the tax system tax "wealth"? Even middle class wealth?

Doesn't it mostly tax income?

That is true, which is why we need to start looking at other methods of taxation. Much heavier estate taxes, for instance.

[GRG55]

Re: Bankruptcy? In Germany??

That is true, which is why we need to start looking at other methods of taxation. Much heavier estate taxes, for instance.

Perhaps. I suspect those are coming. But they will most certainly come with some rather negative "unintended" consequences as well.

[BadJuju]

Re: Bankruptcy? In Germany??

Always do. =(

[jk]

Re: Bankruptcy? In Germany??

Since when did the tax system tax "wealth"? Even middle class wealth?

Doesn't it mostly tax income?

real estate taxes, personal and corporate property taxes, as well as estate taxes are the only ones that come to mind.

otoh, as willie sutton said: that's where the money is.

we can tax money flows and/or money stocks [not equities per se, but stocks in the broader sense of inventories]. with velocity low, flows [which are incomes] are low. so why not tax money inventories?

it will never happen, but it's a thought.

[dcarrigg]

Re: Bankruptcy? In Germany??

It might be a bit simpler and much less of a conspiracy than you state.

I did not mean it to sound like a conspiracy theory.

I mean this is for LazyBoy too.

Many times I've been tempted to profess my love for your posts, dc.

But "goal"? I have no doubt that it's the result and probably inevitable at this point. But do you really see policy makers sitting around saying "How can we crush the middle class today? Mwahaha!" Isn't it more likely the endgame of a bunch of guys playing "How can I accumulate even more wealth?".

It's not a conspiracy. And I didn't mean for it to sound like that.

So maybe I'll turn it around and offer a new way of looking at it.


The middle class consists of only five types of people:

1) Middle managers in large corporations
2) Small business owners
3) Certain types of technically proficient professionals
4) Public sector employees
5) Unionized laborers


When discussions about corporate efficiency happen, they are looking for ways to cut #1. Corporate efficiency never happens by trimming executive's salaries. The middle managers lose their jobs.

When regulatory hearings happen, the big players look for ways to cut #2. Now it can't just be an electrician with a bucket truck that bids to get the gig changing streetlights. Now he has to be insured for a billion dollars. They are losing their businesses.

When #3 get expensive, it's time to talk about outsourcing jobs and insourcing immigrant labor that might work for less. Meet our new Moscow Center for Excellence in Software Engineering. Just teach them your job. Don't worry about it. For nurses, they'll flood the market with RN graduates and pull in immigrant labor where possible until the cost comes down. And then they eliminate LPNs so now there are only CNAs getting minimum wage and RNs above them. Gut the middle.

#4 has become the scourge of the banking system that actively tells them they should lose their jobs. Some political parties actively tell them this now. They are losing their jobs in great numbers throughout the first world.

There is no shortage of people trying to eliminate #5. That's the most obvious thing in the world.

The policy goals very much align to eliminate jobs in these five areas. It doesn't have to be a conspiracy.



#2 might be the only one that is not obvious. Small business owners are also losing ground. Here's the percentage of self-employed people by year coming into the recession. The numbers only get worse coming into today any angle you look at it.

The reason the middle class taxes rise more is because there aren't enough rich people. You could tax all of the rich of 100% of their income, and I doubt it would be more than a fraction of the taxes the USA Federal and State governments have imposed over the past 40 years on the majority of citizens in the USA...who by definition are (were?) the middle class.

No. There are more rich than there were before that line turned blue.



This is about the lowest marginal tax rate on the highest income earners ever. It is not about there not being enough of them. It is about some of the lowest marginal tax rates on the lowest income earners ever. It is not about there not being enough of them either.

It's the middle actively getting squeezed for a bigger percentage of their paycheck than the bottom and the top. This is a new phenomenon that came with the post 1991 fall of communism and thrust to globalization. No country taxed the middle highest before. That would be odd.

But now they do.

That's why I put that graph up.

The tax code first went regressive in the 80s and went really regressive in the 90s. But then it does something funny with the Bush tax cuts. It's not so regressive or progressive. There's not a word for it yet. It squeezes the middle. And government revenue drops dramatically. Why else would there be perpetual deficits?

It's on purpose. The goal of today's tax code is to soak the middle class. Believe it or not, it's in the data. The squeeze is on. Why else would capital gains be taxed differently than income (an idea Reagan himself thought was stupid)?

Look at it again. It's obvious why there are deficits. Nobody's paying in big. It's obvious why the middle class would shrink. It's paying the largest share per person as a percentage of income into the kitty.

If one is to talk about class warfare, the targeted class in the tax code today is pretty obvious.

Astonas took the time to explain this graph, and I'm going to copy and paste the explanation he quoted here:

That’s a line for every year from 1913 onward, sized and colored by the tax burden: the amount of tax due relative to the long-term average at each income level. Above-average burdens appear thick and red and below-average thin and blue. We adjusted everything forinflation to ensure an apples-to-apples comparison, with the caveat that the effects of Social Security, Medicare, and other taxes are not included. The underlying data comes from The Tax Foundation, IRS, and Bureau of Labor Statistics, and is the same information we used in last year’s bracket graph, updated for 2011.

And through most of that time I believe it would be difficult to argue that the middle class weren't the primary beneficiary of the programs those taxes sponsored...

I'm not sure about that. It's a tough thing to argue. The poor get means tested welfare programs that the middle do not receive. Things such as WIC, SNAP, Medicaid, etc. The middle class get defense, civil service and DBA jobs. The rich get a tax code rigged heavily in their favor. At the end of the day, the public treasury is the biggest loser here. But it's hard to say who the winner is. It depends on one's philosophy, I assume.