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Taco John
08-20-2007, 01:45 AM
After the Pain of Foreclosure, a Big Tax Bill

By GERALDINE FABRIKANT

Published: August 20, 2007

Two years ago, William Stout lost his home in Allentown, Pa., to foreclosure when he could no longer make the payments on his $106,000 mortgage. Wells Fargo offered the two-bedroom house for sale on the courthouse steps. No bidders came forward. So Wells Fargo bought it for $1, county records show.

Despite the setback, Mr. Stout was relieved that his debt was wiped clean and he could make a new start. He married and moved in with his wife, Denise.

But on July 9, they received a bill from the Internal Revenue Service for $34,603 in back taxes. The letter explained that the debt canceled by Wells Fargo upon foreclosure was subject to income taxes, as well as penalties and late fees. The couple had a month to challenge the charges.

For those who struggle to pay their bills, who watch their housing payments rise out of reach with their adjustable-rate mortgages, who lose a job or who fall victim to illness, losing one’s home can feel like hitting bottom. But one more financial indignity may await as the fallout from the great housing boom ripples across the United States.

“Getting that tax bill,” Mrs. Stout recalled, “my first thought was that I needed to see my family doctor to help me with my stress, because we had a big mortgage and other debt and then here came the I.R.S. saying we owe this.”

Notices of unpaid taxes, unanticipated and little understood, will probably multiply as more people fall behind on their mortgages, said Ellen Harnick, senior policy counsel at the Center for Responsible Lending, a nonpartisan research and policy center in Durham, N.C.

Foreclosure is one way that beleaguered homeowners can fall into this tax trap. The other is when homeowners are forced to sell their homes for less than the value of the mortgage. If the lender forgives that difference, they are liable for income taxes on that amount.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy.

The Center for Responsible Lending expects that 20 percent of the home loans made in 2005 and 2006 to people with weak credit, commonly called subprime loans, will end in foreclosure. Because so little money was required as a down payment during the boom, the value of many of these houses may be less than what is owed.

Some people in this predicament are fighting the I.R.S. and winning. Sometimes, lower payments can be negotiated with the I.R.S., tax experts say.

In other cases, bankruptcy or a claim of insolvency can eliminate the tax burden. Sometimes, the bills are sent out erroneously, as banks fail to keep track of home values and what price the properties ultimately sell for.

“The tax laws are far too complex for borrowers to understand,” said Kurt Eggert, a professor at Chapman University School of Law, noting that there are distinctions between selling a house for less than the loan amount and losing one in foreclosure. He says it is crucial to get expert tax advice to sort through the bewildering complications.

The whole concept can be counterintuitive. “Your home has declined in value and you lose it,” Mr. Eggert said. “Then the I.R.S. says you owe tens of thousands in taxes because you got a windfall when the debt was forgiven.”

Mr. Stout has suffered doubly from the downturn in the housing market. He earned $65,000 last year as a salesman for a roofing company. But last winter, his job was cut from a salaried position to an hourly one. Then his hours were reduced, as construction demand eased. Through July he had earned only $25,000, said his lawyer, Stephen G. Doherty, of Bennett & Doherty in Doylestown, Pa., putting him on pace for a pay cut over all this year.

Mr. Doherty set out to appeal the Stouts’ tax bill by arguing that Wells Fargo got the home as collateral so the family did not reap a benefit. The Stouts and their lawyer also hoped to show that Wells Fargo was able to sell the house for far more than $1. Finally, they contended that penalties were inappropriate because they did not receive a tax notice in 2005 or 2006.

After a reporter inquired about the Stout matter, Wells Fargo Home Mortgage said last week that it had reviewed the Stouts’ tax documents and was filing a corrected 1099 tax form to show that no debt had been canceled, because the fair market value of the home was actually more than Mr. Stout had owed.

Mr. Doherty, the Stouts’ lawyer, pointed out that the acquiring lender, in this case Wells Fargo, has some leeway in valuing a house. The fair market value can be the high bid at a sheriff’s sale, or an alternative valuation.

In this case, Wells Fargo’s about-face was tied to an appraisal that Mr. Doherty says he believes was completed before the sale. It set the value of the house at $132,844, eliminating the Stouts’ liability. (Lenders do periodic appraisals once a property is in default, Mr. Doherty said.)

The Stouts found in county records that Wells Fargo had sold the house to U.S. Bank for $106,000 — the same amount Mr. Stout had owed — in March 2006. The house was resold that month for $140,000.

An I.R.S. spokesman would not comment on the Stout matter or how the agency applies the tax rules on forgiven debt, but referred to a document on the I.R.S.’s policies.

Diane Thompson, a lawyer in Godfrey, Ill., for the National Consumer Law Center, says the tax can be a real hardship for some people.

She recalled a client who owed $39,000 to her lender and got a tax bill after her house was sold in foreclosure for $10,000. Ms. Thompson appealed to tax authorities, contending that her client, a part-time waitress, was broke because her debts were greater than her assets.

“If you can prove you are insolvent, the I.R.S. does not treat the forgiveness of debt as income,” Ms. Thompson said. Her client did not have to pay.

Lawyers may also be able to show that the original loan process was so flawed that the borrower is not liable for taxes. Indeed, during the real estate bubble, lenders and mortgage brokers sometimes encouraged homeowners to borrow more based on inflated home values.

Such was the case with Agnes Mouser, a 65-year-old widow who works in the records department in a Houston prison. In 2000, she sought to pay off her credit-card debt with a loan from Beneficial Finance, which sent an appraiser to assess the value of her home.

“A real nice young man came out to see me,” Mrs. Mouser recalled. “He could have been my grandson.”

That appraiser compared her 1977 mobile home with two new standard homes with two-car garages. Using those homes as benchmarks, Beneficial agreed to lend $34,730 on her home, valued at $43,500, in 2000. Mrs. Mouser’s loan carried an interest rate of 14.88 percent, and she paid 7 points, or $2,431, at closing to get that rate, along with $270 to Beneficial for the appraisal.

A spokeswoman for HSBC, the parent company of Beneficial, said it did not comment on matters involving specific customers.

In 2003, when Mrs. Mouser could not meet the payments, she contacted Ira D. Joffe, a lawyer in Houston. He found that her property was valued by the county at $19,970, less than half of what Beneficial had estimated.

“I promised to depose the appraiser’s Seeing Eye dog if there was a lawsuit,” Mr. Joffe recalled telling Beneficial.

Beneficial released the lien. But then Mrs. Mouser got a tax bill for $10,000, or the amount owed on the $29,566 that Beneficial had treated as a canceled loan.

“The tax bill scared her to death,” Mr. Joffe recalled. “It took a letter from an accountant and two letters from me to get the I.R.S. to go away.”

http://www.nytimes.com/2007/08/20/business/20taxes.html?ex=1345262400&en=c924620782ab01f5&ei=5090&partner=rssuserland&emc=rss

ClevelandBronco
08-20-2007, 03:18 AM
...Foreclosure is one way that beleaguered homeowners can fall into this tax trap. The other is when homeowners are forced to sell their homes for less than the value of the mortgage. If the lender forgives that difference, they are liable for income taxes on that amount.

The 1099 shortfall, as it is called, stems from an Internal Revenue Service policy that treats forgiven debt of all types as income even if the taxpayer has nothing tangible to show for it, unless the debt is canceled through bankruptcy...

I helped a neighbor and friend get through a "short sale" recently. They had found an appraiser a couple of years ago who was willing to overvalue their property by about $150,000 or so, and they had borrowed against that unrealistic price.

A couple of unfortunate business decisions led to a cash flow crunch and they fell behind on their mortgage.

Here's the thing, though: The 1099 shortfall is a negotiable event. That is to say that the lender isn't required to issue a 1099, and the mortgagee who is in default can negotiate with the lender to prevent the 1099 from being issued. The agreement should be written out, of course, or there is no agreement.

But Taco and this story are correct. The difference between the eventual resale price of the property and the defaulted loan can be treated as taxable income to the mortgagee who defaulted.

With all the foreclosures that are already or nearly ready to go down, what he's posted is important to know. Even if you aren't in trouble, It's likely that you know someone who is.

Jilly
08-20-2007, 07:08 AM
wow, that is really good information. Thank you, because I do know some folks that could be going through this.

patteeu
08-20-2007, 07:35 AM
I'm as anti-tax and anti-IRS as anyone around here, but I fail to see how this constitutes "screwing over Americans." :shrug:

If you owe someone $1000 and you work overtime to earn an extra $1000 from your employer to pay off the debt, you're going to owe taxes on that $1000. Why should the guy who doesn't work any overtime, but has the good fortune of having his lender forgive that $1000 debt get a tax break?

I definitely agree with this quote from the article though:

The tax laws are far too complex for borrowers to understand.

I'd go even farther and say that the tax laws are too complex for tax lawyers to fully understand them.

banyon
08-20-2007, 09:50 AM
Yes, forgiven or canceled debt is income. It has been for a long time. If they are truly destitute, they can do an offer in compromise with the IRS and settle for 1/2-1/3 of the amount owed.

Taco John
08-20-2007, 11:52 AM
I'm as anti-tax and anti-IRS as anyone around here, but I fail to see how this constitutes "screwing over Americans." :shrug:

If you owe someone $1000 and you work overtime to earn an extra $1000 from your employer to pay off the debt, you're going to owe taxes on that $1000. Why should the guy who doesn't work any overtime, but has the good fortune of having his lender forgive that $1000 debt get a tax break?




Two things:

1) It's not income

and

2) The government doesn't inherently own us. We shouldn't have to pay income tax period.

patteeu
08-20-2007, 11:56 AM
Two things:

1) It's not income

and

2) The government doesn't inherently own us. We shouldn't have to pay income tax period.

I don't like the income tax so I won't argue with your second point (although technically, we did grant the federal government authority to collect such taxes in the 16th amendment).

But you're wrong about whether or not it's income. It's definitely income.

BucEyedPea
08-20-2007, 12:13 PM
How I take Tac's pov is that it may be treated as income currently in our system but that he feels it shouldn't be. More of a moral/ethical pov if you ask me.

Likewise, the govt does own us to a certain degree currently, in a certain sense...but that doesn't mean it should be this way.

Taco John
08-20-2007, 12:19 PM
I don't like the income tax so I won't argue with your second point (although technically, we did grant the federal government authority to collect such taxes in the 16th amendment).


Actually, we didn't grant anything. The government granted it for itself. It's an illegal tax.


But you're wrong about whether or not it's income. It's definitely income.


No it's not. The government and anyone programmed to repeat the government POV of course, sees it that way.

BIG_DADDY
08-20-2007, 12:21 PM
IRS is unfriggenbelievable.

Baby Lee
08-20-2007, 12:22 PM
If you owe someone $1000 and you work overtime to earn an extra $1000 from your employer to pay off the debt, you're going to owe taxes on that $1000. Why should the guy who doesn't work any overtime, but has the good fortune of having his lender forgive that $1000 debt get a tax break?
In that case, one would still have the benefit of the goods or experiences gained in incurring the debt.
In this case, the forgiveness comes with recission of the goods gained, ie the house.
Seems like that should make a difference.

Baby Lee
08-20-2007, 12:23 PM
Actually, we didn't grant anything. The government granted it for itself.
In a representative democracy, that's a distinction without a difference.

patteeu
08-20-2007, 12:46 PM
In that case, one would still have the benefit of the goods or experiences gained in incurring the debt.
In this case, the forgiveness comes with recission of the goods gained, ie the house.
Seems like that should make a difference.

It seems to me to be the difference between a good investment and a bad investment. Whether your investment is a good one (gain goods or experience) or a really bad one (lose house), if someone effectively gives you the money to reduce the cost of your original investment, I think it ought to be considered income.

Maybe I'm missing something though. :shrug:


reason to decide that a gratuitous benefit . As long as the terms of the bargain are agreed to at the beginning, the difference in the benefit received

Baby Lee
08-20-2007, 12:59 PM
It seems to me to be the difference between a good investment and a bad investment. Whether your investment is a good one (gain goods or experience) or a really bad one (lose house), if someone effectively gives you the money to reduce the cost of your original investment, I think it ought to be considered income.

Maybe I'm missing something though. :shrug:


reason to decide that a gratuitous benefit . As long as the terms of the bargain are agreed to at the beginning, the difference in the benefit received
But with a bad investment, gambling, stock market, beanie babies, you still have; 1. the devalued investment [when it comes to real property or stocks], or 2. the experience [of gambling, watching movies, taking vacations, or investing in the market].
If the person herein got their debt reduced AND possession of their '$1' house, I'd agree it's income. But they paid for their debt with the loss of the house.

patteeu
08-20-2007, 01:20 PM
But with a bad investment, gambling, stock market, beanie babies, you still have; 1. the devalued investment [when it comes to real property or stocks], or 2. the experience [of gambling, watching movies, taking vacations, or investing in the market].
If the person herein got their debt reduced AND possession of their '$1' house, I'd agree it's income. But they paid for their debt with the loss of the house.

They gained the experience of taking out a loan that, for whatever reason, they ended up not being able to repay. It's rough experience, but what's the difference between gambling your house away on a speculative loan that goes lousy or gambing it away on pro football or poker? I suppose that if you assume that the debtor did nothing wrong and was just a victim of circumstances completely beyond their control, there would be an argument for compassion, but I don't see a philosophical difference between these various agreements-gone-bad that would prevent forgiven loans from being considered income. They are gifts of value.

Mi_chief_fan
08-20-2007, 01:43 PM
In that case, one would still have the benefit of the goods or experiences gained in incurring the debt.
In this case, the forgiveness comes with recission of the goods gained, ie the house.
Seems like that should make a difference.
:clap:

That's one of the most well-thought out posts i've ever read. Good job.

Logical
08-20-2007, 03:34 PM
I'm as anti-tax and anti-IRS as anyone around here, but I fail to see how this constitutes "screwing over Americans." :shrug:

If you owe someone $1000 and you work overtime to earn an extra $1000 from your employer to pay off the debt, you're going to owe taxes on that $1000. Why should the guy who doesn't work any overtime, but has the good fortune of having his lender forgive that $1000 debt get a tax break?

I definitely agree with this quote from the article though:



I'd go even farther and say that the tax laws are too complex for tax lawyers to fully understand them.

Dude you are sometimes just weird. How can you not see the injustice in a loan amount that you do not have to pay off being seen as income. That is far from intuitive and in fact it is really illogical.

Logical
08-20-2007, 03:36 PM
They gained the experience of taking out a loan that, for whatever reason, they ended up not being able to repay. It's rough experience, but what's the difference between gambling your house away on a speculative loan that goes lousy or gambing it away on pro football or poker? I suppose that if you assume that the debtor did nothing wrong and was just a victim of circumstances completely beyond their control, there would be an argument for compassion, but I don't see a philosophical difference between these various agreements-gone-bad that would prevent forgiven loans from being considered income. They are gifts of value.

And that seems like income to you in what sense?

Baby Lee
08-20-2007, 03:43 PM
Dude you are sometimes just weird. How can you not see the injustice in a loan amount that you do not have to pay off being seen as income. That is far from intuitive and in fact it is really illogical.
If the person had spent the loan proceeds on things they already extracted full enjoyment from [gambling, vacations], or on goods they got to retain, it'd be income. Harder to figure in this instance, unless you figure the experience of owning the home for the period they did, or the enjoyment of the benefits of home ownership for the period they held it was the aim of the venture.

patteeu
08-20-2007, 04:06 PM
Dude you are sometimes just weird. How can you not see the injustice in a loan amount that you do not have to pay off being seen as income. That is far from intuitive and in fact it is really illogical.

Compare two identical people who take out identical loans on houses and eventually default and experience foreclosure. If the bank forgives the remaining debt of A (let's say $100,000) and refuses to forgive the equal debt of B, which person is better off and by how much?

If people don't want to pay this tax, they can choose not to accept the bank's generosity.

patteeu
08-20-2007, 04:08 PM
If the person had spent the loan proceeds on things they already extracted full enjoyment from [gambling, vacations], or on goods they got to retain, it'd be income. Harder to figure in this instance, unless you figure the experience of owning the home for the period they did, or the enjoyment of the benefits of home ownership for the period they held it was the aim of the venture.

Would we agree that a $100,000 gift from Uncle Harry would be income?

Baby Lee
08-20-2007, 04:20 PM
Would we agree that a $100,000 gift from Uncle Harry would be income?
Sure.
But what we have here is Uncle Harry giving us a house worth 100K, buying it back for $1.

If anyone received income, it was WF, who received a home that they deemed worth $106K for $1. Notwithstanding the lack of bidders that particular day, they still retain Fee Simple real property of real worth. Now I'm sure they'll have a gains hit when they finally unload it, but that just means that the Govt profits from the poor dealings of the mortgager and mortgagee both.

Baby Lee
08-20-2007, 04:28 PM
Compare two identical people who take out identical loans on houses and eventually default and experience foreclosure. If the bank forgives the remaining debt of A (let's say $100,000) and refuses to forgive the equal debt of B, which person is better off and by how much?

If people don't want to pay this tax, they can choose not to accept the bank's generosity.
I'd say B, because the foregiveness and foreclosure are part and parcel, so if WF refuses to forgive the debt, that means they're not exercising their rights in regards to the collateral and B still has their house.

Taco John
08-20-2007, 04:35 PM
Compare two identical people who take out identical loans on houses and eventually default and experience foreclosure. If the bank forgives the remaining debt of A (let's say $100,000) and refuses to forgive the equal debt of B, which person is better off and by how much?



They both seem pretty screwed to me. Person A lost their house because they couldn't make the payments, and Person B lost their house because they couldn't make the payments. Now throw in the Federal Government looking for their pound of flesh, and it looks like they're both uber-****ed, as both are going to ultimately declare bankruptcy.

I don't understand how anyone could be on the government's side on this one. This is one of the most plainly unfair taxing practices that I can ever remember being exposed to. Not only that, it shows the inherent flaws in an income tax system. What is the government going to do with the person-they're-breaking's money? What would that person be doing with that money that the government is taking? We're sucking local dollars out of our economies and putting them in control of federal planners to redistribute as they see fit, perhaps for some social cause, all while kicking someone to the curb.

So much for the ownership society (http://en.wikipedia.org/wiki/Ownership_society). More like the ownership society (http://www.capmag.com/article.asp?ID=63).

patteeu
08-20-2007, 05:00 PM
I'd say B, because the foregiveness and foreclosure are part and parcel, so if WF refuses to forgive the debt, that means they're not exercising their rights in regards to the collateral and B still has their house.

Are you saying that WF can't foreclose if they don't forgive the debt. If so, I don't believe so. They are two separate business decisions unless there's some kind of state or federal intervention in the mortgage process that mandates it of which I'm unaware. That's a possibility, but I'll be surprised to find out that that's the case.

banyon
08-20-2007, 05:01 PM
I'd say B, because the foregiveness and foreclosure are part and parcel, so if WF refuses to forgive the debt, that means they're not exercising their rights in regards to the collateral and B still has their house.

The foreclosure action is separate from the debt. A is clearly better off because B can still be sued after they lose their home for a deficiency judgment for any amount they don't recover at a foreclosure sale (which will likely be a good chunk of change).

patteeu
08-20-2007, 05:02 PM
Sure.
But what we have here is Uncle Harry giving us a house worth 100K, buying it back for $1.

If anyone received income, it was WF, who received a home that they deemed worth $106K for $1. Notwithstanding the lack of bidders that particular day, they still retain Fee Simple real property of real worth. Now I'm sure they'll have a gains hit when they finally unload it, but that just means that the Govt profits from the poor dealings of the mortgager and mortgagee both.

What we have here is person C who buys the house with a loan, loses it to foreclosure, and then receives a gift from Uncle Harry so that they don't end up buried in debt too.

Logical
08-20-2007, 05:07 PM
Compare two identical people who take out identical loans on houses and eventually default and experience foreclosure. If the bank forgives the remaining debt of A (let's say $100,000) and refuses to forgive the equal debt of B, which person is better off and by how much?

If people don't want to pay this tax, they can choose not to accept the bank's generosity.

And do what, declare bankruptcy? Seems like the tax system is setup to induce bankruptcies.

patteeu
08-20-2007, 05:08 PM
They both seem pretty screwed to me. Person A lost their house because they couldn't make the payments, and Person B lost their house because they couldn't make the payments. Now throw in the Federal Government looking for their pound of flesh, and it looks like they're both uber-****ed, as both are going to ultimately declare bankruptcy.

I don't understand how anyone could be on the government's side on this one. This is one of the most plainly unfair taxing practices that I can ever remember being exposed to. Not only that, it shows the inherent flaws in an income tax system. What is the government going to do with the person-they're-breaking's money? What would that person be doing with that money that the government is taking? We're sucking local dollars out of our economies and putting them in control of federal planners to redistribute as they see fit, perhaps for some social cause, all while kicking someone to the curb.

So much for the ownership society (http://en.wikipedia.org/wiki/Ownership_society). More like the ownership society (http://www.capmag.com/article.asp?ID=63).


I agree, they're both screwed. Person B is screwed by $100,000 (less the federal tax on that amount) more than person A though.

I also agree that this is a pretty significant flaw in the income tax system.

But as far as fairness is concerned, I think it would be even more unfair to reward a person who fails to pay his debts relative to a person who works a second job to pay them.

patteeu
08-20-2007, 05:10 PM
And do what, declare bankruptcy? Seems like the tax system is setup to induce bankruptcies.

In this case, it appears that that could be the result. Of course, bad consequences follow when you get yourself into a position to be foreclosed upon. Most of the people who find themselves in this position aren't really completely innocent victims. It's not like the tax code or the federal government caused them to overextend themselves.

And btw, it's people who see situations like this as unfair, who try to put a fix into the tax code and thereby increase it's complexity.

Baby Lee
08-20-2007, 05:16 PM
The foreclosure action is separate from the debt. A is clearly better off because B can still be sued after they lose their home for a deficiency judgment for any amount they don't recover at a foreclosure sale (which will likely be a good chunk of change).
Yeah, just overstating aversion to unsecured debt.
I rather imagine that the loan in question had a provision from the outset that the mortgager would not pursue the unsecured portion, thus leading to the 'forgiveness.'

Logical
08-20-2007, 05:31 PM
In this case, it appears that that could be the result. Of course, bad consequences follow when you get yourself into a position to be foreclosed upon. Most of the people who find themselves in this position aren't really completely innocent victims. It's not like the tax code or the federal government caused them to overextend themselves.

And btw, it's people who see situations like this as unfair, who try to put a fix into the tax code and thereby increase it's complexity.

Dude it cannot get more complex than taxing non-income that is unpaid debt. Hey another bonus idea is to collect income taxes on all the unpaid credit card debt, I bet there is real bonanza waiting there.

Baby Lee
08-20-2007, 05:33 PM
Dude it cannot get more complex than taxing non-income that is unpaid debt. Hey another bonus idea is to collect income taxes on all the unpaid credit card debt, I bet there is real bonanza waiting there.
I'd support taxing forgiveness of that. In that case, one would presume that the debtor got full enjoyment of everything they charged.
But that debt is rarely forgiven.

Simplex3
08-20-2007, 05:41 PM
Actually, we didn't grant anything. The government granted it for itself. It's an illegal tax.
Let's not forget that the 16th Amendment didn't actually pass.

http://www.freerepublic.com/forum/a3785caf25970.htm
Of the 48 states, here's the story:

----Eight states (Rhode Island, Utah, Connecticut, New Hampshire, Kentucky, Florida, Virginia and Pennsylvania) did not approve or ratify the amendment.

----Texas and Louisiana were forbidden by their own state constitutions to empower the federal government to tax.

----Vermont and Massachusetts rejected the amendment with a recorded voice count, and only later declared it passed without a recorded vote after the amendment was declared ratified by Knox.

----Tennessee, Ohio, Mississippi, California and Washington violated their state constitutions in their ratification procedures.

----Minnesota did not send any copy of its resolution to Knox, let alone a signed and sealed one, as required.

----And Oklahoma, Georgia and Illinois made unacceptable changes in wording. (Some of the above states also made such changes, in addition to their other unacceptable procedures.)

Take 48 states, deduct these 21, and you have proper ratification by only 27 states-- far less than the required 36.

BucEyedPea
08-20-2007, 05:48 PM
I'd support taxing forgiveness of that. In that case, one would presume that the debtor got full enjoyment of everything they charged.



Isn't that the same as bankruptcy?
Don't they get full enjoyment of what they charged?

BTW could an individual declare bankuptcy to avoid the tax liability the why private creditors can be screwed?

Baby Lee
08-20-2007, 06:07 PM
Isn't that the same as bankruptcy?
Don't they get full enjoyment of what they charged?

BTW could an individual declare bankuptcy to avoid the tax liability the why private creditors can be screwed?
Discharge by a judge is not the same as forgiveness by the creditor.

BucEyedPea
08-20-2007, 06:09 PM
Discharge by a judge is not the same as forgiveness by the creditor.
Bear with me a moment. It's seems like it's a different person and process but the defaulter still enjoyed what they used right?

And what about the second question....can one do that?

alnorth
08-20-2007, 06:13 PM
Bear with me a moment. It's seems like it's a different person and process but the defaulter still enjoyed what they used right?

And what about the second question....can one do that?

You cant discharge a tax debt in bankruptcy.

a1na2
08-20-2007, 06:13 PM
It sounds like the banks are giving lawyers a way to redeem their reputation.

This is worse than most of the lawyer jokes I've ever heard.

BucEyedPea
08-20-2007, 06:18 PM
You cant discharge a tax debt in bankruptcy.
Thank you.

alnorth
08-20-2007, 06:19 PM
Let's not forget that the 16th Amendment didn't actually pass.

http://www.freerepublic.com/forum/a3785caf25970.htm

That silly tinfoil theory was debunked (http://www.quatloos.com/bill_benson_debunked.htm) repeatedly throughout the internet and in the Supreme Court. The 16th amendment did pass, and the income tax is perfectly legal (http://www.quatloos.com/taxscams/taxprot.htm).

alnorth
08-20-2007, 06:24 PM
I'm not gonna take one side or the other on the forgiven debt-as-income debate, because I could argue both ways on it.

I can understand the IRS's reasoning, especially when you boil it down to the simple guy A gets forgiven guy B isnt forgiven examples above where guy A is clearly way ahead. Essentially, the bank paid guy A the money he needed to retire his remaining debt with the bank, is one way to look at it.

On the other side, its not intuitively obvious as income. You really have to screw your head around and look at it in an odd way to see it as income. An alternate arguement would be to call it a gift. However, if we did call it a gift then the bank would have a STRONG incentive to never forgive anything to avoid a gift tax issue, so in that way calling it income could be helpful to those people I guess, if it would encourage the banks to forgive loans more often.

patteeu
08-20-2007, 06:58 PM
Dude it cannot get more complex than taxing non-income that is unpaid debt. Hey another bonus idea is to collect income taxes on all the unpaid credit card debt, I bet there is real bonanza waiting there.

If credit card companies frequently forgive the debt of their customers you might be right. I'd be surprised to find out they do though.

Taco John
08-20-2007, 06:59 PM
That silly tinfoil theory was debunked (http://www.quatloos.com/bill_benson_debunked.htm) repeatedly throughout the internet and in the Supreme Court. The 16th amendment did pass, and the income tax is perfectly legal (http://www.quatloos.com/taxscams/taxprot.htm).



Uh oh... The wild shills for the socialist money collection scheme are around, and they're calling everyone else "tin foil hat wearers."

a1na2
08-20-2007, 07:16 PM
If credit card companies frequently forgive the debt of their customers you might be right. I'd be surprised to find out they do though.

When hospitals forgive debt they issue 1099's and the people that get the 1099's are responsible for the income.

Bills paid, regardless of the method seem to be open for taxation. Which would you rather do? Pay the whole amount plus the taxes on the money that you made to pay the amount or just pay the taxes?

alnorth
08-20-2007, 07:28 PM
Uh oh... The wild shills for the socialist money collection scheme are around, and they're calling everyone else "tin foil hat wearers."

Sadly for you, I am also correct on the legality of the 16th amendment and the income tax.

banyon
08-20-2007, 08:13 PM
Sadly for you, I am also correct on the legality of the 16th amendment and the income tax.

Yes, you are.

These arguments are usually the last resort for big time tax evaders, who like capital murder defendants, will try any theory no matter how silly to try to bail themselves out of trouble.

One argument that has been raised several times (and always ruled meritless) suggests that the Sixteenth Amendment was not properly ratified. This argument is based on the fact that the legislatures of various states passed ratifying resolutions in which the quoted text of the Amendment differed from the text proposed by Congress in terms of capitalization, spelling of words, or punctuation marks (e.g. semi-colons instead of commas).

The earliest reported court case where this argument was raised appears to be United States v. House,[1] about seventy-two years after the ratification. The best-known proponent of the non-ratification claim is William J. Benson, co-author of the book The Law That Never Was (1985), who testified in the House case to no avail. The Benson contention was comprehensively addressed by the Seventh Circuit Court of Appeals in United States v. Thomas:[2]

Thomas is a tax protester, and one of his arguments is that he did not need to file tax returns because the sixteenth amendment is not part of the constitution. It was not properly ratified, Thomas insists, repeating the argument of W. Benson & M. Beckman, The Law That Never Was (1985). Benson and Beckman review the documents concerning the states' ratification of the sixteenth amendment and conclude that only four states ratified the sixteenth amendment; they insist that the official promulgation of that amendment by Secretary of State Knox in 1913 is therefore void.

Benson and Beckman did not discover anything; they rediscovered something that Secretary Knox considered in 1913. Thirty-eight states ratified the sixteenth amendment, and thirty-seven sent formal instruments of ratification to the Secretary of State. (Minnesota notified the Secretary orally, and additional states ratified later; we consider only those Secretary Knox considered.[3]) Only four instruments repeat the language of the sixteenth amendment exactly as Congress approved it. The others contain errors of diction, capitalization, punctuation, and spelling. The text Congress transmitted to the states was: "The Congress shall have power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several States, and without regard to any census or enumeration." Many of the instruments neglected to capitalize "States," and some capitalized other words instead. The instrument from Illinois had "remuneration" in place of "enumeration"; the instrument from Missouri substituted "levy" for "lay"; the instrument from Washington had "income" not "incomes"; others made similar blunders.
Thomas insists that because the states did not approve exactly the same text, the amendment did not go into effect. Secretary Knox considered this argument. The Solicitor of the Department of State drew up a list of the errors in the instruments and — taking into account both the triviality of the deviations and the treatment of earlier amendments that had experienced more substantial problems — advised the Secretary that he was authorized to declare the amendment adopted. The Secretary did so.

Although Thomas urges us to take the view of several state courts that only agreement on the literal text may make a legal document effective, the Supreme Court follows the "enrolled bill rule." If a legislative document is authenticated in regular form by the appropriate officials, the court treats that document as properly adopted. Field v. Clark, 143 U.S. 649, 36 L.Ed. 294, 12 S.Ct. 495 (1892). The principle is equally applicable to constitutional amendments. See Leser v. Garnett, 258 U.S. 130, 66 L.Ed. 505, 42 S.Ct. 217 (1922), which treats as conclusive the declaration of the Secretary of State that the nineteenth amendment had been adopted. In United States v. Foster, 789 F.2d. 457, 462-463, n.6 (7th Cir. 1986), we relied on Leser, as well as the inconsequential nature of the objections in the face of the 73-year acceptance of the effectiveness of the sixteenth amendment, to reject a claim similar to Thomas's. See also Coleman v. Miller, 307 U.S. 433, 83 L. Ed. 1385, 59 S. Ct. 972 (1939) (questions about ratification of amendments may be nonjusticiable). Secretary Knox declared that enough states had ratified the sixteenth amendment. The Secretary's decision is not transparently defective. We need not decide when, if ever, such a decision may be reviewed in order to know that Secretary Knox's decision is now beyond review.
http://en.wikipedia.org/wiki/Tax_protester_constitutional_arguments#First_Amendment_arguments

Mi_chief_fan
08-20-2007, 08:22 PM
In this case, it appears that that could be the result. Of course, bad consequences follow when you get yourself into a position to be foreclosed upon. Most of the people who find themselves in this position aren't really completely innocent victims. It's not like the tax code or the federal government caused them to overextend themselves.

And btw, it's people who see situations like this as unfair, who try to put a fix into the tax code and thereby increase it's complexity.

While it's a fair assessment that some people do overextend themselves, sometimes life is just cruel.

People lose jobs (a job leaves Michigan every minute it seems), and are unable to find one that pays as well as the last. Heck, my parents are struggling because of some outragous medical bills right now, luckily they had pretty good insurane or else they'd be screwed. Families lose head of households, and the remaining family simply cannot compensate for the loss.

And now, thanks to some strong lobbying by the credit card companies (who aren't always forthright, BTW) bankrupcy laws have been changed so that the average Joe must repay most of or all of their debt when they declare bankrupcy.

Just sad.

Logical
08-20-2007, 08:27 PM
I'm not gonna take one side or the other on the forgiven debt-as-income debate, because I could argue both ways on it.

I can understand the IRS's reasoning, especially when you boil it down to the simple guy A gets forgiven guy B isnt forgiven examples above where guy A is clearly way ahead. Essentially, the bank paid guy A the money he needed to retire his remaining debt with the bank, is one way to look at it.

On the other side, its not intuitively obvious as income. You really have to screw your head around and look at it in an odd way to see it as income. An alternate arguement would be to call it a gift. However, if we did call it a gift then the bank would have a STRONG incentive to never forgive anything to avoid a gift tax issue, so in that way calling it income could be helpful to those people I guess, if it would encourage the banks to forgive loans more often.

The only way I see it as income is if they get to keep the house. Then I agree it is income.

banyon
08-20-2007, 08:37 PM
The only way I see it as income is if they get to keep the house. Then I agree it is income.

They got to live in the house didn't they?

Hey, I pay rent every month, so I know that has a dollar value.

I think you could view the difference between the foreclosure sale price and the price of the mortgage note as this difference for their use of the home.

patteeu
08-20-2007, 09:34 PM
While it's a fair assessment that some people do overextend themselves, sometimes life is just cruel.

True enough although my position would be that trying to figure out which cases are purely bad luck and which cases are due at some level to poor choices is not a very good thing to try to do with the tax code.

patteeu
08-20-2007, 09:39 PM
The only way I see it as income is if they get to keep the house. Then I agree it is income.

The house is really unrelated to this issue. The issue is that these people have already lost possession of the house and now they have an outstanding debt. If they were to work to earn the money to repay that debt I doubt that you'd argue that they weren't receiving income and that they didn't owe taxes on it.. How you can believe that getting that money without having to work for it is any less like income is impossible for me to understand. It's unearned to be sure, but it's still income.

Mi_chief_fan
08-20-2007, 09:45 PM
True enough although my position would be that trying to figure out which cases are purely bad luck and which cases are due at some level to poor choices is not a very good thing to try to do with the tax code.
Agreed, but there should be some way to figure it out.

patteeu
08-20-2007, 09:51 PM
Agreed, but there should be some way to figure it out.

banyon seemed to indicate that there is, to some degree. It sounds like you can work something out with the IRS if an event like this really drives you to insolvency. I suspect that they are more willing to accommodate someone who hasn't put themselves in this position through their own reckless actions.

Logical
08-20-2007, 09:52 PM
The house is really unrelated to this issue. The issue is that these people have already lost possession of the house and now they have an outstanding debt. If they were to work to earn the money to repay that debt I doubt that you'd argue that they weren't receiving income and that they didn't owe taxes on it.. How you can believe that getting that money without having to work for it is any less like income is impossible for me to understand. It's unearned to be sure, but it's still income.:shake:

This is just so completely illogical and counterintuitive I am at a loss to understand how you come to the conclusion.

So theoretically all the money I don't really earn but I might have earned should be considered income, because the potential was there?

Taco John
08-20-2007, 10:36 PM
I understand what patty is saying, I just don't buy the argument. If a bank forgives a loan, that's between the bank and the person. The federal government shouldn't factor into it. Parsing out what is fair and not fair is for socialists who want to micro-manage society from on high, and ensure that the government gets their cut. In my mind, to sit and argue over which person is getting the most or least screwed misses the point, which is that BOTH of them are getting screwed.

As individuals, we serve as either stewards for Socialism or stewards for Liberty. Socialism is winning because people that consider themselves conservative get caught up in the mechanisms of what is fair and not fair about the system, and have become completely oblivious to the fact that the entire system is a morally bankrupt Socialist system. In a system that honors Liberty, citizens do not inherently owe the government the fruits of their labor.

patteeu
08-20-2007, 10:43 PM
:shake:

This is just so completely illogical and counterintuitive I am at a loss to understand how you come to the conclusion.

So theoretically all the money I don't really earn but I might have earned should be considered income, because the potential was there?

No, the financial benefits you get, whether you earn them or not, are income.

banyon
08-20-2007, 10:46 PM
I understand what patty is saying, I just don't buy the argument. If a bank forgives a loan, that's between the bank and the person. The federal government shouldn't factor into it. Parsing out what is fair and not fair is for socialists who want to micro-manage society from on high, and ensure that the government gets their cut. In my mind, to sit and argue over which person is getting the most or least screwed misses the point, which is that BOTH of them are getting screwed.

As individuals, we serve as either stewards for Socialism or stewards for Liberty. Socialism is winning because people that consider themselves conservative get caught up in the mechanisms of what is fair and not fair about the system, and have become completely oblivious to the fact that the entire system is a morally bankrupt Socialist system. In a system that honors Liberty, citizens do not inherently owe the government the fruits of their labor.

See, BEP, this is the kind of rhetoric I am talking about. If you aren't with Ron Paul, then you're against "Liberty". BS, again similar to the limited 2 variable logic we've been living under for the last 7 years.

And Taco, you never answered my question about Capital Gains taxes in the other thread, but extrapolating from this post, I would guess that you would say, like the private contractual relationship between the Bank and the noteholder, you would similarly say that a bondholder or stockholder should get to keep whatever they make and the Feds should not get involved. Or between an employer and an employee too?

patteeu
08-20-2007, 10:53 PM
I understand what patty is saying, I just don't buy the argument. If a bank forgives a loan, that's between the bank and the person. The federal government shouldn't factor into it. Parsing out what is fair and not fair is for socialists who want to micro-manage society from on high, and ensure that the government gets their cut. In my mind, to sit and argue over which person is getting the most or least screwed misses the point, which is that BOTH of them are getting screwed.

As individuals, we serve as either stewards for Socialism or stewards for Liberty. Socialism is winning because people that consider themselves conservative get caught up in the mechanisms of what is fair and not fair about the system, and have become completely oblivious to the fact that the entire system is a morally bankrupt Socialist system. In a system that honors Liberty, citizens do not inherently owe the government the fruits of their labor.

But they aren't getting screwed. They are getting benefited. The bank doesn't have to forgive the loan. The baseline case is the case where the bank doesn't forgive the loan. Anyone who has their loan forgiven and ends up with a significantly smaller tax liability instead is benefited by comparison.

I specifically said, earlier in this thread, that we shouldn't be using the tax code to figure out why these people were in a position to default on their loans in the first place. The tax code should treat all income as income. You are arguing for carving out this one type of income and ignoring it. That's where parsing out what is fair and what isn't fair is coming into this discussion. I'm an opponent of the income tax, but if we're going to have it, everyone should be paying taxes on their income and that includes people who are poor and people who default on their mortgages but then have the good fortune of having their debt forgiven by their bankers. If you want to argue against the income tax, then fine, I'm with you. But if you want to take the income tax as a given and argue against this one aspect, you have to have a basis for that argument and I can't figure out what yours is.

Taco John
08-20-2007, 10:59 PM
It's not about being for or against Ron Paul. Liberty and Socialism are diametrically opposed to eachother. You can't be a Socialist who is in favor of Liberty. You can't be a Libertarian who is in favor of Socialism. They are oil and water.

What we have is a socialist system that pays lip service to Liberty, and has convinced the population that "it's just the way it is, and there's nothing that you can do about it." And in fact, what has happened is that those who speak out in favor of Liberty have become marginalized as "tin foil hat wearers."

This isn't about being "with us or against us." This is about recognizing a layer of the political spectrum that has gotten lost over the last half-century.

Liberty does not exist in a social system. You can dress up socialism to *look* like Liberty, but it's an illusion that shows itself in situations like the one in the original threadpost.

alnorth
08-20-2007, 11:03 PM
After thinking about it some more, I'm going to disagree with the IRS on this one fine point. I believe that when this debt is forgiven, that should be considered a gift.

Therefore, the bank needs to worry about gift tax issues and possibly file a gift tax form. Because of that, under my interpretation, banks would never forgive these loans, they would only not bother to pursue collection if the guy is clearly busted.

Thats how it works in many other situations. Lets say you loan a family member some money. If you later forgive that loan, its now a gift and you have gift tax implications if its over (I think) $11,000 per year for each person you gift money to. (Otherwise you'd have a stupid loophole where Bill Gates "loans" his kids a few billion dollars, and then "forgives" the "loan" a couple days later)

Yes you can kind of make the odd arguement that the bank paid the debtor some money that he turns around and pays back to retire the loan, so there's income involved, but doesnt it make a lot more sense to consider this a gift instead? If giving out too much in gifts would be harmful to the bank, leading to no one ever having a debt forgiven or getting a bank to agree to a short-sale, then so be it, borrowers will just have to be even more careful.

patteeu
08-20-2007, 11:06 PM
It's not about being for or against Ron Paul. Liberty and Socialism are diametrically opposed to eachother. You can't be a Socialist who is in favor of Liberty. You can't be a Libertarian who is in favor of Socialism. They are oil and water.

What we have is a socialist system that pays lip service to Liberty, and has convinced the population that "it's just the way it is, and there's nothing that you can do about it." And in fact, what has happened is that those who speak out in favor of Liberty have become marginalized as "tin foil hat wearers."

This isn't about being "with us or against us." This is about recognizing a layer of the political spectrum that has gotten lost over the last half-century.

Liberty does not exist in a social system. You can dress up socialism to *look* like Liberty, but it's an illusion that shows itself in situations like the one in the original threadpost.

AFAICT, you have yet to explain why it's more socialist to tax forgiven debt than it is to tax a gambling windfall or a waiter's tips or an executive's salary or a stock dividend. It's socialist to transfer wealth from producers to nonproducers, but that's a problem that runs throughout our income tax system.

BucEyedPea
08-20-2007, 11:10 PM
Liberty does not exist in a social system. You can dress up socialism to *look* like Liberty, but it's an illusion that shows itself in situations like the one in the original threadpost.

I think the progressive left concept of liberty is more like "freedom" from want...an FDR'ish concept. But I meant the over regulation of business when I said that to banyon iirc. I know he's gonna dig it up and post it to prove me wrong. It's really govt that restricts liberty more, not businesses.

Taco John
08-20-2007, 11:15 PM
And Taco, you never answered my question about Capital Gains taxes in the other thread, but extrapolating from this post, I would guess that you would say, like the private contractual relationship between the Bank and the noteholder, you would similarly say that a bondholder or stockholder should get to keep whatever they make and the Feds should not get involved. Or between an employer and an employee too?



I'm most definitely against Capital Gains taxation. It takes money out of the market, limiting its growth potential, and also keeps people on the sidelines who might otherwise participate. If the government wants to tax the transaction, I would be ok with that. But for them to tax your gains is, IMO, the most insidious tax practice ever devised. When I go to a casino, I understand that there's a certain amount of vig taken out of my hide each deal. But a casino is smart enough to recognize that if they try to take a chunk of my gains after a win, I'm going to think twice about going back.

banyon
08-20-2007, 11:20 PM
It's not about being for or against Ron Paul. Liberty and Socialism are diametrically opposed to eachother. You can't be a Socialist who is in favor of Liberty. You can't be a Libertarian who is in favor of Socialism. They are oil and water.

What we have is a socialist system that pays lip service to Liberty, and has convinced the population that "it's just the way it is, and there's nothing that you can do about it." And in fact, what has happened is that those who speak out in favor of Liberty have become marginalized as "tin foil hat wearers."

This isn't about being "with us or against us." This is about recognizing a layer of the political spectrum that has gotten lost over the last half-century.

Liberty does not exist in a social system. You can dress up socialism to *look* like Liberty, but it's an illusion that shows itself in situations like the one in the original threadpost.

In my view it's an overly simplistic way to look at the last century and the way you have set up the spectrum is fairly specious.

When I pressed BEP on this, she admitted that "Liberty" means essentially economic liberty. So using it without conditioning it that way implies falsely, I think that "socialists" are against personal freedoms. The biggest assumption it makes is that tyranny is only possible through government regulation. If the first half of this century showed anything, it's that tyranny is just as possible through free enterprise conglomeration and control as through governmental means.

What practical difference did it make in the lives of cannery workers who got to live in a company town, pay rent to their employer, buy goods from the company store, go into permanent indentured servitude, work 80 hours a week along with their kids in dangerous working conditions? Not much. There would be little that government could do beyond that situation to more thoroughly dominate an individual's life.

Even today, I would guess that Ron Paul is one of the few candidates who does not have any kind of universal health care plan. And I guess you might say that universal health care is antithetical to this vague concept of "Liberty". But how free are the people who are going bankrupt every day trying to just pay their medical bills? Would universal health care really decrease these people's "Liberty"? or people who are denied treatment because they can't afford it? I guess they will revel in their "Liberty" to die earlier than they might have otherwise, or to suffer from other debilitating conditions.

I've used this line on BEP several times, but wat country is out there that empirically shows that abolishing a centralized tax collection and minimizing government involvement will make people better off? People can do whatever the f*** they want probably in Chad or Mali (as long as they have the requisite amount of guns or money), but how much "Liberty do those people really have? Why do the socialist Scandavian countries always come out so much better in every quality of life index (Oh wait, I'm sure it's because all of those indexes are made by "socialists").

And since you really apparently believe the highly questionable free market premise that parties in an economic transaction have equal negotiating power, then why weren't the people free to not take the loan? I mean, the people had perfect information ( another free market assumption) that if they defaulted and the loan was forgiven that there might be tax consequences right? They weren't forced to sign the loan, right?

BucEyedPea
08-20-2007, 11:21 PM
No I don't think liberty means economic liberty. It's part of liberty.

Taco John
08-20-2007, 11:26 PM
AFAICT, you have yet to explain why it's more socialist...


That's because it's ALL socialist. Where is the virtue in arguing what is more fair in an unfair system? I'd rather argue that neither of them should be faced with income tax than rationalize why it's ok for the government to pummel the person who received the loan forgiveness.

banyon
08-20-2007, 11:28 PM
I'm most definitely against Capital Gains taxation. It takes money out of the market, limiting its growth potential, and also keeps people on the sidelines who might otherwise participate. If the government wants to tax the transaction, I would be ok with that. But for them to tax your gains is, IMO, the most insidious tax practice ever devised. When I go to a casino, I understand that there's a certain amount of vig taken out of my hide each deal. But a casino is smart enough to recognize that if they try to take a chunk of my gains after a win, I'm going to think twice about going back.

Do you mean tax the commodity transfer like a sales tax? Wouldn't people just invest in foreign markets then to avoid the tax?

When Reagan cut the cap gains tax in the 80's, it did more than anything else to widen the gap between rich and poor in this country. Believing that wealthy capital holders will trickle the benefits down to us plebs is outmoded in today's global economy. They will reinvest their savings elsewhere where they will have lower labor costs and we will lose more decent paying middle class jobs. Taxing only work and not wealth is a way to ensure that the rigidity in our social structure will intensify.

Logical
08-20-2007, 11:29 PM
But they aren't getting screwed. They are getting benefited. The bank doesn't have to forgive the loan. The baseline case is the case where the bank doesn't forgive the loan. Anyone who has their loan forgiven and ends up with a significantly smaller tax liability instead is benefited by comparison.

I specifically said, earlier in this thread, that we shouldn't be using the tax code to figure out why these people were in a position to default on their loans in the first place. The tax code should treat all income as income. You are arguing for carving out this one type of income and ignoring it. That's where parsing out what is fair and what isn't fair is coming into this discussion. I'm an opponent of the income tax, but if we're going to have it, everyone should be paying taxes on their income and that includes people who are poor and people who default on their mortgages but then have the good fortune of having their debt forgiven by their bankers. If you want to argue against the income tax, then fine, I'm with you. But if you want to take the income tax as a given and argue against this one aspect, you have to have a basis for that argument and I can't figure out what yours is.

You have yet to conince me this is income in any way. You have to gain something to have income, these people simply have not lost something they never had.

Taco John
08-20-2007, 11:38 PM
In my view it's an overly simplistic way to look at the last century and the way you have set up the spectrum is fairly specious.


It's not much of a spectrum really. Liberty and socialism are divergent roads going in opposite directions. It's like light and dark. You can moderate the light by dimming it, but you don't have the same choice with darkness. Likewise, you can moderate Liberty by taking away freedom, but you can't moderate socialism in the same way. The only mechanism for moderating socialism is how much the government gives, how much they take away, and from whom.

Taco John
08-20-2007, 11:51 PM
Do you mean tax the commodity transfer like a sales tax? Wouldn't people just invest in foreign markets then to avoid the tax?

I guess that depends on how oppressively the government decides to tax.


When Reagan cut the cap gains tax in the 80's, it did more than anything else to widen the gap between rich and poor in this country. Believing that wealthy capital holders will trickle the benefits down to us plebs is outmoded in today's global economy. They will reinvest their savings elsewhere where they will have lower labor costs and we will lose more decent paying middle class jobs.


I'm not talking about trickle down economics. I think that concept is farcical. I don't personally care that people get rich. I think that's wonderful. I'm talking about participation economics, where more people participate in the system, capitalizing on the free market.



Taxing only work and not wealth is a way to ensure that the rigidity in our social structure will intensify.

Taxing income and redistributing wealth is a surefire way to ensure that the poor always stay poor.

alnorth
08-21-2007, 12:16 AM
Taxing income and redistributing wealth is a surefire way to ensure that the poor always stay poor.

Those are two seperate decisions. One doesnt have to follow the other.

Thats probably a pipe-dream in today's politics, but oh well.

Taco John
08-21-2007, 12:21 AM
Those are two seperate decisions. One doesnt have to follow the other.


In a socialist system, they are intrinsically linked, like siamese twins.

ClevelandBronco
08-21-2007, 01:11 AM
You have yet to conince me this is income in any way. You have to gain something to have income, these people simply have not lost something they never had.

Let me try to show how this could be income, using the process that got my neighbor in trouble.

A man buys a house for $300,000. He pays 5% down on a stated income loan at an adjustable rate. The man's equity is $15K.

A year later, the man takes out a second mortgage, leveraging the property at 125% of its fair market value. The man's equity is still about $15K, but he's now taken out a second $75K loan against the property. He's taken $60K more than he has in the property.

Soon after, he looks to combine the two loans under a new adjustable rate first mortgage. He finds an appraiser who values the property at $450,000 and the new first mortgage goes through.

Throughout this two-year period, the market has actually been flat, and my friend has put $60K in cash in his pocket at the expense of lending institutions that didn't do their due diligence. Two years later his rate begins to adjust and he can't keep up with the payments.

In my friend's case, he used the $60K to invest in his business. In someone else's case they could have used it to buy a boat. In either case, it is income that was paid to the man by his lender.

The short sale went through (to a third party). The lender didn't have to go through the eviction process. They didn't have to pay fees to real estate agents, and they didn't have to continue to carry the house as a bad debt on their books.

He's not getting a 1099, but he did receive income. That's the bottom line.

ClevelandBronco
08-21-2007, 01:20 AM
One more thing on that subject. Bill consolidation under second mortgages and serial refinancing at crazy teaser rates was pretty common there for a while. Plenty of people are in trouble now because they weren't playing with their own money. They were playing with borrowed money they mistook as their own. If they can't or won't repay it, it's income.

Logical
08-21-2007, 01:40 AM
Let me try to show how this could be income, using the process that got my neighbor in trouble.

A man buys a house for $300,000. He pays 5% down on a stated income loan at an adjustable rate. The man's equity is $15K.

A year later, the man takes out a second mortgage, leveraging the property at 125% of its fair market value. The man's equity is still about $15K, but he's now taken out a second $75K loan against the property. He's taken $60K more than he has in the property.

Soon after, he looks to combine the two loans under a new adjustable rate first mortgage. He finds an appraiser who values the property at $450,000 and the new first mortgage goes through.

Throughout this two-year period, the market has actually been flat, and my friend has put $60K in cash in his pocket at the expense of lending institutions that didn't do their due diligence. Two years later his rate begins to adjust and he can't keep up with the payments.

In my friend's case, he used the $60K to invest in his business. In someone else's case they could have used it to buy a boat. In either case, it is income that was paid to the man by his lender.

The short sale went through (to a third party). The lender didn't have to go through the eviction process. They didn't have to pay fees to real estate agents, and they didn't have to continue to carry the house as a bad debt on their books.

He's not getting a 1099, but he did receive income. That's the bottom line.

First trust that I understand how the IRS is viewing this I just feel it is completely wrong. If I get an secured loan of 50,000 and then I default on it and lose the secured item that was not income. Your case is different in that the person is leveraging the original property loan to obtain an additional loan to use personally outside the realm of buying the home. This I can see as income (though I am with TJ on the inappropriate nature of taxing it but that is a different issue). But it would only be the amount above the secured loan value that I would consider income. The property lender foreclosing is going to sell that property and thus recoup the money not to the benefit of the original lendee. But if the lendee doubled the value of the loan beyond actual value that was a gain. Actually that seems like it should be Capital Gains not income.

patteeu
08-21-2007, 06:54 AM
That's because it's ALL socialist. Where is the virtue in arguing what is more fair in an unfair system? I'd rather argue that neither of them should be faced with income tax than rationalize why it's ok for the government to pummel the person who received the loan forgiveness.

If this thread was about rejecting the entire income tax system, I'd have been in agreement, but it appeared that you were singling this facet out as particularly offensive and I can't agree with that.

patteeu
08-21-2007, 06:56 AM
You have yet to conince me this is income in any way. You have to gain something to have income, these people simply have not lost something they never had.

If someone would forgive my debt, I'd sure consider it a gain. Why you have trouble seeing this, I can't explain.

patteeu
08-21-2007, 07:01 AM
In a socialist system, they are intrinsically linked, like siamese twins.

I disagree with that. It's the redistribution of wealth that is the socialist component here. If you taxed income without redistributing wealth, what would be socialist about it? I mean, I realize that the revenue collected by the government is going to be spent on socialistic activities (e.g. public roads, the military, college loans etc), but any source of revenue is going to be spent on these things, not just a tax on income.

patteeu
08-21-2007, 07:06 AM
First trust that I understand how the IRS is viewing this I just feel it is completely wrong. If I get an secured loan of 50,000 and then I default on it and lose the secured item that was not income. Your case is different in that the person is leveraging the original property loan to obtain an additional loan to use personally outside the realm of buying the home. This I can see as income (though I am with TJ on the inappropriate nature of taxing it but that is a different issue). But it would only be the amount above the secured loan value that I would consider income. The property lender foreclosing is going to sell that property and thus recoup the money not to the benefit of the original lendee. But if the lendee doubled the value of the loan beyond actual value that was a gain. Actually that seems like it should be Capital Gains not income.

Why are you so fixated on the "loss" of the house? It wasn't the taxpayer's house because he didn't live up to his part of the bargain by paying for it. The issue here is the outstanding loan that exists after the house is lost. At one moment, there's a debt (but no house) and at the second, the debt is forgiven (still no house).

BucEyedPea
08-21-2007, 08:29 AM
I disagree with that. It's the redistribution of wealth that is the socialist component here. If you taxed income without redistributing wealth, what would be socialist about it? I mean, I realize that the revenue collected by the government is going to be spent on socialistic activities (e.g. public roads, the military, college loans etc), but any source of revenue is going to be spent on these things, not just a tax on income.
I can see the college loans being in the socialist camp ( and not completely either) but roads and the military?

Socialism is where the group is all and and individual nothing...emphasis is on the collective to the point where there is no balance against with group's rights ( or the state) and the individual's. Even a small govt like our Framer's intended still had a military and spent money on roads.

BigMeatballDave
08-21-2007, 08:38 AM
I'd send a check for $5, per week, and a note that says, "Kindly accept my weekly payment of $5, I hope it fits nicely up your ass!"

banyon
08-21-2007, 08:54 AM
I can see the college loans being in the socialist camp ( and not completely either) but roads and the military?

Socialism is where the group is all and and individual nothing...emphasis is on the collective to the point where there is no balance against with group's rights ( or the state) and the individual's. Even a small govt like our Framer's intended still had a military and spent money on roads.

Why do you draw a line at roads? I mean, shoudn't the free enterprise system dictate that too? Couldn't they do it more efficiently and such? I don't see the theoretical distinction.

banyon
08-21-2007, 09:00 AM
It's not much of a spectrum really. Liberty and socialism are divergent roads going in opposite directions. It's like light and dark. You can moderate the light by dimming it, but you don't have the same choice with darkness. Likewise, you can moderate Liberty by taking away freedom, but you can't moderate socialism in the same way. The only mechanism for moderating socialism is how much the government gives, how much they take away, and from whom.

Okay I get it now. By "Liberty" you really mean "anarchy" and by "socialism" you mean "totalitarianism". This is not really a new paradigm at all.

Of course conflating these things with traditional understandings of the word "Liberty" is still misleading.

patteeu
08-21-2007, 09:07 AM
I can see the college loans being in the socialist camp ( and not completely either) but roads and the military?

Socialism is where the group is all and and individual nothing...emphasis is on the collective to the point where there is no balance against with group's rights ( or the state) and the individual's. Even a small govt like our Framer's intended still had a military and spent money on roads.

Anytime the group pools it's resources and utilizes them in a collective manner, it's socialistic.

Theoretically, roads could be privatized and individuals could provide for their own defense.

I'm not arguing against public roads and military, btw.

KC Jones
08-21-2007, 09:17 AM
Theoretically, roads could be privatized and individuals could provide for their own defense.

I'm not arguing against public roads and military, btw.

That's something I always think about when people start talking about how great libertarianism is. I start thinking how much of a toll my neighbors would charge me for my commute, how reliable the pinkertons would be for a police force, and where we would go hiking and camping if everything was privatized.

Taco John
08-21-2007, 09:23 AM
Okay I get it now. By "Liberty" you really mean "anarchy" and by "socialism" you mean "totalitarianism". This is not really a new paradigm at all.




Not at all. You're dramaticism is getting closer to understanding the far ends of the divergent roads though.

Also, who said anything about a new paradigm?

patteeu
08-21-2007, 09:31 AM
That's something I always think about when people start talking about how great libertarianism is. I start thinking how much of a toll my neighbors would charge me for my commute, how reliable the pinkertons would be for a police force, and where we would go hiking and camping if everything was privatized.

Yes, I'm pretty extreme in some of my small government beliefs, but I can't buy into most of these ideas either.

I don't like how increased levels of socialism have crept into our society without so much as a constitutional amendment (e.g. The New Deal), but we would be foolish to believe we could go all the way back to our Founders' formulation without accounting for 200+ years of societal change and technological advancement.

BucEyedPea
08-21-2007, 09:37 AM
Anytime the group pools it's resources and utilizes them in a collective manner, it's socialistic.
I don't agree with that. I think it's a matter of degree and how the paradigm is set up. It's true some of those things are for the collective, but socialism is about controlling individuals in particular by a powerful central govt. It's a control philosophy for control freaks!

Theoretically, roads could be privatized and individuals could provide for their own defense.

Yes they could. But it's unwieldy and cumbersome and so the group decides to forego certain things to avoid that. It'd require tolls everywhere. I wouldn't barr entry for private roads though, while having govt roads at the same time.

In fact in the early days of the Republic, some collective needs were addressed which was why we went from the Articles of Confederation to a Constiutional with some more central power....just not too much. It was actually a balanced center then...but I wouldn't call that socialistic or collectivistic compare to today.

Taco John
08-21-2007, 09:47 AM
Yes, I'm pretty extreme in some of my small government beliefs, but I can't buy into most of these ideas either.

I don't like how increased levels of socialism have crept into our society without so much as a constitutional amendment (e.g. The New Deal), but we would be foolish to believe we could go all the way back to our Founders' formulation without accounting for 200+ years of societal change and technological advancement.



You're not going to find many Libertarians who will insist that we need to blow it all up. Socialism, like any system, creates dependancies. I don't think anybody believes that a magic wand can be made to undo those dependancies overnight.

Most Libertarians will have little problems accepting that a state can build roads if that's what their population wants. The issue though, is when the federal government starts to strong arm the states by holding money over their head that their people rightly own, saying "we won't give you your money back unless you conform to Lax XYZ."

banyon
08-21-2007, 10:01 AM
Not at all. You're dramaticism is getting closer to understanding the far ends of the divergent roads though.

Also, who said anything about a new paradigm?

I guess you said something about a new paradigm by utilizing the word "liberty" in this unconventional and misleading way. But it's nice that your newfound devotion to this cause doesn't involve any desire to address the rather specific refutations I offered of this position in post #68.

Taco John
08-21-2007, 10:03 AM
Also, something that I should clear up... Socialism, or collectivism, works on a local level, and I have no problems when a local community decides that this is the best way to address their needs. It's federalized socialism that I have a problem with.

Taco John
08-21-2007, 10:06 AM
I guess you said something about a new paradigm

No, I didn't. I haven't mentioned anything about a new paradigm.


But it's nice that your newfound devotion to this cause doesn't involve any desire to address the rather specific refutations I offered of this position in post #68.


Actually, I did address post 68 in post 71.

ct
08-21-2007, 10:22 AM
tax law must be changed

sincerely,
cap'n obvious

patteeu
08-21-2007, 10:29 AM
You're not going to find many Libertarians who will insist that we need to blow it all up. Socialism, like any system, creates dependancies. I don't think anybody believes that a magic wand can be made to undo those dependancies overnight.

Most Libertarians will have little problems accepting that a state can build roads if that's what their population wants. The issue though, is when the federal government starts to strong arm the states by holding money over their head that their people rightly own, saying "we won't give you your money back unless you conform to Lax XYZ."

I don't think I've heard any Libertarians talking about complete privatization of the military (although I have heard them talk about reducing the size of the standing army to that which would be necessary for border defense only), but I heard a surprising amount of talk about privatized roads when Harry Browne was running for president. I don't recall whether it was an official plank in the Libertarian platform then or not.

Here is an article from the party's website endorsing the idea though (not that that means it's an idea endorsed by the party of course).

Libertarian Solutions: Private highways: A solution whose time has come (again)? (http://www.lp.org/lpn/9801-highways.html)

EDITOR'S NOTE: How can Libertarianism solve America's problems? Each issue, LP News will showcase how "Libertarian Solutions" -- or interim steps in a libertarian direction -- can help improve our nation.

By Daniel Klein

Private ownership of "public" resources may be an idea whose time has come. There are proposals for the privatization of Grand Coulee Dam, Dulles airport, Conrail, and Amtrak. State and local governments are studying private urban transit, garbage collection, and prisons. If privatization maintains its momentum, we will have to consider a logical candidate: The roads.

The best way to understand the notion of private roads is to examine America's own era of private turnpikes. In 1821, there were over 4,000 miles of private roadway in the state of New York. Between 1792 and 1840, some 230 New England turnpike companies built and operated 3,800 miles of roads. It was private enterprise that really got the "show on the road" in America.

In early America, routes had not been beaten through the wilderness, and roads were sorely needed. People wanted to move westward, and commercial interests in the coastal cities sought to tap the trade of distant areas. State and local governments instituted feeble systems of mandatory labor and taxation to provide roads, but their failures were manifest.
Operated for profit
In the 1790s, the road business was opened up to private enterprises throughout New England and the mid-Atlantic region. Private turnpike companies constructed and operated their own roads. They were equity-financed and operated for profit. User payment was made at tollgates along the route. No government financial assistance was made, except inand in New Jersey and in Pennsylvania.

Between 1795 and 1830, turnpike construction was brisk, crisscrossing the Northeast with private roads. During the same period, public construction virtually ceased. In New York between 1790 and 1821, for example, the state's expenditure of $622,000 on the construction of roads and bridges is dwarfed by the investment in similar private concerns: $11 million in turnpike companies and $850,000 in bridge companies. A mixed system of private and public roads emerged.

Not only did private enterprise boost road mileage in America, it greatly improved the qualities of the roads as well. As the leading transportation historian B. H. Meyer stated, "It is evident that the turnpike movement resulted in a very general betterment of roads."

Although the turnpikes were private, the government maintained tight control through heavy regulation. Most important were the limits on tollgates and the restrictions on the placement of tollgates. These regulations made turnpike profits practically nonexistent. It wasn't long before everyone knew that there was no money to be had by way of turnpike dividends.

Despite the poor direct returns that resulted from government interference, turnpikes still found enthusiastic support for the indirect benefits they conferred. Local merchants, farmers, and landowners bought turnpike stock because the turnpike would make their businesses and holdings more valuable through improved transportation.

During the mid-1800s, state governments brought the era of private roads to a close by gradually reclaiming control of roads, although a few private turnpikes survived into the 20th century.
Technological Advances
What lessons can we draw from America's experience with private roads? Clearly, with today's technology, road provision through private enterprise could be even more successful. Electronic metering devices could make stopping at tollbooths obsolete. In Hong Kong, Japan, and elsewhere, authorities are experimenting with tamper-proof electronic plates, the size of cassette tapes, which are placed on cars. The plates interact with equipment built into the road surface to register the driver's toll, which he pays through the mail. If this system is feasible, private enterprise could provide roads as easily as it does movie theaters.

Think about recent advances in technology; personal computers are household items; supermarket cash registers now speak to us; ATMs handle our banking; and Blue Cross issues credit card-sized "Lifecards" that can contain the equivalent of 800 pages of medical information. Now think about the roads you drive on: How much improvement have you seen in the past 15 years? How much do you expect to see in the next 15? Nil, in both cases. The reason: Government control.

Private roads may sound far-fetched, but a familiarity with American history casts the idea in a different light. There was a period when private enterprise was able to provide such "public goods." Now, the idea of privatizing the roads is beginning to be taken seriously again. Even the federal government's National Research Council has held a conference on "Roles of Private Enterprise and Market Processes in the Financing and Provision of Road Services." The future may be closer than we think.

And I agree with you that there aren't many people calling for blowing things up overnight, but I'm not sure I'm on board with going all the way back to a 1787 baseline even if we have a transition period. The direction is good, but 1787 needs to be re-invented taking 200+ years of advancement into consideration. (E.g. The defensive barrier provided by two oceans is diminished, we are no longer an agrarian, self-sufficient society, etc.)

banyon
08-21-2007, 10:36 AM
No, I didn't. I haven't mentioned anything about a new paradigm.

Fine, you don't have any new ideas. Quit using "Liberty" in this bastardized way then.


Actually, I did address post 68 in post 71.

with this?

It's not much of a spectrum really. Liberty and socialism are divergent roads going in opposite directions. It's like light and dark. You can moderate the light by dimming it, but you don't have the same choice with darkness. Likewise, you can moderate Liberty by taking away freedom, but you can't moderate socialism in the same way. The only mechanism for moderating socialism is how much the government gives, how much they take away, and from whom.

Yeah, I see how that addresses the argument I made. :shake:

Democracy and Anarchy are divergent roads going in opposite directions. It's like Hot and Cold. You can moderate the cold by heating it, but you don't have the same choice with heat. Likewise, you can moderate Democracy by increasing Anarchy, but you can't moderate Anarchy in the same way. The only mechanism for moderating Anarchy is how much others take from the hand you're dealt, and how much, and from whom.

While we are at it, why can't you moderate darkness by increasing a light source? You answers are platitudinal at best and not grounded in any historical or empirical basis.

patteeu
08-21-2007, 10:41 AM
The most impressive thing in this thread, afaic, is that we've finally found something in which BEP *can't* detect any socialism. :p

Logical
08-21-2007, 10:51 AM
Why are you so fixated on the "loss" of the house? It wasn't the taxpayer's house because he didn't live up to his part of the bargain by paying for it. The issue here is the outstanding loan that exists after the house is lost. At one moment, there's a debt (but no house) and at the second, the debt is forgiven (still no house).

Then it is not income if anything it is a loss, in business it would certainly be written off as a loss.

patteeu
08-21-2007, 11:05 AM
Then it is not income if anything it is a loss, in business it would certainly be written off as a loss.

No it wouldn't. You are completely confused. The lender writes it off as a loss. The borrower gets a benefit that is economically indistinguishable from income.

Logical
08-21-2007, 11:13 AM
No it wouldn't. You are completely confused. The lender writes it off as a loss. The borrower gets a benefit that is economically indistinguishable from income.

Drop the crack pipe, inome means you earned something. You earned nothing if a loan is forgiven and you lose the house. It is absolutely income if they let you keep the house.

Taco John
08-21-2007, 11:24 AM
Fine, you don't have any new ideas. Quit using "Liberty" in this bastardized way then.


That's the key. We're not introducing new ideas. We're supporting sticking to the old, constitutional ones.

Also, we're not bastardizing the term liberty. We're just supporting a move away from the modern bastardization of the term, and recognizing things like in a system of Liberty, people do not inherently owe the government the fruits of their labor. Liberty isn't just another word to be co-opted (like "Patriotism" has become recently). It actually means something (ie. immunity from arbitrary exercise of authority). The concept is diametrically opposed to socialism. This isn't something that is "new." It's always been this way.

Thanks for the opportunities to clear both of these points up.

ClevelandBronco
08-21-2007, 11:31 AM
Drop the crack pipe, inome means you earned something. You earned nothing if a loan is forgiven and you lose the house. It is absolutely income if they let you keep the house.

Would you allow that it's income if you lose the house but still get to keep the boat that you bought with the money you borrowed against the house?

ClevelandBronco
08-21-2007, 11:33 AM
That's the key. We're not introducing new ideas. We're supporting sticking to the old constitutional ones.

Also, we're not bastardizing the term liberty. We're just supporting a move away from the modern bastardization of the term. Liberty isn't just another word to be co-opted (like "Patriotism). It actually means something (ie. immunity from arbitrary exercise of authority). Thanks for the opportunities to clear both of these points up.

He must be correct, Taco. He posted it in blue.

Maybe if you rebut in red...

patteeu
08-21-2007, 11:36 AM
Drop the crack pipe, inome means you earned something. You earned nothing if a loan is forgiven and you lose the house. It is absolutely income if they let you keep the house.

Try to remember a time when your thoughts weren't absolutely controlled by emotionalism.

The house is irrelevant.

The house is lost because the borrower defaulted on his loan and the house was collateral. The bank then sells the house. If the bank gets enough from the sale to retire the debt then the borrower is clear of the obligation and all is well (no income). If the bank gets less than the loan amount out of the sale, the borrower remains on the hook for the outstanding amount. That's what the borrower agreed to when they took the loan. This is where the transaction stands at the point when the Bank either forgives or does not forgive the debt. The house is already long gone.

Let's personalize this and get away from the emotionalism of the OP article. Let's say your house is worth $100,000 and you have an outstanding balance on your mortgage of $70,000. You're tired of not being able to get Air America on your radio so you decide to move. You sell your house but only get $50,000 for it. The bank is going to expect you to pay them $70,000 which means you have to break open your piggy bank for the remaining $20k. If, instead, the Bank says they'll settle for the $50k and forgive the rest which makes you $20k richer than you would have been if you'd been held to account for your agreement. You don't have the house, but you're still $20k ahead. Income.

patteeu
08-21-2007, 11:37 AM
Would you allow that it's income if you lose the house but still get to keep the boat that you bought with the money you borrowed against the house?

Excellent, simple example. Perfect.

patteeu
08-21-2007, 11:40 AM
That's the key. We're not introducing new ideas. We're supporting sticking to the old, constitutional ones.

Also, we're not bastardizing the term liberty. We're just supporting a move away from the modern bastardization of the term, and recognizing things like in a system of Liberty, people do not inherently owe the government the fruits of their labor. Liberty isn't just another word to be co-opted (like "Patriotism" has become recently). It actually means something (ie. immunity from arbitrary exercise of authority). The concept is diametrically opposed to socialism. This isn't something that is "new." It's always been this way.

Thanks for the opportunities to clear both of these points up.

To be honest, property taxes (which mean you can't ever really own anything) bother me more, on a philosophical level, than income taxes (which tax the fruit of your labor).

ClevelandBronco
08-21-2007, 11:48 AM
To be honest, property taxes (which mean you can't ever really own anything) bother me more, on a philosophical level, than income taxes (which tax the fruit of your labor).

Annually taxing things we've already acquired, if not insane on its face, at least rubs up closely to insanity.

banyon
08-21-2007, 12:02 PM
That's the key. We're not introducing new ideas. We're supporting sticking to the old, constitutional ones.

Also, we're not bastardizing the term liberty. We're just supporting a move away from the modern bastardization of the term, and recognizing things like in a system of Liberty, people do not inherently owe the government the fruits of their labor. Liberty isn't just another word to be co-opted (like "Patriotism" has become recently). It actually means something (ie. immunity from arbitrary exercise of authority). The concept is diametrically opposed to socialism. This isn't something that is "new." It's always been this way.

Thanks for the opportunities to clear both of these points up.

I don't know anyone who believes this straw man you have set up that people "owe government the fruits of their labor". People elect their representatives who then make decisions about what spending is needed for the benefit of the country and how such revenues will be raised. In a representative democracy, you are agreeing that you should be taxed.

"Liberty" hasn't been co- opted, again to reiterate, liberties can be personal in nature (i.e., keep the government out of my bedroom) or economic (let me have as many capital gains as I want without taxation), but to pretend that socialists are against both is just patently false. I also still don't have any meaningful reply to what I posted in #68. 1) Are there any examples, historic or contemporary, of a country flourishing without a central taxation authority? 2) Why do the "socialist" Scanadavian countries fare so much better on quality of life indices. 3) Why wouldn't an abolition of the governmental regulations created starting with the FDA in 1905 and contiuing to the present send us back to the days when monopolists exploited families and towns for their personal gain?

ClevelandBronco
08-21-2007, 12:11 PM
...Why do the "socialist" Scanadavian countries fare so much better on quality of life indices...

Because the lazy ass masses get to enjoy the fruits that are produced by the few who are driven to plant and harvest. Then the lazy ass masses answer that they are happy when someone asks about their quality of life.

BucEyedPea
08-21-2007, 12:26 PM
Because the lazy ass masses get to enjoy the fruits that are produced by the few who are driven to plant and harvest. Then the lazy ass masses answer that they are happy when someone asks about their quality of life.
Actually, it's not really true that they do better. As for Sweden it's unraveling and having problems...the same ones all socialisms bring. They got away with their brand of socialism longer due to their neutrality in two WW's, which didn't destroy their economy or incur huge debts. Now time has caught up with them and they are incurring debt. It has infantilized their people like dope addicts who no longer are willing to take any personal responsibility for their own sustenance. It's just a matter of time before they bring thier country down with them.

European standard of living overall isn't as high as ours anyway. I've been there. Less socialistic Switzlerland's is much higher than the rest of the socialist democracies of Europe. Let's face it the other socialist countries are places like: Cuba, former Soviet Union, China (although they're infusing it with capitalism so there's improvement),India, Iran, Syria and many African nations. Hardly examples of a higher standard of living or better index of anything. Gotta include all of them to get the real picture.

BucEyedPea
08-21-2007, 12:58 PM
The most impressive thing in this thread, afaic, is that we've finally found something in which BEP *can't* detect any socialism. :p
LMAO! Ha! Ha!

You do know that Marx's socialism is about socializing people to be a certain way more than anything. It actually isn't just an economic system. He wanted to destroy what he called the "bourgeouis family" aka the traditional family, free women from her biology, free-love and much more. Cultural Marxism. Economics was just a way to get there. And of course it just works in a vicious circle since the family is the smallest governing unit in a society. When that goes more dependency on govt occurs and so goes the society eventually. Perhaps, this may explain part of why I see it in a more expanded light even if there have been other forms, under different labels, prior to Marx.

I think this is one reason why some lefties assume when they hear the word "libertarian" that it fits their left paradigm on social issues at least. When theirs is really cultural Marxism. It doesn't. It takes both the economic argument of a libertarian and the social arguments to make a libertarian. Without the economics it's cultural Marxism.

I say this because if we're paying for other people's lifestyle choices, and paying for the consequences of them instead of real life disciplining those choices on a natural basis because some of those just don't survive that long, then we're not really advocating liberty or any sort of ordered liberty either.
I don't think many social libertarian arguments work within the current partially socialist milieu we live in for this reason. It's like taking the bumper of a volkswagon and trying to fit it on a Cadillac.

ClevelandBronco
08-21-2007, 01:17 PM
Actually, it's not really true that they do better. As for Sweden it's unraveling and having problems...the same ones all socialisms bring. They got away with their brand of socialism longer due to their neutrality in two WW's, which didn't destroy their economy or incur huge debts. Now time has caught up with them and they are incurring debt. It has infantilized their people like dope addicts who no longer are willing to take any personal responsibility for their own sustenance. It's just a matter of time before they bring thier country down with them.

European standard of living overall isn't as high as ours anyway. I've been there. Less socialistic Switzlerland's is much higher than the rest of the socialist democracies of Europe. Let's face it the other socialist countries are places like: Cuba, former Soviet Union, China (although they're infusing it with capitalism so there's improvement),India, Iran, Syria and many African nations. Hardly examples of a higher standard of living or better index of anything. Gotta include all of them to get the real picture.

They feel better. That's all that matters for socialists (like us).

Taco John
08-21-2007, 01:31 PM
I don't know anyone who believes this straw man you have set up that people "owe government the fruits of their labor".


It's not a straw man. It's the law of the land. Are you sure you understand what a straw man is? Your use of the term here is pretty cloudy.


"Liberty" hasn't been co- opted, again to reiterate, liberties can be personal in nature (i.e., keep the government out of my bedroom) or economic (let me have as many capital gains as I want without taxation), but to pretend that socialists are against both is just patently false.

Liberty has definitely been co-opted. Socialism inherently robs economic freedom in order to provide the most benefit to the collective. Income tax is the perfect example of this. Capital Gains tax is another example. Liberty isn't just about keeping the government out of your bedroom, or keeping them out of your pocketbook. It's about both. Of course socialists want to associate themselves with Liberty as closely as possible. It's a popular concept. In fact, most socialists are adamant when it comes to social freedoms. They aren't so enthusiastic about Liberty when it comes to money though.



I also still don't have any meaningful reply to what I posted in #68. 1) Are there any examples, historic or contemporary, of a country flourishing without a central taxation authority?

Weren't you just complaining about straw men? I don't find this question very relevant, because I've never proposed that we shouldn't have a central taxation authority. I just challenge what and how much they should be taxing, and for what roles. The government still has a duty to protect the American people, and because of this, there will always be a need for some sort of centralized taxation authority.



2) Why do the "socialist" Scanadavian countries fare so much better on quality of life indices.

I don't think that they really do. Which indices are you talking about? Are they credible? By what standards are they measuring quality of life?



3) Why wouldn't an abolition of the governmental regulations created starting with the FDA in 1905 and contiuing to the present send us back to the days when monopolists exploited families and towns for their personal gain?

Another straw man. You've mistaken anarchy for libertarianism. Libertarianism isn't about arbitrarily abolishing government regulations. Business still has to play by the rules. But for my part, you've struck upon a role that I see as legitimate for the government: providing a fair and competitive market.

BucEyedPea
08-21-2007, 01:49 PM
It's not a straw man.
It sure isn't! Carry one....but you'll never convince someone on the progressive left otherwise.

banyon
08-21-2007, 02:21 PM
Actually, it's not really true that they do better. As for Sweden it's unraveling and having problems...the same ones all socialisms bring. They got away with their brand of socialism longer due to their neutrality in two WW's, which didn't destroy their economy or incur huge debts. Now time has caught up with them and they are incurring debt. It has infantilized their people like dope addicts who no longer are willing to take any personal responsibility for their own sustenance. It's just a matter of time before they bring thier country down with them.

Other Scandanavian countries weren't neutral and have similar standards of living and quality of life ratings, so the non-involvement in WWII cannot be the key variable.


European standard of living overall isn't as high as ours anyway. I've been there.

I've been there? Well I guess that beats the hell out of numbers, statistics and what not. I've been to Mississippi too, we must be one of the poorest countries in the world.

Logical
08-21-2007, 02:43 PM
Try to remember a time when your thoughts weren't absolutely controlled by emotionalism.

The house is irrelevant.

The house is lost because the borrower defaulted on his loan and the house was collateral. The bank then sells the house. If the bank gets enough from the sale to retire the debt then the borrower is clear of the obligation and all is well (no income). If the bank gets less than the loan amount out of the sale, the borrower remains on the hook for the outstanding amount. That's what the borrower agreed to when they took the loan. This is where the transaction stands at the point when the Bank either forgives or does not forgive the debt. The house is already long gone.

Let's personalize this and get away from the emotionalism of the OP article. Let's say your house is worth $100,000 and you have an outstanding balance on your mortgage of $70,000. You're tired of not being able to get Air America on your radio so you decide to move. You sell your house but only get $50,000 for it. The bank is going to expect you to pay them $70,000 which means you have to break open your piggy bank for the remaining $20k. If, instead, the Bank says they'll settle for the $50k and forgive the rest which makes you $20k richer than you would have been if you'd been held to account for your agreement. You don't have the house, but you're still $20k ahead. Income.

You are full of shit, you are not 20K richer. I take it you believe your wife when she goes out and buys a 1000 dollar dress but comes home saying she saved you 200 dollars because it is a 1200 dollar dress.ROFLROFL

BucEyedPea
08-21-2007, 02:44 PM
Other Scandanavian countries weren't neutral and have similar standards of living and quality of life ratings, so the non-involvement in WWII cannot be the key variable.
Were they bombed like the other countries too? I don't know that they were.
My guess is that if Sweden had more advantages, then their system must suffer from more of socialism's flaws too. I will look this up though.

I've been there? Well I guess that beats the hell out of numbers, statistics and what not. I've been to Mississippi too, we must be one of the poorest countries in the world.
Even if that has truth in it, it easy to see that they don't have what we have.
It's also easy to see a rather dramatic improvement once one crosses over the border into Switzlerland. Just sayin.' It counts for something. Statistics don't tell the whole story. For one it may show everyone has health care but the same numbers may not show how long people waited, how many died waiting or what other consequences occured such as costs in taxes and to their economy. And what works can be subjective to some degree. People on the recieving end of perceived free services, the have-nots, will naturally say it works, while others won't. The selling point of socialism is fear of poverty.


Sweden [A System That Doesn't Work] (http://www.fee.org/publications/the-freeman/article.asp?aid=1213) written by a Swede

Socialist programs have had a grave impact on the family:
• lowest first marriage rate
• lowest birthrate
• half the children born out of wedlock

Because the paternalistic state takes on many of the historical functions and services of the family.

Other:
• labor's wages eaten up by inflation
• employer's chafe under the system's 40% cost for social services as part of salaries
• unprecendented absenteeism by workers who collect 90%of their salary from their first day off
• high taxes and breakdown of social services they are supposed to fund are causing tensions in Sweden's body politic
• Swedish industry has falling profit margins ( something any socialist admires because profit is dirty word)
•many firms established subsidiaries outside of Sweden where workers were more productive and taxes were lower.
• savings are nonexistent
• investments going abroad more

I've also read they have an alcoholism problem too.

Logical
08-21-2007, 02:47 PM
Would you allow that it's income if you lose the house but still get to keep the boat that you bought with the money you borrowed against the house?

I already posted on the example of a 100k loan where you got another loan for 150K and used the 50k for something other than buying a house. Then the additional 50K that is forgiven would appear as a gain more likely a capital gain rather than income.

patteeu
08-21-2007, 02:53 PM
You are full of shit, you are not 20K richer. I take it you believe your wife when she goes out and buys a 1000 dollar dress but comes home saying she saved you 200 dollars because it is a 1200 dollar dress.ROFLROFL

That would be funny except that it's true. I'd be 200 dollars richer than if she had spent $1200 on it. But the difference between your dress example and the forgiven debt example is that she didn't negotiate a $1200 price and sign a contract and then later have someone give her $200 or forgive $200 of what she legally owed.

Logical
08-21-2007, 03:20 PM
That would be funny except that it's true. I'd be 200 dollars richer than if she had spent $1200 on it. But the difference between your dress example and the forgiven debt example is that she didn't negotiate a $1200 price and sign a contract and then later have someone give her $200 or forgive $200 of what she legally owed.

We are never going to agree, the IRS is screwing people into bankruptcy and that is just plain stupid as it hurts other lendors who are 3rd party victims. It is just plain bad economics.

Baby Lee
08-21-2007, 03:35 PM
That would be funny except that it's true. I'd be 200 dollars richer than if she had spent $1200 on it. But the difference between your dress example and the forgiven debt example is that she didn't negotiate a $1200 price and sign a contract and then later have someone give her $200 or forgive $200 of what she legally owed.
It's not 'someone' it's the same entity that sold her the dress.

So if I stop off at the grocers, plop down a pound of ham at $5.00 a pound, and the cashier rings me up. Then I discover that I only have $4.00 in my wallet and the cashier accepts that sum and bags my purchase. I now owe taxes on the $1.00 in income I just received?

BucEyedPea
08-21-2007, 03:47 PM
It's not 'someone' it's the same entity that sold her the dress.

So if I stop off at the grocers, plop down a pound of ham at $5.00 a pound, and the cashier rings me up. Then I discover that I only have $4.00 in my wallet and the cashier accepts that sum and bags my purchase. I now owe taxes on the $1.00 in income I just received?
Why do you have to pick ham?

ClevelandBronco
08-21-2007, 04:37 PM
I already posted on the example of a 100k loan where you got another loan for 150K and used the 50k for something other than buying a house. Then the additional 50K that is forgiven would appear as a gain more likely a capital gain rather than income.

Yeah. I read it. It's nothing like a capital gain.

Adept Havelock
08-21-2007, 04:49 PM
Why do you have to pick ham?

Yeah, why? That ain't kosher! :cuss:

Taco John
08-21-2007, 04:54 PM
What about rebates? Do we owe Income taxes on the rebates we receive?

ClevelandBronco
08-21-2007, 05:00 PM
What about rebates? Do we owe Income taxes on the rebates we receive?

There's a good chance that you do. I know that I've paid income tax on "allowances" (basically rebates on a property I bought) that I received in the form of cash at real estate closings.

alnorth
08-21-2007, 05:42 PM
Drop the crack pipe, inome means you earned something.

Thats the crux of the matter, and why I call it a gift rather than income.

Calling it a gift would strongly discourage banks from ever forgiving anything, so these borrowers in trouble would be in even bigger trouble with a perpetual debt hanging over their head till BK, but so be it.

banyon
08-21-2007, 06:31 PM
It's not 'someone' it's the same entity that sold her the dress.

So if I stop off at the grocers, plop down a pound of ham at $5.00 a pound, and the cashier rings me up. Then I discover that I only have $4.00 in my wallet and the cashier accepts that sum and bags my purchase. I now owe taxes on the $1.00 in income I just received?

In that example the transaction is not completed until you pay them. You don't owe them money unless you leave the store with an agreement to pay later (e.g, if you pay with a check and then bounce it and they say "Forget about it", then your friendly IRS agent will consider that a forgiven debt and thus income). The $4 would be the original agreed upon price prior to the completion of the transaction.

banyon
08-21-2007, 06:59 PM
It's not a straw man. It's the law of the land. Are you sure you understand what a straw man is? Your use of the term here is pretty cloudy.

I apparently understand it better than you, but for your edification, it is misrepresenting someone's else's argument in a way that it can be attacked more easily. As I showed, you won't find any relevant political group that campaigns on "you owe the government the fruits of your labor", so making such a claim is a misrepresentation of the obviously superiorly presented version of the argument that sees taxation as an event of representative democracy and not the act of malicious malcontents determined to screw you over.



Liberty has definitely been co-opted. Socialism inherently robs economic freedom in order to provide the most benefit to the collective. Income tax is the perfect example of this. Capital Gains tax is another example. Liberty isn't just about keeping the government out of your bedroom, or keeping them out of your pocketbook. It's about both. Of course socialists want to associate themselves with Liberty as closely as possible. It's a popular concept. In fact, most socialists are adamant when it comes to social freedoms. They aren't so enthusiastic about Liberty when it comes to money though.

I think the easy rebuttal to this position is to ask you to clairfy "economic freedom" for whom? The examples I have given you that are abundant in our nation's history show that having little to no regulation usually means that wealth is concentrated in the hands of the few. What makes you think it'll be any different this time?



Weren't you just complaining about straw men? I don't find this question very relevant, because I've never proposed that we shouldn't have a central taxation authority. I just challenge what and how much they should be taxing, and for what roles. The government still has a duty to protect the American people, and because of this, there will always be a need for some sort of centralized taxation authority.

Hey, you're the Ron Paul supporter not me. That's what he says. Unless he's not sure what he wants to do. You tell me what the quote in Adam's signature means then.


I don't think that they really do. Which indices are you talking about? Are they credible? By what standards are they measuring quality of life?

Here's a good example from those socialists at the Economist (http://www.economist.com/media/pdf/QUALITY_OF_LIFE.pdf) The UN Development index (http://www.infoplease.com/ipa/A0778562.html) is another:

CHIEF4EVER
08-21-2007, 07:29 PM
I think the easy rebuttal to this position is to ask you to clairfy "economic freedom" for whom? The examples I have given you that are abundant in our nation's history show that having little to no regulation usually means that wealth is concentrated in the hands of the few. What makes you think it'll be any different this time?

I know I am reaching here but are you arguing this vehemently in favor of Income Tax because you are in favor of wealth redistribution?

banyon
08-21-2007, 07:35 PM
I know I am reaching here but are you arguing this vehemently in favor of Income Tax because you are in favor of wealth redistribution?

No, I am in favor of a baseline safety net and regulation of corporate entities, although that term "redistribution" is certanly thrown around pretty loosely. Anytime you take money from one source and direct it toward another, there is technically redistribution going on in a narrow literal sense.

CHIEF4EVER
08-21-2007, 07:51 PM
No, I am in favor of a baseline safety net and regulation of corporate entities, although that term "redistribution" is certanly thrown around pretty loosely. Anytime you take money from one source and direct it toward another, there is technically redistribution going on in a narrow literal sense.

So what, in your opinion, is a baseline safety net? Also, what do you mean by 'regulation of coroporate entities'? Finally, who should, in the end, pay for the "baseline safety net"?

patteeu
08-21-2007, 08:34 PM
It's not 'someone' it's the same entity that sold her the dress.

"Someone" was a general variable that covered the case that the "someone" was the "entity that sold her the dress." The key is that the original arms length exchange fixes the value of the transaction and the forgiven debt becomes a windfall.

So if I stop off at the grocers, plop down a pound of ham at $5.00 a pound, and the cashier rings me up. Then I discover that I only have $4.00 in my wallet and the cashier accepts that sum and bags my purchase. I now owe taxes on the $1.00 in income I just received?

You could make that argument I suppose, but I would argue that the price of the ham wasn't settled until ownership changed hands. If they signed a contract for $5 and then the cashier accepted $4 without voiding the contract, then I'd say it's income.

Logical
08-21-2007, 08:42 PM
So patteeu, lets say you end up in the unlikely scenario where you cannot pay your mortgage and the bank forecloses. Now the IRS comes calling, are you going to petition the foreclosing company to amend their 1099 after they sell the home for a reasonable price or are you going to just roll over on the taxes?

BucEyedPea
08-21-2007, 08:44 PM
You could make that argument I suppose, but I would argue that the price of the ham wasn't settled until ownership changed hands. If they signed a contract for $5 and then the cashier accepted $4 without voiding the contract, then I'd say it's income.
Isn't there a thing in law that if you don't enforce something the way it was written then the actions you used are what set the contract? I think it's called lache but not sure if that applies.

It seems to me, at least from a natural right's pov, that what the seller settled for is the terms of the agreement or the price.

patteeu
08-21-2007, 08:49 PM
So patteeu, lets say you end up in the unlikely scenario where you cannot pay your mortgage and the bank forecloses. Now the IRS comes calling, are you going to petition the foreclosing company to amend their 1099 after they sell the home for a reasonable price or are you going to just roll over on the taxes?

I don't understand the question. Amend the 1099 in what way?

One thing I can say I am going to do though is publicize the date of the auction in some way so that the house isn't sold for $1. I'll find a house flipper to make sure that they bid the price up to a decent level.

Logical
08-21-2007, 08:54 PM
I don't understand the question. Amend the 1099 in what way?

I take it you did not read the entire article.

After a reporter inquired about the Stout matter, Wells Fargo Home Mortgage said last week that it had reviewed the Stouts’ tax documents and was filing a corrected 1099 tax form to show that no debt had been canceled, because the fair market value of the home was actually more than Mr. Stout had owed.

patteeu
08-21-2007, 08:58 PM
I take it you did not read the entire article.

First of all, I edited my response.

Second, yes, I would.

Logical
08-21-2007, 09:08 PM
...

Second, yes, I would.Seems like asking them to amend the 1099 is inconsistent with your belief that you earned something.

patteeu
08-21-2007, 09:22 PM
Seems like asking them to amend the 1099 is inconsistent with your belief that you earned something.

Theoretically speaking, the income is the difference between the outstanding debt and the fair value of the house that is foreclosed upon (i.e. the value that the bank receives toward retiring that outstanding debt owed). In the case where the house sells at auction to a third party, the value the bank receives is set by the auction price. In this case, since the bank bought the house itself and then sold it again, there is a reasonable argument that they received more than $1 of value from the house. In fact, they received the price of the second sale less any sales costs. That's not inconsistent, but you're right that I hadn't read the part about the resale before.

BTW, I think it's a reasonable argument, but I don't think it's a conclusive argument.

Logical
08-21-2007, 09:27 PM
Theoretically speaking, the income is the difference between the outstanding debt and the fair value of the house that is foreclosed upon (i.e. the value that the bank receives toward retiring that outstanding debt owed). In the case where the house sells at auction to a third party, the value the bank receives is set by the auction price. In this case, since the bank bought the house itself and then sold it again, there is a reasonable argument that they received more than $1 of value from the house. In fact, they received the price of the second sale less any sales costs. That's not inconsistent, but you're right that I hadn't read the part about the resale before.

BTW, I think it's a reasonable argument, but I don't think it's a conclusive argument.

Eh it was just fun catching you. I was pretty sure you had missed that part of the article from your arguments.

patteeu
08-21-2007, 09:35 PM
Eh it was just fun catching you. I was pretty sure you had missed that part of the article from your arguments.

LOL, you got me. :)

banyon
08-22-2007, 09:21 AM
So what, in your opinion, is a baseline safety net? Also, what do you mean by 'regulation of coroporate entities'? Finally, who should, in the end, pay for the "baseline safety net"?

You first. What do you mean by "redistribution of wealth"?

CHIEF4EVER
08-22-2007, 09:27 AM
You first. What do you mean by "redistribution of wealth"?

No, no, don't deflect. If you don't want to answer the question then don't answer it, I think we will all know why. I asked you if you you supported wealth redistribution since you supported the income tax code so vehemently. You gave a rather ambiguous answer and I asked you to qualify what you meant for clarity.

banyon
08-22-2007, 09:34 AM
No, no, don't deflect. If you don't want to answer the question then don't answer it, I think we will all know why. I asked you if you you supported wealth redistribution since you supported the income tax code so vehemently. You gave a rather ambiguous answer and I asked you to qualify what you meant for clarity.

Right, you asked the question and I am trying to answer it. Now since you seem so eager to press me on it I want to know what your original question meant so that I can answer it. BTW my answer wasn't ambiguous in the least. Vague, perhaps, but it was a pretty vague question which is why I want clarification.

CHIEF4EVER
08-22-2007, 10:56 AM
I think you know perfectly well what wealth redistribution means. We both speak English. The taking of money or goods from one class or group of people and giving it to another.