Thursday, October 22, 2009

Put your money where your mouth is

Here's a challenge for anyone who believes the President when he says that "I will not sign a plan that adds one dime to our deficits either now or in the future. Period."

I'm not usually a betting man. I'm on record pointing out what a ripoff the lottery is, not like that's news to anyone. Casinos have no appeal to me. But I do like a sure win. So I propose a friendly wager over Obama's promise that Obamacare will not add one dime to the deficit. If you have the courage to back up your blind faith, match my $500. We'll find someone mutually acceptable to hold the money, and the winner can designate the $1,000 plus interest to the charity of his choice. When I win, I'll select Samaritan's Purse to receive the money.

I've discussed what it means to not add to the deficit, so if you want to understand the thinking behind the metric, read my last few entries, particularly this one.

Here are the terms:

If Obama vetoes the health care reform bill citing the fact that it is not deficit-neutral as the reason, and does not sign any health care reform bill, I will concede the bet.

If Congress does not pass a health care reform bill in 2009 or 2010, the wager is off and each person gets their money back.

If Congress passes a health care reform bill and Obama signs it, we will compute the per-capita health care contribution to the deficit in 2009 dollars for 2009 and for each of the first 5 years that Obamacare is fully enacted. Most of the proposed bills require about two years to take affect, so the years we would consider would be 2012-2016.

Given these inputs:

MedicalCosts(year) = Total actual Federal expenditures for the specified year, for all health-care programs, including Medicare, CHIPS, VA medical program, Medicaid, HHS, Obamacare, etc.

MedicalTaxes(year) = Total actual Federal tax revenue for the specified year levied specifically for medical programs, including Medicare payroll taxes, and all taxes included in the Obamacare bill

CPI(year) = Consumer Price Index, a measure of inflation, from July 1 of the specified year

Population(year) = Total population of the United States for the given year, according to the Census Bureau

For each year we would compute

RealPerCapitaDeficit(year) = CPI(2009)*(MedicalCosts(year)-MedicalTaxes(year))/

If the real per capita deficit is higher in any of those five years than it was in 2009, I win. If not, you win.

The $1,000 with interest will be given in the winner's name to the charity of his choice.

I almost feel bad about taking advantage of fools, but they seem to want it so badly.

Friday, October 09, 2009

Already a mockery

Today's London Times declares that the awarding of the Nobel Peace Prize to BO makes a mockery of the Nobel Prize. They have a point. The cutoff for nominations for this year's awards was February 1, at which point BO had occupied the White House for less than two weeks. Thus it seems that the very act of campaigning, reading soaring oratory from a teleprompter, being successful enough at self promotion to get elected, surviving the horrific poetry readings at the inauguration, and unpacking his stuff in the White House was enough to merit the Nobel Peace Prize. In the few months since then, he has talked about closing Gitmo, sent more troops to Afghanistan, ignored Iraq, given wimpy speeches around the world apologizing for America, thrown our closest allies under the bus, overlooked threats from Iran and North Korea, hobnobbed with dictators, bowed to the Saudi prince, declared America to be one of the biggest Muslim nations, and capitulated to terrorists.

But on deeper inspection, awarding BO the Nobel Peace Prize despite his complete lack of tangible accomplishments was not responsible for making a mockery of the Nobel Prize. That was already accomplished years ago, when the same award was bestowed on Yassir Arafat, the hapless Jimmy Carter, Al Gore, Anwar Sadat, Mohamed ElBaradei, Gorbachev, and Henry Kissinger.

Alfred Nobel, a great man, established the Nobel Prize to honor “champions of peace” who genuinely contributed to peace in the world. He deplored the “absurd and futile efforts of windbags who are capable of thwarting the best of aims.” But Oslo's Nobel Committee, made up of five Norwegians nominated by Norway's left-wing Storting consistently bases their decisions on politics rather than rewarding real accomplishments of resolving conflict and promoting justice.

The Nobel Prize was a joke long before they added BO to the lineup alongside terrorists, dictators, and frauds. This is just another punchline.

Thursday, October 08, 2009

Something you can do

To a large extent, there is little that you can do to reduce your own tax burden without reducing your income even more. You can pay mortgage interest or contribute to a 401(k), IRA or charity to get a tax deduction, but each of those things take more out of your spendable income than they reduce this year's income tax. For itemized deductions to be worthwhile, you first have to exceed your standard deduction, so for most of us, it won't do much good. Unless you are in the top tax bracket, you have to spend four dollars or more on mortgage interest to save one dollar in taxes. While that is better than nothing, it's not good enough to justify spending more on your mortgage just to get the tax break. Tax-efficient investing using low-turnover mutual funds can make a difference by deferring realized gains, but again, for most people, income taxes, property taxes, and payroll taxes far exceed capital gains taxes. Some people buy expensive annuity products to gain the advantage of tax deferral, not realizing that the investment company's excessive fees eat up more than they would have paid in taxes.

But last week I cut my tax bill for the cost of a gallon of gas and twenty pages of printer paper. I did it by asking for a cut.

In the spring, our annual property-tax appraisal from Tarrant Appraisal District indicated an increase of 5.5% in our property value compared to 2008. Property values in our area have not been decimated as brutally as they have in other parts of the country, particularly on the coasts. But neither have they been increasing. A recent survey indicates that property values in Dallas/Fort Worth are down about 0.2% in the past year. Homeowners in Phoenix, Miami, Chicago, or anywhere in California would be envious of so small a drop, as they lost 20% or more of their homes value. But still there is nothing to justify a 5.5% increase in our appraisal.

On May 30 I filed an appeal with the Tarrant Appraisal District. More than three months passed without a notice of my hearing date, but in mid-September I received a letter indicating that I would present my case to the Tarrant Appraisal Review Board on October 2. Also included were some instructions regarding how to prepare for the hearing and what to bring.

A realitor friend sent me a Comparitive Market Analysis for my house, listing recent sales in our area and houses currently on the market. I got a similar analysis back in 2005, showing twenty o thirty houses which had sold in our area in the past year. The analysis for 2009 indicated that three houses had sold between January 1 and September 1 of 2009. Several more sold in 2008. But a dozen houses within 4 blocks of our house had been on the market for six months or more without finding a buyer. One house just four doors down our street from us has been on the market for eleven months, with the price dropping repeatedly. Now the asking price per square foot is 70% of the appraised value of our house.

On the day of the hearing, I drove over to the Tarrant Appraisal Review Board office with five copies of all of my information, wondering if my efforts were futile. With the current economic situation, tax revenues are dropping like a rock and local governments are strapped for cash. Could I really expect them to cut my taxes in this environment? The information I had received from the county indicated that the review board was made up of impartial citizens, not county employees, and that they would fairly evaluate the true market value of my property, but I was still slightly skeptical.

I signed in at the front desk and took a seat in the waiting room. I dropped the suggested 25 cents into a can for a cup of coffee, which was not bad for the price. Good Morning America was showing on a large screen, but I read a few more pages from Atlas Shrugged until my name was called. I once waited three hours in the Social Security Administration waiting room, so thirty minutes seemed quick. The receptionist led me back to Review Board Room #7. Inside were three men, each roughly 75 years old, and a middle-aged woman at a computer terminal. I had five minutes to present my information, the county representative had five minutes to support the appraised value, I could offer a rebuttal, and the three men would decide on a fair value.

I went through my data, showing that most houses in my area were selling for a lower price per square foot, and that even at those prices, houses were not selling well. I used three of my five minutes. The county representative showed the same list of recent house sales, but also included some houses from the neighboring Crowley School District. In my rebuttal I pointed out that property values in Crowley were higher than in Fort Worth.

The chairman of the review board asked me what result I was hoping for. I indicated that I would like our appraisal to remain where it was in the previous year.

The board went to work, scanning the market data, punching numbers into their calculators, averaging, adjusting for square footage and build date, and comparing their results back and forth. I had no idea if their results were favorable for me or not. Finally they agreed on an average of their three results.

When the chairman announced their decision, I was shocked. They did not give me the 5.5% cut in property taxes I asked for, but instead a 12% cut. I was certain that I had not heard him correctly, so I asked him to repeat the number. He did, and I heard correctly, although I'm still a bit incredulous. I don't exactly like what it says about our property value, but I'm not planning to sell any time soon, and this will make a significant difference when our taxes come due in December.

Joe Biden says that paying more taxes is patriotic but I say that paying more than you have to is worse than just dumb, it is immoral. From a stewardship standpoint, paying taxes you don't owe is worse than playing the lottery, where are least you have some slim chance of winning something back. I encourage you to keep an eye on your appraisal each year, and if it seems out of line, do something about it.