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3 Things 8-26-24

Thing One



Big Crime Is Coming To Small Towns



By now, we’re all likely to be familiar with the stories of brazen crime in big cities like San Francisco where it’s commonplace for tourists and residents alike to have their vehicles or homes broken into with such impunity and precision that it suggests an organized element was just watching and waiting for the right moment to strike an unsuspecting victim. But since it all seems to be happening so far away from us, our tendency is to react by shaking our heads in disgust, sympathizing with the victims, and taking comfort in the fact that we’re safe because don’t live in the big cities where that kind of thing happens. But that is the wrong attitude and it could end up costing you lots of time and money if you don’t get appropriately re-oriented.



That’s the conclusion we’ve reached after hearing what happened to the wife of a good friend in little old Augusta, Georgia last week. While waiting for a to-go order at an upscale establishment in what would normally be considered a very “safe” part of town, a young man in a hoodie snatched her purse and ran - in broad daylight. A couple of days later, someone bearing a fake passport in the husband’s name tried to cash a check in a tiny town in North Carolina. To make matters worse, the couple learned their information had been sold on the Dark Web which makes it more likely that other attempts at identity theft are sure to follow. The police, who have been largely unhelpful, indicated to them that the crime they had fallen victim to was organized.



This is all another reminder of just how vigilant we have to be not only online, but also when we’re out and about - no matter where we are. And since vigilance isn't always enough to stop a thief, please consider a credit monitoring service. Most include Dark Web monitoring and offer plans that immediately alert you whenever there’s a credit inquiry or a credit account opened in your name and they also typically offer identity theft insurance (usually around $1 million dollars). In addition to that, if your identity is stolen, they will assign a case manager to you to help you sort it all out. You’ll find the subscriptions range from $6.99-$29.99/month. And, as you start to see your subscription service in action, you’ll likely find the peace of mind priceless.



Luckily for our friend, he had Lifelock, which has been (and will be) much more helpful than the local authorities in putting the pieces back together.




Thing Two



A Wealth Tax Primer



With both major political parties scrambling to make their cases, the party platforms are starting to get clarified. One old plank that seems to be new again is the idea of a wealth tax.



Cristiana Enache of the Tax Foundation points out the many problems with a wealth tax implementation in an article on their website. See an excerpt below;



"...Many developed countries have repealed their net wealth taxes in recent years. Among Organisation for Economic Co-operation and Development (OECD) countries, only four currently impose one: Colombia, Norway, Spain, and Switzerland.


Countries have repealed their wealth taxes for a variety of reasons. They raise little revenue, create high administrative costs, and induce an outflow of wealthy individuals and their money. Many policymakers have also recognized that high taxes on capital and wealth damage economic growth.


The flawed design of these taxes has created problems in countries that have implemented them. In 1997, the German Constitutional Court declared the wealth tax unconstitutional. In the Netherlands, the Dutch Supreme Court ruled in 2021 that the wealth tax violates European law regarding property rights and non-discrimination. In 2023, the regional governments of Madrid, Andalusia, and Galicia appealed the new “solidarity wealth tax” to the Spanish Constitutional Court.


Wealth taxes generate double or even triple taxation. For safe investments like bonds or bank deposits, a wealth tax of 2 or 3 percent may confiscate all interest earnings, leaving no increase in savings over time. Additionally, if the individual’s wealth is not growing at a rate higher than the tax rate, the tax will ultimately reduce that individual’s wealth.


In the case of Spain, the combination of personal capital income taxes and net wealth taxes results in marginal tax rates well above 100 percent. This means that the entire real return on investment is taxed away and, by saving, the real value of people’s wealth shrinks. Spain is the only country in the world that in addition to net wealth and capital gains taxes also levies taxes on capital transfers, a financial transaction tax, and one of the highest inheritance and gift taxes in Europe.


Wealth taxes disincentivize entrepreneurship, leading to less innovation and less long-term growth. A wealth tax reduces wages, destroys jobs, and reduces the stock of capital. All income groups are worse off under a wealth tax due to decreased economic activity.


Wealth taxes account for a very small share of tax revenues. In 2022, tax revenues from individual net wealth taxes ranged from 0.19 percent of GDP in Spain to 1.19 percent of GDP in Switzerland. As a share of total tax revenues, they ranged from 0.51 percent in Spain to 4.35 percent in Switzerland.


Even a small increase in the wealth tax rate can lead to capital flight and wealthy individuals relocating to neighboring jurisdictions. For example, after a 1 percent increase in Norway’s wealth tax, many high-net-worth individuals left the country. In 2023, after Spain introduced a new “solidarity wealth tax,” Portugal extended its tax regime for nonresidents since more Spanish taxpayers were considering changing their tax residence..."


For those of you tempted to say, 'don't worry, I hear the wealth tax is only going to be imposed on the income of individuals with a net worth of more than $100 million', we'd like to point out that the federal income tax, when it was first implemented in 1913, only applied to the "super-rich". Then, as the cost of government grew and the politicians realized there weren't enough super rich people to fund it, they lowered the income threshold until it eventally included almost everybody. A betting man would place a large wager on that eventuality coming to fruition once again if such a law were to get passed. We would all do well to keep that in mind as the debate rages on.



Thing Three



Just A Thought



"The act of voting is one opportunity for us to remember that our whole way of life is predicated on the capacity of ordinary people to judge carefully and well.” - Alan Keyes

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