One huge advantage the wealthy have over most people

[Quixote1818]

They often don't have to pay any interest on purchases because much of the time they can pay cash for houses and for cars etc.

Think about this:

For the average person buying a $250,000 house they pay as much as $200 or $300 thousand just in interest over 30 years. That means a $250,000 house actually costs them around 1/2 million.

A wealthy person who pays cash for the same house SAVES $200,000 or more.

This also gives them a HUGE advantage when investing in real estate. Because they are not making payments they also have more free cash for investing or paying off other debts. They can purchase house after house and not pay interest then start making INSTANT profit!

Think about kids who inherit old money from their wealthy parents. They don't have to do anything but live off their parents investments and use the equity from those investments to get even more wealthy.

Something about this just seems wrong to me. And they want huge tax cuts on top of everything they save by not paying interest on their homes. :wtf:

[Unperson]

1. The rich are different from you and me.

They have more money. Can't remember who said that.

[Mister Ed]

3. 'Twas Will Rodgers N/t

[Spider Jerusalem]

7. Two people, actually...

Supposedly, F. Scott Fitzgerald said "The rich are different from you and me", and Ernest Hemingway replied with "yes, they have more money".

[Lost-in-FL]

2. Maybe because they have money...

and do not have to get a loan with interests. They DO pay state or county taxes on both home or cars. I do not think you pay taxes on "gifts" at least if you get a car as a gift since you paid nothing for it. Can someone correct me if I am wrong?

[pnwmom]

8. A gift tax is owed if the gift was above a certain amount.

It used to be $10,000 in a year. I think it's $12,000 now.

[unblock]

12. any individual can gift $12,000 to any individual. so, rich parents can gift $72,000/yr

if each parent gifts $12,000 to each of their three kids, they can offload $72,000 of wealth each year to their kids tax free.

then there are trusts and so on....

[pnwmom]

17. True. Rich parents of several children can "offload" a lot of income.

[unblock]

19. of course, you're not REALLY rich unless $72,000/yr is chump change :)

[pnwmom]

22. Wouldn't that be something?

[bdrube]

4. There IS a class war. We're losing it. n/t

[originalpckelly]

5. Oh you have no clue how bad we're being fucked...

Yes, that's just one part of it, but there's something really fucking sick going on.

The house flippers go out to foreclosure auctions to bid on houses to buy IN CASH (calling all rich people).

Because the lender doesn't give a fuck about the equity in the house which a home owner has, and they just want to get the money owed to them, they put the house on auction at the price of loan remaining on the house.

So if someone has been paying a mortgage on a house for 29 years, and then in the last year of their mortgage, defaults, all the equity in that house would probably be lost.

Now, by law, if the house goes for more than what the lender wanted, you receive a little check in the mail, but a lot of times that doesn't happen, and when it does it's not all the equity.


So in other words the rich are literally stealing from the poor.
-----------------------------------------

That's house flipping and foreclosures, but let's talk about renting:

Renting is the biggest scam, unless you need the full service of a rental property, it's always better to own.

Basically, you pay months and months of rent, and that money is completely lost.

In a house, you would at least have equity, either in the form of the increased value of a house over the years you've owned it, or from when you're lucky enough to start paying off the principle of the debt.

-------------------
Oh yeah, let's talk about the deficit last year.

Last year the deficit was supposedly cut in half. You probably remember Bush bragging about it.

Here's the article where I read this, it was posted late last year:
http://www.msnbc.msn.com/id/14756403/site/newsweek/

When they took money from the Social Security trust fund, they burdened the poor and the middle class unfairly.

You see, if the Bush administration had taken money from foreign countries or issued bonds, then everyone in America would be responsible for paying that debt back, including the rich.

However, the tax which pays into the Social Security trust fund is a regressive tax, meaning that at about $100,000, the percentage of someone's income paid in the tax goes down. Or rather, poor and middle class people are taxed at a much higher rate than millionaires and billionaires. :-) How do you like that?

And not only that, on income from investments there is no payroll tax (i.e. investment income doesn't pay into Social Security.) Again, the vast majority of investors are rich people.

Anyway, they took that regressively taxed money. That means the burden for that tax is primarily on poor and middle class families, and that we have to pay for that debt instead of the rich.

Robbin Hood in reverse.

We're getting fucked big time.

[Theres-a]

6. Ouch.

Greedy bastards.

[originalpckelly]

10. Our whole economic system is similar in principle to that of the former slave sharecroppers...

in the South.

They made enough to stay alive and give the owner of the land what they had to keep the land and work another day for the owner.

70% of people in America live paycheck-to-paycheck, which means they are doing the same thing that the sharecroppers did.

People pay for cars and car insurance, houses or rents (and insurance), food and clothing, heat and electricity and water. And then should someone happen to get ahead and manage to pay that, they are advertised to death until they want to buy some piece of crap thing from China.

No one has a real chance of getting ahead.

The rich bastards at the top are fucking us so bad, and what's weird is that this is even worse than it once was. This system is circling the drain, because the people of America are about to wake up and realize how badly they are getting fucked.

This whole outsourcing thing is a ploy for them to take more of our money, and they treat the people getting our jobs just as bad or worse than they treat us. They are outsourcing to make more profits and keep them.

We always hear that products are supposedly getting cheaper because of outsourcing, but are they? If they are, the consumer price index should be negative, or should have been at some time in recent history. I don't recall hearing that once.

And illegal immigration is the same ploy by the fuckers at the top, instead of paying the immigrants a fair wage, they pay them minimum wage, or if they pay the immigrants under the table, lower than minimum wage.

We're still paying the same prices (actually, technically prices have risen) for things, but the people producing things and doing services are paid less.

Someone somewhere has to be cashing in, and if 70% of America is living paycheck-to-paycheck, it's not us.

[originalpckelly]

13. Yep, here's the consumer price index...

This is data from the last ten years:
http://inflationdata.com/inflation/consumer_price_index/HistoricalCPI.aspx

Looks like prices are going up to me, or maybe I'm just interpreting this wrong?

[originalpckelly]

29. And another thing, small businesses suffer big time...

because of the monopolies the richest of the rich have established. They don't want competition, so they try to kill off upward mobility.

In addition, the only real way to improve one's innate capital production capability is eduction. Of course, we all know the system for that too, rich kids don't have to take out student loans, but many middle class kids do.

It's another way to be saddled with debt.

[Manifestor_of_Light]

39. I have lots of education and no student loan debt.

Education was not the way to a good job for me. I have a bachelor's and a doctorate (in a supposedly non-exportable field, law) I have not used, and can't get a job anyway. My folks paid for the B.A., I worked full time and went to night school for five years to pay for the doctorate.

I stopped looking and now I goof off.

They already destroyed the middle class. I don't know why a kid now would go to college expecting to get a good job because of it. I have ten years of college that are useless as far as helping my earning capacity or employability. They are useful for the knowledge, new friends, and expanding your thinking, but I don't have connections.

[Nay]

49. I know what you mean, Perro. My son went straight to the union

hall and is now in his last year of electrician's apprenticeship. He'll be making decent middle-class money in 2 years, without one year of college. And he'll be debt-free.

What's sad is that all the unions (electric, plumbing, house trades) all have trouble finding decent apprentices because, according to my son, no one want to "get their hands dirty" anymore. That does show up Americans to be less eager for decent work than is often portrayed here on this site, and it is a troubling development. I blame TV and the unrealistic expectations it creates for part of this, but somehow, we have to get people out of the mode of expecting a cushy job with no work.

[Quixote1818]

9. That reminds me of this song by Dan Fogelberg

This is a great song. You can listen to part of it here: http://www.amazon.com/River-Souls-Dan-Fogelberg/dp/B0000027FN/sr=8-20/qid=1169960736/ref=sr_1_20/104-7875452-4610366?ie=UTF8&s=music


Faces Of America


There was a time, a simpler time
When a man could be sure of where he stood
I used to work at the yard, working honest and hard
The hours were long but the pay was oh so good

I had a family and friends, oh so many friends
We'd drive to the lake on holidays
Back then it wasn't so dear for a sandwich or beer
At night I still dream I can see their faces

Certain things that you depend upon
There are places that you know
And the faces of America
Oh, where do they go, where did they go

I was born on a farm, a mid-western farm
I rode on the tractor with my dad
And though we never had much it was always enough
And we made the best with what we had

But then came four years of drought and the bottom dropped out
My father was broken like the rest
And I can still see his hands signing over his lands
And the bankers grow fat on the flesh of the dispossessed

Certain things that you depend upon
There are places I can go I sift the ashes of America
For someplace I used to know
Someplace I used to know
Someplace I used to know

There was a time, a simpler time
When a man could be sure of where he stood
I used to work at the yard, working honest and hard
The hours were long but the pay was oh so good

Certain things that you depend upon I used to think were guaranteed
Like the right of every man to work And feed his family
And the faces of America seem so distant and estranged
Have their eyes become too blind to see
How much their hearts have changed
How much their hearts have changed
How much their hearts have changed

[conscious evolution]

43. The rich also make money off the debt when they buy Treasury bonds.

[I_Make_Mistakes]

11. Additionally, if they are business owners (which many are) they

have their cell phones, computers, gas mileage (sometimes vehicles), etc. all paid for in pre tax dollars. It is really a scam on us!

How about those entertainment deductions, sky boxes, elaborate corp. parties (not for the employees), professional sporting events tix and on and on!

The rich really pay for nothing relatively speaking.

[pnwmom]

14. The advantage isn't necessarily in paying cash. Even wealthy people

may decide to take a mortgage, if they can make more money in other investments than they would otherwise have to pay in interest. For example, suppose they had a million dollars that they could put in a house. That would tie up their million dollars, and they wouldn't be able to benefit from the appreciation until they sold it.

Or, they could put $200,000 in that house and take an 800,000 mortgage for the rest, paying 6% interest. The interest would be deductible from their federal income tax, lowering their income tax payments. And they would still have $800,000 in cash which they could invest in something paying significantly more than the mortgage interest that they owe.

So it's not that the wealthy have the advantage because it's always better to pay cash. They have the advantage because they have the CHOICE. They can pay cash, or they can get a mortgage, depending on which situation is better for them.

[Quixote1818]

16. Good point! Thanks for that. nt

[unblock]

15. it's not just the lack of interest, it's the SPEED of cash

if you have enough CASH to buy a house, you don't have to go through the TIME it takes to get a mortgage. so you can buy the house and immediately start renovations or whatever and get a mortgage at your leisure if you actually care to borrow more money for whatever reason.

a rich person can buy an underpriced house for cash and KEEP IT ON THE MARKET and sell it for a profit in a matter of days.

[pnwmom]

20. Non-cash buyers do have an option to help them act quickly.

They can get pre-qualified for a mortgage so that they can make an offer that isn't conditional on qualifying.

[unblock]

26. it can still take a month.

nothing moves like a wire transfer .....

[pnwmom]

31. We sold our first house to a cash buyer. It still took more than a month,

because of the legal stuff. I don't think that buyer would have had any advantage over another buyer coming in with a mortgage guarantee from a lender -- unless there was a bidding war, and she was willing to pay more.

[unblock]

45. the really rich have their own lawyers

who can make legal stuff go away FAST.

[provis99]

18. is this yet another subtle swiftboating of John Edwards?

I tired of this crap

[pnwmom]

21. Why would you think that? Edwards doesn't support tax cuts for the rich. n/t

[Quixote1818]

24. No, it's just something I was thinking about a while back

and remembered to do a thread on it tonight. It has nothing to do with John Edwards. I had to post a Daily Show link for a break from John Edwards then I posted this for something new.

I don't think Edwards payed cash for that house. I would guess he is making payments. His is only worth a few million, not filthy rich.

[mitchum]

23. Yes, but they do bleed like all people...

something they NEED to be reminded of from time to time

[originalpckelly]

25. I know, these rich folks are starting to act up again...

if they don't watch out peasants may start storming things.

[Kickin_Donkey]

42. Yeah, but they have health insurance ...

or enough assets to cover the medical bills. No sweat, no worries.

Bleeding a little isn't going to ruin them like it would devastate someone from the middle or lower classes.

[jen4clark]

27. I think the real trouble

started because the elite tried to pretend in America there were no class divisions. If everyone realized and accepted that there has always been and always will be class divisions, it wouldn't be such a big deal. That the divisions have become so huge has made it much worse. As long as there was a healthy middle class we could accept it better. Now...not so much.

[originalpckelly]

28. There was a time when the classes didn't exist per se...

or else we'd still have a bunch of poor Irish people living in America. There was at one time such a thing as upward mobility, but it seems that these selfish bastards have decided they don't want competition.

[aquart]

30. And here I thought the difference was full body massages.

They just walk around feeling good all the time.

[frogcycle]

32. rich people don't buy $250,000 houses

they buy bigger ones, and still pay interest

ok, granted, they may not have carrying charges on credit cards, maybe pay cash for cars, so the point is partially valid. But I doubt there are many people with $250,000 cash ready to spend on lodging who don't push it up to a 750,000 house.

[Quixote1818]

34. Many are wealthy enough to pay cash even for a $750,000 house

and even if it's not the house they live in they can pay cash for a $250,000 house and rent it out. Then they are making probably around 5% equity a year just on that house plus the $1,300 a month in rent. Thats almost clear! Thats a profit of over $20,000 in just one year off a $250,000 house. Of course they do still have to pay taxes etc.

I suspect when you are wealthy you try to pay cash for investments as much as possible. You are probably right about many people though.

I am talking about the 2% of the population that is filthy rich, but even those who are just well off have many big advantages when it comes to paying interest on property.

[frogcycle]

46. your points are valid in that

they do not HAVE to pay mortgage interest. But most do, because they have investments that yield more than that rate. A LOT of the "high-net-worth" clients of upscale financial advisors are mortgaged to the hilt - many have "interest-only" mortgages, some in the millions, as well as those investment properties, because they have their money working elsewhere (and large parts of mortgage interest are deductible). So they choose to pay mortgage interest, but not the other higher rates you mention.

[Raydawg1234]

33. Is it me, or are people on DU having mental breakdowns?

[Quixote1818]

35. ?

Care to enlighten us as to what you are talking about?

[alittlelark]

36. As a 'class jumper' I can say there are definate advantages.

The interest rates are much better for the wealthier among us. Never using 'credit cards' only 'charge cards' saves quite a bit of cash. The jobs offered to many of the wealthier (they do credit checks for employment now) have GREAT benefits programs. A good credit score is an essential in this consumerist society - those that are able to pay unexpected bills (due to the aforementioned and inheritances) have a good credit score.....

Before I 'jumped up in class' life was difficult. I remember. I donate, I volunteer, I try to help.

This country will slide into obscurity unless we FIX THIS SHIT!!!

[Quixote1818]

37. Credit cards are a killer!

I just used some of my equity to pay off $15,000 of credit card debt. Of course I will make less off the house sale but save quite a bit in interest.

[alittlelark]

38. TEAR THEM UP!!!! Burn them!

They have destroyed a few friends. It is a backdoor form of slavery.

[leftofthedial]

40. the wealthy are our enemies

wealth is immoral. the world simply can't sustain capitalism any longer.

[Quixote1818]

41. They need to be saved

O8)

[ShortnFiery]

48. Agreed "The American Dream" is to own your own home not become FILTHY RICH. n/t

[MadHound]

44. If you know what you're doing, willing to be patient and have some common sense

You too can live, thrive and survive in today's economy. A couple of words up front, my wife and I make a grand total of 45,000/yr. Next year it will be less than that, since I'm going back to school to get an education degree. Second disclosure, in the past twenty five years, I have gone from being homeless for a couple of years to now owning my second house, a farm with twenty acres.

First thing that you need to do is limit your borrowing to one thing, a house. Cut up the credit cards, go to a cash/check based life. You won't have to pay interest to buy things, thus saving yourself another monthly bill. Second, if you need a new car, buy the best that you can afford, the highest quality you can afford, and pay cash for it. Maintain it religiously(if possible, learn to do some of the minor things yourself, oil change, plug changes, etc), and run that puppy into the ground. While you are driving this car, start putting aside some money each month for the next car. The vast majority of even mid quality cars will last you ten years, and by that time you can have enough saved up to pay cash for another.

The same applies for other big ticket consumer goods, buy quality, make them last. My dryer is still going strong after twenty years. My stereo is fifteen years old. Don't be seduced by the latest, greatest bullshit. Rushing out to buy a receiver with Dolby 7.1 is stupid, because the audio difference between Dolby 2.1 and 7.1 is negligible to the human ear, most of the difference is on paper.

Rather than paying for school with loans, etc. go to work for the college. Most colleges and universities offer free or reduced tuition for employees and their families. Sure, you're going to be in school six or seven years, but frankly it is better than paying off student loans for half of your career.

I realize that not everybody is in a situation where they can implement these sort of actions. But if you are, I would recommend doing so. It will save you much money and pain in the long run.

[frogcycle]

47. may I just say to young people everywhere:

LISTEN TO MADHOUND!!!!

[MadHound]

50. A couple more things

When buying a house, don't go for the fancy ARMs. Stick to the old fashioned basics that work. Don't buy a house whose payments will take up more than 25% of your net income. Get a fixed rate loan. Down payment should be as much as you can possibly make it, at least five percent, and ten is better. If you thirty year note, pay an extra ten percent into the principle every single month. This will knock that thirty year note down to a twenty year note, and save you much money. Same is applicable for ten and twenty year notes.

[momster]

51. You're So Right!

You should do a financial advice column or book...you've already got a hook that will make publishers sit up. From Homeless to Houseproud...Lessons for a Secure Life.

I tell my daughter (now 13) that we'll help her get on the 'property ladder' as soon as she's in college. A House to share with roommates while she's getting a degree, then using the money from that to buy another in the next location, etc. There are two fast and legal ways to financial security in this world...buy a house or buy a radio station. We can't afford a radio station.

[MadHound]

52. I'm sooo wanting a radio station

I was in radio for six years, long enough to find out that unless I went out to the coasts I wasn't going to make a decent living. But I love the profession and have seriously thought about putting up a little five watt tower of my own, along with a good size server, in order that I could broadcast and webcast at the same time. Perhaps something to do in my old age. For right now I've got an orchard to tend and crops to grow. I'm going back to school to get a teaching degree, and despite the fact that most Americans view teaching as absolutely the most important profession in our society, they are the most chronicly underpaid. Therefore the orchard and small farm, a good supplemental income, and food for myself. Besides, I love digging in the dirt and growing things.

Thanks for the compliment, but I certainly don't want to do an advice column. Besides, these common sense suggestions have been done to death. The trouble is that common sense is drowned out by greed and the yammering of Madison Avenue.

[jmowreader]

53. They don't HAVE to, but quite often they do

Let's say that, just for the hell of it, you have $25 million in investments. And, all of a sudden, you have a hankerin' for a million-dollar house. You go out, find a million-dollar house you like, and negotiate out the transaction.

Now it's time to pay for it, and here you have two options. You have five million dollars parked at nine percent interest somewhere. You can pull one million out of the investment it's in, give it to a realtor and have your house free and clear. No interest payments, no mortgage insurance, all is good. Well, all except the fact that one of the millions that was throwing off $450,000/year in interest payments is now sitting in someone else's bank account.

Or you can go to your banker and tell him, "I will park five million dollars in your bank for ten years at five percent simple interest, if you will issue me a $1 million mortgage at 5% interest with no points for ten years and deposit my earned interest into an account from which my mortgage payments will be electronically debited." No banker in the world would pass that up.

What it does for the bank is very simple: it gives them an immediate $4 million (your $5 million, minus the $1 million they loaned back to you) they can use to make 15% car loans, and they've got it for the next ten years. Paying 5% for money you can turn around and lend for 15% is always good.

Now here's what it does for you. Your mortgage payment is $10,606.55 per month. Your $5 million is throwing off $20,833 per month. This gives you $10,227 per month in excess interest, which will go to pay your insurance, your taxes (both property tax and income tax on the interest from the parked $5 million), and to generate interest on its own. Just for S&G, we'll pretend your taxes and insurance are $5227 per month, leaving you with $5000 in the bank every month to draw $250 interest on its own. You're paying taxes on the interest income but they're lower than they were before you entered into this deal because at 9% interest the $5 million was earning $450,000 per year, and now it's only earning $250,000. You can deduct the mortgage interest from your taxes. And the piece de resistance: after all is said and done, after you've had your mortgage-burning party in 10 years...you get to put the intact $5 million back into the 9% investment you pulled it out of to do this deal.

This is completely legal, and the net effect is that not only do you own a million-dollar house without ever seeing a mortgage coupon, you actually profit off the deal. You'd have to be an idiot to pay cash for a house if you were seriously rich. Plus, you still have $20 million throwing off $900,000/year if it's parked at 9 percent.

The difference between the rich and you & me isn't that they've got more money, it's that they've got enough more money that they can afford to get creative.

[Quixote1818]

54. Interesting. Thanks. nt