I remember the reason for this from economics class. Essentially, when you set a price ceiling on something that is above the equilibrium price for supply and demand, you have no effect on the market equilibrium.
What rent control DOES do in this case is prevent speculation and rapidly ratcheting up rates. If the price ceiling is slightly above the LONG term equilibrium for rents, it prevents short term speculation and economic manipulation (such as a period of easy credit) from artificially inflating rents and creating a bubble.
How would you do this? Do competent asset analysis, factoring in the incomes and true value of a rental property. Come up with a reasonable 'formula' for a rent control ceiling based on this property value. Set the rent control rate to automatically INCREASE at 1% above the rate of inflation every year.
Do this competently, and you have put a governor on the free market engine, not blocked it.
The general feeling around here is that no-one WANTS to believe it is even possible that Windows 7 doesn't suck. Because if that were true, that would sort of devalue everything done to improve Linux the last few years. (because if Windows 7 is fast and stable and lets you play games, that doesn't leave any room for Linux on the desktop)
It could actually be that Microsoft got it right. It may be that the core of Vista is not as terrible as we all think it is. I've seen posts discussing how Vista uses a completely refactored kernel, with more layers of abstraction and cleaning up of many of the quirks of win32.
Then, on top of this decent foundation, they overloaded it with poorly thought out gimmicks in an attempt to compete with Apple. In addition, some of their rewrites introduced new bugs, such as the networking problems where Vista machines are unable to talk to shared file servers.
It's possible that Windows 7 succeeded. If they fixed the bugs, and ripped out some of the bloated, inefficient Vista code then you might have a decent OS after. Microsoft might be a monopoly, but if they sat on their heels for too long, eventually (it might take 10 years) alternatives would overtake them.
For this reason, why didn't you go with a natural gas powered generator, with a propane tank for backup? That way, in almost all emergencies, you would not need to worry about fuel. For the occasional disaster that kills the natural gas supply, you can switch to the propane. 1 1000 gallon buried propane tank should be enough for a couple days, enough to figure out what to do next.
Also, propane can be stored much, much longer than diesel.
Now, you have the best of all worlds : a generator that you can leave safely in your dry garage, protected from any damage. You can run your whole house on it, and if you get an extra gas tap installed, you can use natural gas as well as gasoline, giving you two options in case one fuel or the other is unavailable. (after all, some disasters could kill the natural gas supply)
I did a little reserach today, and here's what I think is THE right way to do it.
You might as well buy a generator powerful enough to run your entire house. That means you don't have to compromise : you can have AC, heat, your electronics, the works.
Second, since power outages are rare, you want a generator that is on wheels. That way, you can buy a new generator, don't even put oil into it, and leave it in a dry garage until it is needed. That way you do no maintainence, and the unit is basically brand new. Or, you could test it, but be sure to put preservatives in the lubrication oil, and to leave the gas tank dry.
Outdoor generators tend to rust.
While natural gas and propane generators have the advantage of not depending on fuel, if you own a truck then gas is fine. Just keep a siphon kit so that you can safely transfer fuel to the generator. Or, get a tri fuel generator, so that you can run on natural gas if it is still available, and go get gasoline if it is not.
Don't pay an electrician to install the circuitry. Do it yourself, and have an electrician check the job afterwards for $100-$200 instead of $500-$1000.
Cost? Here's everything you need on ebay for $3230, shipping included. Not that I am not affiliate with the seller, I just noticed that this is a pretty good price considering you can run your entire house and you don't have to buy anything else.
Yes, good point. Several posters have pointed out that this is not really as dangerous as it sounds. That the real danger is overloading the wiring in a house (a dryer plug is only wired for a limited amount of current) and causing a fire, blowing out your generator when the power is restored, or electrocuting yourself on the male : male plug.
None of which are all that dangerous, as long as you use a small generator, turn off the power at the main, and plug the male to male cord into the house side first.
Still, people do die every year from screwing this basic task up, so it is dangerous.
Is what I meant, basically make sure that the switch leaves no circuits connecting you to the outside wiring.
Second, out of curiosity, I looked on walmart.com at generator prices. A 5500 watt generator costs $618. Elsewhere in this forum, there's a link to Lowe's that sells transfer switches : $448.
The logical thing to do is to buy one of those walmart generators and keep it in your garage, untouched, until you need it for a prolonged power outage. Make sure to buy gas siphoning equipment and a couple of spare 240 volt plugs so that you can fabricate a male to male plug.
Walmart generators are probably so crappy that it would fail after relatively little usage, but it still would probably run for at least one prolonged outage.
Cost is a big deal, though. You can pick up generators cheaply sometimes, from either the used market or from discounts that occur ever so often. Also, the OP needs a fairly small generator : he just wants to run his furnace blower. And, you can go to the breaker panel and turn off the circuits to everything else, in order to prevent multiple appliances starting at same time.
So if you already had a cheap generator, and just wanted to hook it up, in todays economy...
It is still a switch.
And I might do something more permanent like pull the meter, which is a 100% sure way of making sure there is no connection to the lines.
I know. Personally, if I had a generator, and it wasn't too high a wattage, I would probably use this technique. A double throw switch can cost as much as a small generator!
First, if you follow these instructions, remember this KEY STEP
TURN OFF THE MAIN SWITCH. Also, NEVER turn that main switch on if the generator is running.
Finally, the main switch MUST be double throw.
Forget to follow these instructions, and you can very easily kill a lineman or blow up your generator.
Anyways, you just need a three pronged dryer plug, 2 of them, and sufficient length of heavy gauge wire. You create an illegal male - male 3 pronged plug, and connect your generator socket into the 3 pronged plug in your house used for the clothes dryer.
The reason it is illegal is because this form of installation does not prevent you from connecting your generator to the wiring outside your house. If you left the main switch on, you can energize the dead lines outside with 12,000 volts and kill a lineman.
The advantage? As long as the main switch is double throw, and you don't turn it on when the generator is connected, it is pretty safe. And cheap : a double throw switch and circuit box is $200-$500, while this method can be done for $10.
Your statements about flywheels are completely false.
First, the charts are for use as a UPS. Notice that the machine is providing 250 KILOWATTS for 9 minutes, per $48,000 module. Yes, that's expensive : but that's small scale production for mission critical customers.
Second, think again : the flywheel uses magnetic levitation bearings and a hard vacuum. There's almost no friction. It takes years for the spinning flywheel to spin down. On the specs they mention that it is usually 99% efficient.
There's tremendous energy in that iron disc, and it would take a long time to drain it.
And for my proposed purpose : a buffer between wind and solar power and the electric grid, the flywheel never has to store power longer than 12 hours, anyway.
As for DC : AC : again, flywheels. DC motor generator to spin the flywheels up, and an AC induction alternator for getting the current out. No need for an inverter. If you read the website, you'll notice that this is one of the uses of these flywheel power systems : power conditioning and conversion. This is actually how AC : DC systems often work for subways.
I understand your view a lot better now. Dealing with the government regulators and regulations must have been miserable. Your whole business would be subject to the arbitrary whims of petty bureacrats, fat overweight people behind desks who would decide if the 'job was done' for an environmental cleanup.
Course, before making that decision, they would subject you to delays and stacks of paperwork. Their decision woudld determine whether you were even profitable, and if you cleaned up the same site twice, they would probably make a different decision each time.
It's $1 per watt-hour stored, off the shelf, 20 year lifespan (at least). Essentially 0 wear on the system.
I calculate that it would be more cost effective if these flywheel systems were about 10 times cheaper, which is within the realm of plausibility. Notice that there are no rare elements of any sort used, just steel discs that could be mass produced in china and some commodity electronics. Quality would not be nearly as important for a large scale flywheel storage system because you would not care if a few modules failed prematurely. This is exactly the kind of product that China could make on a massive, commodity scale.
That's what I meant all along : if nanosolar had about 10 of those machines, and there were about 5 other competitors in the market, solar power would be economical TODAY. Read some of the comments by the nanoscale CEO, who compared it to the DRAM market. Just LOOK at the machine : that's exactly the sort of product that mass production will make cheap, just like DRAM.
So, I rest my case. I argue that if you put, say, $100 billion dollars into plants to make thin film solar panels using the KNOWN process by nanosolar, and another $100 billion into plants to make flywheel storage devices, you would solve the energy problem almost entirely. The final step is fast charging lithium ion batteries, which you would charge up from electric gas station that would use underground flywheel storage reservoirs, in about 5 minutes.
And, guess what : here they are, ready to be purchased. http://www.altairnano.com/ Again, expensive : but nothing that mass production and time won't solve. Lithium ion battery costs have plummeted over the past decade, so further improvement follows logically.
Of course further R&D will help tremendously. But all of the pieces are here already.
Darn. Bob would come out ahead by several million if he could dodge taxes this way. I guess if Bob really wanted that extra 4 or 5 million, he could just do plan B : rob a bank. Bank robbers do occasionally get away with their crime, and Bob could grab about 4 or 5 mil (assuming he had insider info as to which bank to rob, I guess...and a dump truck to haul away the cash) in one go rather than elaborately building it up over 20 years.
I see your point. I'll find the PBS Frontline if you are interested. I'm curious : what do you do for a living? You seem to be interested in a wide variety of subjects. All I really know besides that is that you've watched That 70s show and probably own a house with welding equipment.
While in my case, you know that my mom's basement is quite cozy...
Sort of brainstorming. Suppose "Bob" has a financially successful career, and he makes $100,000 more than he spends for 20 years. Bob pays income taxes on this money (35%, no medicare or medicaid because it is above 90k) and decide to invest the rest in "MunchkinCorp", a company that is set up in Panama.
The corporate charter of "MunchkinCorp" is to to invested money and make fiscally sound investments. Bob owns 100% of the shares of the company. The shares do not pay dividends, except when "Bob" turns 65, the MunchkinCorp will begin selling assets and paying Bob a dividend, wherever he is.
All of this is in the charter, and controlled by the trustee : Bob does not have direct control of the funds. The corporation really is a separate legal entity.
So, MunchkinCorp sits around for 20-30 years, buying and selling stocks. MunchkinCorp has to pay the capital gains tax on stock sales in Panama, which is I think 0%. Dividends received from stocks that MunchkinCorp owns would also not be taxed, and could be reinvested without penalty. MunchkinCorp does have to pay fees to the trustees that adminster it, as well as the Panamanian government. Bob may not actually be rich enough to be worth this much effort.
When Bob turns 65, MunchkinCorp has about 10 million bucks. Bob decides to emigrate to a country with lower income taxes, and collects his 10 million. Bob pfficially renounces his U.S. citizen, but heads back here a few weeks later on a tourist visa and rents a Ferrari.
Bob then emigrates to a nicer, Western country. He doesn't need anything but semi-permanent visas, and need not fear taxes, since his 10 million sits in the bank in his name. He can freely visit France and Sweden and all the other incredibly highly taxed countries, and laugh, paying nothing but sales taxes.
If the real jobs weren't so godawful boring, I think being a tax lawyer or accountant could be fun. I'm not sure whether the commonly used loopholes are actually legal. For some reason, Exxon, Berkshire Hathway, and a bunch of other big corporations do have stuff in Panama. It's right there in the records. I don't actually know how they are using these trusts and vehicles, but it ain't because Panama has legitimate economic value. It has to be for tax or legal reasons.
Oh, and the privacy laws are such that without a court order, noone can find out anything about these corporations other than the name.
There's a PBS Frontline on this. A major bank, I think it was BoA, has a whole team of specialists who work on tax schemes for the bank's assets. Supposedly they were saving the bank a billion bucks annually.
I've only done a little reading on tax shelters, but I'm convinced that the 'perfect setup' is possible. I'm sure there must be a way to evade paying most taxes with little legal danger. And completely legal ways to cut tax burdens to the minimum, by essentially only having the pay capital gains taxes on most of your income.
Honestly, it reminds me of various roleplaying games. In any complex set of rules, there's almost always a way to 'game' them for an optimal outcome, and a way to completely break the game entirely.
It's actually pretty elegant. The Panama trusts are not owned, nor controlled by the super rich people that created them. They obey various charters and are overseen by law firms. They follow fixed investment formula, as specified by the charter (Buffet can't call his trust up and demand that it sell something short) and pay him and his descendents according to certain rules. A trust fund.
And they are subject to the income and other taxes of Panama alone.
The reason Buffet, and the other super-rich use trusts is simple.
Yes, any money that the trust pays these people is taxed.
BUT, when you GROW your wealth, you want to be able to move money around, buying and selling stocks and reinvesting dividends without paying taxes on the intermediates.
That is GIGANTIC. Remember, investments are like an exponential function. If you own a million dollars in investments, and you can buy and sell without paying taxes, you will get a MUCH higher 10 or 30 year rate of return than if you have to pay taxes.
Say some of those investments pay dividends. Normally, those count as income, taxed to 35% for a super-rich man. So, you can only reinvest 65% of the money. But, if the dividends are payed to a self-owned trust in Panama, the taxes are maybe 1%. You reinvest 99% of the money, which in turn buys more shares which in turn pays more dividends...you see where this is going. Long term, it's a gigantic advantage, and I'm sure everyone with any real money must do this, or they would never have become as wealthy as they are in the first place.
As for the taxes question : you are confusing short term action by employers with long term, net actions. The fact is, any company has to keep the TOTAL cost of an employee on their balance sheets, and use that as a basis for making decisions. No rational actor would work otherwise.
Even irrational actors (employers that are 'dumb' and only care about the hourly wage they pay) will be AFFECTED by the tax. Just like I can jump out a window and ignore gravity, but still be affected by it. My allusion to physics is simple : ultimately, money does actually represent a real world quantity, wealth. And wealth in turn, while perhaps difficult to measure in a practical sense, refers to available human labor and physical resources that are finite quantities.
Your final example "what if a company got a windfall" doesn't mean anything. Labor rates are determined by a market, and a single company gaining a windfall is not going to affect the market. The company only pays more if it gains something from doing so. (such as efficiency wages)
Basic law of economics is that employers are rational actors, and consider the total 'cost' of keeping an employee, not just wages. So you do have to add that 7.65%. Sorry. This is as fundamental as F=ma. (actually, it is.)
Otherwise you could create wealth from nothing:P Can't do that.
As for Buffet : I think there are various scams like 'self-owned' trusts and other tricks. I think there's still work-arounds that effectively let those offshore trusts evade tax laws. It's very complicated, and a race against the IRS, but I think there are still semi-legal ways to do it.
I have to admit, this does sound kind of exciting. Would make for a good movie or detective story.
Of course, no matter how clever you are, there's a million ways to get caught. And the time locked up in federal prison would most likely cancel out whatever thrills you got from doing the crime.
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I remember the reason for this from economics class. Essentially, when you set a price ceiling on something that is above the equilibrium price for supply and demand, you have no effect on the market equilibrium.
What rent control DOES do in this case is prevent speculation and rapidly ratcheting up rates. If the price ceiling is slightly above the LONG term equilibrium for rents, it prevents short term speculation and economic manipulation (such as a period of easy credit) from artificially inflating rents and creating a bubble.
How would you do this? Do competent asset analysis, factoring in the incomes and true value of a rental property. Come up with a reasonable 'formula' for a rent control ceiling based on this property value. Set the rent control rate to automatically INCREASE at 1% above the rate of inflation every year.
Do this competently, and you have put a governor on the free market engine, not blocked it.
The general feeling around here is that no-one WANTS to believe it is even possible that Windows 7 doesn't suck. Because if that were true, that would sort of devalue everything done to improve Linux the last few years. (because if Windows 7 is fast and stable and lets you play games, that doesn't leave any room for Linux on the desktop)
It could actually be that Microsoft got it right. It may be that the core of Vista is not as terrible as we all think it is. I've seen posts discussing how Vista uses a completely refactored kernel, with more layers of abstraction and cleaning up of many of the quirks of win32.
Then, on top of this decent foundation, they overloaded it with poorly thought out gimmicks in an attempt to compete with Apple. In addition, some of their rewrites introduced new bugs, such as the networking problems where Vista machines are unable to talk to shared file servers.
It's possible that Windows 7 succeeded. If they fixed the bugs, and ripped out some of the bloated, inefficient Vista code then you might have a decent OS after. Microsoft might be a monopoly, but if they sat on their heels for too long, eventually (it might take 10 years) alternatives would overtake them.
For this reason, why didn't you go with a natural gas powered generator, with a propane tank for backup? That way, in almost all emergencies, you would not need to worry about fuel. For the occasional disaster that kills the natural gas supply, you can switch to the propane. 1 1000 gallon buried propane tank should be enough for a couple days, enough to figure out what to do next.
Also, propane can be stored much, much longer than diesel.
Oh, and scratch what I said about tri-fuel.
Just get a conversion kit, like this one http://www.propane-generators.com/generac-generators.htm
Now, you have the best of all worlds : a generator that you can leave safely in your dry garage, protected from any damage. You can run your whole house on it, and if you get an extra gas tap installed, you can use natural gas as well as gasoline, giving you two options in case one fuel or the other is unavailable. (after all, some disasters could kill the natural gas supply)
I did a little reserach today, and here's what I think is THE right way to do it.
You might as well buy a generator powerful enough to run your entire house. That means you don't have to compromise : you can have AC, heat, your electronics, the works.
Second, since power outages are rare, you want a generator that is on wheels. That way, you can buy a new generator, don't even put oil into it, and leave it in a dry garage until it is needed. That way you do no maintainence, and the unit is basically brand new. Or, you could test it, but be sure to put preservatives in the lubrication oil, and to leave the gas tank dry.
Outdoor generators tend to rust.
While natural gas and propane generators have the advantage of not depending on fuel, if you own a truck then gas is fine. Just keep a siphon kit so that you can safely transfer fuel to the generator. Or, get a tri fuel generator, so that you can run on natural gas if it is still available, and go get gasoline if it is not.
Don't pay an electrician to install the circuitry. Do it yourself, and have an electrician check the job afterwards for $100-$200 instead of $500-$1000.
Cost? Here's everything you need on ebay for $3230, shipping included. Not that I am not affiliate with the seller, I just noticed that this is a pretty good price considering you can run your entire house and you don't have to buy anything else.
http://cgi.ebay.com/NEW-Generac-Guardian-Generator-26-250-Watt-Trans-Sw_W0QQitemZ380088266146QQcmdZViewItemQQptZLH_DefaultDomain_0?hash=item380088266146&_trksid=p3286.c0.m14&_trkparms=66%3A2%7C65%3A16%7C39%3A1%7C240%3A1318
Yes, good point. Several posters have pointed out that this is not really as dangerous as it sounds. That the real danger is overloading the wiring in a house (a dryer plug is only wired for a limited amount of current) and causing a fire, blowing out your generator when the power is restored, or electrocuting yourself on the male : male plug.
None of which are all that dangerous, as long as you use a small generator, turn off the power at the main, and plug the male to male cord into the house side first.
Still, people do die every year from screwing this basic task up, so it is dangerous.
Err, I meant double pole. Turns out they all are, I shouldn't have mentioned that detail.
All I meant was that the switch needs to cut off both phases from the power company.
Is what I meant, basically make sure that the switch leaves no circuits connecting you to the outside wiring.
Second, out of curiosity, I looked on walmart.com at generator prices. A 5500 watt generator costs $618. Elsewhere in this forum, there's a link to Lowe's that sells transfer switches : $448.
The logical thing to do is to buy one of those walmart generators and keep it in your garage, untouched, until you need it for a prolonged power outage. Make sure to buy gas siphoning equipment and a couple of spare 240 volt plugs so that you can fabricate a male to male plug.
Walmart generators are probably so crappy that it would fail after relatively little usage, but it still would probably run for at least one prolonged outage.
They do call those things a suicide plug.
But, like anything else dangerous (surgical scalpels, firearms, industrial equipment, dynamite) it CAN be handled safely.
Just know what you are doing, and make sure not to screw up :P
Really? I thought it was startup current from everyone's appliances starting overloading utility company equipment.
There's a transformer between you and the lines. They do work in reverse, and so 120vac would get stepped up to about 12,000.
Cost is a big deal, though. You can pick up generators cheaply sometimes, from either the used market or from discounts that occur ever so often. Also, the OP needs a fairly small generator : he just wants to run his furnace blower. And, you can go to the breaker panel and turn off the circuits to everything else, in order to prevent multiple appliances starting at same time. So if you already had a cheap generator, and just wanted to hook it up, in todays economy...
It is still a switch. And I might do something more permanent like pull the meter, which is a 100% sure way of making sure there is no connection to the lines.
I know. Personally, if I had a generator, and it wasn't too high a wattage, I would probably use this technique. A double throw switch can cost as much as a small generator!
There's a dirty, and illegal way to do it.
First, if you follow these instructions, remember this KEY STEP
TURN OFF THE MAIN SWITCH. Also, NEVER turn that main switch on if the generator is running.
Finally, the main switch MUST be double throw.
Forget to follow these instructions, and you can very easily kill a lineman or blow up your generator.
Anyways, you just need a three pronged dryer plug, 2 of them, and sufficient length of heavy gauge wire. You create an illegal male - male 3 pronged plug, and connect your generator socket into the 3 pronged plug in your house used for the clothes dryer.
The reason it is illegal is because this form of installation does not prevent you from connecting your generator to the wiring outside your house. If you left the main switch on, you can energize the dead lines outside with 12,000 volts and kill a lineman.
The advantage? As long as the main switch is double throw, and you don't turn it on when the generator is connected, it is pretty safe. And cheap : a double throw switch and circuit box is $200-$500, while this method can be done for $10.
Your statements about flywheels are completely false.
First, the charts are for use as a UPS. Notice that the machine is providing 250 KILOWATTS for 9 minutes, per $48,000 module. Yes, that's expensive : but that's small scale production for mission critical customers.
Second, think again : the flywheel uses magnetic levitation bearings and a hard vacuum. There's almost no friction. It takes years for the spinning flywheel to spin down. On the specs they mention that it is usually 99% efficient.
There's tremendous energy in that iron disc, and it would take a long time to drain it.
And for my proposed purpose : a buffer between wind and solar power and the electric grid, the flywheel never has to store power longer than 12 hours, anyway.
As for DC : AC : again, flywheels. DC motor generator to spin the flywheels up, and an AC induction alternator for getting the current out. No need for an inverter. If you read the website, you'll notice that this is one of the uses of these flywheel power systems : power conditioning and conversion. This is actually how AC : DC systems often work for subways.
I understand your view a lot better now. Dealing with the government regulators and regulations must have been miserable. Your whole business would be subject to the arbitrary whims of petty bureacrats, fat overweight people behind desks who would decide if the 'job was done' for an environmental cleanup.
Course, before making that decision, they would subject you to delays and stacks of paperwork. Their decision woudld determine whether you were even profitable, and if you cleaned up the same site twice, they would probably make a different decision each time.
Anyways, here's how you'd store all the power from these solar panels : http://www.vyconenergy.com/pages/flywheeltech.htm
It's $1 per watt-hour stored, off the shelf, 20 year lifespan (at least). Essentially 0 wear on the system.
I calculate that it would be more cost effective if these flywheel systems were about 10 times cheaper, which is within the realm of plausibility. Notice that there are no rare elements of any sort used, just steel discs that could be mass produced in china and some commodity electronics. Quality would not be nearly as important for a large scale flywheel storage system because you would not care if a few modules failed prematurely. This is exactly the kind of product that China could make on a massive, commodity scale.
And here's what you make all the panels with : http://earth2tech.com/2008/06/18/nanosolar-prints-thin-film-solar-at-100-feet-per-minute/
That's what I meant all along : if nanosolar had about 10 of those machines, and there were about 5 other competitors in the market, solar power would be economical TODAY. Read some of the comments by the nanoscale CEO, who compared it to the DRAM market. Just LOOK at the machine : that's exactly the sort of product that mass production will make cheap, just like DRAM.
So, I rest my case. I argue that if you put, say, $100 billion dollars into plants to make thin film solar panels using the KNOWN process by nanosolar, and another $100 billion into plants to make flywheel storage devices, you would solve the energy problem almost entirely. The final step is fast charging lithium ion batteries, which you would charge up from electric gas station that would use underground flywheel storage reservoirs, in about 5 minutes.
And, guess what : here they are, ready to be purchased. http://www.altairnano.com/ Again, expensive : but nothing that mass production and time won't solve. Lithium ion battery costs have plummeted over the past decade, so further improvement follows logically.
Of course further R&D will help tremendously. But all of the pieces are here already.
Don't have the player...
hate the game.
Meaning, I hate how females behave as well, but one might as well be a munchkin and do what you can to min max your chances with them.
Darn. Bob would come out ahead by several million if he could dodge taxes this way. I guess if Bob really wanted that extra 4 or 5 million, he could just do plan B : rob a bank. Bank robbers do occasionally get away with their crime, and Bob could grab about 4 or 5 mil (assuming he had insider info as to which bank to rob, I guess...and a dump truck to haul away the cash) in one go rather than elaborately building it up over 20 years.
I see your point. I'll find the PBS Frontline if you are interested. I'm curious : what do you do for a living? You seem to be interested in a wide variety of subjects. All I really know besides that is that you've watched That 70s show and probably own a house with welding equipment.
While in my case, you know that my mom's basement is quite cozy...
Sort of brainstorming. Suppose "Bob" has a financially successful career, and he makes $100,000 more than he spends for 20 years. Bob pays income taxes on this money (35%, no medicare or medicaid because it is above 90k) and decide to invest the rest in "MunchkinCorp", a company that is set up in Panama.
The corporate charter of "MunchkinCorp" is to to invested money and make fiscally sound investments. Bob owns 100% of the shares of the company. The shares do not pay dividends, except when "Bob" turns 65, the MunchkinCorp will begin selling assets and paying Bob a dividend, wherever he is.
All of this is in the charter, and controlled by the trustee : Bob does not have direct control of the funds. The corporation really is a separate legal entity.
So, MunchkinCorp sits around for 20-30 years, buying and selling stocks. MunchkinCorp has to pay the capital gains tax on stock sales in Panama, which is I think 0%. Dividends received from stocks that MunchkinCorp owns would also not be taxed, and could be reinvested without penalty. MunchkinCorp does have to pay fees to the trustees that adminster it, as well as the Panamanian government. Bob may not actually be rich enough to be worth this much effort.
When Bob turns 65, MunchkinCorp has about 10 million bucks. Bob decides to emigrate to a country with lower income taxes, and collects his 10 million. Bob pfficially renounces his U.S. citizen, but heads back here a few weeks later on a tourist visa and rents a Ferrari.
Bob then emigrates to a nicer, Western country. He doesn't need anything but semi-permanent visas, and need not fear taxes, since his 10 million sits in the bank in his name. He can freely visit France and Sweden and all the other incredibly highly taxed countries, and laugh, paying nothing but sales taxes.
If the real jobs weren't so godawful boring, I think being a tax lawyer or accountant could be fun. I'm not sure whether the commonly used loopholes are actually legal. For some reason, Exxon, Berkshire Hathway, and a bunch of other big corporations do have stuff in Panama. It's right there in the records. I don't actually know how they are using these trusts and vehicles, but it ain't because Panama has legitimate economic value. It has to be for tax or legal reasons.
Oh, and the privacy laws are such that without a court order, noone can find out anything about these corporations other than the name.
There's a PBS Frontline on this. A major bank, I think it was BoA, has a whole team of specialists who work on tax schemes for the bank's assets. Supposedly they were saving the bank a billion bucks annually.
I've only done a little reading on tax shelters, but I'm convinced that the 'perfect setup' is possible. I'm sure there must be a way to evade paying most taxes with little legal danger. And completely legal ways to cut tax burdens to the minimum, by essentially only having the pay capital gains taxes on most of your income.
Honestly, it reminds me of various roleplaying games. In any complex set of rules, there's almost always a way to 'game' them for an optimal outcome, and a way to completely break the game entirely.
It's actually pretty elegant. The Panama trusts are not owned, nor controlled by the super rich people that created them. They obey various charters and are overseen by law firms. They follow fixed investment formula, as specified by the charter (Buffet can't call his trust up and demand that it sell something short) and pay him and his descendents according to certain rules. A trust fund.
And they are subject to the income and other taxes of Panama alone.
The reason Buffet, and the other super-rich use trusts is simple.
Yes, any money that the trust pays these people is taxed.
BUT, when you GROW your wealth, you want to be able to move money around, buying and selling stocks and reinvesting dividends without paying taxes on the intermediates.
That is GIGANTIC. Remember, investments are like an exponential function. If you own a million dollars in investments, and you can buy and sell without paying taxes, you will get a MUCH higher 10 or 30 year rate of return than if you have to pay taxes.
Say some of those investments pay dividends. Normally, those count as income, taxed to 35% for a super-rich man. So, you can only reinvest 65% of the money. But, if the dividends are payed to a self-owned trust in Panama, the taxes are maybe 1%. You reinvest 99% of the money, which in turn buys more shares which in turn pays more dividends...you see where this is going. Long term, it's a gigantic advantage, and I'm sure everyone with any real money must do this, or they would never have become as wealthy as they are in the first place.
As for the taxes question : you are confusing short term action by employers with long term, net actions. The fact is, any company has to keep the TOTAL cost of an employee on their balance sheets, and use that as a basis for making decisions. No rational actor would work otherwise.
Even irrational actors (employers that are 'dumb' and only care about the hourly wage they pay) will be AFFECTED by the tax. Just like I can jump out a window and ignore gravity, but still be affected by it. My allusion to physics is simple : ultimately, money does actually represent a real world quantity, wealth. And wealth in turn, while perhaps difficult to measure in a practical sense, refers to available human labor and physical resources that are finite quantities.
Your final example "what if a company got a windfall" doesn't mean anything. Labor rates are determined by a market, and a single company gaining a windfall is not going to affect the market. The company only pays more if it gains something from doing so. (such as efficiency wages)
Basic law of economics is that employers are rational actors, and consider the total 'cost' of keeping an employee, not just wages. So you do have to add that 7.65%. Sorry. This is as fundamental as F=ma. (actually, it is.)
Otherwise you could create wealth from nothing :P Can't do that.
As for Buffet : I think there are various scams like 'self-owned' trusts and other tricks. I think there's still work-arounds that effectively let those offshore trusts evade tax laws. It's very complicated, and a race against the IRS, but I think there are still semi-legal ways to do it.
I have to admit, this does sound kind of exciting. Would make for a good movie or detective story.
Of course, no matter how clever you are, there's a million ways to get caught. And the time locked up in federal prison would most likely cancel out whatever thrills you got from doing the crime.