From: jwh@citi.umich.edu (Jim Howe)
Subject: Re: Ignorance - Was Re: VOTE, BABY, VOTE!
Date: Mon, 16 Nov 92 11:34:47 EST
Organization: IFS Project, University of Michigan
Reply-To: jwh@citi.umich.edu

In article <Bxop7r.so@slipknot.rain.com>, robert@slipknot.rain.com (Robert Reed) writes:
|> In article <KxC=h9B@engin.umich.edu> jwh@citi.umich.edu writes:
|> |In article <BxMwz5.Lo6@slipknot.rain.com>, robert@slipknot.rain.com (Robert Reed) writes:
|> ||In article <KVC=yK=@engin.umich.edu> jwh@citi.umich.edu writes:
|> |||
|> |||The Federal government guaranteed accounts up to $100,000.  This was
|> |||stupid, but a promise is a promise.
|> ||
|> ||You may think it was stupid, but it was viewed at the time as a necessary
|> ||measure (along with bank regulation) to raise people's trust of the banking
|> ||system following the great depression. [...]
|> |
|> |The depression occured in the 30's.  The insurance level was increased from
|> |$40,000 to $100,000 in the 70's.  I don't think the banking system was
|> |so bad off in the 70's that this increase was warranted.
|> 
|> The program was instituted in the 30's because some legislators thought it was
|> a good thing, a safety net whose worth could only be measured in times of
|> catastrophe.  The potential for catastrophe had not lessened in the 70's but
|> the value of money used to measure someone's net worth had.  Raising the
|> payback restored the level of protection that had eroded over 40 years due to
|> inflation.
|> 

I disagree that the potential for catastrophe had lessened in the 70's.  For
one thing, there were many more savings opportunities available that were
not in existance in the 30's.  Second, we weren't in a depression, the
level of confidence in the banking system was not particularly low.  The
best thing the legislators could have done was simply leave the limit
where it was and let inflation erode it away.  Private insurance should
have been encouraged to take up the slack.

|> |||Corporate taxes should be abolished, therefore tax breaks would be pointless.
|> ||
|> ||So that we can all incorporate as individuals and thus avoid paying any taxes?
|> ||Dream on!
|> |
|> |Even if you incorporated, you would still have to draw a salary or
|> |take a dividend if you wanted to spend money on non-business items.
|> 
|> Why?  If my corporation owns my house and car, and my corporation has to pay
|> no taxes, then I don't have to justify corporate spending for business
|> expenses, because I don't have to worry about deductions, or profits,
|> because regardless of what the balance sheet looks like, my corporation has 
|> to pay no taxes.  I can pay myself a modest salary (low enough to avoid 
|> paying income taxes), and then charge my living expenses to the corporation,
|> because the corporation doesn't have to justify it.  It pays no taxes.
|> 

The IRS could easily pass regulations regarding what it consider to be
'de facto' compensatation.  Corporations could be required to file
information about compensation based on IRS rules.  The corporation
could pay your living expenses but the IRS may require the corporation
to declare that expenditure.  If you didn't report it on your personal
form, you would be guilty of tax evasion.  If the corporation didn't
report it, it could be guilty of fraud and it's officers (you) fined
or imprisoned.


James W. Howe                  internet: jwh@citi.umich.edu
University of Michigan             uucp: uunet!mailrus!citi.umich.edu!jwh
Ann Arbor, MI   48103-4943         
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