On The Money Trail - A Skeptic’s Guide to Prosperity

Is it possible that the idea of a flat rate income tax is really a good idea? Some persons claim that everyone paying at the same tax rate, with no deductions or exemptions, is far fairer than the present system where the wealthy can presumably avoid their obligations with clever accounting tricks. Over the years the idea has been promoted by such public figures as presidential aspirant Steve Forbes and one-time California Governor Jerry Brown.

Arguments against the flat tax come from representatives of all classes. Those who claim to speak for the poor maintain that the anticipated flat tax rate, generally estimated to be no more than 15-20%, will put money in the pockets of the rich by lowering the top brackets in which they currently reside. Members of the upper end of the income scale vehemently denounce the flat tax, contending that the loss of legitimate deductions and credits will penalize them, resulting in their bearing an even greater share of the nation’s tax load. And of course many in the great middle class are equally hostile to the idea, fearing that the loss of such benefits as family exemptions and mortgage interest deductions will work to their ultimate disadvantage. For every enthusiastic supporter of the flat tax you can find an equally vocal opponent.

It cannot be denied that the world of taxation is hostile, and the government’s appetite for the citizens’ dollars is insatiable. It’s likely that whatever flat tax compromise might ever be reached, the bureaucrats’ take will be at least what it currently is—and quite possibly larger. This is because there’s no way to tell what laws will eventually come to pass after the political infighting ends. The lobbying activities will be intense while the charges and countercharges hurled will exceed anything in recent memory. Without a doubt, one thing can be counted upon: Fairness will not be a major consideration in whatever legislation is finally enacted.Perhaps a final comment is in order. Most taxpayers resent having their money taken, so the politicians must regularly genuflect to the concept of tax relief, and an endless variety of proposals are periodically floated to convince the citizens that their best interests are uppermost in the minds of their leaders. The flat tax is but one such contrivance.

A concluding thought:
Although I entertain some preconceived biases on this matter, I recognize that there are valid arguments both pro and con. For those of you with strong opinions on this subject, I’d be pleased if you’d share them with us.

There’s no end to the investment opportunities paraded before the buying public, with coins among the more popular in recent years.  If the offerings have one thing in common, it is high price markup.  Some months ago I reported on a firm selling 5-cent pieces for about 22 cents each.  The 440 percent markup caused me to choke a bit.  However, a newspaper advertisement just appeared that suggests the nickel peddler was a piker. 

The headline reads: “U.S. Government to Abolish the Lincoln Penny . . . FOREVER?”  The ad goes on to say “The First Federal Mint announces the limited release to the public bags of old vintage ‘Wheat Back’ Lincoln Cents.  These have not been minted for over 45 years.  You can acquire them in half-pound bags.”  Though it took a bit of analyzing, plus a telephone inquiry to First Federal, I discovered that 61 pennies, in circulation these past many decades, can be purchased for $26.90.  This represents a price markup of 4,410 percent, justified by their claim that “Most [the coins] have long disappeared . . . They’re sure to make a treasured gift or legacy.”

It didn’t take much investigation to discover that the “Wheat Back” bronze pennies, minted from 1909 through 1958, were produced in quantities up to 30 million per day.  With some of these still included among the more than 130 billion pennies currently in circulation, they’re yours for the plucking at a penny apiece—a zero percent markup.  Admittedly, some of them, such as 28 million issued in 1909 and displaying the initials of the designer, Victor D. Brenner, retail at $10 apiece uncirculated—but don’t expect to find any of these included in the bag.  What you will find are coins from the late 1930s through the final year of issue in 1958.  One prominent coin dealer, American Rare Coin and Collectibles, LLC, of St. Paul, Minnesota, lists their value: “The common date ‘wheat cents’ circulated from the late 1930’s up to 1958 are worth 2 cents per coin.  The Lincoln cents dated 1929 and earlier generally trade in the $0.05-$1.00 range, based on date, mintmark, and condition.”

A concluding thought:
There is a rule of thumb I’d like to pass on to you.  If a vendor must issue an 8-page color brochure or full page newspaper advertisement describing how wonderful its investment offering is, you may reject it out of hand.