Market Conditions: In March, Chicago Sales Fell YOY for the 8th Month in a Row
The Illinois Association of Realtors is out with the March home sales.
As expected, it was another year-over-year weak month. It was the 8th month in a row that home sales fell compared with the prior year.
And this was despite falling mortgage rates.
The city of Chicago saw year-over-year home sales decrease 13.6 percent with 2,025 sales in March, compared to 2,343 a year ago. The median price of a home in the city of Chicago in March was $291,450 down 6.1 percent compared to March 2018 when it was $310,500.
Historic data courtesy of G:
City of Chicago condo/TH/SFH closed totals March
year/closed/median/% REO-Short Sales
Year Closed Median %REO/SS
1997 1,226 $126,875
1998 1,540 $137,003
1999 1,766 $152,125
2000 1,793 $167,500
2001 1,800 $195,000
2002 2,112 $210,000
2003 2,261 $225,000
2004 2,772 $244,950
2005 2,822 $271,125
2006 3,000 $275,862
2007 2,399 $285,000
2008 2,098 $300,000
2009 1,219 $217,000 37%
2010 1,860 $207,750 38%
2011 1,481 $163,763 49%
2012 1,630 $170,500 44%
2013 1,894 $187,500
2014 1,875 $235,000
2015 2,173 $260,000
2016 2,149 $269,000
2017 2,546 $295,000
2018 2343 $310,500
2019 2025 $291,450
Was the Mayor’s race to blame?
“The data is reflective of a spring where buyers are being deliberate in their spending,” said Tommy Choi, president of the Chicago Association of REALTORS® and broker at Keller Williams Chicago – Lincoln Park. “With political uncertainty heading into the April run-off and new tax rules coming into play, buyers held back to see how it all shook out. As the spring selling season ramps up, we’ll start to see more activity again, although at a more measured pace reflective of the current consumer climate.”
Higher mortgage rates can’t be blamed like they were last fall when sales abruptly slowed as rates have actually been falling.
30-year fixed mortgage rates fell to 4.27% from 4.37% in February and were down from March 2018, when they averaged 4.44%.
“There are several things to consider when looking at the March data, not the least of which is that the time it took to sell a home once again decreased, indicating continued interest in homebuying,” said Ed Neaves, president-elect of Illinois REALTORS® and managing broker of Berkshire Hathaway HomeServices Snyder Real Estate in Bloomington. “While statewide we saw positive median price growth last month, the upcoming spring sales season will test the extent of whether available housing inventory continues to drive market dynamics as it has for the past few years.”
Statewide, the average days on the market fell to 63 days from 65 days a year ago. It was 68 days in February.
Inventory declined 2.5% to 49,875 from 51,137 a year ago.
After 8 months of bad year over year comparisons on sales, can we still blame low inventory for the lackluster sales?
Or is it something else?
Illinois median home prices inched higher in March; sales and inventory slip[Illinois Association of Realtors, Press Release, April 23, 2019]
they sure do come up with some strange excuses, never see taxes or prices being too high as one of them
I know I sound like a broken record but with short market times and low inventory it doesn’t sound like a demand problem to me.
What does the Realtors association not get about this: when property taxes are rising 5-10% a year, and with salt deduction limits now in place (a great thing btw, renters shouldn’t be subsidizing your high property taxes or mortgages), there isn’t nearly as much of an incentive to buy as to rent. Whatever amount the monthly mortgage payment went down due to lower rates and and lower home prices, increased property taxes and salt limits lifted it back up. So the monthly nut is the same.
Not sure if there’s an answer to this, but would now be a bad time to buy a Lakeview condo? Would it be like buying one in 2006? Prices have come so far over the last few years, and I’m worried about buying at the top.
a great thing btw, renters shouldn’t be subsidizing your high property taxes or mortgages
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Uh, those costs are factored into the setting of your rent?
“Would it be like buying one in 2006? Prices have come so far over the last few years, and I’m worried about buying at the top.”
This is not 2006. The market is completely different. There were thousands of condos being built. People were buying them pre-construction and flipping them without even moving in for a higher price 2 years later.
You didn’t have to put any money down to get a mortgage. In some cases, you didn’t even need a job to get a mortgage.
Housing prices usually mirror the economy. When it’s good, they go up. When it’s not, they don’t.
“prices being too high as one of them”
If prices were too high, the laws of economics would eventually kick in. You’d have prices start to go down (as they are now doing in places like Southern California.)
It’s not just the SALT limit that’s hurting housing. The much higher standard deduction also means that mortgage interest is effectively not deductible for many people because they don’t pay enough interest to make itemizing worth it anymore. Obviously less of a thing in high cost areas like the GZ.
“The much higher standard deduction also means that mortgage interest is effectively not deductible for many people because they don’t pay enough interest to make itemizing worth it anymore.”
This happened to us this year. The standard $24k marriage deduction and $4k child deduction exceeded our mortgage interest and tax deductions.
“Uh, those costs are factored into the setting of your rent?“
Landlords like to think they can always pass on increased costs (property taxes, assessments), however, in practice that is not always the case.
Thanks, Sabrina. Good perspective.
Regarding higher property taxes…
The one thing I can tell you for sure is that it will depress the values of investment properties. Target cap rates will not change. And supply and demand determine rents. So the only thing that should logically respond is investment property prices.
Gary posted “… So the only thing that should logically respond is investment property prices.”
I believe virtually all existing net leased commercial properties transfer tax cost to tenants for term of their leases, which can be as long as 75 yrs using Walgreen’s leases as an example.
But I agree higher property taxes negatively impact values of new developments. Tenant demand will be negatively impacted by this extra cost. More importantly imo higher property taxes definitely will depress value of land purchased for new developments.
“The one thing I can tell you for sure is that it will depress the values of investment properties. Target cap rates will not change. And supply and demand determine rents. So the only thing that should logically respond is investment property prices.”
Exactly. That’s why I’m unloading one of my properties. Property taxes have outpaced rent increases. The numbers don’t work anymore.
“virtually all existing net leased commercial properties”
Gary was only referring to residential.
“The standard $24k marriage deduction and $4k child deduction exceeded our mortgage interest and tax deductions.”
The $24k standard deduction for married couples is separate from the $2k per child tax credit. You were likely phased out of the previous smaller child tax credit because you earned too much but now there is a much higher cap.
I too lost my mortgage interest deduction because the standard deduction was doubled. My SALT taxes exceeded $10,000 but not by too much, fortunately my taxes are ‘low’ compared to other people because I bought a smaller house to live well within my means.
The tax bill was awesome for me. I paid roughly $10,000 less in federal taxes in 2018 than 2017 with about the same income. Three kids = $6,000 credit, plus lower tax rates and 20% deduction for pass through income was great. I was actually shocked to get a huge refund after paying estimated taxes at 110% based on 2017 taxes and I got a comparatively large refund.
For a full year I read everywhere how screwed I was going to be under the new tax law, and the NYT calculator said I’d be lucky if my tax bill increased by only $2,000. Ha! Just goes to show how much nonsense is out there these days.
“Just goes to show how much nonsense is out there these days.”
Everyone isn’t you homedelete. Some of us paid more. Much more. And many people that used to get a refund, didn’t.
And yes, people use their refunds to pay for vacations and things like new patio furniture. They don’t care that they were loaning it to the government.
“My SALT taxes exceeded $10,000 but not by too much”
C’mon, those Long Grove taxes have to be at least $7k, even if you downgraded to a double-wide. At 4.95%, you implying your IL taxable income was around $100k?
Our tax bill went up, by quite a bit. It is what it is–the R’s specific intent was to fuck over people like my family. They already weren’t getting our voted based on social policy, now there isn’t an economic incentive for us to vote R, either.
mine went down rate wise but I made less money so its hard to tell.
Looking forward to this coming year though…
@HOMEDELETE – – if you were able to benefit from the new Section 199A then likely your situation is out of scope of most online tax calculators.
The Cat:
The §199A is only part of my household income, the other part is wages and some investment income.
anon(tfo): Your estimate of IL household income is quite a bit off. I’m not trying to be obtuse, I have my IL tax return in front of me now, my line 11 is not the figure you estimated.
I’m just saying, yeah, the tax bill made some people with big mortgages and high state tax bills pay more taxes. so what. It only affects “rich” people. I could care less. For the vast majority of america not paying $800,000 for a 2/2 in a high property tax area, the tax bill was great for us. Which is great, I don’t need to subsidize anyone’s McMansion.
“The §199A is only part of my household income, the other part is wages and some investment income.
anon(tfo): Your estimate of IL household income is quite a bit off. I’m not trying to be obtuse, I have my IL tax return in front of me now, my line 11 is not the figure you estimated.
I’m just saying, yeah, the tax bill made some people with big mortgages and high state tax bills pay more taxes. so what. It only affects “rich” people. I could care less. For the vast majority of america not paying $800,000 for a 2/2 in a high property tax area, the tax bill was great for us. Which is great, I don’t need to subsidize anyone’s McMansion.”
Could not further from truth. Not rich. Cannot afford $800k property. Taxes went up this year. Tax bill is scam to benefit the 1% and corporations.
“I’m just saying, yeah, the tax bill made some people with big mortgages and high state tax bills pay more taxes. so what. It only affects “rich” people.”
Is the upper middle class now “rich”? That’s a new one on me. Of course there’s a big range for the upper middle class. There’s those making $130,000 a year with no kids versus those making $300,000 a year with 2 kids.
If they live in a big metro area, neither one is “rich.”
That’s who got hit the hardest by the tax changes.
“Your estimate of IL household income is quite a bit off.”
It’s based on this:
“My SALT taxes exceeded $10,000 but not by too much”
And a guess that your property tax bill is around $7k. “not bay too much”, to me, is something like $12-13k, which means state tax bill of about $5k-6k, which implies a taxable income of about $100k.
“Tax bill is scam to benefit the 1% and corporations.”
Delusional. I just gave you an example of how I saved $10,000 in federal taxes. That’s quite a bit! I’m not a corporation OR the 1%. And I saved a ton in taxes.
I’m not sure why you’re complaining about paying more taxes, unless you’re the type of guy who only wants to tax those that are ‘richer’ than you.
“Is the upper middle class now “rich”? That’s a new one on me. Of course there’s a big range for the upper middle class. There’s those making $130,000 a year with no kids versus those making $300,000 a year with 2 kids. If they live in a big metro area, neither one is “rich.” ”
Yeah, the upper middle class is ‘rich’ according to everyone not in the upper middle class. No one in flyover counties, or in poorer urban areas, really cares that the cost of living is higher in Chicago and earning $200,000 a year doesn’t buy a condo in Soho.
Anon, i’m not going argue semantics whether $12,000 or $13,000 or $16,100 is “not too much” when the standard deduction is $24,000. It’s significantly less. And my mortgage interest is under $10,000, so $10,000 SALT plus $10,000 mortgage interest is only $20,000, and less than the $24,000 standard deduction. I didn’t have much else to itemize this year. Despite what the news media reports, and your own personal experience of other north siders in the top 5% of income in all of Illinois, the tax bill has been great for a lot of people around the great, including people like myself. A family with a normal mortgage and a couple of kids did really well under the tax bill.
Keep in mind the median household income in IL is something like $62,000 a year. The 80%th percentile is $117,000. 4 out of 5 households in IL earn less than $117,000. The top 5% is $217,000. So cribchatter households with $225,000 incomes – which is not uncommon for many of us on cribchatter, your household earns more than 94 out of 100 households in IL. But according to Sabrina, living in a metro area like Chicago with a $300,000 household income and two kids is not ‘rich’. Except that the 95%-98% of people in the state earning less than $300,000 look up at this household and say “yeah, you’re rich”. Jabba the Hutt thinks that $250,000 is the cut off for rich people and he’s probably right.
Meanwhile, I just posted my April update: http://www.chicagonow.com/getting-real/2019/05/chicago-real-estate-market-update-lowest-home-sales-drop-in-6-months/
I think it’s further evidence that the market is OK. Sales dropped just a little this time, though I think we’ll see a bigger drop in May since March contracts were way off and that hasn’t worked its way through the system yet.
One caveat, the condo market has significantly diverged from the single family market.
both hd and sabrina are right
but I think that slamming upper middle class families (250k HHI is such an arbitrary number and IMO for Chicago metro, not really “rich”) with more taxes isn’t the solution to the state’s woes
“Despite what the news media reports, and your own personal experience of other north siders in the top 5% of income in all of Illinois”
As I noted, the tax bill was specifically designed to screw people like me. And, as I noted, it is what it is. Doesn’t mean that I have to like it, at all, nor that I should shut up about it.
The current Republican party likes to pick winners and losers. They are crony capitalists on the same level as the extended Daley clan. It’s just as despicable either way, but at least the corrupt Chicago Way doesn’t try to cloak in in “free market” BS, playing on the stupidity of the masses, who are happy to gets a few crumbs.
“As I noted, the tax bill was specifically designed to screw people like me. And, as I noted, it is what it is. Doesn’t mean that I have to like it, at all, nor that I should shut up about it.”
they are never going to get your vote so “screw you”, is basically what it is… nobody is going to feel sorry for you either… its actually brilliant politically if you think about it
“Jabba the Hutt thinks that $250,000 is the cut off for rich people and he’s probably right.”
Measuring “rich” based on current income from *work* is facile, and plays into the hands of the new aristocracy. The Democratic Party has allowed the Rs to define the game, and the winners are the actual rich who are getting off basically scot (original meaning) free.
“brilliant politically”
It’s disgusting whoever does it.
It’s factional governance, and anti-American.
“Measuring “rich” based on current income from *work* is facile, and plays into the hands of the new aristocracy. The Democratic Party has allowed the Rs to define the game, and the winners are the actual rich who are getting off basically scot (original meaning) free.”
well at least you understand whats going on unlike the average joe
“As I noted, the tax bill was specifically designed to screw people like me.”
How are you getting ‘screwed’? Because your high SALT taxes are capped? Weren’t the low SALT tax states getting ‘screwed’ by subsidizing your high tax life style?
“Measuring “rich” based on current income from *work* is facile, and plays into the hands of the new aristocracy. The Democratic Party has allowed the Rs to define the game, and the winners are the actual rich who are getting off basically scot (original meaning) free.”
It’s not just ‘work’ it’s all income (other than pension income which is exempt, for the benefit of the unionized class). And it’s a good proxy. There aren’t many ‘rich’ people with zero income! Even their investments/retirement account withdrawals get taxed! Perfect, no. it’s a good start though.
And in case you haven’t noticed, the ‘aristocracy’ these days is increasingly voting Democratic, and going more and more progressive too. The days of the rich republican banker are over, they’re all democrats now. The corporate class is liberal. it’s the working class that is conservative.
“(250k HHI is such an arbitrary number and IMO for Chicago metro, not really “rich”)”
$250k is well into the top 4% of all incomes in Illinois. It’s the richest people in the state. Sure, a lot of them voluntarily choose to live on the north side of Chicago and pay $1,000,000 for their single family home but that’s their choice. They could just as easily live in a bungalow in Berwyn but choose not to.
The $250k cap is a trojan horse when in 4 years the higher progressive tax rate is lowered to $200k, then $150k, then $100k, and pretty soon everyone in the state with more than $50,000 in income is paying 8% state tax or higher. And everyone knows this too. That’s why Zorn is writing columns saying that its NOT a trojan horse (yeah right!!)
“the low SALT tax states”
You mean, all the states at the top of the Federal Handout list??
It’s double taxation. I thought Rs were against taxing income twice?
“$250k is well into the top 4% of all incomes in Illinois.”
Take out all the HH w/o income from wages for FTE work. It’s prob more like top 15%, but, so long as we are measuring solely on income, the top 15% of a high income state, in the richest country on the planet, prob still qualifies as “rich”. But that’s neither here nor there–it’s still a stoopid way of looking at it.
“other than pension income which is exempt”
Not talking about Illinois taxes here.
jeez anon I can taste the salt in your posts
bet you’re anxious for your new tax bill in July too, right? 🙂
“new tax bill in July”
I’m thinking ours will be +10% to +12%, plus whatever the increase in the aggregate levy.
I don’t like government picking winners and losers even if I’m winning. I do get salty when I’m losing, tho.
HD is clearly fine with it, so long as he’s winning.
anon(tfo), I too can taste the salt in your posts. But realistically, the Federal Handout list is a total myth. The ‘handouts’ include things like military bases, national parks, farm subsidies and retirees benefits (like medicare and social security). Using these figures, sure, Red states get more federal money. But that’s missing the real significance of the data.
If anon you too should be thinking about leaving the state. I’ve already made my plans. Sure they’re a decade out! But I’ve already started planning. I’m not retiring here, I can tell you that for sure.
“I’m not retiring here, I can tell you that for sure.”
You’re not alone. How many are retiring in Iowa, Wisconsin, Minnesota, Illinois, Indiana, Michigan?
This is why the sunbelt cities are the fastest growing. Has been true for 30 years. This is why Lou Malnati’s has opened in Phoenix and the Cubs spend the spring there.
So much changes when you age though. You might want to move far away from your children/grandchildren. Your health could be poor and it makes no sense to move to Florida or Arizona.
Or maybe you will leave when you’re 65 and then when you’re 75 or 80, it becomes a burden to be that far from family.
I have a friend whose grandmother retired to Hawaii at 65. At 85 she had to come back. It was getting too much of a burden to fly that length of time to visit children and grandchildren. She came back to Illinois (god bless her.)
“The $250k cap is a trojan horse when in 4 years the higher progressive tax rate is lowered to $200k, then $150k, then $100k, and pretty soon everyone in the state with more than $50,000 in income is paying 8% state tax or higher.”
Stop it with the “scare” tactics about progressive tax rates. My god.
34 states have progressive rates.
California has had progressive taxes for forever. The top bracket pays the highest. It’s 13%. Good times. But even those in the upper middle class, like lawyers and doctors, are paying around 11%.
It has never hurt California’s ability to keep people. It’s still the American dream there.
But maybe you can move to Iowa, which will actually have a higher upper bracket rate than Illinois.
“There aren’t many ‘rich’ people with zero income!”
The truly rich aren’t concerned about “income.” It’s assets. As we see with Bezos, Zuckerberg etc. Heck, they can get paid $1 and it won’t matter.
Taxing people on income is a dumb way to do taxing. It should be on assets. That way someone like Mitt Romney doesn’t pay just 14% tax rate.
“they are never going to get your vote so “screw you”, is basically what it is… nobody is going to feel sorry for you either… its actually brilliant politically if you think about it”
This.
Only the vaunted “corporate tax cuts” are actually cutting the other way. Those haven’t “worked” to appease the base. Letting the billionaires get even richer is a really hard sell as your healthcare costs continue to rise and you’re still waiting for Trump to propose the “better” healthcare plan he promised.
Thanks Gary. It looks only “okay” but this is the spring market and you’d think things would be a bit hotter.
I can’t tell if it’s the high prices, lack of the “correct” product (buyers want more townhouses, for instance) or if they’re all just content to rent (as apartment vacancies still remain low.)
“But according to Sabrina, living in a metro area like Chicago with a $300,000 household income and two kids is not ‘rich’.”
Nope. Not rich. This is upper middle class. You still have a mortgage. Not even flying first class at this salary level. No Tiffany jewels. Probably no multiple houses. No “staff” to assist, although you may have a cleaning firm or a gardening firm. Not the same thing as the truly rich which has all of these things.
Wealth is concentrated in the major metropolitan areas now. Isn’t this what the 2016 election was all about? The “rural” areas wanted to get theirs too? That they were being left out? That no one was talking to them?
In the last 3 years, it’s gotten worse. Wealth is more concentrated than ever. Where are the jobs going? Amazon is opening in downtown Nashville and just across the river from DC. McDonald’s, Google, Facebook (in its largest office outside of the Bay Area) and Salesforce are all in downtown Chicago now. They’re not only not in the suburbs, they’re certainly not in DeKalb or Springfield. So there’s less wealth there.
There’s a reason ADM moved from Decatur, right?
The corporate tax cuts have only made it worse. More wealth to the corporate headquarters, many of which are in big cities or their surrounding areas.
Amazon is paying, on average, $100,000 for those new Nashville jobs. You think that’s not going to completely screw up the Nashville housing market with 5,000 really high earners?
$300,000 incomes are totally normal in all of America’s big cities now. This is why home prices have soared there.
“Taxing people on income is a dumb way to do taxing. It should be on assets. That way someone like Mitt Romney doesn’t pay just 14% tax rate.”
Agree that taxing income is dumb but taxing assets is even dumber. Why would you tax something you want more of? We should be taxing stuff we want less of. I say that’s consumption. The income tax should be replaced by a sales tax – essentially a VAT tax (23%) like in Europe – and everyone thinks Europe does everything right but I digress. You could exempt food, reasonable housing costs, and medical expenses. But this is simpler than an income tax and the inherited wealth spent by unproductive heirs gets taxed as they squander it. There is no escaping a sales tax.
Try taxing assets and people will be hiding/ moving assets left and right too.
” But realistically, the Federal Handout list is a total myth. The ‘handouts’ include things like military bases, national parks, farm subsidies and retirees benefits (like medicare and social security). Using these figures, sure, Red states get more federal money. But that’s missing the real significance of the data.”
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Well, military base location is very much a function of political clout, so that counts as a handout. Farm subsidies are a handout too, as is food stamps, which is why the two were paired in appropriations until very recently. National Parks are neutral — you have to go where the nature is. Medicare and social security is a function of where people want to live, so one can’t complain about that.
Military bases, though, thems government hand outs big time.
“inherited wealth”
The thing that absolutely stunned me when I first came across it was the step up in cost basis at death. Is there any reason for that at all?
“It has never hurt California’s ability to keep people. It’s still the American dream there. ”
Sabrina, I’ve been coming here to CC a long time. You referred to your days in SF as something in the distant past even back then. But Cali has changed a lot and it’s not the same Cali it was. It’s not the American Dream – it’s a third world country with fabulous wealth and grinding poverty. California has the highest poverty rate in the union – in raw numbers of people AND as a percentage of the population. It has a higher poverty rate than the deep south. But it also has the billionaires too. It looks more like unequal Brazil than it does egalitarian Peoria.
Sabrina, $300k a year is ‘rich’ to everyone earning below $300k a year. In IL a $300k household puts you in the top 5% of all income earners, probably likely the top 2%. Of course the top 1%, and even the .1% has the most money (Ken Griffin etc) but then make the progressive tax the billion’s tax. Jabba the Hutt shouldn’t choose $250k to jack up rates, make it the billionaire’s tax and tax it at 20%. A $300k a year household could save $100k a year before and after tax and be millionaires in less than a decade, and multimillionaires by retirement. Is that rich?
“Military bases, though, thems government hand outs big time.”
I wouldn’t call military bases government handouts. I call it the price of freedom.
“This is why … the Cubs spend the spring [in PHX].”
No, that’s not why.
“$300k a year is ‘rich’ to everyone earning below $300k a year.”
GTFOOH. It’s “rich” to people making under something between $50k and $100k (I’d say ~$60k). No one who makes $250k thinks “If I just made another $50k, I’d be rich”.
“If anon you too should be thinking about leaving the state. I’ve already made my plans. Sure they’re a decade out! But I’ve already started planning. I’m not retiring here, I can tell you that for sure.”
what are you waiting for! Life is too short! I’ll be pumping Reno like bizzaro-hd after he bought his house, since I’m under contract to buy a home there now
nah just kidding, stay the fuck outta here!
“The thing that absolutely stunned me when I first came across it was the step up in cost basis at death. Is there any reason for that at all?”
From the IRS’s perspective, they dislike the stepped up cost basis upon death. It’s literally tax free money to the person who inherits it. NO one should escape a tax.
On the other hand, it’s a great public policy decision to step up the cost basis. Otherwise you’d be forcing children and families of the deceased to sell their parent’s assets as quickly as possible – often at fire sale prices – just to satisfy the IRS tax deadlines on the ‘payable at death cost basis tax’.
Here’s an example. Adult children A & B inherit their parent’s summer home on Green Lake. IRS says the deceased’s estate owes 20% tax on the house because the deceased bought it in the 1970’s for a song and it’s worth $500,000 today. Family must sell the family summer home just to pay IRS tax bill.
“GTFOOH. It’s “rich” to people making under something between $50k and $100k (I’d say ~$60k). No one who makes $250k thinks “If I just made another $50k, I’d be rich”.”
You’re right, because a well grounded in reality household making north of $200,000, like my own, already knows it is ‘rich’ compared to the rest of the state.
I think people are confusing ‘rich’ with ‘fabulously wealthy 1%er’s’.
Sometimes I think people tend to forget that most people live paycheck to paycheck, on the median wage, with credit card and mortgage debt and a car payment or two. I have family members who think I’m ‘rich’ and they find it deeply concerning, and offensive, when I try to tell them I’m not. All they see is the new cars, the remodeled house in an upper middle class neighborhood, the vacations, the fridge full of good food, and so on. I am ‘rich’. I am not a fabulously wealthy 1%er.
“I wouldn’t call military bases government handouts. I call it the price of freedom.”
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Ever stop to wonder why the economic benefits of “the price of freedom” goes predominantly to Southern states with powerful congressmen well versed in pork barrel politics?
Like I said, thems gummint handouts.
“From the IRS’s perspective, they dislike the stepped up cost basis upon death. It’s literally tax free money to the person who inherits it. NO one should escape a tax.
On the other hand, it’s a great public policy decision to step up the cost basis. Otherwise you’d be forcing children and families of the deceased to sell their parent’s assets as quickly as possible – often at fire sale prices – just to satisfy the IRS tax deadlines on the ‘payable at death cost basis tax’. ”
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Keep in mind that finding out the original price, and basis adjustments, could well be physically impossible for the heirs. Hence the stepped up basis is a means of keeping the people reasonably mollified when dealing with the IRS.
AND, remember — to make up for the lost revenue for stepped up basis, the estate tax historically was extremely progressive. The big print gaveth, and the small print tooketh away.
$250k is well into the top 4% of all incomes in Illinois. It’s the richest people in the state. Sure, a lot of them voluntarily choose to live on the north side of Chicago and pay $1,000,000 for their single family home but that’s their choice. They could just as easily live in a bungalow in Berwyn but choose not to.”
Great comment.
“The $250k cap is a trojan horse when in 4 years the higher progressive tax rate is lowered to $200k, then $150k, then $100k, and pretty soon everyone in the state with more than $50,000 in income is paying 8% state tax or higher. And everyone knows this too. That’s why Zorn is writing columns saying that its NOT a trojan horse (yeah right!!)”
How about this gem from Gov. Pat Quinn in 2011: “The tax increase will take Illinois’ 3-percent flat-rate income tax up to 5 percent for four years, then drop back to 3.75 percent. Taxes are never going back down, only up.
The Tribune has some of the worst Leftist globohomo writers in America. Rex Huppke Chapman, Zorn et al, are unhinged and you can taste the POZ in all their articles. How about that doozy racist Dahleen Glanton? The Trib was bought by Sam Zell to destroy it and turn it into a Leftist rag barely better than Buzzfeed and the rest of the fake news. Zell bankrupted the paper and the employees ESOP.
“In IL a $300k household puts you in the top 5% of all income earners, probably likely the top 2%.”
95th percentile is $217.5k; 99th about $450k. The mean of the top 5% is $375k; I’d think that implies that $300k is about 97th.
“A $300k a year household could save $100k a year before and after tax”
Assume two earners, and using only above the line vehicles available to most wage earners (ie, no deferred comp plans, no p-ship/solo 401k, no catch-up contributions), you get 2x$19k for 401k + $7k HSA = $45k above the line, leaving $55k after tax.
$300k – $45k – $24k (std deduct) = ~$230k in AGI. Ignoring any other complications, that’s ~$50k in fed + IL tax, leaving $180k. Yeah, saving 1/3 of that is completely doable. Still leaves ~$10k/month for everything, and if you can’t live reasonably comfortably on that, in the Chicago metro, you’re doing it wrong.
HD, being upper middle class is the worst place to be.
The vast majority of the population thinks you are rich, but you aren’t really rich….as a result you are political fodder. You don’t make enough to have any real political influence and no one who makes less than you is going to feel sorry for you.
The reality though is that people making say $200-$400k have way more in common with that $100k household than they do with the people making seven figures. The 1% has more in common with the 99%… The real “wealth” is in the .01% of the 1%.
A household income of $400k or so puts you in the 1% but no one believes that household has anything in common with Ken Griffin. Your are the “working rich” and a down year, lay off, or divorce could see you broke. Making that kind of money means you can fund your retirement, maybe splurge a little on a vacation or afford private school. A broken furnace or car repair isn’t a major financial burden. However, you are not popping bottles, driving Bentleys, and doing all the other extreme stuff the lower classes think of when someone say “rich”
But what politicians will do is show pictures of Ken Griffin and then write policy affecting people making $250k. It is like assuming every person who is 6 foot 3 or so has a shot at the NBA….
I sometimes go to a NYC oriented message board. People there making $1 million or more complain about being middle class… by the time they pay for two kids in private school, weekend home, 2 or 3 bedroom condo, day camps, etc they feel “broke.”
It is all relative.
“being upper middle class is the worst place to be.”
That is such a UMC/Todd Henderson thing to say.
“by the time they pay for two kids in private school, weekend home, 2 or 3 bedroom condo”
It’s a luxury consumption choice to live in Manhattan.
They move to Scarsdale, or Creskill, or wherever tf and they have plenty of money to feel better than MC, having a bigger home for far less $$, and saving $100k/year on the kids school-plus costs.
@Anon, I don’t disagree. I say move out of NYC altogether to lower cost city but many think NYC is center of the universe. They think “fly over” is provincial, uncultured, etc. It is quite funny to see some of the posts.
You can live a lot better on $500k in Chicago than $1.5 million in NYC.
It is all relative… If someone makes $10 million and their social circle are people making $50 million, they probably feel broke too.
“If someone makes $10 million and their social circle are people making $50 million, they probably feel broke too”
Only if they are trying to keep up.
But, even if not really trying to keep up, they’d feel MC, as they have to (fly commercial; rent in Hamptons; only invited to Aspen and not Davos), and they’re 100% devoid of real context.
“Only if they are trying to keep up.”
But isn’t that always the case? No matter the income. People conform to the social norms of their circle. How many BigLaw partners are going to live in Berwyn when they can afford Wilmette? Or how many finance bro’s are going to move to Bronzeville when they can live in River North?
Very few people are willing to significantly downgrade their lifestyle out of the norm of their income bracket expectations. Most people don’t have that discipline…
“Ever stop to wonder why the economic benefits of “the price of freedom” goes predominantly to Southern states with powerful congressmen well versed in pork barrel politics?
Like I said, thems gummint handouts.”
It’s the rural areas that produce our soliders and its the rural areas that get our bases.
Here is an interesting article in chicago biz about income distribution in IL:
https://www.chicagobusiness.com/government/heres-what-happened-after-illinois-income-tax-jumped-67
interesting take away, there were “3,618 Illinoisans reporting $1 million-plus incomes in 2014”. That’s not very many for a state of 12 million people. Yes, they have a lot of the money.
“more than 70 percent of Illinois tax filers reported annual income of less than $75,000 in 2016, and there were 300,000 fewer of them that year than in 2006.” This to me says “good bye middle class!”
from wiki: Newport News Shipbuilding (NNS), a division of Huntington Ingalls Industries, is the largest industrial employer in Virginia,
from the article:
That was unlikely to happen. Aircraft carriers have strong, entrenched constituencies in Congress, with senators and representatives from states and districts with shipyards, shipbuilding subcontractors, aircraft manufacturers, and naval bases all having a keen interest in keeping a strong carrier fleet
https://www.popularmechanics.com/military/navy-ships/a27334183/uss-truman-retire/
It’s a luxury consumption choice to live in Manhattan.
^^^
Agree.
know quite a few managing directors in Financial Services working in NYC.
I only know of one guy with two kids that lives in Manhattan. Everyone else lives in a borough Brooklyn Long Island even NJ. Don’t know anyone with three kids or more living in Manhattan.
“It’s the rural areas that produce our soliders and its the rural areas that get our bases.”
If you look at the list of bases, quite a few are in major urban areas like Houston, San Antonio and near Honolulu.
Obviously, San Diego is huge for the military.
So, no, the “rural” areas don’t get all the bases. Not even close.
Not rural.
“They think “fly over” is provincial, uncultured, etc.”
People on this very blog have commented in the past that there is no point to living in Chicago unless you are within walking distance/seeing distance of the lake. There is no reason to live in, say, Bucktown or Hinsdale.
Otherwise, all of the culture is on the coasts (according to some of the people who have posted on this blog in the past.)
And that’s just Chicago. Why, for goodness sakes, would you EVER move somewhere like Nashville or Austin? The horror.
“The Tribune has some of the worst Leftist globohomo writers in America. Rex Huppke Chapman, Zorn et al, are unhinged and you can taste the POZ in all their articles.”
Once again, confirmation that Helmethofer doesn’t live in Chicago. He has no clue.
The Tribune is conservative. It endorsed Daley for mayor, for goodness sakes.
“Here’s an example. Adult children A & B inherit their parent’s summer home on Green Lake. IRS says the deceased’s estate owes 20% tax on the house because the deceased bought it in the 1970’s for a song and it’s worth $500,000 today. Family must sell the family summer home just to pay IRS tax bill.”
No one would ever have this happen. Federal taxes don’t kick in at that low of a level. Almost no one pays an estate tax. If you’re the Bushes, you may have to pay on Kennebunkport now that George Senior and Babs have died (although that’s in a trust so they can probably avoid it for another generation).
The kids just get the house. $500,000 is too low to pay anything.
“But Cali has changed a lot and it’s not the same Cali it was. It’s not the American Dream – it’s a third world country with fabulous wealth and grinding poverty.”
Ba ha ha ha!
You’re right about one thing HD: it IS a country. And it has the 6th largest economy in the world.
Yes- it has gotten even richer since I left. I go back often. It’s still the American Dream and I’d move back again. The food, the culture, the architecture, the natural beauty, the ocean, the ambition. But you’d better make that $400,000 a year Apple salary to afford it, that’s for sure.
It’s fantastic. Every time a millennial asks me, “should I move there?” I always tell them yes. Sonies is right. Life is too short. Why do people wait for retirement to live their lives? The country is big.
Plenty of great jobs in California. Get one and move there. You can rent. Don’t have to own anything (probably better since a big quake is overdue.)
If you hate it or it doesn’t work out, just leave.
These decisions get more difficult if you have a family. But if you’re younger and starting out, just go for it.
“Jabba the Hutt shouldn’t choose $250k to jack up rates, make it the billionaire’s tax and tax it at 20%.”
Who is Jabba the Hutt? WTF.
Quit whining about the progressive tax HD. You don’t make enough to pay it.
Here’s the calculator.
http://www.chicagotribune.com/news/local/politics/ct-viz-graduated-income-tax-calculator-htmlstory.html
And for those who DO make that much, many other states are still higher.
In California, those making $125,000 were paying 10% and I didn’t know a single person who moved because of it. Not.A.One.
Again, it’s a big country. Plenty of places you can move to where it’s lower.
But the reality is, the jobs in those states suck. Let’s just call it what it is. Why are they building 10,000 luxury apartments in downtown Chicago? (with more to come)
Because the great jobs are here.
Sabrina
It’s less funny when it has to be explained
Pritzker is not a small guy. He is being referred to as Jabba
Pritzker has a proposal to progressively increase the income tax above 250k
https://www.chicagotribune.com/news/local/politics/ct-met-pritzker-graduated-rate-income-tax-bill-20190430-story.html
and on another topic; why is it that you never admit when you are wrong?
“It’s the rural areas that produce our soldiers and its the rural areas that get our bases.”
—————————
Ur funny Homedelete. Military service isn’t a commuting job, so rural has nothing to do with locating bases. Politics has everything to do with where bases are located. That why San Antonio has SIX Air Force bases.
But it’s a shorter trip to targets in Russia or China from, say, northern Michigan or Maine than it is from Texas (a southern state)
Sing and dance all you want, but military bases are located where they are located due to being handouts/rewards for political support of the Pentagon.
” IRS says the deceased’s estate owes 20% tax on the house because the deceased bought it in the 1970’s for a song and it’s worth $500,000 today. ”
You don’t owe tax on it until you sell it – unless, in rare cases, you actually owe an estate tax. However, the point about determining tax basis is a good one. My father-in-law made investments decades ago and it would be virtually impossible to figure out the tax basis.
hd: “…i’m not going argue semantics…[sic]” and “I think people are confusing ‘rich’ with ‘fabulously wealthy 1%er’s’.”
This word does not mean what you think it means. Arguing semantics (and missing the real point) is 95% of your shtick!
“It’s fantastic. Every time a millennial asks me, “should I move there?” I always tell them yes. Sonies is right. Life is too short. Why do people wait for retirement to live their lives? The country is big.
Plenty of great jobs in California. Get one and move there. You can rent. Don’t have to own anything (probably better since a big quake is overdue.)”
Waiting for retirement to “start living” is the dumbest thing ever… by the time you’re retired you’re way too old to do anything and everything hurts and you have no energy… why wait your whole life to finally move somewhere you enjoy? Seems dumb to me. Especially in the current economy where you often don’t have to be physically in a location and can work remotely anywhere.
As for California, it used to be the American middle class dream, now it resembles China or some other commie place with its insane income disparity… its a fucked up place and no way would I live there ever too many people in one place, too much traffic, crime, druggies, taxes, everything is expensive and a hassle, no thanks!
But yeah if you’re young and have some sort of tech degree, why not go try it out, you might hit it big with some start up, or you might get miserable and then you can leave and go somewhere else!
“$400,000 a year Apple salary to afford it,”
And that’s to afford a nice apartment within a reasonable commute of Infinite Loop. Can’t afford a house on that income.
“its a fucked up place and no way would I live there ever too many people in one place, too much traffic, crime, druggies, taxes, everything is expensive and a hassle, no thanks!”
I had no idea you were such an expert on California Sonies.
So you’ve spent a lot of time in Santa Cruz, Ojai, Santa Barbara, Monterrey, Laguna Beach, Sacramento, Tahoe, among others?
Who knew?
“My father-in-law made investments decades ago and it would be virtually impossible to figure out the tax basis.”
They will be the last generation this happens to, right? Since everyone else (boomers, GenX etc.) now have computer records of just about everything so it’s quite easy to figure out the basis now.
True to some extent. Anyone with investments more than 10 or 15 years ago might have trouble determining the tax basis. Not sure when the government started requiring brokerages to track it. However, if you move investments between brokerages or even between accounts at the same brokerage the links could be broken.
“So you’ve spent a lot of time in Santa Cruz, Ojai, Santa Barbara, Monterrey, Laguna Beach, Sacramento, Tahoe, among others?”
Laguna, Sac and Tahoe, yes
Great places to visit (except sac) but I wouldn’t live there… I have friends in san diego and LA and have visited them often and explored the surrounding areas a lot… traffic in socal is just unreal and a total burden, the bay area too. Its certainly one of the many reasons I got the hell out of Chicago, very similar QOL issues
“They will be the last generation this happens to, right? Since everyone else (boomers, GenX etc.) now have computer records of just about everything so it’s quite easy to figure out the basis now.”
——————————-
Nope. I received stocks as Christmas presents as child and the shares were set up with automatic dividend re-investment. I’ve held that stock for over 50 years and I’ve kept spreadsheet computer records of the dividend reinvestment going back 30 years. There’s still no way I could figure out my basis, and I’m a computer-using Boomer.
Like I said, that’s why estate taxes are/were steeply progressive. Stepped up basis keeps the heirs from tearing out their hair, and the progressive rates make up for the lost capital gains.
Not to mention it cuts down on the number of malefactors of great wealth.
the estate tax was incredibly easy to dodge if you were uber wealthy and mostly punished successful farmers more than anyone
“However, if you move investments between brokerages or even between accounts at the same brokerage the links could be broken.”
I have some employee stock from 15-20 years ago where my (now former) employer switched the brokerage managing the accounts a couple times and managed to lose the cost basis. Either I’ll spend a day trying to get to a reasonable basis estimate or give up and let the step up do it’s work. Also have another large chunk in a stock that is mostly cap gains at this point. May just hold that too even though it doesn’t seem entirely advisable.
“dividend reinvestment”
Yeah it’s the div reinvest that gives particular headaches for trying to reconstruct basis on my old employee stock holdings. Could probably do something reasonable in a few hours but it’s a pain.
I also stopped dividend reinvestment because I didn’t want to deal with basis. Instead I have to deal with trying to make sure I get and deposit 4 paper checks a year because the stupid brokerage won’t do any sort of direct deposit (and it’s a specialized account to just hold the employee stock purchases, so you can deposit in there). One time I realized I had forgotten about the dividends for two years and I wasn’t getting them because they didn’t have my current address. Finally got it sorted but that was about $10k.
yeah I only recommend dividend reinvestment for retirement accounts where basis and all that jazz doesn’t matter
“yeah I only recommend dividend reinvestment for retirement accounts where basis and all that jazz doesn’t matter”
or just hold it until you die, which is a good buy and hold strategy.
I think I’m also giving up on foreign holdings that require tracking tracking foreign source income/credit.
meh can’t take it with you when you die
Been to a LA Dodgers game lately? That is a great proxy for the decline of LA. Ghetto, beaner gang-bang. That’s the “culture” Sabrina is touting? Lol. Hancock Park is now all Koreans occupying those formerly all-American houses. Venice beach is overwhelmed with homeless. Pasadena still has an American vibe.
The perverts have overtaken the school curricula in CA and they’re teaching transgender and masterb to kids. Gavin Newsom is a Beto-like white-hating white freak sell-out. Nothing weirder and more satanic than a possessed anti-white white person. Nobody like them, they’re evil. It’s only fitting they are being rejected by people of color who hate them too. Like Deb Mell, the worse woman in the world deserved to be beaten by a Hispanic. The Hispanic will actually be less hateful to whites!
BTW, anyone who has hugely appreciated investments should set up a charitable trust. Most brokerages offer this. You never pay the capital gain on the contributions so the basis doesn’t matter and you get to deduct the market value of the contributed investment. Also, you can consolidate several years worth of future donations this way and actually exceed the standard deduction on your return.
Unless of course you never donate money.
“I have some employee stock from 15-20 years ago where my (now former) employer switched the brokerage managing the accounts a couple times and managed to lose the cost basis.”
Well- that’s a totally different story DZ. So sorry.
“the estate tax was incredibly easy to dodge if you were uber wealthy and mostly punished successful farmers more than anyone”
The estate tax only “punished” farmers in like, 1980. For the past 20+ years it’s been a non-event.
Most farmers are huge now. Not that many little ones. The little ones still don’t pay any taxes. Same with small businesses. People figured out the estate tax decades ago. Few pay it. Heck, look at the Cargill family. How do they manage to keep that company all in the family? It’s amazing what the lawyers can set up.
And yes- even the farmer’s lawyers.
Last year, only 80 farmers paid the estate tax. 80!
The argument about the poor farmers losing the farm is stupid. They will lose it because of the tariffs, not the estate tax (ironic.)
Nope. I received stocks as Christmas presents as child and the shares were set up with automatic dividend re-investment.
Again- you got them 50 years ago. That’s my point. How many people would have gotten stock in 1969? No one. Would have been super unusual (because the fees for the brokerage alone were super expensive.) Only the rich did that.
But since the last 1990s, with electronic trading accounts, everything is computerized, more or less. Some boomers would have had the old accounts, though. GenX shouldn’t really. They were too young to be buying stocks before the electronic accounts. Mutual funds were “in” in the 1990s. Would have been more likely to own those.
Buying individual stocks was rare before electronic accounts.
“Anyone with investments more than 10 or 15 years ago might have trouble determining the tax basis.”
Yes. The older investments. It’s a rare person that owns a stock for 20+ years. The average length of stock ownership is currently under 2 years.
“Been to a LA Dodgers game lately? That is a great proxy for the decline of LA.”
We know you haven’t helmethofer.
California is the American Dream. Always has been. Always will be.
The energy, drive and ambition there is incredible.
As much as I love Chicago, it can’t compete with that. But that’s okay. Chicago has other strengths.
“I think I’m also giving up on foreign holdings that require tracking tracking foreign source income/credit.”
Me too DZ. It sucks.
“Heck, look at the Cargill family. How do they manage to keep that company all in the family? It’s amazing what the lawyers can set up.”
I’d like to understand exactly how that works. I’ve never seen that written up. Usually there is some vague reference to a family foundation but then the family doesn’t really own the stock.
“The average length of stock ownership is currently under 2 years.”
As this accounts for the often seconds long holding of active traders it is, at best, misleading.
“then the family doesn’t really own the stock”
Which typically is a feature from the perspective of the generation that set up the foundation. Means that the profligate grandkids can’t ruin the company.
“The argument about the poor farmers losing the farm is stupid. They will lose it because of the tariffs, not the estate tax (ironic.)”
—————————–
Actually they lose it because the sibling who wants to run the farm cannot afford to buy the other siblings out. Nothing to do with estate taxes, which can be borrowed for and the loan paid back.
“Usually there is some vague reference to a family foundation but then the family doesn’t really own the stock”
——————————-
True, but the family is set up as the directors and officers, and get paid handsomely, so they still own for all practical purposes.
Individual tax free gifts in 2008 were, if memory serves, about $11,000 a year. So how did Mitt Romney give hundreds of thousands a year to each of his kids? Simple. Romney gave the cash to his family foundation, which had the kids as directors and officers. The foundation paid them generous salaries using the money daddy gave. No gift taxes.
Why is there no high quality aftermarket laser printer toner? I can pay $400 for a set of HP color toner or $50 to some no name on Amazon. Why isn’t there there an “Anker” type company that I can have confidence in and pay $100-200?
I find it amusing you can buy a printer for cheaper than the replacement ink cartridge costs… its a racket and needs to be busted up! Down with big ink!
“I can pay $400 for a set of HP color toner”
Well, this is kind of like, “why are these OEM replacement handmade V12 AMG engines so expensive?” If you are concerned about cost, ditch the HP and get a good Brother. I’ve put tens of thousands of pages through my B/W laser (which probably only cost $175 or something) and I’m only on my 4th or 5th replacement knockoff cartridge (Google the “tape trick”), which cost about $7 a piece.
HP’s whole printer financial model is around making money on replacement toner and making it hard to get around paying them. Other manufacturers, not as much. I’m not up on LED vs. laser and the technology/quality differences, but knockoff replacement set – all 4 cartridges – for a popular Brother color LED looks to set you back around $30. You can read the reviews yourself but most people seem to have great experiences with them.
“If you are concerned about cost, ditch the HP and get a good Brother.”
Entirely possible I screwed up my laser printer purchase decision. I had toner costs vaguely in mind but I think the HP was the only viable color laser all in one. I’d even get a new one (kinda wish I had duplex scanning) but not enough to go through all the set up again. I have scan to email working and who knows if I could do that again. So $400 in toner it is.
“HP was the only viable color laser all in one”
Only viable one I could buy from Costco, that is.
““why are these OEM replacement handmade V12 AMG engines so expensive?””
They’re nothing alike. What would be similar would be if there were AMG-branded gasoline, it was broadly available, it was $40.00 per gallon and was the only gas pumped thru pumps that fit the tank inlet on the AMG. You *could* get regular gas in a portable can, and siphon it into your AMG using a hose, but the car computer knows you’re using off-brand gas, and that voids your warranty.
AMG doesn’t build the cars with an expectation you will buy a new engine. HP absolutely builds their printers expecting to sell expensive toner.
And, of course, unless you print like a decent sized office and have an appropriately sized printer for that, you should just buy a new printer whenever anything aside from the toner needs to be replaced.
“ctually they lose it because the sibling who wants to run the farm cannot afford to buy the other siblings out. Nothing to do with estate taxes, which can be borrowed for and the loan paid back.”
Nah. Again, johnc, this is what was happening in 1980. It’s just not the reality in 2019. There’s estate planning now. The lawyers are really good! Quit living in the past.
And there are far more small, family owned businesses, than there are farms, that people should be more concerned about but, gasp, they aren’t “losing” the family business to the estate law either. Go figure.
“A this accounts for the often seconds long holding of active traders it is, at best, misleading.”
Nope. It accounts for them.
Online accounts and cheap (to no) fees have allowed people’s emotions to get the better of them. It’s simply too difficult for most people to hold long term anymore. And 20 years? My god. Never going to happen anymore.
“I’d like to understand exactly how that works. I’ve never seen that written up. Usually there is some vague reference to a family foundation but then the family doesn’t really own the stock.”
Various newspapers and BusinessWeek have covered the diverging interests in the Cargill family over the years. Because it’s quite massive now.
What about the Hallmark company? Isn’t that private too? I think so.
Same with Panda Express restaurant chain. Still owned by the family.
What about Forever21 stores? That’s family owned too.
We could go on and on. Some go public to pay off the family members who want nothing to do with it. But others have put together quite an extensive system.
Yeah, but exactly how does that system work? And I don’t buy the foundation salary explanation either. If you put $1 B into a foundation you’d have to pay family members like $80 MM/ year in salaries for it to be economically equivalent to owning the $1 B outright and that ain’t happening. And there is income tax on that so ultimately it gets taxed that way.
“Nope. It accounts for them.”
That’s what I wrote. There’s no “nope”.
That’s why the mean is so low. Using an extreme, but simple, example: If 90% are held, on average, for a day, how long are the other 10% being held to have an overall mean of 2 year? A: an average of 20 years.
“$80 MM/ year in salaries for it to be economically equivalent to owning the $1 B outright”
Where are these cash on cash yields of 8%, taking out capital gains?
Tape Trick? My Brother home office printer has an setting in options to continue printing even if it says replace toner. No need for tape. It will print until the sheets are so light you can barely read them and there are streaks of missing toner on the page.
Sabrina, your advice to move to CA to live the dream works well for college educated professionals. Go for it, live the privileged dream.
What about a middle class person, or god forbid, a poor person? Should they move to CA to live a life of at or near poverty level existence?
“About four in ten Californians are living in or near poverty.
Nearly one in five (18.9%) Californians were not in poverty but lived fairly close to the poverty line (up to one and a half times above it). All told, two-fifths (38.2%) of state residents were poor or near poor in 2016. But the share of Californians in families with less than half the resources needed to meet basic needs was 5.6%, a deep poverty rate that is smaller than official poverty statistics indicate.”
https://www.ppic.org/publication/poverty-in-california/
(Public Policy Institute of California)
A generation plans an exodus from California
https://www.ocregister.com/2018/09/08/a-generation-plans-an-exodus-from-california/
“Who’s leaving?
One of the perennial debates about migration, particularly in California, is the nature of the outmigration. The state’s boosters, and the administration itself, like to talk as if California is simply giving itself an enema — expelling its waste — while making itself an irresistible beacon to the “best and brightest.”
The reality, however, is more complicated than that. An analysis of IRS data from 2015-16, the latest available, shows that while roughly half those leaving the state made under $50,000 annually, half made above that. Roughly one in four made over $100,000 and another quarter earned a middle-class paycheck between $50,000 and $100,000. We also lose among the wealthiest segment, the people best able to withstand California’s costs, but by much smaller percentages.
The key issue for California, however, lies with the exodus of people around child-bearing years. The largest group leaving the state — some 28 percent — is 35 to 44, the prime ages for families. Another third come from those 26 to 34 and 45 to 54, also often the age of parents.”
“Here’s an example. Adult children A & B inherit their parent’s summer home on Green Lake. IRS says the deceased’s estate owes 20% tax on the house because the deceased bought it in the 1970’s for a song and it’s worth $500,000 today. Family must sell the family summer home just to pay IRS tax bill.”
The issue isn’t the sale – it’s the transfer of ownership. The deceased owner would have had to pay federal income tax if he sold it on his death bed minutes before he died. But if he dies before signing the deed to the buyers, it still transfers ownership to different people. For free too – and the government loses it’s cut of the income tax on the sale. This is not fair from the government’s perspective.
its the same people that deny there isn’t a problem in Illinois/Chicago because its only “poor blacks” moving out… well thats not totally true either
which is strange since the biggest supporters are liberals, but like usual there is a ton of hypocrisy with them
“Where are these cash on cash yields of 8%, taking out capital gains?”
Gary will be happy to tell you when you show up with your $1B.
“Where are these cash on cash yields of 8%, taking out capital gains?”
7 or 8% annual average stock market returns…so…yes.
“7 or 8% annual average stock market returns…so…yes.”
That’s mainly cap gains, that can’t be spent.
Yes, $80m likely to eventually be taxes at 20% is ‘better’ than $80m of OI taxed mainly at 37% this year, but only one of them pays for my winter at Eden Rock.
Why can’t you spend capital gains? And dividends can easily be 1/3 of the total return.
But my point is that these foundations could never pay enough salary to equalize owning the investments outright.
“What about a middle class person, or god forbid, a poor person? Should they move to CA to live a life of at or near poverty level existence?”
Gosh, homedelete, I don’t know. Would a smart poor person move somewhere that’s even harder for them to make it? Have they done that throughout all of time? Did the poor Irish move to London or did they get on a boat and move to the Americas? Gosh…let me think.
Most, but not all, of those moving to California are those with the better paying jobs. However, if you go to LA, there are plenty that moved there from Iowa in their 20s looking for the Hollywood dream. Many wait tables. They live in group houses with 10 others. They teach yoga. Many end up leaving because it’s just too tough to make it.
Nothing different about this. It has happened the last 30 years. In the decades before that, California was cheap enough that they could get a job and stick around.
It’s all about housing costs, obviously.
But this is why cities like Atlanta and Nashville are booming. Until the last 2 years, they were actually dirt cheap compared to anything on the coasts. Lots of people living the music dream in Nashville now too.
So, yeah, if you are thinking about moving to California and can get a job, just do it. Now is the time with the best job market in the last 20 years. Everyone is hiring. This is when California is at its best: optimistic. Making tons of jobs. Everyone is happy.
You can always leave.
But when the sun goes down and you see the sunset on that mountain with the home lights twinkling in the distance, there’s really nothing like it. It’s magical.
“That’s why the mean is so low.”
Sigh.
The average doesn’t include high speed traders.
The average has been falling for the last 10 years. People are owning stocks for much shorter periods of time compared to when there wasn’t electronic trading and when you had to wait to look at the price of the security in the newspaper the next day.
Too much emotion.
Just to start the week, people were freaking out that the stock market had fallen 5%. So silly.
“Yeah, but exactly how does that system work? And I don’t buy the foundation salary explanation either. If you put $1 B into a foundation you’d have to pay family members like $80 MM/ year in salaries for it to be economically equivalent to owning the $1 B outright and that ain’t happening.”
Cargill family doesn’t have a “foundation” that I’ve ever heard. That makes no sense. Foundations have to file paperwork with the government about finances. There’s no way a privately held company like that is telling the world its business.
And it wouldn’t work correctly going forward with future heirs etc.
The Cargill family still actively runs the company.
“Why can’t you spend capital gains?”
Because it is a closely held company??
Are you suggesting that the Cargills should have been monetizing they equity by selling to outsiders, eventually ceding control?
““A this accounts for the often seconds long holding of active traders it is, at best, misleading.”
Nope. It accounts for them.”
“The average doesn’t include high speed traders.”
Um, which is it??
“Been to a LA Dodgers game lately? That is a great proxy for the decline of LA.”
We know you haven’t helmethofer.
California is the American Dream. Always has been. Always will be.
Oh since you’re a known liar, and can see people’s IP addresses and have lied repeatedly that I don’t live here, now you say I do live here? Like I don’t travel to LA or FL? The Dodgers are playing in Tampa next week and I’m going to be there for business and attending with some USC alums, who rarely get to see the Dodgers play interleague in FL. CA is not the American ..dream, because all AMERICANS who grew up with the dream acknowledge that it no longer exists except in their memories. Basically, there used to be a Hollywood censor and that all ended in (I think) 1964 and the first movie that came out after the censor was The Pawnbroker. It was a Jew movie that was also about “muh holocaust”. Satan and his angels never sleep and LA has been on the decline every year since the Syn of Satan took over that once American place. If you want drugs, tattoos, porn, homeless, third world culture, homosexuals leading your “arts & culture”, then maybe CA is your dream But to so many Americans it’s not their dream.
Silicon Valley isn’t even a “dream”. High technology just so happened to land there, near Stanford and the nerds. Nobody wants to truly live there, it’s windy, foggy and you can even use the beaches or bay. It’s suburban sprawl and nothing special.
I love how Sabrina talks about seeing the hills and lights twinkle in LA, so what? There are people who come to Chicago and marvel about the “skyline”. Oh, but big deal, after you’ve seen the Hancock, Willis Tower and Trump building so many times, who cares? Ask the MEXICANS how great and beautiful their country is!!! They all leave it or want to. The West is not the best, otherwise why would Chicago be the Second City of Mexicans in the USA?
“Are you suggesting that the Cargills should have been monetizing they equity by selling to outsiders, eventually ceding control?”
I wasn’t talking about just the Cargills. I was talking more broadly about all mega-wealthy, many of whom have large stakes in public companies.
“all mega-wealthy, many of whom have large stakes in public companies.”
But that wasn’t the topic–it was about how you pass down wealth in a family-controlled company.
“some USC alums”
Real ones, or the typical “daddy bought my way in” DBs?
“But that wasn’t the topic–it was about how you pass down wealth in a family-controlled company.”
A family friend of mine is a CPA for a family trust. One of many accountants for the large billion plus dollar family trust with about 40 current descendants milking grandpas or great grandps money. I’ll ask him exactly how it works the next time I see him.
“One of many accountants for the large billion plus dollar family trust with about 40 current descendants milking grandpas or great grandps money.”
A family trust is completely different than a corporation.
Plenty of rich families have family trusts (see the Kennedys.) They don’t own a corporation, although the Kennedy trust owned all that real estate much of which they ultimately did have to sell to keep everyone in the style to which they have become accustomed.
Or see the Johnsons (from the Johnson & Johnson fortune) or the Waltons from Walmart. I’m assuming Sam started gifting shares of stock to his kids very early which is why he was able to get it out of his estate without a big tax burden.
But those are public companies. What do you do with the private entities? They are still shareholders.
Aren’t there any estate and trust attorneys lurking on here?
Oh- and family trusts only last so long. Eventually they dissolve. They don’t go much past “great grandpa.”
“I was talking more broadly about all mega-wealthy, many of whom have large stakes in public companies.”
Yeah- public companies are different. Bill Gates has been selling shares every quarter for 20+ years and he still has millions. Just think about the dividend payments alone on his shares outstanding.
“Oh since you’re a known liar, and can see people’s IP addresses and have lied repeatedly that I don’t live here, now you say I do live here?”
Nope. You don’t live in Chicago.
And yes, you are a known liar.
“Silicon Valley isn’t even a “dream”. High technology just so happened to land there, near Stanford and the nerds.”
Nope. Just didn’t “happen.” The military was there. And yeah, combined with world class universities and tons of talent. Oh, and a love of science that is missing from many other parts of the world.
“Ask the MEXICANS how great and beautiful their country is!!!”
Gosh, I do ask them all the time. And they agree. Mexico is gorgeous. If you go to Central Mexico you really get a sense of how connected it is all the way up the West Coast since it’s the same mountain range, essentially. Same plants too and similar weather. It’s not a surprise that the Spanish just extended their empire all the way up to Northern California.
Mexicans come to America for the same reason as everyone else: opportunity.
Although, they aren’t coming anymore. There’s been negative immigration the last couple of years. Mexico’s growth has really helped stem the tide. Their middle class has really expanded. Now, there are many of the same consumer goods and whatnot like in the United States. Remember when you used to have to take “supplies” in your suitcase when visiting people abroad? Not any more. Global supply chain and brands are supplying everything to everyone (Costco, Walmart, Home Depot, even Old Navy.)
California is amazing. Like I said, if you get an opportunity to move out there, and you don’t have kids, just do it. You only live once.
Helmethofer is too old. You have to be willing to take chances and take on risk.
Oh- and I get a flutter in my stomach every time I’m on the Eisenhower and see the Sears looming over the city. It’s such a signature building. Still stunning.
“Oh- and I get a flutter in my stomach every time I’m on the Eisenhower and see the Sears looming over the city.”
I get annoyed every time I’m on the Eisenhower
fuck that road and fuck its counterpart I-90 too
If HH is posting from his work computer it might indicate he isn’t from here. The server my work computer connects to changes periodically and I know this because the targeted ads reflect one of a small handful of locations….none of which is Chicago.
Then again, you are likely correct in that HH is retired and posting from the shared computer room in a 55+ community in Florida.
“family trusts only last so long. Eventually they dissolve.”
Partially correct. Each individual has a trust. The grandparents each have a trust. The parents each have a trust. Every child has a trust. Assets can more from trust-to-trust.
As long as there are assets in great grandpa’s trust, it remains under the control of the trustee.
I was just in Mexico City (obviously anecdotal evidence here, both one person’s experience and the capital city) but there was a lot less poverty than I was expecting – not that it wasn’t there, just much less than I expected – we drove through a lot of lower end areas and a lot more construction left and right, both residential, corporate and retail. And most shockingly – Sears has billboards all over town and appears to be a trendy middle income department store!
It’s not Mexico City that’s bad, it’s the cartel controlled areas and the more rural northern areas of Mexico that are literally dirt poor with half the village sending reparations back as the sole source of income for the other half. The capital cities of most nation states are not door. Heck, DC consistently has the wealthiest counties in the nation.
“It’s not Mexico City that’s bad, it’s the cartel controlled areas and the more rural northern areas of Mexico that are literally dirt poor with half the village sending reparations back.”
So you know nothing about Mexico then?
Mexico City is 20 million people. The vast majority are poor. They moved there from the rural areas. They live in slums that stretch for miles and miles outside the city.
And the poorest states are in the south (not the north.) The north is actually pretty well off as it has the big business city of Monterrey as well as the tourist city of Cabo on the Pacific side.
The poorest states are Oaxaca or, possibly, Chiapas. Neither one has many good paying jobs.
Please visit before you talk about what is going on in Mexico. You really have no idea what you’re talking about.
“I was just in Mexico City (obviously anecdotal evidence here, both one person’s experience and the capital city) but there was a lot less poverty than I was expecting – not that it wasn’t there, just much less than I expected – we drove through a lot of lower end areas and a lot more construction left and right, both residential, corporate and retail. And most shockingly – Sears has billboards all over town and appears to be a trendy middle income department store!”
What “lower end areas” did you drive? Out in the slums?
There aren’t many “lower end areas” right near the centro or the downtown. Some areas are still gentrifying though.
The reason you didn’t see much “poverty” is because the city got rid of the homeless encampments a few years ago. When they put in the 20,000 surveillance cameras, Slim convinced the mayor that if they wanted to market the city to foreign tourists they had to clean up the parks. They got rid of homeless camps as well as those selling tourist goods without permits.
There are also a ton of police just walking around and monitoring certain neighborhoods like the Centro.
But, yes, right in the downtown there is mostly middle and upper middle class. They are working professionals in offices and government agencies. These are Mexico’s elite.
Sears has been in the country for decades and is very popular. But I don’t think it’s owned by the US corporation anymore. Still, for most Americans, it’s kind of strange to see it being so popular there.
“As long as there are assets in great grandpa’s trust, it remains under the control of the trustee.”
No. It doesn’t last forever. They explicitly set the law up so you couldn’t have trusts giving out money like 200 years later. Aren’t there any estate attorneys who can tell us?
The assets are paid out. You pay your taxes etc. There aren’t multiple trusts, unless someone wants to set them up after getting some assets. That’s allowed.
The Kennedy grandchildren, for instance, get income from Joseph P. Kennedy’s grandchildren trust, set up differently from the trust for his own children.
But that trust will end something like 21 years after the last beneficiary dies. When the last grandchild dies, the trust is dissolved. The trustee pays out the remaining assets.
And I’m pretty sure that you can’t just move money into a trust for your descendants while you are alive without paying gift taxes or using your lifetime exemption. And if you move it there upon your death it is subject to estate taxes.
“But that trust will end something like 21 years after the last beneficiary dies. When the last grandchild dies, the trust is dissolved. The trustee pays out the remaining assets.”
Rule against perpetuities!
“Please visit before you talk about what is going on in Mexico. You really have no idea what you’re talking about.”
DUh! I meant southern and typed northern instead.
I still refuse to travel there, ever.
“I still refuse to travel there, ever.”
They won’t miss you. 45 million visitors are expected this year. Whoa. Amazing. But it’s a big country so there are plenty of amazing places to visit. You can do jungle, mountains, and thousands of historic sites including one of the largest pyramids in the world.
It’s what I call a “mature” country in terms of tourism. They have it down now. Their service and hospitality is one of the best. You can really see the difference when you go to some of the Caribbean islands where service just isn’t up to par.
I once met a Mexican guy who was a tour leader on one of the popular food tours but he had been in charge of all entertainment staff at one of the big all inclusive resorts for a number of years. It was hundreds of employees. He told me he had gotten a BA in hospitality at UC-Riverside.