Fat Cats

The Australian Government is mulling over a plan to increase the tax rates for high net worth indivs to 50% of every dollar that make once their income passes the 1 mil threshold.

Now, waddaya think of that? Fancy, the Aussies coming up with a workable tax system! What a load of crap.

The reason for that is because they reckon that being the creme de la creme, we can rake a litle bit more off of them. Yup, agreed. But the 50% rate is going to deliver v marginal returns to society. Why? Because if a guy earning 2m can be paying the same tax rate as the guy earning 40k, then something is obviously not right. Obviously, someone is taking advantage of tax loopholes. So unless you scrutinize their returns and close those holes, they can still get away with it, even if you increase the tax rate to 80%. And if you issued a blanket tax that way, no one would have the incentive to try to get very rich, or to be as successful an entrepreneur as they might be inclined to be. If I am already pulling 900k, why should I strive to expand my business and increase my income to 1.2m, when the result of all that labour is that the Govt will take 50% of my marginal increase anyway?

In that case, the economy loses out on its potential, along with all the potential consumers and employees who might otherwise benefit.

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If you look at the way Westerners, and Australians, manage their finances, you start to feel really good about yourself, and pat yourself on the back for the genetic advantage that you have; after all, it is a known fact that Asians are more prudent with their cash. Luckily for us, the Asian financial crisis and its subsequent reforms have buffetted us from the fallout this round. I reckon the West is in for a really hard landing, inc. in Australia. Their constant self delusions that they are insulated by being so far away is an illusion, a very dangerous fallacy. The only silver lining in this cloud is that it's a good time to invest in the Aus dollar.

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I've always maintained that the best jobs are jobs where you actually perform a real exchange or either a product or a service. In the financial sector however, its an exchange and trading of a lot of hot air and virtual money. Thats not for me. It never could be. Really, when they run through their investment software and models, what are the assumptions, the business information, the data, they feed into such systems? There is an interesting article on precisely this. I reckon its a good wake up call. Its not just over optimistic; it is feeding a system an entirely wrong set of data and assumptions. My friend Rand has been hyping up his own simulation model that has supposedly been outperforming the market consistently for the last one year. Well, lets see how he fares these last and next few months. If it really works, I reckon he is a genius.
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