So My dear wife, Myrolen forwards this email to me and asks for my comments. Here is the email. My comments are in the next post.
Things are not always as they seem. Your recent GIFT from FED-ZILLA
Math lesson for suckers! Taxes vary per state. ____________________________________________________________
For the ones who took FEDZILLA up on its offer of $4500. dollars to trade in your old “Clunker” (interesting choice of words)? Well, let’s see who got the best of that “deal”… If you traded in a clunker worth $3500, you got $4500 off for an apparent “savings” of $1000. You could have gotten $3,500 if you had just traded the car in. So you really are $1,000 ahead (depending on your clunker’s value) at this point. Not too bad…
However, you WILL have to pay taxes on the $4500 come April 15th (something that no auto dealer will tell you). If you are in the 30% tax bracket, you will pay $1350 on that $4500.
So, rather than save $1000, you will actually pay an extra $350. to the feds. In addition, you traded in a car that was most likely paid for. Now you have 4 or 5 years of payments on a car that you did not need, trading in a “clunker” that was costing you less to runthan the payments that you will now be making. Even if you save $1,000. dollars a year in gas due to better mileage, you’re still gonna be in the red for five years….hello?
But wait, it gets even better: you also got ripped off by the dealer. For example, the month before the “cash for clunkers” program started, every dealer here in LA was selling the Ford Focus with all the goodies including A/C, auto transmission, power windows, etc for $12,500. because competition was stiff due to poor sales from the stalled economy.
When “cash for clunkers” came along, they stopped discounting them and instead sold them at the list price of $15,500. So, you paid $3000 more than you would have the month before. Honda, Toyota , and Kia played the same list price game that Ford and Chevy did. Now let’s do the math…
You traded in a car worth: $3500
You got a discount of: $4500
———
Net so far +$1000
But you have to pay: $1350 in taxes on the $4500
——–
Net so far: -$350 (that’s minus…in the red)
And you paid: $3000 more than the car was selling for the month before
———-
Net Loss: -$3350
We could also add in the additional taxes (sales tax, state tax, dealer prep, etc..) on the extra $3000 that you paid for the car, along with the Five years of interest on the car loan; but let’s just stop here while you kick yourself. Suffice it to say that those costs will be much higher than any savings you get from “better mileage”.
So who actually made out on the deal? FEDZILLA collected taxes on the car along with taxes on the $4500 they “gave” you. The car dealers made an extra $3000 or more on every car they sold along with the kickbacks from the manufacturers and the loan companies. Manufacturers got to dump lots of cars they could not give away the month before. Lots of good or repairable used cars got taken off the market, crushed and sold as scrap metal to (ready for this?) CHINA ! (Look it up…) And the poor consumer got saddled with even more debt that they cannot afford.
FEDZILLA’S merry men (who promised that people making less than $250,000. would pay “not one red cent more in taxes”) will make millions in new tax revenues after convincing Joe Consumer that he was getting $4500 in “free” money from the “government” In fact, Joe was giving away his $3500 car and paying an additional $3350 for the privilege. Chicago politics gone global….with an agenda.
If you find errors in this math, please let me know…being a simple guy, I’m always willing to learn new things; and if you took “advantage” of the Clunkers deal, I have some swamp land down in Florida that’s for sale…
And remember, these are the same Einsteins who want to take control of our health care system. Hold on to your wallet!!
Wifey,
Well you caught me at a good time to ask me “what I think”. You get a Rant from Roger. And yes, I will post this on my webpage: Rogersrant.com If you go there you can sign up as my first member:)
The math is basically sound. The only reach I see is the 30% tax bracket. Remember, nearly half of the people (I think its 40% http://www.factcheck.org/askfactcheck/do_40_percent_of_americans_pay_no.html ) don’t pay any federal income taxes. That being said, the idea of the sticker price being raised AND more importantly, the financing charges paid by the clunkee over time eat all the savings away. But just like the forced lending to people that could not afford to pay their mortgages, these clunkees are most likely more likely to see the repo man in their driveway than a conventional buyer.
Another point to consider is the effect on the whole supply/demand dynamics of cheap, good used cars in the under $5,000 price range. A lot of good, reliable, running cars were taken off the market, crushed and had their engines disabled as part of the program. So now Joe the Plumber’s assistant can no longer find the old pickup truck that he could have used to get back and forth to work. He might be able to find one, but because of the decreased supply of such vehicles, he will be forced to either pay more (which he might not be able to afford) or forgo a purchase at all (lowering the velocity of money in the marketplace-if not eliminating it).
The most glaring deficiency of the whole program is the base assumptions (lets call them the “Green Assumptions”) that taking these cars off the road will somehow 1) make a difference in the temperature of the Earth (don’t get me started) and/or 2) reduce pollution at the margin and 3) increase activity at our government owned car makers- and therefore “creating or saving jobs here in America”. What a crock!
There is a tendency for corporations and politicians to throw the “GREEN” term around quite loosely. It means squat! Our elitist ruling class have now gotten quite comfortable with throwing around the terms “green” and “carbon” . Glorifying one and vilifying the other. Remember Congressman Perlmutter’s claim of “writing the ‘green’ portion of the cap and trade bill”? Gee, I don’t know how I can ever thank him enough!!!
I don’t know about you, but I gotta ask myself why these people are doing this. I don’t think they are stupid people. In fact, most are pretty smart. Is it all about buying votes? Must be. Either that or they are all part of some evil empire run by the decedents of Darth Vader.
One solution. Start over. Throw out the idiots. They dont understand basic economics. They dont understand or even want to listen about basic science. If we must, start with term limits so that being a professional politician is NOT an option. Term limits can be accomplished at the state level I believe. Things on the “not to do” list: dont let government take over health care any more than they already have. Have them fix the problems with the programs we already have. As Brian T. Campbell says: “lets audit each and every department” of the federal government BEFORE we grant them one more dime of funding. With Government Spending now approaching 45% of total GDP in this country, the Federal Government and its 1600 or so departments and agencies appear to be mostly unaudited, with little or no incentives for running a tight ship. You can find them all listed here: http://www.usa.gov/Agencies/Federal/All_Agencies/index.shtml
But Pres. Obama’s “Compensation Czar” is charged with setting the payment of Corporate America. Let’s turn him loose on the Feds! This is not a knew idea, but one whose time has come. Lets start with Congress for starters. Let’s see if Charlie Rangel ( http://online.wsj.com/article/SB10001424052970203946904574300013592601036.html ) taxes are paid, or if Chris Dodd will let us all see the details of his real estate practices are on the up and up. I got it, lets have a Scandals Czar appointed. Not by that racist, some of us call Mr. President, but by Joe the Plumber. On second thought, forget Congress. Lets start at the Executive Branch. How much money are we paying all these Czars? What does Valerie Jarrett make per year? How about the chick who’s job it was to excite the Arts Community for Obama’s agenda? Buffy Wicks or something like that? What does she make per year. In fact, I think its time to seriously consider DEFUNDING the NEA. That is a luxury. One that we, as taxpayers cannot afford right now. When we can operate at a surplus then we can afford paying people to draw, paint, sculpt, or whatever the hell those people get grants for. If they need work, send up to Washington State where they can displace a few thousand apple pickers that are here illegally. Heck if you can draw, you can pick, right?
Sorry, but I have taken this simple question of yours about what I think about Cash for Clunkers and run on and on. I know you agree with me on a number of these issues, and I sure hope that you continue to respond to your emailers with suggestions on how to support the vote to remove the ruling elites from office BEFORE they screw this country up further. Tell them to pick up their checkbook and make a donation to ANY person willing to serve his or her country for the right reasons….not the selfish ones.
Wifey,
Well you caught me at a good time to ask me “what I think”. You get a Rant from Roger. And yes, I will post this on my webpage: Rogersrant.com If you go there you can sign up as my first member:)
The math is basically sound. The only reach I see is the 30% tax bracket. Remember, nearly half of the people (I think its 40% http://www.factcheck.org/askfactcheck/do_40_percent_of_americans_pay_no.html ) don’t pay any federal income taxes. That being said, the idea of the sticker price being raised AND more importantly, the financing charges paid by the clunkee over time eat all the savings away. But just like the forced lending to people that could not afford to pay their mortgages, these clunkees are most likely more likely to see the repo man in their driveway than a conventional buyer.
Another point to consider is the effect on the whole supply/demand dynamics of cheap, good used cars in the under $5,000 price range. A lot of good, reliable, running cars were taken off the market, crushed and had their engines disabled as part of the program. So now Joe the Plumber’s assistant can no longer find the old pickup truck that he could have used to get back and forth to work. He might be able to find one, but because of the decreased supply of such vehicles, he will be forced to either pay more (which he might not be able to afford) or forgo a purchase at all (lowering the velocity of money in the marketplace-if not eliminating it).
The most glaring deficiency of the whole program is the base assumptions (lets call them the “Green Assumptions”) that taking these cars off the road will somehow 1) make a difference in the temperature of the Earth (don’t get me started) and/or 2) reduce pollution at the margin and 3) increase activity at our government owned car makers- and therefore “creating or saving jobs here in America”. What a crock!
There is a tendency for corporations and politicians to throw the “GREEN” term around quite loosely. It means squat! Our elitist ruling class have now gotten quite comfortable with throwing around the terms “green” and “carbon” . Glorifying one and vilifying the other. Remember Congressman Perlmutter’s claim of “writing the ‘green’ portion of the cap and trade bill”? Gee, I don’t know how I can ever thank him enough!!!
I don’t know about you, but I gotta ask myself why these people are doing this. I don’t think they are stupid people. In fact, most are pretty smart. Is it all about buying votes? Must be. Either that or they are all part of some evil empire run by the decedents of Darth Vader.
One solution. Start over. Throw out the idiots. They dont understand basic economics. They dont understand or even want to listen about basic science. If we must, start with term limits so that being a professional politician is NOT an option. Term limits can be accomplished at the state level I believe. Things on the “not to do” list: dont let government take over health care any more than they already have. Have them fix the problems with the programs we already have. As Brian T. Campbell says: “lets audit each and every department” of the federal government BEFORE we grant them one more dime of funding. With Government Spending now approaching 45% of total GDP in this country, the Federal Government and its 1600 or so departments and agencies appear to be mostly unaudited, with little or no incentives for running a tight ship. You can find them all listed here: http://www.usa.gov/Agencies/Federal/All_Agencies/index.shtml
But Pres. Obama’s “Compensation Czar” is charged with setting the payment of Corporate America. Let’s turn him loose on the Feds! This is not a knew idea, but one whose time has come. Lets start with Congress for starters. Let’s see if Charlie Rangel ( http://online.wsj.com/article/SB10001424052970203946904574300013592601036.html ) taxes are paid, or if Chris Dodd will let us all see the details of his real estate practices are on the up and up. I got it, lets have a Scandals Czar appointed. Not by that racist, some of us call Mr. President, but by Joe the Plumber. On second thought, forget Congress. Lets start at the Executive Branch. How much money are we paying all these Czars? What does Valerie Jarrett make per year? How about the chick who’s job it was to excite the Arts Community for Obama’s agenda? Buffy Wicks or something like that? What does she make per year. In fact, I think its time to seriously consider DEFUNDING the NEA. That is a luxury. One that we, as taxpayers cannot afford right now. When we can operate at a surplus then we can afford paying people to draw, paint, sculpt, or whatever the hell those people get grants for. If they need work, send up to Washington State where they can displace a few thousand apple pickers that are here illegally. Heck if you can draw, you can pick, right?
Sorry, but I have taken this simple question of yours about what I think about Cash for Clunkers and run on and on. I know you agree with me on a number of these issues, and I sure hope that you continue to respond to your emailers with suggestions on how to support the vote to remove the ruling elites from office BEFORE they screw this country up further. Tell them to pick up their checkbook and make a donation to ANY person willing to serve his or her country for the right reasons….not the selfish ones.
Have a nice day.
Comment by roger — October 8, 2009 @ 1:40 pm
Should have just called it the smoke-in-mirrors program.
Like the blogsite Rogie!
Comment by Roller — October 8, 2009 @ 1:51 pm
I must say this is a great article i enjoyed reading it keep the good work
Comment by Susan Kishner — October 8, 2009 @ 1:55 pm
I finally decided to write a comment on your blog. I just wanted to say good job. I really enjoy reading your posts.
Comment by Mike Harmon — October 8, 2009 @ 2:00 pm
Well said
Comment by Henery Schaffer — October 8, 2009 @ 2:07 pm