But first . . .
Did you see the op-ed in last Thursday’s New York Times calling for a $500 “dividend” for every man, woman and child in America instead of a tax cut? This one-time $140 billion dividend could be effective right away in fighting recession. And being a one-shot, it would deflect our deficit-reduction trajectory just once. That’s a great thing, because paying down the national debt will provide a terrific ‘tax cut’ all its own. Namely: low mortgage rates, low car loan rates, low rates for business borrowers, a strong economy, and a strong dollar that keeps consumer prices low (especially stuff we buy from abroad, like your TiVo). A one-shot dividend doesn’t rule out some kind of ongoing tax cut – especially if it’s not too large, and is aimed at those who need it most. But what a great, democratic (small d) idea. A dividend! I like this so much, I think I’ll repeat it all week.
John March: ‘The proposed $500/person dividend in lieu of a tax cut is, as even you must recognize, shamelessly redistributive. If the tax code is progressive on the way up, shouldn’t it – to be fair – be just as progressive on the way down? In other words, if ‘the rich’ pay a disproportionate share of tax revenues, shouldn’t they receive a (dis)proportionate share of any tax cut when the government runs a surplus? Whose money is it, anyway?’
☞ Well, in Eisenhower’s day, the top marginal federal rate was 90%. Under Kennedy, Johnson, Nixon, Ford and Carter it was 70%. It got all the way down to 28% under Reagan – and I didn’t notice average folks’ tax bites dropping proportionately. (In fact, when you take into account the payroll tax, their bite was rising.) Yes, I know it’s not this simple; among other things, ‘tax shelters’ allowed you to avoid the high tax rates. (Instead of paying 90%, you’d often lose 100% in a disastrous tax shelter. But it was worth the try.) My point is that, while an ethustiastic case can be made to give 43% of the tax relief to the top 1% of our countrymen (me! me!), the fact is, we’re doing just fine. We are! And much better than we’d be doing in most other industrialized countries, where tax rates are higher. So . . . in a world of limited resources, with many Americans truly straining to raise their kids and make ends meet, my own priority would not be relief for the best off (who already pay tax at a low rate on the often large chunk of their income that comes from capital gains).
Now . . .
DO 401(k)s MAKE SENSE AT A 15% RATE?
Tom Whitaker: ‘Under Dubya’s tax cut plan, the 28% bracket would go to 15%. If this is true, will it make a substantial difference in the advisability of contributing to 403b accounts, versus just investing in index funds? My thinking is: the 403b contribution will be ‘only’ getting the advantage of 15% which would go to taxes, versus the current 28%. And currently, taxes on capital gains are (am I right?) less than those charged eventually on 403b proceeds.’
☞ Good point. It makes little sense to shield money from tax at 15% only to withdraw it years from now at what might be a 35% tax rate. For low-bracket folks, a Roth IRA makes much more sense than a traditional IRA or 401k or 403b. And index funds entirely outside a retirement plan will defer the tax on much of their growth until you sell – and then, likely, be taxed at a low, long-term capital gains rate. However, despite all this, a 401k or 403b remains truly compelling if — as is very often the case — the employer provides matching money of its own. Free money is hard to beat.
I told you last week that I love my TiVo. It’s truly one of those great leaps forward, like cell phones, that squeeze more hours out of each day and make your life better. (Yes, too much TV rots your brain, and there’s some slight chance cell phones do, too, but on balance they make your life better.)
Bill Coppedge: ‘You are right – it is awesome. I could not even imagine how cool it would be until we started using it. My wife is into old movies — AMC and TCM are where we record most stuff. I spent about 5 hours hooking the thing up because I had to think through what I thought would be the optimal way to hook up all the cables, so that we would have the most flexibility.’
Robert Miller: ‘I have had TiVo for a year and a half and share your enthusiasm. A couple of comments: It is possible to watch a show on one channel while Tivo is recording another, provided that you have a VCR hooked up to the TV and to TiVo. I’ll spare you the details but I think the TiVo booklet shows how. And, as you say, one can save TiVo recordings to videotape. I did this for several months until I realized that I never watched the tapes. There were always too many newer things on Tivo that I preferred to watch.
‘Incidentally, my dog would like to thank you and your reader who recommended audible.com. The Diamond Rio player arrived about a week ago and we go for much longer walks now. My first download was a winner: Great Books, by David Denby. I’d read those great books myself [rather than Denby’s discourse on them], but with TiVo and now the Rio, I just don’t have the time.’
Nick Barendt: ‘An aspect of the Tivo device that is interesting from many views (e.g., technical, social, business, etc.) is that it uses an embedded version of Linux, the free, open Unix-replacement operating system. It is one of the first such consumer devices to be introduced to the market, hopefully followed by many more.’
J.E. Bakke: ‘A wasteful and extravagant suggestion: Get an extra cable box, dedicated to TiVo. That way, TiVo can record what it wants when it wants independent of what else you might be watching. True, this costs an extra few bucks a month in rental from the cable company, but I find it’s worth it. You have to find a way to shield the little infrared remote transmitter from the second box (aluminum foil works), so there’s no cross-interference, and you have to use two video inputs either at the TV or via a receiver (which is simple but can seem complex to some). But I recommend the TiVo/cable box combination. Think about it.’
☞ My own solution is similar but less high-tech. If there were something on NBC I wanted to see while TV were recording CNN, I’d go in to the other room and watch it.
Or you could try Rick Mayhew’s method, which is written in a language I do not know, but faithfully transcribe for you here:
Rick Mayhew: ‘You can configure TiVo to do this. Use a splitter on your cable wire and run two separate wires (one to the TV – another to the TiVo) and then run a wire from the TiVo to your TV (output to input). We have ours setup this way and it works great. TiVo stays active on channel 3, you grab the regular remote when a show starts to record – and surf to your heart’s desire.’
Andrew Megibow: ‘If you get a splitter for the cable wire you will be able to watch live TV while using Tivo to tape another show. Unfortunately, you cannot watch a premium channel while recording (assuming you have a cable box). You can tape a premium channel while watching a basic cable channel. Let me know if you need more info.
Also, you wrote about a small keychain attachment that connects through a USB port and acts as a 16MB drive. Just wanted to pass on that a number of mp3 players perform the same function – many people have the equivalent of the Q-Drive and don’t know it.‘
Quote of the Day
Every debt is ultimately paid, if not by the debtor, then eventually by the creditor.~Jim Grant
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