Monthly Archives: January 2015

Cry not my Angel of Death

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http://widehdwalls.com/images/big/angel_of_death-603695.jpg

In my annual review of my financial situation, I also called on my Angel of Death loophole; as he is part of the critical framework, for my lineage to succeed or fail. Currently the tax law allows me to pass on appreciated assets to my heirs without any capital gains tax liability, for our deficit strapped nation. I found my Angel of Death crying and very upset as there may be some changes coming and the capital gains tax loophole would go away, removing his powers. He is upset that the inherent inequalities between the top 1% who love this loophole, is up against the ordinary wage earners; who support Social Security, Medicare and other social programs through direct taxes on their income. Meanwhile the wealthy just avoid this obligation and pass their accumulated and inherited wealth gains, on to their heirs at death, without paying anything in the form of taxes to the state.

So a trust fund baby, say Mr. Slim in my example is automatically enrolled by the Angel of Death loophole into the elite, while an ordinary working class baby say Mr. Fat is left to live paying taxes on every income dollar, he makes in his lifetime. Mr. Slim stands to go to the best private schools and universities and remain above the proverbial glass ceiling, while Mr. Fat is consigned to public schools and maybe a community or state college if lucky, and then work on an hourly wage basis for the rest of his life (not even realizing that there is a glass ceiling). Mr. Slim will hire and fire Mr. Fat based on his inheritance and superior circumstances of birth due to ownership of assets. He will pound the gavel of injustice saying that these working class blokes; should work and study harder, to rise out of their poverty reinforcing circumstances.

I consoled my Angel of Death and requested him not to worry and to hush up, as there is no way that the powerless 99% can overcome the powerful 1%. I said that I and my heirs will continue to pay Capital Gains and Income and other taxes, as we need to sell our assets to live, as we are more Mr. Fat than Mr. Slim. The wealthy will ensure that this Angel never dies, as all kinds of erroneous arguments will be made to protect this tax loophole.

  1. Reduction in capital gains tax improves tax collections and allows productive investment in our economy. I do not see billionaires lining up to pay their fair share and instead see tax and financial consultants, spending huge amounts of time helping the wealthy ensure; they can pass the capital gains to their heirs. No productive deployment of capital is possible in a model where huge capital gain investments are kept “locked in”, just to avoid tax, and not because it is best for our economy.
  2. Capital gains help the poor come out of poverty as they encourage innovation and entrepreneurship. In my example Mr. Slim does little or nothing to promote innovation and entrepreneurship because his grandfather left him billions in capital gains, which he will pass on to his heirs on his death, also tax free. Mr. Fat on the other hand may become hugely successful and then end up paying millions in taxes, as he and his heirs will need to continually sell and invest; in new ventures, and risk taking entrepreneurships. In fact this Angel is truly one of death, as it encourages protection of the status quo, and not the wild adventures of swashbuckling pirates needed for development of our economy.
  3. Cutting Capital gains tax will lead to an economic boom. Detailed analysis over a long period has shown that there is no clear relationship between Capital gain’s tax rates and GDP growth as increases in rates have not caused an economic collapse or a decrease in rates caused an explosive growth in GDP.

I pointed out to our Angel that half of our tax code is used to just define the difference between Capital Gains and Income and we can reduce all this complexity by just going to a single consumption tax. The current code is unfair, inefficient and overly complex. When I said that congress can do all this at one stroke, he brightened up considerably. I smiled and said that as it is so simple he need not worry as the Angel of Death, will become the Angel of Life for a new economic boom. It was then I realized that he was happy not at the easy solution but at the mention that only our Congress can change this complex tax law. He passed my financial plan for the year and I left I saw him smiling; as he knew he was secure, as the do nothing congress, will make sure he lives forever.

Music of the universe

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“You know, you come from India and you say, ‘OK, I’m representing a 3,000-year-old history,’ so you think you’re gonna teach the world about rhythms and drums and so on,” he says. “And then you arrive here. You suddenly realize that you know nothing. You’re just one little dot in the painting that is the music of the universe.” Zakir Hussein tabla maestro who played early with George Harrison, and later in the Grateful Dead’s endless jams at their barn cum studio at SF, and many leading musicians over his lifetime, said in retrospection.
With India’s PM Modi showcasing his Vibrant Gujrat model, and a Rs. 100,000 Crore (1B) investment promised by leading industrialist Mr. Mukesh Ambani, the grand show is off to a good start. Why a privileged few are anxious to showcase their interest in an economy, which has been consistent only in underperforming on expectations for the past few decades, is mystifying. Expectations that Mr. Modi and his Finance minister Mr. Jaitely will perform the magical rope trick; on which the Indian economy will climb to the stars, are to say the least high. In many Indian’s mind, the climb to becoming number one in the world is; not how but when. Make in India drumroll marches on the back of its prowling lion and all are invited.

The solution needs a many pronged approach and will be a long and hard journey. With a million people joining the workforce every year, India is poised to become the number 1 workforce supplier for a longtime to come. With a 100 million already issued, the PM’s Adhar Bank accounts, it is going to be the largest exercise of Keynesian economy, at a micro or a macro level. The new NITI body will bring together Centre and State interests and actually work for long term development; as without a strong center, the States cannot develop fully. Grass roots laws, administration and education policy framework has to change, for economic development to take place unheeded. The problems are overwhelming, but as Mr. Modi challenges, he is not looking for incremental solutions but for quantum changes that will radically improve the status quo.

To bring up a judiciary that is at best corrupt and at worst activist to an extreme, meddling in social, political and economic affairs; and make it adhere to the implementation of required justice swiftly, will be tough.
To bring up the education system which is at best misguided, and at worst absent, to a level where India provides the next Doctors, Engineers, Teachers, Nurses, Scientists, Mathematicians and other skilled professionals to the whole world, will be tough.
To bring half its population out of years of servitude to a male dominated society, and into the free world of equal participation and reward, in the form of true woman’s equality; without fear of torture, rape and travel alone in their own city streets, will be tough.

To end the socialist state of government run organizations in all fields of human endeavor like Banking, Insurance, Railroads, Ports, Steel, Oil etc., the state will need to focus on providing good governance. The legacy that we need civil servants, to run mighty entrepreneurial enterprises, probably passed away with the Raj and Nehru. For citizens to be weaned away from the Maa Baap (State as the Mother and Father) complex, in their relationship to the state has to move more towards becoming self-reliant. To become independent in their behavior and thinking for India’s citizens, will be tough.

Each one of us is only one dot in the painting of our universe, as Zakir points out, India will need to stand out with its vibrant languages and contributions to world culture from an enthusiastic young population. They will find their own path to become the number 1 economy in the world. If history repeats India was #1 in GDP from 1 AD to 1,000 AD and may its lotus blossom again for another 1,000 years!

Not another resolution?

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A new year has dawned and hopefully all the resolutions of us needy folks, are holding strong. For once my resolution like many others I am sure, was to lose something; rather than gain something. It is my perennial smoking ban on tobacco in all forms, and my personal dragon rears his head, and blows fire and devastation all around, and drives everyone away. Grumpy and anxious I checked out what may be causing these symptoms. What was taking me riding anxiously through an emotional and psychological roller coaster, is this withdrawal pain, from a life time of habits; which should never have been started, in the first place.
Then I looked around and I recognized the symptoms in a few more people around me. What surprised me was that they were not even smokers or ex-smokers, so the cause I felt must be different. There were clear cases of anxiety and depression and so many stressed friends were all around me that my own withdrawal seemed minor to theirs. I realized that they too were suffering from unfulfilled desires just like I had been when I was trying to fulfill them through smoking. My desires remained unquenched but my smoking grew to monstrous proportions. Some of theirs seems to be tied around money and keeping up.
Money does not necessarily make us happy but the lack (or even the perceived lack of it) can lead to a different trauma, which can cause severe anxiety and depression; in some cases. The outcome of which may result in behavioral actions of avarice and greed which in turn leads to hoarding. We are unable to enjoy what we have, and continue to seek more. It is the ego telling us that we will magically reach a tipping point, where all our possessions will turn us overnight; into a state of bliss, delight and happiness.
This also results in extreme cases into kleptomania, where one steals even when one has enough means to pay for the object in question, many times over. If the lack of money can do this to us, imagine what a lack of love or affection can do to a growing child or a loved one. We squander our most precious resource of time and compassion in fruitless obsessions, overcoming perceived shortcomings in ourselves. To step into the clear light of reality, we have to also step out of these dark places; within ourselves. These unfulfilled desires have not uplifted us, or brought us closer to the bliss that is our birthright. Instead they have warped our world and kept us from our true path.
So my resolution is to unchain myself, from this clinging desire. I walk alone, and yet am filled with the universe, as we are one. My search for greatness outside will never be fulfilled. I need to only light the tiny temple lamp within and burn it, for the greater good. Make my light stronger day by day, and soon it will throw light on that hidden desire; which takes me away from reality. I find this needless feeling of inadequacy, fear and anxiety is not for me; but instead filling me with love, warmth and compassion is a better path. So in the end just be, and let all these clinging desires; fall away by the wayside. Smile as it is a new me, with a whole new life ahead of me, to be peaceful and blissful. Resolutions work not when you look back on them, but when you move forward with them.