An example of this is if I donated $100 to an entity that was a tax deductible entity as determined by the IRS, I would pay $35 less on my taxes. The proposed change would result in only receiving the benefit of a $28 reduction on my taxes, a $7 dollar “reallocation” from me, to the government. Which appears to be a smart move (on first look) by the government to raise income. However, this article suggests for every 10% increase in tax deductability, it “raises the amount that a person gives by about 10%.”

A visual representation of the change in tax structure is seen below. The real impact is felt by the charity, who deals with a 20% reduction in income, while the government sees a 6% increase in tax revenue, and the individual sees a 7% increase in discretionary spending. It was probably not the intent to re-allocate dollars from charities to the government , but without considering the relationship between tax deductions and amount donated, this is exactly what capital hill has proposed.

A ponzi scheme occurs when people provide money, in hopes of receiving whatever is being promised (in Madoff case it was steady returns). However, the only way this is achieved is with subsequent “investors” (soon to be victims) monies. A ponzi scheme can extend beyond the investment community. In starting up this blog, I went to the web to get some advice on blogging, and found many sources on bloggers advertising their ability to monetize blogs…if you pay them they will tell you how. An interesting invitation. Maybe it is legit, but I was skeptical as it seems too easy to turn this into a ponzi-ish scheme.

This occurs because there is no real value (similar to Madoff not investing), the value is in the presentation…and if you want to get your money back, you practice the presentation to give to someone else (duping someone just like you were duped).

In looking at the ex-chairman of the NASDAQ staring at a 150 year sentence, I think we can all agree ponzi schemes destroy lives and the (in general) good intentions of many people…don’t do it. And it wasn’t “basically” a ponzi scheme – it was.

Welcome to Reasonable Inference!

This site has been created to critically think about and discuss current topics.

Future material you should expect down the pipeline is:

-supreme court cases being heard this session

-Madoff not purchasing any securities in the last 13 years

-the stimulus package – pros and cons