7 Financial Facts That Will Blow Your Mind

Economy  

AlterNet / By Lynn Stuart Parramore

7 Financial Facts That Will Blow Your Mind

Big-time tax evaders get less jail time than a man stealing socks. 

 

 

 

Photo Credit: Shutterstock.com

May 8, 2013  |  

 

 

 

What does it cost to kick the bucket? What's the best tax scam if you want to avoid jail? Here are a few financial facts that may surprise you.

1. How much does it cost to die? Dying is a pricey proposition. A paper by Samuel Marshall, Kathleen M. McGarry and Jonathan S. Skinner examined how much people spend on out-of-pocket healthcare costs in the last year of their lives. Average bill? $11,618. For the top one percent, who get top-of-line care, the figure is $94,310.

And we haven’t even gotten to your actual death, which comes with funeral and other expenses. If you add in these, dying costs the average senior a whopping $50,000. With an oligopoly in health insurance and Uncle Sam barred from negotiating better prices for pharmaceuticals, the cost of dying is steadily going up, threatening family savings and adding untold stress to what is already a generally stressful experience.

2. Big banks are getting even bigger. As Bloomberg reports, the biggest U.S. banks have gotten even bigger since their risky and criminal behavior helped spark the financial crisis. The number of too-big-to-fail banks is projected to increase by 40 percent over the next 15 years. And consider this: When big banks get help from you and me, they behave worse. According to USA Today, banks that received federal assistance during the financial crisis “reduced lending more aggressively and gave bigger pay raises to employees than institutions that didn’t get aid.” Megabanks are undermining democracy, subverting the rule of law, rigging the world’s largest markets, and doing untold damage to the economy.

The vast majority of Americans, regardless of political affiliation, thinks banks are too big. Half think the 12 largest banks should be broken up. A growing number of economists and financial experts -- among them former Fed chairman Alan Greenspan and former Citi CEO Sandy Weill -- warn that unless the big banks are broken up, the economy can’t recover. President Obama is pretending that Dodd-Frank has ended too-big-to-fail, a position the Washington Post calls “startlingly and dangerously naïve." As current Fed chairman Ben Bernanke recently put it: “Too Big To Fail is not solved and gone… It’s still here."

3. Offshore tax cheating v. stealing socks. U.S. courts are feeling very generous toward offshore tax evaders these days. Mary Estelle Curran, a wealthy 79-year-old Florida widow who failed to tell the IRS that she had $43 million stashed in offshore accounts, was sentenced to one year of probation by federal district court Judge Kenneth Ryskamp, who berated prosecutors for going after her in the first place. Then he revoked the probation altogether.
U.S. Justice Department lawyer Jack Townsend told the Wall Street Journal that the average sentence handed down in offshore cases has been less than 15 months, half the average for other types of tax-shelter schemes. Judges hand down prison sentences about half the time in such cases. In contrast, Florida man Dean Rockmore, 48, received a mandatory life sentence as a repeat offender for nabbing a $4 pair of socks from Walmart.

4. Wall Street family values. JPMorgan Chase honcho Jamie Dimon got a 19 percent pay cut in 2012 following revelations that $6 billion had gone missing from his company in the London Whale fiasco. We now know that Dimon and JPMorgan lied to investors, regulators and Congress about the bank’s risky activities. Several shareholder groups are fighting to demote Dimon by separating the CEO and chairman's job at JP Morgan.
Jamie is the hot seat, but Papa Dimon, meanwhile, somehow managed to get a gigantic raise from his son’s firm last year. The octogenerian Theodore Dimon, who joined the brokerage unit of JPMorgan Chase in 2009, raked in more than three times his usual salary in 2012, piling up an eye-popping $1.6 million. It’s touching to know that the family coffers are not suffering as a result of Dimon Junior’s nefarious activities and epic management failure.

5. Wall Street Journal is shocked that Americans are broke. A recent report by the Employee Benefit Research Institute revealed what most ordinary folks understand keenly every time they look at their IRAs: Despite the stock-market boom, Americans don’t have much money for retirement; in fact, they have less than they’ve had in decades. Well over half of American workers have total household savings of less than $25,000, and over a quarter admit they have zero confidence that they will be able to retire in any comfort. This was big news to theWall Street Journal. As Alex Moore succinctly put it, “The Wall Street Journal parsed the data and made what appears to be a startling, shocking find: Americans are fucking broke.”

The news apparently has not yet reached austerity hawks Erskine Bowles and Alan Simpson, who have strained themselves into pretzels trying to convince the public that Social Security and Medicare need to be cut – right now! Obama, with his proposal to cut Social Security using the discredited chained CPI “adjustment,” also fails to grasp the basic terror most Americans feel when they consider their golden years. Perhaps that’s because when the President leaves office at 56, he will have a starting annual pension of around $200,00, and that doesn’t count perks like money for rental payments, staff salaries and travel expenses. Right now, only 22 percent of full-time private industry workers in the U.S. get a defined pension benefit, compared to 42 percent in 1990. And the number shrinks every year.

6. The rise of medical debtors. According to a 2009 report published in the American Journal of Medicine, 62 percent of bankruptcies filed were medical-related. The kicker? Seventy-five percent of people surveyed hadsome type of health insurance. The "medical debtors" surveyed in the study were well-educated home owners with "middle-class" occupations. Many of those bankrupted found that they were under-insured and hit with thousands of dollars in out-of-pocket bills. Others had lost insurance when the primary insured became too ill to work.

The study also showed that a quarter of insurance companies cancel coverage the moment an employee suffers a disabling illness. So, will Obama's Health Care Affordability Act put a stop to medical related bankruptcies? Jon Walker of Firedoglake doesn’t think so: “Even under the law,” Walker writes, “people who buy insurance on the new exchange will face out-of-pocket limits they may not able to afford. For a family plan the annual out-of-pocket limit will be over $12,000. This is a financial burden many families simply can’t afford, especially while dealing with all the other expenses normally faced when taking care of a very sick family member.”

7. Buy or rent your home? Home ownership in the U.S. is at its lowest level since 2004, down to 65.4 percent from 69 percent in 2004. Whether renting is better than buying depends on a bunch of things, including how long you stay in your home. According to a report in the New York Times, once you’ve passed the five-year mark, buying is still better than renting. The report shows that owning after that time period will save you an average $1,743 each year.

Owning a house for the long term means lets you build up equity and improve your credit. But be warned: there are lots of predators out there who will try to fleece you when you decide to buy a home. You need a thorough home inspection to understand what you’re getting into, but guess who normally recommends the inspector? The real estate agent – and some agents will pressure the inspector to provide a good report. Also, some lenders will try to sell you a loan at a higher rate than the one you deserve. In both cases, you have to shop around to know what’s kosher and what’s not.

Lynn Parramore is an AlterNet senior editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' She received her Ph.d in English and Cultural Theory from NYU, where she has taught essay writing and semiotics. She is the Director of AlterNet's New Economic Dialogue Project. Follow her on Twitter @LynnParramore.