# Democrats' latest tax proposal **URL:** \ **Category:** Great Debates\ **Created:** [January 17, 2015, 4:53pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075 "2015-01-17T16:53:53Z")\ **Posts on this page:** 20\ **Page:** 14
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 22, 2015, 9:27pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/261 "2015-01-22T21:27:57Z")
> [@D\_Anconia](#): > > Why are you altering my quote? I did use capitalization. Huh? Q=_"When was the last time that treasuries were paying 4%?_" A=In 2007 or 2008. Ah, I see. Somehow, due to spellchecker or something, your post got altered when I quoted it. Interesting. Sorry. ---
**Author:** ![Terr](https://avatars.discourse-cdn.com/v4/letter/t/839c29/32.png) [@Terr](https://boards.straightdope.com/u/Terr)\ **Post date:** [January 22, 2015, 9:29pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/262 "2015-01-22T21:29:04Z")
> [@Bone](#): > > And on a side note, the rate on a US 3 month treasury is usually treated as the “risk free rate of return” since any risk it carries is negligible. On that point, iiandyiiii is on target. It isn’t anywhere near 4% though. Yes, more like 0.03%. That’s $3K from a buy in of $10M. I am sure **iiiandiiii** can live large off that. ---
**Author:** ![chargerrich](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/chargerrich/32/5399_2.png) [@chargerrich](https://boards.straightdope.com/u/chargerrich)\ **Post date:** [January 22, 2015, 9:31pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/263 "2015-01-22T21:31:18Z")
> [@iiandyiiii](#): > > Suppose I have $10 million dollars. I put it all in 10 year treasury bonds at 4%. The value of those bond may fluctuate, but each year no matter what the value is, I earn $400,000 from the bonds, and in 10 years I get my $10 million back. > > That’s a safe and risk-free investment, as long as I’m willing to hold it until it matures. I am sorry and do not mean to be rude, but your grasp of the way investments, particularly how bonds work, makes it very hard to take you seriously. You just laid out a scenario that COULD happen (albeit at about 2.5% not 4%) but is FAR from certain (i.e. rising interest rates). In 10 years you could lose most of that 10 million. That is the very definition of risk and one you seem to so casually toss aside as not relevant when in fact it is the single most important facet of the discussion. Now I am not sure about you, but even a minimal risk to lose a LARGE portion of my 10 million is FAR more risky than the fact that I might lose my job and have to look for another. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 22, 2015, 9:31pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/264 "2015-01-22T21:31:41Z")
> [@DrDeth](#): > > Huh? > > Q=_"When was the last time that treasuries were paying 4%?_" > > A=In 2007 or 2008. Compare post #251 with your quote of me in post #255. Do you see the difference? It’s not a big deal, I’m more curious as to how it happened. Ninja’d. I saw your clarification. No problem. ---
**Author:** ![DrDeth](https://avatars.discourse-cdn.com/v4/letter/d/b487fb/32.png) [@DrDeth](https://boards.straightdope.com/u/DrDeth)\ **Post date:** [January 22, 2015, 9:43pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/265 "2015-01-22T21:43:19Z")
nm. ---
**Author:** ![Happy\_Fun\_Ball](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/happy_fun_ball/32/17664_2.png) [@Happy\_Fun\_Ball](https://boards.straightdope.com/u/Happy_Fun_Ball)\ **Post date:** [January 22, 2015, 10:00pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/266 "2015-01-22T22:00:24Z")
Post 186 was clear, thanks. I agree, when you trade time for money there is not risk in the same way there is risk when you trade use of capital for a delayed return. ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 22, 2015, 10:14pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/267 "2015-01-22T22:14:57Z")
> [@Terr](#): > > And if two years after you put the money in the inflation goes above 4% and stays there, you will be losing money every year until the 10 years are over. Or you will sell the bonds and lose a percentage of the principal immediately. Is that “safe and risk-free”? Unless I’m misunderstanding how treasury bonds work, when it matures in 10 years (for a 10 year bond) you get back the initial cost. And you get 4% (or less, now, I suppose) of the initial value each year. That’s no risk, whatever inflation is (barring a calamity, like the total collapse of the dollar into trash). Maybe I just misunderstand how bonds work. If so, I’ll do some more reading. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 22, 2015, 10:17pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/268 "2015-01-22T22:17:31Z")
> [@iiandyiiii](#): > > Unless I’m misunderstanding how treasury bonds work You are, and you’re misunderstanding investments in general. ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 22, 2015, 10:22pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/269 "2015-01-22T22:22:44Z")
According to [this link](http://www.investopedia.com/university/bonds/bonds1.asp), I’m right about bonds – you get the coupon percentage every year, and you get the initial value back at maturity. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 22, 2015, 10:28pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/270 "2015-01-22T22:28:21Z")
> [@iiandyiiii](#): > > According to [this link](http://www.investopedia.com/university/bonds/bonds1.asp), I’m right about bonds – you get the coupon percentage every year, and you get the initial value back at maturity. But if you’re getting 4% interest, and inflation is 5%, you’re losing money. The same thing applies to the principal in that bond. $10,000 ten years from now is worth LESS than the $10,000 you invested. All investments have risk, which you seem not to understand. ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 22, 2015, 10:32pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/271 "2015-01-22T22:32:38Z")
> [@D\_Anconia](#): > > But if you’re getting 4% interest, and inflation is 5%, you’re losing money. The same thing applies to the principal in that bond. $10,000 ten years from now is worth LESS than the $10,000 you invested. > > All investments have risk, which you seem not to understand. I know all investments have risk, but the risk for some is near-zero. T-bonds, and perhaps even to a greater extent T-bills, have near-zero risk. The chances of long-term high interest rates are low, and even if it happens, you just lost some value – you can’t lose your principal (or the income). That’s a very, very low risk. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 22, 2015, 10:38pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/272 "2015-01-22T22:38:48Z")
> [@iiandyiiii](#): > > I know all investments have risk, but the risk for some is near-zero. T-bonds, and perhaps even to a greater extent T-bills, have near-zero risk. The chances of long-term high interest rates are low, and even if it happens, you just lost some value – you can’t lose your principal (or the income). That’s a very, very low risk. Have you ever heard of the time value of money? If you invest $10,000 and get that same $10,000 back ten years later, _it’s no longer worth $10,000._ ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 22, 2015, 10:40pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/273 "2015-01-22T22:40:38Z")
> [@D\_Anconia](#): > > Have you ever heard of the time value of money? If you invest $10,000 and get that same $10,000 back ten years later, _it’s no longer worth $10,000._ Obviously, but you had the coupon income for 10 years, and you know exactly how many dollars you’re getting back. Very, very low risk. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 22, 2015, 11:21pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/274 "2015-01-22T23:21:19Z")
> [@iiandyiiii](#): > > Obviously, but you had the coupon income for 10 years, and you know exactly how many dollars you’re getting back. Very, very low risk. Not if inflation exceeds the coupon rate. And again, if you have to sell the bond, to finance current expenses in your retirement, you could very, very well face a loss on your investment. ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 22, 2015, 11:25pm UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/275 "2015-01-22T23:25:18Z")
> [@D\_Anconia](#): > > Not if inflation exceeds the coupon rate. > > And again, if you have to sell the bond, to finance current expenses in your retirement, you could very, very well face a loss on your investment. For a retiree with fixed expenses and insurance, these are extremely low risks. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 23, 2015, 12:14am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/276 "2015-01-23T00:14:43Z")
> [@iiandyiiii](#): > > For a retiree with fixed expenses and insurance, these are extremely low risks. Fixed expenses, who has those, and where do I sign up? Heat, electricity, food, and gasoline, to name just a few, are all variable. Even those that are fixed in the short term, such as rent, cable, or even yard waste stickers, tend to go up every year. I’m not sure what insurance has to do with the equation, though. 😕 ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 23, 2015, 12:21am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/277 "2015-01-23T00:21:46Z")
> [@D\_Anconia](#): > > Fixed expenses, who has those, and where do I sign up? > > Heat, electricity, food, and gasoline, to name just a few, are all variable. Even those that are fixed in the short term, such as rent, cable, or even yard waste stickers, tend to go up every year. > > I’m not sure what insurance has to do with the equation, though. 😕 We’ve probably gone as far as we’re going to go. I think the risk (for T-bonds and T-bills) is really, really low, and (I presume) you think it’s still low but not quite as low as I do. ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 23, 2015, 12:40am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/278 "2015-01-23T00:40:20Z")
> [@iiandyiiii](#): > > We’ve probably gone as far as we’re going to go. I think the risk (for T-bonds and T-bills) is really, really low, and (I presume) you think it’s still low but not quite as low as I do. "Really (even really, really) low, is not risk-free, which was your claim, on multiple occasions. I would still like to know what you are referring to as “fixed expenses”, or did you mean fixed income? ---
**Author:** ![iiandyiiii](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iiandyiiii/32/7924_2.png) [@iiandyiiii](https://boards.straightdope.com/u/iiandyiiii)\ **Post date:** [January 23, 2015, 12:49am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/279 "2015-01-23T00:49:03Z")
> [@D\_Anconia](#): > > "Really (even really, really) low, is not risk-free, which was your claim, on multiple occasions. I said ‘for all intents and purposes’ it was risk-free, or negligible-risk. You think I’m underestimating the risk, I think you’re overestimating the risk. We got it. > [@](#): > > I would still like to know what you are referring to as “fixed expenses”, or did you mean fixed income? I meant fixed income. The coupon income is part of the fixed income, and that income won’t change – so unless the retiree drastically changes his/her lifestyle, there’s (virtually) no risk for a T-bond/T-bill to his/her future. The larger point is that while it’s very difficult to get rich, it’s very easy to stay rich, if one’s chief goal is to maintain their wealth (rather than grow it). ---
**Author:** ![D\_Anconia](https://avatars.discourse-cdn.com/v4/letter/d/67e7ee/32.png) [@D\_Anconia](https://boards.straightdope.com/u/D_Anconia)\ **Post date:** [January 23, 2015, 1:26am UTC](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075/280 "2015-01-23T01:26:29Z")
> [@iiandyiiii](#): > > I said ‘for all intents and purposes’ it was risk-free, or negligible-risk. That’s not what you said in posts 212, 228, or 233. You said risk-free. No such investment exists. [Previous page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=13) [Next page](https://boards.straightdope.com/t/democrats-latest-tax-proposal/710075.md?page=15)