Snarky Behavior

Entries tagged as ‘taxes’

Joe the Plumber(s)

October 20, 2008 · Leave a Comment

l this talk about small business and income above $250,000 got me thinking… hey, I used to work for a small business. I wonder how the Presidential candidates’ respective tax plans would effect them?

I realized though, that there really is no “Joe the Plumber” at my old firm.  Before she passed away, the CEO established an “Employee Stock Ownership Plan,” (ESOP) devolving her ownership to the employees.  Individually, the employees should be able to make tax-exempt “contributions” (i.e. purchase shares of stock) without any changes… this policy should remain untouched regardless of who becomes President.

In terms of the firm, and somebody should definitely check me on this, my understanding is that there are significant tax deductions to be had on pre-tax contributions to the fund.  Additionally, both Obama and McCain are proposing to eliminate capital gains taxes on small businesses, so any realized gains in the value of the shares currently held by the firm would also be exempt from taxation.

What about the $250,000 threshold?  Again, I should be checked on this, but my understanding of tax burdens and incentives is that because there are tax-deductions for pre-tax contributions to the ESOP, it would make sense for the firm to pay dividends on the Net Operating Profit (NOP) up to that threshold.  The company is essentially paying down a leveraged loan used to buy-out the previous owner, and both the interest and principal are tax-deductible.  (Lots of deductions here going on here).  So, depending on the structure of the businessess, that seems like an appropriate amount of money to carry forward year-over-year.

So basically, my understanding is that the “Joe the Plumber” model does not apply.  It would if there were a single owner who received all of the after-tax earnings, but since the company is employee-owned, if anything, the Obama tax-plan seems like a better alternative because it encourages the firm to pay-out dividends below the $250,000 threshold.

Note:  I am nowhere near 100% confident this interpretation is correct.

Categories: Neato
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Question for Those in DC

September 16, 2008 · 7 Comments

We all know somebody who works in government who is probably vastly under-qualified for what they do.  Or we’ve at least met someone who works in government for some obscure program, in which you respond “wait… that’s tax-payer funded???

My question is:  does that make you less inclined to support government in theory and/or in practice?  Or does it come with the territory, as in you have a “can’t throw the baby out with the bathwater” mentality about it (i.e. you take the good, you take the bad, you take them both, and there you have… the facts of life)?

I had always assumed that people became Republican as they got older because their wealth increased, but now I’m starting to question that premise.  I mean, if I knew a schmuck who got hired at a relatively high level for a publicly traded company, I could short the stock or at least avoid buying it.  But what can you do when that happens in government?

Categories: work
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Inform Your Vote: Tax Edition

June 11, 2008 · Leave a Comment

via CNNMoney.com: (Thanks to Melissa)

BREAKING DOWN THE NUMBERS
Here’s how the average tax bill could change in 2009 if either John McCain’s or Barack Obama’s tax proposals were fully in place.
MCCAIN OBAMA
Income Avg. tax bill Avg. tax bill
Over $2.9M -$269,364 +$701,885
$603K and up -$45,361 +$115,974
$227K-$603K -$7,871 +$12
$161K-$227K -$4,380 -$2,789
$112K-$161K -$2,614 -$2,204
$66K-$112K -$1,009 -$1,290
$38K-$66K -$319 -$1,042
$19K-$38K -$113 -$892
Under $19K -$19 -$567
Source:The Tax Policy Center
So if you’re voting in your self-interest, and the tax rate is a primary concern of yours, it doesn’t make sense to vote for John McCain unless your income is over $161K.
I’m not sure how capital gains is figured in all this but I guess you can go tot he Tax Policy Center to get a better understanding of the methodology.

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Dropping Knowledge: The Economics and Ethics of Carbon Abatement

May 20, 2008 · Leave a Comment

This past semester I took an interesting (albeit frustrating) class on the “Risks of Globalization,” taught by an economist who was involved in the incipient development of the Kyoto protocol. 

Fundamentally, the risks of climate change are as follows:

1.      Overwhelming scientific evidence shows that the earth is becoming progressively warmer, and that this trend is accelerating.  People who still argue this fact are known in most circles as “dumb fucks.”

2.      Significant evidence suggests that this warming is anthropogenic, primarily due to Carbon emissions (CFC, CO2, and CH4).  People who argue this fact are known as Republicans.

3.      The atmosphere is treated as a global public good.  That means it is non-rival and non-exclusive (everyone enjoys it for free without diminishing anyone else’s right to enjoy it).  Also important to note is that gases disperse evenly throughout the atmosphere.  Hence the “global” part.

4.      Because the atmosphere is treated as free for everyone, it is subjected to what is known as “the tragedy of the commons.”  In economic terms, this means that because no single person (or nation) can reap the benefits of a clean atmosphere, no single entity will incur the costs to do so.  Another way to think of this is: a public toilet that everyone uses but nobody cleans up.    

5.      Generally, when dealing with the market of public good provision, we would say that the sum of everybody’s preference for clean air (instead of carbon-based energy consumption) should equal the rate at which we as a society choose that tradeoff.  That is another way of saying, if you want to reduce your individual carbon footprint, and I want to reduce my individual carbon footprint, and so on for every person in the world, the total amount we reduce carbon emissions will be equal to the global rate of change between a public good (clean air) and a private good (energy production).   

6.      The problem here is that there is significant reason to believe that we cannot afford to make that tradeoff at its current rate, because it results in insufficient abatement. 

This is where the majority of people who think about solutions to this problem begin to diverge significantly.  The consensus is that we either need some mechanism to increase the individual incentives to abate (i.e. a carbon market), or to decrease the benefits of polluting (i.e. a carbon tax).

In theory, a market (which allocates property rights or permits to emit, which are then priced and traded for competitively) provides certainty for the outcome of the tradeoff (since emissions are capped), without providing certainty for the costs.  A tax provides near certainty in costs (by internalizing the cost of the tax), without providing certainty for emissions (since there is no cap).

What makes these options trickier is the underlying game theory.  Since the policies are directly tied to energy consumption, which is directly tied to domestic output, self-imposed “carbon constraints” in a global economy put early adopters at a competitive disadvantage.  Carbon markets that aren’t global essentially introduce a “black” market in non-participating nations, who continue to treat the air as free.

Even if we can get beyond the competitive issue with present rivals, the issue becomes even more complex when we consider future generations.  As this article from Scientific America highlights, there is a fundamental ethical question surrounding inter-temporal dynamics:      

The costs of mitigating climate change are the sacrifices the present generation will have to make to reduce greenhouse gases.  The benefits are the better lives that future people will lead: they will not suffer so much from the spread of deserts, from the loss of their homes to the rising sea, or from floods, famines and the general impoverishment of nature.

I think that this way of framing the problem (sacrificing today for the benefit of tomorrow) complicates the issue unnecessarily. 

First of all, if we indeed create the incentives to reduce current consumption, we should compensate ourselves by treating this reduction as an immediate increase in investment.  As such, we (current generation) should be entitled to a return from future beneficiaries—through financing for alternative energy sources today.   

Future generations will expect a cleaner and energy independent future, and will pay for it by an increased debt burden.  This is a fair and just expectation, unlike the expectations to bear the costs of the reckless and unjust invasion of Iraq.

The problem after all isn’t energy consumption per se… it’s carbon emissions.  If we can invest in and/or subsidize immediate alternatives to coal/oil/natural gas, then we can consume all of the energy we want (hypothetically speaking).    

Second, I believe that the idea of sacrifice for future beneficiaries undervalues the costs we are currently facing from not only climate change, but fluctuating commodities.  As long as coal and oil are the most cost competitive sources for energy, we will use them, and build our infrastructure around them.  Clearly these are not viable long term investments, so the risks to the investments, and therefore the incentives to remain committed to those inputs of production, increase.

 

If you take oil off the table, there is no longer speculation on what the future holds or when it will get here.  It is not a matter of reducing current consumption.  It is a matter of leveraging the future.

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That’s a Whole Lot of Money

April 9, 2008 · 1 Comment

Joseph Stiglitz has estimated the cost of the Iraq war to be $3 trillion dollars by 2017.

These cost estimates include:

  1. disability and compensation for veterans (1.7 million troops have been deployed to date, with 70,000 wounded or diseased and 120,000 having already sought mental health care);
  2. replenishing the military to its normal level of soldiers and equipment; and,
  3. repaying the debt (with interest) that was raised to pay for this war, which has been fully funded by borrowing.
  4. lost economic contributions of those who went to war
  5. the withdrawal from the economy of family members who quit work to care for loved ones injured in the war
  6. the cost to allies and to Iraq

Now, projecting cost estimates for a destructive exercise like war over long-term periods (including well into the future) can prove to be a debatable task, especially when you’re accounting for opportunity costs (i.e. the lost economic contributions of those who went to war) and significant unknown variables (price of oil, nature of military commitment).  We can’t even agree on civilian death tolls in that country, which should be a far easier task in simple accounting.   So it’s no surprise when such attempts are dismissed or attacked for their methodologies in arriving at such an absurdly large figure.

Most importantly– and this is where journalism tends to do the public a great disservice, I think– is that the figure of a trillion dollars (let alone three trillion) is an entirely unrelatable figure for our democratic republic, which is financing the operation.  (Note:  credit the New York Times for their efforts… although presenting the figure as “what else could we have spent this money on?”, while useful in explaining scale, widens the scope of the issue beyond “why are we spending this much on this particular effort?”)

$3 trillion may not be an “accurate” figure, but I’m willing to give the former chief economist of the World Bank the benefit of the doubt in his estimates. I haven’t read the report and am not sure if the valuation is in present dollar terms (although I assume it is, including future interest payments).  Keep in mind then, that the following calculations are going to be (very) fast and loose… it’s not intended as an exercise in social science, only one in wrapping your arms around the scale of what has transpired:

Our government spends $16 billion per month on military operations in Iraq and Afghanistan (excluding incurred interest), putting the annual figure at something around $200 billion.  The IMF estimated the nominal GDP of the World’s Economy in 2007 to be $53.35 trillion, $13.8 trillion of which is generated by the United States.  This means that as a share of the world’s economy, government spending on Iraq and Afghanistan amounted to 1.5% of the US’ GDP.  And for what?

Some might argue that Keynesian deficit spending is necessary during a recession, but what percentage of the spending are we recapturing in our economy?  How much of that $16.6 billion per month can we actually count toward our own GDP?

What about the premium costs that war and instability have created in the pricing of oil?

What about the costs to our sluggish economy of higher energy prices?  Higher priced commodities (including food), all around?

The Bush administration initially estimated the reconstruction costs of Iraq in the $50-$100 billion dollar range, with only $1.6 billion required to rehabilitate the oil industry.  Oil revenues would help the reconstruction “pay for itself.”  Now projections suggest that this estimate was off by a scale of over 30 to 60 times the actual cost?

Can you imagine investing in a company where the CEO took on an extremely risky project, estimating tremendous (and long-term) returns, and then misses the capital expenditure by 30 to 60 times the projection?  And not only that, but the business model on which he hopes to rely on for future revenues is extremely volatile, and universally accepted as out of date and in dire need of overhaul within the next 10 years?

Now we find ourselves in a situation where on the one hand,  our country should be trying to develop new utility-scale energy sources (other than fossil fuels), and on the other hand, we’re entirely dependent on a global market for oil to recuperate the massive expenditures for the invasion, occupation, and reconstruction of Iraq.

I believe that’s what’s called “between Iraq and a hard place.”

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Do It for the Kids

January 9, 2008 · 1 Comment

Robert Samuelson, in the Washington Post, reminds me why I’m angry:

Our children face a future of rising taxes, squeezed — and perhaps falling — public services and aging — perhaps deteriorating — public infrastructure (roads, sewers, transit systems). Today’s young workers and children are about to be engulfed by a massive income transfer from young to old that will perversely make it harder for them to afford their own children.

No major candidate of either party proposes to do much about this, even though the facts are well known.

Don’t mind us though.  We’re just a bunch of self-indulgent Gen Y’ers. 

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DC Hot Cops

May 9, 2007 · Leave a Comment


These guys are pros, Michael. They’re gonna push the tension till the last possible moment before they strip.
GOB Bluth

Well, it’s been nearly a month since the District of Columbia received my 2006 tax return. I’d like to point out that my accompanying check for $46.43 was cashed within a day of receipt. (I’m guessing there are a ton of bad checks written in this city to the Tax Authority).

Now, despite the “Taxation Without Representation” motto, I feel pretty comfortable with how my money is spent in DC. The metro runs decently enough, the streets are reasonably well maintained, the sidewalks are generally clear, and the rats are only a minor issue (I propose a feral cat initiative… sorry, Bob Barker). The crime in my neighborhood is way down, and I generally feel safe.

True, the city pays more per-student than any other school district, and does an overall appalling job of educating its youth (”Thomas Jefferson was the gayest president ever!“– duh, it was William Henry Harrison). True, the Washington Nationals suck and I am uncomfortable with local government ponying up for their half-assed stadium design. True, the city did an awful job of snow-removal this year. And true, the city that headquarters every major environmental NGO is embarrassingly behind in terms of recycling.

Those things I can live with. I hope my $46.43 and the rest of my withholdings went to improving these issues.

What I cannot live with is arbitrary enforcement of the law… especially when it is arbitrarily enforced against ME.

Today I was issued a citation in the amount of $10 in a “jay-walking” sting on 15th and Rhode Island. I kid you not. Officer Wright of the MPD stopped me for entering the intersection with 6 seconds remaining on the flashing hand, and safely crossing the street within the cross-walk without obstructing any traffic.

I asked him: “you’re kidding, right?” He assured me, he was not kidding. It’s weird how cops get unfairly stereotyped as assholes.

Not that I blame him. If I were a cop, I’d rather cherry-pick young professionals ambulating on their way to work rather than, you know, preventing crime.

Obviously I have no intention of paying this fine.

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