Month: December 2015

When operating a business in one of the highest-tax jurisdictions in the world (Tax Foundation), presumably it is important to know what tax rates and regulations are. When did the rates that affect decisions made in 2015 become known? Today! Well, since President Obama hasn’t signed the bill yet, maybe next week some time. Forbes explains what’s there with “Tax Deal Makes Permanent R&D Credit, Generous Child And College Breaks”:

R&D Credit: businesses, rejoice! The biggest ticket item of all the 52 extenders has finally been made permanent, as well as bigger and better. Beginning in 2016, businesses with less than $50 million in gross receipts will be free to use the credit to offset alternative minimum tax. [See this article on alternative minimum tax for corporations and this example.]

Enhanced Section 179 deductions: In recent years, taxpayers have been entitled to immediately deduct up to $500,000 of the cost of qualifying asset acquisitions (with a phase-out beginning at $2 million). These threshold were due to plummet to $25,000 and $200,000 respectively, beginning on January 1, 2015.

100% exclusion on Section 1202 stock: as I wrote about here, changes made in 2009 and 2010 to Section 1202 — which allows a taxpayer who sells qualifying small business stock held for longer than 5 years to exclude part of the gain — increased the exclusion from 50% to 100% (subject to limitations). This 100% exclusion was made permanent for stock, bringing great relief to investors who acquired QSBS stock in 2015. [i.e., if you have a PhD in accounting you can avoid paying capital gains tax on appreciated small business stock]

Enhanced American opportunity tax credit: From 2009 through 2017, taxpayers have been entitled to a $2,500 credit for four years of post-secondary education, with phase-outs beginning at $80,000 (if single) and $160,000 (if married filing jointly). In 2017, however, the credit was slated to return to an $1,800 annual maximum with lower phase-out thresholds. This deal makes the enhanced credit a permanent fixture in the law. [more welfare for U.S. universities]

Obamacare came under fire as part of the negotiations, as the agreement would pause the 2.3% excise tax on medical devices in 2016 and 2017, while the start of the so-called Cadillac tax on high-cost employer-sponsored health insurance would be delayed from 2018 to 2020. [i.e., the only parts of Obamacare that we like, apparently, are the ones where the government is giving us money]

Because the earned income credit is a lightning rod for fraud, taxpayers will not be permitted to file amended returns claiming the credit for a year when they did not have a valid social security number. The same holds true for the child tax credit; a taxpayer may not file an amended return claiming the credit for any year in which they did not have a valid ITIN (taxpayer identification number). In addition, taxpayers convicted of fraud in claiming the earned income credit will be barred from claiming the credit for ten years, while those found to have recklessly disregarded the rules will be prohibited from claiming the credit for two years. A 20% penalty will also be applied to the refundable portion of improperly claimed credits, reversing an earlier court decision. [i.e., the dream of simplifying the American welfare system with a negative income tax doesn’t work because we are too devoted to fraud]

I look forward to paying my accountant to figure out what all of this means…

Related:

• previous Forbes article that describes the federal tax code as “about as permanent as a Kardashian marriage.”

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Spotlight is a good movie but it may end up being a great record of what we lost when the news business died (except for a few national products, such as the Wall Street Journal). Paying a team of journalists to nail down a story about child abuse by Catholic priests isn’t something that can be done without ad revenue.

The portrayal of Boston is realistic. Our city looks somewhat worn, not blessed with ideal weather, and crowded. Accessing public records in the courthouse was a lot easier in the fictional world of the movie, at least compared to the Middlesex County registry that we visited to create our analysis of the May 2011 divorce lawsuits filed there. A reporter is able to ascertain quickly, for example, that there are no cases filed by a particular lawyer against the Archdiocese. In practice that could take quite some time as only the barest minimum facts about cases are in a computer system. Once a case is pulled, the paper file is incomplete, which we found to be true of a lot of divorce lawsuits. The Boston Globe building is authentic and the interior doesn’t look that different than during my last visit there. The movie premise that there are story categories that the editors are reluctant to research or publish is consistent with what I was told (a reporter had dug around in the Massachusetts family court system and found that judges were appointing friends to serve as guardian ad litems (GALs) in custody lawsuits, contrary to the rule requiring GALs to be appointed sequentially from a list; the connected GALs were running up bills for $50,000 to be paid by the litigants despite the fact that the goal was supposed to be closer to $5,000; the story was killed by the editors and the reporter was told not to poke around in or write about the family court system).

The acting was good, though generally the movie concentrated on people doing their job. We didn’t get to learn a whole lot about these characters outside of their work. Rachel McAdams is my second favorite import from London, Ontario (first favorite), but print media journalists don’t usually look like movie stars. She seemed a little out of place.

Spotlight ends with text explaining what happens after the action of the movie, but doesn’t mention any of the financials. The lawsuits were for cash but we never found out how much was paid. Wikipedia has some numbers. Perhaps the after-movie titles should have been eliminated. The movie tells the story of investigative reporting, not the story of child abuse or pedophilia. So the logical end of the movie is the reporters getting their story out, not what happened to Cardinal Law or the Catholic church.

Readers who aren’t from Boston: What did you think of the movie?

Everyone: Will there be investigative reporting by local media going forward? How will they pay for it? Can the citizen-to-citizen communication made possible by the consumer Internet compensate for the loss of advertising revenue to enterprises that previously funded investigative reporting? Will it take more or less time in a world without profitable local newspapers for a secret like this to be uncovered?

Related:

• Boston Globe archives that are relevant
• “Why Tickets to College Games Come Easy on Capitol Hill” (WSJ, December 14, 2015), a recent example of what reporters get when they dig through public records
• Opportunity in the demise of Boston Globe (from 2009)

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I’m reading Goebbels: A Biography and it seems as though things aren’t that different, 100 years later.

Envious of the rich and feeling oppressed by them?

A series of articles by Goebbels appeared in the Völkischer Beobachter in the following weeks. On May 24 the paper published part of his attack on Reventlow from January,54 and in June the first of his essays, “Idea and Sacrifice,” a declaration of war on the “bourgeois,” whom he hated, as he openly conceded, not least because they displayed what “we have not yet conquered in ourselves, a touch of small-mindedness placed by Mother Nature in every German cradle.”55 He harped on the same subject later that month with his contribution “Sclerotic Intelligentsia,”56 and again in July with “National Community and Class War.”57 This latter article took the form of an open letter to Albrecht von Graefe, leader of the Deutschvölkische Freiheitsbewegung, in which Goebbels described the class war as the repression of the great mass of the people by a very small exploiting class. They and their bourgeois accomplices, their “shameless henchmen” (Graefe and company, in other words), were preventing the formation of a true “national community.

Paying attention to politicians who say outrageous things?

If the whole object of Goebbels’s highly robust propaganda campaign was to attract attention at any price, he certainly succeeded: “People started talking about us. We could no longer be ignored or passed over in icy contempt. However reluctant and furious they were about it, people couldn’t avoid mentioning us.” The Party was “suddenly at the center of public interest,” and “people now had to decide whether they were for or against.

Bored with your job? Having trouble getting a new one?

On January 2, 1923, Goebbels took a job in a bank. Else had strongly urged him to take this step;116 the doctor of philosophy, as he now was, seemed to have few other professional prospects. But his dislike of this new occupation set in quickly and grew steadily. … Back in the Rhineland, he received his dismissal notice from the bank. Although various literary projects were taking shape in his mind, he went looking for employment. He found none.

Looking to buy a high quality piano?

The piano manufacturer Edwin Bechstein and his wife, Helene, were fervent supporters of Hitler, who made use of their home for discreet political meetings.

Living at home and fighting with the parents?

He found the atmosphere in the family home increasingly oppressive. He wanted to get away, he confessed in late December: “If only I knew where to!” At home he was “the reprobate, […] the renegade, the apostate, the outlaw, the atheist, the revolutionary.” He was “the only one who can’t do anything, whose advice is never wanted, whose opinion isn’t worth listening to. It’s driving me crazy!”

One huge change: people didn’t waste as much time in graduate school back then:

Back in Heidelberg, Goebbels worked toward his doctorate. His reading matter, Oswald Spengler’s The Decline of the West, was not calculated to lift his mood. On the contrary, this grand attempt to situate the decline of Europe within a universal history of the rise and fall of the great cultures induced “pessimism” and “despair” in him. Beset by such dark thoughts, he plunged into work on his doctoral dissertation, which he wrote in four months in Rheydt after the end of his Heidelberg semester.

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“The Uncounted Trillions in the Inequality Debate” is an interesting WSJ article by Martin Feldstein, Ronald Reagan’s economic adviser and now a Harvard professor. The main theme of the article is kind of pointless:

So what is the grand total? Add the $50 trillion for Medicare and Medicaid wealth to the $25 trillion for net Social Security wealth and the $20 trillion in conventionally measured net worth, and the lower 90% of households have more than $95 trillion that should be reckoned as wealth. This is substantially more than the $60 trillion in conventional net worth of the top 10%. And this $95 trillion doesn’t count the value of unemployment benefits, veterans benefits, and other government programs that substitute for conventional financial wealth.

In other words, the bottom 90% of Americans are wealthier in the aggregate than the top 10%, something you might not have imagined after listening to our most successful political candidates (nothing works better than manufacturing envy!). But if the relevant question is political power, i.e., can the bottom 90% vote to take stuff away from the top 10% in hopes of having it transferred to themselves (minus whatever share the government bureaucracy takes), then the current distribution of wealth isn’t relevant.

What is interesting about this article to me is the calculation of entitlement program costs:

Most Americans count on Social Security to finance their consumption in retirement. The Social Security trustees estimate that Social Security “wealth”—the present actuarial value of the future benefits that current workers and retirees are projected to receive—is $59 trillion. Excluding the top 10% of households reduces the amount to about $50 trillion.

However, to qualify for those benefits, current workers must pay future payroll taxes with a present actuarial value of about $25 trillion. So you have to subtract these taxes from the $50 trillion, leaving a net Social Security “wealth” of $25 trillion for the bottom 90% of households. Adding this to the $20 trillion of their conventionally measured net worth, and these households have total wealth of $45 trillion.

The Congressional Budget Office estimates that over the next decade total Social Security retiree benefits will be $10.2 trillion, while the benefits for Medicare will be $9.0 trillion and those for Medicaid will be $4.6 trillion (about half of Medicaid benefits are for retirees in nursing homes). In short, the benefits for these two government health programs exceed the amount Social Security will pay out to retirees in cash.

But unlike Social Security, receiving government health benefits does not depend on current workers continuing to pay taxes. This suggests that the net “Medicare and Medicaid wealth” implied by current law is probably about as large as these households’ “gross Social Security wealth” of $50 trillion.

The apparent inequality of wealth in the U.S. in reality reflects the government’s out-of-date way of financing retirement. Politicians worried about inequality should start by fixing the inefficient programs they directly control.

Feldstein claims that somehow Americans would be better off if they financed their own retirements by putting their payroll tax funds into a 401(k). This doesn’t seem plausible. If we are paying in $25 trillion and getting out $50 trillion (both on a net-present value basis), how are we ever going to find an investment in the market that will beat that? Maybe our children or grandchildren could be better off, but not current voters.

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According to the New York Times, Ellen Pao is one of the most qualified workers in the United States. She is also nearly ubiquitous in the media. And the U.S. labor market is supposedly tight, especially for high-skill workers. Ms. Pao’s last full-time job was in July 2015. Why haven’t we heard about Ms. Pao being snapped up by another venture capital firm or being hired to exercise her unique skills on behalf of another enterprise?

[Ms. Pao was a “luncheon keynote” speaker on December 10 here in Boston at the Massachusetts Conference for Women. She was part of “A Conversation on Workplaces that Work” and characterized as “entrepreneur, investor and writer”.]

Readers: What happened to Reddit after Ms. Pao’s departure? Has the company done better or worse under the new management? Is the site better or worse from a user’s perspective? (I’m assuming that the collapse of Internet advertising and the rise of Facebook imposes a generally negative trend on sites such as Reddit, independent of who is CEO.)

Related:

• the awesome PC-24 that the Kleiner Perkins partners could have bought for themselves if they hadn’t had to spend what is likely to have been $10+ million defending against Ms. Pao’s lawsuit
• “Global douchebag circuit: Aspen Institute, Ellen Pao, and Buddy Fletcher”
• “Litigious Minds Think Alike: Divorce litigators react to the Ellen Pao v. Kleiner Perkins lawsuit”
• “MIT built its own Ellen Pao before the Ivy League did: Gretchen Kalonji” (since the conference was in Boston!)

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New way to scare children: “We were so poor growing up that our fridge had only two doors.”

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“Battle over Kerkorian’s child support payments lives on” is a Las Vegas Review-Journal article that captures a lot of the spirit of the U.S. family law system. Here are some excerpts:

Kirk Kerkorian died in June, but the battle over his estate rages on.

The court-appointed guardian of the daughter of Kerkorian’s ex-wife last month petitioned the Los Angeles Superior Court to revoke the admission of the late Nevada casino magnate’s will to probate.

The court’s website shows the revocation petition was filed Nov. 23, the same day Lisa Bonder, Kerkorian’s ex-wife, filed a $1.3 million creditor’s claim against Kerkorian’s estate. Mynewsla, a website, says Bonder seeks unpaid child support.

…

Kira Kerkorian is the child of Bonder, a onetime tennis pro to whom Kerkorian was married for 28 days in 1999. Kerkorian thought he’d fathered the girl until Bonder revealed Hollywood producer Steve Bing was the father. A security guard working for Kerkorian nabbed dental floss from Bing’s trash to get a DNA sample.

Kira Kerkorian is 17; she’ll turn 18 March 9. …

Bonder’s child support fight with Kerkorian has lasted 13 years already. In 2002, she demanded $320,000 in monthly child support for then-4-year-old Kira; a judge granted $50,316 per month. The Associated Press reported that Kerkorian in December 2010 agreed to pay more than $10 million in back child support plus $100,000 a month for Kira, of whom he’d grown fond.

The AP said in the 2010 settlement, Kerkorian agreed to provide $100,000 a month until Kira turns 19, or graduates from high school, is no longer a full-time student or no longer lives with her mother full time. After that, the settlement says, the child support would drop to $50,000 a month.

Mynewsla says Bonder’s claim states the $50,000 monthly payments were to run from July 2016 through June 2017 and were made from July through November. Therefore, according to the claim, Kerkorian’s estate should receive a $500,000 credit, leaving a $1.3 million balance.

Note that the extent to which Lisa Bonder is also getting child support revenue from Steve Bing is unclear due to the fact that it wasn’t litigated. Under California’s child support formula, Kira should have yielded a strong cashflow for her mother, though there was a competing claim against Bing from Elizabeth Hurley (Telegraph). [Despite these brushes with the family law system, Bing still has enough left for a personal Boeing 737, though, according to Wikipedia.]

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My neighbors and I all promise to lose 10 lbs during the Thanksgiving/Christmas season. How is this different than this weekend’s climate agreement described by the New York Times as “landmark”?

“Leaders Move to Convert Paris Climate Pledges Into Action” quotes one of the assembled bigshots saying “Today, we celebrate. Tomorrow, we have to act.” Is that distinguishable from me saying “At this evening’s party I can have a few extra plates because tomorrow I am going to eat very lightly”?

Another attendee is quoted as saying “we have to make sure our national contributions are aligned with what the scientists tell us we need to be doing.” Isn’t that like me saying “I have to make sure that my eating and exercise in 2016 are aligned with what the fitness instructor says to do”?

The article: “The Paris Agreement’s provisions will not kick in until 2020.” Me: “My diet starts right after Fred and Beth’s awesome New Years party.”

Related:

• Video of Barack Obama: “President Obama said the historic agreement is a tribute to American climate change leadership.”

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I went to see Spectre, the latest James Bond movie. The opening scene is well worth the price of admission, even before the aerobatic Bo-105 helicopter comes on screen. The feeling of immersion in a Day of the Dead festival in Mexico city is a tremendous artistic achievement. How did they make it look as though the helicopter were doing maneuvers over the heads of the crowd? According to this article, they did it by… flying maneuvers over the heads of the crowd (maybe not the loops and rolls, though!).

I have to love any movie that starts and ends with helicopters. Consistent with other Bond movies, checklists and laborious starting procedures are not featured. Maybe in a FADEC world we will get to see Bond actually start a helicopter! Airplane pilots will appreciate seeing the Britten-Norman Islander used to chase cars.

My companions for the film were two adult friends and their 12-year-old son. The father said afterwards that he thought that the 12-year-old shouldn’t have been allowed to see the movie, partly due to the fact that it suggested that James Bond would have sex with women he had only recently met. Discussing this the next day at lunch, the assembled group of adults concluded that we would be conducting a natural experiment: If a few years from now the boy says that he wants to have sex with an attractive young woman, we will know that it is because he watched the movie. This observation did not cheer up the father.

Separately, a friend emailed this on the same weekend:

“You know, those are just lines of code, not actual people.”
— [10-year-old] responding to his friend’s comment about the dead bodies/skeletons in a multiplayer game they are playing on Xbox live

Dumb question for readers… (spoiler alert!): Why was there value to Spectre in gathering electronic surveillance data? Our own government agencies can’t do that much with the data streams, apparently; how could criminals use surveillance data to make money? Steal credentials for transferring funds?

Related:

• Stream of consciousness commentary on the movie San Andreas
• a comparison of the potential profitability of a sexual encounter with James Bond in different international jurisdictions (considering all of the movies together, most of Bond’s intimate activities with women seem to occur in Civil Law countries where child support revenue tends to be capped, rather than in England (Common Law), where profits from a one-night encounter are potentially unlimited; in the U.S., Bond seems to favor Nevada)

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Considering buying a house? Here’s a tale from the Department of How to Turn a Small Problem into a Fatal Problem: the erratic temperature control in our IKEA-brand oven finally got on my nerves enough to arrange service. The range is made by Whirlpool in Italy so it was Whirlpool who showed up. The technician got excited about a loose trim piece as the source of the temperature fluctuation and took the range away from the wall to facilitate reattachment. Then he put it all back and tested the oven and discovered that the temp was still not regulated properly. So he ordered some parts and left. A few hours later we began to think “this gas smell is a little too strong to be accounted for by a two-year-old playing with the knobs.” So it was time to call the emergency number for National Grid. They had to show up after dark, pull the range away from the wall again, and tighten the connections so that they were no longer leaking.

Related:

• Best expressed arguments against homeownership

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