Philip Greenspun’s Weblog

“Putting Numbers to a Tax Increase for the Rich” is a nytimes article aiming to quantify the richness of America’s rich bastards.

All of the data are misleading due to the fact that the Times uses average rather than media income. So the average after-tax income of someone in the top income quintile is $238,685. The typical person in that quintile is likely earning much less, however, because the average includes people who enjoy $50 million in a good year (perhaps an entrepreneur cashing out of ten years of investment in a startup).

It also turns out that the Times calculates “after-tax income” by looking only at federal income taxes. This makes it easier to conclude that a rich bastard could pay more without being discouraged from working. Thus a person in the 95-99% area, has an average pre-tax income of $405,492, pays federal taxes of about 25 percent, and ends up with an “after-tax income” of $303,273. But what if that person lives in Manhattan? New York state tax is roughly 8 percent of gross and New York City tax is about 3.65 percent of gross. Considering that state taxes are deductible for the purpose of calculating federal tax, let’s call this a 10 percent rake. Now the rich bastard has an average after-tax income of about $260,000. The rich bastard also has to buy some goods and services in Manhattan where sales tax is nearly 9 percent. Suppose that $100,000 is spent each year within the city, including on restaurant meals. That’s another $10,000 to the government, so the after-tax income is $250,000. Finally, if this person owns a condominium he or she will pay perhaps another $20,000 per year in property tax, about $5,000 of which will be refunded in the form of lower federal taxes. So the true after-tax income is $235,000 and the total tax rate is about 42 percent.

Suppose that the high income of this rich bastard did not go unnoticed in the world of romance. After 10 years of Upper East Side boredom, the spouse decided that it would be more fun to start having sex with younger companions and sued the rich bastard for divorce, obtaining custody of two children. Under New York family law, the victorious plaintiff would be entitled to 25 percent of the defendant’s gross income, a non-deductible $100,000 per year. Now the income after child support is $135,000. (Concrete example from the nytimes of a law firm partner earning $375,000/year who can barely afford to survive in Manhattan. This is partly due to the fact that he was mined out for $125,204 per year by a divorce plaintiff.)

Suppose that our example rich bastard is a male. Post-divorce he decides to start dating. His new friend becomes pregnant and decides that she wants to keep the kid but ditch the father. Now he is on the hook for 17 percent of 75 percent of his income (the 25 percent paid to his first plaintiff is deducted for the purposes of calculating child support). That’s a non-deductible $51,700. This leaves our rich bastard, the target of the Democrats’ proposed new taxes, with $82,300 in spending power with which to (1) sustain himself in the New York metropolitan area, (2) provide a place for children to stay every other weekend, and (3) pay whatever additional federal taxes are imposed by Congress.

[Note that, depending on the income of the first plaintiff, the example rich bastard might have less after-tax and after-divorce-litigation money. In addition to child support profits, the first plaintiff might be entitled to alimony of about 30 percent of the pre-tax income. This would be a tax-deductible $121,678 per year.]

Readers: What do you think of the nytimes analysis? Is the U.S. full of low-hanging fruit ripe for the picking by the IRS? Or does looking only at federal taxes grossly distort the data?

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I ran into a divorce and personal injury litigator at a party in Cambridge the other day (background on Massachusetts family law). Her most recent trial concerned the amount of alimony that a defendant who had reached full retirement age (67 currently) should pay. Under a 2011 law characterized by proponents as “alimony reform” (I personally reject that characterization since family law is pretty much a zero-sum game and what looks like a positive “reform” to a plaintiff will generally be a negative for a defendant, or vice versa), the defendant should have been able to stop paying the plaintiff. What did the judge decide?

First, a little background… about 30 years ago the plaintiff sued her husband. As is typical in Massachusetts, the plaintiff prevailed (obtaining the house, kids, cash) but the profitability of the whole enterprise was limited by the defendant’s below-average income. Stripped of daily contact with his children, his domicile, and most of his spending power, the defendant went over the border and moved in with his brother in a neighboring state, thus saying goodbye to the plaintiff and severing his ties with the children (consistent with the research results summarized in http://www.realworlddivorce.com/ChildrenMothersFathers: “Ten years after a marriage breaks up, nearly two-thirds of the children report not having seen their fathers for a year”). The plaintiff eventually learned that the defendant, together with his brother, had won his local state’s lottery and thus 20 years of substantial annual payments. She went back to court and sued for increased alimony and child support payments based on the new cashflow. “We were able to get almost 100 percent of the net lottery proceeds transferred to us,” said the litigator, “in a combination of child support and alimony. But there were a lot of hassles due to the interstate nature of the litigation.” My companions and I at the party congratulated her on winning what seemed like a complete victory. “My client did make one mistake,” she said ruefully. “She should have gone back to court to get her alimony increased when her children turned 23 and the child support payments stopped.”

The latest court proceeding was started by the former husband. “His income from wages was zero,” said the plaintiff’s lawyer, “and the lottery payments had ceased, but he was still under a court order to pay the same amount out of his Social Security and retirement savings.” The former husband sought to have the alimony terminated in accordance with the headline language of the new alimony statute. The former wife, who had never worked and therefore was not entitled to Social Security, sought to have the court order her ex-husband to keep sending checks in the same amounts, regardless of his new lower income or advanced age. The judge split the difference and ordered the man to keep paying the woman indefinitely, but at a reduced rate. (The fine print of all of these laws gives judges discretion to do more or less whatever they want.)

[Note that this is consistent with what a divorce litigator with 40 years of experience told us. “Statutory language changes, but there is no jury in a divorce lawsuit,” she said. “So if the Legislature gives the judge any discretion the outcomes won’t change. The judge has a certain idea of what a fair resolution looks like and, absent removing judicial discretion, the only thing changing the statute does is change what the judge writes to justify that outcome.”]

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We received a hardcopy insurance statement in the mail for our son’s first two days of life at a local community hospital. The “amount your provider charged” was $5,047. Blue Cross got a “discount” of $3,030. The total cashflow was thus $1,945 of which we paid $73 (Blue Cross says “Benefits are not available for routine services” and this was the full amount billed for “Hospital Services”). The printout says to expect a hardcopy bill to arrive in the mail from the hospital at a future date.

Now I’m wondering what function the retail price serves. Does Blue Cross pay attention to the $5,047 that the hospital wanted in order to pay $1,872? If Obamacare makes it illegal for Americans to refuse to purchase health insurance, why have a retail price at all? TIME says that roughly 10 percent of Americans are uninsured (August 12 article; students of government-media partnership will be interested to see that the journalists focused on the accomplishments of the Great Father in Washington: “Nearly 90% of of Americans Now Have Health Insurance”). That’s about 32 million people. But are those 32 million uninsured folks going to schedule a delivery at a private hospital like this one? And then have $5,047 that they are able and willing to pay?

[Note the that hoped-for $5,047 was on top of all of the maternity/labor/delivery costs. This is a bill for the child; the major expenses show up on the mother’s statement.]

• What other industry can afford to mail out a 4-page hardcopy bill for $0?
• America’s Efficient Health Care System: my $15 bill for a checkup (pre-Obamacare)
• An Obamacare Day
• Slam-dunk employment discrimination case against hospital maternity operations?

 

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New Yorker ran a story back in December 2014 about how Theranos, a Silicon Valley darling valued at $9 billion (the same as Sikorsky; Sheryl Sandberg and the New York Times would want us to remember that, had the company been founded by a man instead of a woman, it would be valued much more highly and therefore Elizabeth Holmes would be worth a lot more than $4.5 billion).

The killjoys at the Wall Street Journal today, however, report that getting regulatory approval for the new machine is proving challenging. Even worse, the true enemy might be Biology, that great humbler of scientists and engineers:

In 2005, Ms. Holmes hired Ian Gibbons, a British biochemist who had researched systems to handle and process tiny quantities of fluids. His collaboration with other Theranos scientists produced 23 patents, according to records filed with the U.S. Patent and Trademark Office. Ms. Holmes is listed as a co-inventor on 19 of the patents.

The patents show how Ms. Holmes’s original idea morphed into the company’s business model. But progress was slow. Dr. Gibbons “told me nothing was working,” says his widow, Rochelle.

In May 2013, Dr. Gibbons committed suicide. Theranos’s Ms. King says the scientist “was frequently absent from work in the last years of his life, due to health and other problems.” Theranos disputes the claim that its technology was failing.

The Journal made a disturbing chart showing the results of six tests by Theranos compared to results from traditional hospital tests. For those six tests (out of an unstated larger number), Theranos found that the patient was outside the normal range while the hospital tests were normal.

Perhaps this will end up as a good reminder to investors that when the FDA and Biology are involved, not every company can be a Tesla…

Some interesting reader comments from the Journal:

A woman with zero medical and engineering training claim invented a earth-shattering testing machine that beats all existing technologies and equipment that human race have accumulated so far. So she was born with all knowledge far surpassing human being has possessed. A very good theme for a sci-fi fiction.

Is she married? I’d be willing to take care of mansion and other domestic duties (hire her a fashion consultant, cook dinner, coordinate social calendar, etc.). Prenuptial agreement not required.

All, including the author, are focusing on the wrong issue. The fact is ALL of them: labcorp, quest and theranos are weak on accuracy. Results routinely come back with a HUGE range on the “answer”. The solution is implementing mass spectrometry to whatever test possible This is where diagnostics is moving. And one company, applied isotope tech, possesses the method which makes mass spectrometers more accurate (now testing human blood for metals). They are more accurate by far then all of them, including the reference labs theranos aspires to!

I had a very well respected and well published doctor tell me recently that he and his research team sent 3 tubes of the SAME PATIENT SAMPLE to three different labs, and got back wildly different results on a mass-spectrometry assay (which is supposed to be the gold standard for this particular test, and more accurate than the radioassay). One result varied by 100% another by close to 50%. One reason results have to be always interpreted within the lab provided reference ranges, but even that, do not assume the result you receive is pinpoint accurate. It may not be. Blood tests are good at detecting things wildly out of whack, and within closer thresholds to normal ranges treat cautiously and retest at an interval.

Interesting article, of course what’s driving this want to be IPO is the opportunity to exploit the already ridiculously expensive Lab Corp / Qwest-for higher prices, market. Recent lab script from my doctor produced a quoted 1200 dollar lab corp “cash” price while internet company, Private MD, (using Lab corp drawing center) was 330, herein lies the problem, somebody’s making money at 1200 bucks for, in this case, Male Hormone panel tests. Where is the economy of scale ? It seems the more consolidated these companies become the ore expensive their product becomes, go figure. Anyway, we should all hope the Theranos’s of the world succeed, we need the competition.

I did a medical residence in clinical pathology (lab medicine). I worked in a major hospital lab for 2 years. I practiced medicine for more than 30 years. I have reviewed test results for thousands of blood samples. It is difficult to make generalizations from one test result, but here are ideas for future review. In general, blood test results for calcium are accurate and rarely outside the “normal = reference” ranges. This is because the body carefully regulates calcium in blood. A high calcium far outside normal range is unlikely. It is rarely affected so much by fasting or diet or medications. All results are consistently elevated (WSJ graph). Usually means sample became concentrated during extraction, storage, etc. I agree that now labs draw too much blood. Personally, I require lab drawing on pediatric tubes, and only as much as needed x tests (which I know). However, tiny draws may alter blood chemistry.

[Update, 10/16: “Hot Startup Theranos Dials Back Lab Tests at FDA’s Behest” is a WSJ follow-up story subtitled “Firm has stopped collecting tiny vials of blood drawn from finger pricks for all but one of its tests.”]

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Why does the U.S. economy grow so slowly on a per-capita basis? (we have growth in headline GDP, of course, but much is driven by the increase in population size) “In California, Electric Cars Outpace Plugs, and Sparks Fly” (nytimes) may explain a small portion of the stagnation: some of our best-educated and highest-paid citizens are fighting over electric outlets for their taxpayer-subsidized Teslas, BMWs, etc. Presumably the time and energy that they spend arguing over plugs is time and energy that they’re not spending working.

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The Weather Experiment: The Pioneers Who Sought to See the Future is a somewhat tedious book that covers the infancy of weather forecasting. There is an interesting anecdote about a 19th century effort to determine whether or not prayer was effective:

Never one to quake in the shadows of old institutions, [Francis] Galton had turned his mind to the practice of prayer. The question was troubling him. Did prayers work? In his usual methodical way he began to tackle the issue statistically. He started his experiment with a hypothesis: ‘We are encouraged to ask special blessings, both spiritual and temporal, in hopes that thus, and thus only, we may obtain them,taken from Smith’s Dictionary of the Bible. He then devised a way of testing the claim. He found a copy of the Journal of the Statistical Society, which listed the mean life expectancy of kings and queens with those of other classes of people. Galton pointed out that at every church service, Protestant or Catholic, it was customary to pray for the sovereign: ‘Grant him/her in health long to live’. If prayer worked, Galton argued, specifically such targeted and constant prayer as this should result in longer lives for kings or queens. But according to the Journal of the Statistical Society, this was not the case. A member of the royal house lived an average of 64.04 years, while clergy, lawyers, medical doctors and the aristocracy lived much closer to 70 years. ‘The sovereigns are literally the shortest lived of all who have the advantage of affluence,’ Galton summed up. ‘The prayer has therefore no efficacy.’27 Galton’s paper would not see the light of day until it appeared with predictable controversy in the Fortnightly Review in 1872. But its very existence was significant. If he had written such a paper three hundred years before he would have been burnt; two hundred years before he would have been thrown into prison, or a hundred years before into a lunatic asylum. Yet by the 1860s such questions about the power and integrity of religion had found their place in contemporary debate. Galton was only writing what many were already thinking. [emphasis added]

Separately, how is it that medical doctors, constantly exposed to contagious diseases for which there were no effective vaccinations or cures, managed to live so long? Is it that germs were so prevalent that everyone else was equally exposed?

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Pretty much following the libretto of Carmina Burana (e.g.,

Fate – monstrous
and empty,
you whirling wheel,
you are malevolent,
well-being is vain
and always fades to nothing,

), Geoffrey Marcy was celebrated by the New York Times in May 2014 as a Prius-driving save-the-Earth-from-a-comfortable-Berkeley-perch right-thinker (link). The same newspaper today reports that he must resign from his tenured job at UC Berkeley for “groping students, kissing them and touching or massaging them inside their clothes” and then failing to apologize properly (what would have been sufficient?).

Earlier this month I asked where Syrian and Afghan refugees would fit into a U.S. economy with a $15/hour minimum wage. But maybe a harder question is what does a pariah like Professor Marcy do next? Running an astrophysics lab is a pretty specialized skill and the field is small. Could he emigrate to a country where they don’t care about this kind of incident and are willing to set him up with an all-male lab? Presumably no big U.S. company would be enthusiastic about bringing in this kind of litigation risk even if Marcy wanted to debase himself by taking a Java-programming job or whatever.

This reminds me of what a tenured UC Berkeley professor once told me: “I can be fired for any reason… except incompetence.” But, more importantly, I wonder if this calls into question the value of corporate training and groupthink. My physics prof friend is required to spend hours of time each year learning about various things that he is not supposed to think or do around students and colleagues. Marcy grew up in California and received all of his education within the UC system, which is also where he has worked for most of his career. If Marcy didn’t get the message, what is the point of all of those hours that everyone is required to spend looking at PowerPoint slides?

Separately, I think that Marcy and Tim Hunt may be examples of how academic science is a crummy career. Marcy was getting paid about one third of what a competent dermatologist or radiologist might earn. Due to America’s desperate shortage of doctors in many regions, the dermatologist who was accused (but not criminally convicted) of sexual harassment in San Francisco could probably get a job in a Great Plains state at a substantial raise. Consider a 22-year-old contemplating investing in graduate school and 15 years of scrambling through post-docs and the tenure race. Perhaps he or she is confident that he or she will not commit any of the sins that are currently firing offenses. But how does that 22-year-old know that, upon reaching middle age, there won’t be some new ways to get fired such that it is impossible to work anywhere else within academia? [The “groping” accusation against Marcy is, of course, way beyond the apparently-not-funny words that ended Nobel laureate Tim Hunt’s career.]

So… readers: where does Dr. Marcy fit into the worldwide workforce now?

Related:

• Kary Mullis shows what a scientist could get away in fairly recent times (the Wikipedia article hints at only about 1 percent of his bad behavior; this 1998 nytimes article mentions a conference talk where “‘His only slides (on what he called ‘his art’) were photographs he had taken of naked women with colored lights projected on their bodies,”
• Tim Hunt
• Women in Science

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“If Anyone Finds MH370, It Will Be the Men on This Ship” is a well-researched Esquire article on the technical details of the continuing search for the missing Boeing 777 (which I expected to have been found already). It turns out that the ocean floor had never been mapped in this part of the world. The fundamental process is then (a) make a reasonably precise map using sonar from the surface, (b) make a more detailed map, including looking for debris, using a towed sonar system roughly 500′ above the ocean floor.

[Separately, the article, starting with the title, implies that the crew of this search is 100-percent male. Yet I have seen no New York Times articles demanding to know why women are being excluded from the job of spending months on a 200′ boat in the world’s heaviest seas.]

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As a child in the 1970s I was told that racial quotas and other affirmative action policies would reduce prejudice in the U.S. One people from Minority Group X were in positions of authority and power, members of other groups would have warmer feelings about Minority Group X.

Today we have a president who identifies as “black.” Yet we are told by newspapers that prejudice against blacks is at a level not previously seen in modern times.

I’m wondering if the purported increase in prejudice is because of rather than in spite of having a black president. Consider that only about half of voters support any person who becomes president of the U.S. Thus it seems safe to assume that whatever actions the president takes will be the opposite of what roughly half of Americans want. If the president were a white male protestant a person might say, in response to these actions, “I hate Democrats” or “I hate Republicans” but never “I hate members of Minority Group X.”

The phenomenon seems to occur at lower levels of government as well. A reader contacted me because he had been sued by his wife in Middlesex County, Massachusetts and had read our statistics in the Massachusetts chapter and this analysis of divorce lawsuits filed in May 2011. Via temporary orders (decisions made within a few months of a lawsuit being filed, typically after a 15-minute hearing with no witnesses testifying) he had lost the house, the kids, and most of his income going forward. According to U.S. Census data from March 2014, this is the expected outcome for roughly 97 percent of fathers in Massachusetts, regardless of the sex, race, etc. of the judge. He was in front of Judge Maureen Monks, whom he believed to be a lesbian (she is identified in this article as “a long-time radical lesbian activist”; this article identifies her as “a founding member of the Massachusetts Lesbian and Gay Bar Association”), and said “I used to have a positive opinion of lesbians, but now I hate them.” If it had been a white male judge he might have said “I hate this judge,” “I hate the Legislature,” or “I wish that I had moved to Arizona or Pennsylvania ten years ago.”

[You might ask what advice I gave to this reader… I told him that temporary orders were de facto permanent in Massachusetts, that there was no way to get around paying his plaintiff every week despite the fact that she earned more than he did, and that he should stop paying his lawyer if the hope was that somehow any aspect of this could be turned around at a trial.]

I’ve also seen this in the private sector. I have heard anti-Mormon grumbling from employees of companies whose CEO is a member of the Latter Day Saints church and who brings in other LDS members for executive and managerial jobs. “I never gave any thought to Mormons before I joined this company,” said one worker bee, “but watching people get jobs and promotions because they are Mormons makes me angry.”

What do readers think? It seem safe to assume that the reign of the white male Christian will not be reestablished in the U.S. Thus an ever larger percentage of powerful positions will be occupied by people who are members of groups that have minority status. People will never be unanimous regarding what decisions should be made. Can we thus expect ever more inter-group acrimony, contrary to the Age of Aquarius that affirmative action advocates of the 1970s predicted?

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Jennifer Gonnerman writes “A Daughter’s Death” (New Yorker, October 5, 2015) and inadvertently answers the question of what young New Yorkers do when they don’t have to work or study. How large a slice of the NYC population is this?

Murphy and Haynes never called the kids they met “disconnected youth,” but that is how academics and policymakers would describe many of them. (The term refers to young people who are neither in school nor working; the group comprises about twenty per cent of New York City residents between the ages of sixteen and twenty-four.)

It turns out to be quite a contrast with the ever-more-gold-plated Manhattan that most of us see:

Since Chicken’s death, the violence in Grant and Manhattanville had grown worse. A sixteen-year-old was shot in the shoulder, a twenty-one-year-old was shot in the leg, and at least three bystanders were hit. Taylonn, Jr., was still living in the Grant Houses with his mother, and during this time he acquired a rap sheet. At the end of 2012, he was arrested for burglary, after a dispute involving a cell phone; he was charged as a “youthful offender” and put on probation. The next summer, he was arrested again, accused, with four others, of punching a Manhattanville resident and robbing him of a hundred dollars.

At the same time, the neighborhood was rapidly gentrifying. Double-decker tour buses frequently drove by the projects, and passengers took pictures of the residents. “It’s like they’ve never seen people before,” Arnita Brockington said. Meanwhile, a sleek, nine-story glass block, designed by Renzo Piano, was rising right across Broadway. It will house Columbia University’s new science center, the first of sixteen buildings to be erected as part of a six-billion-dollar addition to the main campus.

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