They fail to see the irony

In the AJC today there's an article about car dealerships "left out of Detroit bailouts".

Here's an excerpt:

Executives with the nation’s Big Three automakers say they love you. They sympathize with you. But they think there are too many of you out there, and they’re not about to come to your rescue if you’re hanging on by a thread.

When pressed about the plight of dealerships during media sessions before the show opened to the public, executives from the Big Three were resolute about what they saw as the need to reduce the number of dealerships as the recession grinds on.

The restructuring plans of all three companies include reducing the number of dealers in communities across the country. But rather than forcing the reduction through corporate strong-arming, which could lead to costly lawsuits or buyouts, executives this week suggested it would be achieved through natural selection: The weakest would go; the strongest would survive.

“When you take a third of the market out, a third of the dealers don’t really have a business to go forward with,” Jim Press, vice chairman and president of Chrysler LLC, said Jan. 11, referring to how the Big Three have lost sales to foreign competition.

How bitter is the irony? Here I was thinking that if you take away a third of the market, then it seems reasonable that one of the Big 3 is likely to go out of business. Instead, they show up in front of Congress with their hands out, ready to suck off the taxpayer tit. But their dealers, of let's let some of them fail, it's only natural.

In this case, my thoughts are that what's good for the goose (dealers) ought to be good for the gander (Big 3).

Geithner had to know

It seems to me that if he was audited for '03 and '04 and had to pay back taxes, interest, and penalties that he should have been smart enough to realize that he had done exactly the same things in '01 and '02. At that point, he could have done the right thing and paid those off too. Instead it seems he decided to keep his mouth shut so as to "get away with it"

If this guy is the best we can do for Treasury, then we've got big problems. He might be the smartest, most qualified re education and experience, but if he's dishonest enough to knowingly cheat on his taxes to the tune of tens of thousands of dollars then he should be dismissed from consideration.

After all, Michael Vick was a great quarterback, but his cruelty and dishonesty off the field means he will probably never play football again. Even after he gets out of prison.

Geithner again: now I'm pissed

In fairness, I must note that the man was once-upon-a-time a Republican, who re-registered as an independent some time ago; he later served in varying roles in Treasury in the Clinton administration. So my "Dems:..." post below, while still "truish", might not be factual--I have no idea whether he now considers himself a Democrat.

More information keeps coming out. Again, not a national tragedy, but it does fall under the "do as I say not as I do" flag and presents a conflict of interest question if nothing else. I've got a few postings below that explain some of the problem (that Obama's appointment for Treasury--who would be in charge of the IRS--didn't pay some of his taxes in 2001,02,03,and 04).

Documents released by the Senate Finance Committee strongly suggest that Geithner knew, or should have known, what he was doing when he did not pay self-employment taxes in 2001, 2002, 2003, and 2004. After his failure to pay was discovered, first by the IRS and later during the vetting process, Geithner paid the federal government a total of $42,702 in taxes and interest.

The IMF did not withhold state and federal income taxes or self-employment taxes — Social Security and Medicare — from its employees’ paychecks. But the IMF took great care to explain to those employees, in detail and frequently, what their tax responsibilities were. First, each employee was given the IMF Employee Tax Manual. Then, employees were given quarterly wage statements for the specific purpose of calculating taxes. Then, they were given year-end wage statements. And then, each IMF employee was required to file what was known as an Annual Tax Allowance Request. Geithner received all those documents.

The tax allowance has turned out to be a key part of the Geithner situation. This is how it worked. IMF employees were expected to pay their taxes out of their own money. But the IMF then gave them an extra allowance, known as a “gross-up,” to cover those tax payments. This was done in the Annual Tax Allowance Request, in which the employee filled out some basic information — marital status, dependent children, etc. — and the IMF then estimated the amount of taxes the employee would owe and gave the employee a corresponding allowance.

At the end of the tax allowance form were the words, “I hereby certify that all the information contained herein is true to the best of my knowledge and belief and that I will pay the taxes for which I have received tax allowance payments from the Fund.” Geithner signed the form. He accepted the allowance payment. He didn’t pay the tax. For several years in a row.

So now it seems that he was meaningfully informed by his employer about his tax responsibilities, quarterly even! And yet this "mistake" continued for four years. Combined with some of the other ways he cheated on his taxes, I'm not sure he's someone who should be running the IRS.

On the other hand, what did I expect from a politician?

Perhaps I was too easy on Geithner

According to the WSJ, President-elect Obama's Treasury nominee Timothy Geithner made "mistakes" on his taxes for several years. I had initially read that he simply didn't pay his FICA taxes, because his employment with the IMF was as a 1099 employee. Ok.

I said it was stupid, especially since it went on for several years. I expected TurboTax, etc. or his accountant to do a better job than that and to have caught the error in the first year.

Now it seems that this was not his only "mistake". The WSJ says

Other tax issues also surfaced during the vetting, including the fact Mr. Geithner used his child's time at overnight camps in 2001, 2004 and 2005 to calculate dependent-care tax deductions. Sleepaway camps don't qualify.

Amended tax returns that Mr. Geithner filed recently include $4,334 in additional taxes, and $1,232 in interest for infractions, such as an early-withdrawal penalty from a retirement plan, an improper small-business deduction, a charitable-contribution deduction for ineligible items, and the expensing of utility costs that went for personal use.

I love the WSJ's remarks: "We're tempted to say America needs a Treasury secretary who is smart enough to figure out his own taxes. But such a cheap shot would be beneath us. Instead, we are going to make a serious point: America needs a tax code simple enough for the Treasury secretary to figure out." Pretty much what I said yesterday.

Dems: Do as I say not as I do?

http://www.ajc.com/metro/content/printedition/2009/01/14/geithner.html

Timothy Geithner, the man tapped to lead the nation out of the greatest economic crisis in decades —- and who would oversee the Internal Revenue Service —- trekked to Capitol Hill on Tuesday to explain to senators how he made $42,702 worth of mistakes on his own tax returns.

As treasury secretary, Geithner’s job would be directing a mammoth rescue of the nation’s economy. President-elect Barack Obama selected him for the post late last year, citing his “unparalleled understanding of our current economic crisis, in all of its depth, complexity and urgency.”

Now, to be fair, it does seem to have been a minor snafu and not some sort of intentional tax evasion. He thought his employer was withholding FICA. But they were not, because they (the IMF) hires so many foreigners they do not automatically do that and require employees who must pay those taxes to manage their own affairs. He has apparently already paid the back taxes, penalties and interest.

On the other hand, if he plugs the numbers into TaxCut or TurboTax he'd find that they didn't come out right and should have known right away (i.e. in the first year) and should not have gone on for more than 3 years. If he had tax accountant, that's even worse.

What it does highlight is the absurd complexity of our tax code.

Why am I not surprised?

Multiple sources, but this one is pretty concise.

It turns out that the best time to make money on Wall Street is when Congress is out of session. In fact, according to Wall Street analyst Eric Singer, stocks do ten times better when Congress leaves town. (Good news! The House has gone on recess, and the Senate set to leave any day, and they won't be back until September!)

Whether you're a Republican or Democrat, this is a real eye-opener. We all hate to see our hard-earned taxpayer money wasted, or our business over-regulated. Now the evidence is in: Politicians are bad for Wall Street, and your pocketbook!

Singer revealed his shocking study at this year's FreedomFest in Las Vegas (www.freedomfestcom). He went back to 1963, "When we went off the silver standard" (as he puts it). He found that the S&P 500 Index has gone up only 1.6% a year during the time when Congress is in session... and a whopping 17.6% annually when Congress is in recess.

Economists Michael Ferguson, of the University of Cincinnati, and Hugh Douglas Witte, of the University of Missouri at Columbia, confirmed Singer's proposition.

They found that since 1897, 90% of the gains in the Dow Jones Industrial Average came on days when Congress was out of session. A dollar invested in 1897 with the strategy of going back to cash every time Congress met was worth $216 by 2000.

But an 1897-dollar invested on the reverse strategy was worth only $2. The correlation got worse after World War I, when Washington started playing a more activist role in taxing, regulating and inflating.

Another look at the same topic (and same research) comes from the woman who wrote "The Forgotten Man" (see my blog entry on same).

How to profit from the effect? To ensure your money is in stocks during all Congressional holidays and all in cash when Congress is in Washington, you'd have to go in or out of the market 15 or 20 times each year. Singer doesn't say how he's addressing such challenges, or share his results.

Still, the facts are there: If you applied his thesis from the end of 2000 through 2005, and stayed out of the S&P 500 while Congress was working, you earned close to 7 percent a year. If you stayed in the S&P 500 the whole time, the annual total return (including dividends) was less than 1 percent. There may be money in ideology, after all.

This satisfies my notion that the best federal Government is one where Congress and the President are from different parties and are largely antagonistic. This leads to "gridlock" in Government, which as far as I can tell is a good thing.

Obama the "Ice Cream Man"

This is a comment on the Town Hall article by Neal Boortz:

I have copied the entry here because it is too classic to be left alone.

Posted by Dave:

Obama the "Ice Cream Man"
CIVICS 101 3rd GRADE
From a teacher in the Nashville area

We are worried about "the cow" when it is all about the "Ice Cream"

The most eye-opening civics lesson I ever had was while teaching third grade this year. The presidential election was heating up and some of the children showed an interest. I decided we would have an election for a class president.

We would choose our nominees. They would make a campaign speech and the class would vote.

To simplify the process, candidates were nominated by other class members. We discussed what kinds of characteristics these students should have. We got many nominations and from those, Jamie and Olivia were picked to run for the top spot.

The class had done a great job in their selections. Both candidates were good kids. I thought Jamie might have an advantage because he got lots of parental support. I had never seen Olivia's mother.

The day arrived when they were to make their speeches Jamie went first. He had specific ideas about how to make our class a better place. He ended by promising to do his very best. Every one applauded. He sat down and Olivia came to the podium.

Her speech was concise. She said, "If you will vote for me, I will give you ice cream." She sat down. The class went wild. "Yes! Yes! We want ice cream."

She surely would say more. She did not have to. A discussion followed. How did she plan to pay for the ice cream? She wasn't sure. Would her parents buy it or would the class pay for it. She didn't know. The class really didn't care. All they were thinking about was ice cream.

Jamie was forgotten. Olivia won by a land slide.

Every time Barack Obama opens his mouth he offers ice cream, fifty percent of the people react like nine year olds. They want ice cream. The other fifty percent know they're going to have to feed the cow and clean up the mess.

My stimulus plan

Instead of printing up $1T or thereabouts and letting Government bureaucrats decide which companies live or die, I propose the following.

First item: Let's acknowledge that corporate taxes are a fraud. Corporations do not pay taxes. Rather, they remit so-called taxes that have been passed on, ultimately to consumers. Any tax the Government may levy on corporations will almost always be passed along to the consumer in one way or another. The corporation may simply directly pass along the cost by increasing prices and assuming taxes similarly affect all their competitors then this will be the easiest to accomplish. They may cut back on workers wages and benefits to offset the taxes. They may cut or eliminate dividends to shareholders. Most likely some combination of the three. And they may even pretend to eat some of the tax by paying for it by reducing profits (but I contend this is equivalent to cutting dividends).

Second item: business regularly seek to manipulate their operations to minimize taxes. They hire tax accountants and make business decisions based not on the soundness of the decision vis-a-vis how it benefits the business but on how the tax bottom line is impacted. On top of the actual corporate taxes paid, which were about $370B in 2007, corporations spend an additional $200B or more simply to comply with the tax code.

Third item: businesses regularly lobby for special exemptions and loopholes in the tax code. This leads to an overly complex tax code (and increased compliance costs) as well as the potential (and actuality!) for corruption in Government.

Fourth item: our federal corporate tax rate is one of the highest and most punative in the world, and is cited as a major reason for our multi-national corporations to move their headquarters overseas.

By now, my proposal should be obvious: eliminate corporate taxes.

The compliance costs go away...$200B+ freed up for more productive things.
$350B (+$200B compliance costs) or so goes right to the bottom line, which will lead to cheaper goods for consumers and/or higher wages or dividends to employees and shareholders--what'll that do for the economy?
Business decisions now will be based on sound busniess principles instead of tax impact.
Loopholes, etc. go away...all businesses now on level playing field.
"Corporate welfare", which almost always takes the form of tax credits, goes away.

But best of all, consumers will make the decisions, not bureaucrats.

Addendum: current estimates of uncollected taxes are estimated at $250B to $300B each year. So put the IRS people who would have been overseeing corporate tax collections to work recovering these revenues and the corporate taxes not collected are basically offset!

What Roland Burris should have said

Once Governor-under-indictment Rod Blagojevich appointed him, Roland Burris has greedily lapped up the spotlight and proclaimed himself to anyone with a microphone to be "the junior Senator from Illinois". His words and actions, not to mention his appointment by Blogojevich, makes me wonder whether he doth protest too much. That is to say, I'll always wonder whether he (Burris) did have some hand in the pay-for-play appointment to get the title he seems so desperately to want.

He could have really taken the high road with something like this:

Ladies & gentlemen,

I am honored by the consideration our Governor has bestowed upon me when he named me as his choice to fill President-elect Barak Obama's former Senate seat. However, given the current scandal surrounding the Governor and this same Senate seat, I must respectfully decline the appointment.

I further implore my fellow citizens, especially those who have served and are currently serving the people of the State of Illinois, to likewise refuse any appointment that might be made by Governor Blogojevich. Leaving the Senate seat unfilled for a short period of time is better for Illinois than carrying a cloud of suspicion to Washington, D.C.

I would be proud to serve the state of Illinois in the US Senate in the future, should the situation be resolved and the appointment was offered again under better circumstances.

AJC swipes at Bush again

They just keep beating this lame duck.

Bush’s tax cuts helped eliminate the surpluses of the Clinton years and drive the annual budget deficit to a record $413 billion in 2004. The deficit later plummeted to $162 billion in 2007 but soared to $455 billion in the fiscal year that ended in September.

It wasn't Bush tax cuts that did this. While tax revenues did dip in 2002 and 2003, due to the recession at that time, they quickly rebounded and are at an all-time high by 2007. Here's personal income taxes and total tax revenue (all sources, in millions of dollars) for a few years:

1995 590,244 1,351,932
1996 656,417 1,453,177
1997 737,466 1,579,423
1998 828,586 1,721,955
1999 879,480 1,827,645
2000 1,004,462 2,025,457
2001 994,339 1,991,426
2002 858,345 1,853,395
2003 793,699 1,782,532
2004 808,959 1,880,279
2005 977,222 2,153,859
2006 1,043,908 2,407,254
2007 1,163,472 2,568,239
2008* 1,219,661 2,521,175 (*estimated, source tax policy center)

The problem was not the Government's income, but rather its outlay:

FY 2000 1,813,718
FY 2001 2,026,886
FY 2002 2,280,841
FY 2003 2,518,447
FY 2004 2,518,626
FY 2005 2,604,577
FY 2006 2,873,261

Note: numbers may not be in same adjusted dollars, I could not find that notation in either source used.
Note: not sure if first set of numbers is FY or calendar.

Spending increased about 30% in the administration, which is the real problem, which annual government spending per household rising to $23,494 in 2007 (up from $20,451 in 2000), up 14.8% over the period.

Let's face it, the Government has run a deficit almost every year since 1965. The one noticeable (very noticeable) change comes under Clinton, but not until Newt's Congress takes over.

Reading "The Forgotten Man"

This book is about the Great Depression, in particular how Government actions actually prolonged the Depression. Ironically, a good friend is reading the same book (not too strange, since we were both given the book for Christmas by the same person) and, based on a brief discussion, I think he thinks the book is actually about how the New Deal was a great thing. But here's some notes from the inside flaps:

The author also traces the mounting agony of the New Dealers themselves as they discovered their errors. She shows how both Presidents Hoover and Roosevelt failed to understand the prosperity of the 1920s and heaped massive burdens on the country that more than offset the benefit of New Deal programs. She argues that the real question about the Depression is not whether Roosevelt ended it with World War II, but why the Depression lasted so long. From 1929 to 1940, from Hoover to Roosevelt, government intervention helped to make the Depression Great.

The title comes from an essay by Yale professor William Graham Sumner, which I found a copy of here.

The type and formula of most schemes of philanthropy or humanitarianism is this: A and B put their heads together to decide what C shall be made to do for D. The radical vice of all these schemes, from a sociological point of view, is that C is not allowed a voice in the matter, and his position, character, and interests, as well as the ultimate effects on society through C's interests, are entirely overlooked. I call C the Forgotten Man.

The fallacy of all prohibitory, sumptuary, and moral legislation is the same. A and B determine to be teetotalers, which is often a wise determination, and sometimes a necessary one. If A and B are moved by considerations which seem to them good, that is enough. But A and B put their heads together to get a law passed which shall force C to be a teetotaler for the sake of D, who is in danger of drinking too much. There is no pressure on A and B. They are having their own way, and they like it. There is rarely any pressure on D. He does not like it, and evades it. The pressure all comes on C.

The question then arises, Who is C? He is the man who wants alcoholic liquors for any honest purpose whatsoever, who would use his liberty without abusing it, who would occasion no public question, and trouble nobody at all. He is the Forgotten Man again.

This essay is chock full of great tidbits:

Now, we never can annihilate a penalty. We can only divert it from the head of the man who has incurred it to the heads of others who have not incurred it. A vast amount of "social reform" consists in just this operation. The consequence is that those who have gone astray, being relieved from Nature's fierce discipline, go on to worse, and that there is a constantly heavier burden for the others to bear.

And:

They are always under the dominion of the superstition of government, and, forgetting that a government produces nothing at all, they leave out of sight the first fact to be remembered in all social discussion - that the State cannot get a cent for any man without taking it from some other man, and this latter must be a man who has produced and saved it.