SALT Deduction Cap Fight

I play chess. I hate when my opponent manipulates me into a situation with no good choices. I don't think that former President Trump and his merry band of sycophants are good chess players but they did box in the Democrats on an issue that divides people along class and regional lines. 

I am referring to the 2017 tax law which capped the individual federal tax deduction for state and local income and property taxes or SALT at $10,000. This deduction was previously unlimited. 

So before 2017 someone who owned a mansion or other expensive property as their primary residence could deduct the entire state or local property tax or income tax owed from his or her federal income tax liability. But they can't do that today.

 
Some people who pay high local income and property taxes don't like the new law. Not one bit. Many of the people most impacted are well off or wealthy Democrats in politically Democratic or "blue states".  

It's ironic because much of the Democratic messaging is that the well off should pay their fair share, which is in part what the SALT $10,000 deduction cap does, even though that's NOT why Trump and Republicans put it into place. I think the issue is probably the perceived unfairness that someone with a million dollar home in say Texas or Alabama is, all else equal, paying less in overall taxes than someone with the same priced home in California or New York. 

Flooding in South East Michigan and Metro Detroit

It is a matter of increasing frustration, annoyance and black humor to me that almost every time we get more than two or three inches of rain in SE Michigan, entire sections of our roadways and expressways become impassable for days. This really shouldn't occur in the United States of America. 

Some people, including myself at times, might snark about crappy Third World standards or problems. Well. If you spent the past sixty or seventy years under the boot of European colonialism or fighting US funded civil wars at least you have a valid reason for not having solid infrastructure that's up to snuff. The US has no such excuse. 

Should We Make Everyone's Tax Returns Public???

How much money do you make? How many tax loopholes do you use? Do you have a bunch of medical deductions?  Are you or your dependents suffering from some expensive and possibly embarrassing medical condition that you would rather not discuss with most people? Did you properly report all of your income, investment income and capital gains for the past year? 

What has been your rate of income growth over your lifetime? Are you well paid at your job?  Are you a lagging performer? Are you only hanging on to your job because your bosses don't think you're worth the trouble to fire because you earn so little? Do you have a job or do you instead survive on some combination of disability, savings, capital gains, and family or spousal support?  Did you retire early thanks to wise investments, business ownership and inheritances? Well if you're like most Americans I know you probably think that information and data like it is strictly between you, the IRS and any really close friends, family or intimates that you decide have a pressing need to know that information. It's not for public consumption. It's private.

Well at least one person on the NYT editorial board thinks that information should all be public for everyone.

In October 1924, the federal government threw open for public inspection the files that recorded the incomes of American taxpayers, and the amounts they had paid in taxes. Almost a century later, it’s time to revisit the merits of universal public disclosure. Democrats in Congress are fighting to obtain President Trump’s tax returns under a separate 1924 law, written in response to related concerns about public corruption. That issue could be resolved, at least in part, if Congress embraced the broader case for publishing everyone’s tax bill.

Trump Tax Hike on Middle Class

Some Trump voters are shocked and upset that the Trump Tax Cut is hurting them.

It’s February which means it’s officially everyone’s favorite time of year: tax season! And while most of us will be putting off tracking down our W-2’s until early April, some people have already managed to file their taxes. And among those early birds, many in the middle class have been shocked to find that instead of the nice little chunk of change they were expecting with their return, they actually owe money to Uncle Sam. What’s the reason for this financial switcheroo? 

It stems from President Trump’s tax reform, which was passed in 2017 and was touted by Trump and the GOP as a win for the middle class. However, with the new tax system now in place, Americans are discovering that most of the tax relief from the bill is actually being experienced by corporations. 

Meanwhile, many people are seeing an increase in taxes due to the bill eliminating many of the deductions that were used by middle-class families in order to lower the amount of taxes they were required to pay. Most notably, the tax reform placed a cap on deductions for taxes on both state and local levels.

Republican Tax Cut Doesn't Work: Republicans Threaten Social Security

The problem with voting is that there are a lot of stupid, gullible, or downright hateful people who vote. Their vote counts just as much as yours does or mine does. To be fair they may very well think of me or you in the same terms which I just used to describe them. That's politics. That's never going to change. If we accept that every citizen has a right to vote and pursue his or her own interests as he or she defines them then we also must accept that sometimes people will make objectively sub-optimal decisions.

This brings us to the impact of the Trump tax cuts. You may recall that the majority of economists across the political spectrum predicted that the tax cuts would not create enough growth to shrink the deficit. The tax cuts would increase the deficit. And just about every economist or political theorist on what's rather broadly defined as the left, argued that that once the increased deficit became obvious Republicans would smartly pivot and without missing a beat argue that programs such as Medicare, Medicaid and Social Security had to be cut in order to bring down the deficit. 

Republicans would weep copious crocodile tears as they congratulated themselves on their willingness to cut benefits to people who weren't invited to the tax cut party in the first place. It's classic bait and switch. It's one of the oldest cons in the book. With ever increasing frustration Nobel Prize winning economist Paul Krugman has been warning about the tax-cut/deficit con and predicting the Republican response since before the tax cut became law. This isn't new. It's what Republicans do-or at least what the upper class/business class Republicans do. The middle-class/lower-class Republicans aren't necessarily supporting the party for its dedication to cutting taxes and slashing social programs (at least those used by whites) so much as they are supporting the party for racial and cultural resentments. 

States Rebel Against Republican Tax Plan

The Republicans changed tax law so that starting in 2018 there will be a upper limit of $10,000 for state and local tax deductions to federal taxes (SALT). If you happen to be impoverished, low income or live in a relatively low tax state the impact of this change on you will probably be small or non-existent. If you however live in one of the relatively high tax coastal states and/or happen to be somewhat well off then the impact will be a bit greater. And it may not be a very nice change. Unless the states make other changes, placing a limit on federal deductions for local taxes means that all else equal some people will pay more in federal taxes. Or to put it another way, the federal government will no longer help shield you in toto from your state's tax policy. States will then have less money available for local initiatives.

This delights many Republicans for at least four reasons. (1)They really do believe in low taxes for the wealthy and low services (at least for the poor and middle class). (2) They deeply resent their perception of federal underwriting of higher tax bases in Democratic leaning states. (3) They enjoy watching people who claim to support higher taxes on the wealthy in general turn around to fight effective higher taxes on their wealthy. (4) Most of the states impacted are "blue" states, not "red" ones. Here it's very important to point out that the cost of living/housing can vary widely from state to state. Someone in say SE Michigan with a household income of $180K and a home valued at $500K may be better off even before taxes than someone in New York City with a household income of $250K and a home valued at $700K. Generally the South and Midwest are lower cost regions than the Northeast and West coast.

Detroit Foreclosures Are Big Business

Detroit is making something of a comeback. Or to be more precise, certain areas of Detroit are making something of a comeback. The downtown area and the area just north of downtown formerly known as either the University District or the Cass Corridor and now rebranded as Midtown have attracted a lot of business investment, police protection and new residents and customers from the suburbs and other places. And certain high profile neighborhoods (Indian Village, Boston-Edison, Palmer Woods, etc) have seen bidding wars for area homes. However those sections of Detroit have always received a fairly outsized amount of attention and resources, even under previous mayors. Those areas were like Detroit's living room. If you have guests over and don't have time to clean or repair the entire house, then at the very least you will clean your living room as that is likely the first area your guests will see and where they will spend most of their time. Hopefully they won't venture into the kitchen where the dirty dishes are stacked or go down the hall to use the smelly bathroom with the leaky faucet and toilet that won't stop running.

The rest of Detroit is still like those rooms in your home that haven't been cleaned up enough to allow important guests to visit. Many of the public schools are a mess. There's still an unacceptably high level of violent and property crime. And there are not enough good paying jobs for an impoverished Detroit population. Many of these problems stem from a vicious legacy and current day practice of segregation and exclusion. In many ways Michigan is Mississippi North. But the specific issue of foreclosures is even knottier. Banks have often discriminated against Black customers, saddling them with loans they can't afford. And because the tax base is so shaky in Detroit the city has been resistant to properly valuing homes. The city and county have overvalued homes in an attempt to strain blood (tax revenue) from a stone (the Detroit taxpayer). 

Trump Tax Plan

President Donald Trump and his team of economic advisers recently released their plan for tax "reform". You can read some of the highlights here. 

On September 27, 2017, the Trump administration released its tax reform plan. The Unified Tax Reform Framework would cut income tax rates, lowering the top rate to 35 percent. It doubles the standard deduction but eliminates personal exemptions. The plan would reduce the corporate tax rate from 35 percent to 20 percent. It allows a one-time repatriation of corporate profits earned overseas.

The Framework would lower the maximum corporate tax rate from 35 percent to 20 percent. The United States has one of the highest corporate tax rates in the world. But that doesn't hurt large corporations. Most of them don't pay more than 15 percent. That's because they can afford tax attorneys who help them avoid paying higher taxes.

Trump's plan lowers the maximum tax rate for small businesses to 25 percent. That includes sole proprietorships, partnerships, and S corporations. Many of those are real estate companies, hedge funds, and private equity funds. As a result, 85 percent of the tax cut benefits the top 1 percent of earners. Most mom-and-pop small business won't benefit from the reduction. They don't earn enough to qualify for the top tax rate. The Framework does not mention increasing the tax on some profits, called carried interest. That's taxed at 15 percent instead of the income rate. It benefits private equity funds. Trump campaigned on making them pay their fair share.

Trump's plan would almost exclusively benefit the extremely well off. The people that Trump sent out to defend this plan couldn't speak with a straight face about the plan's benefits to the middle class or working class. There are few benefits to the working class or middle class.This plan is warmed over supply side trickle down economics, which is the discredited but never truly dead idea that if we would only reduce taxes on our "betters" then they would be inspired to open more businesses and hire more workers, and not instead buy another vacation home or more stocks or bonds.

Trump Tax Plan Is Giveaway to Fat Cats

President Trump recently revealed his preferred tax plan. It is something that is as many people said, unserious. Of course that description depends on your perspective. The plan was something that many Republicans would support. Among other things the tax plan would radically cut taxes on businesses and the well off, eliminate some funding for ObamaCare, end federal deductions for state and local taxes, and eliminate the estate tax. If you earn a lot of money or have a lot of wealth then there's a lot for you to like in this plan. People who earn in the high six, or better yet, seven or eight figures, would make out pretty well if this plan were to be adopted as is. People opposed to the plan have spent and will spend a great deal of time going over the plan and pointing all the various ways in which the average taxpayer will get hosed, to use a verb that is safe for work. Detractors will say that this proves that all the people who voted for Trump are dummies. They will alternate between mocking the stupidity of the Trump voter and wondering how long it will take before that moron sees the light, if ever. They will enjoy this. And so on.

That's all good as far as it goes. As Jonathan Haidt has pointed out people on the progressive side of the spectrum tend to value the moral concerns centered around "care" and " fairness" very highly, even occasionally to the exclusion of all else.

Corporate Tax Deductions for Settlements, Fines and Damages

When you do something wrong and are punished for it by having money taken from you the purpose of that little exercise is to convince you not to break the law or violate the rules again. The size of the fine may vary depending on how serious the offense is, whether the person who is being fined is a first time offender, how much money the person who is being fined has, whether or not the person or institution levying the fine is in a bad mood that day or is looking to make an public example of some schmuck or a million other reasons. But the purpose of the fine remains the same regardless of whether you are an NFL player who doesn't like to talk to the media, an NBA player who publicly questions the integrity of the league or its referees, or a taxpayer who simply doesn't like paying his taxes when the city, state or country says that he must. For example, in my younger days (i.e four years ago) I used to consider posted speed limits on expressways as something more akin to suggestions than hard and fast rules. I certainly wasn't the only motorist inclined to do this. On some local expressways if you aren't doing at least 80 mph you just aren't trying. However, four years ago a friendly police officer stopped me to let me know that no, he for one really did take those speed limits seriously. He thought I should as well. To assist me in reaching this future goal he wrote out a ticket that had a fine which I found to be entirely too high. Well I suppose it had the desired effect. I got a radar detector and kept a closer lookout for cops. Most days I rarely drive more than 3-4 mph over the posted speed limit. I simply don't have the money to give away to a podunk municipality over nonsense like that.
But imagine if instead of having to pay the entire fine myself and wreak havoc in my monthly budget I could come to you and force you to pay a significant portion of that fine. You might protest that you weren't the big dummy who was driving significantly over the speed limit. I would respond with something along the lines of how we were all in this together. I would help you out if it came to it. So suck it up buttercup and hand over some cash. If you were forced to pay part of my penalty not only would you be upset (something I wouldn't care about that much to be honest) but more importantly the fine wouldn't be enough to deter my future behavior. Because the net fine to me would then be much lower I would be less likely to be deterred from speeding. That would be a really good deal for me. It might not be such a great deal for you or for the rest of society. The person who incurred the cost and broke the law/rules is not the one who is paying the cost.

When a Montana judge ordered Hyundai to pay $73 million in punitive damages last year to the families of two teenagers killed in a car crash, she found that the South Korean automaker had “recklessly” ignored scores of warnings over more than a decade about the steering defect blamed for the accident. But even if Hyundai is eventually forced to pay the full amount of the damages, the punishment could be substantially reduced through a tax loophole that permits the company to save millions of dollars by deducting any court-ordered punitive damages as an ordinary business expense. The result, critics say, is that taxpayers are in effect subsidizing corporate misconduct. 

Carmakers are far from the only companies that can exploit loopholes that allow them to lower their tax bill by deducting fines, forfeitures and other payments related to wrongdoing. Although the tax law forbids deductions for criminal fines and penalties owed to the government, other kinds of payments — to compensate victims or correct damages — are eligible for a tax deduction.  The rating agency Standard & Poor’s, which was accused of helping to cause the financial crisis with its inflated assessments of mortgage investments, is eligible to deduct half of the $1.37 billion settlement with state and federal prosecutors it agreed to this week, according to the U.S. Public Interest Research Group, a consumer-oriented nonprofit. The result would be a roughly $245 million reduction in its tax bill, the research group calculated.  

At least 80 percent of the more than $42 billion that BP has paid out because of the 2010 Deepwater Horizon rig explosion that killed 11 people and spewed oil into the Gulf of Mexico qualifies for a tax deduction, according to U.S. PIRG. That has saved an estimated $10 billion to $14 billion for the company. The exact amount is uncertain because of the lack of transparency, the group complained.  Brandon Garrett, a law professor at the University of Virginia and author of “Too Big to Jail,” said that BP was “asking taxpayers, in effect, to pay for the victim compensation fund it agreed to set up.”
LINK

So this is an incredibly good deal for companies which have to pay for wrongdoing. Not only do the company officers and owners generally avoid personal damages and/or prison time for misdeeds they even are able to avoid the full impact of the fine by getting the government (i.e. you) to help pay for it. Often they can get the fine or settlement reduced on appeal. It might not be such a great deal for you or for the rest of society. The person who incurred the cost and broke the law/rules is not the one who is paying the cost. That seems to violate basic fairness. This is another example of how our tax code and public perception of welfare leeches. This is why as we recently discussed one has to be careful when one reads about this or that inner-city ghetto or poor trailer park person "cheating" the system out of a few hundred dollars each month. Your disgust or contempt should be saved for the big dog who's crapping on the floor, not the little puppy. Corporations are cheating the government out of BILLIONS. Technically I shouldn't even use the term "cheating" as this is all quite legal. Moral outrage doesn't trump law. The fact that these tax code provisions are still in place proves the amount of power that corporations and their armies of lobbyists and attorneys can bring to bear. A great many of these mega corporations don't pay many, if any income taxes in the first place so this is just par for the course. Until enough people get angry enough to demand changes, these policies will continue. But to demand change you have to know what's going on behind closed doors and out in the open. This is why it's so important to read, inform yourself and get politically active.

Bill Cosby Rape Allegations and Al Sharpton Tax Issues

It's difficult to keep up with the various rape accusations against Bill Cosby. There are currently over fifteen different women who have made allegations that Bill Cosby either attempted to seduce them or raped them. Unfortunately, for those of us who would like to know the truth, these charges detail events that may or may not have occurred many decades ago. Some accusers (Janice Dickinson) have made past statements which contradict their present ones. Other women claim to have engaged in ongoing intimate relationships with Cosby after the alleged rape. Cosby himself has categorically refused to address the accusations. He has previously reached civil settlements with some of the women. Because of the statute of limitations, unless someone with more current accusations pops up, these claims can't be criminally tried. I don't know if outstanding claims can be heard in civil court but there are lawyers who could address that. Nonetheless there are so many accusers that lack of criminal convictions notwithstanding, Bill Cosby's reputation and future business plans have taken a serious hit. NBC and Netflix cancelled planned projects. Much like with allegations with Herman Cain or Jian Ghomeshi, with this many women coming forward, even a Cosby fan who holds innocent until proven guilty as a moral cornerstone might wonder about some things. It's important to point out that I am agnostic on Cosby's guilt or innocence. Who among us knows either Cosby or his accusers? There is no evidence so far that anyone has provided that would strongly convince me of his guilt or innocence. Too much time has passed. We're not in a court of law.

We could be watching bitter former groupies or mistresses lie about an innocent man. We could be watching some delayed justice catch up with a filthy serial rapist. I simply can't call it. Women can and do lie about being raped. Men can and do get away with rape. People who claim that women never lie about rape or that men are constantly beset with false allegations of rape generally have ideological or personal axes to grind.

I wanted to write about this situation because of the news that TVLand cancelled reruns of The Cosby Show. Because apparently if you watch The Cosby Show you support rape or something. Other people are asking if we should boycott reruns of A Different World. 
I wrote on this before but I am not a huge fan of linking enjoyment of or appreciation for people's artistic accomplishments to who they are morally. If you consistently do that you won't enjoy much art. In her memoir Lena Dunham revealed that as a child and teen she had what many people would consider at best an odd relationship with her younger sister. At worst she was a molester.

As she grew, I took to bribing her for her time and affection: one dollar in quarters if I could do her makeup like a “motorcycle chick.” Three pieces of candy if I could kiss her on the lips for five seconds. Whatever she wanted to watch on TV if she would just “relax on me.” Basically, anything a sexual predator might do to woo a small suburban girl I was trying.

I shared a bed with my sister, Grace, until I was seventeen years old. She was afraid to sleep alone and would begin asking me around 5:00 P.M. every day whether she could sleep with me. I put on a big show of saying no, taking pleasure in watching her beg and sulk, but eventually I always relented. Her sticky, muscly little body thrashed beside me every night as I read Anne Sexton, watched reruns of SNL, sometimes even as I slipped my hand into my underwear to figure some stuff out.

Now I wouldn't watch Dunham's HBO show Girls if you paid me but if I did watch would that mean I support Dunham's perversities? No it wouldn't. One of the most beautiful rock ballads ever written, Led Zeppelin's "Ten Years Gone" was created in part by a man, Jimmy Page, who was having sex with fourteen year old girls when he was twenty-eight. That was statutory rape even back in the hedonistic seventies. If you listen to this song are you condoning sex with underage girls?  Do you boycott anything Sean Penn is associated with because he once went upside Madonna's head with a baseball bat? Charlie Sheen has beaten and shot women. Mark Wahlberg committed racist hate crimes, beating a Vietnamese man so badly he went blind in one eye. So even if every allegation against Cosby is true, I don't see what that has to do with the Cosby Show. Cliff Huxtable is a fictional character. Obviously I dislike some artists for non-creative reasons. I understand that because of an artist's criminal actions or particularly vile political or racial stances there will be Americans who hate the artist. I get that. What I don't comprehend are people who want to yield to the totalitarian impulse to insist that a disgraced artist have all of his or her art eliminated so that no one can enjoy it. Just because you enjoy someone's creative impulse does not mean that you support rape or murder or any other foul action or belief. Bill Cosby may or may not be a rapist. His Fat Albert cartoons, his comedy albums and his television shows are still worthwhile additions to American culture. Life is complex like that sometimes. If you think that Cosby committed these crimes and thus can't watch his comedy routine or tv shows again, that is fine. But other people can separate art from creator and that is also fine.

The New York Times recently ran some articles disclosing that the Reverend Al Sharpton of the National Action Network and of MSNBC has not been paying his federal or state taxes. The article also alleged that Sharpton had been moving monies back and forth between his personal accounts and his business and non-profit accounts. Supposedly this also included paying his daughter's tuition bills with funds that had come from non-profit organizations. The paper alleged that the good Reverend had been ducking out on private bill paying obligations. It's unclear how much information the Times obtained from investigation of publicly available documents and how much the Times obtained from sources within the IRS or elsewhere who wanted to drop a dime on Sharpton. The paper is mum on that since some of the information it has appears to be private. Al Sharpton wasted no time finding the nearest microphone to rebut some, but not all of the charges, and blaming it on unspecified enemies who wanted to disgrace him. There is a long history of prominent black political leaders being targeted in the press and discredited by untrue or partially true allegations. Sharpton's no doubt aware of this history and seeks to place himself within that narrative.

Although I think he's FAR too much of an uncritical water carrier for the Obama Administration and a horrible utterly inarticulate television host, on a few issues I care about Sharpton's heart is in the right place. But if you're going to stand up and be counted you need to make sure your stuff is together. Historically, some social justice or civil rights organizations, particularly black ones, have been one man charismatic operations that didn't give enough priority to the mundane business necessities such as ensuring that taxes and bills were paid along with staff workers. You can't maintain the trust of the people you're supposedly fighting for if you don't keep your business tight. No one with a functioning brain stem will give their hard earned money to someone who is paying himself a hefty salary and otherwise "dealing in dirt and stealing in the name of the Lord". It's understandable that a neophyte may not know all the various local, state and federal rules and regulations or generally accepted accounting standards surrounding non-profits, taxes, licensing, financial statements, and when you can and can not mix personal and business monies. But Sharpton is not a young man. He's been at this for a while. He should know better. Get it right. And young or not, everybody has to pay taxes. Ask Wesley Snipes.

What do you think of these situations?

Carbon Taxes: Is the time right?

I belong to the NRDC. I support many local and national initiatives designed to reduce carbon emissions and protect disappearing flora and fauna. Humans must live more harmoniously with the planet, as this appears to be the only place in our solar system where we can live. I believe that the relevant scientific data shows unambiguously that global climate change is real and that humans are a huge causal factor. I despise the idea of killing animals for fun or for backwards religious/medical/cultural beliefs (See post on "The Devouring Dragon"). If humanity doesn't change worldwide practices around energy use and resource consumption we could see an even more devastated planet. There will be higher temperatures and more floods. There will be less wildlife and fewer trees. And those unpleasant changes could arrive sooner than we think. And yet I find myself unable to fully support a carbon tax though I will admit that it’s probably the right thing to do. Hypocrisy?  Probably. Quite possibly actually. Heck, absolutely. But let’s examine why.

The basic idea of a carbon tax is that pollution is an externality to economic activity. Neither the seller nor the buyer is concerned with pollution because they aren't paying for it. Just as an amoral factory owner will, absent aggressive regulation, criminal penalties and civil liability, dump pollutants in the water, someone else, i.e yours truly or even the people reading this blog post, will engage in activities that increase carbon emissions because we are not paying the full price.

If the government taxes carbon producing activities, you will engage in them less. You will try to produce less carbon, saving yourself money and also saving the environment. Suddenly the monetary incentives and the environmental incentives are lined up together. You spend less money. Climate change slows. That’s the idea, anyway. The reality might be a little different. Although the whole “coastal elites” trope is beyond hoary it's useful to compare and contrast the different experiences of people who live in very densely populated urban areas and use mass transit to reach work and of people who live in more open areas and/or don’t use mass transit. I spend roughly about $300/month on gasoline. That's the cost of my commute. I live in SE Michigan which lacks consistent public transportation but does have massive suburban sprawl. If I lived in The Bronx or Harlem and worked in downtown Manhattan my transportation costs (assuming I didn’t drive) would probably be a little over $100/month. For now, I am locked into working where I do. Working closer to home would entail a significant pay cut. I'm not a fan of that. 

So if there were a carbon tax the million dollar question is how much would it cost. A CBO analysis claimed that a $21/ton carbon tax would raise gasoline prices by about $0.20 gallon. That would cost me roughly $5/week or about $20/mth, not counting other changes a tax would require. I wouldn't LIKE it but I could live with it. 

Some people think that such a small carbon tax doesn't really change behavior enough. They would prefer a carbon tax anywhere from double to twelve times the amount mentioned in the CBO analysis. They would like to see gas prices raised by $1/gallon or more.
I would be against that for many reasons but the biggest one is obviously that I just don't currently earn enough to be blase about $5,$6,$7 or more for a gallon of gasoline. Something would have to give. Maybe it's food, although a carbon tax would also increase food prices because so much of our food supply is delivered to market via fossil fuels. Maybe I eat out less or don't see first run movies or just buy less food or (horror) fewer books but I can't stop driving to work. A US carbon tax also gives US companies more incentives to move production to China, already the world's largest carbon emissions producer. China is taking steps which could mean game over as far as global climate change is concerned. The Chinese are increasing their use of refrigeration. This is wonderful if you are concerned about food spoilage, food safety and storage, fighting disease, and immediate access to varied foods. But if you're primarily concerned about climate change then the idea of 1.3 billion people deciding to live just like Americans makes you nervous.

An artificial winter has begun to stretch across the country, through its fields and its ports, its logistics hubs and freeways. China had 250 million cubic feet of refrigerated storage capacity in 2007; by 2017, the country is on track to have 20 times that. At five billion cubic feet, China will surpass even the United States, which has led the world in cold storage ever since artificial refrigeration was invented. And even that translates to only 3.7 cubic feet of cold storage per capita, or roughly a third of what Americans currently have — meaning that the Chinese refrigeration boom is only just beginning. This is not simply transforming how Chinese people grow, distribute and consume food.

It also stands to become a formidable new factor in climate change; cooling is already responsible for 15 percent of all electricity consumption worldwide, and leaks of chemical refrigerants are a major source of greenhouse-gas pollution. Of all the shifts in lifestyle that threaten the planet right now, perhaps not one is as important as the changing way that Chinese people eat.

Calculating the climate-change impact of an expanded Chinese cold chain is extremely complicated.  Artificial refrigeration contributes to global greenhouse-gas emissions in two main ways. First, generating the power (whether it be electricity for warehouses or diesel fuel for trucks) that fuels the heat-exchange process, which is at the heart of any cooling system, accounts for about 80 percent of refrigeration’s global-warming impact (measured in tons of CO2) and currently consumes nearly a sixth of global electricity usage.

You see the issue, yes? No American should tell any one in China that they shouldn't be using refrigeration. But it may be that what's good for the Chinese and their health is bad for the planet. Probably the Chinese wouldn't be too interested in altering their approach unless everyone else does likewise. Are you willing to give up refrigeration and other modern comforts that contribute to emissions? No? Then don't expect (insert foreign group here) to do so. Our ability to change our environment has outstripped our political control. I could support a carbon tax if every country has one as well. We can only fix carbon emissions via a planet wide solution. But that won't happen because each country has different goals and needs. It's easy to wax rhapsodic about saving the Brazilian rainforest but if your family's livelihood depends on lumber, then that rainforest will have to go. We're experiencing the classic prisoner's dilemma. From outside the system cooperation makes sense but rational actors within the system will not cooperate. Everyone is worse off. The usual solution is imposition of an outside regulator. 

For criminals this might be the Mafia. If criminals have certainty that talking brings swift and certain death, then each criminal keeps his mouth shut. No one is convicted and both criminals walk free. They are better off. But states are the regulators. Who can tell sovereign states what to do? How would we create a planet wide single regulator for carbon emissions. I don't see how it could be done. So that means that the climate change we're seeing now could be irreversible. It's not completely hopeless of course. China is moving towards greater usage of natural gas, not because of foreign concerns, but because of internal Chinese worries about air quality and dependency on foreign imports. But Australia just repealed its carbon tax because of some of the fears I listed above. People generally act in their own interest. The challenge is bringing the narrow national or individual private interest and the greater public or international interest into congruence. How do we do that?

What are your thoughts? Would you drive less if a carbon tax were imposed?

Are you concerned with climate change?

Would you give up refrigeration to save the environment?

More Taxes for Michigan Roads?

One of the reasons for encouraging people to use less gasoline and more green technology was not only to help reduce pollution but also to reduce wear and tear on the roads. Ultimately for pollution's sake it might be better for us all to be driving hybrids or electric vehicles. Or for the roads' sake more of us should be bicycling or taking mass transit. But in the mean time the auto companies should be compelled to increase CAFE standards while consumers should be encouraged to car pool, bicycle, walk to work, use mass transit and do other things which will result in less use of gasoline. One person who's almost comically gung-ho about this is NYT Pulitzer Prize winning columnist Thomas Friedman, who has a 70% chance of working his support for a carbon tax into any column he writes, no matter the subject matter. Mid-East Peace? Carbon tax will solve it. Islamic Terrorism? Carbon tax will hit the spot. Russia making ominous noises? A carbon tax will settle their hash. China polluting the entire planet? Obviously we need a carbon tax. Donald Sterling situation? A carbon tax would have prevented it. And so on. Vehicles are more fuel efficient than they used to be. Gasoline costs more than it used to. And people don't buy as many cars or drive as much as they used to. So you would think that the state would be happy about this right? We're cutting back on emissions and getting more out of less: the very definition of efficiency. That's good, right?

Well not so fast partner.


You see all that fuel efficiency and higher CAFE standards and bicycling to work may be good for the environment and for politicians who have made it their business to be seen as standing up against older methods of energy generation but they're not good for state revenue. When people buy less gasoline they also pay less gasoline tax. Less money coming into the state coffers means the state either has to (a) be wiser and smarter with less or (b) find a way to shake citizens down to make up the difference. If you know anything about Michigan politicians (or politicians anywhere) you can hazard an informed guess about which choice they would likely prefer. 

LANSING — Michigan could solve its road funding problems by being one of the first states in the nation to move to a system where motorists pay a fee based on the number of miles they drive, according to a University of Michigan report to be released today. The report, prepared for the Michigan Environmental Council by Sustainable Mobility & Accessibility Research & Transformation (SMART) at U-M, says fuel consumption is declining as traditional vehicles become more efficient and electric vehicles more common. 

Together, those trends are making road funding models based on fuel taxes obsolete, the report says. Instead of continuing to raise fuel taxes to pay for transportation infrastructure a mileage fee could more fairly allocate costs based on the number of miles driven, the time of day, the route taken, and the weight of the vehicle,” the report says. Elizabeth Treutel, a master of urban planning candidate at U-M and one of the authors of the report, said moving to such a system is probably five to 10 years away, but the report is partly intended to start a conversation.

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Let me be perfectly clear, as our President likes to say. Climate change is real. I support less pollution, better roads, and within reason, certain higher CAFE standards. Lord knows I've spent more than my share of money because of issues caused by potholes. But as you might have noticed I also have this strange preoccupation with privacy. I just don't think it's any of the state's business how much I drive each year. I don't think there is any non-intrusive method for them to obtain that information. And if you're going to make people pay for the number of miles they drive then frankly I would just as soon the state (speaking federal and Michigan here) get out of the business of twisting arms to get companies to produce little hybrid/electric clown cars that at least in Michigan are not super popular. I have a 45 minute one way commute on a good day. I don't think it's "fair" to charge me more because I was not fortunate enough to find a job closer to home. And by "fair" I also mean in my interest. There are people who outearn me by factors of five, ten or more who may have a 10 minute commute. Is it really right that they would pay less tax than I do?

I also don't like the baked in presumption that that the state is guaranteed some fixed amount of revenue from citizens. They wanted us to use less gasoline; we're using less gasoline. Now that's no good because their tax revenue is declining? That is not my problem. If I were running things I would suggest cutting the truck weight limits in half and giving businesses more incentive to transport items by train. There are far too many semi-trailers or other large trucks on Michigan roads. That's where the road damage starts if you ask me. I also think the standards for roads are far too low. Other states in the upper Midwest don't seem to have the kinds of roads with which Michigan is cursed so I don't think the problem is weather related. So right now I'd want to know more about who's fixing the roads and why are they doing such a poor job before I'd support giving them more money.

But what's your call?

Is a tax based on mileage rather than gasoline usage fair?

If you were the state what would you do when faced with declining gas tax revenue?

Fight Over Online Sales Taxes: Marketplace Fairness Act

Occasionally I might or might not purchase items from Amazon and other online retailers. When I file my tax returns the State of Michigan insists that I give it a listing of online purchases and estimate and provide the sales tax I then owe to the state. Now it takes more than a bit of chutzpah to bogart your way into a private transaction that neither involved you nor took place in your jurisdiction and then claim that the actual parties to that transaction owe you a cut and need to let you wet your beak, or else. But that's how states tend to behave when there's money at stake.

For obvious reasons I won't discuss my answers to my state's nosy little questionnaire. But in general some higher sales tax states and "brick and mortar" retailers aren't pleased with the explosion in online sales. Apparently some of my fellow true blue Americans don't see the point of paying taxes to their state for transactions in which that the state had no role. Even excessively honest people tend to get amnesia about the $1500 or so they spent online last year without paying sales tax. Retailers who aren't primarily online get annoyed with people using their stores as a showroom or to price check for items they intend to purchase online. Some consumers visit a bookstore or electronics shop with no intention of purchasing anything therein. All they're doing is getting a hands on experience before ordering elsewhere. This makes some retailers rather peeved, as you might imagine. They have less money to kick up to their mob captain, state.

Some people have come up with a solution. That is a solution from their point of view, not necessarily mine. This solution will of course require you to pay more taxes. It's only fair right? I mean why should some states go without what they view as their tax revenue just because some consumers have decided it's better to order things online on occasion.

Legislation that would empower states to tax online purchases cleared a key hurdle in the Senate on Monday after winning an enthusiastic endorsement from President Obama. 

Senators advanced the bill in 74-20 procedural vote on Monday evening, just one vote short of the backing it received in a test vote last month. Twenty-six Republicans joined Democrats in moving forward with the bill..

Major retailers are putting all their lobbying muscle behind the legislation, arguing it would close an unfair loophole that benefits online merchants over brick-and-mortar stores. The National Retail Federation, which represents chains such as Macy’s, and the Retail Industry Leaders Association (RILA), which counts Target and others among its membership, announced it would score lawmakers’ votes. But signs of trouble for the bill also emerged as Wall Street groups urged the Senate to slow down and eBay began marshalling its users in a massive campaign to kill it.

The Securities Industry and Financial Markets Association and the Financial Services Roundtable said the measure could pave the way for financial transaction taxes on the state level, an idea that Wall Street and its supporters fiercely oppose.  “It’s important for Congress to explore all the possible outcomes and costs of the proposal, especially the impact on consumers,” Scott Talbott, the senior vice president of public policy for the Roundtable, said in a statement...The Marketplace Fairness Act would empower states to tax out-of-state online retailers, but would exempt small businesses that earn less than $1 million annually. 

Under current law, states can only collect sales taxes from retailers that have a physical presence in their state. People who order items online from another state are supposed to declare the purchases on their tax forms, but few do. The proposal has the support of a host of governors, including Republicans Chris Christie of New Jersey, Rick Snyder of Michigan and Bob McDonnell of Virginia. Passage of the bill could bring billions of dollars in new revenue to state governments. The bill has split the tech industry, pitting eBay against the retail giant Amazon. 

In email to eBay users, eBay CEO John Donahoe argued that the bill would “penalize small online businesses,” urging the site’s millions of users to contact their members of Congress and voice opposition.The company is lobbying for Congress to increase the small-business exemption from $1 million to $10 million.  Donahoe also took a shot at Amazon, a key supporter of the legislation. “Amazon, for example, has fought harder than any other company to require all businesses to collect sales taxes online, while also seeking special tax benefits as it expands its warehouses throughout the country. It’s bad tax policy,” Donahoe wrote....

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So as you can see some of this is a case of the elephants fighting and the grass getting trampled. I don't think that Wall Street cares about whether I pay the proper use tax on books or cd's I order online. But Wall Street is very concerned about states attempting to put financial transaction taxes on services that take place in cyberspace. For example California, which has a political class much friendlier to higher taxes than some other jurisdictions, might decide that every transaction which takes place between consumers in California and bankers or financial service companies based in say New York, is now subject to a California tax.

This sort of backdoor tax was disallowed in a 1992 Supreme Court ruling in which North Dakota attempted to tax Quill Corporation, a business which had no sales force, retail outlet or other physical location in the state. Amazingly North Dakota tried to argue that Quill's floppy disks and sales flyers were physically located in the state and therefore so was Quill. The Court rejected this line of reasoning but evidently said that Congress could change the law if it wanted to do so. And now it looks like Congress wants to do so.

I think this is a bad idea and also unfair. If you're a business who is only physically located in one state why in the world should you have to figure out the tax policies of 49 other states, and various counties, cities, townships and territories. That's expensive. Additionally this new online tax proposal would seem to discriminate between online purchasers and physical purchasers. There are states who do not have sales taxes or have different sales taxes than my state. That's their right. If I happen to drive across the border to purchase goods or services that's my business and my right to do so. My money doesn't automatically belong to my state or the businesses that reside within. If I order something online from a state with no sales tax like New Hampshire my state wants to be able to track that transaction and get its cut. But if I drive to New Hampshire and purchase something my state is just out of luck? Does that makes sense? Or is Michigan also going to try to put GPS on my car to track down any such trips? 

If the states feel that their tax structure is no longer feasible because of a change in consumer behavior then they are free to do things more efficiently OR raise other taxes on businesses or individuals within their state. I don't think states should be able to compel other businesses or other states to adopt their tax policy on "their" citizens. I think all this law would do, if passed, would be to squeeze out smaller businesses. It's not coincidental that Amazon is in support. Amazon just happens to be selling new tax policy software and has already negotiated tax exemptions for itself. Or maybe I'm just being selfish. Maybe I'm just opposed to paying my "fair" sales taxes on goods I hypothetically order online...

What's your take?

Phil Mickelson, Taxes and Fairness

You can pay Uncle Sam with the overtime
Is that all you get for your money
-Billy Joel "Moving Out"

During my time on this planet I've known several people who are doing much better financially than I am. I'm sure you have known people more successful than you are. Some of these people were born to it or inherited it. Others worked for it. Some were smarter and harder working than I was. Some have skill sets which I lack. Other people are just older and more experienced. Other folks simply happened to marry well. In any event very few of them liked giving money away, and certainly not to the state or federal government. I remember listening to a rant by a former friend, who having built an income in the high six figures, was outraged that to her mind, so much of it, too much of it was going to the federal government. It seems like it was a weekly event of listening to her whine about taxes and how it wasn't fair and blah, blah, blah.

I've also known a few wealthy people who made it a point never to complain publicly about their taxes because they considered it gauche and something not likely to engender sympathy. I certainly didn't feel much sympathy or empathy for the friend I mentioned. This lack of sympathy often occurs because when you're living paycheck to paycheck you don't see how someone making high multiples of what you make can have too many financial problems. I look at some people making more than I make and think they have it made. But I also know some people who earn much less than I do and think I have it made. And I assure you that is so not the case. It's all relative.

This feeling of "Buddy we've all got it tough" could be what golfer and California resident Phil Mickelson ran into when he complained about the high taxes he was paying, and specifically the increased taxes he would owe under the fiscal cliff deal and California's just passed 13% income tax rate.

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“If you add up all the federal and you look at the disability and the unemployment and the Social Security and state, my tax rate is 62, 63 percent,” Mickelson said. “So I’ve got to make some decisions on what to do.”Mickelson, who lives with his wife, Amy, and their three children outside San Diego, his hometown, said he planned to elaborate on his comments in more detail this week when the tour stopped in his backyard, at Torrey Pines in La Jolla, Calif.

“It’s been an interesting off-season,” said Mickelson, who cracked open a window into his thought process last week during a teleconference. Asked if he has considered following his United States Ryder Cup teammate Steve Stricker, another 40-something golfer, into semi retirement, Mickelson replied: “You know, I think that we’re all going to have our own way of handling things, handling time in our career, our family, handling what’s going on the last couple of months politically. I think we’re all going to have to find things that work for us.”

In December, Mickelson, who was part of a group that had bought the San Diego Padres four months earlier, abruptly announced that he was no longer involved in the business deal. His reversal came shortly after California voters approved Proposition 30, which imposed a 13.3 percent tax rate on incomes of more than $1 million.

Asked Sunday if the election results played a role in his decision to sever his ties with the Padres’ ownership group, Mickelson replied, “Yeah, absolutely.” "I'm not going to jump the gun, but there are going to be some drastic changes for me because I happen to be in that zone that has been targeted both federally and by the state and...it doesn't work for me right now."

Mickelson faced a backlash over his comments with some people claiming he should only be paying 52% of his income, not 63% and therefore should stop whining and take it like a man.

Mickelson frenemy Tiger Woods came to Mickelson's defense by pointing out that high taxes were one reason that he had previously left California. But perhaps not wanting to seem insensitive or place himself within political controversies any more than he already had, Mickelson issued an apology for his statements.

"I'm like many Americans who are trying to understand the new tax laws. I certainly don't have a definitive plan at this time, but like everyone else I want to make decisions that are best for my future and my family. Finances and taxes are a personal matter and I should not have made my opinions on them public. I apologize to those I have upset or insulted and assure you I intend to not let it happen again".

Mickelson was, according to Sports Illustrated, the second highest paid athlete in 2012. Floyd Mayweather was #1. So even by the elevated standards of New York or Hollywood, Mickelson would remain rich even if the federal, state and local governments really were shaking him down for 63% of his total (not marginal) income. Perhaps he really should just keep his mouth shut and pay up. Never complain and never explain is often really good advice for an adult to heed. If you're paying a lot of taxes, you're probably earning a lot of money so what do you really have to complain about when all is said and done? Mickelson's net worth is estimated at or around $180 million. So it's not like I'm ever going to see Mickelson on my homeward bound expressway exit forlornly holding up a sign that reads "Will putt for cash. Please help".

So this raises an interesting question. There are as stated, very few people who like paying taxes. People at all levels of income complain about the bites various governments take whether they're getting clothing at goodwill or going shopping for suits in Paris and Rome over the weekend. Presumably Mickelson and his wife know better than anyone not in the IRS, how much he pays in taxes. Whatever his tax burden is, by Mickelson's reckoning it's too damn much. He has a right to say so. California's 13% income tax is by my standards, too high and could well be a reason why some people who have the ability may consider departing California for more pleasant (lower tax) locales. You need not be a right-wing free market fundamentalist to recognize that there is a point where higher tax rates do not result in higher revenue. Because all else equal people can and do decide to leave the political unit where high taxes are imposed or failing that work less. For a high tax area to succeed, it needs to offer some other super high quality services to go along with the higher taxes-high quality schools, high income potential, clean air and water, great roads, open space, responsive police and fire service. Does that sound like California these days? I couldn't say...

But Mickelson should count himself lucky. Progressive talk show host and author Thom Hartmann thinks we should outlaw billionaires.  Mickelson doesn't make that cut yet but if he keeps whining I'm sure some people might decide that a 100% wealth tax on anything over 1 million might be a good idea. On the other hand I am shortly due for significant pay raises and bonus, though the increases are sadly somewhat short of $60 million. I imagine that I will be rather po'd when I see how much of the increase in income goes to the federal government. Last year I remember going to my boss wondering if the check was correct. NO ONE likes taxes!!

Questions:

Was Mickelson right to speak out? Do you have any sympathy?

Was an apology necessary?

Is 63% of income going to government too high?

How much of his own money should Mickelson get to keep?