Random Thoughts – Page 22

Death and Taxes

2016 was a tough year for hedge funds, their managers anyway. The combined income for the top 25 managers was a paltry $11 billion, the lowest since 2005. That’s just a little over half of the $21.2 billion they “earned” in 2014. Don’t feel too sorry for them, though. Most of their income is categorized as “carried interest” and taxed at a rate of 20%, compared to the 39.6% top tax rate for “earned” income. Your investment in a hedge fund is subject to the typical “two and twenty” fee structure. The fund manager annually takes two percent of your invested assets plus twenty percent “performance fee” on profits realized. (The performance fee is considered carried interest.) What if your assets lose money? Does the manager suffer 20% of the loss? Ha, ha, that was a joke.

While campaigning last year, our president said, “I have hedge fund guys that are making a lot of money that aren’t paying anything.” He said he would change the tax system to force those who work for hedge funds to pay more. “They’re paying nothing and it’s ridiculous. I want to save the middle class. The hedge fund guys didn’t build this country. These are guys that shift paper around and they get lucky.”

What little that has been revealed about the Republican “tax reform” includes a reduction of the tax rate to 15% for “pass-through” income. This is trumpeted as relief to small family businesses that are S corporations – meaning the business is not taxed. The income is passed through to the individual owners who are presumably taxed at a lower rate. Guess what – investment firms can be pass-through businesses also. If carried interest is taxed at the higher rate, who cares, because as pass-through income it will be taxed at even less than before.

The United States nominal tax on corporations is 35%, purportedly the highest in the industrialized world. The effective tax rate, because of endless incentives and breaks, is not so high, about 22% for profitable companies. Of the Fortune 500, nearly forty percent paid zero Federal tax in at least one year between 2008 and 2015. Some, including General Electric, International Paper, Priceline.com and PG&E, incurred a total federal income tax bill of less than zero over the entire eight-year period — meaning they received rebates.

Our president recently delivered a speech to an audience including hundreds of truckers – “hard-working men and women” who are “the lifeblood of the economy.” He touted a lower tax on manufacturers as a boon to truckers as it will increase growth and demand for trucking. He also wants to eliminate the estate tax, pejoratively called the “death tax” by Republicans. He claims this will allow truckers to pass their assets on to the next generation, allowing their businesses to stay in business. Republicans have previously said keeping family farms alive was the overriding reason to abolish estate taxes.

The first $5.49 million of your estate is exempt from estate tax; for a married couple, it’s $11 million. Tax experts calculate last year 80 farms were subject to any estate tax at all; for trucking companies, it was 30. Elimination of the estate tax is estimated to save the Trump family approximately a billion dollars. That assumes that The Donald does actually own anything.

As billionaire hotelier and husband of another New York real-estate magnate, Leona Helmsley, famously said, “We don’t pay taxes. Only the little people pay taxes.”

Urban Renewal and the Dreamland Ballroom

As in many cities of segregated America, Little Rock Arkansas had a thriving African-American community. The West 9th Street neighborhood on the eastern edge of downtown was filled with black-owned businesses and professional offices. The Dreamland Ballroom headlined acts such as Duke Ellington, Fats Waller, Etta James, Louis Jordan, Big Joe Turner et cetera. Urban renewal came to the neighborhood in the 1950s. It came with a vengeance after the integration of Central High School made news around the world.

Originally termed “slum clearance,” the more genteel label “urban renewal” saw the eviction of black families and their relocation to housing projects further east. The Little Rock Housing Authority (LRHA) had authority to purchase –requiring homeowners to sell at assessed price – and demolish swaths of “blighted” areas. The LRHA director went on record that, “the city of Little Rock through its various agencies including the housing authority systematically worked to continue segregation” through its slum clearance and public housing projects. The city built two new high schools: Horace Mann High in the mostly black eastern part of Little Rock, and Hall High in the white western edge. Construction in the 1960s of Interstates 630 and 430 solidified the de facto boundary between white and black Little Rock.

Fast forward to 1991. Kerry McCoy, founder and owner of Arkansas Flag and Banner, was looking for a new headquarters for her company. The Taborian Hall, built in 1918 by an African-American contractor for the Knights and Daughters of Tabor, had stood derelict on West 9th for decades; it even lacked a roof when McCoy purchased it. In addition to the lodge, the building in its glory days housed the USO, the Gem Pharmacy, medical and dentist offices and the Dreamland Ballroom. The flag business has thrived and Kerry McCoy has steadily progressed with making the Dreamland a viable operation. (You can schedule your wedding reception there.)

While full-scale gentrification has yet to come to the West 9th district, the neighborhood’s changes and Dreamland’s resuscitation was the subject of a PBS documentary.

Keeping Up the Outrage

(This was originally published August 2016.)

By not standing for the national anthem, Colin Kaepernick has disrespected the sacred ritual of football. The American concussion game is inseparable from patriotism. There has not been so much outrage since John Lennon commented that the Beatles were more popular than Jesus.* Defenders of Christianity – as if Christianity needed to be defended against a pop-music star – organized burnings of Beatles records.

Two years after Lennon’s remark, at the Mexico City Olympic Games in the incendiary year of 1968, Tommie Smith and John Carlos stood, barefoot, on the podium at the medal awards ceremony. Smith had won the gold, setting a new world record, in the 200-meter sprint. Carlos took the bronze. Instead of humbly holding hands over hearts during the playing of “The Star Spangled Banner,” they each raised an arm, gloved hands clenched in fists, in what was considered to be a black-power salute. The silver-medal winner, Peter Norman, an Australian, did not raise a clenched fist, but wore an Olympic Project for Human Rights badge on his jacket, as did the other two. They were booed as they left the podium.

Smith and Carlos were pulled from upcoming relays and Olympic chairman Avery Brundage evicted them from the Olympic Village. Back home, both athletes, and their families, received death threats and had difficulty finding employment. They each played briefly in the NFL. Smith became track coach and taught sociology at Oberlin College in Ohio and later at Santa Monica College. Carlos was a counselor and track and field coach at Palm Springs High School.

Norman was allowed to stay in the Olympic Village, but was shunned at home. Although qualifying for the 1972 games, he was not selected for the Australian team. Norman’s time in the 1968 race, still stands as the Australian record. He died of a heart attack in 2006. Smith and Carlos gave eulogies and were pallbearers at Norman’s funeral.

John Lennon continued to have a successful musical career. A born-again Christian and rabid Beatles fan, Mark David Chapman felt betrayed by Lennon’s blasphemous remarks. On a night in 1980, Chapman waited with a loaded gun for Lennon’s return to his New York apartment building.

And Colin Kaepernick? Who knows? Outrage over a football player’s sitting down may tell more about us than it does about him.

* John Lennon: Christianity will go. It will vanish and shrink. I needn’t argue about that; I know I’m right and I will be proved right. We’re more popular than Jesus now. I don’t know which will go first – rock & roll or Christianity. Jesus was all right, but his disciples were thick and ordinary. It’s them twisting it that ruins it for me.”

Handy Guide to Coming Disasters

Both senators from Texas, John Cornyn and Ted Cruz, and twenty of their House colleagues voted against the 2013 Hurricane Sandy Relief Act. (In the previous fiscal year, Texas received more federal disaster relief money than any other state.) All but four Texas reps voted in favor of initial Harvey relief legislation. The four dissenters don’t represent coastal districts, so they don’t care.

Florida Governor Rick Scott (still the record holder for Medicare fraud) warned residents of his state as Hurricane Irma bore down on them, “This is a catastrophic storm our state has never seen.” Governor Scott in 2015 purportedly banned state employees from using the terms “climate change” and “global warming.” Post hurricane, he still demurs when questioned about the subject, his stock answer, “I am not a scientist.” (I am not a doctor, but I know a 105° fever requires attention.)

Climate-change denier Scott Pruitt, head of the Environmental Protection Agency (a legacy of the Nixon administration) says it would be “very, very insensitive to the people in Florida” to discuss the cause of “these massive, anomalous storms.”

The Los Angeles Times recently published a concise summary of scientific consensus about cause and effect of natural catastrophes and why we can expect more in the future.

Wind & Rain – Rising sea levels mean more flooding – storm surge – when storms push water into the shore. Warmer air results in more moisture in the atmosphere, so… when it rains, it pours. And oh yeah, scientists say there’ll be fewer weak storms. That’s because more of them will be Category 4 and 5.
Lack of Wind & Rain – Warmer temperatures mean quicker evaporation into the atmosphere to feed the storms in hurricane zones. Meanwhile, in the southwestern U.S., even with normal rainfall – which has not occurred the past few years – the ground will be drier meaning less moisture for living things.
Fire – Dry conditions mean more fires. Duh. Warmer weather also means greater survival rates for pine beetles that generally perish in frigid conditions. The pest has expanded its area of devastation from the Rocky Mountains to the Pacific Northwest and Canada.

Read the rest of it here.

Labor Day

We think of Labor Day as summer’s last gasp. The final three-day weekend of the season. In polite society, it’s the last day to wear white. There was a time when Labor Day meant the beginning of the presidential campaign, not a multi-year slog to election day.

Continue reading “Labor Day”

A World Without Tipping?

Do you ever wonder – as you carry your dishes from your restaurant table across the room to the bus tubs, after eating a meal that you ordered and paid for at the counter, and went back to the counter when your name was called to pick up your food and carry it yourself to the table – why you dropped money into the tip jar on the counter before you even saw a glimpse of your food?

Continue reading “A World Without Tipping?”