tax policy

Comment Of The Day: “Comment Of The Day: ‘Sunday Ethics Warm-Up, 1/12/2020′” (Economic Data Thread)

/ Jack Marshall / 12 Comments

This Comment Of The Day covers a wealth of ethics issues, including the ancient ethics debates over what is a fair share on societal wealth and who decides when someone has “enough” wealth. It also is an Ethics Alarms first: Chris Marschner’s Comment of the Day is on his own Comment of the Day!

And here it is, his Comment of the Day on his previous Comment of the Day on the post, “Sunday Ethics Warm-Up, 1/12/2020: Broken Ethics Alarms, An Ethics Conflict, And “Who Are You Going To Believe, Me Or Your Own Eyes?”

The point I was making was that people use economic data to illustrate all kinds of things. Typically they use charts and graphs to illustrate a point THEY want to make. The values within those charts and graphs need full examination before drawing a conclusion. For example, Reagan dropped the unemployment rate overnight by including the military in the labor force. In that case the number employed went up and the labor force went up as well. Given that the unemployment rate is the number unemployed/labor force if the denominator rises the UE rate falls.

Conversely, between 2008 and 2012 the unemployment rate showed a downward trend because the Labor force participation rate (LFPR) shrank and not because more people got jobs. People gave up looking for work so they were no longer treated as unemployed and the number of people working grew relative to the LFPR. Since 2016 the LFPR has been growing and the UE rate is dropping. That means that there are more people are working. That is a good thing because it puts upward pressure on wages.

For some, higher wages have overtaken what is known as an individual’s reservation wage. The reservation wage is the minimum amount needed to get a person to accept the offered job. Unfortunately, we have a great number of people whose true reservation wage has been distorted in both psychological and real terms. Reservation wages have been growing because of the growth in governmental income maintenance programs. Imagine how many will decide to live only on Yang’s guaranteed $12K a year. Couple that $1000 a month with housing assistance, food stamps, childcare, Medicare, and WIC you can live quite well on the dole. Oh I know, Yang says he would replace all those other programs to fund his guaranteed minimum income. Name a program that ever went away. We just layer one atop another.

These are not my opinions but well established facts and fundamental economic theory that is taught in first year Econ classes. I know because I taught those courses for 20 years. Continue reading →

Wait, WHAT? Alimony Is Deductible? Why?

/ Jack Marshall / 25 Comments

Family law attorney Corri Fetman received a lot of publicity—much of it bad— when her all-female law firm ran the above cheeky advertisement to spur business. No, it’s not exactly unethical to encourage people to break up their families because there is better sex to be had, it’s just sleazy. (Funny! But sleazy….) Now, however, marital-dissolution lawyers are engaged in due diligence and meeting the ethical the  of communication by telling their clients–particularly the wealthy ones— that if they want out, the clock is running.

One of the features in the new Republican tax law that the news media didn’t tell you about while it was trying to get you angry about it will eliminate the tax break for alimony payments. I didn’t even know that alimony was deductible, but you can bet Donald Trump did.  Now, they won’t be if they are finalized after December 31, 2018.

Under the new law, Americans who finalize or modify divorce agreements in 2019 or later will no longer be able to deduct alimony payments from their taxes. The IRS says that about 600,000 taxpayers claim the deduction each year, and the cost to the Treasury is not chump change. The current, soon-to-be-ended system allows those paying alimony or so-called unallocated support, which are payments  meant to help a divorcing spouse and children at the same time, to deduct all of it from their income before calculating what they owe in taxes.

I’d like to know why alimony was ever deductible. Deductions are supposed to encourage conduct and expenditures that benefit society, like buying a home (domestic stability, the economy) and giving to charity. Why would the government want to encourage divorces, and reward the guy who is paying alimony because he cheated on his wife and got nailed in the settlement? Why should I be paying part of Donald Trump’s/ Tom Cruise’s/ George Clooney’s/ Harrison Ford’s alimony payments?

Analysts suggest that the absence of the deduction may lower divorce rates slightly. Good.

I have to find out what else is in that tax law, which was generally irresponsible, since it adds to the national debt. Apparently there are some silver linings…

Latest Ethics Notes On The Hillary Clinton E-Mail Scandal Ethics Train Wreck, Part 3

/ Jack Marshall / 32 Comments

denial

Continuing from Part 1 and 2…

9. Hillary Clinton’s presidential campaign circulated a draft letter critical of James Comey to former federal prosecutors, implicitly inviting them to comment publicly.  (This is an implied but unenforceable quid pro quo. These people are good...) Eric Holder, naturally, former US attorney general Michael Mukasey and poor, disgraced former Bush AG Alberto Gonzalez heeded the dog whistle, all disgracing themselves in the process.

Not one of them are privy to the evidence involved, and for these men to be using their positions and reputations to level charges and accusations at a high-placed law enforcement official based on speculation and partisan warfare is unethical. It is unfair, and  undermines the public trust. This is always something that former officials should avoid, as a near absolute. The Golden Rule also applies. These men know how hard these jobs are, and what they would have thought about  ex-officials criticizing them. Basic professional ethics principles discourage this.

Holder, of course, is a proven Clinton hack. Gonzalez might even make Comey look better by criticizing him, so thoroughly discredited is he. (My guess is that he’s desperately attempting to fashion a new pubic image.)

Mukasey’s comments may have been the worst of all. He took the opportunity of the current controversy to attack Comey again for his decision not to recommend that Clinton be indicted. (Meanwhile, CNN used his name in a misleading headline implying that he was criticizing Comey for his letter to Congress. It initially fooled me.) Speaking of the earlier Coney statement, he said,

“This wasn’t Comey’s call. It is not his function as director of the FBI to decide who gets charges and doesn’t. It’s his function to gather evidence. And he didn’t fulfill that function very well. But it’s certainly not his function to get up and pronounce on whether charges should be brought or whether a reasonable prosecutor would ever bring them.I don’t think he should have been this fix. I don’t think he should have put either himself or the bureau or the Justice Department in this fix.”

Wrong (1): it was Comey’s call, because Loretta Lynch told the public that Justice would accept the recommendation of the FBI regarding Clinton’s possible prosecution. Did Mukasey follow the story? I guess not.

Wrong (2): Comey’s extensive public statement in July was necessary to ensure transparency and trust after Loretta Lynch stupidly allowed Bill Clinton to appear to be brokering a deal with her. Presumably Mukasey wouldn’t have done that.

Wrong (3): So Comey did not “put either himself or the bureau or the Justice Department in this fix.” Obama put them in this fix, by allowing his Secretary of State to skirt security policies. Holder put them in this fix, by operating such a blatantly partisan and political Justice Department that public trust in a fair investigation of the presumptive Democratic Party presidential candidate was impossible. Lynch put them in this fix, by not resigning.

To his credit, Mukasey did dismiss Harry Reid’s and Richard Painter’s Hatch Act nonsense with appropriate disdain, saying, “That’s baloney. I mean, you know, it’s sort of an amusing talking point for three and a half seconds, but it’s not serious.”

10. The issue is not whether Donald Trump is as corrupt and dishonest as Hilary Clinton, or even more so. In trying to shift focus to Trump to allow Clinton, as usual, to wiggle out of the well-earned consequences of her own wrongdoing by distraction, confusion, and diversion, Clinton’s corrupted allies are throwing every accusation and innuendo at Trump that they can concoct or dig up. It-Doesn’t-Matter. Trump is horrible, the bottom of the barrel, UNDER the barrel, at the bottom of a long, narrow pit under the barrel. Understood. That still doesn’t make Hillary less corrupt, less untrustworthy, and less dishonest. Nor less ruthless, cynical, manipulative, venal and totalitarian.

Continue reading →

Burger King Ethics: What’s Unethical About Burger King’s “Tax Inversion” (And It’s Not Burger King)

/ Jack Marshall / 42 Comments

BKAs you may have heard by now, Burger King is preparing to merge with the larger Canadian equivilent of Dunkin Donuts, Tim Hortons and move the company’s headquarters to Canada. As with the proposed Walgreens move to Europe that was considered and ultimately rejected, the Burger King merger was made for tax reasons, and good ones. The good ones should be clearly explained to the American public, especially voters and those with unemployed workers in their families, but they are not. Let’s  call this BK Ethics Foul #1: news media incompetence. Because the public doesn’t understand what “tax inversion” means, they are vulnerable to having it distorted and demagogued for them by unethical politicians and pundits, and so it has been. Let us designate this BK Ethics Foul #2: the anti-corporate disinformation campaign.

The United States tax rate is  a whopping 35%, more than any other large industrial nation, even more than those that tend toward socialism. There’s nothing unethical about this, necessarily, though it can be argued that it is a foolish and self-destructive policy. Did you know, however—and I wouldn’t blame you if you didn’t, because not being an international corporation myself, I didn’t know until this issue arose—that the U.S. applies that tax to all global earnings of U.S. companies. This means that the earning of U.S. companies doing business abroad are not only taxed where they earn the profits, but also in the U.S., or as this is technically called, twice. (UPDATE: I should have made it clear that the the US does give a foreign tax credit for the money paid in taxes abroad, so the effect is not completely double tax, just two taxes.) That is definitely unfair (and also bad policy), and will be called BK Ethics Foul #3: predatory taxation.  Continue reading →

Comment of the Day and Ferguson Thread Highlight: Chris Marschner On The Elusive Equal Treatment Problem

/ Jack Marshall / 4 Comments
Doesn't seem right, somehow...

Doesn’t seem right, somehow…

At least one good thing has out of the Ferguson Ethics Train Wreck, anyway: several unusually intense, frank and thought-provoking threads about race, “privilege” and poverty led by Ethics Alarms All-Stars Chris Marschner, deery, and urbanregor, with trenchant contributions by others as well. The most vigorous thread emerged here, in response to Marschner’s Comment of the Day on this post, on the unfolding Ferguson situation.

I could have chosen any number of comments to highlight by a separate post, but decided on this one, by Chris. First of all, it is remarkably thoughtful. Second, it transcends Ferguson and addresses the larger, related issues of poverty and perceived inequality of opportunity in the U.S. Third, it constitutes a first: a Comment of the Day, by the author of a Comment of the Day, commenting on his own piece. Guinness has been notified.

Here is Chris Marschner’s Comment of the Day on his previous post, Comment of the Day: “Ethics Train Wrecks Collide, As The Redskins And Trayvon Martin’s Mother Board The Ferguson Express”: Continue reading →

Deficit Reduction Ethics: We’re All Selfish Dunces, and We’ll Be Sorry

/ Jack Marshall / 1 Comment

President Obama’s bi-partisan commission on cutting the deficit has come up with its draft recommendations, and they are fair, balanced, obvious, and, inevitably and unavoidably, flawed. Despite the flaws, everybody gets hurt, as everyone deserves to be when we elect a series of profligate and irresponsible leaders who spend more money than the nation has, on too many dubious projects and policies.

Personally, it would kill my already struggling personal finances dead: I’d have to sell my house, for one thing, at a lower value than it has now. Are the recommendations perfect? Surely not. They address the problem, however, and it is a problem that 1) has to be addressed 2) has to be addressed quickly and 3) will never, ever be addressed sufficiently if left to the usual corrupt legislative process, where it will sliced to pieces by lobbyists and turned into more pork, more lies, and another 3000 page bill that nobody reads before voting on it.

If Americans were responsible, honest, fair and genuinely concerned about America’s future prosperity and strength, we would just buckle down take deep breaths, and agree to make the sacrifices necessary to put the nation back on the road to fiscal health. But we won’t, will we? Continue reading →

Ethics Dunces: Sen. Kerry’s Critics

/ Jack Marshall / 10 Comments

Hypocrisy, unfairness…pick your own adjective for Republican and conservative attacks on Sen. John Kerry for saving himself some money by docking his $7 million yacht in Rhode Island, where he could avoid Massachusetts’ s $435,000 one-time tax and an additional $70,000 in excise taxes every year. Incredibly, talk show host Sean Hannity just called Kerry a “tax cheat,” although Kerry is breaking no laws, has no obligation to make sure his home of Massachusetts gets all of his tax money, and is doing what all wealthy Americans—usually championed by Hannity and others as those who create jobs and make the country prosperous—do: using  available loopholes, safe harbors and tax minimization methods to hold on to as much money as he can. Continue reading →

Rebuttal on the Trial Lawyer Deduction

/ Jack Marshall / 5 Comments

Following the argument of reader Bob Stone, a trial lawyer blog makes a strong pitch that the Obama deduction for his up-front expenses—criticized in Ethics Alarms—in contingency fee cases is reasonable and fair, because other small businesses can deduct similar expenses. Continue reading →

Obama’s Unethical Gift to the Trial Lawyers

/ Jack Marshall / 10 Comments

After January 1, 2011, when you begin to process all the new taxes coming your way and all the deductions you can no longer take, think about this:

The nation’s largest trial lawyer trade group, the American Association for Justice, has announced it was informed by Obama Administration officials that the U.S. Department of Treasury will give its members (and all tort lawyers) a tax break on contingency fee lawsuits. The new provision is expected to mirror proposed legislation by Sen. Arlen Specter, himself a lawyer, that was previously rejected by Congress last year. That bill would have allowed attorneys to deduct up-front costs in contingency fee lawsuits. Continue reading →

The Senate Closes an Unethical Tax Loophole

/ Jack Marshall / 5 Comments

When a defendant corporation is hit with punitive damages in a jury verdict, that means that in addition to causing the plaintiff’s injuries or damages, the corporation also was guilty of wrongdoing. Punitive damages are large amounts of money that the losing defendant must pay over and above compensatory damages, in order to make it too expensive for the company to keep doing what caused the original problem. This is one of the virtues of the civil justice system. Thanks to punitive damages, a lawsuit by a single injured party can result in a sufficiently painful financial penalty that the corporation has a significant incentive to reform.

So why do the tax laws allow companies to use punitive damages as tax deductions, since it 1) lowers tax revenues and 2) makes the damages less expensive, less painful, and less of an incentive to correct unsafe, dangerous or dishonest practices? Continue reading →