Lower Tax Rates = More Jobs?

I’ve been an employer for about 30 years. “But you’re an attorney,” you say. “Yes, of course I am, but I’ve always had a secretary, and the firms with which I have been affiliated have had associates, contract attorneys, legal assistants, bookkeepers, files clerks, etc.” So, directly and indirectly, I’ve been employing people for three decades.

My practice focuses on business and real estate issues. My clients are employers, large and small, in many, many different industries.  I’ve represented my clients in times good and bad, and often talk with them about employment issues.

My point? Never, not once, have I decided to hire someone because I–or my firm–had extra money lying around. And never, not once, has a client of mine told me he or she hired someone because they had some extra money in the bank.

We–people who hire employees–hire them when we have work for them and think we will earn more money on account of the work they do. No mystery here; it’s really that simple!

So I get a little nutty when I hear about the Republicans’ job creation scheme. Lower marginal tax rates for the highest earners, they claim, and small business owners will have more money and, thereafter, start hiring. Rubbish, and here’s why:

Assume I own a business. I have employees.  We generate gross revenue of $500,000, and I net $250,000 after paying all expenses. My income tax bill (federal) is about $45,000, leaving me with after-tax income of $205,000.

Now, assume all of the same facts, but change the highest marginal tax rate on my income from its current 33% to 25%. When the math is done, I’ll have an extra $10,000 in my pocket. Cool, but the extra money gives me no reason to hire someone else. After-tax income of $205,000 or $215,000 changes nothing about how I run my business, as we’re still focused on the sweet spot, where I am maximizing revenue and minimizing expenses.

I know, I know, if lots of people all have an extra $10,000, they’ll buy more stuff and maybe, just maybe, they’ll buy it from me. Then, I’ll need to hire more people because demand for what I sell will actually increase.

True, but what if I decide to save the $10,000, or use it to pay off debt? In fact, with an income of $250,000 there’s not much I need. Maybe I don’t appreciate the consumer culture–I, of course, don’t have a credit line of $500,000 at Tiffany, like a certain “regular guy” who’s running for President–but the notion that, somehow, high-earners who pay less to the government will spend their tax savings and cause employers to hire people is just as silly as the old supply-side canard that if we lower tax rates enough tax revenues will increase. There aren’t that many high-earners, and there’s only so much “stuff” we can buy.

If people want lower tax rates, fine. Let’s be honest, though, about two things: First, lower rates means government collects less, which means government must borrow or do less. And, second, putting extra money in people’s pockets does not cause employers to hire more workers unless the extra money increases demand, which won’t likely happen if we focus on demand generated by our highest earners.

Note: The opinions offered here are mine, and mine alone, although they happen to be supported by the Congressional Budget Office and lots of other groups that know this stuff much better than I do.

A Little Truth, Part 1

A Little Truth, Part 1, is the first post of what I hope are several more, identifying falsehoods in our discourse that don't get challenged.  I hope you enjoy these brief encounters with reality, that they make you more critical thinkers and better citizens, and that you tell your friends.

So, it's a given that people live longer than they used to and, therefore, the United States of America must raise the retirement age for Social Security to save us from ourselves.  Right?  No, wrong, although I'm sure those people who argue for increasing the retirement age will quibble with my characterization of their main argument in support of their position.  To them I say, get your own damn blog!

So, wrong?  Why?  Let's stick with white males, only because I am one and, surprise, the life expectancy tables start with white males. A boy born in 1850 would be expected to live, on average, for 38.3 years. A boy born in 1950 would, on average, be expected to live for 67.55 years, almost 30 years longer. That's a lot of extra years.  Hmmm.  Still wrong?  Yes.

Let's look at how long 1850 boy, if he lived to be 50 years old, would be expected to live.  20.76 more years, all the way until 1920.  And 1950 boy in 2000, when he turns 50?  He'd be expected to live for another 28.2 years.  So over 100 years the average 50 years old's life expectancy lengthened by less than an eight years.

To recap, at birth lives lengthened by almost 30 years over a century, while at 50 years old the same century only gave us middle-aged white guys an extra eight years.  Why the discrepancy?  That's easy; it's all about surviving childbirth.  When a generation lives longer lives than its predecessor generations, but its older people's life expectancies are not significantly greater, mathematics tells us it's all about people dying before they get older.

What does all of this have to do with the Social Security retirement age?  Soon after Social Security came into being in the mid-1930s, 60 year old men were expected to live for about 15 years when they retired.  And now, 75 years later?  About 20 years.  Not very much longer, and certainly nothing worthy of "people are living longer, so we have to raise the retirement age."  I'm no expert on Social Security, but I do know this:  When you talk about people living longer in the context of Social Security, overall life expectancy matters not at all!  Instead, it's about how long people will live once they receive benefits.  And the little truth is that over the past 75 years, retirees aren't living all that much longer.

So, when you hear noise about people living longer, find out who the people are who are living longer, how much longer they're living, and ask yourself, Does this matter?

Random Thoughts On The Tucson Tragedy

I've been quiet until now. "Mostly quiet, " to be totally truthful. We did have a dinner party on January 8--the food was ready and the friends close, so we saw little reason to cancel--and, at about 9:30 and with a snoot full of wine in me, I answered the phone. A reporter from JTA, an international Jewish news service, was calling from Washington, wanting a referral for an article he was writing about the shooting. (Long story about why he was calling me.) I told him I'd get him Jonathan Rothschild's number in the morning. Jonathan is my law partner, a dedicated Democrat, an active member of the Jewish community (and, most likely, the next Mayor of Tucson.) I must have said more than "I'll get you Jonathan's number in the morning," however, as the story that was released on Monday identified me as a Tucson-area lawyer (right) and a Democratic Party activist (huh), and quoted me thusly:  “You have a vice-presidential candidate for a major party who runs ads with targets saying ‘remove Gabby Giffords’ and a young man with issues. You're going to spend a long time convincing me it doesn't have something to do with it.” (My partner was more temperate, but he spoke with the reporter in the morning!)

I promised random thoughts. First one. If you've met Congresswoman Giffords, she's your friend. I've met a fair number of politicians over the years, but never one like Gabby. No pretense, and lots of fun and funny. (And she must have a photographic memory for faces and names.) Plenty smart and strong, but I've never seen her proving her smarts by putting someone down or building herself up. Just a really nice person. (BTW, it takes a certain amount of confidence to be a young woman in what is still a man's world, slight in stature, and call yourself, and let others call you, Gabby!)

Big deal? Yes, as I believe Gabby's personality plays a significant role in our reaction to the horrid events. Of course, I can't be proved right or wrong, but if Tucson was represented by someone who more closely fits "central casting" for a Member of Congress, our community's reaction might be different. (Nothing about Judge John Roll, the other prominent victim, changes this theory. Another exceptional person, totally approachable and friendly, albeit in a way very different from Gabby's.)

Second one. About the criticism of the memorial service:  Get over it, critics. Everyone mourns differently. The Right Wing owns this tragedy no more than it owned 9/11 (despite its claims to the contrary), and if the service at McKale Center on Wednesday didn't suit someone's taste, all he or she had to do was leave or, more likely, turn off the television set. Yes, if weird is a synonym for unfamiliar, the opening by Dr. Carlos Gonzales was weird. Of course, weird is not a synonym for unfamiliar! Dr. Gonzales is an American with a non-Anglo Christian heritage--like so many people in Tucson, Arizona--and, like Christians, Jews, Moslems and others, he follows a tradition that he knows. That he shared it with tens of millions is very cool. That a few people found this weird--yes, you, Brit Hume, among others--is very sad.

Third one. About the tone, and all that. I heard no public official blame the shooter any less because of the intemperance we've all experienced over the past two years. (Yes, the Sheriff of Pima County is a public official--and not a very liberal one at that--and no, he did no such thing. Read what he said!) One group in this country has gotten very good at taking what other say, amping up the words and, then, screaming about the unfairness of it all. In my workaday world we call this a "straw man argument." Throw something out there, blow it down and call it a day! It's crap in a courtroom, and it's crap on cable, too.

On the same issue, I am reminded of Hamlet and "The lady doth protest too much, methinks." Yes, campaign is a political term with origins in the language of war. Yes, Democrats have run ads with bullseyes. Yes, sometimes people associated with Daily Kos and other liberal blogs forget every mother's adage:  "If you don't have something nice to say, be quiet."

Agreed, politics is a tough game. But there's a difference between a bullseye and what's seen through a rifle scope. (And no, Sarah Palin, the surveyor's scope bit won't sell!) And when a candidate in Florida shoots at a target with with the initials DWS (for Congresswoman Debbie Wasserman Schultz), that's not OK. Nor is candidate Jesse Kelly holding an event that gets promoted in this way:

Get on Target for Victory in November
Help remove Gabrielle Giffords from office
Shoot a fully automatic M16 with Jesse Kelly

It wasn't OK when it happened, and it can't be OK after January 8, 2011. We're all better than this! Really, we are! And as for Daily Kos, does the Far Right really want to compare some blogger with many of its elected leaders and its propagandists. I mean really, some guy posts something and you all want to liken him to Glenn or Rush or Newt or Sarah? (In passing, on the Jesse Kelly event, who gets off on shooting an M16? I'm sure I'd feel like a fool, hanging out with a bunch of guys and being all macho with guns!)

Fourth one. Last thought. The Tea Party crowd swears by the Constitution, but I cannot recall another election cycle in which we heard more chatter about amending the Constitution, all of it offered by Tea Party candidates. They suggest doing away with the 16th and 17th Amendments (taxing authority and direct election of Senators, respectively), the 21st Amendment (which repealed the 18th Amendment, which instituted Prohibition), and those portions of the 14th Amendment that make people citizens if they're born here and subject to our jurisdiction when they're born. For a crowd that thinks the Constitution is Biblical in its import, they seem to have issues!

I have an issue, too. My issue is the 2nd Amendment. Why is it so sacrosanct? In fact, courts have routinely allowed for reasonable restrictions on the right to bear arms, but with the National Rifle Association in control of state legislatures, Congress and the U.S. Supreme Court, the notion that any legislative body would adopt the most minimal of restrictions seems unimaginable. Yet, we have a problem that seems obvious:  More guns than any other developed nation and more gun deaths. We can't fix the problem because of the 2nd Amendment, so we need to repeal the 2nd Amendment. Fat chance, of course, but why is the 2nd Amendment not worthy of thought, when those who swear most loudly their adherence to the Constitution want so badly to rewrite it?     

I could say much more, about so many other things, but I think I've said all I need to say, save one thing. Be kind to your children, your spouse, your friends and others. If we all learned anything from what happened last week, we now know a quick trip to the grocery store, a visit with a friend or any other daily activity can turn everyone's world upside down.   

Don't Sell Us Out!!

I met with a client not long ago and heard a story I can't let go of. My client's business interfaces with the federal government. One of his employees failed to comply with a notice requirement associated with a regulation. A screw-up, absolutely, and a violation of a federal regulation, you bet! That all said, the violation was insignificant and, when it was discovered, my client's people self-reported the violation. What followed was Kafka-esque, and only ended with the payment of a very, very large fine. The fine bore no relationship to the harm caused by the violation. (X times nothing, with nothing representing the harm, will always equal nothing.) I imagine my client could have fought the assessed penalty, but the business depends on a positive relationship with the government. Good sense said, Pay the man! Good sense prevailed.

Several years ago another client had a problem with a different federal agency. (The problem related to a  signature not being notarized on an administrative appeal. For want of the notarization, the appeal would have been granted, according to the agency.) Not so dependent on the good graces of the government, this client had me sue the federal government to avoid a six-figure penalty. A very nice fellow from Washington, DC defended the suit by filing a motion to dismiss. Lots of blather in the motion about the need for compliance with laws and all that, and about courts not interfering with administrative regulations. I gave as good as I got and, finally, we had a hearing on the motion. The judge (the late John Roll) asked the Washington lawyer--he flew out to Tucson for this hearing--to address anything not addressed in  his memorandum. He couldn't and, after fumbling around for a while, Judge Roll asked me to speak. I started to explain why my client had a right to have the court test the propriety of the penalty, whereupon Judge Roll said:  "I agree." He also suggested, from the bench, that we discuss a resolution.

The case settled for about $10,000 a few days later. When I spoke with the lawyer after we reached an agreement, I asked him about the regulation, as he was the lawyer for the government who was tasked with enforcement. He said the agency had promulgated the regulation and was giving it a "test drive." I asked him about his success rate. "Not so good," he said. "I'll bet," I thought.

Government has the power to solve problems for real people. In fact, many problems our society faces, slogans and buzz words aside, can only be solved by the federal government. So, when I hear about nonsense like the fine my client was (effectively) forced to pay, and when I have to file a lawsuit to avoid a ridiculously large penalty being assessed because someone forgot to carefully read some instructions, I ask myself, How does the government expect those of us who believe government is a force for good expect us to sell that position to others? How can I tell my clients they ought to believe government can be a positive force in our society when the federal government takes their money, and only takes it because it can?

There are millions of people like me who believe government makes people's lives better, but we also know government works best when people believe it can solve more problems than it creates. So, government, be smart whenever you can be. Focus on long term impacts. Make friends, not enemies. You'll be more effective, and we'll all  be better off. 

Straight Talk About Tax Cuts

Tax cuts, and whether they will expire at the end of 2010, have been discussed for months. Sadly, almost every article/column/blog post I've read has been wrong on simple facts. 

The facts are really simple. Proposals advanced by President Obama and the Democrats in Congress leave the so-called Bush tax cuts in place with respect to the first $250,000 of taxable income earned by families. Thus, the Bush tax cuts will remain in place for all taxpayers who pay federal income tax, as to the first $250,000 of taxable income.

The 2% figure you hear about represents the percentage of Americans with taxable incomes that exceed $250,000. As for them, they get the lower tax rates on the first $250,000 of taxable income. The balance of their taxable income will be taxed at the rate in effect when Bill Clinton was the President, back when our government spent less money than it collected (and was using the excess to reduce the national debt.)

As for the $250,000, that represents taxable income. That sum represents total earnings before deductions and exemptions. Many people with taxable income of $250,000 have gross income of more than $300,000.

So when you hear a story that claims tax cuts will only be available for 98% of all Americans, that's a false story. When someone claims tax cuts will only people making less than $250,000, that's false too.

This is not terribly complicated stuff! Unfortunately, those people who report on public policy debates--and some of the debate participants, because they are lazy thinkers or dishonest advocates--are often wrong on the facts!!! 

A LIFE AT 50-ISH (the book)

Buy A LIFE AT 50-ISH right here, right now, for $15! Or, if you're not a Paypal person, contact me at markdrubin@gmail.com.

Pizza

I've been eating pizza for 50 years. I've had lots and lots of good pizza, some bad pizza and a fair amount that falls "in between." And that only includes the pizzas made by others, for I've been making my own pies for 35 years or so. In that realm there have been a few good ones, and many that have been unremarkable.

For the past several years I've been curious about "the best" pizzas. Are they really good? Exceptional? Memorable?

There's no standard for "the best," of course. (My daughter used to be sweet on Chuck-e-Cheese pizza. I thought she wanted to play games and collect little red tickets, so she could exchange them for plastic junk I'd throw away when I cleaned out drawers, but then she wanted to know if Chuck-e-Cheese delivered. Wrong I was, I guess, about her taste in pizza!) There are, however, purveyors who receive recognition, far and wide, for exceptional pizzas. By 2010, I decided it was long past time for me to start answering my questions.

In Phoenix Pizzeria Bianco resides just east of downtown, a mere 116.51 miles from my garage door. Alas, PB does not take reservations, it's only open Tuesday through Saturday from 5-10 and the wait is generally 2-3 hours. It's always on my mind but, like cleaning the garage and losing the extra 10 pounds, it never seems to happen!

Last month we had more than one good reason to be in Los Angeles, so we decided to try Pizzeria Mozza, the restaurant owned by Joe Bastianich, Mario Batali and Nancy Silverton. The joint has a national reputation, and it takes reservations. So, while getting there involves more travel than a round-trip to Phoenix, if one needs to be in LA, the travel is not a huge burden.

Pizzeria Mozza is a very nice place. It's small, comfortable and the staff is very friendly. (None of the LA "attitude" one gets in certain places.) Prices are not low, but they're also not ridiculously high. Pizzas run from about $14-21, salads and sides are mostly less and wine prices are fair.

And the pizza? Very nice. Good. Tasty. Memorable? Not really. (Frankly, Pizzeria Vivace makes very similar pies in Tucson, they're as good or better, and the drive is 15 miles, round trip.)

I'm sure I'll try Pizzeria Bianco someday. (Ed Levine, in Pizza:  A Slice of Heaven, gives his "best pizza" in America award to PB.) My journey to LA has given me an operating hypothesis for the time being, however:  Some dining experiences are not meant to be memorable. I'll never forget a meal I had at Aureole, a fine French restaurant in New York. Or the sweetbreads and grilled octopus I ate at Sardinia Enoteca Ristorante in Miami Beach in 2008. Or the Pinot Noir I had at Sogno Di Vino, the wine bar next to Buon Appetito in San Diego. (I remember how wonderful it was, and how annoyed I was that I didn't note the name.) Pizza, though, is pizza. It's good and certainly pleasurable. (Some have said that, like sex, when pizza is good it's great and when it's not so good, it's still pretty wonderful. Of course, never having experienced "not so good" sex, I can't say.) It may be, though, that it's simply too simple to be really wonderful. Just not one of those "I'll never forget it" foods. Or, maybe, I simply haven't had the best there is!!!

P.S. You can buy A LIFE AT 50-ISH, for better documented observations about many other important phenomena, by contacting me at markdrubin@gmail.com or by clicking the Buy Now button below.