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.

Liz Cheney and the Lawyers

So Liz Cheney (former Vice President Cheney's darker incarnation) and her pals on the Way Far Right have taken out after lawyers who work for the Justice Department now and used to represent detainees. Never mind that, when lawyers who represented detainees later worked for the Justice Department in the GWB Administration, there was nary a public peep from Ms. Cheney, Bill Kristol (a fellow board member with Ms. Cheney at Keep America Safe) or anyone who talks on Fox News. And never mind the fact that Ted Olson--it was his lawyering that put W over the top in the Supreme Court in the last days of 2000, and it was his wife Barbara who died when American Airlines Flight 77 crashed into the Pentagon on September 11, 2001--took out after Ms. Cheney for her comments! Never mind all that, because I have but one question for Ms. Cheney and her gang of crazies:

What gives with the criticism of lawyers for supporting a cause, as opposed to simply being in it for the money?

(Supporting terrorism is hardly noble, but if someone thinks terrorism is a worthy cause, we can hardly say they are unprincipled when they support that cause. Misguided, crazy and absolutely best dead, but not unprincipled.)

I'm confused because, for most of my career as a lawyer, I've listened to your crowd complain about lawyers only being in it for the money. Y'all have been after trial lawyers for decades. (BTW, every trial I’ve ever been in has always had at least two lawyers, and whenever the crowd you like shows up for court, they’re always represented, and always by well-paid, highly skilled lawyers.) You come at us hard, constantly, as if society’s ills will vanish if we can just get rid of the lawyers!

Have you changed your minds? Decided lawyers really might be principled from time to time. That we might be so scrupulous that we'll give up money to support a cause? If so, welcome to the right side of the line. Now, just take another step or two in the right direction and consider the fact that maybe, just maybe, the principle these lawyers have advocated, and continue to advocate, is adherence to the law. The law as it is written in the Constitution. The law as the U.S. Supreme Court applied it in case after case, against the Bush Administration, with respect to detainee rights. Maybe, just maybe, that's the principle these lawyers--these people you claim are so principled that they adopt their clients' causes, never mind the money--are following!

P.S. When y'all rant about safety concerns if terrorists are tried in the United States, how ‘bout a little candor? The decision to store people at Guantanamo was never based on any worry about U.S. security, and you know it! Guantanamo was always about the oddity that is Guantanamo:  Kind of "U.S. lite," controlled by us but ... not too much, so we can run the place but we don't have to follow U.S. law when we do it. For pity's sake, how ‘bout a little bit of honesty? Just a little? Please?

Where I've Been

Sorry about the lack of blog postings. Writing A LIFE AT 50-ISH has occupied lots of time during 2009 and the early part of 2010. I also closed my law practice and joined a firm, Mesch, Clark & Rothschild, P.C., and that process occupied plenty of hours I'd have otherwise spent writing here. Expect more posts going forward!

Isaac Toussie

Isaac Toussie is hardly a household name in our country, but he's getting his 15 minutes of fame as a result of a pardon taken back. Mr. Toussie was convicted in 2001 and 2002; both convictions related to fraud arising out of home loans to poor people. Apparently, the pardon was granted before the White House knew Mr. Toussie's father had donated $28,500 to the Republican Party and $2300 to John McCain. (These donations would mean less if Toussie pere had been a regular donor to Republican causes; apparently, he wasn't.) Allegedly, when the President learned about the donations, he said: "not on my watch."

The people who talk and write are in an uproar, comparing this event to the Marc Rich pardon at the end of the Clinton Administration and other pardon scandals. (With the nomination of Eric Holder--who played a role in the Rich pardon--to be Attorney General, the Rich situation was already getting plenty of attention.) Lawyers are debating the right to withdraw a pardon, referencing a case from the 1860s and debating the interplay between the Constitution and a pardon "bureaucracy" the Constitution never contemplated. Others focus on the political aspects, with one observer believing Karl Rove must have played a role in the "do over," as message control hasn't been what it was when Mr. Rove ran things.

With respect (the commentators get paid to comment and I don't), the noise machine is missing the point. Who cares, really, that the Bush Administration is mopping up a mess less than four weeks before Barack Obama takes over? And, while the legal issues are interesting, Mr. Toussie has already served his sentence and, thus, who really cares if he goes through life as a convicted felon or not?

The real issue here relates to priorities. This Bush Administration has been more parsimonious with pardons than any recent President who served more than one term. (Ronald Reagan used the power rarely, as compared with his predecessors, yet he granted more than twice as many pardons and commutations as has President Bush.) Yet the powers that be decided, in the face of what looks like the worst financial crisis since the Great Depresssion, to pardon a man whose crimes relate directly to the primary cause of the fix we're in: the housing bubble and dishonest lending. Mr. Toussie roped poor people into bad loans with lies and, to make matters worse, they got houses that were falling apart. Bear in mind, in all of this, that he was prosecuted by the United States of America while the Bushies were in charge. This guy must have been a bad dude to be noticed by an Administration committed to the free market and caveat emptor.

In sum, the noise about withdrawing a pardon dominates, while we really ought to be asking this question: Why, with a group of people in charge who see little reason to forgive anyone, did someone/anyone think Isaac Toussie deserved a Presidential pardon?

I wrote this essay in the summer of 2007, when corporate greed seemed like not much more than an irritant. Now, knowing what we know about the recklessness on Wall Street that went hand-in-hand with the greed, and now that we know the greed involved truly unfathomable sums of money, the essay seems quaint to me.

Does it seem like there’s an awful lot of “me” and not much “us” in the world today? People rally around when there’s a crisis, of course, but those situations pass quickly and people move on. Where’s the follow-through? And, in normal times, where is the concern for others? And the shame?

Imagine yourself as the Chief Executive Officer of a public company. You are a man. (Only 10 of the 2006 Fortune 500 companies had female CEOs.) You are well-educated. Tall. (In 2005 the average Fortune 500 CEO was 6' tall, 3 inches taller than the average American male. 90% of corporate CEOs are of above-average height.) Middle-aged. Advantaged in every respect, even if you might have come up the hard way. Oh, and rich! How rich? Rich beyond the dreams of Croesus.

According to the Economic Policy Institute, in 2005 the average CEO of a public company earned just less than $12,000,000 per year. That is a sum 262 times greater than an average worker’s wages (and 821 times more than a minimum wage worker’s wages.) Think for a moment about this disparity. In a 250 day work year, the CEO earns the average worker’s annual salary in less than a day, and the minimum wage worker’s annual income in less than 2-½ hours. Before he’s gotten through the e-mails that piled up over the New Year’s weekend, the CEO has earned more than the night watchman will earn in a year.

This disparity has not always been a part of our economy. In 1965, the average CEO earned 24 times more than an average worker. That CEO had to work until January 15 to exceed his average worker’s annual salary.

As a CEO your income will come from multiple sources. Your salary will only represent a small share of everything you make. Stock options will provide the bulk of the total take. Of course, some of this money is dependent on the company’s performance, as stock options only have value if the stock reaches a certain price. So you’ll only get paid if you perform, right?

Well, sort of! Your workers will generate the profits, with the guidance and smart moves that may be your contribution. Or, maybe, you’re a guy who’s simply smart enough to stay out of the way. Regardless, if we blame you when things go wrong we should credit you when they go right, right? In principle, sure, but it’d be nice to see more companies blaming the boss when things go badly before they are so quick to credit him when the company’s performance is better than average.

So, without regard for what you do, the company will still need to have a good year if you expect your stock options to make you lots of money. Actually, no! With an assist from the Chief Financial Officer–who is also probably dependent on stock options for a big share of his income–you can monkey with the books. By the time anyone catches on (and earnings have to be restated), y’all will probably have moved on to another company. (Think I’m kidding? In 2002, a record 225 public companies restated earnings. Funny, too, how those restatements never seem to involve increases in income.) Stock options and bonuses have been paid, so what’s the diff? (Unless you are dumb enough to be really greedy, you won’t have to worry about Justice Department prosecutors, and shareholder suits–with a little help from your friends in Congress and the White House, these suits are much tougher to bring–will be handled by the company or your insurance carrier, whose premiums the company paid.) And if monkeying with the books doesn’t work? You and your friends change the date on the options to improve your take (or simply make sure you’re getting the package to which you know you’re really entitled.)

Well, of course there are taxes, which reduce the $12,000,000 to something almost paltry. Not always, though; your company, like many others, might “gross up” some wages and benefits, so that you get to keep almost everything you make. Regardless, the share of your taxable income that you’ll pay to the government will likely be much smaller than you think (and almost surely less than the amount you rant about up at the club on Saturday morning with your golf buddies.) Warren Buffet reports that he paid taxes of 17.7% on his $46,000,000 of taxable income in 2006, while his receptionist paid taxes equal to 30% of her very much smaller taxable income.

And what about your company’s workers. Globalization has sent many of the jobs–not the workers, just the jobs–to places beyond our borders. And those Americans who still have jobs? They’re working, increasingly, in service sector positions that offer smaller salaries, fewer raises and less stable health care benefits. Always, there is the increased risk of a job loss. Not to worry, though, as this is just “part of the deal” in the modern economy.

The CEO’s salary is always inconsequential when it is measured against labor costs for a company employing tens or hundreds of thousands of workers. But it would be nice, every once in a while, to see a CEO acknowledge that the workers contribute greatly to the company’s profits, that times are tough, and that he can get by on $1,200,000 per year, as opposed to $12,000,000. What a fantasy! People happily running companies for $1.2 million per year

I am obliged to note the fact that many CEOs are fine people who work hard, care about their employees and contribute to their communities. Facts are facts, however, and just because there are plenty of exceptions, no one should ignore what are clear changes in our corporate ethos.

I also need to be clear about one thing: I have no problem with someone making lots of money. Much of what I do for a living involves helping people, many of whom are wealthy, maximize their profit. My quarrel–quibble doesn’t begin to do justice to how strongly I feel–relates to hired help who pack their boards of directors with friends and pay themselves as if they own the joint! When people own the company and make plenty they should enjoy their success, but when the money belongs to the shareholders and the CEO is taking it because he wants it, shame on him.