August 30, 2012
The Walrus has never done this before. I really have nothing more to say other than to direct you to the link, below.
I am absolutely in awe of Matt Taibii, and this link to a most recent analysis on Bain Capital and Mitt Romney is about as good as it gets:
Hope you enjoy!
August 28, 2012
I really appreciate the service provided by NPR and WNYC in terms of trying to present a variety of positions and opinions on our economy, our country and a broad array of other subjects.
Tonight, I listened to an interview of former Gov. John H. Sununu by Brian Lehrer.
Gov. Sununu has some interesting perspectives based on years of academic and political leadership, as well as a sound educational foundation – including a PhD from MIT.
Gov. Sununu has some strong opinions, some of which he shared with listeners in the interview.
One opinion I heard revolved around federal income taxes on dividends and capital gains. As I understood Gov. Sununu, his posture is that we need to protect the favored tax status on dividends and capital gains because this rewards and encourages entrepreneurs to take risks, to create new enterprise, and to create and sustain new jobs.
I like this strategy for active equity investors who devote a substantial amount of their own personal time and energy, in addition to their capital investment, in the business.
Where I believe we ought to consider drawing the line is with passive equity investors.
Under the leadership of President Ronald Reagan, Congress enacted the Tax Reform Act of 1986, which essentially eliminated many of the tax preferences formerly available through real estate investment transactions. In the Revenue Reconciliation Act of 1993, Congress “relaxed” the rules somewhat for active real estate investors, allowing those who meet defined requirements necessary to be considered a real estate professional to bypass the passive activity rules for real estate investments in which they materially participated.
Today, we allow those who are essentially passive equity investors to treat significant amounts of passive income from equity investments in the form of dividends and capital gains as preference items for federal tax purposes. Meanwhile, hard working Americans – including most small business owners – are taxed at standard income tax rates, compounded by the mysterious “Alternative Minimum Tax”.
Our standard income tax system is indexed so that as taxable income increases, the effective tax rate increases.
As an example, an American family with 2 adults which had a taxable income of $100k from employment in 2011 were in the 25% tax bracket, but they didn’t have to pay 25% in federal income taxes on the full amount. Rather, they paid 10% on the first $16,050, 15% on the next $49,050, and 25% on the last $34,900. This works out to a federal income tax obligation of $17,687.50, or an effective rate of just under 18%.
Now, contrast this against a passive investor who receives most of his income from passive activities, and where there is no indexing in place. How is this rational, appropriate or equitable?
I would have hoped to hear a well-educated and knowledgeable individual like John H. Sununu give us a more informed and critical analysis of the overall situation here, versus trying to create what sounded on the radio to be a biased, inflammatory and very narrow interpretation of the facts.
August 25, 2012
On the eve of the Republican Convention in Tampa, I keep thinking back to the movie, “Other People’s Money” which starred Danny DeVito in the role of “Larry the Liquidator.”
Larry was a Vulture Capitalist who was noted for buying up under-valued firms; then breaking them up into component parts; selling off the parts; and making lots of money for himself and his partners.
In this scene from the movie, the essence of the dilemma emerges: http://www.youtube.com/watch?v=p7rvupKipmY
Gregory Peck as the current executive in charge of New England Wire and Cable is immersed in a critical vote at the company’s annual meeting which could allow Larry and his Vulture Capital Firm to take control of the company, which would result in closing down the company and putting hundreds of people out of work. Permanently.
New England Wire and Cable was modeled on the many indigenous American family-owned small manufacturing companies which took root in New England in the 19th century. The inspiration for the theme of Other People’s Money was a real company in Seymour, CT which went through a fatal and permanent intervention by some Venture Capital Pirates around 1990.
Back in the Golden Age of Pirates (approx. 1650s to the 1730s), the pirates were self-declared. They typically didn’t dress up in suits, fly in private aircraft, or ride in chauffeured black cars. Today’s pirates operate openly in daylight; they pay taxes (albeit at greatly reduced rates vs. regular working people); and many own multiple mansions in delightful places around the world.
I imagine a shortened version of Other People’s Money (Part 1) where the name of Larry’s firm was changed to “Brain Capital.”
Then, I envision Part 2 as a take-off which is focused on ‘off-shore blocker’ strategies where the principals of Brain Capital explain their strategies:
Part 3 of the series could contrast one or more successful U.S. entrepreneur(s) who have invested their own money into a business that manufactures some product and where 50 to 500 people work full-time at decent wages with benefits, against a principal from Brain Capital. Part 3 would contrast the effective tax rate (and amounts paid) by the actual entrepreneur and all of the employees (year after year) vs. the tax rate (and amount paid) by the Vulture Capitalist in the current year. Don’t forget: once the Vulture Capitalist liquidates the company, there will be no further jobs; no further purchases; and no further local property tax, sales tax or income tax collections.
Part 4 of the series could be a lesson on the multiplier effect of all of those employees; the goods and services purchased by the manufacturing company; and so forth, vs. the absolute finality of the liquidation of a struggling but operating business.
To a great degree, the contrast between a real American entrepreneur and a Vulture Capitalist is very similar to the contrast between hard-core, tea-party conservatives and main-stream Democrats (plus what some might call ‘Centrist Republicans’).
The hard-core Right seems to be laser-focused on reversion to a society and economy that mirrors Medieval Europe and Feudalism, where the majority of main-stream residents in the U.S. seem to continue to favor the more egalitarian approach on which the United States was founded and has operated until very recently.
Through some very clever sound bites and an inordinate amount of attention on trivial but emotionally engaging issues, Tea-Party conservatives have polarized our society in an unprecedented way.
Best example of this would be Obama-care — which was inspired by the health care reforms enacted in Massachusetts under the leadership of former Gov. Mitt Romney.
Obama-care is not a perfect solution — primarily due to the amount of compromise that was required to get it passed — but the majority of experts tell us that it is a significant move in a positive direction.
Yet, there are a number of elected officials (and their disciples) — ‘Hard-Core Right’ — who continue to hammer on REPEAL!
What are their reasons, what are their real objections? Here is a synopsis: http://theamericandrivein.com/2010/11/21/why-repeal-obamacare/
As Jon Stewart may have already said — while stamping his feet and whining: “Just because!”
August 5, 2012
A modest article published in the August 4, 2012 issue of The Journal News provides some continuing details on the apparent impasse between Westchester County Executive Astorino and HUD on the need for “source of income legislation” in relation to the 2009 settlement with the U.S. Department of Housing and Urban Development.
The terms of the settlement require Westchester County to take several steps to break down the effects of housing discrimination, including building 750 units of affordable housing in mostly white communities and marketing those units in areas with largely non-white populations. At the time of the settlement, the County also agreed to “promote” source-of-income legislation. The definition of promote has been and continues to be a “sticky wicket” in the discussions.
Here is a link to the article:
As a taxpayer in Westchester County, I am very puzzled as to how this constant bickering can possibly be productive. I am further concerned that the continuing obfuscation detracts from the ability of our County government to do the work of the people, and further, is wasting precious County resources on legal costs and other unnecessary expenditures.
The Equal Credit Opportunity Act (ECOA) prohibits credit discrimination on the basis of race, color, religion, national origin, sex, marital status, age, or source of income.
Housing Choice Vouchers (a.k.a. ‘Section 8’) are generally and widely accepted as a legitimate and stable source of income for housing purposes.
The great majority of people I’ve met who are eligible to receive Housing Choice Vouchers are people of good will who just want a decent and safe place to live and raise their children (or, in some cases, grandchildren) and to be able to feel confident their children have the same opportunity for a ‘free and appropriate public school education’ as other children in nearby neighborhoods and/or towns.
Landlords can most effectively screen potential tenants by: (1) employing a standard and uniform application; (2) run a credit report; (3) check references; and (4) verify income sources.
Using a consistent decision-making process for any prospective tenant is considered a “best practice” by a number of sources, including www.Landlord.com
Background & Definitions
The housing choice voucher program (often called “Section 8”) is a national program for assisting very low-income families, the elderly, and the disabled to afford decent, safe, and sanitary housing in the private market. Housing choice vouchers are administered locally by public housing agencies (PHAs). The PHAs receive federal funds from the U.S. Department of Housing and Urban Development (HUD) to administer the voucher program. Since housing assistance is provided on behalf of the family or individual, participants are free to find their own housing, including single-family homes, townhouses and apartments. The participant is free to choose any housing that meets the requirements of the program and is not limited to units located in subsidized housing projects. A family that is issued a housing voucher is responsible for finding a suitable housing unit of the family’s choice where the owner agrees to rent under the program. Rental units must meet minimum standards of health and safety, as determined by the PHA. A housing subsidy is paid to the landlord directly by the PHA on behalf of the participating family. The family then pays the difference between the actual rent charged by the landlord and the amount subsidized by the program.
Under certain circumstances, if authorized by the PHA, a family may use its voucher to purchase a modest home.
Source of Income Legislation in this context would cause “Source of Income” to become a protected class under Westchester’s Fair Housing Law, and would include any legal, verifiable income derived from social security, or any form of federal, state or local public assistance or housing assistance, including Housing Choice Vouchers.
Disparate impact is a legal concept used to describe situations where an apparently neutral practice has an unexpected or unjustified adverse impact on members of a protected class. Typically, a plaintiff must prove that the challenged practice or selection device has a substantial adverse impact on a protected group. Generally, this proof is offered through statistical comparisons.
Protected classes in the sale and rental of housing (as defined by the Federal Fair Housing Act) include: (a) race; (b) color; (c) national origin; (d) religion; (e) sex; (f) familial status; or (g) handicap.
Some clear and obvious examples of discrimination illustrated on HUD’s website include:
• Refusal to rent or sell housing;
• Refusal to negotiate for housing;
• Make housing unavailable;
• Deny a dwelling;
• Set different terms, conditions or privileges for sale or rental of a dwelling;
• Provide different housing services or facilities;
• Falsely deny that housing is available for inspection, sale, or rental;
• For profit, persuade owners to sell or rent (blockbusting); or
• Deny anyone access to or membership in a facility or service (such as a multiple listing service) related to the sale or rental of housing.
Note: The Fair Housing Act covers most housing. In some circumstances, the Act exempts owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit occupancy to members.
Selected Census Demographics for Westchester County
Westchester County is a county located in the U.S. state of New York. Westchester covers an area of 450 square miles and — according to the 2010 Census — has a population of 949,113 residing in 45 municipalities. A quick review of some demographics captured in the Census reveals:
• Median Household Income: $79,619
• % of Persons living at or below Poverty Level: 8.2%
• % Persons under 18 years: 23.6%
• % Persons over 65 years: 14.8%
• % White, not Hispanic: 56.9%
• % Black or African American: 14.8%
• % Hispanic or Latino Origin: 22.4%
Housing Choice Voucher recipients in Westchester County have a much different profile than residents of the County overall. Based on data submitted to HUD from PHAs in Westchester which administer these vouchers (Form HUD-50058) for the period 4/01/2011 through 7/31/2012 , the voucher recipients are:
• Average Annual Income: $20,236
• % of Persons living at or below Poverty Level: Not Available
• % Persons under 18 years: 27.0%
• % Persons over 62 years: 29.0%
• % White, not Hispanic: 48.0%
• % Black or African American: 50.0%
• % Hispanic or Latino Origin: 34.0%
There seems to be sufficient evidence to warrant a statistical analysis to measure the probability that inaction by Westchester County on Source of Income Legislation has exacerbated disparate treatment of individuals protected under the Fair Housing Act and other protections guaranteed in the laws of our land.