Monday, January 30, 2012

Taxes Can Be Fun! (On a theoretical level)

With taxes and the US Tax Code in the news, I have a confession to make: Many years ago, I almost became one of Those People.

What happened was, I was in grad school finishing up my MBA when the school decided to start up a Masters in Taxation program, dedicated entirely to the inner workings of the United States Tax Code.

I loved the Tax Code. LOVED. The. Tax. Code. (Is this warped or what?) We actually had to buy our own copies and carry them around with us every single day. Two volumes, printed on the flimsiest of paper to reduce weight. Page after page after page -- several thousand -- detailing all the ways to get out of paying one's statutory rate. (Because nobody in the 35% bracket actually pays 35%. Literally, nobody, because it's structured that way.)

I had already taken two or three tax courses, and they left me with the same fascination I used to get as a knitter when four or five skeins of yarn would get all tangled up together in a pile and I'd have to separate them. Up, out, in, around, over, wind in, wind out... And eventually, with a lot of hard work, you'd have four or five neat, tidy balls of yarn in place of that huge mess. It was taking the extraordinarily complex and simplifying it enough to apply to real-life circumstances.

(Fascinating, right? Or maybe I'm just easily amused.)

In my tax classes, I would take my assignments, delve into the imaginary tax problems of the imaginary taxpayers, figure out the legal issues, go to the law library and dig into the dusty volumes of tax law... (Yes, actual dusty volumes. Not computers. Does this tell you how long ago it was?) Up, around, in, over, analyze... And in the end I'd write up a tidy little answer and go onto the next problem.

A second Master's would have taken only one more year, and once I finished that? Tax specialists who can analyze tax law are in very high demand. Not by the moms and pops and little businesses of the world, who probably couldn't afford graduates of the program. Our school's graduates would be far more likely to be offered jobs by the multi-national corporations and the uber-uber-rich. Ooooh!

But my dreams crashed back to earth one day in class, when my brilliant, hilarious professor casually said, "If you believe your argument has a 20% chance of succeeding on appeal, you have an obligation to your client to make it." Or, in other words, if the tax strategy you're considering advocating has an 80% chance of being found illegal, you need to make it anyway.

And that was when I realized something: Even though I loved tax work on a theoretical level, I couldn't actually devote my life to getting rich people and rich companies out of paying taxes. Because, to be honest, I think the world would be a better place if they actually paid their damn taxes. I agree whole-heartedly with Justice Oliver Wendell Holmes, who said, "Taxes are what we pay for civilized society."

But, y'know, that's just me.

One thing I learned, though, is this: If you have any questions whatsoever about the US Tax Code, 98% of them can be answered by looking at the response to this question: What Would Benefit the Rich Guy?

That's not an exaggeration. Because the US Tax Code was almost entirely written by rich guys -- nearly half of our congresspeople are millionaires -- for people like themselves. (As far as I can tell, this is the only way to explain why gambling losses are treated more preferentially in the tax code than medical expenses.)

One example: Charitable donations. Which are generally fully deductible, which is one of the things that helps the US give more to charity than do a lot of other countries. (One of many examples of using the tax code to advance social policy. Just sayin', it's not all bad.)

But let's look at three guys who make charitable donations.

First we have Jim Workingclass, who doesn't make enough to itemize. He makes a donation of, say, $75. He doesn't have enough other deductions to give him a number greater than the standard deduction, so his taxes are exactly what they would be otherwise, and 100% of the donation comes from his own pocket. Tax subsidy for Jim's charity = $0.


Second, we have Tom MiddleManagement. He's doing better than Jim, owns his own home, itemizes deductions, not yet married, and has worked his way up into the 25% tax bracket by making somewhere between $35k-$85k. (We're going to apply this rate to everything and ignore Social Security, Medicare, etc. because you don't have all day.)

So. Tom earns $100. He wants to give it to charity. But, because he earns it through a job, he first has to pay $25 in taxes.

$100 - $25 = $75, which is what he has left to give to charity.

He gets to fully deduct all of that $75, which will save him $18.75 in taxes. ($75 x 25% = $18.75.) Or, in other words, the US Treasury gets $25, the taxpayer gets back $18.75. Not a bad deal -- the government is subsidizing your charity. But not completely. Advantage, US Treasury, if you're a middle income person.


And then we have Tex Richman. (Because I love the Muppets.) He lives on investments, which are taxed at a 15% rate. A few years back, he got a sweetheart deal on some stock, which he got for pennies. (Which I'm going to round down to zero because I'm lazy and the theory here holds regardless.) The stock is now worth $100.

Since you pay tax on appreciated assets only when they're sold, and the stock is being donated as stock, this left our congressional tax code writers with an interesting issue. Do they collect tax on the transaction? What amount will Tex get for his deduction? And if the stock is not actually sold, what should it be it worth on the books of the charity?

Congress could have treated it as a sale, taking 15% of the proceeds, leaving Tex with $85 to donate. ($100 appreciation x 15% = $15 taxes.) And if he paid taxes and got only an $85 deduction, that would put him on par with Tom MiddleManagement. Which would be fair, right? (I mean, aside from the fact that somebody who lives on investments pays a lower tax rate than somebody who works for a living.)


Here's what really happens: Tex donates the stock, worth $100. Because it's a donation and not a sale, the writers of the tax code decided it is not a taxable event. Therefore, the US Treasury gets $0. Zip. Zilch. Nada. No taxes levied whatsoever. BUT he gets to take the full $100 as a deduction. And his chosen charity gets to put the stock on their books at $100, meaning that they don't ever have to pay taxes on Tex's capital gains either. In other words, nobody will ever pay any taxes on this $100 gain, ever, and Tex gets to fully deduct the entire donation.

So he saves the $15 taxes he'd have to pay if he sold the stock and donated the proceeds, AND he gets to take a $100 deduction, which saves at least another $15 in taxes. (More -- up to $35 -- if he has any working-person income taxed at a higher, working-person rate.) So not only is the US Treasury taking in no money on this transaction (and donation to the charity of or Tex Richman's choice), they are actually paying him to make it. (That "they" means "you", Mr. and Ms. Middle-class Taxpayer.)

Got it? Yeah. Multiply by thousands and thousands more instances, and you get the US Tax Code.

And THAT's why I became a full-time mom instead.

I think society is better off.

I know I am.

P.S. No, I can't do your taxes. I still only love the Tax Code in theory. :-)

Sunday, January 22, 2012

Light Over Ice

My house, early morning, streetlight reflecting on ice-covered snow:

Saturday, January 21, 2012

Not That My Friend is Casting Aspersions on the Intellectual Capacity of European Footballers. Or Anything.

Skype conversation between me and a soccer-loving friend about the apparent turn-around of a previously tantrum-prone European player:

Me: That interview that talked about [certain European player] growing up and maturing may have been true. He's starting regularly and scored again today.

Friend: He sounds like he had therapy. The simple fact that he recognized his actions were the result of his father's lack of love doesn't sound like the type of thing a professional athlete would conjure up himself.

Me: What, you don't think they talk about these things in the locker room?

Friend: Oh, right. That and cold fusion.

Thursday, January 19, 2012

Snowmageddon 2.0

The meteorologists predicted Sunday, and Monday, and Tuesday, and Wednesday. Today?

Not so much.

My husband went out on Tuesday and plugged the Christmas lights back in. (I had been planning to take them down this week, but the weather had other ideas.) Don't Santa and the angels look happy?

Wednesday, January 18, 2012

Snowmageddon Arrives In Seattle

They were saying 12 inches.  Now they're saying 2-4.  Whatever.  It's still enough to cause mass hysteria. 

As I have said before, though, it is not our fault. Seattle is VERY hilly, and when we get snow the temperature hovers right around freezing, so we get freeze-melt-freeze-melt-freeze, and by the third day every horizontal surface is a sheet of glare ice.

But it sure is pretty when you can sit inside and watch the snow fall. (Even prettier since it only happens a couple of times a year and you know that chances are you won't get to see this view again for a long time.)

From my windows:

Tuesday, January 17, 2012

Is Ver' French

I was working out today to a French soccer game I DVRed from the weekend.  (Because, y'know, what else would one work out to?)  One of the bonus clips was an interview with the Colombian goalkeeper who plays in Nice.  He gave the interview entirely in French, which I thought was impressive. 

So it amused the heck outta me that the French channel subtitled his French.  In French.  With grammatical corrections. 

To quote the woman on the train to Euro Disney a few years back, "Is ver' French."

(Technically she was talking about strikes.  Which are also ver' French.  But it applies to the language, too.)

I think the French are a bunch of word nerds.  Like me.

Except, y'know, different.

Saturday, January 14, 2012

Seattle Streets Quilt from Fran

Getting emails with photos like this one always make my day! 

This is a Seattle Streets quilt from Fran.  (She says it's more gold and less pink in real life.  I say it's gorgeous regardless.) 

We're  having one of those cold, dark, dreary, can't-decide-if-it-wants-to-rain-or-snow kind of mornings, and looking at this photo is like curling up in front of a warm fire!  Nice job, Fran!

Tuesday, January 10, 2012

Driving Forces

My husband can be a bit...driven.  He has things to do, and he wants to get them done, y'know?  And this can be reflected in his driving. 

The other day we were in the car together and I noticed that his pace was rather...sedate.  I gave him a questioning look which, after twenty-five years of marriage, did not need translation.

He grinned.  "Y'know," he said, "it's so much easier to drive the speed limit when you're being tailgated by a BMW.  I suddenly feel abiding!" 

I love this guy. 

(I am also unusually law-abiding in the presence of tail-gaters.  Pretty sure this makes me a good person.)

Wednesday, January 04, 2012

New Year's Resolution Workout Guide for the Middle-Aged

Ladies and gentlemen, here is your official

New Year's Resolution Workout Guide for the Middle-Aged

Day 1: Lift weights, all muscle groups! Then do sixty minutes on the elliptical, maximum setting! Revel in Endorphin Euphoria the rest of the day!

Day 2: Use all four limbs to haul yourself out of bed. Spend five seconds contemplating walking the dog to the corner and back before abandoning the idea as too strenuous. Climb back under the covers with an ice-pack and lie there whimpering.

Day 3: Repeat.

Monday, January 02, 2012

The End of the World As We Know It

From a friend with a new iPhone:

"Now customizing iPhone ringtones. Download the most popular app, go to the most popular category.....

'Fart Tones' "


Almost enough to make one wish the Mayan calendar thing were real, innit?

Editorial note: I realized toward the end of December that I barely wrote one blog post a week. Managed only 52 for all of 2011, mostly because I kept waiting for momentous things to write about. And waited... And waited... So I've decided I'm going to post more in 2012, no matter how little momentous stuff happens. Which means that some days it could be just two lines of fart humor.

Apologies in advance.

Sunday, January 01, 2012

Words With Family

Tonight we were out at our favorite Indian restaurant, celebrating the New Year with family. My older son started talking about the "Words With Friends" the internet word game he's playing with his girlfriend while she's at job training in Atlanta.

"I could never play Words With Friends," I said. "I would get completely addicted."

"Yeah," said my son, "and nobody would want to play with you, either."

Pretty sure he was talking about the vocab that comes from my obsessive word nerdery.

Yup, almost positive...