“Taxes are the price we pay for a civilized society.”

-Oliver Wendall Holmes, Jr. Associate Justice of US Supreme Court (1902-1932)

 

Following last week’s Phil Mickelson discussion, I received lots of emails and comments from financial advisers, accountants and lawyers. A recurring theme was an ongoing, almost resigned surprise amongst the professional set that people are still unaware of the many legal ways that exist to reduce the taxes you pay.

Some went as far as to suggest that the bitching and moaning is an act — political theater that is a remnant left over from when top rates approached 90%. The truth is, a wealthy or even moderately well off American has the lowest Federal Tax burden in half a century.

Charles Smith breaks takes a crack at breaking it down by Socioeconomic class:

America’s Four Socioeconomic Classes
1. Parasitic financial Aristocracy (creates no value, skims national surplus)
2. High value creation (employed, heavily taxed)
3. Low value creation (employed/informal economy, lightly taxed)
4. No value creation (unemployed, dependent)

-Of Two Minds

Even that is a bit of an exaggeration: I would guess I am in #2, well compensated for (hopefully) high value creations. (I also live in a high tax state). But if I am objective, I have to disagree with him not to the theoretical but actual heavily taxed part.

Why? It is very simple to process to set up an LLC corporation, max out your 401k, do all of the perfectly legal things you can do. All the while directing your accountant to stay on the correct side of the bright line of what is legal and what is not, and reduce your taxes the maximum amount. I always send a document directing them “Not to Push the Envelope” and to “Stay within well established legalities.” I don’t have a Romney-like 13% effective Federal Tax rate, but it ain’t anywhere near a Mickelson 63% burden either.

If you want to make the argument that there are benefits from lower tax rates, economies do better, job creation is higher — then gather your data and make your case.

But the people making the claim that we are oppressed by the yoke of burdensome Federal Taxes at all time highs — then I am compelled to point out that those people are without evidence to support that view. Indeed, the overwhelming weight of evidence supports the exact opposite — that Federal taxes are extremely low. (And, we have the deficit to prove it).

The bottom line: Try to derive some of your income from work you do that as part of a small owner-operated business. Get a decent accountant. And for crying out loud, do some tax planning.

 

 

Source: Factcheck.org
~~~

Note: This posts adds the new category: “Wealth Management”

Category: Taxes and Policy, Wealth Management

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

60 Responses to “Forgetting History: Value Creation & Tax Burdens”

  1. Lyle says:

    Your comments remind me of Warren Buffets comments about the inheritance tax, that if you get competent professional help one can minimize its impact. I agree that for his income level Michelson seemed out of it on financial matters even though he likely has someone manage his financial affairs. Perhaps the issue is that because someone else does it he does not really know what is going on with them, so he just reads the media and gets confused between marginal and average rates for example.

  2. MidlifeNocrisis says:

    I think Lyle may be correct.

    Phil probably finishes his round, goes to the practice tee to work on swing improvements for the next day, goes to supper with Bones, and then goes back to his hotel room to kick back, relax, and watch some Fox News.

  3. CSF says:

    LLC corporation? Fine for the self-employed or small business types. Max out your 401K? This is the best advice, though it’s a struggle even for “moderately well off” Americans living on the coasts and trying to put a couple of kids through school. After the 401K, what meaningful accounting schemes are available to a family on a salary, already making modest mortgage payments, earning around 150K? Their accountant’s main job will be to help them figure the AMT tax on their capital gains when the market has a good year.

    Bottom line: the average effective tax rate doesn’t tell us much about individual circumstances.

  4. BR,

    you Know as well as, if not Better, than most, that the Rate is one thing, the Cost of Complying is, yet, another..

    differently, that Chart you posted is, next to, Worthless..

    http://search.yippy.com/search?query=Cost+of+Complying+with+the+Federal+Tax+Code&tb=sitesearch-all&v%3Aproject=clusty

  5. mjfitz9 says:

    Federal tax burdens are certainly lower than past. What about total tax burden? State taxes, property taxes, etc. Does anyone know where you can get a breakdown of what a total tax burden would be by state including analysis of state sales tax?

    _____

    BR: %hats a different discussion, not the one I am having here

  6. BITFU Search Engine says:

    “Why? It is very simple to process to set up an LLC corporation, max out your 401k, do all of the perfectly legal things you can do.”

    Sure, it’s simple to set up an LLC and max out 401k…as to the rest of your statement that “(it’s very simple) to do all of the perfectly legal things you can do…” that’s a preposterous statement.

    Take the Alternative Minimum Tax. Many of your readers will be affected by this over the next few years…and it’s pernicious. Do you really think this is tax is simple?

    Even better: I’m sure many of your readers trade Forex. Are Forex losses deductible as ordinary income? It’s a VERY simple question. Go ahead…take a stab at it. [Believe it or not it is not a settled matter. http://www.greencompany.com/EducationCenter/GTTRecCurrency.shtml

    I get that you’re not an accountant…but you’re a lawyer AND you’re in the business of wealth management. If you can’t answer this question, then do you think a simple tax preparer and H&R Block is up to task?

    The tax code is riddled with impenetrable complexities that touch upon every aspect of a working person’s life. Taking advantage of the legal things you can do is anything but simple.

    ____

    BR: Its a case of first impression, as we dont know many FOREX traders who can meet our minimums (LOL)

  7. A says:

    I think we must always remember that the majority (not all) of sports figures have not done an impressive job of managing their new-found wealth.

    The first law of personal financial management: keep your mouth shut.

  8. perpetual_neophyte says:

    I would suggest being very specific and particular in your diction when discussing taxes as so many writers and commenters are not. Romney’s taxes are a perfect example of that confusion. Too often, I see the interchanging of effective and marginal rates, no distinction between the _types_ of taxes (e.g. Federal income, payroll/FICA, state, county, city, etc).

    Taxes are confusing enough without sloppy word choice.

    I do think that focusing on effective Federal income tax rate is a much more useful measure than the marginal rate because a 90% marginal that netted a 30% effective because of “loopholes” (i.e. deductions) is obviously not more onerous than a 40% marginal that nets a 33% effective.

  9. NoKidding says:

    “I would guess I am in #2″

    Have you ever met anyone who would not?

    ~~~

    BR: Most people are not in that category. I made my assessment based on income/Assets

  10. Greg0658 says:

    “Note: This posts adds the new category: Wealth Management”

    @BR – I think your re-introduce’g a genesis of white paper importance
    Credits to some of you other bloggers this week too:

    http://www.ritholtz.com/blog/2013/01/sunday-reads-16/#comment-655513
    Iamthe50percent Says: January 27th, 2013 at 5:05 pm
    “Please explain to me how a piece of paper can make society richer…..”

    http://www.ritholtz.com/blog/2013/01/rise-of-the-empiricists/#comment-655719
    farmera1 Says: January 29th, 2013 at 9:01 am
    “Ah, The Age of Enlighment. Great age of reason and scientific…..”
    ~
    There is another post that comes to memory – but can’t find

    White Papers of Category:
    ~ Religious Text – sentiment, history and preLaw
    ~ Account Sheet – T account of assets & liabilities aka wealth transfer and retention
    ~ News Paper – no explaination needed – you get it
    ~ Scientific & Manufacturer Drawing – science thru trial & error to build real things that can be experienced in the real 3D World*
    ~ Law Text – sorta really a blend of the other papers when juxed X2 with colored papers of currency world round

    * provide’g that very important “what have you done for me lately”
    http://en.wikipedia.org/wiki/What_Have_You_Done_for_Me_Lately

  11. Savage1701 says:

    Mr. Ritholtz:

    I am NOT asking what you earn a year or what your wealth is. I am, however, curious what you think a fair effective tax rate is for someone who is in your class as Smith breaks it down. And I say effective because I am not trying to find out your income level by asking you what your marginal tax rate is.

    Perhaps this is a better way to ask it: What do you think is a fair percentage for you to pay all levels of government that tax your income? Obviously, Mr. Mickelson finds it unsavory to pay more than about 60% total, and you both apparently reside in states with a high tax rate. But I don’t know if he is quoting a marginal rate or an effective rate on his income.

    Also, have state taxes taken up some of the “slack” of lower federal tax burdens, especially in high-tax states such as yours and Mr. Mickelson’s?

    ~~~

    BR: That a complex nuanced question: My idea of the ideal rate is irrelevant — but a society that wants to know what the ideal tax / spending ratio needs to have a very adult discussion to figure out what it should be. What our spending NEEDS (infrastructure, defense, courts, education, etc) and followed by a discussion as to what our spending WANTS are.

    Figure that out and we figure out how much our income & sales taxes/user fees/licenses should be.

  12. boogabooga1114 says:

    “The truth is, a wealthy or even moderately well off American has the lowest Federal Tax burden in half a century.”

    Well, that might have been in true in 2012. However, federal income taxes, the federal Medicare tax and California state income taxes all rose for 2013 on the top earners (which certainly include Phil Mickelson). They did have the lowest tax burden in half a century — but no longer.

  13. Petey Wheatstraw says:

    All of this would go away if we simplified the tax code.

    While we’re at it, we should simplify the entire US code. There is no better breeding ground for criminality or tax scofflaw than the snake nests that are our current codes. Lawyers make huge salaries understanding and exploiting the COMPLEXITIES of these laws (as opposed to keeping their clients on the right side of the ostensible intent of them). That is to say, the money is in understanding exploiting the loopholes – not in keeping their clients on the up and up.

  14. rct01 says:

    I hate the argument that “federal taxes are a lot lower than they used to be” argument. Well people used to smoke a lot more crack 25 years ago, does that make it better? I also hate the argument that “the U.S. tax rate is lower than a lot of other countries in the world” argument. Monkey see monkey do. Because your friend smokes crack you should too? Many European countries also have chronic high employment and stagnant economies.

    Why be bound by the traditional DOGMA of how ” because it’s always been done that way” that taxes MUST be high? Why not try to innovate and think differently with tax policy and size of Gov? Do something no one has done before?

    Every high income w-2 worker doesn’t have the time to start their own freaking business or start a S corporation just to create more write-offs and a larger 401k and a dividend/payroll split. Some w-2 doctors are too busy saving lives in the emergency room!

    Taxes are too high in CA for high income earners. You have a 40% Fed tax + a 10% state tax. That is too f-ing high. I personally just moved my business from CA to WA State to at least get some relief on the state income tax side. Especially while CA Gov is paying state some state workers $250,000 pensions a year for life and state physchiatrists $800,000 a year salaries, cops $200,000 a year, etc… No cutting of those salaries and benefits, yet they raise taxes on the SO CALLED wealty in society busting their arse in the private sector. What a bunch of BS!

  15. dsawy says:

    People in your business peddle their services to parasitic financial aristocracy. You enable them to sit on their plump posteriors and do nothing.

    If they had to manage their own money, most of them wouldn’t be able to passively increase their wealth.

  16. boogabooga1114 says:

    Also, for a guy in Mickelson’s shoes — very mobile and very high-earning — the twin increase in federal and state marginal rates, while they won’t leave him in the poorhouse, do magnify the incentive to move from, say, San Diego to a nice estate outside Vegas in no-income-tax Nevada. And that was his point, not that he’d quit playing golf.

  17. JimRino says:

    Your income levels also relate to Solar Energy, and the Bubble the 1% live in.
    - Once you get those kind of funds established, you become extremely conservative and start investing in bonds.
    The 1% also is consumption oriented, more interested in how they spend money, and not investment.

    That’s why the people who are actually doing the math and investing in EV’s and Hybrids and Solar are in the Second Class, working people with high income. They know the Solar payoff.

    The 1% still listen to Fox ( Senile ) News, and the drug addict dropout: Limbaugh, as their “expert” in everything.

  18. Chuck says:

    And what is a civilized society? Adherence to the law? National Defense? Ensuring clean air and water? Ensuring evryone wears helmets? Taking from the earners and giving to non-earners?

  19. wally says:

    “Taxes are the price we pay for a civilized society.”

    We seem to be getting a bit less civilized in recent years; I guess the linkage is pretty solid.

  20. TLH says:

    Politicians should pay their fair share. Contributions should be taxed as income.

  21. CSF says:

    “The 1% still listen to Fox ( Senile ) News, and the drug addict dropout: Limbaugh, as their “expert” in everything.”

    I don’t think so. Fox and Limbaugh have the ears of white, rural & suburban, working class America. The 1% are more likely to read the NYTimes and listen to books on their Iphones.

    Top effective tax rate? How about 50%. It’s arbitrary and psychological, but there’s something unsettling about paying more than 50% of one’s income in combined Fed/State/Local taxes. A civilized society would place a ceiling there and work backwards in progressive fashion to 0% for those below the poverty line. And no, you can’t assume that everyone gets access to the tax breaks negotiated by this and that special interest in Washington, because they don’t apply to everyone. That’s why they’re special interests.

  22. DeDude says:

    @dsawy;

    Yes some would actually say that the financial sector and Wall Street is one big cluster-f#$% of “takers”. The only thing they make is trouble.

  23. rd says:

    The Mickelson tax arguments have been interesting because many people quickly devolve to national tax rates when I believe his primary complaint was state tax rates that Congress has no control over. Instead, people are free to vote with their feet to places with lower tax rates, although they may be in for a nasty shock in a few years when the completely unfunded pension plans and health beenfits for state and local workers come to roost.

    The “ideal” tax rate should depend on the social contract between the populace and the government regarding how much people wanted in the way of government services. Somalia is essentially a libertarian state and has low tax rates while Sweden provides a high level of services with a high tax rate. The US has relatively low tax rates on a national level compared to other developed countries but we also do not get many of the services other countries have. One of our biggest problems is that we often elect people who believe that government cannot operate effectively and efficiently and are bound and determined to prove it.

  24. BillG says:

    “I also hate the argument that ‘the U.S. tax rate is lower than a lot of other countries in the world’. ”

    How true is that though? I mean when you add everything up – the 1040, FICA, state income taxes, plus health insurance premiums (because the rest of the industrialized world has single payer) – are our taxes really that low? Maybe they are for the Romney types and anyone able to set up a small business but for professionals who just work for a salary I have to wonder if the situation is better somewhere else.

  25. louiswi says:

    GREAT post Barry! I especially like the line….Federal taxes are extremely low. (And, we have the deficit to prove it)….

  26. Joe Friday says:

    BR: “I don’t have a Romney-like 13% effective Federal Tax rate, but it ain’t anywhere near a Mickelson 63% burden either.

    NOBODY in America is anywhere near that rate either. Mickelson was foolishly adding up brackets that nobody pays.

    ~~

    mjfitz9,

    Federal tax burdens are certainly lower than past. What about total tax burden? State taxes, property taxes, etc. Does anyone know where you can get a breakdown of what a total tax burden would be by state including analysis of state sales tax?

    According to the Bureau of Economic Analysis, federal, state and local taxes, including income, property, sales, and all other taxes, are at the lowest level in more than six decades. As of 2010, it was only 9.2% of all personal income in 2009.

    The differences between states is such a tiny fraction of the total tax bite, it is insignificant.

    ~~

    rct01,

    Taxes are too high in CA for high income earners. You have a 40% Fed tax + a 10% state tax. That is too f-ing high.

    You are adding-up tax BRACKETS that NOBODY pays.

  27. ben22 says:

    “that Federal taxes are extremely low. (And, we have the deficit to prove it).”

    Well the top federal tax rate IS extremely low by historical standards but is it that simple that the deficits prove federal taxes are “too low”? Why? We have to at least consider the last pres before Obama regarding that claim
    Bush dropped the top marginal rate to 35% from 39.6% — government receipts from individual income taxes rose from $794 billion to a peak of $1.2 trillion in 2007, when the mortgage crisis began — a jump of 47%. Was it lack of tax receipts that jumped the deficit under Bush? Seems it was other factors.

    http://www.taxpolicycenter.org/taxfacts/displayafact.cfm?Docid=200

    there are any number of other factors that cause a deficit, or lack of one right? Don’t we have at least a few other examples of federal taxes being cut at the top and receipts going up afterward along with a reduction of the deficit figures?

    so, not trying to argue for lower federal taxes so much as I’m questioning the idea that a specific tax rates drives deficits higher or lower.

    __________________________

    Also, just to be fair to poor Phil….I thought he made the comment that he “totaled all the taxes up” but this particular post is only about Federal taxes. It would take two seconds to figure out nobody has a 60% federal marginal income tax bracket that they fall into….that bracket simply does not exist right now, nor did it in 2012….. And you sure as hell don’t total all the marginal brackets up the ladder in order to determine “your rate”…..total taxes paid by an individual, on the other hand, might be very different, especially depending on where you live

    Look on the bright side, some might consider a famous rapper and former snowflake dealer to be no better than a “taker” ….but at least they seem to handle the tax burden a little easier than others, in fact they might even enjoy it:

    “what you call money, I pay more in taxes”

    S. Carter

    also would have to agree with BITFU above…as a former owner and seller of two different LLC’s at this point in my life, and about to set up new one….its anything but easy getting everything in order

  28. ben22 says:

    I should just add to my post…if in fact Phil’s total taxes are that high…its really mostly because of his own choices

    nobody forces him to pay sales tax on expensive items

    nobody forces him to buy an ultra expensive house in an ultra expensive zip code and then pay the property taxes

    etc….

    do not want to come across as defending that whining he did….it was pathetic….most people would kill for one year of his income…to say nothing of the fact that over their entire lifetime they will work and never earn as much as that one year in Phil’s shoes…

  29. ben22 says:

    @ Joe Friday,

    “According to the Bureau of Economic Analysis, federal, state and local taxes, including income, property, sales, and all other taxes, are at the lowest level in more than six decades. As of 2010, it was only 9.2% of all personal income in 2009.”

    would you have a link to this paper? I’d really appreciate it if you could put it up.

    I’m trying to search BEA database and can’t seem to find it. On the surface that seems to be wrong to me but certainly would like to read it…..
    “federal, state and local taxes, including income, property, sales, and all other taxes….was only 9.2% of all personal income in 2009″….this sounds like an average, and misleading

    I know tons of people paying at least 5% of personal income tax toward RE taxes on the primary residence alone in the Philly burbs (before accounting for itemized deductions on said RE taxes) and thats before totaling all other taxes paid….9.2% total tax burden amongst them all seems wildly low to me…

  30. ToNYC says:

    Charles Smith breaks takes a crack at breaking it down by Socioeconomic class:

    America’s Four Socioeconomic Classes
    1. Parasitic financial Aristocracy (creates no value, skims national surplus)
    2. High value creation (employed, heavily taxed)
    3. Low value creation (employed/informal economy, lightly taxed)
    4. No value creation (unemployed, dependent)

    -Of Two Minds

    Charles Smith is smoking crack while breaking out a box where the free and animal spirits in the economy solving people’s needs as they develop like Ozzie Smith quick and are in the “Low value creation” bag. They have evolved past taxation sensitivity and are clearly informal which you can tell by their lack of neckties whether from Century 21 or Hermes. If you follow this backassward you belong in the box.

  31. Jeff L says:

    Using my tax year 2010 as an example. W2 total gross income ~320,000, married 2 kids in college, mortgage deduction and maxed out 401k…..after all my deductions etc, total income tax paid, $98,000. That was the total for Federal, State, Local, OASDI and Medicare…all are “income” tax.

    The powers that be have decided that income from labor is less valuable (and therefore taxed at higher rates and more ways) than income from other sources, now if I could just get my income from qualified dividends up to something beyond a few hundred bucks…

  32. Disinfectant says:

    FYI, as with any entertainer who performs in many states, Mickelson’s golfing income will be taxed in whichever state it is earned, not his home state of California. His endorsement income, however, is probably all taxed in California. Investment income will also be taxed in California. So in general, if a high income is earned directly through performance acts and not endorsements or passive sources of income, it doesn’t much matter where you live. It’s those other sources of income that make the home state income tax rates matter.

  33. Joe Friday says:

    ben22,

    Well the top federal tax rate IS extremely low by historical standards but is it that simple that the deficits prove federal taxes are ‘too low’?

    You betcha.

    We have to at least consider the last pres before Obama regarding that claim
    Bush dropped the top marginal rate to 35% from 39.6% – government receipts from individual income taxes rose from $794 billion to a peak of $1.2 trillion in 2007, when the mortgage crisis began – a jump of 47%. Was it lack of tax receipts that jumped the deficit under Bush? Seems it was other factors.

    Nope.

    According to the U.S. Treasury, as reported by the CBO, after numerous rounds of tax cuts that overwhelmingly benefited the Rich & Corporate starting in 2001, by 2004:

    Receipts… As a share of GDP, they accounted for the smallest proportion since 1959

    CBO BUDGET REVIEW

    The subsequent “jump” in federal income tax receipts after that, according to the independent non-partisan CBO, was as a result of a Corporate Tax cut expiring.

    Once again, when federal income tax rates are cut, federal income tax revenue declines, and when federal income tax rates are raised, federal income tax revenue increases.

    Don’t we have at least a few other examples of federal taxes being cut at the top and receipts going up afterward along with a reduction of the deficit figures?

    No.

    Never happened.

    I should just add to my post…if in fact Phil’s total taxes are that high

    They’re not.

    would you have a link to this paper?

    It’s released to the press every year. Here’s just one example of the one I cited:

    Tax bills in 2009 at lowest level since 1950

  34. Boots or Hearts says:

    What a polarizing topic.

    I would agree that not every household has the ability to start an S or C corp, LLC etc and then start maxing out his and her ira’s etc.

    A married couple earning 150k, or even 200k- 250 in NYC, Chicago, DC metro etc etc with multiple kids in school or college is typically in category #2 by my estimation.
    They are not however rich, are typically unable to deduct otherwise standard deductions such as student loan interest or lose deductions to the AMT. They are much better off (hopefully due to working hard) than a great many people, that is not to be disputed.

    And who does not admire the life of Warren Buffet? However amid his cries for higher taxes we forget he pays himself a 100k salary, takes most of his income in dividends & long term cap gains.
    Let us also not overlook BRK having amassed an enormous 70 billion dollar insurance float that it pays no taxes on.

    Maybe it was a better society when we traded cows and chickens for a doctors visit ( provided we can keep antibiotics, MRI’ s and aspirin )?

    ~~~

    BR: The examples I keep using are of the “oppressed wealthy” — not the typical middle class family . . .

  35. ben22 says:

    @Joe,

    my glance at the table in the link in my first post, from the eyes of the furthest thing from a tax expert, seems to indicate that through a huge swing of various top marginal tax rates….the receipts as a percentage of GDP don’t really fluctuate much…my original point being I have a hard time simply chalking our deficit up to the top marginal rate. The table indicates that in 1959 that figure was 16.2%…the lowest it was during the Bush era was 16.1% in 2004. The highest I can find in the table is the 20.6% of GDP in 2000.

    I suppose where I”m still getting stuck is whether or not thats really a function of tax policy or the many other outside factors that ultimately make up GDP??

    ““Don’t we have at least a few other examples of federal taxes being cut at the top and receipts going up afterward along with a reduction of the deficit figures?”

    No.

    Never happened.”

    What I had in mind here was Kennedy, which I guess at best is inconclusive. Real income tax revenues did go up sharply (54.0% from $301.19 billion to $463.84 billion) from 1965 to 1969. However, over 45% of this increase ($74.46 billion of $162.65 billion) occurred in 1969 after the Revenue and Expenditure Control Act of 1968 created a temporary 10% income tax surcharge through 6/30/69 . Real income tax revenues then stagnated for the next 8 years, not surpassing their 1969 level until 1977.

    the Kennedy tax cut reduced the top marginal rate from 91% to 70%. It would seem possible that Kennedy’s tax cut was beneficial, at least in reducing this oppressive top marginal rate but that Reagan’s tax cuts took the marginal rates to a level where the negative effects far outweighed any positive effects.

    I’m no expert…I certainly don’t know what the right rate is in between what Kennedy and Reagan did.

    thanks for the link on the paper, will dig into that a little later

    I’d maybe still debate with you Phils statement on his tax rate…and how I think he made the number up…but its a waste of both of our times…the fact that I’ve even typed on two posts about that crybaby is waste enough

  36. jmay says:

    Hallelujah, Mr. Ritholtz. Hallelujah, Amen, Yes and Thank You.

  37. NoKidding says:

    Re my above comment:

    I did not intend to cast doubt. Just that given list with its limitations, a survey would show … 90%?… putting themself in a category that I opine covers 20% ish.

    I get high value creation from your web site, and for free.

  38. Boots or Hearts says:

    BR: The examples I keep using are of the “oppressed wealthy” — not the typical middle class family . . .

    Yes, agreed. My apologies- I did not mean to imply otherwise. I would risk a wager that we agree on the “oppressed wealthy.”

  39. NotQuiteSo says:

    This is what I have:

    +A world-class education, paid for with scholarships and federally-guaranteed loans and grants (and personal assets and income);
    +Health, fostered by vaccinations developed with federal support, maintained by effective sewage and clean water and air, restored by a variety of drugs developed in federally supported research labs;
    +Safety and freedom, given to me by generations of men and women in public service, from the minutemen at Lexington and Concord to the cops and firefighters who ran into the WTC to the troops in Afghanistan;
    +Infrastructure, from roads and bridges to telephone lines to fiber-optic networks to airports to postal services to snow removal to public transportation and much, much more, so that my goods and services can be developed and shipped anywhere in the country any time of year. Infrastructure provided by the private sector leveraged public sector goods and services in every case;
    + Wealth, built by my own hard work, but leveraging everything I’ve listed above, and preserved by a legal system with (more or less) predictable rules and access.

    This is what it’s cost me:

    +Taxes.

    Compare and contrast this experience with any experience outside of the developed world. I’d say it was a fair deal. I’ve work and traveled in the third world, in Asia, Africa, and South America, and brothers and sisters, let me tell you, the U.S. is a bargain at twice the price. Anybody who says different has no idea of what they’re talking about. Effective rates north of 30%? 40%? A bargain. In most other countries on earth most of us would be broke or dead by now, or both. In most countries where we wouldn’t be broke or dead by now, we’d be paying higher taxes than we pay here. Just a fact.

    Singapore, you might say? OK, let’s try packing all 300 million of us on to that little island and see how that works out. (Gonna need at least a blue water navy while we’re at it, too.)

  40. ben22 says:

    @joe,

    got to look at your link..as suspected they are quoting “averages” which turns into wildly misleading data skewed by the top and bottom, as I assume you already know

    your quote that caught me by surprise was:

    “According to the Bureau of Economic Analysis, federal, state and local taxes, including income, property, sales, and all other taxes, are at the lowest level in more than six decades. As of 2010, it was only 9.2% of all personal income in 2009″

    specifically the claim that all of those taxes combined was “only 9.2% of all personal income”

    I still can’t find the data for this exact quote…in your link above the quote is: “Federal, state and local income taxes consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports. ”

    it does not claim that this includes property sales and all other taxes…part of what I think Philly was trying to do to manufacture his “60%+ rate”.

    I was a financial advisor to individuals for the last decade and worked with hundreds of households. I had clients with incomes that were a few million a year and I had clients who had incomes of below $100k per year….I can’t recall a single person that saw less than 10% of their personal income go toward total taxes, all in….even trying to figure that out would be exhausting…there is tax embedded in the cost of gasoline as an example….

    regardless…thats neither here nor there in a debate about the “right” level of Federal taxes

    anyway, thanks again for the follow up

  41. Boz says:

    In a truly civilized society, taxes would be minimal. We pay tax under threat of violence by government. Without threat of violence, you wouldn’t pay tax. It is, therefore, nothing but a form of robbery. You add federal, state, local, gas, property, sales, franchise, and inflation taxes, among others, on top of the hidden costs to goods and services due to junk rules, regulations and bureaucracy and I would not be surprised if the average person’s overall tax burden is north of 60%.

  42. courageandmoney says:

    “If you want to make the argument that there are benefits from lower tax rates, economies do better, job creation is higher — then gather your data and make your case. “

    I will give it a crack. Let’s keep it simple. The question should be phrased much different imho. “Do you think $1.00 is better in your hands to spend or you feel the $1 plus typically another $.30-40 that is barrowed is better spent by government”. In addtion “How much of that $1.00 would you expose yourself to waste, inefficiencies, fraud and bailouts?”

    So I quess the answer to turn this around…..Why does the government never do without? Give me a trillion dollars for a shovel ready program and let me write the checks. But would never happen. See the problem is I think both sides are beaurcratic fools and really don’t care how the money is spent…so why send them more?

    ~~~

    BR: Cant answer the question?? Answer a different one!

  43. ben22 says:

    this is a neat little summary given this thread topic:

    http://www.taxworld.org/History/TaxHistory.htm

    some interesting tid bits in there, such as:

    “Taxes during 14th century were very progressive; The 1377 Poll tax noted that the tax on the Duke of Lancaster was 520 times the tax on the common peasant.”

    whats sad about this really, is that Phil’s complaining is nothing new at all, nor is tax debate…its essentially as old as taxes are…the ancient egyptians had lots of records of tax…not in the form of money but goods…many records of how much people paid..and lots of records about people complaining about paying

    so here we are….after 6,000+ years

    Rise of the Empiricists BR?

    I might hedge that call :-)

  44. Joe Friday says:

    ben22,

    my glance at the table in the link in my first post, from the eyes of the furthest thing from a tax expert, seems to indicate that through a huge swing of various top marginal tax rates….the receipts as a percentage of GDP don’t really fluctuate much

    You want that I should comment on your perception ?

    I suppose where I’m still getting stuck is whether or not thats really a function of tax policy

    The independent non-partisan Congressional Budget Office disagrees with you.

    the Kennedy tax cut reduced the top marginal rate from 91% to 70%.

    JFK was shot dead in 1963. The tax changes subsequently enacted were drastically different than he had originally proffered.

    The national economy experienced a dramatic slow-down in 1966, less than 18 months after federal income tax rate cuts were enacted into law, with GDP going over a cliff from 10.1% down to 1.4% (note that the previous high levels of GDP occurred while the top marginal rate of individual income tax was 91%).

    This has occurred every time tax-rate cuts that overwhelmingly benefited the Rich & Corporate have been enacted.

    It would seem possible that Kennedy’s tax cut was beneficial, at least in reducing this oppressive top marginal rate

    The non-Kennedy tax cuts were only “beneficial” to the Rich & Corporate and not the nation as a whole, and one of our nation’s greatest periods of economic prosperity was when the top federal income tax rate was 87% and even 91%.

    “Oppressive” my ass.

    Warren Buffett: “I’ve worked with all kinds of systems of taxation. I’ve worked with rich people, even in the ‘50s and the ’60s when the top rate was 70% and I’ve worked with them when the capital gains rate was 39.6%, and not one of them ever said ‘It’s one o’clock, instead of working this afternoon I think I’ll go to the movies because my marginal rate is so high’. If anything, they worked harder.”

    I’d maybe still debate with you Phils statement on his tax rate…and how I think he made the number up

    Eh, what’s to debate ? NOBODY in this country is paying 63%. It’s Purple Kool-Aid stuff.

  45. Joe Friday says:

    ben22,

    it does not claim that this includes property sales and all other taxes…part of what I think Philly was trying to do to manufacture his ‘60%+ rate’.

    FROM THE ORIGINAL ARTICLE:

    Amid complaints about high taxes and calls for a smaller government, Americans paid their lowest level of taxes last year since Harry Truman’s presidency, a USA TODAY analysis of federal data found.

    Federal, state and local taxes — including income, property, sales and other taxes — consumed 9.2% of all personal income in 2009, the lowest rate since 1950, the Bureau of Economic Analysis reports.

  46. pecker says:

    You’re number 1, BR.

  47. ben22 says:

    Joe,

    I know you can’t really believe that a 9.2% rate is anywhere reflect of a real average while including property and sales taxes:

    http://taxfoundation.org/blog/closer-look-popular-usa-today-article-claiming-historically-low-taxes

    as the article says, the headline is still correct, but the 9.2% quote is less than half of likely reality and even then there is an awful lot to explore here I think you’d have to agree.

    And as for the buffett quote….I mean really, I’ll just pretend that a bunch of rich people didn’t just pay special dividends on account of concern over taxes. the whole entire thrust of this post is that if you make more money there are a lot of ways to attempt to reduce taxation and if anyone knows that it is most certainly Warren Buffett, a life lesson in tax avoidance…but that statement is still of course true so he can go around and repeat it, none of those people ever said that…because none of them were going to pay those top rates. They worked….smarter.

    Regarding Phil’s numbers, perhaps you have the tax background to disute the figres in the article below. Do you also know how many homes he owns or total sales taxes paid? I’ve not found the figure just yet, other than he had a place for sale in 2012.

    http://www.city-journal.org/2013/cjc0125rr.html

  48. Joe Friday says:

    ben22,

    I know you can’t really believe that a 9.2% rate is anywhere reflect of a real average while including property and sales taxes … as the article says, the headline is still correct, but the 9.2% quote is less than half of likely reality and even then there is an awful lot to explore here I think you’d have to agree.

    Nope.

    The “Tax Foundation” is a fake RightWing front group.

    I’ll stick with the independent non-partisan Bureau of Economic Analysis and the independent non-partisan Congressional Budget Office.

    And as for the buffett quote….I mean really, I’ll just pretend that a bunch of rich people didn’t just pay special dividends on account of concern over taxes. the whole entire thrust of this post is that if you make more money there are a lot of ways to attempt to reduce taxation and if anyone knows that it is most certainly Warren Buffett, a life lesson in tax avoidance…but that statement is still of course true so he can go around and repeat it, none of those people ever said that…because none of them were going to pay those top rates. They worked….smarter.

    Let’s see, whom to believe, you or Warren Buffett, the man that is advocating for a minimum federal income tax rate for all income over $1 million ?

    Tough call.

    Regarding Phil’s numbers, perhaps you have the tax background to disute the figres in the article below.

    Sorry, your author is just another uninformed idiot adding-up tax brackets that nobody pays.

  49. Vivian Darkbloom says:

    “The “Tax Foundation” is a fake RightWing front group.”

    That “fake right wing front group”, in what strikes me as an honest appraisal, pegged Phil’s effective marginal tax rate at 51.9 percent. They weren’t carrying Phil’s bags:

    http://taxfoundation.org/blog/phil-mickelsons-tax-rate

    Of course, as much lower income folks like to remind us, there are other taxes to pay other than that “after- tax income” as calculated by the Tax Foundation. If Phil wants to actually “enjoy” his “after-tax income” as calculated above, like most other folks, he’d have sales tax (California minimum rate of 8 percent and usually higher), excise taxes, property taxes, etc., to contend with. If rather than spend it, he wants to give or bequeath it to his kids, unlike most other folks he (that is, he or his estate) would pay 40 percent of the remainder.

    Those are just the facts in the spirit of intelligent and honest debate—a topic touched on more recently by BR in this space.

    I’ll leave the moral judgements to others.

  50. ben22 says:

    Joe,

    I see…you live on that planet where if Buffett says it, it must be right, as if that quote proves anything about oppression or even reality, as you intended it to. And certainly, nobody ever makes any choices based on taxes as Mr. Buffett claims…and this post has nothing to do with that either. Right. Ok…you win. Perhaps you’d do well do go back and read 50 years of Warren Buffett statements on taxes…rather than the last 5-6. Here’s one:

    “I am an outspoken advocate of paying large amounts of income taxes – at low rates.”

    http://www.forbes.com/sites/realspin/2012/11/30/buffetts-billions-cant-buy-him-exemption-from-his-tax-averse-past/

    Ah…Forbes wrote it though…right? Probably all made up quotes. Oh, btw, the Buffett “millionaires tax” was a proposal for tax rates of 30% on incomes from 1-10 million and 35% above that….but lets go ahead and do quotes about top marginal rates of 70% and capital gains rates just below 40%.

    Back to Phil and the taxes “no-one” pays, this is the here and now, feel free to dispute with facts from the tax code for 2013, or call names, whichever you prefer…you are treating this commentary as “koolaid” drinking when most tax experts have already stated that his total tax liability IS at least north of 50% in 2013:

    “Until 2013, state income taxes were deductible for federal income tax purposes. Starting in 2013, for the really rich, this deductibility largely goes away (as does deducting property taxes and many other deductions). For people with over $2 million of income, they lose 80% of such deductions.

    With Proposition 30 passed in November, CA has raised its income tax on the wealthy by 29%. Do the math, and you find that in 2011 the net CA income tax for Mickelson was 6.7%. In 2013 his net CA income tax is 12.3% — an increase of 83.6%.

    Some would respond that Mickelson has been subject to AMT (the Alternative Minimum Tax) and thus could not deduct his state income tax in years past. But almost surely he has NOT been subject to AMT.

    When you make that much income, and have relatively few deductions (even when deductions were allowed prior to 2013), you seldom if ever trigger AMT. Mickelson earns income with RELATIVELY few deductions, tax credits, etc. so he’s been paying the full rate for many years. It’s only the returns where special income (some municipal bond income, for instance) or massive deductions are used that AMT is triggered — ironically mostly for incomes below $1,000,000.

    This little-noticed tax increase through the loss of deductibility was not brought up during the Prop 30 campaign because at the time state income taxes were still fully deductible for federal income tax purposes. Only after the measure passed in November did the geniuses in Congress change the rules on this.

    The big taxers love to point to a bogus study by the Stanford Center on Poverty and Inequality (the name says it all regarding their objectivity) “think tank” which concluded that the California 1% millionaire’s tax increase in 2005 had little or no effect on millionaire’s leaving. While the study has since been largely discredited, the magnitude of that 2005 increase vs. the 2013 CA increase is worth considering.

    In 2005, the maximum CA income tax went up from 9.3% to 10.3% for those with over a million dollar income. At the time, the CA income tax was fully deductible. With a 35% maximum federal tax bracket, that meant that the increase cost the rich a net 0.65%.

    With the changes I’ve discussed, the 2013 NET CA income tax increase is 5.6% — 8.6 TIMES HIGHER than the 2005 increase. Only a fool would think that such a massive increase would still not motivate many of the wealthy to depart the “Golden State.”

    Parenthetically might I add that California abounds with such fools.”
    ____

    I also encourage you to calculate your own income tax liability each year, including all taxes (if you can, be sure to include things like imputed income tax if you have a large amount of group life insurance), and you let us all know how close 9.2% is to your reality, ask all your friends with earned income for their numbers as well…I challenge you to find one person paying that rate or lower in total taxes….Even Mittenswho enjoys an effective Federal tax rate “lower than most secretaries” has a total tax liability likely double the 9.2% figure you keep quoting.

    …as for this

    “The “Tax Foundation” is a fake RightWing front group.”

    the BEA disclosure speaks for itself,…the figure you keep quoting does not include sales and property tax, it simply does not, you just have to actually read what it is that you keep bolding “property, sales, and other taxes”…. the author of the BEA paper states this in the original and then gives the formula for how the 9.2% figure was arrived at (you keep quoting personal property when the original article plainly states this does not include property tax on the home, personal property tax in that formula DID include taxes on things like, a car)…its right in the original notes…..doesn’t matter who reads it to you….

    and btw, the “author” of the information on CA tax laws above has a lifelong income tax background, you’ve demonstrated no expertise in taxes….to say nothing of the fact that you continue to misinterpret the 9.2% figure

  51. capitalistic says:

    The tax burden argument is a joke. As a financial sponsor, you can’t imagine the number of lower middle market business owners who pay Mitt Romney taxes. And you’re right, if you want to be wealthy in any society, you’re better off starting or buying a business. 9-5 won’t cut it.

  52. ben22 says:

    and here is the BEA on the GDP report out recently:

    “Current-dollar personal income increased $256.2 billion (7.9 percent) in the fourth quarter, compared with an increase of $72.7 billion (2.2 percent) in the third. The acceleration in personal income primarily reflected a sharp acceleration in personal dividend income, an upturn in personal interest income, and an acceleration in wage and salary disbursements. The sharp acceleration in personal dividend income reflected accelerated and special dividends that were paid by many companies in the fourth quarter in anticipation of changes in individual income tax rates. The upturn in personal interest income primarily reflected an upturn in interest rates for Treasury Inflation Protected Securities.

    The acceleration in wages and salaries reflected the pattern of monthly Bureau of Labor Statistics employment, hours, and earnings data for the fourth quarter, as well as a judgmental estimate of accelerated compensation in the form of bonus payments and other irregular pay in the fourth quarter.”

    Does this have anything to do with Buffetts reality, that nobody makes choices about work in relation to taxes? This didn’t really just happen. His stupid remark that it was ever a choice about “going to the movies or getting paid” has nothing to do with anything…the choice is to pay at X rate…or to recognize income when you can pay at a rate lower than X….rich people don’t typically have incomes based on some hourly rate of pay, where they dont’ get paid if on any particular day they decide to go to the movies at 1 o’clock….ask Stan O’neal.

    Buffett can sometimes take breaks to sip cherry cokes and to trade ties with Jay-Z, or maybe go to the movies…rather than “work harder” because he figured out lots of ways to always avoid paying the top rate.

  53. Joe Friday says:

    Vivian,

    That ‘fake right wing front group”, in what strikes me as an honest appraisal…

    “Strikes” you ?

    Now that’s substantive.

    …pegged Phil’s effective marginal tax rate at 51.9 percent.

    My point exactly.

    ~~~

    ben22,

    So, other than your unsubstantiated (and long-winded) perspective, you got nuthin’ ?

  54. ben22 says:

    Joe,

    “Now that’s substantive.”

    you’ve got to be kidding right? Your rebuttal to the BEA disclosure was equally “substantive”

    as a reminder, here it is:

    “The “Tax Foundation” is a fake RightWing front group.”

    The rest of your substantive claim, was to repeat the same stupid quote you have been..which the BEA states plainly does not include property tax on homes or sales taxes….you read the quote, not the disclosure or the formula behind the conclusion.

    I think I proved my point, quite clearly. You, on the other hand, keep pounding the table with more sound thinking such as,

    “this group is non-partisan…what they say MUST be correct”

    if this is the standard, my voter ID card reads non-affil: whats that make my analysis?

    “…pegged Phil’s effective marginal tax rate at 51.9 percent, My point exactly..”

    actually, no this was never your point…and I might add, Joe, that this figure is an estimate not “the figure”…unless you have knowledge of all the sales tax Phil will pay in 2013…as well as his property taxes. You have that right? I’ve seen other “expert” estimates as high as 58.5%….wildly off phils claim of 62 or 63…..or not.

    I see also you “contradicted” the facts presented about california state tax rates in 2013 due to Prop 30 and the considerable impact it also has on federal taxes by changing the subject to a study of “average” taxes paid from a 2009 study. If you want to continue to claim in the affirmative that there is no way possible that Phil could even be close to his claimed tax rate, the responsibility is then on your to show your work on why. Other tax experts now all over the web have shown theirs…and he wasn’t far off in his claim at all.

    and I think everyone here is still waiting for you to admit you were completely wrong about the 9.2% figure btw…its right in the BEA disclosure, the non-partisan BEA, that is.

    or you could just continue to repeat it because you like that narrative better

    I never had a political motivation to my questions, I simply wanted the right figures, it seems clear now you were not approaching the topic in the same manner

  55. ben22 says:

    Vivian,

    even the estimate of 51.9% contains what may be fuzzy math, on the foundation site:

    “For example, the 51.9% top METR [marginal effective tax rate] for wage income in California for 2013 under the Fiscal Cliff scenario is equal to the 39.6% federal income tax rate plus the new 13.3% top state income tax rate in California minus the deductibility of state taxes against one’s federal taxes (5.27%)”

    but then Prop 30 in california has this:

    Until 2013, state income taxes were deductible for federal income tax purposes. Starting in 2013, for the really rich, this deductibility largely goes away (as does deducting property taxes and many other deductions). For people with over $2 million of income, they lose 80% of such deductions.

    So based on that reading of the 2013 tax law, in Phil’s case, he can’t deduct the full state taxes against his federal as he’ll likely earn well over 2 million in 2013, there is no 5.27% reduction in overall tax liability, iow.

    Barry thinks this is all pretty easy, perhaps he can clear it up??

  56. ben22 says:

    Look, more proof that taxes don’t motivate anyone to do anything per Mr. Buffett:

    http://online.wsj.com/article/SB10001424127887324039504578261860345831462.html

    This is the WSJ, could be considered “right wing” so read at your own risk of higher BP.

    “Last week, Lefty’s rival, Tiger Woods, acknowledged that he left California for Florida in 1996 when he turned pro because of the difference in state tax. California’s top marginal rate then was 9.3% for individuals earning more than $32,000. The move was particularly farsighted given that rates on high earners in California have since soared.

    In November, voters in California approved a ballot measure raising the top rate on income over $1 million to 13.3% (the increase applies retroactively to last year). According to SportsIllustrated.com, Mr. Woods grossed $56.4 million in 2012. As a Floridian, he will keep about $7.5 million that he otherwise would have owed to the state of California. His net tax savings over his 16-year career come to about $100 million. Mr. Mickelson last year earned $60.7 million. Paying the 13.3% California rate, he will owe the state $8 million.

    “The day California passed the tax increase, I received three calls from concerned athletes,” accountant Steve Piascik, president of Piascik & Associates, told me. His firm is one of the largest representatives of professional athletes in the country.

    Mr. Piascik isn’t urging his clients to pack their bags just yet, but he says that some are considering moving to reduce their tax liabilities. And several of his clients, whose names he won’t disclose, have already ordered their lives around the tax code: They play for teams in California but live elsewhere for tax reasons.”

  57. ben22,

    you know the mentality at ‘work’, here, “EZer to Steal someone else’s, it’s, already, been made..”

    or, differently, feel free to wager that they read.. http://search.yippy.com/search?input-form=clusty-simple&v%3Asources=webplus-ns-aaf&v%3Aproject=clusty&query=Harrison+Bergeron+Vonnegut

    as a ‘Love Story’..

  58. Joe Friday says:

    ben22,

    Glad we now both agree. You got nuthin’.

  59. Vivian Darkbloom says:

    “but then Prop 30 in california has this:

    Until 2013, state income taxes were deductible for federal income tax purposes. Starting in 2013, for the really rich, this deductibility largely goes away (as does deducting property taxes and many other deductions). For people with over $2 million of income, they lose 80% of such deductions.”

    No need for Barry to clear that up. The answer was right in front of you. I linked to the “right wing” Tax Foundation’s blurb on Phil’s METR; however, for those who don’t know how to use hyper-links, here’s the summary:

    “For example, the 51.9% top METR [marginal effective tax rate] for wage income in California for 2013 under the Fiscal Cliff scenario is equal to the 39.6% federal income tax rate plus the new 13.3% top state income tax rate in California minus the deductibility of state taxes against one’s federal taxes (5.27%) plus the marginal tax rate effect of Pease returning (1.18%) plus the current 1.45% Medicare employee tax plus the new 0.9% tax on Medicare plus the current 1.45% Medicare employer tax which we assume is borne by workers in the form of reduced after-tax wages. The sum of these tax rates, which equals 52.6%, is then divided by 1.0145 (1 + Medicare employer tax) because by assuming that the incidence of the Medicare employer tax is borne by workers, we must add back the employer contribution to the worker’s income. The final METR figure is thereby 51.9%.”

    What you are referring to as regards the phase-out of itemized deductions (like state income taxes) is referred to as the “Pease” phaseout. You’ll note (I hope) that that was taken into account in the above calculation.

    I agree that this analysis does not include all taxes that Phil very likely pays (or will pay); however, as far is it goes it does *strike me*, not only subjectively, but objectively, as a reasonably fair analysis.

  60. Joe Friday says:

    Vivian,

    as far is it goes it does *strike me*, not only subjectively, but objectively, as a reasonably fair analysis.

    Which just adds to my amazement that so many people can somehow delude themselves into believing something is true that is actually false. I’ll leave the ‘why’ to the professionals.

    You exampled:

    the 39.6% federal income tax rate plus the new 13.3% top state income tax rate in California minus the deductibility of state taxes against one’s federal taxes (5.27%) plus the marginal tax rate effect of Pease returning (1.18%) plus the current 1.45% Medicare employee tax plus the new 0.9% tax on Medicare plus the current 1.45% Medicare employer tax which we assume is borne by workers in the form of reduced after-tax wages. The sum of these tax rates, which equals 52.6%, is then divided by 1.0145 (1 + Medicare employer tax) because by assuming that the incidence of the Medicare employer tax is borne by workers, we must add back the employer contribution to the worker’s income. The final METR figure is thereby 51.9%.

    Let’s walk through this one more time, real slow:

    * The author is adding-up tax BRACKETS that nobody pays. Familiarize yourself with a couple of IRS terms like ‘Adjusted Gross Income‘ and ‘Taxable Income‘.

    * Even assuming one doesn’t avail oneself of professional tax advice, or even take a stab at doing it yourself, with just what is built into the 1040 form, NOBODY in America pays (or will pay) 39.6% of their gross income in federal income tax.

    * Even assuming one doesn’t avail oneself of professional tax advice, or even take a stab at doing it yourself, with just what is built into the California tax form, NOBODY in California pays (or will pay) 13.3% of their gross income in state income tax.

    * This DESTROYS the author’s entire basis for adding-up 38.6 + 13.3, and then adding or subtracting trivials like 5.27, 1.18, 1.45, and 0.9.

    Lastly, if what ben22 posted is indeed true, that “the ‘author’ … has a lifelong income tax background“, then they should be sued for malfeasance and banished from the practice.