Personal

Wealth Tax

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There is an old adage regarding investing that when your stocks are down, you haven’t actually lost any money until you sell the stock. Because of this, the corollary has always been, that likewise, the gain is not realized until you sell the stock. Gains and Losses “on paper” don’t really matter, until they are realized when they are converted to cash or traded for other things. President Biden and now candidate Harris, along with some members of Congress are pushing a Wealth Tax, which would tax these paper gains.

As an example, if you bought 100 shares of Apple’s stock in 2010, it was 6 dollars a share. It cost $600 to make that purchase. It is now over $200 per share so your $600 investment is worth upwards of $20,000 or a 33 times as much as when you bought it. But that gain is on paper. You’re not able to use that value to purchase anything until you sell the stock, at which time you’ll take a $5,800 capital gains haircut.

The wealth tax proposal suggests that you should pay tax on that unrealized gain now. But how will the unrealized tax be determined? Apple’s stock’s all time high was $237, but its highest day end value was $234. And on August 5th with the short crash, it was at $207. Those numbers all are within the past month. With the constant fluctuation of stock prices, will there be an arbitrary day chosen? The all time high? An average of the past year? At a minimum, this seems like a record keeping nightmare. Record keeping is already a problem with the current capital gain tax where you have to keep documentation of a stock purchase price, transaction costs, and splits along the way… sometimes over decades. This is worse with a business or property where you have to track expenditures on improvements, depreciation and other things that affect value.

Another local example is what has happened to many families around Lake Maxinkuckee. Their ancestors owned a lake cottage which was bought decades ago. The property was passed down to descendants. Not all of these descendants were wealthy, but suddenly they were wealthy on paper because of the appreciation in lake property values. They were then forced to sell property that may have been in the family for generations because they couldn’t afford the real estate taxes on the appreciated value. The wealth tax could be another hit on unrealized generational wealth like that.

https://youtu.be/J5DajhNjSJE?si=xU2kSrJgQidqN1Ms

In a Kiplinger.com article, John Goralka posits this concept about estate planning, “The cash people receive from you is more cash than you have.” This translates to day to day things as well. Wealthy people don’t live like Scrooge McDuck, with a vault in the back of their home where they swim in gold coins. How much money do you think Elon Musk or Jeff Bezos have that they can access immediately? More than me, I’m sure, but as a percentage of their wealth, I would guess the percentage is smaller. Wealth is generally tied up in “things” and those things are working to help you create more wealth. Some of those things employ people who provide goods and services. It’s likely that a wealth tax would require forced liquidation of those things to pay the tax. That would result in less investment in those things so that cash that should be put to work in the economy is held back in anticipation of tax liabilities.

John Goralka’s article has made me think about my own situation. I own my home and currently have no plans to sell it. That value adds to my net worth, but it’s not money I can spend. But when I die, that home will be converted to cash to distribute to heirs. A smaller version of what Elon Musk has with Tesla and Jeff Bezos has with Amazon, but the concept is the same.

In our current DEI world, it has become de rigueur to bash successful people. Hard work, saving and investing are out of fashion. Along with the wealth tax, there are discussions about taxing 401(k)s and IRAs where people have saved too much or invested successfully. Envy of wealth has replaced the aspirational goal of becoming wealthy. Most wealth is the result of some risk. Most wealth remains at risk as it remains invested. No government has been good at playing Robin Hood. We should push back on this, as a tax on those creating wealth by a government that can’t live within its means won’t end well.

What’s in a name?

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I’m pretty unhappy that I know the name of the shooter that attempted to assassinate former President Trump. If you don’t know his name, I’m not going to be the one to enlighten you…

My personal feeling is that it’s unconscionable that the press puts the names of such people out there. Law enforcement must, in the name of full disclosure, but it’s the press that gives them posthumous fame. My distaste for this is not because of concern for their families. Often their families are complicit, through ignoring red flags, if nothing else. My reasoning is that many of these individuals are doing it for that fame. How many other disturbed people see this and think, “At least I will be recognized”? What other heinous acts are being contemplated by disturbed individuals seeing this shooters name plastered across all media?

I knew the names of the killers from Columbine. I knew the name of the Boston Marathon Bombers. I knew the name of the Aurora, Colorado shooter and the man that shot up the music festival in Las Vegas. I know the name of Sharon Tate’s killer cult. I know the names of the brothers famous for killing their parents. I know the name of President Reagan’s attempted assassin. I know the names of JFK’s assassin and clear back to Lincoln’s assassin. I’m sure this is enough to bring many of those names to your minds… None of this information is valuable to us nor does it protect us. All of this could be the catalyst that causes a continuation of this murderous loop.

What’s in a name? For some people, this is their way of achieving their 15 minutes of fame. Let’s stop making that possible.

Chevron Deference

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I wrote a bit on this last January (here) when I first heard the Chevron Deference was up for consideration by the Supreme Court. (Kiplinger’s follow-up article here.) Now there seems to be a huge uproar over this or to paraphrase the words of Charlie Daniels: They’re all out there steppin’ an’ fetchin’, like their heads are on fire and their asses are catchin’… (from Uneasy Rider)

Saying that we’ve always done it this way, fails to recognize that the Chevron Deference is a product of the 80’s, not something springing from the Constitution. It was a case where the courts gave up their constitutional power to interpret laws, ceding it to the administrative agencies. This has been abused by the agencies and aided by lazy lawmakers, who intentionally or unintentionally write ambiguous legislation.

Unfortunately, the agencies are abusing their power over their clients, the citizens of the United States, while also ignoring their bosses, the Senators and Representatives that write the laws. (Check out this video of Democratic Senator, Joe Manchin, schooling Treasury Secretary, Janet Yellen, on the way that agency is disregarding very specific language in a Law he wrote and helped pass.) Unambiguous language in legislation is rare, but even when it’s in place, it requires legislators to be enforcers, as with the above video or citizens to risk their livelihoods taking them to court. The Chevron Deference had been used to give the advantage in these situations to the agencies as the de facto experts.

I seriously feel that the various bureaucratic agencies are being allowed to run the show. Even granting them the benefit of the doubt on knowing a lot about the things they oversee, bureaucracies tend to be invasive. They try and make themselves seem more valuable by growing and inserting themselves into more things. This is true with private bureaucracies and seemingly more so with public bureaucracies. When President Biden said we’re going to add 80,000 more IRS agents, I never heard the IRS say, they could get by with 50,000 or even lets start with 30,000 and see how it goes… No, they gladly accepted the growth, the larger budget and the increase power that came with this.

IRS: You owe us money. It’s called taxes. Me: How much do I owe? IRS: You have to figure that out. Me: I just pay what I want? IRS: Oh, no! We know exactly how much you owe. But you have to guess that number too. Me: What if I get it wrong? IRS: You go to prison. ME: [rifling through papers] Ok this is all kind of confusing, but I think this is how much I owe. IRS: Yikes, looks like you missed a number somewhere. I guess you’re going to prison. ME: [being handcuffed] Can’t argue with justice! – Jordan Stratton

As I mentioned on the previous post here, the agencies’ positions and enforcement can swing wildly based on whichever party is in office. Taking the political positions out, at least as much as possible, by putting it back in the hands of the judiciary, seem prudent. Acknowledging their expertise in these things, it would make more sense to bring them in when the law is being crafted rather than waiting until it’s in place and subject to their, sometimes bias, interpretation.

The striking down of the Chevron Deference seems to make perfect sense to me, but only time will tell. While in place, it was interpreted broadly, which caused the problems leading to the Supreme Court’s review. Doing away with it may create a new set of unintended consequences, but with government in general, less is better…

Rick Hensley

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Rick (Richard Ray Hensley II)

Easterday Construction Co., Inc. has lost another good friend. Rick passed away last week and I attended his funeral today. Rick battled cancer against the odds his Doctors were giving him, and he outlived the expiration date they gave him through sheer will and love for his family. He always had a passion for life and a positive attitude. Losing this friend at only 45 years old is heartbreaking.

Rick and his company, Artizan Flooring, has done multiple projects for us over the years. I’ve never had a second thought about taking him to meet a client. He not only made a good impression for himself and his company, but also for Easterday Construction. He also respected that relationship, looking out for our reputation as well as his. I could always trust him to make the best recommendation possible and to follow through on whatever he said. He would never consider end-running us on a client we introduced to him.

As an example of Rick’s integrity, on one of our first projects together, he made a recommendation at Sand Hill Farm Apartments for the installation of a sound dampening underlayment beneath the vinyl plank flooring in the second floor units. Within 6 months of the installation, the vinyl plank began losing adhesion and curling. Rick fought with the manufacturer over this and when he received no satisfaction from them, he removed the plank, removed the underlayment and reinstalled the plank at no cost to us… because he had told us it would work and it didn’t. That made a huge impression.

While Rick will be missed, we hope to continue our relationship with his wife Amber. She assumed the leadership of Artizan Flooring when Rick had to step back and continues to move the business forward. If you have any flooring or tile needs, please search them out at their Plymouth store. I am confident they will continue forward with Rick’s credo.

Vast Wasteland

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I was fortunate enough to be invited to the 50th anniversary celebration of PBS station WNIT Friday evening. There was an interesting mix of patrons and board members. I did my best Mr. Rogers impression and there were others emulating their favorite characters from shows like Downton Abbey. Elmo and Cookie Monster made appearances as well as one Miss Piggy!

Several times Newton Minow was quoted. Minow laid down his famous challenge to TV executives on May 9, 1961, in a speech to the National Association of Broadcasters, urging them to sit down and watch their station for a full day, “without a book, magazine, newspaper, profit-and-loss sheet or rating book to distract you.” “I can assure you that you will observe a vast wasteland,” he told them. “You will see a procession of game shows, formula comedies about totally unbelievable families, blood and thunder, mayhem, violence, sadism, murder, Western bad men, Western good men, private eyes, gangsters, more violence and cartoons. And, endlessly, commercials — many screaming, cajoling and offending.” – PBS News Hour

Cookie, Bozo, Garfield Goose and Frazier Thomas from Wikipedia

in those early days of television, there were only the big three with the occasional local independent stations scattered in. (I grew up able to catch WGN out of Chicago on a good day, so Bozo’s Circus with Bob Bell and Frazier Thomas was in my viewing rotation along with Garfield Goose and the Roller Derby.) Mr. Minow was no doubt chagrined that while his admonishment took root in some areas, including the creation of PBS, in other ways the vast wasteland just grew vaster…

It was interesting to hear the discussion of PBS’s future, both nationally and locally. There is no doubt that they have a lot of quality programming, but with the choices available, how do they compete? There are stations that appear to have been created to directly challenge them, such as Discovery and TLC (The Learning Channel), but they have slipped into more salacious fair, i.e. “Naked and Afraid” (XL!) and “Dr. Pimple Popper“. How does a local station like WNIT compete?

The interesting quandary is how to produce local content that might be saleable to a larger audience. For example, this weekend I watched part of a local WNIT documentary, “A Legacy Of Memories: Silver Beach Amusement Park“. It’s one that I have watched (parts) before and found it interesting. But that interest was because it’s this area’s history. Would I have watched a similar program about a similar subject in New Jersey? Maybe. Probably not though. So how does this become marketable? I know this was not as expensive to make as one of Ken Burns‘ documentaries, but there is still a significant expense. If there’s no way to recoup that from licensing to other broadcasters, can they afford to do that on a long term basis?

There were a lot of smart people in the room Friday. That bodes well for finding solutions to these quandaries. PBS doesn’t look like it did 50 years ago when WNIT started out with a single channel without 24 hour transmission. Today it has 5 channels, all with 24 hours of content. Who knows what the next 50 years will bring, but there’s no doubt they’re still stiving to make a dent in Newt’s vast wasteland.