The Daily Parker

Politics, Weather, Photography, and the Dog

Home stretch?

With 58 days until the election, the noise keeps increasing. Here's some of it:

Finally, The Smithsonian describes how Greg Priore managed to steal priceless documents from the Carnegie Library of Pittsburgh, because he was in charge of security for those items.

Wednesday, 74 March 2020

Just when you thought the Republican Party couldn't become more anti-science and pro-profit (at the expense of workers), the Wisconsin Supreme Court just struck down Wisconsin's stay-at-home order on a 4-3 party-line vote.

If only that were all:

Someday, we'll all look back on this time, laugh nervously, and change the subject.

That's not how this works

This is a wonky post about tax law and at the same time a pissed-off post about political advocacy under cover of "neutral" commentary that takes advantage of people's ignorance of a nuanced area of law.

Bruce Willey, an Iowa-based tax lawyer, claims in a pearl-clutching post on Kiplinger that recent IRS guidance on Paycheck Protection Program (PPP) loan forgiveness "could bankrupt small businesses:"

On April 30, late in the evening — when few people were likely paying attention — the IRS released guidance that essentially nullified much of the benefit of the Paycheck Protection Program (PPP) created under the CARES Act. It stated that those who receive PPP may not receive tax deductions for using those funds to pay expenses. That includes expenses like payroll and rent, the very point of the PPP.

Let’s say a small-business owner requests and receives $600,000 to cover payroll for the 10 weeks where he or she is covered by the PPP. If they can’t deduct that amount as expenses, that means their federal tax burden clocks in at a rate of 37%.

That equates to a $222,000 increase in their taxable income. Meaning the effective tax-free benefit of the loan is $378,000, not the $600,000 intended by the law.

No, no, no, it does not. And it's easy to see why.

Let's say that the small business takes $600k in PPP loans and pays out $600k in payrolls (including employer payroll taxes) in 2020. Let's also say the business takes in $600k in sales revenue, and that their total 2020 deductible expenses would be $1.2m regardless of the PPP.

So: Under the CARES act, they have $600k in taxable income and $1.2m in deductible expenses. But, since 50% of their 2020 books income was the $600k grant, they can only deduct 50% of that $1.2m—i.e., $600k. Result: $0 adjusted gross income and $0 taxes.

Now let's look at what happens if Bailey's wish comes true, and why the IRS said no. If the business can deduct the full $1.2m, they will have a net operating loss (NOL) of $600k, that they can use to offset future income. And that can generate future NOLs until they finally have enough AGI to offset the full NOL. A $600k NOL for a $1.2m-a-year business would probably wipe out their income tax burden for many years.

In other words, the result of the IRS guidance isn't that the IRS would cost the business money; it's that it would prevent the business from avoiding legitimate taxes in future years. And Willey knows this; he's just hoping you don't.

(Also, the IRS releases guidance every Friday night, which he also knows. But people who don't deal with income tax regularly probably don't, which he's counting on.)

Covid-19 corporatism

A Tweet is making the rounds right now:

The Covid corporate bonus bailout costs about $18,000 per citizen.

So Congress is taking $18,000 from you, giving $16,800 to corporations and giving you back a check for $1,200.

My reply to the Facebook friend who posted the Tweet:

It's not that simple.

First, given the current political landscape, where a minority of 44% of the population have 53 Senate votes to the 66% of us who have 47, compromise—that is, weakening the recovery legislation—was inevitable.

Second, most of the money going to corporations will actually go to normal people. The legislation keeps people on salary and in health insurance instead of being laid off. (Don't get me started on the link between employment and health insurance. That stop-gap ploy to get around WWII salary caps outlived its usefulness by 1955. But it won't go away until we control the Senate.)

Third, I completely support the phase-out that means people like me won't get a single cent of the recovery money for the simple reason that other people need it more. So not everyone gets $1,200; only about 80% do.

Fourth, taxes don't work like that. On average, the recovery act might cost $18k per taxpayer (not per citizen—let's unpack that word choice later). But most people don't pay $18k in taxes. I don't know the exact proportions, but as a percentage of tax, though the $2.2 trn recovery package takes a lot of tax revenue, it's still only a proportion of what an individual pays.

Fifth, most of the corporations getting bailouts are small businesses. Anecdotes aren't evidence, but I will provide one anyway: A good friend of mine owns a used-book shop. She has no employees. She spends 60 hours a week in her shop. Her entire inventory is donated. The State of Illinois closed her business a week ago, and she doesn't know when she can reopen. She's getting a couple thousand bucks from the recovery legislation. You really want to claw that back because it's a corporation getting the money?

Sixth, I commend to the OP the story of Herbert Hoover's steadfast belief that the market would fix the problems revealed by the 1929 crash and subsequent depression. And then go read about the Capitol Hill Babysitting Co-op, which demonstrated better than any textbook why printing money in a liquidity crisis can save marriages.

Finally, my sincerest hope from this disaster is that people finally understand elections matter. What politicians say matters. What they do matters. When my lot were screaming to the heavens that the Republican Party were no longer able to govern, let alone be a responsible opposition party, 48% of the electorate said they didn't care what he said, only how he made them feel. And here we are.

I have a degree in history. That doesn't give me any special ability to fix these problems. But wow, does it help me understand their magnitude.

I just binge-watched the Netflix series Travelers, which postulates that the fate of humanity rests on the 21st century. I'm starting to agree.

Long lines at head shops

As marijuana sales became legal (-ish) in Illinois yesterday, budding demand became overwhelming demand even before the stores opened:

Weed shops around the state opened at 6 a.m. to throngs of people. Cars packed the streets of a light-industrial park in Mundelein, home to the state’s busiest dispensary, Rise, owned by Green Thumb Industries. It’s one of the few that’s open in the northern suburbs.

When CEO Ben Kovler arrived at 5:30 a.m., there were more than 500 people lined up in the parking lot. “Our first customer said he got here at 5 last night,” Kovler said. “It’s a bigger crowd than we expected. The tidal wave (around recreational cannabis) is real.”

The first sale in the state was recorded at Dispensary 33 on North Clark Street in Uptown.

Cresco said it sold more than 9,000 cannabis items to about 3,400 customers at its five shops around the state. The average ring was $135.

So that's a lot of tax revenue. Let's hope it stays high. I did not wait in line to buy weed yesterday and I'm unlikely to do so any time soon. But I'm glad people can relax when they relax now.

And if you don't know how, the Chicago Tribune published some tips.

Which weed for me?

In case you had questions about what to do when THC becomes legal for recreational use in Illinois in six weeks, Chicago Public Media has your back:

What type of high are you looking for?

The type of high you get depends on what strain of weed you use.

The three most common categories are indicas, sativas and hybrids. Indica is a strain of weed that’s meant to help you relax or sleep. Sativa is a strain of weed that’s supposed to give you energy. And there are hybrid strains that are a combination of both strains.

Most forms of weed (joints, edibles, concentrates) come in all three strains.

How high do you want to get?

The answer to this question lies in the concentration of CBD and THC in the product you choose. THC is the ingredient that gets you high and CBD is the ingredient that’s believed to relax your mind, Vale said. So the higher the concentration of THC, the higher you’re likely to get.

You’ll also pay more for highly THC-concentrated products, because the state taxes weed at different levels depending on how strong it is.

Here's what the purchasing process looks like

All purchases are cash only, though many dispensaries have ATMs and some have created their own credit cards.

You’ll need to present your I.D. when you walk into the store in order to prove that you’re 21 or older, and then potentially again when you’re purchasing. Illinois lawmakers say this information won’t be stored.

And it’ll be expensive at first: a gram of weed (about enough for a joint or two) currently runs for $20 on the medical market — and $15 on the black market. That’ll automatically be anywhere from $24 to $27 per recreational gram because of steep taxes. Illinois residents could also see a spike in prices due to high demand and anticipated supply shortages as the industry gets off the ground.

All good to know. I'm fortunate that one of the first dispensaries to get a recreational sales license in the state is less than a kilometer from my house. What a relaxing way to start 2020!

Three quick links

First, former New York mayor Rudy Giuliani, who appears entirely too deeply integrated in the President's impeachable offenses to get out without an indictment, and who also owns what he calls a "security consulting service," butt-dialed an NBC reporter. Twice. And the resulting voicemails were...interesting.

Second, how exactly did Justice Brett Kavanaugh pay for his house in 2006? He seems to have gotten almost $250,000 from some undisclosed source.

Finally, the City of Chicago will raise taxes on ride-shares because they cost the city a lot of money. A new report shows that Uber and Lyft have significantly raised traffic levels and delayed buses since their arrival in 2014.

Happy Friday!

Sleazy real-estate guy

For years, people said that Donald Trump's business practices would never survive first contact with law enforcement. Pro Publica just published a big reason why:

Documents obtained by ProPublica show stark differences in how Donald Trump’s businesses reported some expenses, profits and occupancy figures for two Manhattan buildings, giving a lender different figures than they provided to New York City tax authorities. The discrepancies made the buildings appear more profitable to the lender — and less profitable to the officials who set the buildings’ property tax.

For instance, Trump told the lender that he took in twice as much rent from one building as he reported to tax authorities during the same year, 2017. He also gave conflicting occupancy figures for one of his signature skyscrapers, located at 40 Wall Street.

Trump’s team told Ladder that occupancy was rebounding after registering a lackluster 58.9% on Dec. 31, 2012. Since then, Trump representatives reported, the building had signed new tenants. Income from them hadn’t fully been realized yet, largely because of free-rent deals, they said. But after 2015, they predicted, revenues would surge.

Documents submitted to city property tax officials show no such run-up. Trump representatives reported to the tax authorities that the building was already 81% leased in 2012.

New York prosecutors will, eventually, get Trump's tax returns. And wow, will that be fun.

Not a slow news day

Let's see, where to begin?

Finally, RawStory has a collection of responses to the President's Sharpie-altered weather map. (This is not, however, the first time the Administration has tried to make one of its Dear Leader's errors be true.) Enjoy.

New taxes in Illinois

Starting today, my state has some new laws:

  • The gasoline tax doubled to the still-too-low 10¢ per litre. Oh my stars. How could they. Ruination. (You will detect more ironic tone if you read my post from yesterday about how much gasoline I use.) For comparison with other OECD countries, the UK adds 57.95p (73.3¢) per litre, Australia gets 41.2¢ (28.6¢ US), and even Canada levies 45¢ (34¢ US). But hey, we doubled the tax, so now we can pay for our state pension deficit fixing our infrastructure.
  • Cigarette taxes went up to $2.98 a pack, and e-cigarettes now have a 15% excise. Also, we raised the legal age to buy tobacco to 21, though you can still have sex and get a drivers license at 17 and sign a contract at 18, so kids still have lots of ways to ruin their lives. (Former governor Bruce Rauner vetoed these measures last year.)
  • Schools now have to provide 5 clock-hours of instruction to count as a "school day." Having gone to Illinois schools as a kid that provided 6 to 7, it's hard for me to grasp that until today, schools only had to provide 4.
  • Finally, our $40 billion budget took effect today, the first time in 5 years that a state budget has taken effect on the first day of the fiscal year.

This is what happens when the party that wants to govern takes power from the party that wants to shower gifts on their rich friends. More on that in my next post.