The Daily Parker

Politics, Weather, Photography, and the Dog

Evening news stories

A cold front pushed its way through Chicago this afternoon, making it feel much more like autumn than we've experienced so far. And it got pretty chilly in Washington, where Senate Republicans began the first day of hearings into the nomination of Amy Coney Barrett for the Supreme Court:

And much farther from home, Mars will be in opposition tomorrow night, coincidentally during the new moon, meaning we'll get a really good look at it.

First Tuesday in October

Starting in March, this year has seemed like a weird anthology TV show, with each month written and directed by a different team. We haven't had Aaron Sorkin and Thomas Schlamme yet; I'm hoping that'll be the season finale in February. This month we seem to have Armando Iannucci running the show, as the President's antics over the weekend suggest.

So here's how I'm spending lunch:

Tomorrow night will be the vice-presidential debate, which I will again live-blog. I can't wait.

More fallout from the Times report

Daniel Shaviro, a veteran tax attorney, lays out 10 takeaways from the New York Times story Sunday about the president's tax returns:

1) Tax is the least of it. The article offers direct evidence of Trump’s impending financial liability to unknown lenders, and of pervasive conflicts of interest as president, that are of grave national security concern.

6) The consulting fees that Trump’s various foreign businesses paid to Ivanka Trump and others look potentially fraudulent

Based on what the article says, several different types of fraud may have been involved here. Fees paid to family members who did not provide services in return would be improper deductions. Fees paid to “consultants” who were employees might be properly deductible by the business – as salary – but would potentially trigger 3.8 percent payroll tax liability by the recipient under the so-called Medicare payroll tax. Fees that were actually gifts to family members were not properly deductible, and also may have generated gift tax liability on Trump’s part that the mislabeling helped to conceal.

10) There is an old saying that one can never detect tax fraud purely on the face of a tax return – but this comes closer than usual. – Even wholly fraudulent tax returns generally do not proclaim their fraudulence on their face. The Trump returns presumably are no exception, and much of the evidence suggesting possible fraudulence was developed in the Times article through the use of other sources. Nonetheless, with that aid, the Times article makes a powerful initial case, clearly meriting investigation, that substantial tax fraud may have occurred.

Over at the Washington Post, Jennifer Rubin sees this as yet more evidence that "Everything [the president] touches dies:"

Trump will surely need to account for the latest bombshell at the debate on Tuesday, but Democratic nominee Joe Biden should be clear that Trump’s financial losses are far from his most egregious failure. Instead, Biden should point to the loss of more than 200,000 American lives, of millions of jobs, of America’s international prestige, of the Supreme Court’s integrity, of the presidency’s dignity, of the country’s unity and of the justice system’s credibility. Everything Trump touches is made worse. His rallies bring super-spreaders to America; his policies bring one catastrophe after another.

The latest revelations — and those the Times promises are to come — make it much harder, if not impossible, for Trump to find safer terrain in the waning days of the race. He has failed to come up with a coherent (let alone winning) argument against Biden, and worse, has handed Biden one devastating argument after another to deploy against him. He generates devastating stories faster than Biden’s opposition research team can compile them. We have every reason to believe things will get even worse for Trump in the days ahead.

As for tonight's debate, tune in to The Daily Parker. I'll be live-blogging.

All the president's taxes

The New York Times dropped a bomb over the weekend with its revelation that it obtained 20 years of the president's tax returns. The documents show that either the president is one of the worst businessmen in American history, or he has committed (and indeed may still be committing) one of the largest tax frauds in American history. Actually, it looks like both:

The tax returns that Mr. Trump has long fought to keep private tell a story fundamentally different from the one he has sold to the American public. His reports to the I.R.S. portray a businessman who takes in hundreds of millions of dollars a year yet racks up chronic losses that he aggressively employs to avoid paying taxes. Now, with his financial challenges mounting, the records show that he depends more and more on making money from businesses that put him in potential and often direct conflict of interest with his job as president.

The picture that perhaps emerges most starkly from the mountain of figures and tax schedules prepared by Mr. Trump’s accountants is of a businessman-president in a tightening financial vise.

Most of Mr. Trump’s core enterprises — from his constellation of golf courses to his conservative-magnet hotel in Washington — report losing millions, if not tens of millions, of dollars year after year.

His revenue from “The Apprentice” and from licensing deals is drying up, and several years ago he sold nearly all the stocks that now might have helped him plug holes in his struggling properties.

The tax audit looms.

And within the next four years, more than $300 million in loans — obligations for which he is personally responsible — will come due.

I've had a security clearance, and let me just say that debt will keep you from getting one. You can be a paid-up member of the Communist Party and have a secret drug stash in your basement and still get a top secret clearance—as long as you have no significant debts and you admit the drug stash in your SF-86. But that's just one of the president's problems, according to the documents:

He appears to have paid off none of the principal of the Trump Tower mortgage, and the full $100 million comes due in 2022. And if he loses his dispute with the I.R.S. over the 2010 refund, he could owe the government more than $100 million (including interest on the original amount).

In the 1990s, Mr. Trump nearly ruined himself by personally guaranteeing hundreds of millions of dollars in loans, and he has since said that he regretted doing so. But he has taken the same step again, his tax records show. He appears to be responsible for loans totaling $421 million, most of which is coming due within four years.

Should he win re-election, his lenders could be placed in the unprecedented position of weighing whether to foreclose on a sitting president. Whether he wins or loses, he will probably need to find new ways to use his brand — and his popularity among tens of millions of Americans — to make money.

You can predict the reactions. The president called it "fake news," which means it's true. The Wall Street Journal appears to have ignored it—there's not a single story on their main or opinion pages about it at this writing. Fox News highlighted the president's and his press secretary's responses, but below the fold, in small headlines.

On our side, NBC's Jonathan Allen believes this is "devastating for his campaign:"

The vast majority of his base voters won't care whether he paid taxes or lied about being a successful businessman. His ability to pull one over on the public or the government — perhaps both — will be accepted by most of his supporters as evidence of his cunning, his acumen and his strategic brilliance.

But that base is simultaneously Trump's greatest strength and weakness on the electoral battlefield.

His inability to expand beyond his base and court the less strident is the main challengeto his re-election hopes. And the tax records make things worse. The documents reinforce narratives about Trump that fire up Democrats and give pause to Republican-leaning voters who might be persuaded either to cast ballots for Democratic nominee Joe Biden or simply stay home.

So while the tax records don't contain many surprises for those who have paid close attention to Trump's business dealings — and the distance between his boasts and the reality of his record as the head of the firms that make up "Trump Inc." — they do put Trump in a position he would like to have avoided.

Catherine Rampell of the Washington Post agrees with me:

For his part, Trump has previously argued that shirking his tax obligations made him “smart.” He suggested that he merely took advantage of legal loopholes, the kind available to deep-pocketed Americans who can afford top-notch tax preparation advice. And as I’ve written before, the real estate industry enjoys tons of loopholes and other opportunities for legally minimizing tax obligations, most notably through depreciation deductions. But per the Times, Trump’s “three European golf courses, the Washington hotel, Doral and Trump Corporation reported losing a total of $150.3 million from 2010 through 2018, without including depreciation as an expense.”

That is: They were money pits.

Additionally, Times reporters Russ Buettner, Susanne Craig and Mike McIntire include details of tax practices that were, at best, extraordinarily aggressive and, at worst, suggest possible fraud on a massive scale.

These include deducting lifestyle expenses, such as the cost of haircuts, as if they were business expenses. Or appearing to pay Ivanka Trump consulting fees on the same hotel deals that she helped manage as part of her job at her father’s business, an arrangement that may have been a way to transfer assets without paying gift taxes.

One might reasonably wonder why Trump, who appears to tweet, watch TV and golf more than he exercises his duties as president, has ever wanted a second term. Well, in addition to his desire to finally build his border wall or continue dodging potential indictments, we now know that Trump has about a half-billion dollars’ worth of motivation to stay in office four more years.

These documents show what we've really known all along: the president has perpetrated the biggest con on the American people in the country's history. But you can't fool all of the people all of the time.

Will this really change the election? Well, a 1% swing in any of the battleground states would have done it four years ago.

In related news, Showtime's The Comey Rule will frustrate the hell out of you. I strongly recommend it.

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!