Taxman Cometh

 

 

800px-IRS_Building

“Should five per cent appear too small. Be thankful I don’t take it all. ‘Cause I’m the taxman, yeah I’m the taxman.” -the Beatles 

Deep sighs of relief abound as another Tax Day has come and gone. But if you listen closely, those sighs aren’t the only sounds you can hear. You can still hear the sounds of people grumbling about their taxes.

Grumble, Grumble

People grumbling over taxes goes way back. Yes, even before 1966 when the Fab Four’s George Harrison penned his critique, aggrieved parties in Boston held their tea party and sent a tax message back accross the pond to England. While the issues have changed, it remains true that no one really likes paying taxes. Nor thinks all aspects of the U.S. tax code make sense.

Tax Day

April 15th is a day that almost everyone knows to be an important one. It is arguably the most known date that is not a national holiday or one that appears on a religious calendar. For sure, it’s also a date that’s much more important for those who owe taxes versus those who by this date have already spent their tax refunds on consumer electronics or otherwise put the funds back into the economy.

But one thing that has changed is what Tax Day looks like at the local post office. Remember when there actually used to be traffic jams around U.S. Post Offices on Tax Day?  Youngsters will someday find this hard to believe. Local news teams covered the annual ritual with gusto. For those trying to get anywhere by car, it was necessary to select alternate travel routes.  I think people even sold coffee and donuts out front. These days, not so much.

Sweet Redemption

Another reason that April 15th stands out is that it is that one day in the year where the tables get temporarily turned. It’s a bit illogical, but it’s a day where events that seemed bad when they happened now become worth something financially. Did you sell your house or shares of stock at a loss? Or maybe cringe as you wrote out those alimony checks? What about paying mortgage interest, PMI, and real estate taxes? Perhaps you awoke to find your pockets empty after a long fuzzy night in the casino? Or maybe even experienced something as terrible as death in the family.

But Oh Mother of Mercy and Sweet Redemption -these decidedly negative events may have positive value on April 15th! This could only pretty much be true in the topsy-turvy, upside down, mixed up shook up world of tax. Of course, deductibility of these events and any associated positive tax value may be subject to this, that, and the other limitation, exclusion, or exception. So check the code first, as should always be the disclaimer in the wacky world of tax.

Kramer : It’s just a write off for them .

Jerry : How is it a write off ?

Kramer : They just write it off .

Kramer : Jerry all these big companies they write off everything

Jerry : You don’t even know what a write off is .

Kramer : Do you ?

Jerry : No . I don’t .

Kramer : But they do and they are the ones writing it off .

No Taxes

Once upon a time, I had a job as the top finance person in a company. Accordingly I took great pride in the profitability and balance sheet strength the company had built. For as long as I live and probably even a bit longer, I will never forget the retired company founder, who had just returned from Florida one spring, telling me that I was not doing a very good job at all when it came to taxes.

At first this puzzled me, but then retired owner dude made it crystal clear that we should be paying a lot less in taxes. Retired owner dude apparently had met another similarly retired owner dude who had done quite well but paid very little in taxes each year. Right in line with our CPAs who had been similarly charged in the allegations, my response was to point out that since we were making money, we should expect to be paying some taxes. Silly me.

If you lock in on the mental imagery, you can surely picture these two retired owner dudes talking tax (or lack thereof) while feeding the sea gulls down in Florida- Gulf side of course – in their black knee socks, sandals, and Bermuda shorts!

Bad Policy

I’m no different from anyone else when it comes to having a few pet peeves around taxes. First and foremost, I tend to be critical of what I call “bad policy”. Simply put, this is what results when the tax code discourages the right behaviors from happening, or encourages the wrong behaviors, and in general does not serve the greater collective good of our great nation.

In my opinion, one excellent example at the federal level is found with the alternative minimum tax or AMT. Attempting to ensure that those at higher income levels take their share of the tax burden does not seem like such a bad thing. However, above a certain income level, several overly nasty, almost punitive, tax penalties kick in that discourage the right behaviors from happening. At least in some cases, folks wishing to avoid AMT magically seem to earn right up to the limit and then stop earning (and paying in additional funds to the tax kitty). Bad policy.

We should want these relatively successful individuals and small businesses to “keep going”, earning more and creating jobs as they go. Which obviously would be good for the greater good.

More Bad Policy

Another example is found in at least one state’s capital stock franchise tax. What it does is tax the retained earnings of a business. This is analogous to the government taxing the entire balance in an individual’s savings account. This does not serve well in attracting new corporate residents. Bad policy.

I know of a small businessman who is engaged in what is primarily a service business. His mistake is that he keeps some taxable retail stock on hand to service a very specialized and often medically referred subset of his clientele. He is quick to point out that he pays the same tax bill twice if the specific unit of inventory is on hand at the end of two successive tax years. Bad policy….Maybe he needs to winter in Florida to get some tax tips.

Real Alternative?

There’s a Stanford professor named Joseph Bankman, who advocates that the IRS should prepare our tax returns. His logic goes that employers and financial institutions are already sending the IRS our tax information, so why not let the IRS do the work for us? Critics point out that this reduces the involvement of taxpayers in the tax process, which then starts to sound like that whole taxation without representation thing all over again.

It seems that there is also a strong lobby against Bankman’s thinking. It turns out that the company Intuit thinks the IRS preparing our tax returns is a bad idea. Their product portfolio includes Turbo Tax.

As with most things, it pays to follow the money!

 

Advertisements

Connecting Dots

 

132Urban planners, economists, and government officials – take note. Economic revitalization and making money is as easy as connecting a few dots. 

While it may come as a surprise to some, the City of Baltimore has done an excellent job of following this all too often overlooked rule of simplicity. In the Charm City, connecting the dots has been about taking some basic assets and maximizing their economic impact at an increasing rate.  A truism of economic development is that success encourages others to take the risk to invest. At a certain point, enough investment occurs to have significantly reduced perceived entrepreneurial risk. Economists probably have a term for this, but I’d call what’s happening in Baltimore just plain old common sense.

First Dot

Baltimore is blessed with an omnipresent harbor that automatically becomes the first dot. You see, people love bodies of water and are drawn to them.  The Charm City’s location on the water also gives it a strong maritime tradition. Once upon a time, the Inner Harbor itself and its contiguous areas were economically viable ports that supported major commercial activity.  As time marched on, the relatively shallow waters of the Inner Harbor became a limiting factor.  That was a problem until someone got the bright idea and chutzpah to build the National Aquarium there.  See dot number five below.

007Second Dot

Historical and cultural elements collectively become the second dot.  Examples include Fort McHenry (as in the “Star Spangled Banner”), the Great Baltimore Fire of 1904, several historic port areas, Shot Tower, Babe Ruth’s birthplace, Edgar Allen Poe’s gravesite, Peabody Conservatory, Discovery Art Museum, and several locations of considerable import with respect to our country’s ongoing civil rights movements.

Third Dot

Baltimore’s landscape of contiguous and uniquely characteristic neighborhoods now enters as dot number three.   North of Inner Harbor is the downtown business/financial area and just above that is historic Mt Vernon. Sitting just to the south of the Inner Harbor and Camden Yards is the resurgent and quirkily trendy Federal Hill area.   Just beyond that to the east is Locust Point. Back at the Inner Harbor, now moving east, we encounter Little Italy, Harbor East, Fell’s Point, and then Canton.111

001Fourth Dot

The people who live in these neighborhoods and those nearby are dot number four.  One defining aspect of Baltimore’s personality is a certain Southern-style charm. It’s similar to the vibe one encounters in New Orleans, Charleston, or Savannah. But it’s considerably north of these cities-although still below the Mason-Dixon line.  What results is an energetic, festive and eclectic mix. Great places to eat, to enjoy a pint or pop, eat a crab cake, and take in the groove of excellent music for next to nothing. In other words, big fun!

Dots Five and Six

The National Aquarium definitely got the ball rolling in the right direction.  That’s our fifth dot. But that was back in 1981. At the risk of missing something in between, dot number six came on board in 1992 when Oriole Park at Camden Yards opened its doors as the home of the baseball Orioles. In 1998, the NFL Ravens moved into the same neighborhood, strongly establishing another Charm City destination.

Even with these very functional dots in place, Baltimore still needed more dots. And just as importantly…a way for people to safely move between them. 

 

Connecting the Dots

Here’s how Baltimore’s planners and developers literally connected the dots and hit a home run.  They invested in the infrastructure to make it physically possible to walk safely from Inner Harbor to the adjoining and aforementioned neighborhoods in either direction. There is now a promenade that goes along the water for several miles in each direction.  It is the chief linking mechanism for tourists, and is heavily used by locals for outdoor fitness pursuits and routine transit.  With the help of a few city streets, it’s possible to walk, run, or bicycle all the way from Locust Point to Camden.  Low fare bus service is also available via the Charm City Circulator.

004With the promenade in place and increasing number of people on it, our next wave of common sense came crashing ashore. All those people eventually need to eat and a large percentage of them need a place to stay.  OMG-  let’s build restaurants and hotels. Restaurants and hotels add jobs that are filled by local residents.  Enter some highly visible police presence, and we’ve really got some momentum going. You see, it’s really quite amazing.  If people feel safe and your city has something to offer, they will visit your city if 113you connect the dots for them. They’ll even pay to park!

Success Stories

And success begets more investment seeking a share of the rewards.  It’s a beautiful thing.  Ask Under Armour’s CEO Kevin Plank whose company is headquartered in Locust Point and plans to buy Rec Pier (featured in TV series “Homicide”) and turn it into an upscale boutique hotel that serves tourists, business travelers, and his company’s visitors. His plans include shuttling his visitors from Fell’s Point to Locus Point via water taxi.  Nice touch. (link) Still need convincing to be bullish on Baltimore? Here’s a link to 89 million more reasons.

Momentum in Baltimore isn’t all about tourism.  Highly visible condo development seeks to satisfy the lifestyle demands of those who want to call Baltimore home.  Young upwardly mobile professionals, as well as those who have already achieved some level of success, want to live there.  So, build it and they will come seems to be a natural result of connecting the dots.  Many cities across can learn from this.

124

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Hammer Time

Hammer_nails_smithonian

You may not be an architect, but with the right tools, you can help build the house.  So grab that hammer and get to work! 

That is, if you have one.  Metaphorically, we all need to have a hammer out there in Corporate America today.  Gone are the days of mid-to-upper level management jobs that are removed from the day-to-day action.  Everything is becoming more hands on.  Heed the call – there is wisdom here for both the employed who wish to remain employed as well as those who find themselves in a prolonged period of career transition.

What is it you do, really?

Let’s get down to basics.  What is it that you do, really?  Maybe you are an Engineering Director or an IT Manager in a company that continues to outsource.  How about a Sales Manager whose company keeps consolidating territories?  Or a Brand Manager who sees support positions dwindling by the second?  In today’s world, each of these positions increasingly distills down to its basic elemental structure.  Yes, it’s about the underlying skills that got you there.  It’s about dancing with the girl or guy you brought to the dance.

Closer to Home

Recently, I felt the tap on the shoulder to move from a Financial Planning & Analysis (FP&A) position to Controller within the same division of my company.  Let’s just say it’s a darn good thing I had that hammer.  Why?  Because I really needed it, and more importantly because my company expected to find it in my tool box.  In quite the flashback set of moments, seemingly all of a sudden, I am once again making journal entries, reconciling accounts, safeguarding assets, talking in account code strings, and submitting tax packages.  “Should we be subdividing the Other Liabilities account into more descriptive pieces?”, has resurfaced as a question of increased relevance.

Elemental Distillation

Yep, I still got it.  Whatever it is…..that certain accounting something……if nothing else, my hammer and few other tools that round out a functional value set for my employer.  Rediscovering that I can still rock the debits and credits in a well-credentialed controller crew is a good thing, as is bringing business-side financial knowledge to the position.  It should allow me to ultimately take the position in some new directions, while in the short-term providing an easier transition for my employer versus an external hire.  Quite a lot of words there.  Here’s the distillation update.  It’s about my fundamental accounting skills providing my employer with a solution…..and of course, dancing with the girl that I brought to the party in the first place.

Goldilocks & the C-Suite Shuffle

Moving away from my own story now and back to a key takeaway.   Have you met “Experienced” CEOs, CFOs, CTOs, and Sales VP’s who are in long-term career transition?  Of course not in every case, but at some point after a full cycle of one month+ off for every $10K of income, the market no longer sees them as VPs and Chiefs. Sure, some live off of nice severance packages for quite some time and land well. Countless others languish in the down-market rather than grabbing a hammer or related occupational implement and getting back to work.  It’s a bit of the Goldilocks Syndrome, but it can be about ego and not letting go of dated self-image.  Ultimately, it becomes about a decision to stay out of the game and wait it out on the side line, even though the skill-set distillation process yields immediately employable elements.

Better Days Ahead

As the market picks up, there’s definitely going to be more opportunity, but it will be different opportunity.  There’s been a tremendous amount of consolidation.  The underlying tools of the trade have become increasingly important.  To an increased extent, white-collar America now consists of largely carpenters and tradesmen.  Having the tools and being willing to use them is a necessary first step.  Then it becomes about layering on top the elements that theoretically should narrow the outsourcing gap.  Home field advantage should count for something, as represented by the underlying skill PLUS business knowledge, communication, and people skills.  It involves having a value package that ties up neatly and cleanly with the necessary ribbons and bows.  Although taking many forms, it ultimately comes down to being able to do something useful for an employer…..and continuing to renew one’s own occupantional vitality.

Photo credit – Frabel

No Limits

These days financial scandals happen with increased frequency. While it is not clear what changed, the sky has once again redefined our limits.  It seems that JP Morgan Chase and CEO Jamie Dimon have a rather unique ability to turn $2 Billion into $5.8 Billion.  Good skills to have if you are the nation’s largest financial institution, right?  If you said yes, guess again because Jamie & Co. have recently disclosed that their previously-disclosed “trading mistake”, originally valued at $2B during a previous apology, is now trading just a little bit higher – right around that $5.8B mark.

JP Morgan said its internal investigation yielded results that have led its top brass to “question the integrity” of the previous $2B mistake valuation.  “Dear Shareholders:  Oops.  Please accept our updated apology and revised valuation.  Please do not let it affect your confidence in our management team.”  This language probably would not fly, but then again, these days-who knows?  .

There may be no limits to the amount of mind-numbing financial scandals that we are being conditioned to interpret, digest, and ultimately accept as some kind of “new normal”. This stuff literally runs from “trading mistakes” (code for hedging gone awry) to LIBOR-fixing at Barclays while covering just about anything and everything in between.  Nothing is sacred, and little seems safe.

Interestingly, an AP article from last week offered, “JPMorgan could not necessarily hide behind the actions of its employees.  Regulators could decide that its oversight or risk management contributed to the problematic statements.”  Seems like a good bet there.

It is somewhat paradoxical that this increasingly-no limits run of financial scandal is occurring at a time when corporate treasurers indicate that they now park more cash in bank accounts.  See AFP’s (Association for Financial Professionals) annual liquidity survey findings for details.  The next step for corporate money managers may well be to build  underground vaults within the perimeter of well-guarded corporate campuses.  It used to be that treasurers were dinged on their performance reviews for having “excess cash on hand”. Now they receive high marks for the same behaviors, now termed “effective risk mitigation”.

It’s getting hard to know who or what to trust.  Disclosures are no longer even accurate.  For the times they are a-changin’. It appears that there are no limits.

%d bloggers like this: