Isaac Laquedem

Isaac belatedly wishes our president a happy 79th birthday

And what better way than with a song about a part of the government that celebrated its birthday on the same day as our president?  This particular salute is the work of Phil Ochs, rendered by Pete Seeger and Fred Hellerman.  

 

 

 

Isaac celebrates Tax Day with a traditional reading from A.P. Herbert

Tax Day is Isaac's annual reminder to dip into the works of the underappreciated British author, playwright, humorist, campaigner, and parliamentarian A.P. Herbert (1890-1971), for whom the Inland Revenue (Britain's version of the Internal Revenue Service) provided endless inspiration.  Today's reading comes from Herbert's story "Wear and Tear," framed in the manner of a decision of a court.  (He wrote more than 100 of these fictitious cases to illustrate absurdities in the common law.)  His protagonist Albert P. Haddock, a writer, has appealed to the High Court from a decision of the Tax Court that he could not write off certain expenses that he claimed were necessary for his business, and that he could not take a depreciation deduction for wear and tear on his means of production.  Mr. Justice Radish speaks:

Mr. Haddock asks for a declaration that he is, and has been for some years, entitled to certain allowances or deductions for income-tax purposes under the heading of  (a) Expenses and (b) Wear and Tear of Machinery and Plant; and on the assumption that he is right be claims that a considerable sum is owing to him in respect of past years in which the Commissioners have refused to grant him such allowances. 

Mr. Haddock appears on behalf of the whole body of authors, artists, and composers, and the position of a large number of creative brain-workers will be affected by our decision.

What expenses did the Inland Revenue disallow as deductions?  As the court says, "they have allowed him nothing for hospitality, entertainment, or travel, and they have invariably deleted from his list of professional expenses such items as champagne, Monte Carlo, night-club subscriptions, first-nights, Deauville, and hire of yacht at Cowes."  Haddock argued that those items were not luxuries or personal extravagances, but necessities for the diligent writer.  "How can a man write about Monte Carlo or Cowes unless he goes to Monte Carlo or Cowes?  How is he to study and depict the gilded life of Society without constant visits to the Saveloy Grill Room, to Covent Garden, to the Riviera, and other places where Society is to be found?"

As for depreciation, Haddock argued that "the author's machinery and plant are his brain and his physique, his fund of inventiveness, his creative powers.  These are not inexhaustible.  And if it is proper for the soap-manufacturer to be relieved in respect of the wear and tear of his machinery and the renewal thereof (which money can easily buy), how much more consideration is owing to the delicate and irreplaceable mechanism of the writer!"

Mr. Justice Radish allowed both the deductions for travel and experiences, and a deduction for expenses to keep the author in good health.  The writers of today might endorse Mr. Justice Radish's reasoning, but as he was the product of A.P. Herbert's imagination they should not emulate his line of thought and create their own fictions on their tax returns.

We will return tomorrow to our usual jovial support of the welfare state.

The White House conquers a once-proud law firm

Paul, Weiss, Rifkind, Wharton & Garrison, a prominent New York law firm, gave in to President Trump's sanctions today.  As part of its surrender, the firm agreed to eliminate diversity, equity, and inclusion from its hiring practices, and to provide $40 million of free legal work to civic causes favored by the Trump Administration.

The concession of Paul, Weiss to White House pressure comes just two months after the president revoked John Kennedy's executive order that prohibited federal contractors from discriminating in hiring.  It's especially poignant when set next to the Statement of Firm Principles that its managing partner Simon H. Rifkind laid out in 1963, in a masterful essay that the firm posts on its website to this day (it may still be there next week . . . maybe). 

Judge Rifkind wrote, “We believe in maintaining, by affirmative efforts, a membership of partners and associates reflecting a wide variety of religious, political, ethnic and social backgrounds, characteristic of that community.”  Judge Rifkind also wrote: “We refuse to be deterred by the unpopularity of a client or his cause from accepting a matter which justice and professional responsibility prompt us to take. *** Finally, we are committed to achieving our objectives without wearing any client's collar or any political party's livery.”  

I would like to believe that if Simon Rifkind were to walk into the office of his old firm today he would tear into the current management and then rip his name from the door.

 

This Key question from 1814 has a different meaning today

Fifteen years ago I wrote this short essay about how unusual our national anthem is when compared to those of other nations.  Instead of offering pious hopes for our leaders (Great Britain) or warning citizens of the bloodthirsty armies of the enemy (France), it mostly asks and answers a single question: last night our flag was flying over Fort McHenry.  Did the British army capture the fort, or is the flag still flying this morning?

Francis Scott Key wrote the words to "The Star-Spangled Banner" in 1814, though we didn't adopt the song as our anthem until 1931.  At the end of this first verse he phrased the question thusly:  "O say, does our star-spangled banner yet wave / O'er the land of the free and the home of the brave?"

His words take for granted that the land below the flag is the "land of the free and the home of the brave."  Isaac hears the last couplet differently today.  Perhaps you do too.  Instead of asking whether the flag is still flying, the anthem now questions whether the land below the flag is still the land of the free and the home of the brave.  The Trump administration's slide from antics to autocracy suggests that it is not.

This song from 50 years ago is strangely relevant today

Robert Lamm's 50-year-old call to Harry Truman to rescue the nation resonates again today.  Mr. Truman, three years deceased, didn't answer.  Now would be a good time for him to break his silence or propose a successor.

Born on third base and thinks he . . .

In 1988 at the Democratic National Convention, Jim Hightower said that the elder George Bush was "born on third base and thinks he hit a triple."  Donald Trump and Elon Musk have placed a modern twist on the phrase: they each believe that just because they inherited the stadium they know how to play baseball.

[Image created by Infolight and used under license.]

If Rudy Giuliani is convicted in Arizona . . .

. . . on any of the various counts that Arizona has indicted him for, the sentencing judge will have a dandy opportunity to order him to perform community service instead of serving a prison term, while furthering one of the stated policy objectives of the incoming Trump administration.  Arizona has 2.8 million acres (about 4,500 square miles) of national forest.  In his first term, Donald Trump famously told reporters that Finland rakes its forests and doesn't have any problem with forest fires.  (He had apparently misunderstood something that the president of Finland had told him.)

    It would be fitting for the court to order Mr. Giuliani to spend a month or two raking one of Arizona's national forests, perhaps in the Coconino National Forest at the campsite pictured here.  The folks at Four Seasons Total Landscaping might even be willing to give him a few raking lessons in appreciation for all that he's done for the business.

An Armistice Day reflection

In 1918 Uncle Leon Laquedem, born on this day 125 years ago, joined the United States Navy to fight in the Great War.  Two months later Uncle Joe Laquedem joined the Marines.  In that simpler time, the armed forces were run through the Department of War, though its functions were mainly ones of defense.  

On June 8, 1949 George Orwell's prescient book 1984 was published.  Orwell described a government in which the war department was named the Ministry of Peace, the commerce department was the Ministry of Plenty, and the department of official misinformation was named the Ministry of Truth.  The sardonic names of the government departments in Orwell's dystopia are probably not why, two months later, the United States renamed the War Department the Department of Defense.  Since then the Department of Defense has engaged in mostly war and very little defense.  The hijackings of September 11, 2001, led by Saudi and Egyptian nationals, were the only serious foreign attack on United States territory since 1949, to which the Bush (43) administration responded by mounting a military operation (what we used to call "invading") against a nation that wasn't involved.

Our incoming president will be dealing with three United States wars (by Wikipedia's count) that started before his first term.  Mr. Trump could atone for his past disrespect for the United States military by reducing our involvement in foreign wars, as for instance by stepping down our involvement in Syria and Yemen.  It's unreasonable to expect that killing off the non-military citizens of other nations will make their survivors like us more.  

"Comedian" Tony Hinchcliffe is Donald Trump's modern-day Samuel D. Burchard. Oopsie!

The 1884 presidential contest between James G. Blaine (the Republican nominee) and Grover Cleveland (the Democratic nominee) came down to the wire.  The polls (such as they were then) placed Blaine slightly ahead, and most observers expected that Blaine would defeat Cleveland and become the president in 1885.

Then, 140 years ago yesterday, six days before Election Day, a delegation of local clergymen met with Senator Blaine at the Fifth Avenue Hotel.  The chairman, the Reverend Samuel D. Burchard, included these three sentences in his welcome remarks:

"We have a higher expectation, which is that you will be the President of the United States, and that you will do honor to our name, to the United States and to the high office you will occupy.  We are Republicans and don't propose to leave our party and identify ourselves with the party whose antecedents have been Rum, Romanism and Rebellion.  We are loyal to our flag, we are loyal to you." 

"Rum" meant alcohol, on which attitudes crossed party lines.  "Rebellion" meant the late Civil War, when Republicans stood for the union and Democrats for secession and slavery.  "Romanism," however, meant the Roman Catholic church, which the Protestant ministers opposed on theological grounds and Blaine opposed on political grounds.  (In 1875 Blaine had proposed a constitutional amendment to prohibit all government aid to religious institutions, which for him meant mainly Catholic schools.)

Blaine heard Dr. Burchard call the Democratic Party the party of "Rum, Romanism, and Rebellion," and did not dissent.  The national Democratic campaign committee and some of the state Democratic committees printed signs with Dr. Burchard's remarks to swing Catholic votes from the Republican candidate to the Democratic candidate.  "Here's what Blaine thinks of you," the signs implied, "so vote for his opponent."

I should add that in 1884 Catholicism was New York City's largest religious denomination.

Cleveland defeated Blaine by 23,000 votes nationwide and by a scant 1,149 votes in New York State.  He received 219 electoral votes to Blaine's 182.  If 575 New Yorkers had voted for Blaine instead of for Cleveland, Blaine would have won the state and its 36 electoral votes, and would have defeated Cleveland in the Electoral College, 218 to 183. 

On October 27, 2024 at a rally for republican candidate Donald Trump, almost exactly 140 years to the day after Dr. Burchard torpedoed the Blaine campaign, a speaker named Tony Hinchcliffe called Puerto Rico "a floating island of garbage in the middle of the ocean,"  Several of his other attempts at humor were based on racist or religious tropes.  Mr. Trump heard Mr. Hinchcliffe's remarks and said nothing about them in his own speech shortly afterward.

Tony Hinchcliffe has given Donald Trump a modern "Rum, Romanism, and Rebellion" moment.  Residents of Puerto Rico are citizens of the United States, but they don't vote in the general presidential election  . . . until they move to one of the states, where as citizens they are immediately eligible to register to vote.  Over 200,000 Puerto Ricans moved to the United States after President Trump and FEMA botched the response to Hurricane Maria in 2017, including a large contingent to Pennsylvania, one of the swing states in 2024.  It would be a delicious irony if President Trump's mishandling of Hurricane Maria has combined with his modern-day Burchard moment to switch just enough Puerto Rican voters in Pennsylvania to give the state, and likely the national election, to Kamala Harris.

Isaac riffs on how the 25th Amendment will affect a second Trump administration

    Mr. Trump's increasingly disjointed public appearances have made it evident that he doesn't have the mental capacity to make it through a full term in office - maybe not even the first year. That of course raises the question of the 25th Amendment, which in turn leads to a political dilemma for Solons of both parties. Let's suppose that he and Senator Vance are elected, and that some time later Vice President Vance (as he would then be) and a majority of the Cabinet inform Congress that the President can't perform his duties.

 

    That's fine, if President Trump (as he would then be) agrees . . . but if he doesn't agree, and notifies Congress that he believes himself to be fit to serve, then Congress must vote, and he would return to power unless two-thirds of the House and two-thirds of the Senate vote that he is in fact incapacitated and unable to serve. Neither party will hold two-thirds of the seats in either chamber, meaning that Mr. Trump would return to the presidency unless Democrats join with republicans to oust him . . . in favor of J.D. Vance.

 

    Will the republicans, up to now mostly servile, vote to eject Donald Trump from the presidency and risk the anger of their base? And will the Democrats vote to eject him, knowing that J.D. Vance will then lead the nation? The senators and representatives of both parties will have no correct answer.

 

    The situation gets more complicated if Mr. Trump should resign or die in office. Vice President Vance will become the president, and the Speaker of the House will be next in line for the presidency until President Vance nominates a new vice president and a majority of both houses approve his choice. Imagine that the Democrats flip the House and choose (say) Hakeem Jeffries as the speaker. Would the Democrats, still remembering the non-hearing of Merrick Garland, be willing to vote down any nominee and keep the Veep position vacant? I think that turnabout would be fair play, and would enjoy watching the Senate republicans rage that the House is refusing to hold a hearing on a presidential nominee.

A 100% business income tax rate in Oregon? Watch your ballot

Professor Bogdanski's post today about the corporate gross revenues tax that's the subject of Initiative Petition 17, which we may see on our November ballot, prodded me to pursue some math that I'd been working on for a week or two.  The basic premise of the corporate gross revenues tax is that corporations that sold more than $25 million/year in Oregon would pay the state a tax of 3% of their gross revenues above $25 million.  The state would distribute that fund equally to all Oregonians who satisfied a modest residency requirement.  The state believes that prices will increase 1.3% if the measure passes.  Willamette Week quotes the chief petitioner's reply: "Giant corporations can deduct the tax increase in IP 17from what they pay to the federal government.  So they are not going to pay that much more, if anything at all.  And No. 2, these corporations price their goods nationally or regionally, right?  An iPhone costs the same in Portland as it does in Texas.  There's no difference.  So we don't think price increases will happen."

Let's unpack that with an unpopular example.  WalMart, the store that all good Oregonians love to hate when they're not inside shopping, will be our case study.  WalMart's sales are about $650 billion/year.  Its consolidated pretax income was $21.8 billion, income taxes were $5.6 billion, and after-tax net income after a deduction for minority interests was $15.5 billion, which is about 2.4% of its annual sales.  About 0.8% of WalMart's United States stores are in Oregon.  Some of WalMart's operations are overseas.  It's a fair guess that WalMart sells about $4.5 billion/year in Oregon (maybe $90 million per store) and nets about $120 million/year from its Oregon operations.

IP 17 would levy a tax of $135 million/year on WalMart for its Oregon sales, which corresponds to an effective state income tax rate of 113%.  WalMart cannot offset the state income tax against its federal tax obligation - the chief petitioner may have skipped the corporate taxation class -- but it can claim the state income tax as a deduction against its federal income.  WalMart allows about 26% of its income for income taxes, so a state tax of $135 million creates a federal tax savings of about $32.5 million, for a net tax increase of $102.5 million on profits of $120 million, an effective tax rate of about 85%.  That's in addition to the actual state income tax, and will push WalMart's effective tax rate in Oregon to the mid-90s. Put another way, Oregon will collect 15 to 20 times as much profit from WalMart as WalMart will.

To bring a mot of Oscar Wilde up to date, "If this is the way Oregon taxes its enterprises, it doesn't deserve to have any."

 

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