Tax Bitch #1

Apparently I'm a rich college student, because I owe Barack Obama $400 this year! Most of this is due to a couple scholarships I received which counted as "Other Income" and "Self-Employment Income" (Don't ask, I don't know how that works, either).

In the course of attempting to find ways to escape his Highness' tax collectors, my Dad and I came across a few delightful nuggets of information you might not have known about the tax system in this country.

For instance, if your child has been kidnapped, the residency requirement for child exemptions will be waived, and you can still consider that child a dependent. Phew! I guess it's good you aren't taxed for having your kid snatched.

Also, you can take the child exemption for any child born alive, even if that child dies soon after birth. You cannot, however, take the exemption for stillborn children. Thanks for plugging up that loophole, boys. I can just see a bunch of rich bastards knocking up their wives and then whacking them in the gut with 2x4s just for the tax savings.

Finally, and I am sure I will expand on this much in the future, double taxation of dividends is one of the most evil components of the tax system, not only for its distortion of reality, but also for the perverse incentives it establishes for corporate management. Terrible.

Rand in the Journal

Dr. Yaron Brook, President and Executive Director of the Ayn Rand Institute had an op-ed printed in the WSJ today. Here's the link. It's a very good, very concise explanation of why Rand has become so popular recently, and what her major contributions are to the national discourse. I think Brook really gets it, more than his intellectual predecessors, that pushing an ethics of rational self-interest in the context of the current crisis is the way to go. As opposed to getting up in front of a group and talking about Objectivism as a whole, talk to businesspeople and related audiences about what they know: their own interests. Then, when they're ripe, you can talk about metaphysics and the rest.

Go me!

Some events may have happened in business today; I don't really know. Alan Greenspan wrote an atrocious op-ed in the WSJ in which he attempts to absolve himself of his meddling role in the credit crisis. I think Freddie Mac lost an unconscionable amount of money...again.

All of that pales in comparison, of course, compared to the most important thing that happened to the business community today: I was accepted to the PhD program at the Kelley School of Business to study Strategic Management. I know, I know. I'm awesome. One day this momentous occasion will be recorded in the history books.

That's all. Go celebrate in my honor, now.

Could Not Have Said It Better Myself

The WSJ had a great quote in its "Notable and Quotable" section today. It is from The Times of London from 1846. What I want to know is, why don't newspapers write like this anymore?

The greatest tyranny has the smallest beginnings. From precedents overlooked, from remonstrances despised, from grievances treated with ridicule, from powerless men oppressed with impunity, and overbearing men tolerated with complaisance, springs the tyrannical usage which generations of wise and good men may hereafter perceive and lament and resist in vain.

At present, common minds no more see a crushing tyranny in a trivial unfairness or a ludicrous indignity, than the eye uninformed by reason can discern the oak in the acorn, or the utter desolation of winter in the first autumnal fall. Hence the necessity of denouncing with unwearied and even troublesome perseverance a single act of oppression. Let it alone, and it stands on record. The country has allowed it, and when it is at last provoked to a late indignation it finds itself gagged with the record of its own ill compliance.

Yep, I think that about sums it up. See, London was cool once.

Barney Frank, VP of Marketing

In another development that reminds me just how much I would like to see certain politicians disemboweled, their entrails used as hippopotamus dental floss, Congressman Barney Frank (pictured below), Chairman of the House Financial Services Committee, has been getting his man-panties in a twist over banks sponsoring sporting events. His Rotundity, Duke of Fathead, feels that banks receiving (a.k.a. forced to receive) TARP funds should not be "lavishly" entertaining clients with expensive golf sponsorships.



Well, apparently, after a phone call (a.k.a. campaign contribution) from the Commissioner of the PGA Tour, Barney Frank has softened his stance on the sponsorships, while remaining "skeptical" of their benefit. Anyone who might have thought the capital injection was necessary to unfreeze credit markets should plainly be able to see at this point that the medicine is far worse than the disease. Congressman of the worst breed are acting as marketing directors for banks, deciding which advertising expenditures are justified.

The bright spot in all this is that, one by one, banks are seeing the endgame, and are rushing to pay back the TARP money, eager to get out from under Barney Frank's thumb. As the article states, after a stern letter from Barney, Northern Trust announced they would return the $1.5 billion they received from the government, which they did not need or want in the first place. Good for them. I hope BB&T follows suit.

If you want to see where our government is headed in terms of its involvement in business, I think this quote from the esteemed Congressman says it all:

I'm not ruling out sponsorship, especially since tournaments support charities. But the entertainment aspect is problematic.

I cannot express how deeply I want to see a galactic bikini-clad Carrie Fisher strangle him to death with a metal chain during a Congressional hearing. God, that would be cathartic.

Prediction Markets and the Wisdom of Crowds

Here's an article in the Economist that caught my eye (I recently subscribed to the Economist, does it show?) It caught my eye because it mentions Koch Industries, the founder of which funded the Charles G. Koch summer fellowship that I participated in last summer. Koch Industries is a fascinating company, and their CEO is a big fan of Austrian economics and free markets. One day I'll probably write a post on him and his company.

Anyway, true to form, Koch Industries has apparently been using prediction markets within their company for a few months to determine the course of various outcomes, from commodity prices to bailouts. Prediction markets, for those who don't know, are markets one sets up in which people buy shares in a particular outcome. As an outcome becomes more popular (people think it is more likely) the price goes up. Koch, as well as some other firms, have been using these internal prediction markets to forecast.

I find the idea of prediction markets really interesting. On the one hand, few of these people have any considerable knowledge of the subject in question. On the other hand, the law of large numbers suggests that if you pool enough people, you'll get something resembling the right answer. Koch says it has been working pretty well. I think something like commodity prices would require at least some area of expertise, but assuming that, I think running a prediction market can be a really effective way to create incentives for accurate forecasting.

I Can't Decide How I Feel About This Quote

I ran across this beauty while reluctantly reading my management text:

The things that make a good leader are being open-minded, having a willingness to really ask for and accept advice, showing a sense of humility, and putting the right people in the right seats. -Hank Paulson, CEO, Goldman Sachs (Prior to his stint as Treasury Secretary)

I'm not really sure what to think about this. Either he followed his own advice and failed anyway, which is funny, or he ignored his own advice and failed, which is funny too. All we can be sure of is that he failed. Some of this advice is valid, I think, especially the part about putting the right people in the right seats, which Paulson definitely didn't do. The part about humility is, well, you know. Businesspeople tend to use the word humility to refer to rationality and honesty in the face of unpleasant reality. If he's using it that way, he definitely didn't follow his own advice on that one.

The point of this is that Paulson is a douche, in case that wasn't apparent already.