Welcome to “Not Pretty, Not Rich,” a newsletter about money, the economy, and doing things the hard way.
It’s Friday, March 26, 2021, and here’s this week’s rundown:
In the news: Biden goes big
Taxes: Evasive maneuvers
Research: CEOs play a deadly game
Numbers and links:
Biden goes big
There’s a huge infrastructure bill in the works that could bring about some big changes.
What’s going on: Biden’s going big as the administration is reportedly planning a $3 trillion infrastructure plan. It has yet to be unveiled yet, so we don’t know exactly what will be in it, but looks to include money for a whole lot of (desperately needed) things:
Rural broadband expansion
Worker training programs
Road, bridge, port, etc. construction
Green transit systems
Money to combat climate change (whatever that means)
…and a whole lot more. Again, we won’t know what is in the plan until it’s official unveiled. Then, the question is whether or not it can gain bipartisan support in Congress.
My take: We need a bill like this — our infrastructure is crumbling, and we need a huge reinvestment to get things in working order. There’s really no getting around it. Many of our dams, bridges, and roads were built decades, if not generations ago, and need to be fixed or replaced.
Yes, it’s expensive, but it’s also a chance to create jobs and bring needed technology (renewable energy, broadband, etc.) especially to rural areas that could use the investment.
It’s only a matter of time before another bridge collapses, or a dam collapses. And since we have a backlog of work that needs to be done, we may as well do it before it gets even more expensive. Or before a dam fails somewhere.
What’s the secret to tax avoidance?
The top sliver of high-income Americans dodge significantly more in income taxes than the Internal Revenue Service’s methods had previously assumed, according to forthcoming estimates from IRS researchers and academic economists.
Overall, the paper estimates that the top 1% of households fail to report about 21% of their income, with 6 percentage points of that due to sophisticated strategies that random audits don’t detect. For the top 0.1%, unreported income may be nearly twice as large as conventional IRS methodologies would suggest, the researchers wrote.
How’s it happening? Mostly because businesses (or business entities used mostly by the wealthy) don’t report income — something individuals can’t really get away with because of the W-2 system. The government knows what you and I make because our employers tell them, in other words, but there isn’t really a verification system outside of that.
So, that leads to offshore businesses, shell companies, pass-through entities, and a whole bunch of other measures that are deployed mostly by the wealthy, and mostly for the purpose of tax avoidance. And it works like a goddamned charm, evidently.
As for a remedy, the New York Times Editorial Board published an op-ed in response to the analysis, proposing that the government adopt a plan proposed by Charles Rossotti, who led the I.R.S. in the late 90s and early 2000s. In short, it would create a third-party verification system for business income.
That’s all dandy, but the takeaway here is clear: There are different rules. I know that my wife and I pay an awful lot in taxes — much more than, say, $750. And I don’t even mind all that much; I consider taxes to be sort of a “subscription” payment to my state and country. Obviously, if the subscription cost less, that’d be great. But the tools that some of these people are using to avoid all these taxes are not within my reach — or within reach for most anybody else.
But the system can be gamed, and quite well, apparently. If only we, collectively, spent more effort trying to solve real problems rather than trying to lower our tax burdens, we could make some headway against some of the more serious issues facing the country.
CEOs’ jobs are killing them
Being the boss takes its toll, according to new research.
What the science people say: In another piece of interesting research, a new NBER working paper finds that the stresses of being a CEO have a measurable effect on mortality. Specifically, CEOs in competitive industries may be working jobs that are literally killing them — shaving around 1.5 years off of their average lifespans. The trend works in reverse, too.
Here’s the abstract:
We estimate the long-term effects of experiencing high levels of job demands on the mortality and aging of CEOs. The estimation exploits variation in takeover protection and industry crises. First, using hand-collected data on the dates of birth and death for 1,605 CEOs of large, publicly-listed U.S. firms, we estimate the resulting changes in mortality. The hazard estimates indicate that CEOs’ lifespan increases by two years when insulated from market discipline via anti-takeover laws, and decreases by 1.5 years in response to an industry-wide downturn. Second, we apply neural-network based machine-learning techniques to assess visible signs of aging in pictures of CEOs. We estimate that exposure to a distress shock during the Great Recession increases CEOs’ apparent age by one year over the next decade. Our findings imply significant health costs of managerial stress, also relative to known health risks.
Being a CEO obviously has its upsides, but it’s a job with some life-altering stress. With that in mind, maybe a career washing dishes has its upsides? Right, Jack?
Numbers and links
1.45 million: The number of real estate agents in the U.S., compared to only 1.04 million homes for sale. (The Wall Street Journal)
9%: The year-over-year increase in U.S. boat sales during 2020 — and boat dealers can’t keep up. (CNBC)
$2.88: The average price for a gallon of gas in the U.S., an increase of nearly 30% from a year ago. (AAA)
There’s a bunch of engineers creating Nerf super guns. (The Verge)
Somehow, a massive ship got stuck in the Suez Canal and is slowing the entire world down:
Finally, R.I.P. to Jessica Walter who died yesterday at age 80, and who played perhaps my favorite TV character of all time, Lucille Bluth:
“Not Pretty, Not Rich” is a newsletter about money, the economy, and doing things the hard way, written by me, Sam Becker. You can connect with me through my website, Twitter, LinkedIn, or send me an email at firstname.lastname@example.org. Also, if you enjoy this newsletter, I’d really appreciate it if you would share or forward it to others.
And remember, the contents of this newsletter are not meant to be taken as advice. It’s informational and entertainment only.