Tax Break

John Fisher, international tax consultant

Archive for the tag “Mitt Romney”

The Greatest Show on Earth?

Can you still name this guy?

Laurence Spiegel was my first political hero. Never heard of him? Don’t worry – nor had Google the last time I checked. The one and only time I worked on the campaign team for a British General Election it was for Laurence Spiegel . That was an important election for two reasons: despite polls showing a clear advantage to the incumbent Labour Government, the Tories won an overall majority;  and the voting age was lowered from 21 to 18 on the grounds that if you were old enough to die for your country, you were old enough to choose the idiots that got you killed. None of this affected me. Laurence Spiegel was the no-hope third-party Liberal  candidate for Hendon South who I don’t think even bothered taking the day off work  (I didn’t see him at Campaign HQ)  and, in 1970, I wasn’t old enough to gain admittance to a cinema to see a war film let alone serve my Queen and country.

I have been following political campaigns ever since and the latest American circus was no exception. But it was too drawn out. There is a bridge in Scotland, the Forth, that is so long that, it is said, when they finish painting it they start again at the other end. In America, it used to be that campaigning for the Presidency started 4 years before polling day ie the day after the previous one.  Watching New Jersey Republican Governor Chris Christie cozying up to Barack Obama in the aftermath of Storm Sandy a week before the election, I could not help feeling that, in a piece of brilliantly cynical political manoeuvering, the world might well be  looking at Obama’s successor in the White House.

Election night was a major disappointment. That statement is clearly true for the 48% of  voters who picked Romney and did not, like so many of their countryment, exercise their constitutional right to stay  home welded to a sofa watching a ball game while trying to break records for calorie consumption. It was also a disappointment for me – and I, disenfranchised by accident of birth, actually wanted Obama to win (or, to be more precise, wanted the Republicans to lose). With the advantage of being 7 hours ahead of New York (some would say 7 light years), I was up with the lark to catch the phut of election night. What a yawn.

Within seconds of  Obama hitting 270 electoral college votes and hence guaranteeing a renewal of his Washington lease, what were the pundits talking about? Was it: what will Obama  do about the future of world peace ?  Was it: what will he do to make America  great again?  Was it: what is the future for social welfare ?  No, sir.  In fact, they were talking about tax. TAX! A subject normally reserved for discussion behind closed doors between consenting adults, was the first thing on the lips of the pros. And “reforming our tax code” even made it into Obama’s victory speech in Chicago (which sounded more like the candidate had beaten himself than Mitt Romney).

Fiscal Cliff? Who’s that?

If you have never heard of the Fiscal Cliff, I suggest you climb right back into that little boat in which you have been drifting without food or water for the last 9 months and enjoy the night sky. As everyone  knows, the Fiscal Cliff was Ben Bernanke’s term for the higher taxes and lower government spending that will kick in next January 1st if somebody does not kick Congress’s ass (“bottom” in the Queen’s English) first.

The Fiscal Cliff is, in fact, the unfortunate coincidence of a number of  economic legislative events coming together to cause an unmitigated disaster: the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers); the end of certain tax breaks for businesses; shifts in the alternative minimum tax;, the end of the Bush tax cuts;  and the beginning of taxes related to President Obama’s health care law. At the same time,  spending cuts previously agreed upon will begin to go into effect. If nothing is done, some experts are predicting a cataclysmic effect on GDP and unemployment.

The question you HAVE to ask yourself is “How did the world’s leading nation get into this mess in the first place?” You couldn’t make it up.

The Bush tax cuts (the famous bits are the lower tax rates on dividends and capital gains) could not be pushed through the front door of Congress back in 2001 and 2003 so they used something called the reconciliation process that allowed them to be imposed temporarily until the end of 2010. By 2010 the House of Representatives was resembling the battlefield at Gettysburg, and Congress extended them for 2 years. As politics go, that is kids’ stuff.

Four more years!

In the summer of 2011 the sparks were really flying. Congress needed to raise legal debt ceilings for the federal government, otherwise the US was going to default on its Sovereign Debt. The Republican controlled House of Representatives was not playing. At the eleventh hour, a compromise was reached whereby, default was avoided and  a Bipartisan Committee was established to produce a plan to reduce the deficit over 10 years by $1.2 trillion by late November. There was a  sting in the tail that either  arose from a genuine desire to get things sorted out or  the irrational hatred between the two sides of the House . The House decided that, if the Committee could not reach a conclusion, automatic, and horrendous,  cuts would start to kick in 2013. The Committee, its members too busy scratching each other’s eyes out,  didn’t make it.

All that remains for us to do now is to sit back and enjoy the fireworks coming out of the lame-duck Congress. Presumably a solution will be reached at midnight on December 31 (or, with retroactive effect, on January 1). In American politics, after a massive buildup, most things end in a Phut rather than a Bang.

Hard times, great expectations

Mid-Atlantic. 35,000 feet. Dead of night. Everyone around me fast asleep. My seat bathed in the eery glow of one small lamp. Chapter 22: “A Gritty State of Things Come On”. The height of the novel. I turn the last page and briefly scroll my eyes to the bottom of the text. The final full stop stares back at me. Back to the top.

Reading slowly. Savouring. Reflecting. And then, inevitably, the last paragraph, the last sentence, the last word, the last full stop and it is all  over.

I am emotionally exhausted. I want to wake the stranger next to me but these days you get shot for less on an American plane. So I ask the flight attendant for a whisky and settle back in my seat staring into the black nothingness of the cabin. Thirty-five years since I first met Pip and Magwitch in the Kent churchyard and fourteen and a half novels, scores of adventures and hundreds of amazing characters later,  I take leave of a precious friend, never met. Charles Dickens, born two hundred years ago this week, dotted that full stop and promptly took the mystery of Edwin Drood with him to the grave.

It is apt that the bicentennial should fall in a year where large chunks of the developed world are being forced into austerity, and movements for social justice and a fairer distribution of the tax burden are popping up everywhere (and  in the case of the tax burden, in particular, everywhere where Mitt Romney shows his face).  Dickens was a campaigner for social justice and many of his novels dramatize the major issues of the day.

Dickens was right. They shouldn't have lowered the stamp tax

It is, therefore, ironic that Dickens says very little about taxation. Beyond the occasional jibe at tax collectors and the mention of property rates, the only novel  in which they take a battering is Tale of Two Cities, where criticism is heaped on- you guessed it – the French. Indeed, in his only lengthy monologue on the subject – a letter to his  friend Macready in 1852 – he defended the much hated  stamp tax on newspapers, fearing the mushrooming of a gutter press that would compete for readers with the likes of  The Times, The Economist and – that bastion of Victorian propriety – The News of the World.

So how did the man who demonized the Workhouse in Oliver Twist, lambasted the Debtor’s Prison in Pickwick’s Papers and Little Dorrit, and heaped compassion on destitute Joe the crossing sweeper in Bleak House, steer so clear of the social injustice of the tax system that seems to bother all men of conscience today?

The answer seems to be quite simple really –  despite only relatively well-off men being enfranchised, the distribution of the tax burden was remarkably fair.  For much of the nineteenth century most revenue came from property  and excise based taxes or stamp duties as well as gradually falling import tariffs. The Poor Rate , Land Tax, Window Tax (levied on the number of windows in a house above a certain minimum), and excise taxes on luxury goods fell infinitely more heavily on the rich than the poor. Furthermore, in 1842, the reintroduction of a temporary income tax (still temporary 170 years later) had a threshold that left huge swathes of the population outside its clutches.

The problem, put in 21st century terms, was that, as Britain moved towards a free market system in the course of the 19th century which included a commitment to lower taxes while seeking  a balanced budget, a massive cut in public expenditure on the poor was inevitable. The issue came to the fore in 1834 with the reform of the Poor Law that saw a reduction in the Poor Rate tax charged and the concentration of poor relief almost exclusively on the dreaded Workhouse that was to be the utterly unpleasant refuge of last resort. This  replaced a system that included less horrific workhouses for the orphaned, old and infirm while maintaining Out-Relief  for  able bodied men, thus keeping them in the workforce.  Hence, Dickens’s broadside on the Workhouse three years later in his second novel, Oliver Twist; his problem was with the fabric of society rather than the pursuit of specific economic solutions.

On a recent vacation in England with my two youngest sons, I ordered tickets for the revival of Oliver!  But  we had to stop off somewhere on the way. Hailing a black cab, I asked the driver to take us to 48, Doughty Street which, judging by his smiling  “No problem guvner, jump in”  was, as I would soon discover, chiefly significant to him for the major roadworks blocking the junction with Guilford Street necessitating an extra five quid on the meter. The ride was worth every penny as he abused, in updated Dickens fashion, every perceived maniac on the road, even offering a “Sorry boys” to my children for words which, had they been checked on the worldwide web, would have invited all sorts of inviting pop-ups.

Lionel Bart made a better job of the plot

Arriving  at Dickens’s home, for many years now a quaint museum,  I took the boys to the study window overlooking the timeless back-garden and showed them what Dickens would have seen as he brilliantly conjured up Fagin, Bill and Nancy – just standard grass, shrubs and trees. There was a lesson there, which was further brought home at the outstandingly original staging of Lionel Bart’s musical at Drury Lane a few hours later. If you want to succeed, be innovative. It was true of the industrial revolution in the 19th century; it is all the more true of the information revolution in the 21st. Therein lies the hope of  today’s austerity-stricken nations. Happy Birthday, Mr D, wherever you are.

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