The best marriages, so they say, age like fine wine. They gain richness, and color, and depth. They ripen and mellow as experience piles upon experience, bonding the couple and deepening the intimacy as husband and wife (Or Husband and Husband or Wife and Wife - this stuff applies to us now too you know) stroll hand-in-hand through the majestic tapestry of life. (Cue the rainbows, and unicorns, and George Harrison lyrics.)
Remy and Lara Trafelet didn't have that kind of marriage. Their union aged more like milk. No, scratch that. Imagine strapping a toddler into his car seat to go see Grandma on a hot summer day. You hand him a sippy cup of milk to keep him pacified for the drive. Halfway there, he drops the cup and it rolls under the front seat — but you forget it's there. Three weeks later, when you can't ignore the smell, you find the results. What is it? Some mutant strain of . . . cottage cheese, maybe? Something even worse? That's what happened to Remy and Lara's marriage.
Ordinarily, the IRS wouldn't care about a couple of feuding spouses. But Remy is one of Wall Street's fatter cats, a hedge fund manager who did well enough before the recession to treat 100 of his employees to a long weekend at Venice's five-star Hotel Bauer. He's struggled a bit since then but he's still worth $200 million or so. That's enough to give the IRS a stake in the fight — although maybe not what you think.
From the outside, the Trafelets lived an enviable life. They split their days between a $15 million Park Avenue apartment, a $10 million Long Island house, a grouse-hunting estate in Scotland, a quail-hunting estate in Georgia, and two morehouses. (Seriously, did they really shoot so many birds they needed two estates for it?) They supported a personal trainer, a chauffeur, a private chef, and a 16-seat jet. Apparently, though, all that money failed to buy happiness, and the couple filed for divorce in 2015.
Lara may not have loved her husband anymore. But she still loved the money. So, she hired a squad of accounting ninjas to "kick him between his legs and bring him to his knees." And the ninjas were happy to oblige, working "around the clock" to sort through Remy's "multi-layered complex web of business entities." They even set up a dedicated conference area called the "War Room" for Lara to use. That effort helped convince a judge to bump her interim alimony from $17,000 to $45,000 per month.
But financial samurai don't come cheap, and when they sent Lara a bill for $4.2 million, she freaked. Now she's fighting them in court, too! (Honestly, it sounds like it sucks to be Lara.) Here's where our friends at the IRS come in. The good news is, legal fees for arranging alimony are deductible. So Lara should be able to write off at least part of her bill. The bad news is, the rules are about to change, and starting in January, alimony won't figure into taxes anymore. So she better hope she can wrap things up fast!
Now, lots of us have a painful breakup or two under our belt. But we've never had to put our accountants' kids through college to sort it out!
Fortunately, not all accounting ninjas bill millions. Take us, for example. We can help make sure you aren't paying more tax than you legally owe. And we promise not to bill you seven figures unless we save you millions more. So call us when you're tired of overpaying, and we'll even let you decide how to share it with your spouse!
When Mark Zuckerberg was 19 years old, he launched Facebook from his Harvard University dorm room. (Some cynics might say "stole" is a better word than "launched," but who wants to start that debate?) Since then, he's made Facebook one of the internet's most valuable brands. And as he's done it, his net worth has climbed as high as $81.6 billion, making him the world's third-wealthiest man behind Amazon founder Jeff Bezos and Microsoft co-founder Bill Gates.
At least, that was the case until July 25. That day, just after the market closed, Facebook released its second-quarter earnings. Revenue was up — but not as much as investors had hoped. When the market opened the next morning, investors unfriended the stock big-time. Zuckerberg saw $16.8 billion of his stash evaporate in the first hour of trading. (Shareholders as a group lost $120 billion.) That's roughly the total salaries of all 1,696 players in the National Football League. (Not a football fan? It's also enough to buy the Yankees, Dodgers, Cubs, Giants, and Red Sox combined.)
So at this point, Zuckerberg is hardly even rich anymore. But while he and his wife are tightening their belts, scrounging for change in the couch cushions, and debating whether to keep the HBO, we got to wondering what our friends at the IRS think of the news. The answer, not surprisingly: "it's complicated."
Zuckerberg owes tax on his regular income as soon as he earns it. But his salary is just a dollar a year, which doesn't leave much for Uncle Sam. Of course, he also gets some nice perks. Facebook spent $7.3 million on Zuckerberg's security last year. (Fortune 500 companies can't just hire a bunch of knuckle-dragging goons to trail their CEOs. Top bodyguards, who come from federal agencies like the State Department or FBI, command six-figure salaries, and Facebook's security chief served on former Vice-President Joe Biden's Secret Service detail.) That protection is taxable, too.
But the real action, for a tech entrepreneur like Zuckerberg, is in the stock. Facebook announced last September that Zuckerberg plans to sell 35 to 75 million shares — worth between $6 billion and $12.5 billion — to finance his charitable limited liability company. He'll owe tax on those sales, but he'll get corresponding deductions for much of the cash he donates. In fact, last year's Tax Cuts and Jobs Act made those gifts even more valuable, raising the deduction limit from 50% to 60% of his adjusted gross income.
The IRS gets another whack at the rest of Zuckerberg's stock at his death. Considering he's just 34, that probably won't be for a while. But at that point, at least under current law, they'll download 40% of his taxable estate over $11.18 million. Now, unless Facebook implodes like MySpace, Zuckerberg should still be worth billions at his death. But — Zuckerberg and his wife have announced plans to leave 99% of their fortune to charity. Charitable bequests aren't subject to that 40% tax, which leaves the IRS scrounging for crumbs from whatever table scraps the pair leave for their kids.
The bottom line here is that the IRS had no reason to regret Zuckerberg's terrible, horrible, no good, very bad day, because his smart tax-planning means they wouldn't have gotten into a relationship with the stock anyway. The good news for you is that you can put the same sort of planning to work for yourself. And you don't even have to lose $16 billion in a day to do it! Just direct-message us when you're tired of paying more than you have to. We're sure you'll "like" the savings!
Classic rock fans celebrated a milestone birthday on July 26: Rolling Stones front man and rock legend Mick Jagger turned 75! If that doesn't make you feel old, try these on for size: Aerosmith's Steven Tyler is old enough to collect maximum Social Security benefits. Cyndi Lauper still just wants to have fun, but now she's on Medicare. And 80s icon Madonna can finally take money from her IRA without paying a 10% penalty on early withdrawals.
In 1969, Jagger and the Stones scored one of their biggest hits with "Gimme Shelter," a bleak, brooding meditation on the war and violence that characterized the late 60s. But did you know that "Gimme Shelter" describes the band's philosophy on taxes, too?
The Stones' troubles with taxes go back nearly as far as their troubles with the police. Starting in 1968, British authorities had accused the bandmates of taking a certain laissez-faire attitude to controlled substances laws. Later, reports surfaced that they had taken a similarly lax approach to tax laws, too. As Jagger recalls, "So after working for eight years I discovered at the end that nobody had ever paid my taxes and I owed a fortune. So then you have to leave the country. So I said &@#& it, and left the country."
At that point, guitarist Keith Richards paid $2,500/month for the 16-room Belle Époque-style Villa Nellcôte overlooking the Mediterranean on the French Côte D'Azur. (He should have bought it — in 2005, a Russian oligarch dropped $128 million for the place.) There, the band hosted a summer of legendary debauchery: drinking, smoking, snorting, and injecting anything that didn't move. Somehow along the way, they also managed to record Exile on Main Street in a makeshift basement studio they had soundproofed with cheap carpet and (probably) more drugs.
Running from the law has a wonderful way of concentrating the mind, and the Stones vowed not to repeat their financial mistakes. (The drugs were another story.) Jagger put his London School of Economics education to work, and the band started jamming with some top-notch tax planners. They eventually set up a series of Dutch corporations and trusts which helped them pay just 1.6% in tax over the last 20-odd years. More recently, they established a pair of private Dutch foundations to avoid estate taxes at their deaths.
"Mick would come and visit me occasionally in Switzerland and talk about 'economic restructuring,'" Richards wrote in his 2010 autobiography, Life. "We're sitting around half the time talking about tax lawyers! The intricacies of Dutch tax law vis-à-vis the English tax law and the French tax law. All of these tax thieves were snapping at our heels . . . Mick picked up the slack; I picked up the smack." (It's worth mentioning that Richards — now heroin-free for 40 years — makes his home in decidedly unglamorous, but, relatively speaking, low-taxed Connecticut.)
As for us, we may not be able to make beautiful music. But our tax planning rocks. And we think paying less beats fleeing the country. So call us for when you're ready to pay less and see how much you're wasting right now. We're here for you, and your bandmates too!
Earlier this month, archaeologists digging in Egypt unearthed a 2,000-year-old black granite sarcophagus 16 feet below the surface. Pretty cool, right? But then they announced they were going to open it. What a terrible idea! Have they never seen The Mummy? When the lid came off, they found three skeletons rotting in some dirty water that had probably leaked in from a nearby sewage trench. But that doesn't necessarily mean an ancient undead presence didn't manage to escape, too. It's not like they could actually see it!
Egyptologists aren't the only ones facing an ancient spirit that refuses to die. The tax world has one, too, though not as evil. We're talking about the eternal promise of the tax you can file on a postcard. (Yes, we know, this is a really lame transition to a tax column. Hey, you try finding topics to make taxes entertaining 52 weeks a year!)
Back in 1972, the IRS released a Form 1040A that would fit on both sides of a postcard. There were 27 lines, plus the usual spaces for names, addresses, social security numbers, and signatures. Unfortunately, you couldn't use it if you ran your own business, or made more than $200 in interest or dividends, or itemized deductions. On the bright side, you could take a credit of $12.50 for political contributions ($25 for joint filers), which seems downright quaint in today's era of seven-figure gifts and dark money PACs.
Politicians since then have paid lip service to the idea of a postcard-sized form, even as they've made the actual preparation harder. Last year's Tax Cuts and Jobs Act added several new twists for business owners. But these days, everything has to be sold as "simplification." So IRS officials gamely pledged to play along. And last month, they trotted out a draft of a single form designed to replace the current 1040-EZ (14 lines), 1040A (51 lines) and 1040 (79 lines).
The new form is two half-sized pages, so it could theoretically fit on a postcard (if you didn't need room for a stamp). But calling it a "return" may be fake news. If you have more than two kids, you'll need to add another page to list them. If you report income from a business or real estate, you'll need to attach Schedule 1. If you itemize, you'll need to attach Schedule A. If you owe "other taxes" like AMT, you'll need to attach Schedule 4. Pretty soon that so-called postcard starts to look a bit like a phone book!
While we're at it, let's add another dose of cold reality to the whole "postcard" plan. Who wants their mailman gossiping about how much they make? How do you attach a check to the postcard if you owe? And hasn't the whole idea of "electronic filing" rendered the size of the paper form pretty much irrelevant?
The push for postcard taxes, along with the push for a so-called "flat tax," are steps towards a bigger goal to eliminate the IRS entirely. But here's some more uncomfortable reality. Even if we did have a postcard-sized flat-tax form we'd still need someone in Washington to administer it. We'd still need collections officers to chase down the people who don't pay it. And we'd still need tax cops to catch the people who cheat on it. Much as we love to hate the IRS, it's not going anywhere soon.
Here's something even scarier than unleashing an ancient mummy's curse: wasting money on taxes you don't have to pay! Fortunately, you don't need to dig 16 feet down to discover the solution. All you need is a plan. So call us when you're ready to stop running from the undead beast, and see how much you can save!
When Congress raises the hood on the tax code, they're usually working to raise money to pay for government. But sometimes they're more interested in nudging us to behave in ways they can't legislate directly. Take the mortgage interest deduction, for example, which "cost" the Treasury $69.7 billion in 2013. That deduction encourages millions of Americans to spend billions of dollars buying homes, building homes, renovating money pits, and keeping their homes looking spiffy — all of which returns billions more through our overall economy.
Last week, the House Ways and Means Committee passed another one of those "we-know-we-can't-make-you-do-this-but-we-can-still-give-you-a-tax-break-for-it" laws. The Personal Health Investment Today ("PHIT") Act would let you take medical deductions for general fitness expenses: gym memberships, exercise classes and personal trainers, sports and fitness equipment, and even pay-to-play school sports fees and race registration fees. (That's right, your local Thanksgiving "Turkey Trot" 10k will be deductible!) The bill caps the new deduction at $500 for individuals and $1,000 for joint filers.
Here's the catch. Everyone knows that medical and dental expenses are "deductible." But look a little closer and you'll see that code section 213 lets you deduct them only if you itemize, which leaves about 90% of Americans sitting on the bench. And even if you itemize, you can only deduct the amount of expenses over 7.5% of your adjusted gross income. So, on its face, the new deduction won't mean much.
It turns out, however, that millions of Americans who can't itemize can still benefit from tax-advantaged flexible spending accounts, medical expense reimbursement plans, and health savings accounts. The bill lets you reimburse PHIT expenses from those accounts.
The Congressional Budget Office estimates the bill would (cost the Treasury) save taxpayers $3.5 billion over the next decade. That's enough to get special interests interested. The Wall Street Journal reports that "Fitbit, Inc., the American Heart Association and the American Sports and Fitness Association have all lobbied for the bill." And Planet Fitness stock climbed more than 4% the day the bill passed.
Of course it wouldn't be a tax law without a few, ah, provisos, and a couple of quid pro quos. Sorry, golfers . . . hitting the links doesn't count as "exercise." Same for hunting, sailing, and horseback riding. And couch potatoes need not apply . . . "qualified sports and fitness expenses" won't include instructional videos, books, or similar materials.
You'd think a bill attacking America's expanding waistline would be universally popular. Even potato chip companies can back a law designed to work off calories after they're eaten. But not everyone is enthusiastic. Leonard Burnham, a former Clinton administration tax official and (apparently) a world-class buzzkill, told the Journal that the benefit would mostly go to high-income families that are already buying gym memberships anyway, and "Every principle of tax policy is violated by this."
Fortunately for the rest of us, you don't need to be taking advantage of good policy to save money on taxes. You just need a trainer and a plan. So find some time between trips to the gym to call us, and put your tax bill on an exercise plan!
Americans love a champion, and every year, sports fans get to see new champions crowned. We've got a World Series, a Super Bowl, and NBA finals that drag on for months. We've got the Kentucky Derby, the Indianapolis 500, and the Nathan's Famous National Hot Dog Eating Contest. And every even-numbered year, the Olympics bring us more exotic champions in curling, synchronized swimming, and dancing horses.
But there's one event that mobilizes the rest of the world in a frenzy of competition: soccer's World Cup. A billion people watched France defeat Argentina, 4-3, in a perfectly ordinary first-round-of-finals game. And more than three billion will watch the final match on July 15th in Moscow's Luzhniki Stadium. That's almost half the population of the globe.
Tax collectors across the world will join their countrymen to cheer their countries' teams. But they'll have another reason to watch. It seems the folks in the soccer world don't like paying taxes any more than the rest of us. And there are nearly enough tax cheats in the sport to fill out an entire bracket's worth!
In 2011, IRS investigators used tax charges to "flip" Chuck Blazer, a member of soccer's international governing body, into wearing a wire to help indict 14 corrupt officials on charges of racketeering, wire fraud, and money laundering. Blazer, a 450-pound Falstaffian figure, lived large on his share of those bribes, keeping two apartments at Trump Tower: an $18,000/month three-bedroom for himself and a $6,000/month one-bedroom next door for his cats.
IRS Criminal Investigation head Richard Weber couldn't resist some obvious puns after the eventual arrests, announcing "This is the World Cup of fraud, and today we are issuing FIFA a red card," he said. But really, the jokes just write themselves. How about "Corrupt soccer officials couldn't keep hands off the cash"? Or maybe, "Prosecutors score GOOOOOOOAAAAAAALLLLLLLL against corruption"?
In 2013, Spanish authorities accused superstar striker Lionel Messi of using companies in Belize, Uruguay, and Switzerland to evade €4.1 million in tax on endorsement earnings. Messi, an Argentinean who plays professionally for Barcelona, said he wasn't involved in the details. (Like a player faking injury for a ref, he said "I just played football," and claimed he signed whatever his father put in front of him.) Nevertheless, he made a €5.3 million "corrective payment" equal to the tax plus interest to settle the charges.
But prosecutors insisted on penalty kicks, and in 2016, a court found Messi and his father guilty on three counts of fraud. (Clearly not Messi-ing around, right?) The court imposed a 21-month prison sentence (which was automatically suspended under Spanish law) and fined the pair another €3.1 million.
Not to be outdone, Messi's arch-rival Cristiano Ronaldo, who plays professionally for Real Madrid, just announced he would pay Spain €18.7 million to settle tax charges centered on his endorsements. Now, fans who bicker over who's the better player can start bickering over who's the better tax evader.
What kind of football do you prefer, the kind with headshots or the kind with helmets? Either way, we're sure you'd rather follow your favorite team than spend time looking for missed opportunities on your taxes. That's where our team comes in! So call for a plan, and see where in the world you can go with your savings!
A generation ago, "serious" filmmakers flocking to Hollywood set their sights on movies, not television. Visionary directors like Martin Scorsese and Francis Ford Coppola redefined their craft with a new generation of challenging, personal films. By contrast, television was a vast wasteland dominated by lightweight comedies like Happy Days and sappy, feel-good dramas like The Waltons.
In 1999, HBO's The Sopranos started luring wannabe auteurs to TV. Today, movie theaters are dominated by CGI-generated superheros and endless sequels, while cable networks and streaming video services churn out too many quality programs for anyone but a professional critic to watch. When fan favorites like Netflix's Stranger Things or Amazon's Bosch drop a new season, millions of Americans take a timeout from their ordinary lives to spend whole weekends binge-watching, staring bug-eyed at their screens like so many popcorn-munching zombies.
Naturally, the renaissance of "quality television" has attracted the tax collector's eye, too. So this week's story begins, like any good story, deep in the bowels of the Chicago Department of Finance in the heart of the city's downtown "Loop."
The revenue-starved Windy City imposes a 9% amusement tax on professional sports, theatrical performances, movie screenings, and even the architecture tours cruising the Chicago river. In 2015, officials declared that it includes "not only charges paid for the privilege to witness, view or participate in amusements in person but also charges paid for the privilege to witness, view or participate in amusements that are delivered electronically." That ruling extended the tax to streaming video, music, and gaming services like Netflix, Spotify and Xbox Live.
Now, one of the reasons those streaming services are so popular is because they're so cheap. Netflix's basic streaming plan, which gives you standard definition video on one screen at a time, sets you back a whopping $6.99/month. The premium plan, which immerses you in Ultra-HD video nirvana on up to four screens, is still just $13.99. Even the most-addicted fans won't get mugged for more than $1.26/month in tax. (And when tax collectors see gold in $1.26, you know you're living in tough times.)
But those penny-ante amounts didn't stop a group of fans backed by a public-interest law firm from challenging the tax in Cook County Circuit Court. They argued that extending it to streaming services violates the Internet Freedom Act and federal and state constitutions.
In May, the judge brought Season One of the series to a dramatic close with a cliffhanger episode, "Opinion and Order." Do tax collectors really have the authority to nickel-and-dime our "Netflix and chill"? Or are they just another bunch of bureaucrats with boundary issues? Sadly for fans, he ruled for the city and upheld the tax. But plaintiffs have already announced plans for an appeal, which means a second series should be dropping sometime soon.
We're pretty sure your least-favorite episode of any series is "The One Where You Pay Too Much Tax." The good news is, we can help you fast-forward through it. Just call us for a plan to pay less. See how much you can save. And get ready to click "thumbs up" on our service!
Cryptocurrencies like Bitcoin, Bitcash, and Ethereum rest on a foundation of "blockchain": a continuously growing public transaction ledger consisting of records called "blocks" that are linked together and secured using cryptography. Blockchain bulls see the new technology revolutionizing all sorts of transactions, like real estate sales and medical records. Skeptics dismiss the whole effort as fool's gold, suitable for speculation but nothing more. (Hedge fund tycoon T. Boone Pickens recently tweeted that, "at [age] 89, anything with the word 'crypt' in it is a real turnoff for me.")
Now, former tech CEO Matt Liston has formed a blockchain-based religion called 0xω, ("Zero ex Omega"). "We're incentivizing mindsharing, and eventually mind upload to use consensus to form a structure of collective consciousness," he says. "And then, we'll elevate an individual interaction with a religious structure as a group participation in a collective consciousness where the structure itself is god." He's even unveiled a computer-generated avatar he hopes to be the church's first sacred object: a narwhal with a doge head, a beret, tattoos, an infinity tail, and an ethereum logo.
We're praying that this is all just an elaborate prank, a ridiculous bit of self-referential trolling from a Silicon Valley tech-bro with too much time on his hands. But in the unlikely event that this guy is actually serious, the new church might someday qualify for the same tax deductions as more-established churches.
The path to enlightenment starts with filing IRS Form 1023, "Application for Recognition of Exemption." There's no guarantee that the IRS will play ball — the Church of Scientology fought for decades to gain recognition, and the Service sees plenty of scammers masquerading as churches. But if the IRS greenlights it with a straight face, donors can deduct up to 60% of their adjusted gross incomes for cash gifts and make 0xω the beneficiary of charitable trusts, foundations, pooled income funds, and donor-advised funds.
Tax deductions extend well beyond cash contributions. The Tax Court has approved medical deductions for Christian Science practitioner fees and Navajo Indian medicine man rituals. Under that same logic, voodoo animal sacrifice is also a deductible medical expense, as long as it's part of a religious ceremony for healing purposes. (Hey, do you want to tell the voodoo queen she can't deduct her chickens?)
The bad news for the faithful is that whatever they drop in the plate is deductible only if they itemize. Last year's Tax Cuts and Jobs Act essentially doubled standard deductions, which should cut the number of taxpayers who itemize from about one out of three to just one out of ten.
And there's another downside for blockchain-based religions. The blockchain records everything! No more exaggerating contributions on Form 1040 when the IRS can go online and verify gifts. For that matter, can you imagine showing up at 0xω's Pearly Gates (with your randomly-generated user ID and password in hand), only to see your lifetime of sins chronicled irrevocably on St. Peter's iCloud? If that's the new church's idea of heaven, we can imagine a lot of folks taking their chances with hell.
Here's one thing blockchain won't ever change — the pain you feel when you waste money on taxes you don't have to pay. So call us today for a plan to pay less, and you'll have more to donate to whatever organization you want to support!
Last month, we wrote that New York money manager AllianceBernstein is moving its headquarters and 1,100 employees from a slick black Manhattan skyscraper to the steaming concrete jungles of Nashville, TN. It's going to be culture shock for the firm's employees, who have to trade their harsh winters and corned beef sandwiches for milder weather and hot fried chicken. But AllianceBernstein promises employees they'll love the financial climate most of all: lower housing costs and no personal income tax. Of course taxes played a big part in that move!
But is that always the case? A recent Los Angeles Times article argues that another corporate relocation "gives the lie to all that guff you've been fed about taxes being a crucial consideration."
Chipotle Mexican Grill launched in 1993 with a single location in a former ice cream store in Denver. The chain now has over 2,000 locations and 45,000 employees. But growth has sputtered in recent years. This is partly due to competitors like Qdoba, Moe's, Rubio's and Baja Fresh. And it's partly due to ingredients like norovirus, salmonella, e coli, and campylobacter jejuni sneaking into the burritos. (Hard to taste the viruses under all those seasonings, right?) Partly because of these incidents, founder Steve Ells resigned as CEO in late 2017.
In February, Chipotle hired former Taco Bell CEO Brian Niccol to run the company. (Most would agree that moving from Taco bell to Chipotle is a step up: Taco Bell describes their food as "Mexican-inspired," rather than authentic, but some critics pan it as merely "food-inspired.") Last month, Chipotle announced they're moving their headquarters and 400 jobs from Denver to Niccol's hometown of Newport Beach, CA. The move should actually mean less highway time for Niccol, who used to waste 20 soul-crushing minutes commuting to god-forsaken Irvine every day.
So here's where it gets perplexing. Colorado's personal income tax is a flat 4.63%, which seems like a fair price to pay for those 300 days of sunshine per year that civic boosters promise residents. But California has the highest state tax rate in the country — a genuine millionaire's tax of 13.3% on income over the two-comma mark. The recent Tax Cuts and Jobs Act of 2017 makes that top rate even harsher by limiting federal deductions for state taxes to $10,000.
Logic suggests that any rational business would move the other way. And thousands of companies have fled California, citing taxes and regulations. But California's job growth since 2011 has "easily outstripped" the rest of the country, and the Golden State's economy is growing faster than low-tax states like Texas and Florida.
In 2016, Stanford sociologist Cristobal Young looked at tax returns showing million-dollar incomes over a 13-year period. His study showed that millionaire tax flight is occurring, but "only at the margins of statistical and socioeconomic significance."
What do you think? Would high state taxes be enough to make you move? Or do the quality of your life and breadth of opportunity mean more than mere taxes? Either way, we're here to help you pay less. So call us when you're ready for a plan, and see where your wasted taxes have kept you from visiting!
Back in the early 80s, a group of Democratic legislators decided to room together to cut the cost of staying in Washington for the three nights or so per week that Congress is in session. The motley crew included Representative George Miller of California (owner of the blue-gray house in Southeast DC), Senators Dick Durbin and Chuck Schumer, future Defense Secretary and CIA chief Leon Panetta, and others. We can only imagine whose phone numbers they posted on the refrigerator in a house like that. Pizza delivery? Of course! Liquor guy? Oh yeah. Exterminator? Maybe not a bad idea . . . .
Visitors to the house could be forgiven for thinking they had mistakenly wandered onto the set of Animal House. The stove didn't work, so the group lived mainly on Frosted Mini-Wheats. Durbin stopped making his bed when Bill Clinton was President. Schumer slept on a mattress in the living room, and his wife was so disgusted by the place she refused to stay with him. Still, the unconventional arrangement inspired news stories and even a TV series — Amazon's Alpha House, starring John Goodman as one of four Republican Senators sharing a much cleaner house.
In 2014, Representative Miller retired after 40 years in Congress and sold the tenement fixer-upper. It seems ironic, then, that as Washington has become the most affluent city in America and home prices have climbed even higher, Congress gave up a tax break designed to make it easier to find a place to stay. From 1953 until 2017, lawmakers could deduct up to $3,000 per year for living expenses while they were away from their homes — but with last year's Tax Cuts and Jobs Act, they gave up that deduction for themselves.
Writing off $3,000 may have been a sweet perk back in 1953, when Elizabeth II became Queen, Ian Fleming published his first James Bond novel, and Marilyn Monroe starred in Gentlemen Prefer Blondes. The average taxpayer earned $4,000 that year. The average car cost $1,650. And the gas to power the car cost just 20 cents a gallon. (Of course, there was no Facebook. Life is full of tradeoffs, right?)
Today, of course, $3,000 is a rounding error for most congresscritters. Their base salary is $174,000, which is enough by itself to put them in the top 3% or so of earners. But the average Representative's net worth hovers around $1 million, and the average Senator is worth $3.2 million. Plenty are rich enough to essentially "buy" their seats. Longtime members can cash in for that much in a single year with cushy lobbying jobs after they leave — former Representative Billy Tauzin raked in over $19 million lobbying for drug companies in the five years after he gave up his seat.
Of course, those averages, by definition, include the 50% who are below average. Dozens of mostly-younger members sleep on futons or pull-out couches in their offices while they're in DC. (They shower at the gym.) That group includes House Speaker Paul Ryan (net worth: $7.8 million), who earns an extra $49,500 as Speaker. Bunking at work can make far more sense than dropping a couple grand a month for an apartment when they're only in town for 80 or 90 nights per year. (Durbin and Schumer paid about $800 for their squalid little spaces in Miller's hovel.)
You may live by yourself in one of those fashionable new "tiny houses" or with a whole extended family in a mansion. Fortunately, you don't have to score political points by giving up tax deductions. So why would you? Call us when you're ready for a plan to pay less, and let's see how much home you can buy with it!
John Leidy, EA
DIY Books Coach
It was the third day of the very first income tax course when I realized that it will become my mission to help people understand their taxes better to be able to make better decisions and STOP wasting money on taxes they should not have to pay.