Wednesday, November 30, 2011
The Joke Is On You!!
This was the party at which the fantasy that a tax break for the rich would "trickle" down to you. Too bad you weren't invited.
Nothing About The Debt or Politics In Any Way
There are four restaurants that we have encountered west of the Mississippi that you will enjoy. They are all small, have very interesting international menus, great personnel and charming environments. If you find yourself anywhere close, make sure to schedule a visit. All serve lunch and dinner.
Painted Pony, St. George, Utah
Le Bistro, Des Moines, Iowa
Pot-Au-Feu, El Paso, Texas
Le Hirondelle, San Juan Capistrano, California
Bon Appetit!
Painted Pony, St. George, Utah
Le Bistro, Des Moines, Iowa
Pot-Au-Feu, El Paso, Texas
Le Hirondelle, San Juan Capistrano, California
Bon Appetit!
A Candidate For Congress??
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Tuesday, November 29, 2011
More And More People Are Worrying About The Two Tier Economy
Read John Royer's comments in today's Los Angeles Times. When the richy riches begin to worry about major social unrest, you should be as well.
November 29, 2011
Reporting from Reading, Pa.
Fewer than 50 miles separate the poorest city of its size in the U.S. from the prosperous suburbs of Philadelphia, a corridor of wealth with few rivals. There's an $80,000 difference between the average household incomes. The poverty rates — Reading's is above 40% — don't even compare.
But when it comes to the gulf between rich and poor in the U.S., the residents of Reading and the tony locales down the road sound more alike than one might expect.
"I do think the system is fundamentally unfair in some ways and skewed toward people with a lot of influence and control," said John Royer, a corporate lawyer and registered Republican from Wayne, Pa. "In the back of my mind, I worry, 'If the gap continues and widens, could this be the beginning of major social unrest?' "
Russell Grate is a 44-year-old unemployed warehouse worker from Reading who, even when he had a job, made about as much in a year as the tuition at the private school where Royer sends his children. Grate's view of Congress is more direct: "Everything they do is for the rich. Washington is doing nothing for the working poor in this country. If you don't have money, you're nobody."
As politicians trade accusations of class warfare and corporate cronyism, and protesters occupy public property across the country, a persistent and complex conversation about income and opportunity in the U.S. is taking place on a swath of common ground.
Polls show that a large majority of Americans sees a widening gap between the haves and the have-nots. There is significant consensus that the country's political and financial systems are skewed in favor of the wealthy. While income and party affiliation influence individual opinions on the urgency of the problem and how the government should respond, there is substantial support — typically 60% of voters — for increasing taxes on top earners.
The failure of a congressional "super committee" to compromise last week on taxes, entitlement cuts and other measures to reduce federal deficits has ensured that the income disparity debate will be a major theme of the 2012 election cycle.
The stalemate hardened both parties' positions. Republicans held fast against proposed tax increases on the affluent that the Obama administration and Democrats advocated. Democrats resisted major changes to the social safety net unless new tax revenue was part of the deal.
Sitting squarely in contested territory in a battleground state, this pocket of southeastern Pennsylvania is among a handful of places poised to weigh in.
The area voted solidly for President Obama in 2008 and is far from a conservative bastion, but it took a right turn in state and congressional elections last year. Reading and the suburbs just miles down the Benjamin Franklin Highway share the same congressional district, represented by a Republican.
Like the rest of the country, Pennsylvania has seen its richest residents maintain or improve their economic stature while its poor slide farther down the ladder.
From 1979 to 2007, the richest 1% of Americans increased their after-tax income by 275%, according to a recent report by the independent Congressional Budget Office. Meanwhile, earners in the bottom one-fifth saw their incomes grow by 18%. Because of changes to rates, exemptions and deductions, the tax code did less to even out income distribution, the budget office found.
Reading, an industrial hub that once made eyeglasses, stockings and automobile parts, now makes very little. In the 2010 census, the city barely inched out Flint, Mich., for the largest percentage of people living in poverty in a city with a population of more than 65,000.
The wooded suburbs of Philadelphia, fueled by a boom in the biotech and health industries, have remained havens of wealth, good schools and stately colonials. Most of those interviewed there said they were unaware of Reading's dismal ranking.
Similarly, Grate, whose family is living off his wife's salary from Burger King, had little knowledge of life in the upscale suburbs — just what he gleaned from his days driving a delivery truck of medical supplies.
"I've been there. I've seen the houses," he said.
Americans say they see the trend: In a recent Washington Post-ABC News poll, 60% of people interviewed said they believed the income gap was widening.
At the same time, a majority of those polled said they did not see the country as divided along income lines, illustrating a near-sacred belief in American culture of the notion of economic opportunity. A Pew Research study in March found large majorities believed people who worked hard could get ahead and "everyone has it in their power to succeed."
"The idea that there are haves and have-nots suggests that mobility doesn't exist," said Michael Dimock, associate director at the Pew Research Center. "Americans believe in the idea of mobility and opportunity and want to hold to that value."
Democrats and Republicans have tailored their messages to different elements of these sometimes-contradictory views on income disparity. Democrats argue the Republican policies tip the scales for the rich. Republicans counter that Democrats are promoting class warfare that undermines economic opportunity for everyone.
"It's not that I mind paying taxes," said Randy Meier, a Republican and executive at a health services company from Villanova, Pa. "I just don't have a lot of confidence that the government knows what they're doing with the resources."
Despite the differences, members of both parties were quick to point to the tax code as the primary symbol of inequity. Loopholes, deductions and breaks all favor the wealthy, Grate said.
"I feel like we pay all the damn taxes," he said.
Royer, the lawyer, agreed.
"We ought to make people pay a little bit more, a little more revenue," he said. "I do think there's got to be some kind of fundamental fairness."
kathleen.hennessey@latimes.com
latimes.com
As the rich-poor gap widens, so does debate about what it means
Voters see a system that favors the wealthy, polls show, but most aren't ready to give up on the American dream.
By Kathleen Hennessey, Washington BureauNovember 29, 2011
Reporting from Reading, Pa.
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But when it comes to the gulf between rich and poor in the U.S., the residents of Reading and the tony locales down the road sound more alike than one might expect.
"I do think the system is fundamentally unfair in some ways and skewed toward people with a lot of influence and control," said John Royer, a corporate lawyer and registered Republican from Wayne, Pa. "In the back of my mind, I worry, 'If the gap continues and widens, could this be the beginning of major social unrest?' "
Russell Grate is a 44-year-old unemployed warehouse worker from Reading who, even when he had a job, made about as much in a year as the tuition at the private school where Royer sends his children. Grate's view of Congress is more direct: "Everything they do is for the rich. Washington is doing nothing for the working poor in this country. If you don't have money, you're nobody."
As politicians trade accusations of class warfare and corporate cronyism, and protesters occupy public property across the country, a persistent and complex conversation about income and opportunity in the U.S. is taking place on a swath of common ground.
Polls show that a large majority of Americans sees a widening gap between the haves and the have-nots. There is significant consensus that the country's political and financial systems are skewed in favor of the wealthy. While income and party affiliation influence individual opinions on the urgency of the problem and how the government should respond, there is substantial support — typically 60% of voters — for increasing taxes on top earners.
The failure of a congressional "super committee" to compromise last week on taxes, entitlement cuts and other measures to reduce federal deficits has ensured that the income disparity debate will be a major theme of the 2012 election cycle.
The stalemate hardened both parties' positions. Republicans held fast against proposed tax increases on the affluent that the Obama administration and Democrats advocated. Democrats resisted major changes to the social safety net unless new tax revenue was part of the deal.
Sitting squarely in contested territory in a battleground state, this pocket of southeastern Pennsylvania is among a handful of places poised to weigh in.
The area voted solidly for President Obama in 2008 and is far from a conservative bastion, but it took a right turn in state and congressional elections last year. Reading and the suburbs just miles down the Benjamin Franklin Highway share the same congressional district, represented by a Republican.
Like the rest of the country, Pennsylvania has seen its richest residents maintain or improve their economic stature while its poor slide farther down the ladder.
From 1979 to 2007, the richest 1% of Americans increased their after-tax income by 275%, according to a recent report by the independent Congressional Budget Office. Meanwhile, earners in the bottom one-fifth saw their incomes grow by 18%. Because of changes to rates, exemptions and deductions, the tax code did less to even out income distribution, the budget office found.
Reading, an industrial hub that once made eyeglasses, stockings and automobile parts, now makes very little. In the 2010 census, the city barely inched out Flint, Mich., for the largest percentage of people living in poverty in a city with a population of more than 65,000.
The wooded suburbs of Philadelphia, fueled by a boom in the biotech and health industries, have remained havens of wealth, good schools and stately colonials. Most of those interviewed there said they were unaware of Reading's dismal ranking.
Similarly, Grate, whose family is living off his wife's salary from Burger King, had little knowledge of life in the upscale suburbs — just what he gleaned from his days driving a delivery truck of medical supplies.
"I've been there. I've seen the houses," he said.
Americans say they see the trend: In a recent Washington Post-ABC News poll, 60% of people interviewed said they believed the income gap was widening.
At the same time, a majority of those polled said they did not see the country as divided along income lines, illustrating a near-sacred belief in American culture of the notion of economic opportunity. A Pew Research study in March found large majorities believed people who worked hard could get ahead and "everyone has it in their power to succeed."
"The idea that there are haves and have-nots suggests that mobility doesn't exist," said Michael Dimock, associate director at the Pew Research Center. "Americans believe in the idea of mobility and opportunity and want to hold to that value."
Democrats and Republicans have tailored their messages to different elements of these sometimes-contradictory views on income disparity. Democrats argue the Republican policies tip the scales for the rich. Republicans counter that Democrats are promoting class warfare that undermines economic opportunity for everyone.
"It's not that I mind paying taxes," said Randy Meier, a Republican and executive at a health services company from Villanova, Pa. "I just don't have a lot of confidence that the government knows what they're doing with the resources."
Despite the differences, members of both parties were quick to point to the tax code as the primary symbol of inequity. Loopholes, deductions and breaks all favor the wealthy, Grate said.
"I feel like we pay all the damn taxes," he said.
Royer, the lawyer, agreed.
"We ought to make people pay a little bit more, a little more revenue," he said. "I do think there's got to be some kind of fundamental fairness."
kathleen.hennessey@latimes.com
Monday, November 28, 2011
Another Reason Not To Trust The Talking Heads
Bill Keller, who otherwise has always struck me as a pretty good guy, wrote this opinion piece in the New York Times today, and it is a perfect example of a little knowledge going a long way. He seems to understand that the evidence is that a short term stimulus is a good idea. So far so good. Then he wanders off into why economists can't agree, and that is when the trouble starts. He quotes Glenn Hubbard as a smart economist.
For any of you who haven't seen the documentary INSIDE JOB, see it now. Then you will understand why so many economists can't agree. They are for sale! Disgusting! Pathetic! And he is the dean of the school of business at Columbia.
But while there are things a columnist can ignore (if Kim Kardashian ever features in this column, just shoot me), our failing economic ecosystem is not one of them. So for the past several weeks my airplane and bedside reading has consisted of sexy documents like “A Roadmap for America’s Future” and “The Way Forward” and “The Moment of Truth” and “Restoring America’s Future” and “Living Within Our Means and Investing in the Future.” I’ve also reached out to a few economists respected for the integrity of their science and their patience with economic illiterates.
The first thing I gleaned from this little tutorial will probably not surprise you: There really is a textbook way to fix our current mess. Short-term stimulus works to help an economy recover from a recession. Some kinds of stimulus pay off more quickly than others. Once the economic heart is pumping again, we need to get our deficits under control. The way to do that is a balance of spending cuts, increased tax revenues and entitlement reforms. There is room to argue about the proportions and the timing, and small differences can produce large consequences, but the basic formula is not only common sense, it is mainstream economic science, tested many times in the real world.
So what’s the problem? Why is our system so fundamentally stuck? Partly it’s a colossal, bipartisan lack of the political courage required to tell people what they sort of know but don’t want to hear. Partly it’s a Republican Party that, for its own cynical reasons, wants no deal with this president. Partly it’s moneyed, focused lobbies that swarm in defense of specific advantages written into the law; there is no comparable lobby for compromise, let alone sacrifice.
But also, I’ve come to think something is rotten in the state of economics. The dismal science, as Thomas Carlyle called it, has been ravaged by the same virus that has corrupted the rest of our national discourse.
Back in the very pre-digital days, the writer A. J. Liebling famously remarked that freedom of the press was guaranteed only to the man who owned one. Nowadays, of course, freedom of the press belongs to anyone with Internet access, from the information guerrillas of WikiLeaks to the blogger next door. The democratization of media has diminished the authority once held — and sometimes abused — by a few big newspapers and broadcasters. In many ways this has enriched society, creating a great global buffet of information and opinion, pooling the knowledge of the masses and providing an almost instantaneous reality check on the conventional wisdom.
The consequences have not all been happy, though. The easiest way to stand out in such a vast crowd of microbroadcasters is to be the loudest, the angriest, the most outrageous. If you want that precious traffic, you stake out a position somewhere in oh-my-God territory and proclaim it with a vengeance. Global warming is a hoax! Vaccines make you sick! Obama is a Muslim! In vanquishing the conventional wisdom, sometimes it seems we have vanquished wisdom itself.
Economists don’t live in caves, so there is no reason they should be immune to the centrifugal politics of this noisy world. Thus serious scholars are tempted to sign onto ideas that stretch their own credulity, and lesser economists are thrust forward for their moment of fame as witnesses on behalf of dubious claims. Economists cluster in ideological think tanks that promote political conformity rather than intellectual rigor. Politicians, with no generally accepted consensus to challenge them, can get away with plucking data out of context to bolster assertions that are based more on faith than on reality. Tax cuts pay for themselves! Protectionism saves jobs! It’s all the Fed’s fault! Deficits don’t matter! Obama is a socialist! Say it often enough and before long it’s a serious discussion on cable TV, in which the proven and the preposterous get the same respectful chin-wagging.
“Nobody who is taken seriously as an economist is going to say ‘cancel the Fed,’ ” said Glenn Hubbard, the dean of Columbia Business School, chairman of the Council of Economic Advisers under George W. Bush, and now Mitt Romney’s chief economic adviser. “I find it very disturbing that the media is giving equal time to some ideas that are just crazy.”
The Web site PolitiFact, the Pulitzer-winning fact-checking service, recently did a thorough debunking of Republican claims that Obama’s 2009 stimulus program created, quote, “zero jobs.” In fact, the checkers established, using still-trustworthy sources like the Congressional Budget Office, that the stimulus created or saved a couple of million jobs. Case closed? No, the Republicans just went on repeating the claim.
“The talking points drive the discourse,” said Bill Adair, the editor of PolitiFact. “They repeat the talking points so often I think they start actually believing them.”
In the Internet age, anyone can be an expert, and anyone who says otherwise is an elitist.
The other day House Speaker John Boehner put out a list of 132 economists who signed a statement endorsing a Republican menu of spending cuts, tax cuts and deregulation. All of these are legitimate things to propose, but the statement claimed the Republican list “will do more to boost private-sector job growth in America in both the near-term and long-term than the ‘stimulus’ spending approach favored by President Obama.” Reputable number-crunchers like Moody’s Analytics and some top-tier economists of both parties said Boehner’s statement would have little or no impact on the short-term employment problem. So who were these 132 economists? With a few exceptions they were academics from off-the-beaten-path colleges (no offense to Dakota State University), bloggers (the Calafia Beach Pundit?) and economists from devoutly libertarian think tanks. But the news had the right-wing tom-toms beating with excitement.
“I’ve never in my professional life seen the disjunction between the political debate about economics and the consensus of economists be as large as it is today,” said Justin Wolfers, a Wharton School economist who favors Democrats, and who tweeted withering commentary on the list of 132.
Surely this dilution of authority contributes to our national paralysis. At the very least it befogs the discussion and fosters a pervasive cynicism.
Columbia’s Hubbard says the way to weed out the quackery is for serious economists to speak up when silly ideas get a political foothold. He’s right, but once a mainstream economist has settled comfortably into a party-line think tank or joined a candidate’s brain trust, or even enjoyed the adulation at partisan cocktail parties, a degree of self-censorship takes hold.
Of course, there have always been economists who leaned right or left — and some outright snake-oil salesmen — but until recently the public debate about economics pretty much stayed within the boundaries of accepted science. Friedrich Hayek and Milton Friedman have become conservative icons, John Maynard Keynes and Paul Samuelson are stalwarts of the liberals, but in their lifetimes they all had a reverence for evidence (even if their acolytes did not).
Rereading some of the alternating, left-right weekly columns Samuelson and Friedman wrote for Newsweek in the 70s, I’ve been struck by their shared assumptions, and by the fact that the tone was so civil. It’s not hard to imagine both men signing on to the kind of grand bargain that keeps eluding Congress now. But if they were getting started in today’s media market, they would probably be obliged to amp up the vitriol, to sound like the old “Saturday Night Live” “Point-Counterpoint” parody:
“Paul, you pompous ass!”
“Milt, you ignorant slut!”"
For any of you who haven't seen the documentary INSIDE JOB, see it now. Then you will understand why so many economists can't agree. They are for sale! Disgusting! Pathetic! And he is the dean of the school of business at Columbia.
"The Politics of Economics in the Age of Shouting
By BILL KELLER
I share a virtual neighborhood with a legion of Times reporters, editors and columnists who know more than I will ever know about business and economics. (Look! Right over there: a Nobel-prize-winning economist!) In this humbling company, on this intimidating matter, who am I to tell anyone what to think? And so my plan was, frankly, to avoid the subject.But while there are things a columnist can ignore (if Kim Kardashian ever features in this column, just shoot me), our failing economic ecosystem is not one of them. So for the past several weeks my airplane and bedside reading has consisted of sexy documents like “A Roadmap for America’s Future” and “The Way Forward” and “The Moment of Truth” and “Restoring America’s Future” and “Living Within Our Means and Investing in the Future.” I’ve also reached out to a few economists respected for the integrity of their science and their patience with economic illiterates.
The first thing I gleaned from this little tutorial will probably not surprise you: There really is a textbook way to fix our current mess. Short-term stimulus works to help an economy recover from a recession. Some kinds of stimulus pay off more quickly than others. Once the economic heart is pumping again, we need to get our deficits under control. The way to do that is a balance of spending cuts, increased tax revenues and entitlement reforms. There is room to argue about the proportions and the timing, and small differences can produce large consequences, but the basic formula is not only common sense, it is mainstream economic science, tested many times in the real world.
So what’s the problem? Why is our system so fundamentally stuck? Partly it’s a colossal, bipartisan lack of the political courage required to tell people what they sort of know but don’t want to hear. Partly it’s a Republican Party that, for its own cynical reasons, wants no deal with this president. Partly it’s moneyed, focused lobbies that swarm in defense of specific advantages written into the law; there is no comparable lobby for compromise, let alone sacrifice.
But also, I’ve come to think something is rotten in the state of economics. The dismal science, as Thomas Carlyle called it, has been ravaged by the same virus that has corrupted the rest of our national discourse.
Back in the very pre-digital days, the writer A. J. Liebling famously remarked that freedom of the press was guaranteed only to the man who owned one. Nowadays, of course, freedom of the press belongs to anyone with Internet access, from the information guerrillas of WikiLeaks to the blogger next door. The democratization of media has diminished the authority once held — and sometimes abused — by a few big newspapers and broadcasters. In many ways this has enriched society, creating a great global buffet of information and opinion, pooling the knowledge of the masses and providing an almost instantaneous reality check on the conventional wisdom.
The consequences have not all been happy, though. The easiest way to stand out in such a vast crowd of microbroadcasters is to be the loudest, the angriest, the most outrageous. If you want that precious traffic, you stake out a position somewhere in oh-my-God territory and proclaim it with a vengeance. Global warming is a hoax! Vaccines make you sick! Obama is a Muslim! In vanquishing the conventional wisdom, sometimes it seems we have vanquished wisdom itself.
Economists don’t live in caves, so there is no reason they should be immune to the centrifugal politics of this noisy world. Thus serious scholars are tempted to sign onto ideas that stretch their own credulity, and lesser economists are thrust forward for their moment of fame as witnesses on behalf of dubious claims. Economists cluster in ideological think tanks that promote political conformity rather than intellectual rigor. Politicians, with no generally accepted consensus to challenge them, can get away with plucking data out of context to bolster assertions that are based more on faith than on reality. Tax cuts pay for themselves! Protectionism saves jobs! It’s all the Fed’s fault! Deficits don’t matter! Obama is a socialist! Say it often enough and before long it’s a serious discussion on cable TV, in which the proven and the preposterous get the same respectful chin-wagging.
“Nobody who is taken seriously as an economist is going to say ‘cancel the Fed,’ ” said Glenn Hubbard, the dean of Columbia Business School, chairman of the Council of Economic Advisers under George W. Bush, and now Mitt Romney’s chief economic adviser. “I find it very disturbing that the media is giving equal time to some ideas that are just crazy.”
The Web site PolitiFact, the Pulitzer-winning fact-checking service, recently did a thorough debunking of Republican claims that Obama’s 2009 stimulus program created, quote, “zero jobs.” In fact, the checkers established, using still-trustworthy sources like the Congressional Budget Office, that the stimulus created or saved a couple of million jobs. Case closed? No, the Republicans just went on repeating the claim.
“The talking points drive the discourse,” said Bill Adair, the editor of PolitiFact. “They repeat the talking points so often I think they start actually believing them.”
In the Internet age, anyone can be an expert, and anyone who says otherwise is an elitist.
The other day House Speaker John Boehner put out a list of 132 economists who signed a statement endorsing a Republican menu of spending cuts, tax cuts and deregulation. All of these are legitimate things to propose, but the statement claimed the Republican list “will do more to boost private-sector job growth in America in both the near-term and long-term than the ‘stimulus’ spending approach favored by President Obama.” Reputable number-crunchers like Moody’s Analytics and some top-tier economists of both parties said Boehner’s statement would have little or no impact on the short-term employment problem. So who were these 132 economists? With a few exceptions they were academics from off-the-beaten-path colleges (no offense to Dakota State University), bloggers (the Calafia Beach Pundit?) and economists from devoutly libertarian think tanks. But the news had the right-wing tom-toms beating with excitement.
“I’ve never in my professional life seen the disjunction between the political debate about economics and the consensus of economists be as large as it is today,” said Justin Wolfers, a Wharton School economist who favors Democrats, and who tweeted withering commentary on the list of 132.
Surely this dilution of authority contributes to our national paralysis. At the very least it befogs the discussion and fosters a pervasive cynicism.
Columbia’s Hubbard says the way to weed out the quackery is for serious economists to speak up when silly ideas get a political foothold. He’s right, but once a mainstream economist has settled comfortably into a party-line think tank or joined a candidate’s brain trust, or even enjoyed the adulation at partisan cocktail parties, a degree of self-censorship takes hold.
Of course, there have always been economists who leaned right or left — and some outright snake-oil salesmen — but until recently the public debate about economics pretty much stayed within the boundaries of accepted science. Friedrich Hayek and Milton Friedman have become conservative icons, John Maynard Keynes and Paul Samuelson are stalwarts of the liberals, but in their lifetimes they all had a reverence for evidence (even if their acolytes did not).
Rereading some of the alternating, left-right weekly columns Samuelson and Friedman wrote for Newsweek in the 70s, I’ve been struck by their shared assumptions, and by the fact that the tone was so civil. It’s not hard to imagine both men signing on to the kind of grand bargain that keeps eluding Congress now. But if they were getting started in today’s media market, they would probably be obliged to amp up the vitriol, to sound like the old “Saturday Night Live” “Point-Counterpoint” parody:
“Paul, you pompous ass!”
“Milt, you ignorant slut!”"
Saturday, November 26, 2011
Aww jeeezzz.......................
If you really want to understand why the Occupy Wall Street people (that includes me) are so truly pissed off, read this story from Sunday's New York Times. Be warned!! It may want to make you throw up!!
A Family’s Billions, Artfully Sheltered
By DAVID KOCIENIEWSKI
As he stood in the opulent marble foyer of a Fifth Avenue mansion late last month, greeting the coterie of prominent guests arriving at his private art gallery, Ronald S. Lauder was doing more than just being a gracious host.
To celebrate the 10th anniversary of the Neue Galerie, Mr. Lauder’s museum of Austrian and German art, he exhibited many of the treasures of a personal collection valued at more than $1 billion, including works by Van Gogh, Cézanne and Matisse, and a Klimt portrait he bought five years ago for $135 million.
Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code. By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.
The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person. From offshore havens to a tax-sheltering stock deal so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has for decades aggressively taken advantage of tax breaks that are useful only for the most affluent.
The debate over whether to reduce tax shelters and preferences for the rich is one of the most volatile in Washington and will move to the presidential campaign, now that repeated attempts in Congress to strike a grand bargain over spending cuts and an overhaul of the tax code have failed.
A handful of billionaires like Warren E. Buffett and Bill Gates have joined Democrats in calling for an elimination of the breaks, saying that the current system adds to the budget deficit, contributes to the widening income gap between the richest and the rest of society, and shifts the tax burden onto small businesses and the middle class. Republicans have resisted, saying the tax increases on the wealthy would harm the economy and cost jobs.
An examination of public documents involving Mr. Lauder’s companies, investments and charities offers a glimpse of the wide array of legal options for the world’s wealthiest citizens to avoid taxes both at home and abroad.
His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.
And earlier this year, Mr. Lauder used his stake in the family business, Estée Lauder Companies, to create a tax shelter to avoid as much as $10 million in federal income tax for years. In June, regulatory filings show, Mr. Lauder entered into a sophisticated contract to sell $72 million of stock to an investment bank in 2014 at a price of about 75 percent of its current value in exchange for cash now. The transaction, known as a variable prepaid forward, minimizes potential losses for shareholders and gives them access to cash. But because the I.R.S. does not classify this as a sale, it allows investors like Mr. Lauder to defer paying taxes for years.
It was a common tax reduction strategy for chief executives and wealthy shareholders a decade ago, but in 2006 the I.R.S. said it appeared to be an abusive tax shelter and issued tighter restrictions to regulate the practice. That ruling was enough to persuade most wealthy taxpayers to abandon the technique, according to tax lawyers and records at the Securities and Exchange Commission.
Advisers to Mr. Lauder maintain that his deal “was made in compliance with published I.R.S. guidance on these types of transactions and was fully reported as required by S.E.C. rules,” said his spokesman, Gary Lewi.
In theory, Mr. Lauder is scheduled to pay taxes on the $72 million when the shares are actually delivered in 2014. But tax experts say wealthy taxpayers can use other accounting techniques to further defer their payment.
The tax burden on the nation’s superelite has steadily declined in recent decades, according to a sliver of data released annually by the I.R.S. The effective federal income tax rate for the 400 wealthiest taxpayers, representing the top 0.000258 percent, fell from about 30 percent in 1995 to 18 percent in 2008, the most recent data available.
When Mr. Lauder ran unsuccessfully for the Republican nomination for mayor of New York and released his tax return to the public, he reported paying 30 percent in total federal, state and city taxes on about $30 million in income in 1988. At the time, his net worth was estimated at nearly a quarter of a billion dollars.
Mr. Lauder’s more recent tax returns remain private, and he declined to make them available for this article.
The Family Fortune
Mr. Lauder, now 67, was born into a storied American fortune. His mother, Estée Lauder, the daughter of Eastern European immigrants, began selling homemade beauty creams at a few New York City hair salons in the 1940s and built her product line into a multibillion-dollar global empire.
As the son of a fabulously wealthy fashion icon, Mr. Lauder developed aristocratic tastes — and grand aspirations — at an early age. He summered in Vienna as a boy, developing a passion for Austrian art and medieval armor. At age 13, he bought his first Schiele with money from his bar mitzvah. Mr. Lauder grew so enthralled by politics as a young man that he told friends he dreamed of becoming the first Jewish president of the United States.
After studying in Brussels and Paris and at the Wharton School at the University of Pennsylvania, he joined the family business in 1964 and served in a variety of limited roles. While his older brother Leonard rose to become Estée Lauder’s chief executive, Ronald engaged in a variety of pursuits: becoming a major Republican fund-raiser; serving a rocky tenure as ambassador to Austria; running for mayor, an unsuccessful bid in which he spent $363 for each vote he received; and starting an assortment of business ventures in Eastern Europe, one of which went bankrupt during the technology bubble.
While the family’s wealth was created by hard work and ingenuity, it was bolstered by aggressive tax planning, a skill that has become Ronald Lauder’s specialty. When Mr. Lauder’s father, Joseph, died in 1983, family members fought the I.R.S. for more than a decade to reduce their estate tax. The dispute involved a block of shares bequeathed to the family — the estate valued it at $29 million, while the I.R.S. placed it at $89.5 million. A panel of judges ultimately decided on $50 million, a decision that saved the estate more than $20 million in taxes.
Estée Lauder Companies went public in 1995, and Ronald Lauder and his mother cashed in hundreds of millions of dollars in stock but managed to sidestep paying tens of millions in federal capital gains taxes by using a hedging technique known as shorting against the box.
Together, Mr. Lauder and his mother borrowed 13.8 million shares of company stock from relatives and sold them to the public during the offering at $26 a share. Selling borrowed shares in this way is referred to as a short position. Since the Lauders retained their own shares, the maneuver allowed them to have a neutral position in the stock, not subject to price swings. Under I.R.S. rules at the time, they avoided paying as much as $95 million in capital gains taxes that might otherwise have been due had they sold their own shares.
Such transactions allowed investors to cash in their shareholdings without paying taxes. But the Lauders’ use of the technique was so aggressive that Congress enacted a law afterward that limited the length of the tax deferral. And the Lauders eventually paid tens of millions in stock from the transaction.
Still, the family’s tax planning was effective enough that after Estée Lauder died in 2004, she passed down nearly $4 billion to her heirs, according to tax experts who studied the case and estimated that the estate was taxed at an effective rate of 16 percent — about a third of the top estate tax rate at the time.
Ronald Lauder has not been a director of the company since 2009, but he still serves as the president of its Clinique Laboratories subdivision. He also sublets a full floor of office space from Estée Lauder, on the 42nd story of the General Motors Building in Manhattan, which serves as the hub for the matrix of foundations, investment funds, partnerships and trusts used to control his businesses and personal finances.
His stake in Estée Lauder Companies, according to regulatory filings, is valued at more than $600 million. Nearly $400 million of that stock is pledged to secure various lines of credit. Many financial planners consider it imprudent for principal shareholders in a company to borrow against their stock. But it remains a popular way for wealthy taxpayers to get cash out of their holdings without selling and paying taxes.
There is a certain irony that Mr. Lauder has used $72 million worth of his Estée Lauder shares to carry out his latest state-of-the-art tax reduction tactic. These contracts emerged as a popular tool about a decade ago and were developed by accountants and tax planners after Congress closed down the loophole on the Estée Lauder public offering. The I.R.S. began cracking down on these contracts in 2008, and has pursued a prominent case against the billionaire Philip Anschutz, who used one to avoid more than $140 million in federal taxes.
Whether or not the I.R.S. agrees with Mr. Lauder’s contention that his contract is legitimate, some tax policy experts say the deal illustrates how the wealthy take advantage of the system.
“There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent,” said Victor Fleischer, a law professor at the University of Colorado. “Any taxpayer lucky enough to have appreciated property is usually put to a choice: cash out and pay some tax, or hold the property and risk the vagaries of the market. Only the truly rich can use derivatives to get the best of both worlds — lots of cash and very little risk.”
While Mr. Lauder’s stock holdings in publicly traded companies show some of his tactics, much of his wealth is harder to examine because it is controlled by a maze of privately held trusts and companies. Court documents, S.E.C. filings and property tax records spotlight a few of the more ordinary tax breaks used by affluent people.
Significant portions of his inherited stock are held in family trusts, which reduce the ultimate estate tax. Mr. Lauder and his wife have also established their own family trusts, allowing them to bequeath their wealth to their heirs with minimal taxes.
Other trusts and partnerships control his real estate properties in Palm Beach and the Hamptons and at 740 Park Avenue, a building that was once home to John D. Rockefeller, and is known as one of the world’s wealthiest apartment buildings.
United States tax law allows taxpayers to deduct mortgage interest on one’s homes up to $1.1 million in debt. Households with more than $1 million in income claimed more than $27 billion in such deductions from 2006 to ’09, according to a report this month by Senator Tom Coburn of Oklahoma, who said some wealthy taxpayers even deducted mortgage interest on their yachts.
And there is no limit on the amount of property taxes that can be deducted from federal income. So Mr. Lauder is entitled to deduct the $400,000 he pays annually on his Palm Beach mansion as well as what he pays on his home on Park Avenue and his holdings in the Hamptons.
“This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and i.o.u.’s to be paid off by future generations,” said Senator Coburn, a Republican, who has called for limits on tax breaks for high earners.
Mr. Lauder deducts property taxes on all of his holdings, his spokesman said. Mr. Lauder declined to say how much that reduced his federal taxes, but said he did not receive tax benefits in some years because of the alternative minimum tax and other limits.
Charity and Tax Breaks
A week before the opening at the Neue Galerie last month, Mr. Lauder appeared at another gala, 40 blocks south, at the New York Public Library, to receive the Carnegie Foundation’s Medal of Philanthropy.
The program honored people who have given profusely to charities, including Mr. Lauder’s brother Leonard and his wife, Evelyn (who died Nov. 12), whose causes include the Whitney Museum and the pink ribbon campaign for breast cancer awareness.
Ronald Lauder and his wife, Jo Carole, were honored for a variety of contributions: the work of their joint foundation supporting hospitals, rebuilding monuments and refurbishing American embassies around the world — more than a quarter of a billion dollars over the last five years, according to his spokesman.
The Ronald S. Lauder Foundation has donated tens of millions of dollars to rebuild Jewish communities devastated by the Holocaust and communist rule. Mr. Lauder has also given to a variety of Jewish and Israeli organizations, including the World Jewish Congress, where he has served as president since 2007. Richard Parsons, the former Time Warner chairman, presented the award, calling Mr. Lauder and his wife two of “the nation’s pre-eminent supporters of the arts and civic causes.”
Mr. Lauder said his life was changed 25 years ago when he visited a kindergarten in Austria and met a classroom full of Jewish children who were refugees from Russia. Still, he said he found it odd to be referred to as a philanthropist.
“I did what I wanted to do,” he said. “What I thought was right.”
A Passion for Art
In the United States, Mr. Lauder has focused on what he calls his greatest passion — art.
In 1976, at age 32, his generous donations helped him become the youngest trustee of the Metropolitan Museum of Art. He later served as chairman of the Museum of Modern Art and remains an honorary chairman. He has donated and lent artwork to an assortment of museums. Part of his collection of lavishly decorated ceremonial armor is on display at the Met, in a gallery named for him.
As all art collectors may, Mr. Lauder is entitled to deduct the full market value of artworks donated to museums. (For years, Mr. Lauder availed himself of a quirk in the tax code that allowed donors to take a deduction for donating a portion of an artwork, without actually turning over the art. That break, known as fractional donation, was eliminated in 2006.) The tax code also allows artwork in offices to be deducted as a business expense.
Unlike some wealthy collectors who are criticized for using tax breaks to underwrite private collections that offer little access to the public, Mr. Lauder is widely praised for making his artwork a community asset.
The Neue Galerie, created by Mr. Lauder and Serge Sabarsky, who died in 1996, in a mansion once owned by Cornelia Vanderbilt, offers public viewing of an exquisite collection, worth more than $200 million even before Mr. Lauder added dozens of pieces for its 10th anniversary.
Sheldon Cohen, a former I.R.S. commissioner, said that when used as intended, the tax code’s breaks for art collectors balance private interests with the public good.
“If an art collector makes significant contributions, and the public actually gets access to the works they are donating, then the major thing the collector gets is prestige and social status,” said Mr. Cohen, now a lawyer in Washington.
At times, Mr. Lauder’s efforts to enhance his art collection have coincided with tax avoidance techniques.
In 2006, three months after he agreed to pay $135 million, a record at the time, for the Klimt painting “Adele Bloch-Bauer I,” Mr. Lauder sold a $190 million stake in his broadcast network CME.
When asked about the sale, Mr. Lauder’s spokesman said the proceeds were taxable in the United States at the full capital gains rate. Even then, though, CME’s complex corporate structure — it operates in Central Europe, is organized as a Netherlands holding company, keeps its headquarters in Bermuda and routed the $190 million sale through two Cayman Island companies — allowed Mr. Lauder to minimize taxes in countries outside the United States where it does business.
Some tax reform advocates say that it is unfair that the wealthiest can subsidize their lifestyles using myriad offshore maneuvers and complex accounting strategies.
“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity. “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”
To celebrate the 10th anniversary of the Neue Galerie, Mr. Lauder’s museum of Austrian and German art, he exhibited many of the treasures of a personal collection valued at more than $1 billion, including works by Van Gogh, Cézanne and Matisse, and a Klimt portrait he bought five years ago for $135 million.
Yet for Mr. Lauder, an heir to the Estée Lauder fortune whose net worth is estimated at more than $3.1 billion, the evening went beyond social and cultural significance. As is often the case with his activities, just beneath the surface was a shrewd use of the United States tax code. By donating his art to his private foundation, Mr. Lauder has qualified for deductions worth tens of millions of dollars in federal income taxes over the years, savings that help defray the hundreds of millions he has spent creating one of New York City’s cultural gems.
The charitable deductions generated by Mr. Lauder — whose donations have aided causes as varied as hospitals and efforts to rebuild Jewish identity in Eastern Europe — are just one facet of a sophisticated tax strategy used to preserve a fortune that Forbes magazine says makes him the world’s 362nd wealthiest person. From offshore havens to a tax-sheltering stock deal so audacious that Congress later enacted a law forbidding the tactic, Mr. Lauder has for decades aggressively taken advantage of tax breaks that are useful only for the most affluent.
The debate over whether to reduce tax shelters and preferences for the rich is one of the most volatile in Washington and will move to the presidential campaign, now that repeated attempts in Congress to strike a grand bargain over spending cuts and an overhaul of the tax code have failed.
A handful of billionaires like Warren E. Buffett and Bill Gates have joined Democrats in calling for an elimination of the breaks, saying that the current system adds to the budget deficit, contributes to the widening income gap between the richest and the rest of society, and shifts the tax burden onto small businesses and the middle class. Republicans have resisted, saying the tax increases on the wealthy would harm the economy and cost jobs.
An examination of public documents involving Mr. Lauder’s companies, investments and charities offers a glimpse of the wide array of legal options for the world’s wealthiest citizens to avoid taxes both at home and abroad.
His vast holdings — which include hundreds of millions in stock, one of the world’s largest private collections of medieval armor, homes in Washington, D.C., and on Park Avenue as well as oceanfront mansions in Palm Beach and the Hamptons — are organized in a labyrinth of trusts, limited liability corporations and holding companies, some of which his lawyers acknowledge are intended for tax purposes. The cable television network he built in Central Europe, CME Enterprises, maintains an official headquarters in the tax haven of Bermuda, where it does not operate any stations.
And earlier this year, Mr. Lauder used his stake in the family business, Estée Lauder Companies, to create a tax shelter to avoid as much as $10 million in federal income tax for years. In June, regulatory filings show, Mr. Lauder entered into a sophisticated contract to sell $72 million of stock to an investment bank in 2014 at a price of about 75 percent of its current value in exchange for cash now. The transaction, known as a variable prepaid forward, minimizes potential losses for shareholders and gives them access to cash. But because the I.R.S. does not classify this as a sale, it allows investors like Mr. Lauder to defer paying taxes for years.
It was a common tax reduction strategy for chief executives and wealthy shareholders a decade ago, but in 2006 the I.R.S. said it appeared to be an abusive tax shelter and issued tighter restrictions to regulate the practice. That ruling was enough to persuade most wealthy taxpayers to abandon the technique, according to tax lawyers and records at the Securities and Exchange Commission.
Advisers to Mr. Lauder maintain that his deal “was made in compliance with published I.R.S. guidance on these types of transactions and was fully reported as required by S.E.C. rules,” said his spokesman, Gary Lewi.
In theory, Mr. Lauder is scheduled to pay taxes on the $72 million when the shares are actually delivered in 2014. But tax experts say wealthy taxpayers can use other accounting techniques to further defer their payment.
The tax burden on the nation’s superelite has steadily declined in recent decades, according to a sliver of data released annually by the I.R.S. The effective federal income tax rate for the 400 wealthiest taxpayers, representing the top 0.000258 percent, fell from about 30 percent in 1995 to 18 percent in 2008, the most recent data available.
When Mr. Lauder ran unsuccessfully for the Republican nomination for mayor of New York and released his tax return to the public, he reported paying 30 percent in total federal, state and city taxes on about $30 million in income in 1988. At the time, his net worth was estimated at nearly a quarter of a billion dollars.
Mr. Lauder’s more recent tax returns remain private, and he declined to make them available for this article.
The Family Fortune
Mr. Lauder, now 67, was born into a storied American fortune. His mother, Estée Lauder, the daughter of Eastern European immigrants, began selling homemade beauty creams at a few New York City hair salons in the 1940s and built her product line into a multibillion-dollar global empire.
As the son of a fabulously wealthy fashion icon, Mr. Lauder developed aristocratic tastes — and grand aspirations — at an early age. He summered in Vienna as a boy, developing a passion for Austrian art and medieval armor. At age 13, he bought his first Schiele with money from his bar mitzvah. Mr. Lauder grew so enthralled by politics as a young man that he told friends he dreamed of becoming the first Jewish president of the United States.
After studying in Brussels and Paris and at the Wharton School at the University of Pennsylvania, he joined the family business in 1964 and served in a variety of limited roles. While his older brother Leonard rose to become Estée Lauder’s chief executive, Ronald engaged in a variety of pursuits: becoming a major Republican fund-raiser; serving a rocky tenure as ambassador to Austria; running for mayor, an unsuccessful bid in which he spent $363 for each vote he received; and starting an assortment of business ventures in Eastern Europe, one of which went bankrupt during the technology bubble.
While the family’s wealth was created by hard work and ingenuity, it was bolstered by aggressive tax planning, a skill that has become Ronald Lauder’s specialty. When Mr. Lauder’s father, Joseph, died in 1983, family members fought the I.R.S. for more than a decade to reduce their estate tax. The dispute involved a block of shares bequeathed to the family — the estate valued it at $29 million, while the I.R.S. placed it at $89.5 million. A panel of judges ultimately decided on $50 million, a decision that saved the estate more than $20 million in taxes.
Estée Lauder Companies went public in 1995, and Ronald Lauder and his mother cashed in hundreds of millions of dollars in stock but managed to sidestep paying tens of millions in federal capital gains taxes by using a hedging technique known as shorting against the box.
Together, Mr. Lauder and his mother borrowed 13.8 million shares of company stock from relatives and sold them to the public during the offering at $26 a share. Selling borrowed shares in this way is referred to as a short position. Since the Lauders retained their own shares, the maneuver allowed them to have a neutral position in the stock, not subject to price swings. Under I.R.S. rules at the time, they avoided paying as much as $95 million in capital gains taxes that might otherwise have been due had they sold their own shares.
Such transactions allowed investors to cash in their shareholdings without paying taxes. But the Lauders’ use of the technique was so aggressive that Congress enacted a law afterward that limited the length of the tax deferral. And the Lauders eventually paid tens of millions in stock from the transaction.
Still, the family’s tax planning was effective enough that after Estée Lauder died in 2004, she passed down nearly $4 billion to her heirs, according to tax experts who studied the case and estimated that the estate was taxed at an effective rate of 16 percent — about a third of the top estate tax rate at the time.
Ronald Lauder has not been a director of the company since 2009, but he still serves as the president of its Clinique Laboratories subdivision. He also sublets a full floor of office space from Estée Lauder, on the 42nd story of the General Motors Building in Manhattan, which serves as the hub for the matrix of foundations, investment funds, partnerships and trusts used to control his businesses and personal finances.
His stake in Estée Lauder Companies, according to regulatory filings, is valued at more than $600 million. Nearly $400 million of that stock is pledged to secure various lines of credit. Many financial planners consider it imprudent for principal shareholders in a company to borrow against their stock. But it remains a popular way for wealthy taxpayers to get cash out of their holdings without selling and paying taxes.
There is a certain irony that Mr. Lauder has used $72 million worth of his Estée Lauder shares to carry out his latest state-of-the-art tax reduction tactic. These contracts emerged as a popular tool about a decade ago and were developed by accountants and tax planners after Congress closed down the loophole on the Estée Lauder public offering. The I.R.S. began cracking down on these contracts in 2008, and has pursued a prominent case against the billionaire Philip Anschutz, who used one to avoid more than $140 million in federal taxes.
Whether or not the I.R.S. agrees with Mr. Lauder’s contention that his contract is legitimate, some tax policy experts say the deal illustrates how the wealthy take advantage of the system.
“There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent,” said Victor Fleischer, a law professor at the University of Colorado. “Any taxpayer lucky enough to have appreciated property is usually put to a choice: cash out and pay some tax, or hold the property and risk the vagaries of the market. Only the truly rich can use derivatives to get the best of both worlds — lots of cash and very little risk.”
While Mr. Lauder’s stock holdings in publicly traded companies show some of his tactics, much of his wealth is harder to examine because it is controlled by a maze of privately held trusts and companies. Court documents, S.E.C. filings and property tax records spotlight a few of the more ordinary tax breaks used by affluent people.
Significant portions of his inherited stock are held in family trusts, which reduce the ultimate estate tax. Mr. Lauder and his wife have also established their own family trusts, allowing them to bequeath their wealth to their heirs with minimal taxes.
Other trusts and partnerships control his real estate properties in Palm Beach and the Hamptons and at 740 Park Avenue, a building that was once home to John D. Rockefeller, and is known as one of the world’s wealthiest apartment buildings.
United States tax law allows taxpayers to deduct mortgage interest on one’s homes up to $1.1 million in debt. Households with more than $1 million in income claimed more than $27 billion in such deductions from 2006 to ’09, according to a report this month by Senator Tom Coburn of Oklahoma, who said some wealthy taxpayers even deducted mortgage interest on their yachts.
And there is no limit on the amount of property taxes that can be deducted from federal income. So Mr. Lauder is entitled to deduct the $400,000 he pays annually on his Palm Beach mansion as well as what he pays on his home on Park Avenue and his holdings in the Hamptons.
“This welfare for the well-off — costing billions of dollars a year — is being paid for with the taxes of the less fortunate, many who are working two jobs just to make ends meet, and i.o.u.’s to be paid off by future generations,” said Senator Coburn, a Republican, who has called for limits on tax breaks for high earners.
Mr. Lauder deducts property taxes on all of his holdings, his spokesman said. Mr. Lauder declined to say how much that reduced his federal taxes, but said he did not receive tax benefits in some years because of the alternative minimum tax and other limits.
Charity and Tax Breaks
A week before the opening at the Neue Galerie last month, Mr. Lauder appeared at another gala, 40 blocks south, at the New York Public Library, to receive the Carnegie Foundation’s Medal of Philanthropy.
The program honored people who have given profusely to charities, including Mr. Lauder’s brother Leonard and his wife, Evelyn (who died Nov. 12), whose causes include the Whitney Museum and the pink ribbon campaign for breast cancer awareness.
Ronald Lauder and his wife, Jo Carole, were honored for a variety of contributions: the work of their joint foundation supporting hospitals, rebuilding monuments and refurbishing American embassies around the world — more than a quarter of a billion dollars over the last five years, according to his spokesman.
The Ronald S. Lauder Foundation has donated tens of millions of dollars to rebuild Jewish communities devastated by the Holocaust and communist rule. Mr. Lauder has also given to a variety of Jewish and Israeli organizations, including the World Jewish Congress, where he has served as president since 2007. Richard Parsons, the former Time Warner chairman, presented the award, calling Mr. Lauder and his wife two of “the nation’s pre-eminent supporters of the arts and civic causes.”
Mr. Lauder said his life was changed 25 years ago when he visited a kindergarten in Austria and met a classroom full of Jewish children who were refugees from Russia. Still, he said he found it odd to be referred to as a philanthropist.
“I did what I wanted to do,” he said. “What I thought was right.”
A Passion for Art
In the United States, Mr. Lauder has focused on what he calls his greatest passion — art.
In 1976, at age 32, his generous donations helped him become the youngest trustee of the Metropolitan Museum of Art. He later served as chairman of the Museum of Modern Art and remains an honorary chairman. He has donated and lent artwork to an assortment of museums. Part of his collection of lavishly decorated ceremonial armor is on display at the Met, in a gallery named for him.
As all art collectors may, Mr. Lauder is entitled to deduct the full market value of artworks donated to museums. (For years, Mr. Lauder availed himself of a quirk in the tax code that allowed donors to take a deduction for donating a portion of an artwork, without actually turning over the art. That break, known as fractional donation, was eliminated in 2006.) The tax code also allows artwork in offices to be deducted as a business expense.
Unlike some wealthy collectors who are criticized for using tax breaks to underwrite private collections that offer little access to the public, Mr. Lauder is widely praised for making his artwork a community asset.
The Neue Galerie, created by Mr. Lauder and Serge Sabarsky, who died in 1996, in a mansion once owned by Cornelia Vanderbilt, offers public viewing of an exquisite collection, worth more than $200 million even before Mr. Lauder added dozens of pieces for its 10th anniversary.
Sheldon Cohen, a former I.R.S. commissioner, said that when used as intended, the tax code’s breaks for art collectors balance private interests with the public good.
“If an art collector makes significant contributions, and the public actually gets access to the works they are donating, then the major thing the collector gets is prestige and social status,” said Mr. Cohen, now a lawyer in Washington.
At times, Mr. Lauder’s efforts to enhance his art collection have coincided with tax avoidance techniques.
In 2006, three months after he agreed to pay $135 million, a record at the time, for the Klimt painting “Adele Bloch-Bauer I,” Mr. Lauder sold a $190 million stake in his broadcast network CME.
When asked about the sale, Mr. Lauder’s spokesman said the proceeds were taxable in the United States at the full capital gains rate. Even then, though, CME’s complex corporate structure — it operates in Central Europe, is organized as a Netherlands holding company, keeps its headquarters in Bermuda and routed the $190 million sale through two Cayman Island companies — allowed Mr. Lauder to minimize taxes in countries outside the United States where it does business.
Some tax reform advocates say that it is unfair that the wealthiest can subsidize their lifestyles using myriad offshore maneuvers and complex accounting strategies.
“It’s admirable when people back their charitable impulses up with donations,” said Scott Klinger, tax policy director of the group Business for Shared Prosperity. “But the tax code shouldn’t allow the wealthy the kind of loopholes that let them, essentially, force other taxpayers to underwrite donations to their pet causes.”
Friday, November 25, 2011
Thursday, November 24, 2011
Don't Say Nobody Warned You!
The editorial in today's New York Times spells out the choices clearly.
The Poor, the Near Poor and You
What is it like to be poor? Thankfully, most Americans do not know, at least not firsthand. And times are tough for the middle class. But everyone needs to recognize a chilling reality: One in three Americans — 100 million people — is either poor or perilously close to it.
The Times’s Jason DeParle, Robert Gebeloff and Sabrina Tavernise reported recently on Census data showing that 49.1 million Americans are below the poverty line — in general, $24,343 for a family of four. An additional 51 million are in the next category, which they termed “near poor” — with incomes less than 50 percent above the poverty line.
As for all of that inspirational, up-by-their-bootstrap talk you hear on the Republican campaign trail, over half of the near poor in the new tally actually fell into that group from higher income levels as their resources were sapped by medical expenses, taxes, work-related costs and other unavoidable outlays.
The worst downturn since the Great Depression is only part of the problem. Before that, living standards were already being eroded by stagnating wages and tax and economic policies that favored the wealthy.
Conservative politicians and analysts are spouting their usual denial. Gov. Rick Perry and Representative Michele Bachmann have called for taxing the poor and near poor more heavily, on the false grounds that they have been getting a free ride. In fact, low-income workers do pay up, if not in federal income taxes, then in payroll taxes and state and local taxes.
Asked about the new census data, Robert Rector, an analyst at the conservative Heritage Foundation told The Times that the “emotionally charged terms ‘poor’ or ‘near poor’ clearly suggest to most people a level of material hardship that doesn’t exist.” Heritage has its own, very different ranking system, based on households’ “amenities.” According to that, the typical poor household has roughly 14 of 30 amenities. In other words, how hard can things be if you have a refrigerator, air-conditioner, coffee maker, cellphone, and other stuff?
The rankings ignore the fact that many of these are requisites of modern life and that things increasingly out of reach for the poor and near poor — education, health care, child care, housing and utilities — are the true determinants of a good, upwardly mobile life.
Government surveys analyzed by the Center on Budget and Policy Priorities indicate that in 2010, just over half of the country’s nearly 17 million poor children, lived in households that reported at least one of four major hardships: hunger, overcrowding, failure to pay the rent or mortgage on time or failure to seek needed medical care. A good education is also increasingly out of reach. A study by Martha Bailey, an economics professor at the University of Michigan, showed that the difference in college-graduation rates between the rich and poor has widened by more than 50 percent since the 1990s.
There is also a growing out-of-sight-out-of-mind problem. A study, by Sean Reardon, a sociologist at Stanford, shows that Americans are increasingly living in areas that are either poor or affluent. The isolation of the prosperous, he said, threatens their support for public schools, parks, mass transit and other investments that benefit broader society.
The poor do without and the near poor, at best, live from paycheck to paycheck. Most Americans don’t know what that is like, but unless the nation reverses direction, more are going to find out.
The Times’s Jason DeParle, Robert Gebeloff and Sabrina Tavernise reported recently on Census data showing that 49.1 million Americans are below the poverty line — in general, $24,343 for a family of four. An additional 51 million are in the next category, which they termed “near poor” — with incomes less than 50 percent above the poverty line.
As for all of that inspirational, up-by-their-bootstrap talk you hear on the Republican campaign trail, over half of the near poor in the new tally actually fell into that group from higher income levels as their resources were sapped by medical expenses, taxes, work-related costs and other unavoidable outlays.
The worst downturn since the Great Depression is only part of the problem. Before that, living standards were already being eroded by stagnating wages and tax and economic policies that favored the wealthy.
Conservative politicians and analysts are spouting their usual denial. Gov. Rick Perry and Representative Michele Bachmann have called for taxing the poor and near poor more heavily, on the false grounds that they have been getting a free ride. In fact, low-income workers do pay up, if not in federal income taxes, then in payroll taxes and state and local taxes.
Asked about the new census data, Robert Rector, an analyst at the conservative Heritage Foundation told The Times that the “emotionally charged terms ‘poor’ or ‘near poor’ clearly suggest to most people a level of material hardship that doesn’t exist.” Heritage has its own, very different ranking system, based on households’ “amenities.” According to that, the typical poor household has roughly 14 of 30 amenities. In other words, how hard can things be if you have a refrigerator, air-conditioner, coffee maker, cellphone, and other stuff?
The rankings ignore the fact that many of these are requisites of modern life and that things increasingly out of reach for the poor and near poor — education, health care, child care, housing and utilities — are the true determinants of a good, upwardly mobile life.
Government surveys analyzed by the Center on Budget and Policy Priorities indicate that in 2010, just over half of the country’s nearly 17 million poor children, lived in households that reported at least one of four major hardships: hunger, overcrowding, failure to pay the rent or mortgage on time or failure to seek needed medical care. A good education is also increasingly out of reach. A study by Martha Bailey, an economics professor at the University of Michigan, showed that the difference in college-graduation rates between the rich and poor has widened by more than 50 percent since the 1990s.
There is also a growing out-of-sight-out-of-mind problem. A study, by Sean Reardon, a sociologist at Stanford, shows that Americans are increasingly living in areas that are either poor or affluent. The isolation of the prosperous, he said, threatens their support for public schools, parks, mass transit and other investments that benefit broader society.
The poor do without and the near poor, at best, live from paycheck to paycheck. Most Americans don’t know what that is like, but unless the nation reverses direction, more are going to find out.
Wednesday, November 23, 2011
A True Story From The 99%
I have a friend with a very large problem. I have know him for over twenty-five years. During that time, he has run a series of small businesses, but he has never had health insurance. Two years ago, he had a major motorcycle accident. He spent a month in the hospital while they put him back together, i.e, wire together his pelvis, etc. That cost him his business and all his equity in everything except his house.
Last month, he had a massive heart attack. He said he was sitting watching TV when a huge pain spread from his left side to his right side, and he couldn't lift his arms. But instead of calling 911 and going to an emergency room, he just sat there while the pain got worse. Finally, the pain went away. But fifteen minutes later, a second attack occurred. Still, he didn't call 911. He didn't call because he didn't have insurance and he mistakenly thought they wouldn't treat him without insurance.
Over the next couple of days, he found charity services that would test him to find out what happened without charge. Indeed, he had had a major heart attach and three of his major arteries are 90% blocked. To have much chance of living further, he needs a triple set of stets implanted. That will cost somewhere around $50,000, which he doesn't have.
Now here is the problem. He is sixty-four, one year short of qualifying for MediCal.
So what does he do? Wait around for a year and hope he doesn't die? Bad odds, there. So do we just let him die? Remember the Republican debate when the audience yelled, "let him die", in response to a question from Ron Paul.
Have we become such mean spirited country that "Let him die", has become the rallying cry?
Last month, he had a massive heart attack. He said he was sitting watching TV when a huge pain spread from his left side to his right side, and he couldn't lift his arms. But instead of calling 911 and going to an emergency room, he just sat there while the pain got worse. Finally, the pain went away. But fifteen minutes later, a second attack occurred. Still, he didn't call 911. He didn't call because he didn't have insurance and he mistakenly thought they wouldn't treat him without insurance.
Over the next couple of days, he found charity services that would test him to find out what happened without charge. Indeed, he had had a major heart attach and three of his major arteries are 90% blocked. To have much chance of living further, he needs a triple set of stets implanted. That will cost somewhere around $50,000, which he doesn't have.
Now here is the problem. He is sixty-four, one year short of qualifying for MediCal.
So what does he do? Wait around for a year and hope he doesn't die? Bad odds, there. So do we just let him die? Remember the Republican debate when the audience yelled, "let him die", in response to a question from Ron Paul.
Have we become such mean spirited country that "Let him die", has become the rallying cry?
Tuesday, November 22, 2011
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I went to Harvard and Columbia.
I have one of the biggest private jets in the world take me wherever I want.
My wife wears $44,000 diamond bracelets.
I play golf every weekend at the most expensive resorts.
Goldman Sachs gives me millions of dollars.
When I retire, I’ll get paid hundreds of millions of $ in speaking fees by big companies.
I’ll make millions more as a board member of the corporations you are protesting.
MY NAME IS BARACK OBAMA, AND I AM THE 1%.”
#OccupyWallStreet