For People Who Live Their Work

Imagine you make $50,000 a year, but your expenses are $55,000 a year. To make matters worse, you are hopelessly in debt, and the bills just keep piling up (hopefully you just need to imagine this and it’s not reality). What would you do? Well, most of us would immediately take action to cut expenses and/or make more money. But of course the government is not like most of us.

As I look out my office window I can see a beautiful three story stone building that fills the square block across the street.  Despite the fact that it is a historically-significant building that sits on one of the most valuable locations in Portland, and borders some of the highest priced developments in the history of the city, it has been vacant for almost ten years since the federal offices moved out.

A couple years ago I attempted to buy the building, but the Federal Government that owns it was not interested in talking. I know of at least three other major developers that also tried to buy the building, but due to government bureacracy they were unable to make any headway.  So it sits unoccupied, and instead of the government realizing several million dollars by selling the building, or even attempting to lease it out, they pay maintenance fees for a big empty building, while creating a bit of a blight in the neigborhood.  Even if the government was not open to selling or leasing the building at this point, the site is surrounded by a couple dozen open parking spots that would be in high demand in this neighborhood.

OK, I know that collecting $20,000 a year for parking, or even the millions of dollars the government could reap by selling the building certainly would not cure our budget crisis, but I can’t help but wonder how many other government buildings are sitting empty across the country.  Hundreds?  Maybe even thousands?

When an individual or a business is in financial trouble they initially look at their assets to see what they can sell to raise cash. Maybe they have a little garage sale. Of course, I don’t want the government to sell our National Parks or sell and lease back the White House, but I am willing to bet that a little ”garage sale” could raise a significant amount of cash and lower expenditures.

This year our governmental deficit is projected to be $1.56 trillion dollars – or perhaps more accurately stated with all the zeros in place – $1,560,000,000,000.  The deficit alone is almost 11% of our GDP.

A trillion is a pretty daunting number to comprehend, but here  is one way to put it into perspective.

A million seconds = 12 days.

A billion seconds = 31 years.

A trillion seconds = 31,688 years.

Several states are currently debating the legalization of marijuana, and given the current fiscal issues and relaxation of policies pertaining to medical marijuana use it looks quite feasible that we will see legal pot use in the next few years.

The Federal Government and almost every state in the union are frantically searching for new revenue sources, and as is always the case, the pros and cons of any new tax are heavily debated.  In Oregon there is a move to tax the rich and add corporate taxes.  Of course, corporations and the rich argue this will hurt business, and ultimately result in less tax revenue.  I suspect the truth is somewhere in the middle.  But all this makes the legalization and taxation of marijuana particularly appealing right now.  After all, it is already being sold, just not taxed, and most users would have no objection to a better distribution system that in all liklihood lowers prices and guarantees quality while feeding the economy.  Certainly anti-drug activists would have legitimate arguments against society essentially endorsing more drug use, but the numbers and the argument that “people would do it anyway” are too compelling to ignore, and there is certainly enough societal experience with marijuana to refute some of the “gateway drug” and the other “reefer madness” arguements.  Unlike most potential tax sources, there are few that would argue against taxing it, the issue is simply the legalization.

I was suprised to learn that there is a major effort by otherwise staid and conservative economists to legalize pot based purely on economic impact.  According to a study conducted by Professor Jeffrey Miron, legalizing marijuana would save $7.7 billion per year in state expenditures on prohibition, and if pot was taxed similar to tobacco it would generate $6.2 billion dollars in tax revenue.  We would also free up enormous space in prisons, and arguably free people that don’t really belong behind bars. Another possible positive impact pertains to the costs and hassles protecting our borders. Huge amounts of time and money are spent trying to stop pot smugglers on the Mexican border, and it is a constant source of crime.

The move to legalize is even endorsed by dozens of economists, including three Nobel Laureates; the late Milton Friedman, George Akerlof, and Vernon Smith.  I used to think that conventions for economists must be among the most boring gatherings imaginable, but now I must rethink that position.  Perhaps they have Cheech And Chong perform at the cocktail party?

In any case, a $13 billion dollar plus savings warrants some serious discussion.

The Dark Lord of the religious right, Pat Robertson, sunk to new lows this week,  and also gave us a glimpse into his evil black heart, when he self-rightously claimed the devastating earthquake in Haiti was a result of the country’s ”pact with Satan”.

Though I am certainly no expert on Christianity, I seriously doubt that Jesus would look at a disaster that left tens of thousands dead and in misery and happily proclaim “you guys had it coming”.

But isn’t that the problem with any kind of religious fundamentalism.  Finding a purpose and spirituality in life is a good thing.  But any group that feels they are God’s chosen ones and everyone else should go straight to hell is really an enemy of spirituality.   I much prefer the people from any religious persuasion the believe “God is Love”, as opposed to those that think religious affiliation is some kind of path to moral superiority.

In the midst of all the debate over taxes, healthcare, Kanye West, national security, and Tiger Woods’ career, I somehow lost track of how our legislators are handling the estate tax.  Luckily a few days ago I received a bulletin from the estate planning experts at uber law firm Davis Wright Tremaine, which left me a little surprised.  Rather than me explain (and if you are like me you will get a little lost in the woods reading this), here is the email:

From Davis Wright Tremaine

Congress failed to address pressing estate and generation-skipping transfer tax matters before it adjourned in December. Consequently, as of Jan. 1, 2010, the provisions of 2001 federal tax legislation (the “2001 Act”) will cause the federal estate and federal generation-skipping transfer (GST) taxes to be repealed for one year, starting on Jan. 1, 2010.

For 2009, there was a $3.5 million exemption for each tax and a 45 percent top tax rate for each tax. Under the 2001 Act, the federal estate and GST taxes will come back into effect on Jan. 1, 2011, but with only a $1 million exemption for estate tax, a $1.1 million exemption for GST tax (indexed for inflation), and a top rate of (generally) 55 percent for each tax.

Although the U.S. House of Representatives passed a bill in December to extend the 2009 federal estate and GST tax rates and exemptions, the U.S. Senate did not act to provide any similar extension. A number of Senators have made statements regarding their intent to address this issue early in 2010.

There is no way to predict when, or if, the House and Senate will act in 2010. It is not clear whether any action by Congress during 2010 would or could be retroactive to Jan. 1, 2010. We will continue to monitor developments as the tax picture evolves.

Gift tax

The repeal of the federal estate and GST taxes does not repeal the federal gift tax, which will continue in 2010 with a $1 million exemption, but will have a top rate of 35 percent, rather than the 45 percent top rate that existed in 2009.

Current action

Meanwhile, depending on the action taken by Congress and whether such action is retroactive (and, if retroactive, whether it will be constitutional), there may be opportunities in early 2010 to make gifts at a lower gift tax rate, and to make GST tax-free transfers to grandchildren that would otherwise be subject to GST tax.

Moreover, it is important to be aware that the repeal (and assumed reinstatement in 2011) of the federal estate and GST taxes will affect many estate plans now in place. This is so because many wills (and living trusts) describe gifts in terms of estate and GST tax “exemption” amounts or other formulas tied to federal estate tax terms. Elimination of the taxes (and hence the exemptions) and the reinstatement of the taxes, but with smaller exemptions, could affect the operation of a will (or living trust) in ways that were not intended.

This would be a good time to review and adjust estate plans to be sure the one-year repeal of the taxes and its (assumed) reinstatement will not adversely impact the intended plan. There may also be non-tax related reasons to review your estate plan.

“Carryover basis” for income tax purposes

As part of the 2010 repeal of the federal estate and GST taxes pursuant to the 2001 Act, the income tax basis for property acquired from a decedent will be the lesser of the decedent’s adjusted basis or the fair market value of the property at the decedent’s death. This “carryover basis” is a significant change from the “step-up” in basis that has historically occurred at the decedent’s death.

There are two exceptions to the carryover basis provisions that allow an executor (i) to allocate up to $1.3 million to increase the basis of assets and (ii) to allocate an additional $3 million to increase the basis of assets passing to a surviving spouse or to a qualified trust for the benefit of the surviving spouse. The carryover basis law is scheduled to be in effect only for 2010.

Further changes in January 2011

As noted above, under the 2001 Act, the federal estate and GST taxes come back into effect in 2011 with a $1 million exemption for estate tax, a $1.1 million exemption for GST tax (indexed for inflation), and a 55 percent top rate. (There is also an additional 5 percent surtax for certain large estates.) The federal gift tax exemption of $1 million will continue in 2011, but with a 55 percent top rate. The carryover basis described above would not apply with regard to estates of decedents dying after Dec. 31, 2010.

As we prepare to move into a new decade. I found the following comparison between today and ten years ago quite interesting:

• The Dow was 1000 points higher ten years ago.
• There was a 34% decline in home sales last year versus ten years ago.
• There are three times as many people unemployed today versus ten years ago.

Ah, but the consistent lesson of history is that in the end it always gets better for mankind – even though there might be bumps in the road.

If you are in the advertising business – or many other industries dominated by large clients – there is nothing worse than having your account put up for review – especially if you were under the impression your relationship was solid and wonderful.

I’ve taken the liberty of reprinting an excerpt from today’s AdAge.com, written by James P. Othmer, and taken from his book Adland, that I think adequately describes the emotion of the review:

Excerpt from Adland

Being put up for review is akin to having your spouse announce in front of everyone you know that he or she no longer loves you and for the next several months he or she will be seeing other people — dozens of smarter, younger, cooler people, many of whom, by the way, you know quite well — and then having all sorts of kinky, experimental sex with the most interesting and promising of them, probably no more than six, often doing many of the things that you may have once suggested but were never allowed to.

Sometimes during this process your spouse will describe his or her ongoing antics in excruciating detail for you. Sometimes you’ll simply read a steamy, anonymous, insider’s account of it in the press. And then, after up to six months of this, six months of holding your tongue and continuing to do all of the dishes and dirty laundry and seeing to the upkeep of the home you once shared, the children that mean so much to you, you will finally get your chance to say — after I’ve given you every ounce of my energy and passion for the last xx years, after trying to rekindle better times with romantic weekends and couple’s counseling, after he or she has slept or flirted with just about every one of your friends and neighbors, not to mention several total strangers — “Here’s how I’ve changed, sweetheart, here’s why and the extent to which I’m willing to publicly humiliate myself to win you back.”
At that point, if you were the client (or spouse) would you want to take you back?

Many of my middle-aged friends are unfortunately experiencing the same problems I faced a few years ago before my parents passed away. Their once vibrant folks have reached old age, but still insist on living as if they were 20 or 30 years younger.  If this just meant they wanted to drink, dance and have lots of sex it would not be an issue. But it appears that as you become elderly one of your main desires is to maintain your freedom by doing the things you’ve always done, even if you can’t really do them anymore.  Admirable goals, but impractical for most people, and the attitude can create havoc on the children’s lives.

Case in point….my mother and father continued to drive, legally, until they were almost 90 years old.  Despite the fact that both could barely walk, had trouble turning their heads from side to side, suffered from occasional dementia, and were very hard of hearing, the State of Montana felt it was OK for them to pilot a 4400 lb. car down the road at 70 miles an hour.  Of course this terrified the entire family, and we did everything short of stealing the car to keep them off the road, but they remained adamant about their right to drive.  On many occasions I would explain in horrifying detail the implications if they harmed themselves, or even worse, hurt other people. “Dad, do you really want to go into the twilight of your life knowing you wiped out some wonderful young family just because you insisted you should drive”, I would plead.

“Oh, don’t worry”, he would just reply, “we really only drive back and forth to the grocery store”, as if they couldn’t possibly encounter another car or pedestrian on the say to Safeway.

They also remained steadfast in their desire to live alone, despite the fact that they were past the point of caring for themselves.  They absolutely rejected the idea of going to some kind of assisted living facility.  That seemed a legitimate position, as the idea of leaving your home would frighten anyone.  But they also refused to allow anyone in the house to help them.  I hired cooks, maids, nurses and caretakers – only to have my father fire them all a week or two later.  “We don’t like people in the house”, he would explain. Which was actually code for “we would rather you and your sisters take care of us”.

Don’t misunderstand.  This is not a blog bitch about my parents.  They were terrific and I miss them every day, and most of the elderly I meet share their attitudes.  But it has occurred to me that as you get older you don’t always get smarter.  Sometimes you get stubborn and silly attitudes about life that have a really negative impact on others.  So, I decided to write myself a letter, to be opened if I am lucky enough to make it to age 80 -

Dear Tim -

Wow, you’re still around.  I would have never guessed.  Anyway, a few suggestions.  Get a good ear and nose hair trimmer.  For some reason old men sprout huge growths of hair out of those orifices, and it is really unattractive.  Also, pajamas and your robe are not daytime attire.  Old age is not an excuse to be sloppy.  Get up in the morning, take a shower, and put on clean clothes. You’ll feel better and everyone else will appreciate it.  You used to ask yourself “what would Sean Connery do in this situation”.  Still good advice.

Do they still have cars?  Unless you have gone through some kind of “Six Million Dollar Man” refurbishment you probably shouldn’t be driving one.  If you can’t do ten jumping jacks, see and hear as well as you did 15 years ago, and swivel your head easily each way, you should not be behind the wheel of a car.  Take a cab, or better yet take a walk if you can.  And don’t use the excuse that “I’m different”, or “I will only drive a few blocks”.  Even though you are old it is not your right to endanger other people.

Another point. Just because you are old don”t expect your family to wait on you.  I can guarantee you nobody wants to bathe or clothe your old bones or clean your house.  If you can’t do it yourself, hire someone.  You always liked hiring people anyway.  Don’t be a pain in the ass asserting your independence by taking away someone else’s.

Try to be a wise old sage, not a grumpy old man.  And don’t be cheap.  That rainy day you’ve been saving for?  It’s raining.

Have a drink.  Shaken not stirred.  That’s what Sean would do.

You

Despite the rosy stock market, these are still tense times in the workplace. Unemployment is high, good jobs are hard to come by. So coming from someone who has hired and fired a lot of people, here are a few simple hints to hold onto your job:

1. Do the dirty work. Nobody enjoys taking difficult client calls, collecting money from past due accounts, firing people, and performing the other awful duties that are a day-to-day function of business. But if you are not capable of doing the tough jobs then you might be looking for a job. When I have to perform functions that fall under someone else’s job description it causes me to question that individual’s value to the company. The people that can perform in an organization in tough times as well as good times have the most job security.

2. Hire up. This might seem counterintuitive, but if you are a manager one way to find job security is to hire people smarter than you. Many managers do not do this, preferring to hire much less qualified candidates so they always look good in comparison. But be assured the boss notices when you staff your department with less qualified candidates, And building a great staff below you frees you for a promotion.

3. Adopt the “everything is my job” mantra. If you work for a company your ultimate job is to do everything in your power to make the company successful. The “that’s not my job” attitude isn’t acceptable in this economy. The boss notices people that take initiative to help the company cut costs, raise profits, streamline processes, and generally promote a better work environment.

Shawn Krieger of Toledo, Ohio was arrested for shoving a Salvation Army bell ringer down to the ground, yelling “I can’t stand you and your bell ringing. I hate Christmas.” Krieger then grabbed the Salvation Army pot which contained several hundred dollars, and while the bell ringer gave chase ran to a stolen pickup truck and sped away. Police arrested Krieger the next day, but they have not recovered the money.

Shawn, mellow out! Personally, I hate the guy who dresses like a cowboy and plays air guitar in front of Little Caesar’s Pizza. I really hate it when he waves that big orange foam hand at me when I drive by, trying anything to get me to pull in and buy a $5.00 pizza. But I won’t run him over and steal his air guitar or shove the big foam hand into his mouth. We all need to exercise a little self-control and try to get along. Enjoy the season!