All posts by Rand Simberg

Taxes Are A Drag

There are many infuriating things about the current federal tax rules, but the one that I find the most egregiously unfair and potentially damaging to the economy is the situation with deductability of interest.

In 1986, individuals were no longer allowed to deduct loan interest, except in special cases, and for their home mortgages. The arguments for this change were simplification, discouraging installment borrowing and more revenue for the government. The only valid argument is the first one, since it’s not clear that discouraging installment borrowing is a good thing for either the economy or the individual.

But it did indeed simplify taxes–there’s no longer any need to find all of your interest deductions, and add them up, since they’re no longer relevant to your return. Of course, in exchange for this “simplification,” most people pay much more in taxes than they did prior to the change. This has resulted in the growth of “mortgage lines of credit” since now the only way to make the interest deductable is to borrow money against your house.

This change was outrageously unfair, because they now get you coming and going. You still have to pay tax on interest earned, but you’re not allowed to deduct interest paid. So interest counts only when it’s incoming–not when it’s an outgoing expense, unless it’s going into some other investment (not consumption). (Thanks to Carey Gage for pointing out my previous erroneous statement, now down the memory hole).

But the situation has a more problematic effect (speaking personally)–it discourages small business formation. Suppose someone has an idea for a business startup, but limited access to capital. Well, one way to do it, if one has a good credit rating, is to do “venture capital by Visa.” Borrow the money from your credit card, and pay it and the interest back from the proceeds of the venture.

Now most financial advisors would say that this is insane. Of course, those same financial advisors would probably also say that starting your own business is insane as well, given the rate of failure of startups. So given that you’re going to be an entrepreneur anyway, it’s not that much nuttier to borrow the money to do it from Mastercard, instead of Aunt Nellie.

And therein lies the problem. Clearly, the interest that you’re paying on the loan is a business expense. But if the main thing that you need the money for is to cover your personal bills (rent or mortgage, groceries, gas, etc.) while you’re getting the business going, there’s no way to deduct it under the current rules.

Well, wait–there is one way. You can borrow the money, then relend it to the business startup, and then pay yourself a salary from the loan. This allows you to deduct the interest for the loan to your business. But there’s a big problem–it also means that you have to pay federal income taxes on it, including FICA, and possibly even things like unemployment insurance, because it’s now taxable income to you.

So that’s the choice you have. You can simply borrow money to support yourself, but you can’t deduct the interest because it’s not considered an allowable business expense, though clearly it should be. Or you can borrow the money and lend it, in which case Sam takes a huge percentage off the top before you can get it to pay your bills.

Either way, I suspect that there are a lot of businesses (including space businesses) that don’t get started because of this financial catch-22, which could be eliminated by simply returning fairness to the tax system, by either excluding interest income from taxes, or restoring the interest deduction.

More Foolishness From “Mr. Orwell”

Over at warbloggerwatchers, our new pet cowardly anonymous idiotarian comments:

Something is goin’ on. I feel the winds of change blowing through the warblogs. First it was Shakespeare Sullivan’s realization that the continuation of the Israeli offensive might lead to some kind of insane world conflict that would disasterous for us all and lead to unbelieveable amounts of human misery and suffering (see below) and now I find that Daddy Warblogs faith in the sanity of the Israeli military operation in Palestine is being shaken by the fact that mass graves filled with Palestinians civilians are being found…

Can someone get the poor creature a dictionary, and lend him some commas? It’s probably hard to afford things like that when you’re selflessly and anonymously and breathlessly fighting injustice and war crimes. I mean, whose sentences wouldn’t run on, and on, and on, like the deEnergizer (dumb) bunny?

Actually, I don’t usually criticize other people’s writing, except that in his very next post, he says:

…I see the usual suspects: Ken Layne, Will Vehrs, Rand Simberg, Tim Blair and others. The first thing I’m struck by is how mediocre and third-rate the writing is. That’s too be expected, I suppose.

At least I’m in good company. And note that in the last sentence, he uses the word “too,” when he obviously intends “to.” The irony is intense. As Christopher Johnson notes in the comments section, “Pot, meet kettle.”

Hmmm…”I’m struck by…how mediocre and third-rate the writing is…”

Maybe I’ll put that up as my new blog slogan.

Ah, well, guess I should quit reading blogs, and get back to pitchforking babies, like the rest of my partners in war crime…

[Sunday night update]

This is too hilarious.

That’s too (sic!) be expected, I suppose.

He didn’t correct it. He didn’t explain it. He just added a (sic!), as though it was someone else writing it, and he was reporting it.

What an idiot.

And he’s still got no commas in the never-ending sentence.

More Foolishness From “Mr. Orwell”

Over at warbloggerwatchers, our new pet cowardly anonymous idiotarian comments:

Something is goin’ on. I feel the winds of change blowing through the warblogs. First it was Shakespeare Sullivan’s realization that the continuation of the Israeli offensive might lead to some kind of insane world conflict that would disasterous for us all and lead to unbelieveable amounts of human misery and suffering (see below) and now I find that Daddy Warblogs faith in the sanity of the Israeli military operation in Palestine is being shaken by the fact that mass graves filled with Palestinians civilians are being found…

Can someone get the poor creature a dictionary, and lend him some commas? It’s probably hard to afford things like that when you’re selflessly and anonymously and breathlessly fighting injustice and war crimes. I mean, whose sentences wouldn’t run on, and on, and on, like the deEnergizer (dumb) bunny?

Actually, I don’t usually criticize other people’s writing, except that in his very next post, he says:

…I see the usual suspects: Ken Layne, Will Vehrs, Rand Simberg, Tim Blair and others. The first thing I’m struck by is how mediocre and third-rate the writing is. That’s too be expected, I suppose.

At least I’m in good company. And note that in the last sentence, he uses the word “too,” when he obviously intends “to.” The irony is intense. As Christopher Johnson notes in the comments section, “Pot, meet kettle.”

Hmmm…”I’m struck by…how mediocre and third-rate the writing is…”

Maybe I’ll put that up as my new blog slogan.

Ah, well, guess I should quit reading blogs, and get back to pitchforking babies, like the rest of my partners in war crime…

[Sunday night update]

This is too hilarious.

That’s too (sic!) be expected, I suppose.

He didn’t correct it. He didn’t explain it. He just added a (sic!), as though it was someone else writing it, and he was reporting it.

What an idiot.

And he’s still got no commas in the never-ending sentence.

More Foolishness From “Mr. Orwell”

Over at warbloggerwatchers, our new pet cowardly anonymous idiotarian comments:

Something is goin’ on. I feel the winds of change blowing through the warblogs. First it was Shakespeare Sullivan’s realization that the continuation of the Israeli offensive might lead to some kind of insane world conflict that would disasterous for us all and lead to unbelieveable amounts of human misery and suffering (see below) and now I find that Daddy Warblogs faith in the sanity of the Israeli military operation in Palestine is being shaken by the fact that mass graves filled with Palestinians civilians are being found…

Can someone get the poor creature a dictionary, and lend him some commas? It’s probably hard to afford things like that when you’re selflessly and anonymously and breathlessly fighting injustice and war crimes. I mean, whose sentences wouldn’t run on, and on, and on, like the deEnergizer (dumb) bunny?

Actually, I don’t usually criticize other people’s writing, except that in his very next post, he says:

…I see the usual suspects: Ken Layne, Will Vehrs, Rand Simberg, Tim Blair and others. The first thing I’m struck by is how mediocre and third-rate the writing is. That’s too be expected, I suppose.

At least I’m in good company. And note that in the last sentence, he uses the word “too,” when he obviously intends “to.” The irony is intense. As Christopher Johnson notes in the comments section, “Pot, meet kettle.”

Hmmm…”I’m struck by…how mediocre and third-rate the writing is…”

Maybe I’ll put that up as my new blog slogan.

Ah, well, guess I should quit reading blogs, and get back to pitchforking babies, like the rest of my partners in war crime…

[Sunday night update]

This is too hilarious.

That’s too (sic!) be expected, I suppose.

He didn’t correct it. He didn’t explain it. He just added a (sic!), as though it was someone else writing it, and he was reporting it.

What an idiot.

And he’s still got no commas in the never-ending sentence.

Soccermom In Space

Rita Cosby spent much of the last half of her show “Foxwire” on the space program tonight.

First up she had Jim Lovell, who’s Apollo XIII anniversary is today, on April 13, the day it launched. I’m not superstitious, but I’m still amazed at the fact that Apollo XIII (13) launched on April 13, at 13:13 (1:13 PM in the afternoon).

But she didn’t spend much time on history–she wanted to talk about air safety, for which he’s been responsible to some degree since September 11. Unfortunately, he put out the same pablum that we’ve been getting from officials since then–it’s safe to fly because we’ve upped the (idiotic) security procedures.

More interesting was her next guest, Lori Garver. She was portrayed as just an ordinary mom who is going to go into space. Now, I actually know Lori pretty well, and like her, but I thought this was a little misleading and disingenuous.

Lori is a former NASA Associate Administrator for Plans and Policy. When the new administration came in, she was shown the door (presumably being perceived as part of the Clinton team). Now she’s a VP at DFI, a “beltway bandit”–a consultant that makes a lot of money off of government contracts. She probably wouldn’t have that job if she didn’t bring a lot of connections to the table from her former government experience. In addition, she used to be the Executive Director of the National Space Society, a pro-space advocacy group (though, unfortunately, pro-space to NSS generally meant “pro-NASA”).

Now I’m cheering for her to go, and if she does, she’ll probably be a good spokesman for ordinary citizens to go into space (though she’s hardly an ordinary citizen herself, as the brief curriculum vitae described above shows). But they really should give a little more background, rather than raising false hopes that anyone can go right now, which unfortunately is still not the case, though if she goes, it may bring the day closer to making this true.

The main point of the story was that she is competing with Lance Bass, but it’s not clear that it’s competition as much as simply additional customers for the service. She also mentioned yet another candidate coming out of the woodwork, of whom I hadn’t previously heard, and whose name and affiliation I either don’t remember, or she didn’t say.

She gave a pretty good interview, as I would have expected, but I was disappointed at one point, when she was asked how her trip, and that of other space travelers, would advance the cause. She said that it would raise public awareness of it, which is true, and vague.

The correct answer (assuming that it really is a result) is that it will demonstrate that there really is a market for this, and this may spur much-needed private investment into low-cost space transportation, finally breaking us out of the government-funded rut in which we’ve been stuck for over four decades.

Sorry, Mr. Hoagland

The Thermal Emission Imaging System (THEMIS) on the Mars Odyssey spacecraft has taken pictures of the Cydonia region of Mars, and they’ve been analyzed and released today.

If that looks like a face, then I look like Cindy Crawford.

It’s very clear to me that it’s just a hill with terraces. But I’m sure that the Face-on-Mars loons will persist, claiming that the photo was doctored, or they’ll get out Photoshop and fill in the gaps, and claim that that was what it looked like prior to erosion. Or they’ll just continue to live in denial and say it does so look like a face.