—Tony Blair

“We know that evidence based policy is window dressing, and now, when they want us to believe them on climate science, to justify Stern’s paltry 1% of global GDP [over $600 billion]to mitigate a global horror, we doubt.”

—Dr. Ben Goldacre

” A billion here, a billion there, and pretty soon you’re talking real money.”

—Senator Everett Dirksen

Climate change! As we shiver through another cold winter day, we often wonder: why did they stop calling it “Global warming,” again?

But climate change is a serious issue. If you squint through the smoggy haze put out by 1200 limos and 140 private jets, you can see the serious faces of politicians trying to decide just how fast they can get away with spending your money. But perhaps you’ve wondered which money pits we’re going to be filling up first. With that in mind, I’d like to present the Taxrascal Climate Change Spending Guide.

Tax and spend (and spend, and spend). This one’s easy. What if we made it harder to do something that caused pollution (like manufacturing things, or transporting them to customers), and made it easier to do things that polluted less (like forming Diversity Committees or inventing new holidays)? We could save the planet!

Tax (and tax) and spend. High taxes in general might be a great way to cripple the economy, but what if you just want it to develop a limp? One suggestion is to only tax the activities that pollute the most, like drilling for oil or burning coal. That’s the theory, anyway. But whenever a particular industry’s profits are mostly determined by the government, you can bet that the industry is going to lobby hard to make sure things turn out the way it wants them to. If Exxon has ten billion dollars riding on how the government feels about it.

Use carbon credits. Carbon credits are a way to pay people for how they could pollute, but don’t. This is an elegant solution since it turns pollution into something subject to supply and demand. The devil is in the details, and the details are devilishly complicated: how do you determine who is a potential polluter? Do you really want to pay Russia and Ukraine for how inefficient they used to be, even though they still pollute a lot?? It’s a little like paying convicted criminals not to be criminals any more: sure, it might prevent repeat offenders, but it also gives everyone a good reason to be bad before they decide to be good.

Invest in “Alternative Energy.” An alternative to what, you ask? Apparently it’s an alternative to sanity: we’d be giving away money to the most expensive kinds of energy production, and taking it from the cheapest. But look at the cost of solar power:

Imagine paying ten times as much for all the energy you use! (And that’s assuming it costs what they say it does, and that we can cheaply get rid of our oil-, gas-, and coal-based infrastructure. Not likely!)

Just. Sue. Everybody. The most efficient way to separate people from their money is to give your lawyer a cut. Some of them make the process easy: the Cueto law firm is now accepting payment in carbon credits (which is like a mob lawyer handling your case for free so long as his biggest competitor suffers an unfortunate “accident”).

As you can image, this is a complex issue. Saving the world isn’t cheap, even when you’re spending other people’s money! But you can rest assured that, in the end, our political leaders will address climate change somehow. And that your wallet will be lighter because of it.

Here’s what you can do to avoid getting a raw deal when new rules come into effect

A “fat tax” has been discussed for years, but only now has it become a political possibility. Now that Barack Obama has endorsed it, it could very well happen—even in the next year.

So what can you do?

• Learn to love diet soda. Even though it’s actually worse for your health than moderate consumption of regular soda, drinking diet soda is probably going to keep you safe from the taxman.
• Try all-natural sodas. They’re high in sugar, but they’re not the target here. These sodas are hipper, less popular, and usually sold by smaller companies—all good signs that they’ll be left alone.
• Learn to make your own. Carbonated water and concentrated flavorings aren’t hard to come by, and you might just find that you like your own mixes better!
• Protest! It’s not exactly the Boston Tea Party, but taxing caffeinated drinks has never gone over well in America. If you tell your Congressman how you feel, you might be able to make a difference.

With any luck, the “fat tax” will be dropped soon. But if we were lucky, we wouldn’t have a trillion-dollar deficit, a weakening dollar, unemployment nearing 10%, and a nervous stock market.

So your best bet is to enjoy soda while you can.

Sure, it’s less convenient than just having cash, but it’s also a great way for California to advertise what a disaster area they are. It’s one thing to see on the news that they can’t figure out how to balance their budget. It’s another thing entirely to open up an envelope marked “State Tax Refund,” and find out that it’s full of what looks like monopoly money.

So thanks, Bill Lockyer! Glad you’re enjoying the Rascal. While you’re here, check out this list of the top tax blogs for more fine folks worth reading.

Husband and wife team Lester and Jeanette Mower liked the idea of trading companies for fun. The weird thing is that the confusing part is the legal part: they would create new businesses, merge them with existing public companies, and sell the stock. That meant a blizzard of paperwork, lots of legal fees, and transactions with dozens of banks and brokers. That’s the complicated part.

Next comes the simple part: once they sold their shares — they never paid taxes.

Oops.

The strangest part? their take from the scheme was $30 million. They were dodging the capital gains tax. Which means that, had they not cheated the IRS, they would be forced to make do with a mere… $24 million.

So why did they do it? It’s exactly hard to have a nice life with $24 million, especially in a low-cost state like Utah. So what’s really going on? Two possibilities:

• They had a legitimate business and a serious gambling problem. Some of the news articles mention time spent in nice casinos. Perhaps the schemers were living like regular old rich folks, one of them skimmed off the tax money to gamble it away.

• They were crooks, but the IRS busted them before the SEC could. Utah has a long history of shady stock market dealings, including a huge Uranium penny stock bubble in the 50’s. According to Forbes, it’s “by far the country’s smallest city where the scam-fighting U.S. Securities & Exchange commission has an office.”. Just based on that, there’s a chance these scammers were doing some penny-stock pump-and-dump activity, but that busting them for tax evasion would be easier (the SEC is busy these days, and the fines don’t always cover the profits, much less punish the scammers).

You can read about the whole scheme right here.

One commentator, Jeff Seemann, thinks so. Seemann claims that Sanford used stimulus money to pay for the affair:

The state of South Carolina is granted 2.8 billion dollars in federal stimulus money.
After originally rejecting the money, the SC Supremes smack Sanford down and force the state to accept the money.
Sanford later announces that he will use several hundred million dollars of the stimulus to pay down the state’s budget deficit.
Sanford’s salary is paid for from the South Carolina budget.
Sanford went to Argentina to see his mistress on the dime of the South Carolina taxpayer.

Which, if true, means that all money spent by anyone paid by the government counts as stimulus money. In other words, Jeff Seemann is also claiming that President Obama spent the stimulus on cigarettes. This, by the way, is not the first time Seemann has had any run-ins with dangerously fuzzy math.

It’s unlikely that this will damage opposition to the stimulus. Although it’s likely to sink Sanford’s political career, the enthusiasm with which people are attacking him somewhat nullifies the effect. Looking at Sanford’s announcement alone, it seemed like a dishonest person had tarred his political movement. Looking at the reaction, as well, it seems more like just another example of politicians being politicians.

Irene Prusik passed away in 2003. But Thomas Prusik-Parkin kept on collecting her benefits for years. This had to take some planning: he started by fudging the numbers on her death certificate so she wouldn’t be listed as dead. After that, it was just a simple matter of, um:

donning a wig, nail polish and dresses to impersonate his dead mom and collect $115,000 in Social Security and rent subsidies.

Prusik-Parkin really exemplifies the idea of giving people a “hand up, rather than a handout.” He had to work hard to earn the government benefits of two people. In addition to the creepy cross-dressing disguises, he sued himself for selling his house to himself, and filed a fake affadavit from a fake relative to support the claim. All that, and he still got evicted!

The New York Daily News has the whole bizarre story.

Oh, and one other thing: today, it came out that he kept the casket in his living room. Which you’d think would have been a tip-off.

Okay, that’s crazy & but it’s less crazy than using tax credits as down payments on a new house (first mentioned on Taxrascal in this real estate crisis, redux, post). At least during the dot-com bubble, people were excited about starting new companies. The real estate bubble involved people excited about other people paying too much for dirt.

What’s worse is that this has some support, from people who should know better:

“It is a very attractive offering, and basically it addresses one of the hurdles that keeps more people from buying a home – getting help with the down payment or paying closing costs,” says Bob Meighan, a vice president with TurboTax.

Yes, one of the “hurdles” to owning a home is not being able to afford one. Every month, we get more bad economic news caused by overpriced homes bought with too much borrowed money, and the most popular solution is still to help people overpay for homes, by lending them too much money.

The rest of the article has even more examples of states and lenders falling over each other to get as much financial incompetence out of every dollar of tax credits. Bailout humor is practically its own industry right now. Do we need another crisis already?

It’s just business. Even though Barney Frank expressed outrage over AIG’s recent bonuses, people are (deliberately?) forgetting that AIG is a massive company, with over 100,000 employees in 130 countries. And the team responsible for most of the offices was a remarkably tiny group of remarkably arrogant traders.

If AIG’s structured products team is collecting these bonuses, it is, indeed, an outrage. But it’s much more likely that the bonus recipients aren’t the same team at all. AIG has a huge variety of insurance businesses, and it invests the proceeds from its insurance in an incredible array of assets. Even at a time like this, there are numerous AIG employees who are capable of making the company millions of dollars (and this would be a good time for them to have some extra money).

But think about those people: how happy would they be to work for AIG? If they got stock options for good work in past years, those options are worthless; if they invested their savings in AIG stock, their retirement account just blew up. It’s a wild guess, but I’d bet that the average AIG employee has lost far more (as a percentage of their net worth, and in absolute terms) than the average American worker.

So what are those AIG employees thinking right now? Their first thought is probably something along the lines of “Who’s hiring?” Many of them won’t be able to get jobs. The ones who can demonstrate that they’re good at what they do will be able to get jobs. If AIG doesn’t do something to keep them on board, the company will be reduced to a pile of liabilities managed by mediocre employees, and constantly hoovering up your tax dollars.

When the economy is good, it’s easy to say “You have to spend money to make money.” Now that the market is in the tank, we should at least be able to agree: you have to spend money not to lose it so fast. Retaining good employees for millions is better than losing them — and losing billions, too.

But is it that big a disaster? Obama spent ten years teaching at the University of Chicago, a center of modern conservative thought. Did a decade of rubbing shoulders with Milton Friedman’s disciples rub off on him at all?

The answer is yes. In his budget speech last week, he announced several new programs that are near and dear to conservatives. Here’s why you should be excited about Obama’s new budget:

1. Did you like Ike? Obama’s infrastructure plan is finishing what Eisenhower started. Fifty years after Eisenehower spearheaded the new interstate highway systems, we’re finally going to stop scrimping on maintainence. Ike wouldn’t want to see bridges falling; neither should you.

2. Know what he means when he says ‘reform’. The people who voted for Obama didn’t vote for spending cuts. But that’s just what Obama promised when he talked about unemployment insurance. He just happened to call them ‘reform’. Just like with Clinton and welfare, ‘reform’ is Obama’s code word for giving conservatives what they want and not telling liberals what’s up. Shhhh — don’t tell them.

…despite the efforts of States to reduce improper beneft payments, over $3.9 billion in UI benefts were erroneously paid in 2008. The Administration will tackle this problem…

3. He hasn’t given up on homeland security, and he’s growing the DoD. He might see it as make-work, but at least he knows there’s work to be done. Obama plans to increase the size of the military, which amounts to a get-out-the-vote campaign for future Republicans.

4. His energy plan means less Saudi oil money and less government spending. Perhaps he’s just doing it to ensure that America’s soy latte production doesn’t endager the lives of the semi-striped South Andean tree snail, but Barack Obama is doing a lot to increase domestic energy production, and reduce reliance on foreign oil. You won’t hear any chants of “Drill, baby, drill!” at the White House any time soon, but cheap energy that funds American businesses is better than expensive oil funding foreign terror networks.

5. He wants your teacher to be paid to do a good job. No one knows quite how to fix the current dropout rate, but Obama’s willing to concede something Republicans have known for a long time: if you pay people to solve a problem, you can be someone will come up with a solution. He wants teachers’ paychecks to be based more on how well they’ve taught their students, not how pushy their union has been.

6. He’s willing to un-Enron the budget. This is the big one. Our budget has gotten out of control, and that’s mostly because it’s so easy to shuffle money around. Politicians can fudge the numbers in a way that would send CFOs to jail — and they do it. Obama has publically committed to ending the practice. Usually, a public commitment doesn’t mean much, but just by admitting that the government cooks the books, he’s made it harder for his administration to do more of the same.

7. In the end, a lot of this cancels out. If all this doesn’t convince you that Barack Obama has picked up some great ideas from across the aisle, you can take comfort. It’s likely that he won’t pass much of this budget, but when he does pass, he’s working against the fiscal laws of gravity.

His basic plan is to cut payroll taxes and give out credits — so the average worker has a little more money each week, and things like houses and tuition cost a little less. But this requires higher taxes or a higer deficit (probably both). And since a deficit leads to inflation, the loop is closed: Obama will cut taxes, and make things cheaper, leading to inflation that makes things more expensive — and forcing him to raise taxes. So we’ll be back where we started.

So, in theory, We The People own 36% of Citibank. And this is considered very big news.

But is it? Consider how much the government is already involved in Citi:

• Most of Citibank’s deposits are guaranteed by the FDIC. Which means that when you deposit money at Citibank, you’re really lending it to the government, which is lending the money back to Citibank. Citi is mostly doing the paperwork.

• Citi makes loans with those deposits. Who do they loan to? Mortgages and government bonds make up a huge chunk of the portfolios of many banks, and, once again, those are loans to the government.

• Government regulations control how much they can borrow, how much they can lend, what they can lend to, where they can lend, what kinds of loans they can resell, and who they can deal with. The government has veto power over everything Citibank does.

• Citi pays corporate taxes — over 25% of their pretax income, as of 2006 (the last time their financial statements made sense). Usually, if you got a quarter of whatever a company earned, you’d say you owned 25% of it.

• Citi pays its employees, which means it sloughs off billions of dollars in income taxes, FICA taxes, and the like.

So, let’s get this straight. Citibank is a company that helps people lend to the government, which lends to Citi so they can lend back to the government. Citibank earns money doing this, and the single largest recipient of that money is the government. The government gets to supervise every step of this process, and also collects 25% of the profits, and up to about half of the money Citi pays to its employees.

And now people are up in arms about the government buying a little more stock? Let’s be realistic. Citi isn’t being nationalized now — they’ve been about 95% nationalized for a long, long time. This is not a news story: it’s a rounding error.