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The top of a form 1040 individual income tax return.
Fred Wilson, a venture capitalist at Union Square Ventures in New York, blogs daily at AVC and blogs well. His is the first post I read almost everyday, from a Google Reader that pipes in hundreds. I've written about his thinking before. There are times when he's great. And there are times when he drives me crazy.
On Sunday (he doesn't take the weekend off) the crazy was in evidence (in me, not Fred). After some speculation on where Mitt Romney's income comes from and why it's taxed at 15 percent, he goes on to discuss his own misgivings about getting a similar deal in his own business, due to the "carried interest" exception that allows him to treat income as capital gains. Then this:
...I am bothered by the unfairness of the situation. When I get a big distribution from our funds, I always ask my accountants how much of the distribution I should set aside for federal, state, and local taxes. The answer is usually something like 28% (the difference between 28% and 15% is the state and local taxes). And then I often think of my two brothers who probably pay 40-50% of their income each year in federal, state, and local taxes. It just seems so unfair.
And so lately I've been more and more attracted to the idea of a flat tax where everyone pays the same tax rate on income above a minimum amount. In this model, we would eliminate all tax deductions; for mortgages, charitable giving, for medical expenses, etc. There would be no difference in tax rates for ordinary income vs other forms of income (ie capital gains).
If we did that maybe everyone could pay a 15% tax rate like Mitt Romney and our family does. We would have a fair tax system.
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Ready for your Pinot Grande? Starbucks, the giant coffee retailer, has been undertaking a transformational experiment for the past two years. Back in 2010, on its home turf in Seattle, it began serving beer and wine and premium food in a setting that was meant to evoke a soothing nighttime experience more than a peppy morning wakeup call.
Now "Barbucks" is coming to the Southland. We don't yet know how many locations will serve alcohol along with caffeine, but we do know that the option will be available — and that Starbucks will be charging more-or-less typical prices. Wines will range from $7-9 a glass, while beer will clock in at a fairly modest $5.
We already know that Starbucks can print money, so to speak, by transforming coffee beans, milk, syrup, and other ingredients into $4 and $5 beverages. The beauty of wine and beer is that it requires much less labor to serve than producing a latte.
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First, the good news: unemployment continues to fall in California, to 11.1 percent in December from 11.3 in November. Basically, California is beginning to add jobs at a decent clip — the pace is faster than the nation as a whole. However, the state was clobbered far worse the rest of the country during the downturn, so our unemployment rate remains above the national level of 8.5 percent.
Now the bad news: for a lot of people to get a job these days, they have to create it — themselves! This is from the LA Times:
Self-employment is often the only option for workers with limited education and skills, suggested Christopher Thornberg, principal at Beacon Economics, a Los Angeles consultancy.
"They're struggling, trying to get ahead," he said. "For every guy we see selling fruit on the corner somewhere, there's another guy working as a DJ doing sweet 16 parties and probably making a good dime."
That entrepreneurial spirit is very Californian. "It's healthy," said economist Jerry Nickelsburg with the UCLA Forecast. "People stop looking for others to provide jobs and start using their own creativity."
But this surge of self-employment also underscores fraying job security and declining wages and benefits in many industries. Some hard-pressed employers are shedding full-time workers and hiring independent contractors to do the same jobs for lower pay.
Screenshot from the MegaUpload music video
USA Today reports in the federal government's shutdown of file-sharing site Megaupload yesterday:
The five-count indictment, which alleges copyright infringement as well as conspiracy to commit money laundering and racketeering, described a site designed specifically to reward users who uploaded pirated content for sharing, and turned a blind eye to requests from copyright holders to remove copyright-protected files.
It was unsealed a day after technology companies staged an online blackout to protest two related bills in Congress that would crack down on sites that use copyrighted materials and sell counterfeit goods. Congressional leaders agreed Friday to indefinitely delay action on those bills — Stop Online Priacy Act in the House and Protect IP Act in the Senate.
Critics contend SOPA and PIPA don't so much protect the rights of filmmakers, musicians, writers and artists as they do preserve an antiquated film and music distribution system.
This is one of those charts that shows the power of great graphics. In this case, the information represented here clearly summarizes the jobs crisis in Los Angeles Country following the Great Recession.
The chart comes from the Edmund G. "Pat" Brown Institute of Public Affairs' (PBI) 2011 Los Angeles State of the City Report. The individual circles provide a sense of scale for that industry — federal, state, and local government is a lot bigger than social services — while the two axis plot job growth or decline against wages. The dotted line demarcates what the PBI considers a sustaining wage, in this case $44,000 a year.
These are scary circles. Private education and health care are the only sectors that are complete above the zero level. Pretty much the entire remainder of the economy is below the line. And as you can see, there's a whole high-income cluster on the far right, the $80-100,000 region.