Month: February 2018

The Philadelphia Eagles Won the Super Bowl, but They’ll Lose on Tax Day

The Philadelphia Eagles won the Super Bowl when they defeated the New England Patriots last night. But it’s the tax man who really always wins.

Because the game was played in Minneapolis, the $112,000 bonuses paid to each player on the winning team (and the $56,000 bonuses paid to the losers), will be taxable in Minnesota, which has some of the highest personal income tax rates in the country. Each member of the Eagles will end up paying about $7,200 of their Super Bowl bonus to the state of Minnesota. That comes on top of an estimated $23,500 federal tax hit for each of the winning player’s shares.

And that’s just the start. Minnesota also imposes a so-called “jock tax” on athletes that visit the state for practices and games. Income earned during the days leading up to Sunday’s big game will be taxed at the state’s top marginal rate of 9.85 percent. Only California has a higher jock tax, and even states with no personal income taxes—like Texas and Florida, both frequent Super Bowl hosts—still hit up professional athletes, coaches, and team staff with special taxes.

Robert Raiola, chief of the sports and entertainment group at PKF O’Connor Davies, a New York–based accounting firm that specializes in working with athletes, tells Philly.com that most players on the two teams would have spent about a week in Minnesota during the lead-up to the Super Bowl. That works out to about 3 percent of their total working time for the year, and their tax bills will vary depending on how much they earned during the season. Raiola told Time that Patriots quarterback Tom Brady, who earned about $15 million in salary this year, could end up owing Minnesota roughly $43,000.

While stars like Brady can make tens of millions of dollars annually in salary alone (and yet more in paid endorsements), the average NFL player makes $1.9 million—considerably less than the average in America’s other major sports. Still, that works out to more than $3,300 in state taxes owed simply for spending a week in Minnesota. And of course those players still owe taxes in Massachusetts and Pennsylvania, along with every other state where they played a road game during the season. Tennessee is the only state without a jock tax.

You may find it difficult to feel bad about the tax hurdles that come with being paid a lot of money to play a game for a living. Even so, jock taxes are fundamentally unfair, targeting income earned from a handful of high-profile professions.

“The problem I have is [visiting athletes] are not receiving benefits that other people in that state receive who are paying the tax. It’s unfair that the athletes get singled out,” Illinois tax specialist Mark Goldstick told Stateline in 2014. “If an attorney makes a million-dollar deal in that state, they are not made to pay the tax, they are not pursued. But the fact that an athlete was in the state is in the box score.”

Chris Stephens, a law clerk with the D.C.-based Tax Foundation, writes that states like to tax visiting pro athletes because they are perceived to be easy targets for taxation. Their schedules are published in advance, some have very high incomes, and as non-residents, they cannot vote to voice their displeasure with the tax.

While some teams in low-tax states can use their location to attract highly sought after free agents, players and team staff have no choice about where they play road games. And no one is going to turn down an opportunity to play in the Super Bowl because of the potential for a multi-thousand-dollar tax hit. But all those special tax bills might help explain why more than three quarters of professional football players find themselves in financial difficulties within a few years after retirement.

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US Services Economy Spikes To 13 Year High (Or Slumps To 9-Month Low)

Last week saw mixed messages on Manufacturing (ISM down, PMI up), and Services was even more so (ISM surged, PMI down).

  • Markit PMI Manufacturing – 3 year high
  • Markit PMI Services – 9-month low
  • ISM Manufacturing – fading from multi-year high
  • ISM Services – highest since Aug 2005

Take your pick – 13-year high or 9-month low?

 

Overall the Composite US PMI dropped to its lowest since May 2017, down 3 months straight signaling an unimpressive 2-to-2.5% GDP growth…

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“A slowdown in the service sector comes as a disappointment, though was partially offset by faster manufacturing growth during the month. Combined, the two PMI surveys point to the economy expanding at a reasonably solid, albeit not exciting, 2-2.5% annualised rate at the start of the first quarter.

“Beneath the headline numbers, the survey findings are more encouraging, and suggest the pace of economic growth could accelerate in coming months. Most importantly, growth of new orders jumped higher in both sectors in January, registering the largest upturn in new work since last August and one of the biggest gains seen over the past three years.

“Back orders also showed the biggest rise for almost three years as firms struggled to cope with rising demand.

“This upturn in client demand was a key factor behind another month of strong hiring, but also encouraged firms to hike prices. Selling price inflation accelerated in both manufacturing and services as pricing power continued to return.”

And ISM soared to 13-year highs. topping all forecasts. Under the covers, ISM was incredible:

  • Employment gauge rose to 61.6, the strongest in records to July 1997, from 56.3
  • Measure of new orders surged to a seven-year high of 62.7 last month from 54.5

The month-over-month advance in orders was the second-biggest in data going back to mid-1997 and suggests businesses are responding to the passage of tax-cut legislation and boosting capital spending. What’s more, a gauge of export orders edged up to a three-month high as global economic growth picks up.

Confused? That’s the goal!

 

 

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White House: “We Are Concerned About The Market Selloff”

Having proudly owned every uptick in the stock market since his election, Donald Trump has been rather silent for the past week when it comes to commenting on the S&P’s recent reversal.

Commenting on just that, moments ago CNBC’s Eamon Jeavers reported that the White House said Monday it is worried about the U.S. stock market sell-off.

“We’re always concerned when the market loses any value, but we’re also confident in the economy’s fundamentals,” an official told CNBC.

So far on Monday, the Dow Jones industrial average briefly dropped as much as 300 before rebounding off the lows and trading -200; the S&P 500 traded about 0.6% lower, extending last week’s plunge.

As CNBC notes, President Trump has touted the strong stock market performance since his election win and has yet to deal with a significant market pullback. The Dow is up more than 30 percent since the election.

It is unclear if Trump will – and what S&P level – Trump instruct Jay Powell to start jawboning “QE4 or more”.

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Wells Fargo Plunges 9%, Biggest Drop Since August 2015 “ETFlash Crash”

Following Friday’s stunning announcement by the Fed penalizing Wells Fargo, and effectively quasi-nationalizing America’s largest mortgage lender (or maybe not largest any more), ordering it to “stop growing” until its gets its criminal house in order, on Monday Wells stock is reeling, tumbling as much as 9%, its biggest intraday drop since the August 2015 ETFlash Crash.

Not helping Wells was a batter of downgrades as analysts from Citi, JPMorgan, Morgan Stanley and RBC cut their ratings, using language like “Fed doesn’t pull any punches,” Fed “pounces,” and noting Wells Fargo “will have to be defensive” as summarized by Bloomberg.

Not everyone was gloomy, however: the Fed’s enforcement effort may create “political capital” it can use to justify regulatory relief for big banks and that Congress can use to enact legislation easing regulations, Cowen’s Jaret Seiberg writes in a note.

According to Siebert, the Fed’s enforcement action is positive for new Fed Chairman Jerome Powell, as he can start his tenure touting the action instead of answering questions about why the Fed hasn’t done anything about the fake account controversy. “Creating the perception that regulators are willing to take harsh actions against mega banks for misdeeds is critical in building and maintaining political support for bank deregulation,” Seiberg wrote.

Meanwhile, Nomura’s Bill Carcache concurs in a note that the Fed’s order “offers a healthy progress sign,” as the “unprecedented penalty may allow political pressure to ease.” He also writes that the “financial impact is manageable.”

He’s among the analysts keeping a buy rating on the bank, for now, however, he has an uphill climb to convince traders to stop selling.

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Jay Powell Sworn In As Fed Chair, Issues Statement

With Jay Powell was sworn in as the new Fed chairman,  now that Janet Yellen has moved on to greener pastures over at the blogging department at Brookings, the former banker issued a video statement on the Fed’s website in which he reiterated that the Fed will support continued growth and price stability: “Today, unemployment is low, the economy is growing, and inflation is low,” Powell said, adding that “Through our decisions on monetary policy, we will support continued economic growth, a healthy job market, and price stability.”

In an apparent comment at the recent market turbulence, Powell said that “my colleagues and I will remain vigilant, and we are prepared to respond to evolving risks” and assured Americans that “our financial system is now far stronger and more resilient than it was before the financial crisis that began about a decade ago. We intend to keep it that way.”

The video of Powell’s statement can be found here, and the transcript is below:

CHAIRMAN POWELL: Hello. This is Jay Powell.

A short time ago, I took the oath of office to become Chairman of the Federal Reserve. I am humbled and honored by this opportunity to serve the American people. And as I begin my term, I want to stress my commitment to explaining what we’re doing and why we are doing it.

Congress has assigned the Federal Reserve several important jobs. We are tasked with achieving stable prices and maximum employment. We also supervise financial institutions, including our largest banks. We play a key role in ensuring the stability of our financial system, and the integrity of our payment system.

Today, unemployment is low, the economy is growing, and inflation is low. Through our decisions on monetary policy, we will support continued economic growth, a healthy job market, and price stability.

I am also pleased to report that our financial system is now far stronger and more resilient than it was before the financial crisis that began about a decade ago. We intend to keep it that way.

My colleagues and I will remain vigilant, and we are prepared to respond to evolving risks. We will also work hard to make sure that our regulation and supervision are efficient as well as effective.

At the Federal Reserve, we know that our decisions matter for American households and businesses. Our long-standing, non-partisan tradition is to make decisions objectively, based only on the best available evidence.

My colleagues and I at the Federal Reserve will put everything we have into serving you and our country with objectivity, independence, and integrity.

Thank you.

 

 

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“Things Look Bad”: To Gartman “This Is The Most Important Trendline Of The Year”

Whereas “world-renowned commodity expert” Dennis Gartman has kept a relatively low profile for the duration of the recent market blow-off top and sudden drop, this morning he points out something interesting, and asks a question: “Is this the most important trend line of the year?“

Here’s Gartman the technician, pointing out – correctly – that the S&P has broken a key support level:

In almost text book fashion, the S&P future has fallen to … and actually a bit through…this very well defined trend line extending back into November of last year and for it to hold the market has to open sharply higher and hold those gains… events we doubt very seriously shall happen.

The trendline in question:

 

Some more of his market observations:

SHARE PRICES HAVE FALLEN PRECIPITOUSLY AROUND THE WORLD with nine of the ten markets in our Index having fallen and with 8 of those 9 having fallen by more than 1% while 2 of the 9 have fallen by more than 2%… the market here in the US and the market in Japan, with the former having fallen by 2.1% and with the latter having fallen by 2.5%. Interestingly, the stock market in mainland China has actually risen quite sharply… by 1.6% from where we had marked it on Friday… even as share prices in Hong Kong have fallen by 1.2%.

Here in the US, the slide was “across the board” as there were 8.4 companies’ shares that were down on the NYSE compared to each 1 that was higher while the were were 12.26 shares in volume to the downside compared to each 1 share that traded higher. The numbers were not quite as bad on the NASDAQ as they were on the NYSE, for there “only” 5.2 shares were trading lower compared to each 1 trading higher and the volume was “only” 3.62:1, but this was still a rout to the downside nonetheless.

Historically, the early months of the years of the past several have been, shall we say, “problematic,” with prices seemingly given to weakness. For example, in early ’14 the Dow fell from approximately 16,250 to 15,350 or 5.5%. In the first weeks of ’15 the Dow fell from approximately 18,000 to 17,100 or 5.0%. In very late ’16 until the first few weeks of ’17, the Dow fell from 18,000 toward 15,750, or a bit more than 12%. So given that the Dow’s fall from approximately 26,600 at its peak to 25,450 as of the close on Friday it is down “only” 4.3% from its high so it has some way to go to the downside just to be “average” and we fear that this shall be anything other than average.

Most importantly of all, however, is that this sell-off was not only of US shares and cannot be blamed upon rising interest rates here in the US, but rather this was a global sell off of consequence with rates rising everywhere and with the selling very nearly universal in nature. Overnight, as the markets in Asia “caught down” with the weakness in North America and Europe on Friday, US stock index futures traded sharply lower, but they have rebounded from their worst levels… marginally.

As evidenced by the chart [on top] the trend line that has defined the bull run since mid-November was tested on Friday at the market’s close but is being violated to the downside as we write despite the marginal “bounce” from the worst levels seen earlier today. In order for this trend line not to be violated the nearby S&P future has to rise 2,760 or higher and as we write it is trading 2,748.

And the conclusion:

Things look bad; need we really say more save for the fact that real, longer term support for the S&P futures exists at the 2650-2675, another 75-100 S&P points from where the markets stand as we write.

Will Gartman be right this time? Find out shortly.

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Gene Sharp, RIP: The Man Who Tried to Take the Violence Out of War

The first interview I did with Gene Sharp was for a foreign-policy roundtable back in 2003. He wrote afterward to say he mostly liked the piece but I should please not call him a pacifist again.

This took me by surprise. Sharp, who died last week at age 90, had been a draft resister during the Korean War and an editor of Peace News. He had studied Gandhi’s life and work for strategic insights, and he had dedicated his career to showing how dictatorships could be overthrown and invaders repelled nonviolently. That all sounded pretty pacifist to me. What I didn’t appreciate was how much Sharp associated the term pacifism with a purely ethical position, and how frustrated he had gotten with so many of the people who embraced the p-word. “I don’t condemn people who believe in nonviolence as a way of life,” he told me in one of our later interviews, this one conducted as the Arab Spring was surging. “For them, that may be the best they can do. And there are other people who have been witnessing and protesting and being true to their beliefs, who want to know how they can do this most effectively. But they don’t always grasp the importance of doing more than that. Not just to witness against the wickedness of the world, but how to change the world.”

Meanwhile, most of the people he was learning from weren’t pacifists at all. He had searched the historical record for empirical examples of civic resistance, ranging from mere “rude gestures” to nonviolent strikes and mutinies, even the creation of parallel grassroots systems of governance. He discovered countless case studies all over the globe. The vast majority of people conducting these protests and revolts, he noted, were not ideological pacifists; they were figuring out tactics and strategies on the fly. Sharp, in turn, focused more on how they were fighting than what they were fighting for. In the battle over Jim Crow, his sympathies were with the civil rights movement—he had taken part in a sit-in himself—but when the segregationists used a nonviolent tactic, he made sure to examine that too. After all, someone else might find it useful.

Sharp compiled a long list of those methods, and he developed a theory of power to explain why they worked (and why they sometimes didn’t). It’s a remarkable body of writing: Sharp is, I think, one of the most essential and underappreciated political thinkers of the late 20th and early 21st centuries. No mere armchair theorist, he then set about sharing his findings with dissidents everywhere from Burma to the West Bank. When the next generation of nonviolent rebels came along, they were deeply in his debt. (After the Baltic states gained their independence, one Lithuanian defense minister said of Sharp’s Civilian-Based Defense, “I would rather have this book than the nuclear bomb.”)

I’m pretty certain that Sharp never lost the moral commitments that led him to pacifism (and anarchism) in his youth. But his vision really was much larger than pacifism, and I understand why he didn’t like the label. Besides, the pacifists weren’t sure they wanted him either. My favorite Gene Sharp story is the time he gave a talk about nonviolent resistance to foreign invasions. “Someone in the audience was very shocked,” Sharp recalled, “and accused me: ‘All you are doing is taking the violence out of war!'”

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McCain, Coons To Introduce Immigration Bill Without Wall

Senators John McCain (R-AZ) and Christopher Coons (D-DE) will roll out an immigration bill on Monday which omits funding for a southern border wall, provides a path to citizenship for more “Dreamers” than President Trump has agreed to, and calls for a study to determine whether addition border security measures are needed, according to the Wall St. Journal.

Sen. John McCain (R-AZ)

The bipartisan bill aims to provide a compromise between Republicans and Democrats in order to pave the way for a budget deal before the federal government runs out of money on Friday.

While Mr. Trump said he is open to providing Dreamers with a path to citizenship, he has repeatedly said that there would be no deal without wall funding – telling Ranking Democrat Chuck Schumer “If there is no Wall, there is no DACA” 

Senate aides revealed to the Journal that the plan would allow illegal immigrants who have resided in the US since December 31, 2013 legal status and a path to citizenship – which is a much larger number of people than the 1.8 million covered under Trump’s proposal.

Sen. Christopher Coons (D-DE)

Meanwhile, the bill would require the State Department to submit a three-year strategy aimed at addressing the underlying causes of migration from Central America into the United States (because a better standard of living, lower crime, and taxpayer funded government handouts aren’t the obvious conclusion, apparently). As the Journal aptly points out, “Many Central Americans try to enter the U.S. illegally because of severe drug gang violence in their home countries.” 

The Journal reported that the legislation is “almost identical” to House legislation introduced by Reps. Will Hurd (R-TX) and Pete Aguilar (D-CA), which has the support of 27 Democrats and 27 Republicans in the House.

“It’s time we end the gridlock so we can quickly move on to completing a long-term budget agreement that provides our men and women in uniform the support they deserve,” McCain said in a statement to the Journal on Sunday. 

“While reaching a deal cannot come soon enough for America’s service members, the current political reality demands bipartisan cooperation to address the impending expiration of the DACA program and secure the southern border,” he continued. 

The legislation also calls for the hiring of 55 new judges per year, along with dozens of staff attorneys for three years, in order to clear out the enormous backlog in the immigration-court system. 

The federal government shut down for three days in January after an impasse between Senate Republicans and Democrats, who would not budge unless a deal was reached to provide citizenship for those covered under DACA. 

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Another Deadly Amtrak Crash, Dems Plan Their Own Memo, Philadelphia Eagles Win Super Bowl: A.M. Links

  • At least two people are dead after an Amtrak crash caused by the train, bound for Miami, being on the wrong track.
  • Democrats are planning their own memo on surveillance of the Donald Trump campaign.
  • The Defense Ministry of China complained a new outline of U.S. nuclear weapons policy represented a “cold war mentality.”
  • Israel sent out the first wave of deportation notices to about 20,000 African asylum seekers.
  • A man in North Carolina and his 20-year-old daughter were arrested on incest charges after allegedly having a child together.
  • The Philadelphia Eagles won their first Super Bowl.

Follow us on Facebook and Twitter, and don’t forget to sign up for Reason’s daily updates for more content.

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Blame Binge Drinking for Tulane University’s 2-in-5 Female Sexual Assault Rate

TulaneTulane University has a serious rape problem, if a recent survey can be believed: Nearly 2 in 5 female students reported being sexually assaulted. If that number is indeed real, the most likely culprit would be the university’s binge-drinking problem.

Keep in mind that the infamous 1-in-5 statistic, which supposes that between a quarter and a fifth of female university students will become victims of sexual assault, is controversial; critics point out that the pollsters who arrived at this number often ask broad questions and count as victims people who never described themselves in such terms. Such high rates of sexual violence strike many people as self-evidently ludicrous.

But Tulane, a private university in New Orleans, appears to have an even more staggeringly high sexual assault rate. I’ve parsed the data and found no obvious flaws—sexual assault was defined fairly unambiguously as “unwanted sexual contact,” “rape,” or “attempted rape.” Unwanted sexual contact was further defined as “fondling, kissing, or rubbing up against a person’s private areas of their body (lips, breast/chest, crotch, or butt), or removing clothing without the person’s consent by incapacitation or force.” Without consent was further defined as “taking advantage of me when I was too drunk or out of it to stop what was happening.”

What’s more, the survey is extremely comprehensive: 47 percent of the school’s students participated in it.

According to the survey, 41 percent of undergraduate female students experienced sexual assault while at Tulane. That includes off-campus violence, and it includes violence committed during breaks and holidays. Still, it’s an incredibly high number.

For undergraduate men, the sexual assault rate was 18 percent. Sexual assault rates were significantly higher for LGBTQ men, 44 percent of whom experienced violence, compared with just 13 percent of straight men. Students of color were less likely to be victims than white students. In all cases, the perpetrators were overwhelmingly male students; the violence was just as likely to have occurred on campus as off.

What can explain these bafflingly high rates of sexual violence? The statistics relating to alcohol abuse on campus start to suggest an answer.

“Seventy-four percent (74%) of women and 87% of men who experienced any form of sexual assault reported they were incapacitated by alcohol at the time of the incident,” according to the survey. Perpetrators were also more likely than not to be drinking alcohol, respondents said.

How many students were drinking, and how often? Quite a lot: 43 percent of undergraduate men and 39 percent of undergraduate women reported drinking alcohol three or more times each week. That’s a whole lot of 18- to 20-year-olds drinking regularly.

Tulane

Their consumption levels were also telling. For women, the most common number of drinks to have in one sitting was between three and six. A third of the men were consuming between seven and 11 drinks.

Tulane

To my mind, these numbers indicate a significant drinking problem: Many students, both male and female, are regularly and illicitly consuming copious quantities of alcohol.

A few things are worth bearing in mind.

First, a 120-pound woman who consumes more than three drinks in two hours is typically going to be very drunk. The same goes for a 180-pound man who consumes five drinks.

Second, most of these students are under the age of 21, and thus are not allowed to drink at all. They can’t drink at bars, and they are less likely to consume alcohol in the presence of authority figures. They may not know their limits very well. They might not have much experience taking care of themselves, or other people, while under the influence.

Third, people who frequently drink to excess are taking risks, even of a non-sexual kind. Very drunk people impose obligations on others to take care of them. As Emily Yoffe said in the December Reason:

You cannot do something to someone else’s body without their permission. But when you get incapacitated, you give up that integrity, because other people must take care of you.

You can walk off a roof, which has happened. You can choke on your vomit, which happens all the time. So you’re turning yourself over to other people, and let’s hope they’re all guardian angels, but they’re not always going to be. They could be bad people, or they could be fellow drunk people whose inhibitions are lowered, and you end up together, and potentially he does something criminal to you.

Yoffe and others who have pointed out the link between binge drinking and sexual assault are often derided as victim-blamers, and even now there’s a profound reticence to make the obvious connection. When asked to comment on the survey’s alcohol figures, Tulane President Michael Fitts told Washington Post readers, “It’s very, very important to note that in no way, shape or form is this blaming or holding victims responsible. Alcohol is a tool of perpetrators.”

But what if the campus would have fewer perpetrators if it had fewer abusive drinkers? The vast majority of sexually victimized students became victims while in a state of alcohol-induced incapacitation.

The current strategy—prohibition—clearly doesn’t work. It would be for the best if local decision-makers at Tulane and elsewhere could experiment with some other approach, but because of the National Minimum Drinking Age Act, states must keep the drinking age at 21 if they want federal funds. But there’s reason to believe that if teens could legally drink at an earlier age, they would encounter fewer alcohol-related campus pitfalls.

“If the drinking age were lower, it not only would move drinking out of unsupervised frat basements and into public, but might have a shot at changing our youth culture of excess, moving toward the European model of wine with dinner instead of crushing empty beer cans on one’s head,” Vanessa Grigoriadis writes in Blurred Lines: Rethinking Sex, Power, and Consent on Campus. “Lower the drinking age so that the psychological rush of trespassing, of engaging in binge-drinking culture because illegality is exciting, is deflated.”

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