Decoding the Code
The Imitation Game is the critically acclaimed story of Alan Turing, a British mathematician who is widely credited as being the father of computer science and artificial intelligence. Benedict Cumberbatch plays Turing, whose work in cracking Nazi Germany’s “ENIGMA” code helped lift the Allies to victory in World War II.
Seventy years later, retiring Senator Tom Coburn (R-OK) has picked up the code-breaking bug. But Coburn has decided to take on something even more twisted and fiendish than Nazi ciphers. That’s right — he’s just issued a 312-page “Tax Decoder” taking on our tax system. (Read it at your peril — if decoding takes 312 pages, just imagine what encrypting looks like!)
Coburn’s goal is to give us “an educational reference guide designed to equip taxpayers and lawmakers with the details needed to thoughtfully reconsider many aspects of the existing tax code.” We’re not sure why Coburn thought he needed 312 pages to make his case — anyone who’s ever seen their first paycheck and wondered “what’s FICA?” knows the system is a mess. Still, here are some highlights:
Our tax system has metastasized like a glioblastoma. “In 2012, the Internal Revenue Code contained over 4 million words, enough to fill 9,000 pages. By way of comparison, a pamphlet with the original 1913 income tax required only 27 pages for the full text of the statute.”
Our friends at the IRS really do want to help, but they’re just underfinanced, understaffed, and underfed. “From FY 2004 to FY 2012, the number of calls the IRS received from taxpayers on its Accounts Management phone lines increased from 71 million to 108 million, yet the number of calls answered by telephone assistors declined from 36 million to 31 million.”
The law is full of inappropriate and wasteful giveaways benefiting taxpayers who would do just fine without them. “There is no shortage of tax subsidies for the rich and famous, such as credits to renovate vacation homes and purchase luxury cars and deductions for yachts. McDonald’s even received tax breaks to sell Chicken McNuggets overseas.”
Too many “not-for-profit” groups serve their own interests instead of the public interest. “Lady Gaga’s 501(c)(3) Born This Way Foundation is advertised as an organization that connects youth with antibullying, mental health, and other community resources, but its main activity appears to be throwing free pre-concert tailgate parties for fans.”
Coburn’s solution probably won’t surprise you. Ideally, throw it all out and start over. At the very least, make it simpler, flatter, and fairer. “The tax code should be simple enough that everyone — including members of Congress — is capable of filling out their own tax return.” (We’ll let you decide if that means an easier tax system or smarter members of Congress!)
Still, there is some good news that we can help you put to work — and you’ll find it on the very first page. “Due to the code’s complexity, your taxes are not a simple calculation of earnings and obligations. Instead, taxes are determined by how well you can take advantage of the hundreds of tax credits, deductions, exclusions, and carve-outs tucked into the code.” In other words, all that complexity creates opportunity — and the more complicated your taxes are, the more likely we can help. So, if you’re looking for a New Year’s resolution to kick off 2015, call us and resolve not to waste any more money on taxes you don’t have to pay!
In The Headlines
The Unfriendly Skies of Southeast Asia
In the past year, Southeast Asia’s aviation industry has suffered an unprecedented number of tragedies. The latest, AirAsia Flight QZ8501, had been traveling from Surabaya, Indonesia, to Singapore when it vanished over the Java Sea. These tragedies point to several disturbing trends that raise the question of whether flying in peninsular Southeast Asia is completely safe. The air market in the region has embraced low-cost carriers, leading to a proliferation of flights throughout Southeast Asia, stretching air traffic controllers, and possibly allowing some airlines to expand too rapidly. Indonesian carriers, air traffic controllers, and Indonesian airspace in general have become notorious for weak safety regulations.
AirAsia, modeled on carriers such as Ryanair and Southwest Airlines, was the first low-cost airline to prosper in Southeast Asia, which had been dominated by state carriers until “open-skies” deals significantly expandd the market in the past decade. AirAsia allowed the growing middle classes in Asia to use air travel for pleasure as well as business for the first time. The no-frills airline charged for food, bags of any significant size, choosing a specific seat, and many other services, but it also gained a reputation for solid customer service.
AirAsia has expanded rapidly in Indonesia, the most populous nation in Southeast Asia. Indonesia-based low-cost carrier Lion Air has also grown rapidly and placed a massive order in 2013 for 234 new Airbus planes and then followed that up with an order last month for 40 more planes. Other low-cost carriers such as Citilink, Tigerair, Valuair, and many others have also built up their route networks across the archipelago.
But while air traffic has grown in the region, the increase in low-cost flights may have resulted in planes being operated by men and women with less experience than in the past. Southeast Asian airspace still has the same mountainous terrain, chaotic weather, and tough approach paths as it always did. The pilot on the AirAsia flight had about 6,000 hours of flight experience on the Airbus plane he was flying, but it is unclear whether he had experience flying at 34,000 feet or higher, where he was trying to take the plane to avoid bad weather. (The higher the plane rises, the more difficult it can be to navigate tricky conditions such as thin air and ice crystals.) Some low-cost carriers seem particularly strapped trying to find quality staff and allegedly push their pilots and crew to work too many hours in order to run so many flights. Indonesian carrier Lion Air has had at least three of its pilots arrested for crystal methamphetamine use since 2011. Crystal meth is a stimulant that can be used to stay awake and alert.
The increase in flights seems to have also taxed air traffic controllers, pilots, and mechanics operating in Indonesia. The country has become infamous for poor management of planes in the air and coming in for landings, and for lax enforcement of airlines’ need to maintain planes. Pay for air traffic controllers, mechanics, and regulators of the aviation industry remains low by regional standards, and graft is endemic at all levels of regulatory agencies in Indonesia. Yet the increase in flights into and through the country has required more air traffic controllers, mechanics, and pilots, whether Indonesia is capable of providing trained people to fill these jobs.
Indonesia’s airlines have suffered numerous deadly crashes in the past 10 years. The European Union (EU) has banned virtually all Indonesian airlines from flying in the EU because of safety concerns. Even Indonesian state carrier Garuda Indonesia was, in the 2000s, banned from flying in Europe because of its safety record. The International Air Transport Association has not allowed Lion Air to become a member because of concerns about the airline’s safety.
Indonesia, meanwhile, though a real democracy, also has been reluctant to allow outsiders complete access when working on search-and-rescue missions, perhaps because the government fears exposing the ineptitude of some of the country’s air regulators and controllers. The unwillingness of governments in the region to confront the shortcomings of their aviation systems means that more tragedies are likely to occur.
Coming to a Farm Near You – the Driverless Tractor
Farmers in tractors plowing, planting, and harvesting their fields in a cloud of dust are a classic image of rural America. It may not be for long. Companies such as Kinze Manufacturing, a large farm-equipment maker in Iowa, are developing variations of driverless tractors that would turn a century-old chore over to robots and free farmers to do other work without having to hire someone to take their place.
Autonomous harvesters and planters work much like the self-driving cars that Google, Mercedes-Benz, and Nissan are developing. Instead of navigating streets and highways, they drive back and forth across corn, wheat, and soybean fields. Precision is important because farmers need rows to be plowed and planted within a few inches of accuracy. Autonomous tractors also need to be able to make a U-turn and line up properly in the opposite direction so as not to leave any land unworked. There is also the matter of safety. Tractors often need to travel short distances on public roads to get from one field to the next; a hiccup could result in accidents.
A driverless tractor sounds like the ideal solution for any farmer: Access to 24-hour efficient farming without having to rely on increasingly rare skilled labor. Yet, the take up of such technology has been surprisingly low despite the efforts of manufacturers in the U.S. and Europe to develop the right kit.
“The technology is available and it works,” says Heribert Reiter of Agco, the world’s third-largest tractor maker by sales, based in Marktoberdorf, Germany. “The question is when it will be accepted by customers. We’ve had a lot of discussions but nobody is really convinced they want to be the first movers.” The benefits are clear, he says. “With just one driver, you can still have high yield efficiency, you can use them all year round and because they are robots, they are more precise and can do the work for longer.”
The technology gives farmers the potential to farm their land later in life too, says Terry Anderson, the lead designer at the Minnesota-based Autonomous Tractor Corporation. “A lot of farmers as they get older can no longer ride in the tractors but they still want to farm,” he says. “With our technology, they can sit down and watch many tractors do the work.”
Still, some see stumbling blocks along the way. Price is one thing—and a system requiring the purchase of two tractors can cost as much as $810,000. “Price is somewhat prohibitive,” says Rhett Schildroth, senior product manager at Kinze Manufacturing. He says his company so far has deployed three driverless tractors and concedes the technology is at its early stages when it comes to being commercially viable. The technology needs to improve too, says Mr. Schildroth. “We want to make sure that we work for every farmer in every field as there are so many different terrain types, field types and farmers that operate differently.”
Despite these limitations, Autonomous Tractor’s Mr. Anderson takes an optimistic line and predicts that 100,000 driverless tractors could be working the fields in the next decade.
Citations
1. http://buswk.co/1EDS664 – BusinessWeek
2. http://for.tn/1xGwJej – Fortune
3. http://on.wsj.com/1F2dlPd – Wall Street Journal
The Good News Is . . .
• The consumer confidence index rose 1.6 points to 92.6 which, outside of October’s 94.4, is the strongest reading of the recovery. November’s index was revised 2.3 points higher to 91.0. The “current conditions” component of the index was up 5.1 points to 98.6, a strong gain and the best since the recovery began. The “jobs-hard-to-get” subcomponent showed special strength, at 27.7% vs November’s 28.7% in an improvement that could mean a strong December employment report.
• Nike, Inc., the world’s leading designer, marketer and distributor of athletic footwear, apparel, equipment and accessories for sports and fitness activities, reported earnings of $0.74 per share, an increase of 25.4% over year-ago earnings of $0.59. The firm’s earnings topped the consensus estimate of analysts by $0.04. The company reported revenues of $4.4 billion, an increase of 14.8%. Management attributed the company’s results to the strong performance of its Nike and Converse brands, as well as improvement in its overall gross margin.
• The Chinese conglomerate Fosun International has agreed to acquire the Meadowbrook Insurance Group of Southfield, Michigan, for $8.65 a share in cash, or $433 million. Founded in 1955, Meadowbrook sells and underwrites specialty property and casualty insurance programs. It operates six insurance carriers. The company will continue to operate under the Meadowbrook brand name when the transaction closes. Fosun has more than one third of its total $50 billion in assets invested in insurance businesses around the world, and this deal will allow it to establish a presence in the important U.S. property and casualty insurance market.
Citations
1. http://bloom.bg/1bidM2T – Bloomberg
2. http://www.cnbc.com/id/18080780/ – CNBC
3. http://swoo.sh/14lxwaV – Nike Inc.
4. http://nyti.ms/147qNQU – NY Times Dealbook
Planning Tips
Tips for the New Credit Card
In 2015, you may want to pay closer attention to your credit cards. The coming year is shaping up to be the biggest year for credit card changes since the Credit CARD Act came out and shook things up in 2009. Below are some guidelines for the changes you are likely to see in your credit cards.
Look for new credit card technology to arrive soon – One of the biggest changes, EMV technology, will put new credit cards in most shoppers’ hands by the end of 2015. Computer chips embedded in these cards generate a unique transaction code every time you use them for a purchase, offering greater protection against fraud. There’s no need to apply for a new credit card to get one of these more secure cards, as issuers are already mailing them out.
More support for “mobile wallets” – As a side effect of the new high-tech cards, you may find there is also more opportunity to use a mobile wallet. Many of the new point-of-sale terminals that retailers are installing to read the new chip cards also work with the technology behind Apple Pay and other mobile wallets.
Continue to check your statements – Even with the added security measures, monitoring your credit card statements is still going to be important. This year is the beginning of a transition period where issuers will be sending out the new cards, but not everybody will have them right away. Not all stores have the terminals yet, and not all of those that do have turned them on. Until that time arrives, hackers can still commit the same kind of large-scale data breaches shoppers have seen plenty of in recent years at chains like Target, Home Depot and Michael’s.
Re-evaluate your cards’ interest rates – You may also want to think again about whether you have the right cards in your wallet, in light of the potential for rising interest rates. It is highly likely the Federal Reserve is going to raise interest rates in 2015. If you are carrying a balance, consider switching to a fixed-rate card because the rates will not fluctuate like those of variable-rate cards. They are rare, but a few community banks and credit unions still offer them. Or look into balance transfer offers. Those are typically fixed-rate offers, and a lot of them extend as far as 18 months. Whatever option you choose, take action before the Fed announces a rate hike, something many Fed watchers expect will happen next summer. When that occurs, offers can change literally overnight.
Re-examine your benefits – While you are checking terms, take a hard look at your card benefits. Rewards have gotten more enticing in recent months. In addition to the valuable ones that consumers often miss, like price adjustments and extended manufacturer’s warranties, many cards now include regular free looks at your credit score. Discover Card, Barclaycard US and First Bankcard have already announced such programs, and Citibank said recently it will start sharing scores with cardholders in January.
Citations
1. http://read.bi/1l5T3Hg – Business Insider
2. http://usat.ly/1pPkSKp – USA Today
3. http://www.cnbc.com/id/102277146 – CNBC
4. http://bit.ly/1BuoC5f – CreditCardscom
5. http://1.usa.gov/14lxDDl – Answers.USA.gov
