NY Times has an epiphony: Buses are Eco-Friendly!

This may come as a great shock to some, but the New York Times has found that when you take cars off the road in crowded cities and replace them with fuel efficient buses, you reduce CO2 emissions! Sound crazy? What’s really crazy is that some editor thought that a headline that references poor cities specifically would be a good idea, and that the article itself is news.

The cities of Bogota, Jakarta, Mexico City, and others are of course to be commended, but the idea that buses are something that only poor people would use is a preposterous notion that perhaps automakers would like to perpetuate. Each day, tens of thousands of normal (not so poor) people living in Switzerland hop on buses, trams, and trains to get to where they need to go. I do this myself sometimes.

The article discusses the cost of putting in rail, and here we see a potential avenue for places like the Bay Area. Anyone who knows the Bay Area knows that it is full of rolling hills, has occasional earthquakes, and lots of traffic. Land is expensive, and so a functioning bus system is an ideal addition. But in the Bay Area, those who do use public transportation outside of San Francisco do tend to be poor. That wouldn’t be the case if buses had privileged lanes and the services were both more frequent and comprehensive. Imagine taking a bus from Pleasanton to, say, Sunnyvale? Maybe you would need to change once somewhere. So long as the change is properly timed, what do you care? Who wouldn’t want such a door-to-door service?

Tax Time! Here we go again!

paperwork Some time ago I wrote about the difficulties that expatriates face when we calculate our taxes. As an American I don’t mind paying my fair share of taxes, even though I don’t live in the country, and even though America is practically the only supposedly-civilized society to tax non-resident citizens.

And as I wrote even more recently, I began the process in early March, trying to sort through this year’s paperwork. For those keeping track, this year’s taxes look to weigh in at about 350 grams, or just over 3/4 of a pound. Here are some things we expatriates have to do:

Keep track of every day we spend in America for business. This is the chunk of change the U.S. gets. I think the idea is that someone shouldn’t live just across the border in Vancouver, for instance, and then commute to Washington.
Don’t just assume Turbotax will do the right thing with the standard deduction. In fact, this isn’t just an expat thing: if you are subject to alternative minimum tax (AMT), the standard deduction is taxable, and so if you have some deductions it is sometimes better to itemize. The change from last year is that more expatriates pay AMT this year due to America’s deflated currency.
Keep track of the largest sum in each foreign account for the year. This is because the Department of Treasury wants to know if we’re laundering money (we aren’t). This one is particularly important to manage because the government claims they can seize accounts for which information is not correctly reported. It’s also not made easy for investment accounts, where portfolio values vary by the day. This is a change from last year.
Allocate deductions between those that are related to foreign income, and those that are not. The change from last year is that many could have used the standard deduction.
Properly calculate exchange rates for both income and taxes paid or accrued. For those who have to do this, www.oanda.com has a lovely web site for this purpose. Perhaps the most annoying thing for expatriates is that many of the fields we fill in need to be converted to dollars. What’s more, in Europe it is not uncommon to have multiple currency accounts, making everything just a bit trickier. This is particularly true in Switzerland where some securities are only issued in euros.

And so, the average expatriate has to fill out the following forms:

1040 (no 1040a or -EZ);
Schedules A, B, and possibly D.
Four copies of Form 1116 for Foreign tax credit (general, passive) both normal and AMT;
Two copies of Form 2555 for Foreign Income & Housing Exclusion;
Form 2441 for children;
Form 6251 for AMT;
Treasury Form TD-F 90-22.1 for foreign bank accounts;
a plethora of explanation statements for currency conversion and allocations.

If you own a home, there’s more paperwork. If you have other income, such as royalty income of some sort, you have more paperwork. If you have a disability, there’s more paperwork. If you have a home office, there’s more paperwork.

This is all for federal taxes. Nominally many states such as California would then like you to repeat the effort. If you have any deferred compensation from when you lived in the U.S., such as stock options, you will end up having to file state returns just to reclaim excess withholding. Some states want you to file for merely having attended a professional convention or conference (what some people call the basketball tax).

And so you might say, “Eliot, isn’t your time worth more than doing all of this paperwork?” No. The cost of accountants who prepare expatriate tax returns runs into the thousands of dollars for us, and ours is a relatively simple return. Often times employers will pay for these returns. If so, it’s a good deal for the employee.

Also, all of this does not take into account the taxes we must file in Switzerland. Here we do use an accountant. While my German has improved somewhat, each country has their own rules on where to fill in what column. I will say this about Zürich: they provide free copies of tax software to anyone who has to file.

Latest GM SUV: Big and 30MPG

I don’t have all the details, but a quick look at this article shows that GM’s plight was, at least in part, avoidable. The base model comes with a 182 horse power 2.4 liter engine, and gets you 30 mpg. There is no reason in the world that GM could not have produced this vehicle two years ago. In doing so, they would have seen demand shift from some of their other lines, but also from Ford, Toyota, and Dodge. In addition, they could have easily picked up some gas guzzler trade-ins. Why did they wait? It’s quite simple: they have absolutely no foresight. The GM motto could be “what works today will work tomorrow”. Of course, that motto doesn’t work.

This to me supports the Obama position that if these guys want help they have to change. I remain uncomfortable about the government running a company, and when this administration can force out long time CEO Rick Wagoner, that is what is happening.

Where then is the balance? When should the government not use its coercive power when it doles out money to broken companies? When should it let them fail? And what does one do with the thousands upon thousands of individuals who have been mishandled by bad leadership? I don’t know, but somewhere somehow they have to shoulder some of the burden. Some of this is their poor decision to tie their fates to people like Wagoner, who really did need to go.

Should I renew the WSJ?

I have enjoyed the Wall Street Journal online edition for many years. Their reporting was poignant, accurate, and generally kept within the scope of how a particular effort would have some economic impact on peoples’ lives. There weren’t excessive numbers of fluffy stories, and the right wing bent of the editors was largely kept to the editorial page. The web site itself wasn’t flashy (pun intended), and gave me a pretty good understanding of the important events of the day.

Seemingly with the takeover of the News Corporation, however, the web site has taken a turn for the worse. With more flash, more video, and more interactive grahics, it has become hard to actually find the news stories. With me reading less and less, I wonder, therefore, why I should pay more and more. The price of the Online Journal this year is going up by a honking 50%.

With the former editor of the Wall Street Journal under the previous ownership now at the Washington Post, I wonder if I should read that web site instead. And so my question to you; what is your primary news source? And what is your primary online news source in print? Aside from the WSJ, I also read the New York Times and Google News. Of course, one can always count on CNN for the “Man bites dog” stories…

Should we limit bankers’ salaries?

Bureau of Economics Today the Voice of America reported (amongst others) that President Obama will seek to cap executive pay at $500,000 for any company that accepts bailout money. This after a storm of criticism has washed over Citigroup and Bank of America about bonuses, corporate planes, and my favorite, trips to Las Vegas.

While it certainly seems to me that anyone who requires a bailout should at least have some humility, few CEOs in my own experience do. What they have is a competitive urge and drive to succeed. While in theory humility and drive do not conflict, in practice I am hard pressed to name a CEO who has both, with one exception that proves the rule, Warren Buffett.

Were we to impose humility on CEOs I would be concerned that we would end up with second string players in a Superbowl situation. On the other hand, bonuses in the face of a bailout are insulting to those taxpayers who effectively have paid them. And so some balance should be struck. My own thinking is that these guys should be capped so long as (a) they’re taking money, and (b) their company is not profitable. Shareholders shouldn’t get bonuses either, however. And so while a company is taking money it should not issue a dividend, and the money it takes shouldn’t come for free. I wonder whether the U.S. should require options of a certain amount or actual stock. This way we share in the company’s successes as well as failures.

What are your thoughts?