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I’ve loosely been tracking the trial of Bill Cosby – the TV star from the 1980’s and 1990’s. He’s had a whole stack of sexual harassment allegations spanning multiple decades, and his accusers have accused him of giving them drugs and engaging in unwanted sexual acts with them. There’s not just one or two women accusing him of this, but dozens.

Cosby’s on trial, but because so many of the cases are so old, he can’t be prosecuted for them due to the statute of limitations (or so I’ve heard). Instead, he’s being tried for one incident that occurred in 2004.

The prosecution brought multiple witnesses, whereas the defense wrapped up their case in a few minutes, only bringing in one witness (a police detective). They went to closing arguments, and the jury went into deliberations. That was last Monday or Tuesday (it’s the following Sunday as I write this).

There’s still no verdict, and the jury has asked to review lots of the evidence presented at trial.

I’ve read some commentary by so-called jury experts who say that it’s not indicative of it being either good or bad (for Cosby). But in my view, I think it’s bad news for the prosecution and good news for Cosby.

Now, personally, I think Bill Cosby is guilty. I know he has a wholesome image, but he’s had dozens of accusers come forward and say more or less the same thing. Why he would ever feel the need to give these women drugs – relaxants – to get them to agree to have sex with him is beyond me. He’s a rich and famous celebrity, I would think he wouldn’t have had that much difficulty in finding willing participants. And the circumstances of the story being told is suspicious.

I think he did it.

But I don’t think he’ll be convicted.

For you see, a couple of months ago I was on a jury, and it was a sexual assault case. In the case, it resulted in a guilty verdict. But I feel like the case was really obvious that the guy did it. There was evidence that was too strong to ignore.

In this case, there are a bunch of complicating factors:

First, it comes down to he said, she said

This is unfair, but this ultimately comes down to a he said, she said debate, and which one has more credibility. There isn’t any physical evidence, so the jury has to decide which one they want to believe. Both agree that there was a sexual encounter, and both agree that there was relaxant drugs involved. But one says it was consensual while the other says it wasn’t.

Secondthe prosecution has to prove that Cosby is guilty; the defense doesn’t have to prove he is innocent

This is a high bar to clear in a case like this where there is no physical evidence. As a jury, you can’t just say “Well, she said it so it must be true.” The jury has to find that Cosby is guilty beyond a reasonable doubt. This doesn’t mean that there can be zero doubt, but rather that a reasonable person would find the defendant guilty given the evidence and that alternative explanations are simply implausible.

Third, I suspect that the jury does not know that much about Cosby or the other allegations against him

When I was on the jury, there is a pre-trial process where the lawyers will weed out any juror who they think should not be on the jury. This includes people who have heard about the case on the news, and you are given strict instructions to not read about the case in any way, shape, or form; or to discuss it with anyone in any detail. When you go home for the evening, you can’t discuss what case it is or even what it’s about.

During the trial I was on, we were only given the facts of the case in isolation. I had heard that Cosby had numerous sexual complaints against him, but this probably didn’t come into the trial because it’s not part of this particular case. I say that because the defendant in the case I was on had a long criminal history. That didn’t come up during the trial since it was outside of the context of the case, and I’m sure the defense lawyer argued that it shouldn’t be part of the evidence the prosecution could bring up (and he succeeded).

Cosby’s lawyer would have argued the same thing (if he didn’t, he’s a bad lawyer and there’s no way Cosby would have gotten a bad one). That means that the trial jury would most likely be made up of people who weren’t that familiar with Bill Cosby (celebrities are not universally known) and were unfamiliar with all the other complaints against him. Or, if they did know about Cosby, would have been instructed to put all of their biases aside. But anyone familiar with Cosby’s other sexual misconduct allegations would probably have been excluded from the trial jury.


So with that out of the way, why do I think Cosby will not get convicted?

Guilt beyond a reasonable doubt is hard to define, but it can be attained with the word of a credible witness. That’s the one thing this entire case likely rests on. Is Cosby’s accuser credible?

There will be some on the jury who think she is, but some who don’t. The reason the jury is asking to review her testimony is because they are trying to see if there were any inconsistencies in it. Did all the facts line up? Do they contradict at any point? Because if they do, that will undermine her credibility. There are going to be some on the jury that don’t think her testimony is credible enough to secure guilt beyond a reasonable doubt.

I say that because it’s what happened in my jury room. I’d say between 1/2 to 2/3 of us believe the defendant was guilty, even though the accuser had some minor gaps in the testimony. But the jurors who were unsure were not that willing to find a guilty verdict because they knew the implications, and believed that there was room for reasonable doubt. Reasonable doubt differs from person to person.

In the trial I was on, there was physical evidence on the victim, and there was security footage that caught the two on camera about a half hour after the incident took place. And, there was testimony from friends of the victim. But, the friends’ testimony was not enough to convince the jury, only the physical evidence on the victim and the video camera footage. Had it not been for that, I don’t think we could have gotten a unanimous verdict.

And that’s what I think is happening here. I think that 1/2 to 2/3 of the jurors think Cosby is guilty, and the rest do not – at least not beyond a reasonable doubt. Those jurors will want more than he said it was consensual, she says it was not, in order to say guilty unless they find the accuser credible.

There will be an internal debate going – why would she make it up? The defense argued that it is grandstanding, or trying to get revenge after a consensual sexual encounter, or something like that. And some jurors will hold out that possibility even though it’s not that plausible. It’s true that some men will be falsely accused of sexual assault, but it happens far less than they actually commit sexual assault, and far less than they are accused of it but are acquitted.

So I think that the jury will probably come back as a hung jury, or return a verdict of not guilty, and that’s why it has taken so long. The jury I was on took about 5 hours, and this one is now at least four days (maybe three). They will review the testimony, but you can take notes during the trial and everyone can discuss it. You can bring your own personal experience into the trial, too.

But I think Cosby is, unfortunately, going to get away with it.

Update – June 20, 2017: I found out on CNN today that the result was a mistrial, just like I predicted.

 

In May (I’m writing this a little after the fact), the wife and I took a trip to Cologne, Germany where I had a conference to attend. But before the conference, we were going to take a few days in eastern France in the Alsace region, which borders Germany. Historically this was a disputed region between the two countries. We were planning to wander around several small towns, and then perhaps also Strasbourg before heading up to Germany.

The plan was to fly direct from Seattle to the Frankfurt airport, rent a car, and then drive ~3 hours to the small town where we were staying. Then, we’d drive back the day before my conference to Frankfurt, and take the train up to Cologne.

The plan started off well. We don’t check any bags when we travel (if we can), and with our TSA pre-check we got through security in around 5 minutes. Then, we headed to the Alaska Airlines lounge where we hung out because we have a Passport card which gets us access to various lounges around the world.

It was pretty sweet.

And that’s when things started to go awry.

First, the airline we were traveling on – Lufthansa – delayed the flight. Then they delayed it again. And again. Finally, they announced that because the PA system on the plane was broken and they couldn’t fix it, they were cancelling the flight. We were now 3 or 4 hours later than our originally scheduled departure time.

We had to rebook.

We called up British Airways and got scheduled onto their next flight to London. We figured we’d catch a flight there, and then take a connection to Frankfurt. We had to reschedule our rental car at the Frankfurt airport and that took forever. We also had to recheck through security, but this time couldn’t use our TSA pre-check. The second time around through security (just heading back, rechecking in, and then getting back to almost the exact same gate) took an hour.

This time the plane took off on time, and we arrived in London just fine. Then we got on our connecting flight. But we learned about arrival that our next flight to Frankfurt was going to be delayed due to weather. And it got delayed again. And then we were going to get bumped. For you see, there were thunderstorms in the Frankfurt area that shut down the airport. So even when the airport re-opened, we were going to be delayed because all of the other planes whose flights were delayed would have to have their queues cleared.

And then there was no guarantee we’d even catch a connecting flight.

So we said “Forget it. How about if we cancel our reservations in France and just stay in central London for a few days?”

The wife and I talked it over, and we agreed. I looked up a hotel online and booked one using credit card points in downtown London, close to London Bridge. The wife cancelled the rental car and AirBNB in France, but surrendered some of the charges due to late cancellation.

Oh, well.

But London was neat. We wandered around the city for the first couple of days, checking out the bridges, the museums, some of the art galleries, and the Shakespeare Globe outdoor theater. The third day we went to Windsor Castle, and the fourth day we went to Kew Gardens which I had never heard of but thoroughly enjoyed.

The trip to London completed, and then we made it to Frankfurt. I was holding my breath because I didn’t want yet another cancelled flight. But it didn’t cancel, the weather was great, and we made it to Cologne. I went to my conference, while the wife wandered around the city.

And then we were done.

Some time ago, we discovered that our garage door opener wasn’t working. I tried to debug it, but was unable to. My ladder didn’t go high enough and I didn’t have the right tools.

Some time later, a handyman came by to inspect it. I showed him that neither the remote control opener, nor the button connected to the garage door opener, was working. He checked the electrical power and it was working, so the diagnosis was that the garage door opener motor was dead and we’d have to get a new one.

The handyman got a new one from the store but was unable to install it himself, but I said “No problem, we’ll get someone else to do it.” I secretly thought I could do it myself.

I never did it, though, as I didn’t have time.

Fast forward to today, and we’re getting our master bathroom remodeled. One of the tasks we asked one of the guys to do was to replace the garage door opener. So, this weekend, me and one of the contractors proceeded to try to fix it.

We already had the new garage door opener sitting in the garage, and I thought it would be a matter of snapping off the old one, and snapping in a new one.

Nope.

It turns out we had to disassemble the entire garage door opener – disconnect the power, take down the motor, take down the chains, take down the steel bar that connects to the door, remove the brackets connecting the bar to the wall as well as bar to the door… everything.

It was not fast work. We removed it piece by piece, and I got to use a bunch of tools I had in the garage (my ratchet set came in handy). I also had to make a couple of runs to Home Depot because some of the required pieces were not sent with the opener.

Six hours later (3 hours yesterday, and 3 hours today) we are almost finished. We just have to install a couple of motion sensors. That will complete tomorrow.

However, the uber point I am making is that I was completely wrong in my estimation that it would only take an hour or two to replace the opener. I was so very, very wrong, I couldn’t have been wronger if my name was W. Wrongie McWrongenstein.

Even though I am good at programming and abstract concepts, and not too bad at mechanical engineering, this was beyond my ability. As straightforward as the installation now was in hindsight, at the time I would have been perplexed; my patience would have grown too thin, and I also probably would have broken a whole bunch of things, too.

What I have discovered about house repair is that it is really difficult to gain all the necessary expertise yourself to maintain your own place. Basic yardwork you can do, and maybe even weeding, and maybe even painting, and maybe even gardening. But you can’t possibly know how to do all the plumbing yourself. Or electrical. Or insulation. Or structural remodeling. Or any number of tasks. You have to do it fulltime to gain the necessary expertise.

Why does that matter?

Because amateur work looks like amateurs did it. In the house we’re living in, it’s clear that amateurs did a lot of the work, and the quality is obvious. For example, the insulation in the attic was too thin, it was installed as a cost-saving measure, and it allowed rodents to get in. We remodeled the house before we moved in, but saved costs. The paint on the house interior is not that great, it scuffs up super easily. It seems like it’s just a single coat.

If I were to do all this stuff myself, it would be just as poor quality. The paint strokes would be obvious. The flooring would be uneven. The fence wouldn’t be straight. And on and on and on.

That’s why you should never buy your kids a house if they couldn’t afford it on their own. If they can’t afford the maintenance if they were to buy it on their own, they wouldn’t be able to afford it if you were to gift it to them. And that means either they’d do an amateur job and it would show, or they wouldn’t do it at all and the house would deteriorate.

And that’s all I have to say about that.

As I said in my previous post, I was on jury duty for a couple of days this month. They said the trial would take three days, but it actually only took two. There weren’t a lot of witnesses; the prosecution had 4 while the defense only had 1, the defendant.

I won’t get into the case here because it wasn’t a pleasant case. It wasn’t something trivial like a DUI or break-and-enter, but instead a sexual assault case.

Instead, I’m going to skip ahead to the jury deliberations.

We ended up coming to a verdict of guilty, and you might think I’d feel a sense of civic pride for “putting the bad guy away”. Indeed, a lot of people were joking to me “GUILTY! GUILTY!” during the trial, and afterwards when I told them what the case was about, they all reeled back in discomfort. But I didn’t feel good at all, I had a mixture of depression, sadness, relief, and guilt.

 

First, when I entered the jury room, I was reasonably convinced of the defendant’s guilt. I thought that the victim had a story that was believable; and the defendant did not, and made up his counter story, and lied under oath.

But there were other jurors who were less convinced and gave more weight to the defendant and the principle of innocent until proven guilty. I didn’t like how I was less willing to believe in the defendant’s innocence, and gave much less plausibility to the defendant’s story than others.

Our system of justice is built on the foundation of innocent until proven guilty beyond a reasonable doubt. I didn’t want to be a guy who brought biases into court (“If he’s here he must be guilty”) because if the situations were reversed and I really was innocent, I’d want the jury to understand that same principle and grant me the same standard of justice.

I was worried that I wouldn’t grant this defendant that same standard that I’d want others to grant me.

After all, some jurors were hesitant at first. Why weren’t they right and me wrong? I didn’t like that I could be wrong but was unable to see it.

 

Second, some jurors who were not hesitant admitted they were convinced by a piece of video evidence that I also found convincing.

But I didn’t need the video evidence (or maybe I did… but if I didn’t, it goes back to my first point of not being willing to grant the presumption of innocence).

But I thought to myself “We are convicting on the basis of this video. What about all of the other sexual assault cases that don’t have video evidence? All of the ‘he said, she said’ cases?”

If you’ve ever wondered how sexual assault cases have such a low conviction rate, it’s because the prosecutor can’t prove guilt beyond a reasonable doubt. You need more than just “he said, she said”. Otherwise, you have to presume that the defendant is innocent.

And I found that depressing.

It’s only luck that video evidence was in this trial, and that the defendant did something extraordinarily incriminating in the video that undercut his entire argument.

But I was overwhelmed by the role that luck played in this trial.

Third, delivering the verdict was stressful.

Extremely stressful.

As a jury, we discussed all of the evidence, and we went around the table asking for everyone’s input. We then held a vote, but didn’t come to a consensus.

We went back and discussed some more. We took another vote (secret ballot) and read out to ourselves all the votes, and they all came up Guilty.

When that last vote came up Guilty, a massive knot formed in the pit of my stomach. You know the feeling, it’s when you feel terrible because something bad happened.

Because by rendering a verdict of guilty, we forever changed the defendant’s life. He will go to prison where he will be targeted by other inmates, and he will have to register as a sex offender.

We notified the bailiff and went back into the court room where we delivered the verdict to the judge. She read the verdict aloud, and once again the knot in my stomach returned. Actually, it felt like I was punched in the chest and it physically hurt.

It wasn’t fun. I was responsible for making an impact in someone’s life and it would have negative consequences.

The defendant requested that we all say for the record that the verdict was our own decision, and we each said yes.

And then it was done.

* * * * * * *

Afterwards we talked to the attorneys about the facts of the case, and got more background that we didn’t get during the trial.

Indeed, the trial only had the facts of the case. There was virtually no background or criminal history of the defendant. After I found out about it, it probably would have changed the opinions of the jurors to come to a guilty verdict faster.

I came home, and took the rest of the day off. The mental stress was finished.

At the end of last month, and the start of this month, I was called in for jury duty. I had already deferred it once, so I had to go in this time.

I had to get up early, and I took the bus downtown to be there at 8 am. Normally, I don’t start work until a bit after 9 am. So, this was much earlier.

I got down there, went through a security screening and went to the jury room where I checked in and got my badge. I had to fill in some survey, and I told them that I took the bus downtown because they were going to reimburse me.

The King County Courthouse is a pretty nice building, but it’s in a slightly sketchier area of the city, Pioneer Square. It’s not that sketchy, but there are a lot of homeless people around and they regularly hang around.

Anyhow, I was waiting in the jury room with about 100 other people. Some were there from a case that started on the Monday of that week (I went down on Wednesday). They played a video explaining the justice process, and then I waited some more.

After more waiting, another judge or lawyer or something came in and explained the process. They then started sorting people out and the first set of people from the previous case was called out.

After more waiting, they started calling people up to the next jury. My name was called, so I grabbed my stuff and up we went to the floors above. We were led into a weird order from 1 to 53 and then brought into the court room where we saw the judge, bailiff (who explained everything to us about the process), a security guard, the prosecutor, the defense attorney, and the defendant.

This is when it began. The trial goes through a process called de jure. The lawyers explained what the charge was but then started talking a bunch of theoretical statements about the law in general, and how they might relate to the facts of the case.

The way it used to work is that each lawyer would have three minutes to talk to each member of the potential audience pool, all 53 of us. That could take 53 x 6 = 318 minutes, = 5 hours and 18 minutes.

That would be miserable, but it’s the old way.

The new way is for the prosecutor and defense attorney to talk about hypotheticals and ask the potential jury pool questions. “Juror 32, what do you think about ‘x’ ?” It was a lot like a talk show.

They asked about potential conflicts of interest, and what people thought about various things as they might relate to the case.

Some people were dismissed because they had ties to the prosecutor (they knew him), or the judge (they knew her), or they had scheduling conflicts that would cause “undo hardship.” Some people piped up and said they just didn’t want to serve, and some got dismissed but not all.

That reduced the pool from 53 to around 40. Of those, 13 would be chosen (12 jurors plus an alternate). Each lawyer gets to dismiss 7 jurors each. People would be dismissed, and we’d all get up and shift to fill in seats. The prosecutor and defense attorney make their decisions based upon the responses that jurors make, or based upon reactions that they make in response to questions.

The people in the lower numbers will end up on the jury if they aren’t initially dismissed because they start out in the jury box. The people in the benches only end up there if enough people ahead of them get dismissed.

I was the last person selected to be on the jury.

We were sworn in on a Thursday at around 3:45 pm, and then dismissed for the weekend (there is no trial on Fridays, only [potential] jury deliberations). We were told not to read up or do any research on the case.

And with that, I left to go home. The trial would start on Monday.

This week on the way home from work, I caught part of an interview with the Chairman of the House Ways and Means committee, Kevin Brady. He was talking about tax reform, and how the Republicans were planning a large tax cut. I heard something on the radio that I thought sounded ridiculous, so I went back and read the transcript.

Chairman Brady was proposing a tax cut and referred to it as paying for itself, that is, the lower revenues caused by reduced rates would be made up increased wages of 8%, and increased economic growth of 9%. If you increase the size of the economy, then a smaller rate on a larger share results in the same amount of tax revenue and that’s supposed to keep the deficit from getting out of control.

I thought that a GDP growth rate was completely ridiculous! The only countries in the world that have that high rates are developing economies – because their economies are in such a shambles, they overheat when they get an influx of new capital. Developed economies like the United States simply don’t see that type of growth anymore. If he meant 9% GDP growth per year, I threw up my hands in exasperation because he wasn’t serious.

I decided to read the Tax Foundation’s analysis of the Republican tax plan (Trump’s is similar).

Their analysis must be the one that Brady is referring to because their wage growth and GDP growth numbers are the same. They estimate the plan would lead to 0.7% after-tax income increases for the entire population (oh, gee, thanks) but would go up 5.3% for the top 1% (surprise, surprise). However, when accounting for the extra GDP growth, everyone’s income would go up by an extra 8%.

The economic impact is calculated at 9% by mostly capital investment, and some wage rate increases, and new employment.

Does this make sense?

The Tax Foundation’s estimate is based upon a super-crucial, critical factor. Everything in their analysis hinges around this one fact – that lower taxes can create economic growth by spurring investment, which increases production.

In other words, if a person pays $25,000 in taxes and gets a tax break of $3000, and now only pays $22,000, they will take that extra income and invest it or spend it in the economy. Businesses will take that extra revenue to grow their business, or take that extra investment to similarly grow their business. Our economy is built on capital allocation and consumer spending.

The assumption that people will spend money they get from a tax break is correct if it goes to the lower income people (the bottom 80%). The average person spends nearly all of their income on basic things like food, shelter, transportation, maintenance of their stuff, family, and so forth. Additional incomes goes to projects they were previously putting off.

For wealthier people, they don’t spend all the money from tax breaks. Instead, they spend some of it, or they invest it. Businesses that receive money expand – they can increase productivity or hire more workers.

But here’s the thing, tax cuts can increase economic growth if the money ends up in the economy. Yet wealthy people don’t spend or invest 100% of their rebates; instead, they save it. They don’t invest it, nor do they spend. They just save it.

There’s nothing wrong with people saving money. I save plenty of money. But the problem is that saving money doesn’t grow the economy as much as either spending or investing.

So, the assumption that tax breaks lead to capital investment is incorrect, it is an overstatement.

Capital needs to be absorbed by someone

A tax break makes the economy get bigger by capital investment if a business can expand and make more stuff if there is someone to buy it. Supply without demand doesn’t increase the economy.

If wealthy people are saving money, and businesses are producing more stuff but the people who are most likely to buy (the bottom 80%) aren’t seeing much additional income and therefore aren’t buying enough stuff, then there isn’t that much revenue growth based upon internal demand within the country.

This means that a corporation must export in order to make larger revenue based upon the capital investment. But most US companies sell locally, it’s only the large corporations that sell internationally. But those international customers need additional income, too.

The point I am making here is that capital investment needs to result in increased supply and demand. The reason why the US economy grew so much in the 1950’s and 1960’s is because of Baby Boomers; the large bulge in population resulted in increased consumers and increased demand. Business couldn’t keep up, and that led to inflation.

The US population isn’t increasing as much as it used to, so to say that economic growth can increase without a proportional increase in consumers doesn’t make sense.

That’s why developing economies can rapidly increase GDP – as their child mortality rates plummeted over the past 40 years, their populations increased. And with investment in technology, it led to more wealth for the population by turning poor people into consumers.

Tax cuts need to result in more consumers to achieve economic growth, but they mostly go to the upper classes who don’t spend or reinvest as much as the lower classes.

And the one final assumption is the last problem

The last assumption that is problematic is that the estimates go out for 10 years.

When I read that, I said “Well, this is useless as a prediction.” I recently read Nassim Taleb’s book Antifragile and he makes the case that making predictions more than 6 months to a year out is useless because there are so many variables that can change.

Basing an economic analysis 10 years out and assuming stable conditions is a recipe for disaster. Since I started working full time, I’ve lived through two recessions (2001, and 2008). I will probably experience two or three more in my working time. Every time, these recessions reduce government income and put strains on the economy.

These economic models never account for this, they are always on the happy path.

We’ve never had a happy path.

The conclusion

Ten years ago I was writing blog posts that reduced tax revenue can lead to increased economic activity. That’s somewhat true, but behavioral psychology proves that it isn’t as effective as what some economists believe, including myself (at the time).

I don’t have good answers either, as I am not an economist. But what I do know is that capital investment needs to result in increased production, or increased efficiency, and it needs to be combined with increased consumption.

That’s oversimplified, but I think it’s more accurate, too.

Recently, the White House unveiled its tax plan which President Trump said would be the largest tax cut in history. Here’s a quick screenshot of the changes:

image

I’ve been quasi-doing my own taxes for two years, and each time I’ve almost hit exactly the refund that H&R Block comes up with. So, I did the math on my own taxes for 2016 to see how much more money I would end up with.

The White House’s current tax plan does not list the income brackets that the three rates (10%, 25%, and 35%) are applied at. Instead, I went with a previous document he released last year or the year before and assumed the 10% rate is up to 75,000%, and the 25% rate is all of my household income for the rest; the 35% rate is higher than I currently earn.

Based upon these new income and tax brackets, and adjusting for the higher standard deduction of $24,000 (for both me and the wife), and eliminating the personal exemption of $8000 (for both me and the wife), and adjusting for a new capital gains tax rate and assuming the dividend tax rate is also no higher than 15%, my tax refund would increase by $4200.

Doesn’t sound too shabby, eh?

The drawbacks

The White House has called this the largest tax cut in history.

Well, that’s kind of true… while all Americans would get a reduction in taxes, the biggest gains – by far! – go to the wealthiest Americans.

First, let’s look at how this helps wealthy Americans. The argument that this isn’t a tax cut for the rich is that it phases out all deductions except for charitable contributions, and mortgage interest; and in return, it greatly increases the standard deduction by about $12,000.

If you are in the (new) highest tax bracket of 35%, then reducing your taxable income by $12,000 is worth $4200. So there’s a freebie.

Next, by reducing the top tax bracket from 39.6% to 35%, then for every dollar you make over $300,000 (estimated top bracket for married filing jointly), your tax burden goes down by 4 cents.

That doesn’t sound like much. But if you’re making $750,000/year, then you would owe (750,000 – 450,000) x 39.6% = $118,800. Under the new Trump plan, you would owe (750,000 – 300,000) x 35% = $157,500. So here you owe more.

But let’s suppose you’re really rich and make $10 million per year. Under the old tax plan, you’d owe $3.7 million. Under the proposed plan, you’d owe $3.4 million. So here, you’d owe $400,000 less.

Under the proposed plan, the higher your income goes, the more you save under the new plan. But it seems weird that you’re better off if you’re already doing pretty well to make that much money.

(This analysis doesn’t account for the higher rates in the lower brackets leading up to the highest bracket)

Second, the wealthiest people don’t earn all their income from salaries which is taxed at the highest rate. Instead, they earn a big chunk from dividends and capital gains.

The average American – myself included – don’t make the much from dividends and capital gains. I do make some but I can’t live on it, not even close. And I have a lot of money invested.

Under the Trump tax plan, which mimics the Republican tax plan, capital gains are now taxed only 15% instead of as ordinary income if you hold for less than a year (in other words, the richest people would pay at 39.6% or even 35%). Let’s assume that dividends are taxed at the same rate, only 15% for both ordinary and qualified dividends.

Since wealthy people earn so much from dividends and capital gains, this drop of up to 24% on some of their earnings represents a huge benefit. If you bought and sold a property and flipped it for $100,000 and claimed it as personal income, whereas before you might be hit with a $39,600 tax bill you would now only have a $15,000 tax bill. That’s a big savings, and only wealthy people can actually do.

Of course, wealthy people only structure their income like this in corporations, but still.

Third, look at those eliminations. Eliminating the estate tax! Today, at the federal level, if you die and your heirs inherit money or property, it is tax free up to $5 million (states may have their own rates). Since almost none of us have almost $5 million to bequeath, this doesn’t matter.

Except to the super rich. Let’s be honest, this is a way to pass down inter-generational wealth without paying taxes on it. It’s a freebie for people who are already wealthy and probably don’t need the tax break.

 

Fourth, it eliminates the alternative minimum tax (AMT). I don’t even know what this is, all explanations of it online are like “This is complicated.”

What I do know is that in 2005, President Trump earned $150 million and paid $38 million in taxes. But, that was because of the AMT. Had he not had the AMT, he only would have paid $6 million (4%).

Under his plan, he’d have paid (10% x 75,000) + (25% x [300,000 – 75,000 + 1]) + (35% x [150,000,000 – 300,000 + 1 – 24,000]) = $52 million. I’m assuming he is not writing off mortgage interest nor charitable contributions.

So, Trump would end up paying $14 million more. I’m not sure he realizes this.

Fifth, President Trump isn’t going to pass a tax increase on himself. Another part of his plan is to lower the tax rate on corporations from 35% to 15%, and also make that apply to pass-through entities… like President Trump’s real estate partnerships.

If he’s smart enough to shelter all his income in that matter (and let’s face it, I’m sure he is), then he would owe 15% x $150,000,000 = $22,500,000. That’s about $16 million less than he would have paid in 2005.

So there you have it, that’s what’s in it for him.

Conclusion

I don’t see how this tax plan helps the average American. According to the analysis I’ve seen at those two links in this post, these tax cuts only add about 1-2% to 90% of the population’s after tax income, barely anything. The largest earners in the top 1%) see their income go up by 5%, and that’s 5% on a much larger amount (I think the cut-off is around $400,000; so $20,000 at a minimum on the low end of the wealthiest people and way more for the top of that bracket). For the average person, you’ll get a few hundred… maybe.

So yes, it’s the biggest tax cut in history but it basically goes to people who already are well off.

Doesn’t seem like it helps the people who need it the most.