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Monthly Archives: September 2012

“Despite 2011’s marking the second full year of the recovery, poverty continued to rise in many regions.  An estimated 335,760 people fell into poverty in California alone last year, pushing up the state’s poverty rate to 16.6%… [Further] with jobs scarce, many Americans have accepted pay cuts to take available jobs.”  

That doesn’t sound so good now does it?

Article below by Josh Mitchell of the WSJ:  

The income of the typical U.S. family fell or was flat in almost every state last year, with the drop particularly steep in places where the economy has been hit hard by the housing bust.

The median annual household income—the point on the income scale at which half earn more and half earn less—fell in 18 states in 2011 from a year earlier after adjusting for inflation, according to a Census Bureau report to be released Thursday.

The sharpest drop occurred in Nevada, where median income fell by 6%. The median fell by 3.8% in California and by 2.9% in Arizona and Florida. Those four states are among those that have seen the biggest falls in home values and housing construction since the financial crisis, and where Americans are still struggling with the resulting heavy debt and high unemployment.

Nationally, the median income dropped by 1.3% to $50,502 in 2011. A separate report last week reported a slightly different median income level, but either way, the number is at a level last seen in the mid-1990s, continuing a long period of stagnant or falling wages since an all-time peak in 1999.

Last week’s report focused on the national picture of income and poverty, while Thursday’s data provide detail on the health of the recovery at the state and local level. It shows that despite 2011’s marking the second full year of the recovery, poverty continued to rise in many regions. An estimated 335,760 people fell into poverty in California alone last year, pushing up the state’s poverty rate to 16.6%. Poverty is defined as an annual income of $23,021 or lower for a family of four.

“These are also the states that boomed the most, so we’re talking about a higher peak to fall from,” said Rakesh Kochhar, an economist at the Pew Research Center.

These regions are still suffering from the aftereffects of the financial crash, which left a glut of housing that depressed home values, Mr. Kochhar said. Many families have seen their wealth decline as a result and have cut spending, which in turn has hurt businesses. Companies, in turn, have put off hiring.

With jobs scarce, many Americans have accepted pay cuts to take available jobs. Donna Durham, 57 years old, of Lakeland, Fla., is earning $2 an hour less than she was making before the recession, when she worked full-time as a machine operator at an embroidery shop. Since being laid off during the downturn, she has rotated among three part-time jobs and now makes about $1,700 a month before taxes—barely enough to keep up with her bills. “I work all the time, odds and ends jobs, whatever I can find,” Ms. Durham said.

Ms. Durham earned a diploma at a technical school in 2009 in hopes of landing a job designing architectural blueprints with computer software. Those jobs have been taken by laid-off engineers who settled for lower salaries, Ms. Durham said.

In Lakeland and Winter Haven, a region in central Florida, the median income fell by 5% last year to $40,272—the steepest decline among any large metro area in the state.

The Census report is part of the American Community Survey, a continuous report that collects a wide range of demographic, social, economic and housing data. It samples more than 3.3 million addresses per year.

Median income fell in 18 states last year, against 35 that saw drops in 2010. Maryland had the highest median income last year, at $70,004, while Mississippi had the lowest, at $36,919.

One outlier was Vermont, the only state to register a statistically meaningful increase. The typical family’s income rose 4% to $52,776, the data show, while the state’s poverty rate fell

Art Woolf, a University of Vermont economist, said the state’s small population—about 626,000—makes it prone to larger-than-usual swings in the data.

Nonetheless, he said the Census data on income are consistent with a similar rise in state-tax revenue. Mr. Woolf said Vermont’s birthrate has historically been low and that younger workers are fleeing the state for warmer and more-populous areas. That has left a relatively small pool of job seekers for available jobs, pushing up salaries, he said. The state’s unemployment rate for July, 5%, was among the lowest in the nation.

 

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More excellence use of our tax dollars by responsible, upstanding government employees.  My favorite part of this story is that the pilot of the helicopter “has been relieved and reassigned to administrative duties… .” – thebrackpipe.com

From NBC News – U.S. Customs and Border Patrol officials are investigating claims that one of its helicopters was used to help a teenager invite a girl to homecoming.  While on a routine mission over northern Virginia last Wednesday, a CBP helicopter was allegedly used by a Department of Homeland Security employee to fly over his son’s high school and drop a stuffed animal with the invitation, NBCWashington.com reported.

Students, who were just being released from classes for the day, watched excitedly as the helicopter hovered close to the football field and dropped a stuffed bulldog with a red bandanna parachute to the ground.  Then students said they saw the junior boy, carrying pink roses, walking toward the senior girl and leading her to the football field to collect the stuffed animal, which delivered the message, “Fall Fest?,” The Washington Post reported.

Irene Cromer, a Prince William County Public Schools spokesperson, told The Washington Post that the boy’s father asked the principal for permission to have a helicopter fly in and drop the stuffed animal.

“It was completely authorized,” Cromer said. “They did ask for permission. They were granted permission.”

It’s unclear how the incident was planned and who was flying the helicopter, but the boy’s father is a senior official in air operations at the U.S. Customs and Border Protection.

In a statement, Michael Friel of U.S. Customs and Border Protection said, “CBP management is looking into the matter and the pilot in command of the aircraft has been relieved and reassigned to administrative duties pending completion of the review of the incident.”

Patriot High School’s Fall Festival is Saturday, September 29.

Commentary from the brackpipe:  The Union Bank of Switzerland (UBS) undertook efforts to promote tax evasion among it’s wealthiest clients for decades.  UBS had allowed wealthy people world-wide to evade taxes and paid the US Government $780 million to resolve a criminal case involving secret offshore accounts.  Earlier this year, Switzerland’s oldest bank, Wegelin AG, ceased doing business under that name after the U.S. indicted the bank and several of its employees.

What’s nuttier is that a UBS Banker and convicted felon who exposed the banks actions received the biggest whistleblower award in US history!  Think about this – the felon, Bradley Birkenfeld, was driven to criminal action BECAUSE of greed and now gets a huge cash payout for his whistle-blowing efforts.  Hmmmm… is that like giving the convicted crack dealer a truckload of crack for turning in his friends?

See full article below:

From WSJ.com – by Laura Saunders and Robin Sidel 

A former UBS AG banker who helped the U.S. government unleash an international crackdown on tax evasion was awarded $104 million in what is believed to be the largest-ever whistleblower payout to an individual.

Bradley Birkenfeld, 47 years old, began cooperating with U.S. authorities in 2007, while still at UBS. He provided prosecutors with detailed descriptions of the bank’s efforts to promote tax evasion and confessed to running errands for rich clients, including one instance when he sneaked diamonds into the U.S. in a toothpaste tube.

The case lifted the veil of Swiss bank secrecy that for decades had allowed wealthy people world-wide to evade taxes. UBS in 2009 agreed to turn over the names of more than 4,000 account holders who were U.S. taxpayers and pay $780 million to resolve a criminal case involving secret offshore accounts.

Since then, more than 33,000 U.S. taxpayers have confessed to holding undeclared overseas accounts and paid more than $5 billion in taxes and penalties.

Mr. Birkenfeld also was implicated. He pleaded guilty in 2008 to one count of conspiracy to defraud the U.S., a felony, and was given a 40-month sentence. He currently is in New Hampshire finishing his sentence in home confinement.

Under a 2006 law, the Internal Revenue Service can pay whistleblower awards of up to 30% of the collected proceeds.

The massive award, paid out last week to a felon still serving time, shows the lengths the agency now is willing to go to collect unpaid taxes, experts said. “If Brad Birkenfeld can get an award, then many company insiders will have no problem getting one,” said Scott Knott, an attorney in Washington who specializes in tax whistleblower lawsuits.

The law doesn’t preclude paying money to convicted felons, as long as they didn’t plan or initiate the evasion.

“The IRS encourages courageous actions,” said Sen. Charles Grassley (R., Iowa), who sponsored the law. “An award of $104 million is obviously a great deal of money, but billions of dollars in taxes owed will be collected that otherwise would not have been paid as a result of the whistleblower information.”

Mr. Birkenfeld’s lawyers acknowledged their client wasn’t above reproach.

“As Brad has shown, encouraging knowledgeable insiders to stick their necks out is often the only way we can ever find out about tax cheating by the fat cats,” said his lawyer, Dean Zerbe, in a news conference.

The award was paid out last week. Mr. Zerbe said Tuesday that corrections officials wouldn’t let Mr. Birkenfeld comment. The IRS doesn’t announce whistleblower awards, but an agency spokesman confirmed the payment, adding that Mr. Birkenfeld signed a disclosure waiver.

Experts who track whistleblowers said Mr. Birkenfeld’s payment is the largest ever.

The award could also persuade other whistleblowers to come forward under a broader corporate whistleblower rule revised in 2009 and 2010. There already have been large payments made under that statute.

In 2010 the U.S. government paid $96 million to Cheryl Eckard, a former quality-assurance manager at GlaxoSmithKline PLC who helped the government win a guilty plea and a $750 million payment from the drug company to settle an investigation of manufacturing deficiencies.

The global crackdown on tax evasion isn’t yet over. Earlier this year, Switzerland’s oldest bank, Wegelin AG, ceased doing business under that name after the U.S. indicted the bank and several of its employees.

In July, German authorities raided the homes of Credit Suisse Group AG clients who were suspected of evading taxes. That case centers on about 5,000 clients who might have bought insurance policies at a unit of the Swiss bank as a way to earn tax-free interest on savings.

The inquiries have shaken up the clubby world of private banking so much that Switzerland, long a bastion for the rich, has lost some of its cachet. Alois Pirker, a research director at Boston consulting firm Aite Group, estimates that Swiss private-banking fees have fallen at least 25% in the past two years because foreign clients no longer see an advantage to stashing money there.

“The business that remains there is under extreme fee pressure, and the dust hasn’t settled yet,” Mr. Pirker said. He says wealthy Americans are moving funds to other tax havens, such as the Cayman Islands, Monaco and some Asian countries.

Mr. Birkenfeld, the son of a neurosurgeon, grew up near Boston and graduated from Norwich University, a military school in Vermont, in 1988. Later he worked for Credit Suisse and Barclays PLC in Geneva before moving to UBS in 2001 as one of about 50 private bankers at the firm in Geneva.

Prosecutors said Mr. Birkenfeld described helping clients hide wealth by purchasing art and jewels from funds in Swiss accounts. He said bankers used encrypted laptops and erased references to U.S. banking clients in communications.

He was convicted on the conspiracy charge in 2008, after he started cooperating with authorities. Prosecutors said he withheld information from them concerning his relationship with a wealthy California developer who was a UBS customer.

Mr. Birkenfeld served about 30 months in the Schuylkill County Federal Correctional Institution in Pennsylvania. In August, he was released to a halfway house in New Hampshire. He will be released at the end of November and placed on probation.

Mr. Zerbe said his client has asked for a presidential pardon.

At his sentencing hearing, Justice Department official Kevin Downing said, “Without Mr. Birkenfeld walking into the door of the Justice Department in the summer of 2007, I doubt as of today that this massive fraud scheme would have been discovered by the U.S. government.”

Mr. Zerbe said the $104 million award is 26% of the $400 million in tax paid by UBS to the IRS as a result of the 2009 settlement. The large-awards program pays between 15% and 30% of proceeds collected, which can be hard to determine.

Although Mr. Zerbe said Mr. Birkenfeld provided information that ultimately led to $5 billion in revenue collected by the U.S., not all of that is eligible for whistleblower awards. Mr. Zerbe said his client has other related whistleblower claims outstanding. He declined to say how much Mr. Birkenfeld’s attorneys would collect as a fee.

IRS whistleblower awards are fully taxable.