Teulet Pren, to Throw Wood

On July 16th a Maryland man and woman purchased a lottery ticket at 3 Star Beer & Wine, located in Gaithersburg. Two facts make this event newsworthy. First of all the ticket was a winner landing them a cool $250,000. Second the winning numbers were 02, 15, 18, 20, 39, and the Mega Ball was 34. These numbers were actually found on an old ticket in their recently deceased uncle’s belongings and they decided that as a tribute to him, they would play the numbers on that ticket for the Friday drawing. They won.

They said they would use the money to pay their bills.

This was one of those news items that gets my mental motor running. Some say that lotteries are a “poor tax” or even “tax on stupidity” because most of the people who play them regularly are sacrificing something more important on their budgets, like food, in order to play.

Lotteries have been around since history began. There is a strong belief that the Han Dynasty in China used Keno slips, a lottery, to build the Great Wall. The Celtic people used to draw lots of wood, teulet pren. The Iliad mentions that they used Agamemnon’s helmet to draw lots, to decide who would fight Hector.

The early Americans used lotteries to fund the Revolutionary War. In fact Alexander Hamilton said  “Everybody … will be willing to hazard a trifling sum for the chance of considerable gain and would prefer a small chance of winning a great deal to a great chance of winning little.”

All noble motives to raise money, unfortunately the people with the least resources are usually the most willing to take the highest risk for that “chance of considerable gain” and the State is willing to take advantage. Thus the Poor Tax reputation is well served.

Considering the economy of late, I was surprised to hear that the Georgia Lottery (considered to be the best run, most profitable of all the US lotteries) was experiencing only a slight drop in ticket sales. Receipts for the 2010 fiscal year were about $3.64 billion — down slightly from the $3.66 billion for the previous fiscal year.  What does this tell us? People are out of work, on unemployment, on welfare, food stamps, in the worst economy since the Great Depression and the Lotto sales are only down $20 million.

This raises other questions for me.

Let me share two recent announcements and let’s see if side by side they make sense to anyone?

1)      The Georgia Lottery Corp. announced that profits increased again during the 2010 fiscal year

2)      Lottery revenue didn’t generate enough money for HOPE (the Georgia Scholarship fund) during the 2010 fiscal year, and state officials for the first time in nearly a decade tapped into a $1 billion reserve fund. The reserves are projected to drop to about $373 million by the end of the 2012 fiscal year, according to the Georgia Student Finance Commission, which oversees HOPE. The commission is scheduled to meet with members from the state House and Senate education committees Aug. 2 to discuss the program’s finances and possible changes. Commission leaders have recommended lawmakers amend the program during the next legislative session, warning the program could run out of money if long-term changes aren’t made.

Does anyone see what I see here? Slight drop in sales of the best run, most profitable lottery and they can’t support the one program that was used to sell the lottery to Georgia voters in the first place? I think everyone knows that Lottery money doesn’t supplement what is put aside for education, it replaces it. In other words the money the state earmarked for the budget goes somewhere else, and in a sense the Lottery becomes a tax to support education.

Of course when I asked a few people they just hadn’t realized this. Here is a quote from someone who knows:

“Lottery dollars are revenues that the states would not have otherwise,” says Tennessee Lottery president Rebecca Hargrove.  Hargrove has run the lottery in Illinois, Florida, Georgia, and now, Tennessee.  She argues things would be even worse without lotteries, and that they are more popular than raising taxes as a way to increase the education budget.

So this is a popular tax?

So where does all the money go? The best break down I could find quickly was something put together by Michael Mayo of the Sun Sentinel. He gives the following figures for Florida’s 2009 Lottery.

“Last fiscal year, around 58 percent of the lottery’s $3.9 billion in sales went to the prize pools, 8 percent went to vendor fees and commissions, and nearly 2 percent went to administrative costs, including advertising.

That left 32 percent for education. Last year, the Lottery transferred $1.28 billion to the Florida Educational Enhancement Trust Fund. The fund also got a little over $100 million from Broward casino slot machine revenues.  Not all the trust fund money goes to public schools. Here’s a breakdown of the trust fund allocations for last year:

Ok so 58% of the $3.9 billion went into the prize pool.

Let’s just say that every dollar was paid out in winnings (not likely but humor me) That would be $2.62 billion. Great right?

Not really. What about the tax on winnings going to the IRS? According to my reasearch it could be as much as 38%,  almost $1 billion dollars.  Georgia would take another 6% for state income tax Another $157 million that would not be earmarked for education. This leaves winnings actually taken home of $1.5 billion. 

There is big money here for Government isn’t there? About $1.2 billion in actual tax revenue added to the $1.3 billion in Lottery revenue and we can clearly see that the house wins.

I don’t buy Lotto tickets, can anyone tell me if there is sales tax on the purchase?  If there is, we are seriously talking about triple dipping here, but even if there is no sales tax, I think we can see that Florida still realizes a healthy income from the Lottery.

 I have to wonder this though, how many years did Uncle Maryland Man play those numbers at the 3 Star Beer and Wine?

Posted in Baby Boomers, Finance, Retirement, Taxes, Thoughts | Leave a comment


This morning’s headlines in Dawsonville GA, contained a story about a 71 year old man, Norris Therlow Goss, working on a three man crew, clearing a lot, who was killed by a falling pine tree.

Wait let’s think this through. Why was he out there?

  OK who remembers Stagflation?

Let me take you back to a time when gas was 25 cents a gallon, we drove fast muscle cars and left our doors unlocked. Ah those were the days. Of course minimum wage was only a couple of bucks an hour, and I was working for old Mr. Clark on his dairy farm, doing everything from milking the cows, cleaning up behind them, spreading manure to slinging 50 pound hay bales in the Fall. My first jobs were tough physically and the rewards were small financially but there was little to be concerned about.

As time passed so did the peace I grew up in. The Kennedy assassinations, Dr. King’s murder, the Vietnam war, gas lines and then Watergate. During this period America’s economy stalled and unemployment shot up. About 10 years of rising job loss and inflation, which became known as Stagflation.

Now I am not an economist, nor do I play one on TV. I couldn’t debate Keynesian demand-stimulus economics verses the supply-side economics movement of the day, that supported what became known as Reaganomics. To the best of my recollection, President Nixon was clamping down on the economy, with oil and gas, price and wage controls. Still things seemed to be getting worse.  Under President Carter a man named Paul Volcker was in charge of the Federal Reserve and he basically  initiated a contraction of the money supply. Then President Reagan introduced his plan to turn America around and the economy got better.

On looking back at what happened under the Reagan administration I am mystified by what actually took place. One most glaring factors would have to be that the Baby Boomers were at the crux of their impact on the economy. During the Reagan administration years, they were caught up in a flurry of buying (or financing) their share of the American dream. There were more workers/ consumers than at any time in history and I have to wonder if the sheer number of workers, added to the volume of products purchased would equal what appeared to be a booming economy on the surface. No one seemed to notice the dark monster crouching in the shadows. The monster called Debt.

So what did Reaganomics actually change that would have impacted our economy? Taxes!

First the oil windfall tax was removed, the oil companies made more and suddenly the oil crisis was a thing of the past. (Of course so was the 25 cent a gallon fuel) President Reagan’s tax changes were wide and sweeping, shifting the tax burdens from the wealthy (notice this: a tax cut from 70% down to 28% for everyone who made more than $1 million) to an increase in payroll and new investment taxes. This shift in tax focus from individuals earning more than $1 million to the middle class was enacted while our actor from Hollywood Presdient claimed to  be”cutting taxes” for everyone. It was masterfully executed. The way I see it, the Baby Boomers were the sheep and Reaganomics collected the wool. The trickle down theory.

Reagan also increased the national debt from $900 million to $2.8 trillion dollars during his reign. This “spend what you don’t have” economic theology permeated our culture and I believe all this leads us to where we are today as a country. The “free enterprise” systems that were in place before the Great Depression, were reinstituted and the effects have been realized on the economy over the last 2-3 years.

One of the greatest impacts on the country credited to the Reagan administration was deregulation. The fact is that deregulation was not a high priority for President Reagan and much of the credit for it could be attributed to the Democratic administrations before and after his presidency. Either way there were some disturbing trends (in my opinion) that started during the early 80’s. Manufacturing was moved abroad and the tax burden was shifted to the average Baby Boomer. Less jobs, more taxes for us and an increase in off shore investments by big corporations.

Having set this background I have to circle back now to Norris Therlow Goss. A quintessential Baby Boomer who perished today working on a three man team, clearing a lot. I googled his name and found about 20 single paragraph stories that say nothing at all about him, only what happened. Everything else is conjecture. My guess is that Mr. Goss is one of many Baby Boomers who have had to stay in the work force, well beyond retirement years, because of our economy. In fact the American Dream is quickly becoming an elusive dream, a fantasy for most.

This leads me to a headline on Bloomberg today that caught my breath. President Obama is going after Tax Cheats and they are all major corporations. It seems that companies like GE, Citi Group, Proctor and Gamble, Hewlett-Packard Co, Intel Corp and Oracle Corp. are all avoiding taxes with offshore entities. It didn’t take much research to find out which companies were in the news for using “tax havens” (aka Financial Privacy Jurisdictions) to hide money off shore in countries like the Cayman Islands. You can find them yourself by searching with the following text “Tax Haven (blank)” on Google or any other search engine and “blank” would be your favorite corporate entity.

An example of what I found: Morgan Stanley has 273 subsidiaries in tax havens, 158 of them in the Caymans!

This is not a new issue. President Kennedy went after these loop holes in 1961. He didn’t have much luck. We will see how effective President Obama can be in his crusade. 

I think the “aha!” moment for me today though was the fact that every one of the companies that we the people/ the tax payers bailed out, in the middle of our financial crisis, at the end of the Bush error (not a typo) was listed as taking advantage of these shelters.

The tax cheats were bailed out by the tax payers….

I don’t even want to go down that road mentally right now… to even think that we taxpayers were bailing out corporate tax cheats. No… this leads me to a place I like to call… Agonizesthai.

Posted in Baby Boomers, Finance, Retirement, Taxes, Thoughts | Leave a comment

Let us agonizesthai together.

What does it mean to agonizesthai? Actually it is more of a place or an attitude. A Greek word that was used in the day of the early Olympic Games. It is a place where we strive, struggle, strain and wrestle to overcome in a contest.

When I was looking for the best way to describe my blogging efforts this is the one word that I felt personified how I would describe what I want to write about. There are issues surrounding us today that need to be considered, struggled and wrestled with. We need to think through issues on levels that are important to people not money.

My background is recruiting in the financial services industry. Boil it down and I invest my time in finding clients that I like and trust who have a need to grow their firms and have tried everything they know to achieve this growth, with less than acceptable results.

I then go out representing them and find someone who is qualified, whom I also like and trust. Someone who is looking to be somewhere 5-10 years from now and not really sure, in this economy, how they will ever get there. What happens when I put these people together is that they usually like and trust each other. I have been doing this about two decades now and at first  I strove, struggled, strained and wrestled in the contingency search arena. More than one decade ago a manager moved me into retained search and I never looked back. It is my primary function these days. To explain briefly, I mainly  work with clients who invest in our relationship at the beginning of our efforts. That is how I earn my living. Helping companies to grow, by acquiring the best talent from their competition and by helping successful people to achieve their dreams.

On any given day, I hear about issues that cause me to strive, struggle, strain and wrestle to overcome the idea that something like that particular issue can be really happening in our world today, and no one seems to care.

That is what I want to blog about. Honestly I don’t think it would be very interesting to hear what is happening behind closed doors in the large investment firms (where I spend most of my days). Instead I would rather discuss the problems that I can see from my point of view, that bring me to agonizesthai.  

One of these issues is the inheritance tax law changes that President George W Bush enacted in 2001. You must have read about it, or maybe you’ve had to deal with this issue in your own family. If not let me explain:

Our inheritance tax laws were shameful, taking more than 50% of the estate of someone who has worked hard, and paid taxes on those earnings their whole life. This tax is double dipping as far as I am concerned.

I work hard, pay my taxes, and if I don’t spend it all before I die, and want to leave some money for my children/ family, the US Government takes more than 50% of it. Bad Form!
Well one of President W’s first actions, when he took office, was to wind down the Death Tax (as it is known) over the years until this year; 2010 it is down to zero. Congress, at this point was expected to do away with this abhorrent tax forever. However by doing nothing, the tax comes back in full on January 1st 2011. Seems that Congress excels at doing nothing by the way because that is exactly what is happening.

What does this mean? Well when we consider what happened December 31st 2009 and ten flip it forward to December 31st 2010 it becomes evident.

You see I read about a woman who was terminally ill last year; who spent her final hours, waking and asking her son what time it was, determined to live until after midnight on New Year’s Eve. (When the death tax dropped to 0%) She did! Her motive was to leave more money for her family.

This year as a terminally ill client approaches December, with the full knowledge that the $10 million (example) that they would leave their family in 2010, will become less than $5 million on January 1st 2011, (When the Death Tax jumps back to the highest level again) what will their advisors tell them to do? What will the family be thinking and planning, what will happen?

This is what it means to agonizesthai… to me anyway.

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