Monday, September 23, 2013

What the JOBS Act means for startup funding: beware the cookie lickers

photo credit:
Seed money.  Angel investing.  Venture capital.  Funding start-ups that aspire to be "big business" has become a strange beast.   Today is the official effective date for Title II of the JOBS Act, which many are hopeful can kick off a New Great Era of fundraising.   But in many ways, this is a huge red herring.

Once upon a time pretty much any company that wanted to could raise money according to a broad array of "blue sky" laws which varied by state:
Blue sky laws developed in the frenzied years leading up to the Great Depression, in response to fact that more and more ordinary investors were losing money in highly speculative or fraudulent schemes promising high investment returns, such as oil fields and exotic investments in foreign countries

But after the hype, boom, bust and onset of the Great Depression, thinking changed a bit.  The passing of the Securities Act of 1933 was done with the belief that selling such "risky" early-stage investments to the general public left too much room for swindling.  You know -- bad guys running off with Grandpa's life savings (Which never happens today.  Right, Bernie Madoff?).  Accredited investors are the only ones who can 'afford' to lose, so let's make rules that allow only them take risk that yields high reward -- apparently this was the logic behind Rule 501 of Section D of the Securities Act of 1933, a rule which states that entities need a certain "net worth" to participate in investments which potentially might go public.

But of course, by shielding "small time" potential investors from swindlers, so too were those small- time investors denied opportunities to reap rewards earned from their decision to take risk.   As a result, the next 80 years or so saw an entire profiteering industry sprout up around capital finance, start-ups and highbrow private investing -- an industry "for the elite, by the elite" -- hedged on early access and exclusive access, it is essentially wealth funneling wealth.  It perpetuates by protecting first (usually via preferred stock) the wealth of the wealthiest "if and only if; then and only when" a tiny bit might "trickle" down to common shareholders -- including founders themselves!

If you think this logic sounds a little hokey, you're not alone. Several arguments for scrapping the "accredited investor" rules have floated around, but during the last 80 years, exactly zero headway has been made.   Fred Wilson commented in a May, 2012 Forbes article:
The biggest issue: there is simply too much money. Although $30 billion continues to flow unabated into venture-backed companies annually in the U.S., venture capital as an asset class hasn’t outperformed the market since the early 90’s, when only $10 billion was put to work.
What's happening?  In plain English what's happening is this -- that "exclusive access" members' only club is getting fat, tired and cranky.  Despite the fact that it already has too much on its plate and not enough time to chew, its people just won't stop licking cookies.  Many of those licked cookies are going to waste.

Enter the JOBS Act to "Jumpstart our Business Startups", a plan to help those little guys with freshly baked cookies -- what can be done to change things and help them get their cookie empires off the ground?   Should we make it easier for these guys to advertise their cookies?  Yes!  But first we should probably get rid of the law that makes it illegal to advertise cookies.

September 23 is the official effective date for Title II of the JOBS Act, which many are hopeful can kick off a New Great Era of fundraising.  But in many ways it's a huge red herring:  all it permits is the mere existence of information.  Start-ups now may "legally" use the Internet and/or public airwaves to inform the public that they're looking for capital to grow their business!  Then, with whatever attention their hype is able to attract, those start-ups may be asked to get in line to have their cookies licked by an authorized VC cookie licker.
Of course, the trends threatening VC’s bode well for entrepreneurs. More competition among investors means easier financing and better terms for startups. The eye-popping valuations of some companies may already be a reflection of this phenomenon. Wilson admits that this glut of funding is also probably good news for the economy, job creation and the proliferation of new goods and services.

But whoa. . .  big caveat here --  if a cookie seller accidentally let their cookies get licked by somebody who isn't "legally" allowed to lick cookies, they may get in #BigLegalTrouble and have to wait an entire year to get in the back of the line again.  Seriously.

The spin on this from the VC side seems to be that there 'ought' to be  more competition among VC's ... but is that the issue?  Last time we checked, competition among VCs wasn't the problem; as Paul Graham stated in his recent essay, it's competition for that "first" bit of VC attention that every entrepreneur needs to get the ball rolling:
The biggest factor in most investors' opinions of you is the opinion of other investors. Once you start getting investors to commit, it becomes increasingly easy to get more to. But the other side of this coin is that it's often hard to get the first commitment.

Obviously, we need a larger pool of potential investors / cookie-lickers to woo.  How, exactly can this happen?

The problems that existed at the time of the Securities Act of 1933 -- and the subsequent red tape and paperwork formalities to protect Grandpa's life savings -- surely these were well-intentioned protections.  But the reality of the world today is such that there are too many cookies going to waste.  The professional cookie-lickers of the world just don't have time to sample all the great cookies today's entrepreneurs are making.   Gambling halls and casinos (which certainly are just as likely to swindle Grandpa's life savings) don't require minimum net worth or income limits for patrons, so why are they imposed on investors, where the potential for Return on Investment (ROI) is significantly more feasible?

Title II doesn't address the core problem, but hopefully it can attract more attention and scrutiny to the issues preventing many small and medium-sized businesses from taking root.  Namely -- "accredited investor" rules are antiquated and unnecessary, and they do more harm than good for many small and medium-sized businesses that just want to sell cookies.

Sunday, August 11, 2013

It's time for a Price War in Payments

Bring on the price war.
Price wars are great; they are the very epitome of what our American capitalist economic ideals are all about: competition.
But for the last several years something else has been going on.  For the last several years, every single swipe of your debit card — every single “submit payment” click or iPhone tap for your favorite song, every single “$0.35 debit card fee” gasoline pump authorization button press you’ve been forced to accept has been much, much higher than it needs to be …  about 800 percent higher:
their initial analysis that concluded the actual cost of a debt transaction was only 4 cents.”
You read correctly.   A few days ago (before being bought by Mr. Jeff Bezos), The Washington Post broke the news that a Federal judge had overthrown the cap.
In a strongly worded decision, U.S. District Judge Richard Leon said that the Federal Reserve had not properly interpreted the 2010 financial overhaul law, which directed it to revamp the way banks charge merchants for accepting debit cards. The Fed rule “runs completely afoul of the text, design and purpose” of an amendment authored by Sen. Richard J. Durbin (D-Ill.) to limit these fees to the actual cost of processing debit card transactions.
What does this mean?  It means that our capitalist system is not working properly.  For the last several years, we’ve all essentially been forced, when engaging in natural economic activity, into padding profits of banks and other payments processors (such as my former employer, Balanced and its competitors WePay, Stripe and PayPal) who should be competing with each other for merchants' business.  But instead, they all charge about the same fees.  With collusion, they and the banks they’ve cozied up to know that “guaranteed” profit margin is much better — more money to throw around and lobby to keep things just they way they are, more huge VC rounds for those willing to hop in bed with the big banks, more barriers to entry for the little guys.
In other words:  what it all boils down to is suckage:  the more money payment processors siphon off, the less revenue the actual merchants receive; the less revenue merchants receive, the more they charge.  This naturally results in higher prices for just about everyone (including those who pay with cash!), and pretty much everything is a whole lot of foul.
By 2009, banks were reaping $16.2 billion in revenue from the fees.
This was ~4 years ago; a more modern calculation would surely yield a much higher number.  Indeed, as mentioned in my recent post the Durbin amendment was specifically targeted at this  discrepancy.

Basic economics shows that rather than engage in a price war, it is more profitable for them all to agree to tout like it’s “law” that these “Interchange Fees” set by the government are just not negotiable.  While this is a partial truth — that the Fed set a non-negotiable portion, that non-negotiable portion is actually the “max” but confusion around fixed and variable components inflated both sides.

Let’s break down the costs of the actual information.  Could it really be so simple?  Yes.  It is not nearly as complicated as they’d like us to think; from my recent post on Hacker News
The swipe is the recording of the
 - credit card # (16 digits long)
 - day/time/place of swipe or "submit payment"  
 - expiration date
 - cvc code

which, when put together, all add up to one little thing called an “auth” code which can be used to attach a particular transaction to a particular instance of potential fraud.  Maybe… 200 - 999 bytes for the swipe data alone.  The fraud detection and “cost of equipment” and other such items bundled in the price are other things they should be competing on, as well. 

Think of the cost of storing or transmitting one small text file.  Now that we mention it:  4 cents for even 999 bytes seems pretty high, actually.  

As an Industry expatriate, I would gladly testify that the only way change could have been done was from the inside out: some high-tech “startup” from Silicon Valley could have been the first mover and propagated this change without any Federal intervention.  I worked at one that could have done this, but it didn’t and I lost my job because I tried.

But personal loss aside, the question is:  Should there be any law built into any financial system that guarantees any entity the ability to make 800% profit on your use of your money?  While basically refusing to compete, and murdering anyone who dares?  Of course not.   Debit cards are not credit cards.  When dealing with any of these payments companies, always negotiate and read the laws yourself.   It is time for a price war — bring it on.  

Wednesday, December 26, 2012

Re-Engineering the Tax Code: Part II

Part II -- Closing Loopholes

In Part I we established that for this thought experiment, we need a new way of thinking about our be-loathed tax system.  It just doesn't make sense to keep gluing new doodads (exclusions / extensions) onto the old one; the best thing we can do with the rusted old contraption is to toss it out and start over from scratch.  Starting from scratch, we can implement 21st century concepts, materials, and thinking applicable to our 21st century economy.

Because this new system of taxation is being designed specifically to encourage businesses, organizations and/or entities with excessive profits to more generously reward the "low men on the totem pole," the progressive tax bracket system makes the most sense.  A business can choose to minimize total tax payments by paying its workforce more, or it can voluntarily pay more in tax than it must to when it chooses to keep profits concentrated among the few at the top.  This system rewards benevolence and discourages greed, both at a corporate and individual level.  

This progressive idea is the core strength of our system.   Continuing with our bicycle analogy, it can be likened to a design innovation -- visualize this fantastically awesome carbon fiber frame reinforced with Kevlar.  This frame has made the "guts" the lattice for increased capacity to wear and tear with none of the dead weight of its predecessor; it does more with less, and it provides a good framework to hold together the rest of our moving parts.      

Traditionally, the "corporate" tax rate structure has been different from the "individual" tax rate structure.   Corporations create "jobs," right?  That's why we have two different systems?  In the industrial manufacturing economy, this was more true; it made sense to tax a corporation more aggressively on its profit (which does not include payments to workers).  

Quick accounting concept here:  income (AKA revenue) is not profit.  At a very basic level, profit is what is left over after various business expenses have been subtracted.  There are all kinds of lovely accounting / finance acronyms (NOPLAT, EBITDA) outside the scope of this article, but  for the purpose of this discussion, the main point to take away is that the US tax code historically treats business revenue differently from individual income, even though both are essentially the same when we think of them in the context of earned dollars with the potential to be taxed.  

Historically, taxing business profit differently than worker pay, did NOT stop executives from underpaying workers; budget accountants have almost always had an incentive to minimize DL -- or "Direct Labor" costs (typically workers on the floor of the manufacturing plant / construction workers / wage-hour slaves)  -- lower labor costs  imply better efficiency, and greater efficiency means larger bonuses to managers and executives.   Because of this practice, companies have always sought to pay laborers as little as possible, and erroneously rewarded executives and managers who egotistically presume they are responsible for the "efficiency". 

Plant managers and executives, driven by the need to minimize "costs," would run through workers, with no heed to overtime, working conditions or general welfare of the workers.   Perhaps the only good thing to come out of this historical treatment is the federal minimum wage (which is another can of worms for another day).

Key:  Tax revenue inclusive of salaries and wages.   Tax-free dividend distributions to non-employee shareholders

Historically, if a business had, $2M in revenue and $1M in non-wage / salary expenses for a net profit of $1M ($2M - $1M = $1M), the corporate tax would be the same whether that business' $1M in payment expenses was $900,000 to the CEO and $20,000 to each of its five employees, or if the $1M was divided equally among all the workers.   With our new system, we tax revenue inclusive of salaries and wages; a business has tax liability on the full $1M to be distributed.  The actual tax payment due will vary, and depend upon how it's divvied up.   Thus, each dollar "paid out" in the form of wages and salaries  should be taxed only once; the leftover profit residual to keep the business going would be distributed tax-free to non-employee shareholdersFor employee shareholders, the stock  and dividends are essentially "additions" to salary, and be added to regular income. 
Keys:  disallow mortgage interest deductions; disallow deducting the "cost of obtaining a loan";  Dis-incentivize tax breaks for single companies managing multiple properties

The second loophole from the twisted mass of rusted-out metal that we don't want to duplicate on our new system has to do with property ownership.

First, let's look at the mortgage interest deduction.   This "individual" income tax deduction, as well as its "corporate" twin -- amortized lease expense -- is a cunning and insidious loose little thread.  As we saw from the sub-prime mortgage industry crisis of 2008, this loose thread unraveled the housing / commercial real estate industry and drew an impossibly deep rift between those individuals and businesses beneath the threshold of poverty, and those who teeter barely above its brink.

When Realtors and mortgage brokers collude, the result is disaster.  The 2011 documentary The Flaw discusses the "how" and "why":

Seems almost anti-intuitive, doesn't it, that a deduction that sounds so good could be so bad?  We can deduce that the intent of the deduction was originally probably peddled as being "good," but today we have overwhelming evidence that in the real-world, it has failed miserably to fulfill its purpose.  These are the facts:  this specific loophole allows real estate agents and landlords and mortgage brokers and investment bankers -- any and everyone with a finger in the "property management" pie -- to get away with legalized extortion under the guise of helping people fulfill the "American dream" of home ownership.

Landlords and PMCs use the "steady income" of rent payments to take out larger and larger chunks of debt (not to mention get bigger and bigger tax breaks).   They refinance and restructure their mortgages, always passing the cost of doing so on to the renter, while -- like a snake shedding its skin -- getting out of the liability of such "risky ventures."  

Indeed, the IRS code for tax handling of residential rental property and business  expenses expounds further.

So . . . given all of this, we know what is wrong.  How can we help our new system work better?  There are two possibilities:  dis-incentivize bad behaviors or incentivize good behavior.   In Part III we'll dig into each possibility. 

Monday, November 12, 2012

Re-Engineering the Tax Code: Part I

Part I:  Income Tax

One of my favorite time-killing activities is fairly nihilistic. It involves thought experiments where obviously broken systems are annihilated: figuratively blown apart, sending all the blazing, broken, smoking pieces careening into smithereens.  No more  WD-40 hastily applied to the rusting, booby-trapped secret compartments designed for special circumstances almost two centuries (or even two decades) ago.

Indeed, the defunct system we're talking about here is the US Tax Code.  Not just income tax (which gets most of the attention), but sales tax, property tax, the death tax, etc -- the whole shebang.  We need to re-engineer the very framework underlying concepts and philosophy of tax. In Part I today, we'll focus on the Income Tax, because income is the source of all the grease in the wheels in our economy. 

After studying and pondering the current tax code, which starts taxing AT 25 PERCENT ($70,700 for a married couple), every dollar of earnings at and above $35,350,  I realized that this tax thing is seriously SERIOUSLY broken.   Aside from the fact that there is no reason the tax code should be extra nice to married or child-bearing people (alas: another digression for another day), can we please just stop the insanity?   

Continuing with this analogy, our current tax code is antiquated and irrelevant.  Let's just acknowledge that no amount of WD-40 can save us now; for too long have we been focused on the framework, rather than seeing the big picture for what this machinery is supposed to do.  The tax code in its current form makes it far too easy for nefarious folks to get what practically amounts to a free ride on the efforts of humble, honest working people.   If you've studied the tax code as deeply as I have, it becomes pretty obvious the amount of money and manipulation that goes into getting people like Mitt Romney a tax break could be better used for something else. 

Indeed, is it almost impossible to have a discussion about tax without acknowledging the deep political contentions such discussions about tax seem to invoke.  But it is not the purpose of this article to create or stir any contentions.  Thought experiments are theoretical, and theoretically, we're starting over from scratch here. 

Presuming we don't have to spend time and energy arguing about, revising,  maintaining, and maintaining the revisions on the old system, we are finally free.  Free are we to implement the fortified carbon fiber version:  strong and lightweight, nothing but functional.   Let's focus on what this machinery is supposed to do, not the moving parts themselves. 

Income Tax 

Assumption:  Income Tax is a necessary good, not a necessary evil.  If the tax code in the US worked as it was supposed to work according to the original intentions of the tax, there would be minimal need for any kind of social welfare programs, and thus (paradoxically) less need for tax revenue to fund such social welfare.  Employers would benevolently pay employees their fair share of the profits and increases made as a direct result of their work, allowing them to accumulate savings and create their own safety nets through economic ups and downs.

But we've accumulated enough evidence through two centuries of economic activity: the sad truth is that virtually no employers pay their employees a fair portion; employers keep most of the profits and gains at the "top", and deny the "worker bee" the full value of what has been rightfully earned.   Because of this sad truth, a flat tax just doesn't work.  It is just plain necessary to tax higher incomes at a higher rate; the graduated income tax rate is imperative.   

Income Tax Brackets that just makes sense

The first strata here are the lowest income layer of America; they are most likely to be working families, so they deserve the biggest breaks.    No more different brackets for single, married, Head of Households, business structures, investment income, etc.  Cash is cash, and a dollar is a dollar.  Let's consolidate earnings into one single number, and tax low-digit earners with low-digit prime numbers (since primes really are the most beautiful and forgiving of numbers).

         $0 - $21,200                                  3.00  %  (7 percent decrease)
         $21,201 - $53,000                        7.00  %  (up to 18 percent decrease)
         $53,000 - $132,500                    11.00  %  (up to 17 percent decrease)

The next layer eases the burden on the strata most likely to be small to medium businesses -- the Mom and Pop shops, the startups just getting "started", etc.  Let's give them a break, too.

         $132,501 - $331,250                  23.30  %  (up to 5.7 percent decrease)
         $331,251 - $828,125                  29.70  %  (up to 5.3 percent decrease)
         $828,126 - $2,070,312               31.90  %  (up to 5.1 percent decrease)

The final layer of the tax cake here should apply only to businesses, though perhaps there are a few executives at very large corporations that have somehow beguiled the Board of Directors into paying them way too much.  The final layer of the tax cake increases the tax burden on income earned above $2 million + 70K only.   Lets give them the two prime numbers before and after the meaning to "Life, the Universe, and Everything Else".

         $2,070,313 - $5,175,781            41.00  %   (up to 6 percent increase) 
         $5,175,782 +                                43.00  %   (up to 10 percent increase)


The less intelligent out there would look at the above and zero in on the top tax rate of 43 percent and "freak out."  Puh-leaze.    Taxes work like a formula.  Using the above tax "brackets" it works like this:

The first $21,200 of income is taxed a rate of 3 percent (this is the same whether your total income is $15,000 or $15,000,000) so the most you can pay on $21,200 of income is $636.  In other words, if you earn less than 21,200 per year, you will not pay more than $636.

>> Here is the math. 


Ms. Simon earns $35,000 per year; her total tax bill will be $636 + (0.07 * ($35,000-21,200)) or a total of $1602 with the re-engineering.  Under the current system, Ms. Simon pays $4867.5.

Family Biz owner earns $125,000 per year in his shop that employs his wife and son.   Under the "broken" system, he pays just over $34K in taxes, but on the re-engineered system, he pays just $11K.

Old, young, married, single, caregiver of animals or the elderly -- for too long has the US tax system been biased toward people with children and just a bit too harsh on the "indie" business owner.    America is changing; people earn income from a variety of sources both online and off.   The number of people moving toward the "side" income model where they have supplemental income means that we can and should make things easier for people to be self-employed, if they need to.   

Stay tuned for Part II

Tuesday, September 18, 2012

Of Death and Taxes

" They get away with this treatment of people because they call these men who work under them "sub-contractors," which essentially means that they need to have a CPA to understand all the wonderful tax deductions available to them.  If only those construction workers had business degrees!  "

My father was a construction worker. He measured out, cut, and lifted heavy sheetrock onto bare frames of houses, fitting things together like puzzle pieces with precision and speed. He did this manual labor in the most extreme climates from Las Vegas to Alaska to Utah to Florida. He wore flannels and had a beard, and drank whiskey to ease the pain of the dental work he needed, but couldn't afford. He passed away  too young, as a single parent: zero health insurance, no life savings, no life insurance.  He spent his life building houses for other people, but passed away in a small trailer that didn't even belong to him. Everything he'd worked for in his life: a tiny  amount of money in a savings account -- not enough for the dental work that he desperately needed, but wouldn't live to get.

It baffled me growing up, how my dad could work so hard and so long and so far away all over the place, and yet we could never make ends meet?  Not just anybody could do the work that he did;  drywall is not easy.

During the last 14 years of his life as a single parent of four children, he never accepted or even sought any kind of welfare handouts.

Are the real estate developers who fail to provide my father and other construction laborers with a decent living wage, with medical insurance for their physically exhausting work, with any means to provide even a small amount of savings for their children ... are those people ethical?  Although I'd love to make the judgment call, I won't say. In the grand scheme of things, I do know that in this world, there are good people and bad; that there is no law and nothing that society can do to "make" people behave ethically -- action (or lack of action) speaks for itself about the character of the person, and character is what defines people.  My father was perhaps the most honest and humble human being I've ever known, and he deserved so much better.

To each and every one with a functioning brain out there, considering voting for Mitt Romney "because he's Mormon" or because you think he can run America like an efficient business -- please don't. Please, don't.

Never has there been a nominee so delusional as Mitt Romney. The tragic thing is that there are people who could actually believe that "47 percent of Americans" would be "dependent upon government". Romney uttered his words at a $50,000 per-plate fundraising event in his efforts to become President of the United States.

What the GOP does not understand is that wealth obtained from the fruits of others' labors is not and never has been theirs.  They did not earn it; thy did not build it. It is just not possible to become as wealthy as they are without using people and denying them their share simply because it's LEGAL to deny people their fair share.  Somehow, somewhere along the way, the GOP has become indoctrinated with the false notion that ethics and legality are somehow linked; that "as long as it's not illegal, it's not unethical."
With platitudes for supposed "Christian" values, the GOP insists upon enforcements of laws to criminalize social problems while deregulating and un-criminalizing the very economic causes of those problems.

Truly ethical behavior does not come about from the constructs of government. Mr. Romney has been able to evade paying taxes on much of his income by keeping troves of it offshore . . . he's unashamed to declare that he pays not "a dollar" more in tax than what the IRS code mandates.  So, assuming that manipulation of tax code is legal -- maybe he's not broken any "laws" per-say -- but is this ethical behavior?

It brings up some interesting points about just how desperate the GOP is to destroy the very checks and balances that income tax provides.  Crying about taxes when there are so many less fortunate people in the world, the GOP is like a stubborn toddler whose face is covered in melted ice cream, throwing a rage of a tantrum because he can't have more.

A certain CEO of a real estate development company we once knew in Florida pays immigrants "under the table." Some of these immigrants do landscaping, others do painting and repairs and cleaning at the buildings and sites he's developing.  Once they are done with all the hard work, the Realtors flock in, snapping photos and finding charming little catch phrases to be displayed in colorful real estate brochures.   After having the properties spruced up by underpaid workers, his company is able to "flip" properties and the CEO is entirely convinced that he alone is entitled to the profits. Those workers he so "graciously" employed might not be legal yet, so no need to let the government know about them. CEO pats himself on the back for saving money in labor costs, avoiding paying income tax or health insurance for those workers, and considers that he's "done them a favor."  

It's a common theme in many circles that employing people in a "temp" fashion is somehow "doing them a favor".  Republicans love temporary things, which they rationalize absolves them of any moral duty: temp jobs for temp workers in temp housing. "It's not my problem" they say. Use people up and throw them away, kick 'em out if when they can't pay the rent. There are millions more where those came from, all eager to do dirty work for pennies on the dollar.

There are two main mechanisms stealing the wealth from the very people who are earning it:

  • Underpayment of wages / denial of equity: "Underpaying" can qualify either "at" or "near" the minimum wage, but any worker at any pay rate can be considered underpaid when there is a significant discrepancy between the lowest-paid (even part-time employee, or contract worker) and the one at the top.  Most of the time, companies are built by groups of people working together as a team; it is not right for the person who calls himself "CEO" to keep the bulk of the economic value created by his team.  
  • Overcharging housing:  My father and many of the construction workers he knew weren't able to make it to retirement from their lifelong endeavors of building of houses (and how ironic is it that men who build houses for a living cannot afford their own!)  . . . So, who gets all that money from houses that cost so much?   Real estate agents, landlords, and real estate developers --  these people have deluded themselves into thinking that they are the ones "entitled" to collect rents or commissions from the labors of other people's work. They collude and conspire, keeping rents high, robbing people of their very ability to build equity (and it really is a form of slavery).  But don't take my word for it; there's lots of proof out there that this form of modern slavery is working.
Ultimately, it's people -- not economics -- which are responsible for the theft.  Most members of the GOP are in a position to do at least one of the above items, and some are in a position to do both. When there is a political party that has so much influence over both sides of the coin, when there is a class of people whose very livelihood is actually derived from the control and manipulation of the availability of housing, democracy cannot work. People are unable to establish themselves (and thus their ability to govern in the fallout of greed) when they are continually driven out.

Although these problems are complex, can the solutions be simple?  Is it time to criminalize unethical behavior? Or is it time to economically incentivize ethical behavior? Perhaps the best solution lies in the right mix of both.

My father most certainly did pay income tax, and into Social Security.  But because he barely made $19,000 per year as a single parent, he got most of that money back at the end of the year.  I know this because I did his taxes the second-to-last full "tax" year of his life.   By the time I grew up and earned my degrees to help him figure out what was wrong, it was too late.

Not only do real estate developers fail to provide construction workers with medical insurance or any kind of health, dental, or vision benefits -- nor do they provide the men doing the backbreaking physical labor any kind of reimbursement for their tools, automobiles to drive out to the construction sites, gasoline.   They can get away with this treatment of people because they call these men who work under them "sub-contractors," (contractors who work for contractors) which essentially means that they need to have a CPA to understand all the wonderful tax deductions available to them.  If only those construction workers had business degrees!

Indeed, by the time I earned some accounting degrees and was able to do his taxes, it was too late.  My father didn't see the end of the tax year 2004; the years of physically debilitating work caught up with him, and he passed away on what should have been the celebratory day I was set to accept my Master's degree.

Not a day goes by where I don't think about my father.   Like many construction workers, he was used up and thrown away heedlessly by the mechanisms in the real estate industry, fueled by the insatiable greed of men with too much money and too few ethics.