Author: Caleb Newquist

Founding editor, Going Concern.

Tax Policy Nerds Try to Debunk Each Other’s Debunking Over “The Largest Tax Hike in History”

You may have seen some tax-hating, freedom-loving types waving flags, flying planes with banners and screaming from the rooftops that if the Bush tax cuts expire that it will be “the largest tax hike in history.”

The argument has been made and questioned ad nauseum but yesterday Ryan Ellis of Americans for Tax Reform (founded by Grover Norquist, so you get the context) felt the urge to prove the point once again that this will be the largest freedom-hijacking ever:

CBO projects that nominal GDP over the next decade will be $187.7 trillion over this decade. In order for the Obama tax hikes to be bigger than THE TO WIN WORLD WAR II, it would need to be at least 5.04 percent of this, or $9.46 trillion.

Gerald Prante over at the Tax Foundation’s Tax Policy Blog isn’t amused with this latest attempt:

Ellis is thereby admitting that it’s simply not the largest tax hike in American history. When you say “history,” that includes the 1940s. If you want to exclude WWII, say peacetime. Furthermore, the Treasury study that Ellis bases these claims off only goes back to the 1940s, which means that we don’t even know the relative size of tax hikes pre-1940, such as when the individual income tax was initiated and ramped up. So in summary, we can say that you have to knock off about 170 years of American history in order to make Ellis’s claim only possibly defensible.

Hmmm. We have to give that point to Prante there. You can’t just say “the biggest tax hike in history” and then say “except for that one time.”

And while we’re splitting hairs, we (i.e. the US of A) can’t really take credit for killing Hitler, can we? The Führer killed himself under duress from the Soviets. So there’s that.

Anyhoo, back to the subject – Ellis than tallies up all the tax “hikes”:

The 2011 income tax hikes. These are the rate hikes, the capital gains and dividend hikes, the return of the marriage penalty and the death tax, etc. CBO score: $2.567 trillion

Failing to index the alternative minimum tax (AMT) to inflation. CBO score: $558 billion

Failing to stop dozens of business tax hikes (“extenders”). CBO score: $1.969 trillion

Interactive effects of all these. CBO score: $606 billion

Obamacare tax hikes. CBO score: $525 billion

Add all of these up, and you get to $6.225 trillion over the next decade.

Prante fires back, noting that Ellis is making an auditor to tax accountant comparison:

Ellis classifies a compilation of “tax hikes” that are set to go into effect as one giant tax hike, including AMT expiration, the extenders bill, Making Work Pay, and even health care reform. There are two problems with this. First off, Ellis and ATR have a countdown clock on the ATR website (which is off by one hour by the way due to Daylight Savings Time) saying “countdown to the biggest tax increase in American history.” Well, virtually all of the health care tax hikes, which he counts in his tax hike amount, don’t kick in until 2013 (731 days from January 1, 2011). Therefore, this is inconsistent. Furthermore, summing up all the tax hikes and counting them as one big tax hike is inconsistent with the Treasury study cited earlier. If you want to count all the “tax hikes” occurring under Obama as one big tax hike, then shouldn’t you do the same for previous administrations?

Right! If you’re going to have a countdown clock, shouldn’t it be accurate?

Wrapping up, Ellis says:

Expressed as a percentage of the economy, this is 3.31 percent of GDP. That’s the largest tax hike in history, except for the one that was used to fight simultaneous wars in Europe, North Africa, and the Asian Pacific Rim.

You got us, guys. It’s a mere 3.31 percent of GDP.

Final retort from Prante:

The Treasury study referenced wouldn’t even consider letting the tax cuts to expire to be a tax hike because there was no act of Congress. Has Ellis done a review of history to make sure that no tax cut has expired elsewhere in history that was not counted in this Treasury study (given that Ellis considers an expiring tax cut to be a tax hike)?

This is a good question. Have you done your research into historically impotent and unwilling legislative bodies? Because if you haven’t, then you’d find that the group we’ve got up there now seems to have pretty awesome ability to do exactly nothing (read: estate tax).

Whether past flaccidity demonstrated by Congress has resulted in larger “tax hikes” remains unknown but something tells us that since none of this is getting resolved any time soon, we’ll get an answer.

Largest Tax Hike in History? Outside of Killing Hitler, Yes. [ATR.org]
Is Allowing Tax Cuts to Expire the Largest Tax Increase in American History? The Question Revisited [Tax Foundation]

Promotion Watch ’10: McGladrey Names 21 to Partner/Managing Director

Cake and punch all around, natch. And if you’re lucky, pictures with your McGladrey-sponsored golfer of choice.

Oct 01, 2010 – MINNEAPOLIS (October 1, 2010) — RSM McGladrey, Inc., and McGladrey & Pullen, LLP, leading providers of assurance, tax and consulting services under the McGladrey brand, recently announced the promotion of 21 employees to partner/managing director roles, effective Oct. 1.

“Our new partners and managing directors have demonstrated the power of truly understanding our clients’ needs and proactively contributing to their success,” said C.E. Andrews, president and COO for RSM McGladrey. “They display the firm’s core values of relationships, excellence and integrity every day in their interactions with clients, potential clients and with one another. It’s a pleasure to recognize their significant contributions.”

“These employees have consistently proven their ability to gain a deep understanding of our clients’ businesses, aspirations and challenges,” said Dave Scudder, managing partner and CEO of McGladrey & Pullen, LLP. “They have used this understanding to develop innovative insights and expertise unique to each client and industry that we serve.”

The complete 2010 class of partners and managing directors includes:
Name Line of Business Location
Donnovan Maginley Assurance Florida
Doug O’Connor Assurance Illinois
Linda Dehner Assurance California
Steve Gradl Assurance Minnesota
Tasha Kostick Assurance California
Wes Getman Assurance Atlanta
Allison Egbert Assurance Boston
Kevin Vannucci Consulting Connecticut
Brian Holmes Consulting Illinois
Lawrence Levine Consulting Illinois
Dean Nelson Consulting Boston
Diego Rosenfeld Consulting Boston
Rob Frattasio Consulting Boston
Greg DeVino Tax Florida
John Majer Tax Florida
Tay Reeder Tax Georgia
Phil Wasserman Tax New York
Brian Blacklaw Tax Illinois
Mindy Cozewith Tax Georgia
Rebecca Sheridan Tax Texas
Jim St. Germain Tax Boston

McGladrey Announces New Partners and Managing Directors [PRLog]

Vault Accounting 50: Firms #21-#30 (2011)

Hitting the third group of ten on Vault’s Accounting 50, we see plenty of familiar names that would probably prefer being ranked higher but the people have spoken.

If you’ve got any news, gossip, cost saving ingenuity or anything else worthy of our pages on these firms, get in touch with at tips@goingconcern.com

21. Ernst & Young LLP – New York, NY
22. KPMG LLP – New York, NY
23. Grant Thornton LLP – Chicago, IL
24. BDO Seidman LLP – Chicago, IL
25. McGladrey & Pullen LLP/RSM McGladrey Inc. – Bloomington, MN
26LLC – Southfield, MI
27. J.H. Cohn LLP – Roseland, NJ
28. Eisner LLP – New York, NY
29. Clifton Gunderson LLP – Peoria, IL
30. Crowe Horwath LLP – Oak Brook Terrace, IL


Here’s the scoop from Vault, with the occasional comment from us.

Ernst & Young – “Quality people, quality audits, quality network”; “Grossly overwork their juniors, underpay their seniors”; “Arrogant” [Jim Turely strikes as a humble-ish guy]

KPMG – “Good international firm”; “Frat party all the time”; “Weakest of the Big 4; unwilling to take risks to change its culture” [What kind of frat? Tri-Lambs?]

Grant Thornton – “Youthful and growing”; “More powerful in some regions than others”; “Big Four wannabe; inconsistent” [And a blogging CEO!]

BDO – “Solid, respected”; “Trying too hard to be a Big Four firm”; “Numerous accounting scandals”

McGladrey – “Solid, well known”; “Known to treat individuals with disrespect; questionable management”

Plante & Moran – “Excellent national reputation—they do things right”; “Mixed reviews on training” [Twelve straight years in Fortune bitches!]

J.H. Cohn – “Relaxed,” “open-door team environment”; “Old-line regional firm currently buying clients—the finest reputation advertising dollars can buy”

Eisner – “Solid New York City/Metro New York/New Jersey player”; “More marketing than expertise”

Clifton Gunderson – “Solid regional”; “Small firm, closing offices”; “We still need stronger name recognition”

Crowe Horwath – “More caring than the Big Four”; “From January to April, [you’ll] work every weekend” (Does more caring mean free cookies? More group hugs? We need details!)

And a some recent samples from these pages:

• E&Y’s lead partner on the Emmys doesn’t get any action from groupies and the Shanghai office doesn’t care if you’re afraid of heights.

• The House of Klynveld recently got less-drastic makeover than PwC and Dick Bové thinks the Citigroup team is ‘an acceptable group of auditors.’

• One Grant Thornton office announced its Christmaskuh festivities early and Stephen Chipman encouraged employees to share the firm’s new strategy with loved ones.

• BDO opened a new office down in tobacco land.

• McGladrey rolled plenty of refreshments for their rebranding including punch that was eerily reminiscent of Jonestown and a freakishly large cake that allowed execs to show off their lack of chipping skills.

• Eisner played coy on their merger with Amper Politziner & Mattia at first but then admitted that they were making sweet CPA firm love.

• A Crowe Horwath audit partner pleaded ignorance on tax issues for his banking client because, well, the tax department is on another floor.

Earlier:
Vault Accounting 50 Rankings: Digging Into The Top 10
Vault Accounting 50: Firms #11-#20 (2011)

Tax Associate Who ‘Can’t Handle’ Public Accounting Searching for Options

Back with another edition of “I’m an accountant and my career is in the crapper,” a tax associate just finished their first year with a mid-tier firm and has discovered that public accounting isn’t exactly the glitz and glamor they were expecting. NOW WHAT?!?

Have a question about your career? Determined to keep a promise to yourself but are surrounded by Big 4 hotties and don’t know what to do? Someone digging at your career choice and need a devious plot to get back at them? Email us at advice@goingconcern.com and we’ll help you make a solid decision.

I’m a first year tax associate at a mid-tier firm and after running through my first spring and fall busy season of working 70-80 hours a week, I’ve basically come to the conclusion that this lifestyle is “not my cup of tea”. The reasons are pretty typical, no life, managers hate me, don’t like the people, the culture is toxic, if you leave at 8:00 pm you feel like the world is watching you leave, etc. etc. For those who want to say “well you just couldn’t handle it”, you’re absolutely right, I couldn’t. I [also] know a number of associates in numerous service lines at the end of their respective first year just find that their job is not for them. My question is, what kind of outs do people in this situation have? I know that the option to transfer to another service line and the standard “just grind it for another year” are typical responses, but what other options are there? And how do recruiters view those who have only one year of experience at a public accounting firm?

Thanks!

-OneFootOutTheDoor


Dear OneFoot,

At the beginning of your letter you sound as though you were engaging in a little self-loathing. Sort of like, “Nobody likes me. I’m a pathetic human being because I can’t find it in my heart to LOVE public accounting. What do I do?” Then you admit that there are others around you that hate it as much as you. This surprises no one. Accounting firms see this happen every year: a first year associate realizes quickly that this isn’t their ‘cup of tea’ as you put it. If you’re truly as miserable as you sound, the fact that you made it through both the spring and fall tax seasons is impressive. We’ve seen associates turn in their papers less than six months on the job.

Does this make you a terrible person doomed to a lackluster career that would make Milton Waddams look like an employee of the month? Of course not. You mention the popular options “transfer to another service line” or “grind it out another year” and we agree that they don’t make a damn bit of sense if you’re simply over public accounting.

Realistic options for you are to start talking to professional recruiters and be honest with them about your situation. No recruiter worth their salt is going to say, “Can’t help you kid, move back in with your parents.” They’ve seen others like you – public accounting wasn’t a good fit and you want out stat. The reality is that because your experience is so brief, you might end up in another entry-level position; the sooner you accept that as a possibility, the better. That being said, what you must, must, must, must do OneFoot is give the recruiter a good idea of what you want to do. We know that doesn’t include public accounting but what kind of job would you really like? Knowing that will go a long way helping them get you the job you want. Until you can answer that questions honestly, you’re not going to be happy in any job – public accounting or otherwise.

Accounting News Roundup: SEC at “Bottom of the Barrel” When it Comes to Diversity; More on Competition (or Lack Thereof) in the Audit Market; Define “Rich” | 10.01.10

SEC Plans to Hire More Women and Minorities Amidst Poor Rankings [FINS]
“At a recent panel discussion and networking event at the agency, Commissioner Luis Aguilar spoke about the need to hire ‘the best and brightest,’ while acknowledging that in the past it hasn’t done a good job of recruiting women and minorities.

In his speech, Aguilar said that as of FY 2009, 89% of the SEC’s senior officers were white, 4% African-American, 3% Hispanic and 2% Asian. Along gender lines, 67% of the officers were male and 33% were female.

Moreover, in a recent survey published by the Partnership for Public Service, the SEC fell from 11th to 24th place on a list of the ‘Best Places to Work’ rankings. With regard to diversity, the SEC ranked 24th out of 28 agencies when it came to diversity. In other words, the bottom of the barrel.”

PCAOB Fires Shot on Audit Issues, Calls for Enforcement [Compliance Week]
“The Public Company Accounting Oversight Board has published a report summarizing its observations after inspecting audits performed while credit market seized and the economy plunged into depression. The report says auditors generally didn’t adhere adequately to PCAOB standards when it came to some of the toughest areas in financial reporting through the credit crisis – namely fair value measurements, goodwill impairments, indefinite-lived intangible assets and other long-lived assets, allowances for loan losses, off-balance-sheet structures, revenue recognition, inventory and income taxes.”

Viacom Names New CFO [WSJ]
Controller James Barge succeeds Tom Dooley who jumped over to the COO seat.

Accounting niches [AccMan]
Are accountants doing enough to leverage their professional expertise?

Investors unhappy with lack of competition in audit market [Accountancy Age]
“The Association Of British Insurers (ABI), whose members account for almost 15 per cent of investments in the London stock market, is worried about the audit structure and said it has made its views known in a submission to a House of Lords inquiry into audit competition.”


H&R Block sees 5-cent hit from IRS policy change [AP]
Fewer rapid refunds doesn’t seem like a bad thing.

KPMG’s Fuzzy Math on Atlantic Yards [NYO]
The completion of the Atlantic Yards project remains on a timetable that runs parallel to the adoption of IFRS in the United States.

Tax the rich, whoever they are [Don’t Mess with Taxes]
Come out with your hands up!

Is Anyone Surprised That Christine O’Donnell’s Nonprofit Failed to File Their Tax Returns?

We were really hoping to avoid the whole Christine O’Donnell anti-masturbating/witchcraft/evolution-is-a-myth dealio but we can’t, in good conscience, ignore the fact that the nonprofit group founded by a candidate for the U.S. Senate hasn’t bothered to file tax returns in three years.

The AP got their hands on IRS documents that show O’Donnell’s “pro-abstinence outreach organization” failing to file their 990 for the past three years. This, as you may know, means that the anti-pre-marital bumping uglies organization could lose its tax-exempt status.


O’Donnell’s camp is blowing this off (seems to be standard operating procedure), “It’s not any big deal. I’m dealing with this for all kinds of clients right now,” the AP quotes the campaign’s lawyer, “There are thousands of nonprofits doing this. Everyone is scurrying around.”

According to the AP, the most recent return filed by Savior’s Alliance for Lifting the Truth (SALT) shows $2k in contributions and $1,973 in expenses.

Since this attorney seems to be on top of the situation, we probably don’t have to tell her that the nonprofit can likely file a 990-N in less time than it would take for a young Salty to engage in a manual override. Or cast a spell on the IRS. Whichever.

O’Donnell nonprofit failed to file [AP]

“Robert Herz has had a more interesting career than any accountant deserves.”

We probably don’t need to remind you that today is Bob Herz’s last day at the FASB. It’s a sad day indeed for many that have been addressing their poignant comment letters to Roberto for the last eight years.

How Herz is celebrating his last day up in Norwalk isn’t immediately known but we’re sure it involves making crank calls to the American Bankers Association, Barney Frank’s face on a dartboard and plenty of cake.


Not so surprisingly, there’s not much mention of Bob’s last day out there except for cheeky article over at the Economist that informs us of precisely nothing new but manages to give Bob a backhanded compliment and take a major swipe at every single accountant on Earth:

Robert Herz[…]has had a more interesting career than any accountant deserves. He began his tenure as chairman of America’s Financial Accounting Standards Board (FASB) in 2002, dealing almost immediately with the fallout from the Enron and WorldCom scandals, which had been abetted by accountants. He was due to end it on October 1st, a sudden departure for undefined personal reasons, after a crisis also partly pinned on the profession.

Accountants “deserve” boring careers? Their choice of a profession automatically merits a long drab livelihood that involves choice of pen color, whether or not to upgrade the 10-key calculator on their desk and auditing Excel formulas? Forget about the rest of us for a minute; there are people who are ashamed to share humanity with Herz. It’s the man’s last day. Way harsh, Economist.

Beancounter there, done that [The Economist]

TIGTA Concerned That IRS Is Blowing Off Deaf, Mutes (and Presumably Deaf-Mutes)

The IRS sucks at a lot of things. Given.

Thankfully we have Treasury Inspector General of Tax Administration to inform us about said failures opportunities for improvement.

But today’s news that the IRS isn’t doing enough to help our hearing and speech-impaired friends is especially disheartening to the TIGTA overlords. They can (somewhat) understand providing crappy service to regular Americans (try reading the instructions people) but if you’re unfortunate enough to be without speech or hearing, the IG felt obligated to point out the IRS’s shortcomings:

TIGTA performed an audit to evaluate both the IRS’s customer service toll-free telephone access during the 2010 Filing Season and the access and service it provided to hearing and speech-impaired taxpayers. TIGTA found that the IRS exceeded its overall performance measurement goals by 2.3 percent. However, the Level of Service for the TTY/TDD toll-free telephone line for the 2010 Filing Season was just 8.8 percent, meaning that only 8.8 percent of calls placed using the TTY/TTD successfully reached an IRS assistor. The total dialed attempts for the TTY/TDD product line during the 2010 Filing Season were more than 350,000; however, IRS assistors answered only 339 of those calls.

“Our report found that far too few hearing and speech-impaired taxpayers successfully reached an IRS assistor,” said J. Russell George, the Treasury Inspector General for Tax Administration. “The IRS must do a better job of ensuring that all Americans have equal access to its services,” he said.

Actually, that is pretty shitty service. Even by IRS standards.

The IRS Could Improve Toll-Free Telephone Assistance For Hearing and Speech-Impaired Taxpayers [TIGTA]

Some French Guy Still Trying To Tell the U.S. What to Do Re: IFRS

Look, pal. We get that you’re anxious to slap these sets of accounting rules together like an IKEA ottoman. We also get that you and a certain knight want – nay – need the RW&B to be on board.

But we don’t know who you’re trying to boss here. See, we’re fairly certain you’d be speaking German if it wasn’t for us. Furthermore, in case you haven’t noticed, we like dragging things out until the last possible minute. Or just ignoring things until we have a giant mess on our hands and then we try cleaning up. Why would we treat IFRS any different?


We understand it’s a new century, millennium and you guys have a rough go in the World Cup but you can give it a rest.

We’ll get to IFRS when we’re good and ready and just because today is Bob Herz’s last day at the FASB doesn’t mean you need to get all anxious about it:

The US is due to make a decision about whether fully buy in to international standards in the latter half of next year. There has been speculation that the appointment of a new chairman for the US standard setter, FASB, could determine which way the world’s biggest economy will go on international standards.

In a speech yesterday to a conference organised by European financial think tank EUROFI, Barnier welcomed the involvement of the US in the Basel talks on financial regulation. But he added that the US should not part company with IFRS.

“It’s essential that we adopt the same prudential framework. I say this very simply, we cannot afford to take the risk of divergence in this area. And this is also the case for accounting standards,” he said.

EU chief urges US to buy into IFRS [Accountancy Age]

The Latest on KPMG Compensation: Been Better, Been Worse

Just a quick follow-up to our earlier post on KPMG compensation. There’s been a fair amount of bellyaching about the less serious comments on the thread so we’ll alleviate some of the bitching with reports from trusted sources:

Senior associate promote in West advisory, SP+ rated, 11% raise, 3% bonus. Raise was higher than expected but bonus was definitely lower than what I thought it would be. It was explained to me that the 11% is inclusive of the promotion bonus so it’s really 5% promotion + 6% merit

And back on in the East:

NY Metro M1 to to M2: 10% base increase, $2,600 bonus, SP+ using 9-box system.

We understand that there are still sit-downs going on so do keep us updated.

Earlier:
KPMG Gives Green Light to Start Pretty Disappointing/Pleasantly Surprising Conversations

UPDATE:
Apparently some Klynveldians (we hear in NYFS) will get the esteemed pleasure of sweating this out through the middle of next week. We also had a mini-Flynn close to the situation inform us that “1st year managers can’t be exceptional performers [highest rating in the House of Klynveld].” Keep the tips coming in.