Our Income Taxes Are Not Progressive

Progressive?

The claim we have progressive income taxation has been accepted with no thought given to whether it is true.

It isn’t. Although the wealthy are paying a larger share of total income taxes than ever, they are also wealthier than ever, and Liberals are constantly whining about the growing wealth gap. Far from being progressive, income taxes discourage savings and the accumulation of wealth, and place obstacles in the path to closing the wealth gap. It’s easy to maintain wealth, hard to accumulate it.

To begin, what makes an income tax progressive? The probable answer is that the higher the income, the higher the tax rate. The intent of progressive taxation is to have the wealthy carry the tax load, because: “They should pay their fair share. They need to give back. They receive the greatest benefits. Yada, yada & Etc.”

Because of the “progressive” nature of our income tax system, the wealthy make a lot of tax lawyers and accountants wealthy too by paying them to devise ways to beat high taxes. Even government has leaped into the tax avoidance business, by promoting schemes like tax-free municipal bonds.

Since the top 5% in terms of adjusted gross income pay 60% of income taxes (the top 5% share of the total has increased steadily, up from 37% in 1980 when the top tax brackets were at 70%), and the bottom 50% pay only 3% of the total (less than half of the 7% they paid in 1980).

You can see by the trend, the wealthy need all the help they can buy to avoid fulfilling the Democrat’s dream of wealthy Republicans eventually paying all the income tax. As it is, almost half of our “taxpayers” no longer pay any taxes to the IRS.

Thanks to the Internet, you can also easily find entire nations that provide tax avoidance services, offering off-shore banking in British Virgin Islands, Belize, Dominica, Seychelles, Panama and Gibraltar, and in other less favored states.

As is usual, the unwealthy need not apply.

Can an income tax be regressive? Look no farther than FICA (Social Security) and Medicare payroll taxes for the answer, a resounding “Yes!” The FICA and Medicare rates are the same for all, and FICA is paid equally on the first dollar earned up to the 137,700th dollar, after which the marginal rate is zero. Therefore, the total FICA tax rate for someone earning $275,400 falls to 3.1 percent, exactly half the 6.2 percent rate for anyone earning $137,700 or less.

You do realize your "employer contribution" comes out of your wages too, don't you? It's a sneaky way politicians try to make you think you're only paying 6.2 percent into Social Security. If you were self-employed, you would know you pay 12.4 percent into Social Security, and 2.9 percent into Medicare.

The total FICA tax rate continues to fall once taxable wages pass $137,700  For example, for someone earning $413,100, the tax rate is only 2.07 percent. At $550,800, it falls to 1.55 percent, or approximately the 1.45 percent Medicare tax. Get the picture?

FICA is also regressive because it discourages savings and wealth accumulation. The 12.4 percent of income paid into Social Security earns at about a 2 percent rate, less than the rate of inflation. After a lifetime paying into FICA, mortality tables show that a black male born before 2000 will die just about the time he would collect his first check at about 66 years of age. He will probably be unmarried when he dies, so his Social Security benefits will cease with his last breath. The return on his working lifetime investment is worse than 0.00%, which would be the return if someone was paid what he put in. No, his return on investment is a negative 100 percent (-100%).

Opponents of privatized Social Security accounts don’t spend much time on this feature of the present system, or on the fact it went cash income negative in 2010 and goes bankrupt in 2035.

As added frosting on the wealthy’s tax avoidance cake, a person making a million dollars a year from investments only pays FICA at the 0.00% rate. If, following the example of Ross Perot, the million dollars was all income from tax-free municipal bonds, his federal income tax rate is also 0.00%. Therefore, the wealthy can legally pay FICA and income taxes at the same rate as the drug dealer, who pays none of either unless he is caught, arrested, and convicted, and then only if the government can then find where he stashed his loot (see British Virgin Islands, Belize, Dominica, Seychelles, Panama and Gibraltar), and then find someway to collect from it.

Lots of luck collecting, G-Men.

Not only FICA is regressive, but our “progressive” income tax system is too. It also discourages savings and wealth accumulation, by taking a portion of the income before it can be invested, and then taxing interest and profits which, during inflationary periods (i.e. most of the time), means the IRS is reducing your capital base.

Taxing both interest earned on investments and capital gains are particularly regressive and oppressive forms of taxation. In the first instance, interest usually doesn’t keep up with the rate of inflation, so taxing interest earned just adds to capital shrinkage.

On the other hand, capital investments usually increase with inflation, and often at a faster rate. However, that still means that most of the value of the asset is original cost plus inflation. If the value only goes up by the amount of inflation, and the asset is then sold, the investor has not made a profit, he has just gotten back the value of his original investment.

“Not so,” says the IRS. "You have made a profit, i.e. selling price – original cost = profit, and on that profit you will pay capital gains tax." In other words, your investment not only did not beat inflation, but after paying tax on the “capital gain,” you lost money. Such a deal! Courtesy of your IRS.

I am waiting for a Liberal to explain to me why a system of taxation that discourages savings and investment is considered “progressive.”

The most illogical and regressive part of income taxation is the double taxation of corporate profits. Corporations are taxed at a very high rate (basically 21%, formerly 35%, with possible add-ons) when profits are earned, and then those profits are taxed to individuals when distributed as dividends.

Liberals have justified this double taxation by once again clothing it in the mantel of “fairness,” declaring that corporations must pay their fair share. Either through deceit or ignorance, the Liberals don’t admit that corporations don’t actually pay any income, property, or any other form of taxes; we who buy their products pay their taxes.

That’s right, when you’re calling for corporations to take on more of the tax load, what you are really demanding is government to tax us more. To a corporation, corporate taxes are just another cost of business to be passed on to their customers along with the costs of labor, materials, and overhead.

When the government collects corporate taxes, it reduces the capital the corporation can use for investment. Therefore, instead of funding growth internally through increased retained earnings, the corporation has to replace the funds lost to corporate income taxes by borrowing.

I’ve heard many Liberals dispute this, but without demonstrating to me how corporations could pay their taxes unless they receive money from their customers when they sell them their products. Some have told me that corporations sell a lot to other corporations, and to government, as if that proved a human being was not the ultimate link in the tax paying chain.

For the accounting illiterate among you, I would like to explain that corporations who buy anything from anyone include those costs as material or overhead charges, and recover them through charges such as depreciation, amortization, professional services expenses (such as tax lawyers and accountants), & etc. The only time they “eat” the taxes instead of passing them on is when they are operating at a loss. However, at that point taxpayers subsidize their loss because tax law provides for corporations to carry losses back against prior period taxes paid, and then forward against subsequent year profits.

The bottom line is there is nothing progressive about “progressive” income taxation. It is an artifact created from class envy and taxpayer ignorance by legislators to fool taxpayers. While the taxpayers are gloating and celebrating how politicians have “socked it to” the wealthy and to the evil corporations, the politicians are gloating about how easy it is to fool ignorant and envious citizens and get their votes.

Meanwhile, instead of benefiting from the stronger and healthier economy that sensible taxation would promote, the taxpayer congratulates the politicians for distributing tax misery equitably.

Income taxation problems such as discouraging investment, wealth accumulation and savings, slowing economic growth, and placing American business at a competitive disadvantage in the world marketplace, would be solved by a national sales tax along the lines of the Fair Tax proposal.

Just as regressive income taxation has been called “progressive,” the progressive Fair Tax proposal has been labeled regressive.

Newspeak lives.

Please click on the label below to see all my articles on this topic.

Tax Day Lament

Day after day in years past I have struggled against waves of remorse to sit before my computer and painstakingly compose Alice and my income tax returns. My sole objective every year is to arrive at all ways this side of outlaw to reduce our tax “contribution”. However, I realize that our efforts to minimize our contribution might seem selfish to many: “Where’s your spirit of sharing?”

Oddly though, before I plumb the depths of guilty feelings too deeply, I rationalize that it’s only me and trusty TurboTax against a well-paid IRS army; in years past Democrats like John and Teresa Kerry, John Edwards, and Bill and Hillary Clinton, who were generous to a fault with public funds, were known to sic armies of tax lawyers and accountants onto the IRS to make sure that they too contributed as little as possible. Then, if still burdened by feelings of selfishness, I take solace knowing we donated more to charity in a year than Joe and Jill Biden did in a decade.

At this point waves of smug, self-satisfaction wash over me, until I realize that I live in a community where generosity takes many forms, and is a way of life. Whereas the taxes we pay leave our community to be frittered away, in our communities the Lions, Rotarians, Soroptimists, Gualala Arts volunteers, school boosters, restaurateurs, and donations by generous businesses and individuals do what the bureaucrats won’t and can’t: find our real needs and fill them.

For over twenty years it’s been my privilege to work with many other Lions and Rotarians to round up donations for our fundraiser raffles and auctions, so I am constantly made aware of the generosity of neighbors and business owners.

We render unto Cesar, but our hearts give voluntarily and happily to friends. 

Social Security Privatization Made Easy

Privatization of Social Security is still a hot topic in the Combs house. I started drawing Social Security at my normal full entitlement age, in my case 65 years and 10 months (I was born in 1942). However, Alice waited  until she was 68 before starting.

Both of us knew that Social Security wouldn’t pay me much, even though I earned above or near the maximum for FICA contributions for almost all of a working life now approaching fifty years.

Over the years Alice and I have heard Democrats putting down Social Security privatization, saying that it wouldn’t pay as much and was too risky. As a test, I thought it would be a good idea to use real income and contribution amounts to get an accurate estimate of how a person would have fared if Social Security had always been privatized. Fortunately for my project, Alice had “Your Social Security Statement” in one of her voluminous files (she never throws anything away) and I copied her Social Security income by year onto an Excel spreadsheet, beginning with the $40 she earned in 1959.

The next part, calculating how much Alice contributed to Social Security each year, took a little research. Happily, such research in the Age of Google is the essence of simplicity, and I immediately found a Social Security page on JustFacts.com that provided a table of Social Security tax rates:

Year Social Security Tax Rate
1950 3%
1960 6%
1970 8.4%
1980 10.2%1990 12.4%
2000 12.4%

By multiplying Alice’s Social Security earnings each year by the tax rate for that year I calculated how much Alice contributed each year. Since Alice earned more than the Social Security ceiling since 1977, I projected her income and contributions through the end of 2008 and found she had contributed a total of $220,254.56 from 1958 through 2008.

The next part was simple, but a bit tricky since it required me to select a table of values for stock market investments covering at least a half century. I selected a table of the Compound Annual Growth Rate (CAGR) of the S&P 500 for two reasons. The CAGR gives about a one percent lower rate of return than using simple averages, but avoids the valid criticism that a simple average method mechanically distorts the effects of year-to-year fluctuations. The other reason I chose it was that an index of the S&P 500 reflects a simple, inexpensive mutual fund investment option that has been available for a long time.

I used the date range calculator for each of the fifty years 1958 through 2007 (I valued 2008 FICA contributions at face value). It was laborious work, but now you don’t have to do it, because I’ve done it for you.

(For example, a dollar invested in the S&P 500 in 1958 is worth $32.57 today. Multiply your FICA contribution in 1958 by $32.57, and you would have its value now.)

Year Compound Annual Growth Rate
1958 $32.57
1959 $24.78
1960 $23.22
1961 $24.19
1962 $20.18
1963 $22.88
1964 $19.28
1965 $17.06
1966 $15.65
1967 $17.98
1968 $14.97
1969 $14.05
1970 $15.87
1971 $15.85
1972 $14.37
1973 $12.43
1974 $15.00
1975 $21.29
1976 $16.23
1977 $13.63
1978 $15.37
1979 $15.42
1980 $13.71
1981 $10.90
1982 $12.12
1983 $10.53
1984 $8.98
1985 $8.85
1986 $7.01
1987 $6.07
1988 $5.92
1989 $5.27
1990 $4.14
1991 $4.43
1992 $3.51
1993 $3.36
1994 $3.14
1995 $3.18
1996 $2.37
1997 $1.97
1998 $1.51
1999 $1.19
2000 $1.00
2001 $1.11
2002 $1.27
2003 $1.66
2004 $1.31
2005 $1.21
2006 $1.17
2007 $1.04
2008 $1.00

Now all you have to do is post this to your Excel spreadsheet, and multiply your contribution each year by the CAGR value for that year. When you’re finished, just sum the total and you will find how much your contributions would be worth through 2008 if they had been invested in an S&P 500 index fund. (This fund would be much larger if you assume that dividends are reinvested.)

Alice would have had a fund worth $765,722.90. If she drew on it now, at the rate of the $2,000 per month Social Security would pay if she started now, it would last her 32 years, or until she was 98 years old, even if she never re-invested a penny. That’s a good thing, since Alice, then at age 66, had a life expectancy of another 18 years to the age of 84. If she only made it to 84, by drawing out $2,000 a month she would still have about $333,000 left to pass on in her estate.

(Unfortunately, in our current government-run system, as soon as you die, your Social Security disappears unless you have the unlikely situation of a spouse who does not qualify in their own right, or unmarried minor children.)

Alice, being a very successful businesswoman, would of course re-invest her privatized Social Security funds, and would probably just leave it in an S&P 500 index fund.

The average rate of return for all holding periods beginning in 1926 (the year the S&P 500 was actually founded) is 11.0%. The average rate of return for all holding periods beginning in January 1945 is 11.6%, and since January 1980, the average rate of return for all full-year increment holding periods is 13.9%.

Let’s keep it simple and say that the market can only do 10.0% per year, so in each month of 2009 Alice leaves the principal alone and only takes out as income the average monthly increase of $6,380 ($76,560 per year), which is about 3.2 times larger than she would have been paid under Social Security.

Don’t forget, Alice can keep drawing on her funds at this rate for years and still have over $765,000 untouched to pass on tax-free one day to her heirs (assuming that politicians don’t get greedy, as they usually do, and levy an exorbitant Death Tax on these previously taxed funds).

So why don’t we have privatized Social Security? To answer this question, ask another question. Why aren’t there any funds in the Social Security Trust Fund?

There aren’t any funds in the Social Security Trust Fund because Democrat politicians realized that historical Social Security surpluses could be diverted to finance current spending through the simple device of replacing the Trust Fund surplus dollars with special Treasury Bonds (or government IOUs).

In essence the government said, “I’ll borrow from myself, spend the money, and when Social Security goes into deficit spending in 2010, I’ll increase payroll taxes plus borrow from the General Fund – excuse me, sell back the IOUs, causing the General Fund to borrow and increase taxes to make up the deficit - while pretending the whole time that Social Security is solvent until 2035. By then I’ll be long retired, and some other poor suckers will have to try to clean up the mess.”

Our government has always trusted that we are primarily too stupid, and secondarily too greedy, to privatize Social Security. Too stupid to realize Social Security is a horrible investment for workers, but a great cash cow for politicians to tap for funds to spend to buy our votes. Then we have to be too greedy to stop them from buying our votes and to phase in privatization to pass down a better system to our descendants.

As a final point, and one deserving of a post all its own, if we all had been paying into a privatized account, an S&P 500 index fund (the S&P 500 contains 70% of our stock market capitalization), instead of a government deep in debt, we would have an economy awash in capital. All of our contributions invested in our economy instead of frittered away by politicians would be powering economic growth, and high levels of research, development, and innovation.

As an incidental consequence, the high level of economic activity would also be generating high tax revenues, especially at reduced tax rates.

We would have universal health care through personal Medical Savings Accounts, not a bankrupt Medicare system and Medic-Aid that has been cut so much that doctors are refusing Medic-Aid patients.

We have seen the future, and it works, but only if we can take back control of it from the politicians.

Alice And Vulcan Incorporated - Only In America

Vulcan Incorporated President and Chief Executive Officer at Vulcan's Christmas party, 1988. I proposed to Alice that evening after the party, five weeks after we met.

Belatedly following the advice of my buddy, Sam, I joined the Gualala Rotary several years ago. As with new members, they quickly scheduled me to do a presentation, presumably about myself, at our lunchtime Friday meeting at St. Orres. Without spending much time thinking about what I would say, I chose to talk about Alice and her company, Vulcan Incorporated, plus how we met through Great Expectations, a video dating service. Many Rotarians have since remarked that they were surprised, and pleased, that I chose to talk about Alice instead of myself. It’s not that they’re not interested in my All-American Boy story; it’s just that Alice’s story is much more interesting and compelling.

First things first, Alice and I met through Great Expectations in 1988, the year that my first wife, Marilynn, died of breast cancer at the tender age of 43 less than two months after our 25th anniversary. When we met, Alice already had a very successful small business, Vulcan Incorporated.

Over a decade before we met, Alice divorced her first husband and went back to college while raising her two daughters and working as a waitress in Dublin, the town where they lived in northern California about thirty miles east of San Francisco.

After she completed her degree in Political Science at Cal State-Hayward, her first job was as a Pre-Trainee at Mervyns, with the goal of becoming a Buyer. She soon found each day on the job was a miserable experience, because she had to stand for long periods on her very flat feet. The pain in her feet hurt her concentration and performance, and soon Mervyns informed her that she was not management material.

For her future success, being fired by Mervyns was one of the best things that happened to her.

While a divorcee she had several boyfriends, none of whom were serious marriage material. One boyfriend introduced her to selling, primarily of industrial products like welding rod. She soon realized that she was better at selling and was a much harder worker than the boyfriend. He did make one valuable contribution to her future in sales, when he introduced her to such principles or clichés of selling as: “Find a need and fill it.”

As Alice worked hard, much harder than the boyfriend, she took “find a need and fill it” as her gospel of selling, and one day while visiting Karl, the plant manager for a major boxboard manufacturer, she asked him if there was something the company had difficulty buying.

He was an Italian-American, a flirtatious but fatherly figure, and looking at the leggy young blonde, who was looking back at him with an intense and serious expression, he replied: “Honey, baling wire. Even the farmers are having a hard time buying baling wire.”

“Karl, stop joking, be serious,” she told him, but he just said “follow me,” and showed her the automatic baler that was fed cardboard box scrap through a pneumatic system that gathered scrap from wherever box board was trimmed throughout the plant. She watched as wire was dispensed from hundred-pound spools, threaded around the baled cardboard, and automatically tied when the bale was formed.

The reason baling wire was in short supply was that our government, in October 1974, under the “big government” tendencies and inept leadership of President Ford, was in the throes of one of its usual mindless schemes to do something it had no business doing. In this case it was attempting to control inflation through voluntary and mandatory actions, such as price controls. Do you remember “WIN”? “Whip Inflation Now”?

As is the usual result of unwarranted government meddling, WIN just made matters worse. In the case of baling wire, the price controls on steel production penalized producing low-margin products like baling wire, and favored diverting production to high-margin products. Very quickly baling wire was in short supply, and Alice was unknowingly knocking on the door of opportunity.

She seized the moment, and told Karl she would get him the wire he needed. Soon she found some wire, bought it with a check on funds she knew she didn’t have in her account, and had her boyfriend drive the truck to deliver it. She also prevailed on Karl’s company to pay her immediately, instead of paying through the usual accounts payable cycle, so she was able to get the funds in her account before the check from her supplier hit.

Unfortunately, her wire did not work properly in the automatic baler. Fortunately, Karl did not request a refund and gave her another chance. The second batch of wire worked, but it wasn’t on spools. The third batch was the charm, because Alice worked very hard researching and phoning to get spooled wire. Thus was Alice’s industrial baler wire distribution business launched.

During the Vulcan start up period, her office was her guest bedroom (she replaced the bed with a cheap used desk) in her Dublin home. Before hiring any employees, Alice didn’t want Vulcan to appear to be the little “shoestring” company it was, so she employed a telephone answering service to take calls and transfer them to her home. A sixteen-year old local bakery girl was soon lured away from her cakes to become a part-time employee. The business quickly progressed from purchasing wire directly from suppliers for delivery, to renting warehouse space and services.

While still in her home office, Alice had to worry about cash flow because one of Vulcan’s customers was always slow in paying their account. Alice called the owner, and he promised they would have a $5,000 check for her after work. Alice went to the company’s office to get her money and was told it wasn’t ready. She then demanded to see the owner and was told that was impossible because he was in an important meeting. That was the wrong thing to say to Alice and she immediately walked past the receptionist, banging doors open, then went up the stairs, barged through a door into the meeting, and demanded: “Who is Bob Sherman?”

“I am,” a slight man at the head of the table answered. “What do you mean by this?”

“I came for the check you promised.”

“Then was then, and now is now, and now we don’t have the money.”

“I’m not leaving without my money,” Alice shouted, then threw her portfolio briefcase at Sherman, narrowly missing him as it curved in flight like a boomerang. “Pick it up!” she shouted after the near miss.

“You pick it up!” Sherman shouted back.

One of the bystanders picked it up and rearmed Alice.

“Get out now,” Mr. Sherman demanded, “or I’ll call the police.”

“Give me the phone,” Alice replied, “and I’ll call them myself.”

"Not on my dime!" Sherman roared, and ordered his men to: “Get her out of here!”

Two big men picked up the chair with Alice in it and carried her out the door to the top of the stairs, but didn’t know what to do next. Then Sherman came to their rescue, pulled Alice out of the chair, and started to carry her down the stairs. Although Alice only weighed 135 pounds, she was bigger than Sherman, and he only carried her down two steps before he dropped her.

Alice bounced down the steep stairs on her shapely rear, her slick polyester dress speeding her descent, and landed at the bottom with aplomb and without physical damage, with her papers and briefcase still clutched in her arms. She stood up, glared at Sherman, and shouted through clenched teeth: “See you in court!”

She then grabbed the door to slam it on her way out, but the pneumatic door closer dampened the drama of her exit.

When she returned to her home office, her receptionist said Sherman’s company had called and said they were mailing a check, but that they wouldn’t be doing any more business with Vulcan. “I told them there must be some misunderstanding,” she told Alice, “and that I'm sure Alice will straighten it out.”

Alice thought Vulcan would be finished when word got out about her confrontation with Bob Sherman, but it was the opposite. The Bay Area refuse collection and recycling industry was abuzz with the story of the “little lady with balls.” In fact, Alice was soon invited to join the California Can Carriers Association, made up of former garbage men who had worked their way up to management and sometimes even ownership of their garbage companies. Alice didn't have to seek out contacts. Due to her new notoriety, men came to her and introduced themselves. Vulcan's sales then increased rapidly.

As sales rapidly increased, a second and then a third employee was added, and then all began tripping over the waste baskets and bumping into the desks. The former guest bedroom no longer sufficed, so Alice rented an office nearby. It was an attic space over a regular office, and was not air conditioned. During the summer the heat was unbearable, and Alice quickly relocated Vulcan before her employees left her. She moved Vulcan to a recently abandoned Red Carpet Realty office, which still had the red carpet.

While there, a competitor sent an employee to intimidate Alice into selling her business to him cheap. The first of many competitors learned that Alice can’t be intimidated.

Although Alice’s father, George, at the time had never had a computer of his own, he came up from his home in southern California and helped install Vulcan’s first computer system. At the time the business was growing so fast that George asked Alice to tell the newly hired salesperson to slow down because the computer couldn’t keep up. His request fell on deaf ears, and eventually the computer caught up.

In the course of the fourteen years that passed before we met in 1988, Alice moved Vulcan into increasingly nicer office space. When I met Alice on October 30, 1988, Vulcan was an all-female company located in a very nice office in Pleasanton. The office space was so desirable, Vulcan sublet space to an attorney and to a medical supply sales representative.

"Laissez les bons temps rouler!"
1992, Santa Catalina, Alice and I celebrate mass 50th birthdays with her Reseda High classmates, with Vulcan on a roll. Casino (with Avalon Ballroom on top) behind us.

However, in the early 1990’s Vulcan lost their biggest customer, which had reorganized its purchasing and warehousing in northern California and started purchasing wire directly from the manufacturer. Alice gave herself and everyone in Vulcan a pay cut, and soon rented a combination office and warehouse in the industrial part of Hayward, bought a forklift, and added a warehouse man/forklift driver.

Alice also learned computer spreadsheet formulas, and worked many hours on the computer in our Livermore home designing a spreadsheet that her employees could use to predict when and how much of what type of wire a customer could be expected to need soon. Alice’s customer order prediction spreadsheet replaced a manual system she had developed years before. Alice was inspired to create the spreadsheet system when she and her office manager tired of teaching new employees simple algebra. She had only been able to hire one employee who didn’t need training in simple algebra, an elderly gentleman already drawing social security.

Alice copyrighted her spreadsheet, which made it much easier for Vulcan to bring on new employees to handle routine customer reorders. It also gave Vulcan a very good tool for managing its inventories of various lengths, widths, and types of wire in order to meet customer requirements on a timely basis.

During the “lean” period that led to the move to Hayward, I was laid off in 1994 after ten years at Lockheed. As we say in Defense Contracting, “Peace is Hell,” and Lockheed was losing one direct contract after another as I labored in an overhead position as an Environmental Protection Auditor. While drawing unemployment pay, I started working in small business brokerage at Business Team in Walnut Creek, quickly listing seven businesses, but couldn’t find any buyers. Luckily for me, I soon found a position as Accounting Manager with a small defense contractor in Sunnyvale. Alice volunteered to take over my listings, and began working at Business Team but soon tired of the mind-numbing paper shuffling she had to do without any clerical assistance.

The Business Team office manager soon noticed that Alice was not enthusiastic about the work, and suggested it would be best for all concerned if Alice moved on to other things. Alice was glad to be asked to leave, and as she packed up her things, she told another agent she had been fired. That upset the other agent, but Alice reassured her she was happy it happened. At that point the agent told Alice that she was the type of owner small business brokerages hate. When Alice asked why, the agent explained that good businesses like Vulcan, with a healthy owner, no divorce or family squabbles, and not suffering any other major afflictions or catastrophes, would not go on the market at a sacrificial price, and therefore would be very hard or even impossible to sell. Buyers are looking for businesses in distress to buy at bargain-basement prices. No one wants to pay what a successful business is worth.

Working at Business Team and gleaning this piece of information was another of the best things that happened to Alice. Up to that point, she had often and seriously thought of selling Vulcan, but now she realized that she couldn’t get good value for Vulcan by selling it to a buyer. This inspired Alice to creatively find another way to “sell” Vulcan, and she began investigating “sweat equity” schemes.

By far the most significant change Alice brought to Vulcan was “sweat equity” ownership for her key employees. One of her competitors had been hurting the sales of all the other wire manufacturers and distributors, including Vulcan, by aggressive price cutting. Unfortunately for the competitor, he cut prices too aggressively and didn’t fully cover his selling costs, which landed him in bankruptcy. Suddenly, Alice had an opportunity to hire Mike, the competitor’s best salesman, who had done such a good job of selling that he had almost destroyed Vulcan.

Alice couldn’t immediately offer Mike, who still lives and does most of his work in southern California, the kind of money he had been making at his bankrupt former employer, but she thought of a better deal. She would offer Mike the opportunity to earn shares of Vulcan each year, and to one day become the majority shareholder. In exchange for giving up her shares, Alice accepted a salary with annual inflation adjustments, good until age 110.

Alice also extended the offer of Vulcan ownership to other key employees: her loyal and reliable office manager, Pat; and Theresa, her personable salesperson for the northern California territory. The sweat equity system Alice established enabled her to keep her “Big Three” running Vulcan with expertise and stability rarely seen in a small business. Mike soon led an expansion of Vulcan into manufacturing, followed by the purchase of a 14,000 square-foot building in Hayward to combine office functions, manufacturing, and warehousing. Later a 7,000 square-foot building was added to serve as office space and extra warehousing. During Mike’s tenure at Vulcan, gross sales have increased from roughly a million dollars a year to approximately $10 million.

Vulcan is prospering well into its fifth decade, and is the industry leader in California for sales of industrial baler wire.

Alice and Vulcan Incorporated are truly an “only in America” story. She saw an opportunity and went after it holding nothing back. Along the way she found she had abilities that even surprised herself. She started a business in a historically all-male industry, and succeeded when other larger, more experienced competitors found it easy to fail.

Along the way she showed a remarkable ability to turn setbacks into successes:

She may not have been Mervyns management material, but she’s a great manager when she’s the boss.

When she was thrown out of Sherman’s meeting, she landed on her feet and gained a big reputation and instant respect in a tough, all-male industry.

When she lost her biggest customer, she started doing her own warehousing.

When she couldn’t hire employees who understood simple math, she developed a computer spread sheet for predicting sales that has kept Vulcan far ahead of competitors’ systems.

When a competitor tried to destroy her, the competitor went bankrupt, which enabled her to hire the top salesman of her dreams.

When she was fired from Business Team, she developed a way to “sell” Vulcan to its employees, and receive a generous salary.

It seems each setback Alice faced resulted in her doing better than she would have done otherwise. “When life gives you a lemon, make lemonade.” “When things look darkest, that’s your chance to shine.” “When the going gets tough, the tough get going.”

Each of these describes Alice, but the one that fits best is the one she earned from a real tough audience many years ago. She’s the “little lady with balls.”

And her memoir, The Lady With Balls, provides all the details and drama.

Earth is an Anthropogenic Climate Change Denier

It’s worth revisiting NASA’s Gavin Schmidt’s claim, as reported in your ICO Editor’s Reply, that now “…could be the warmest period since the dawn of civilization.” In my two previous letters on this subject I referenced studies of trees growing in far northern latitudes 9,000 to 5,000 years ago where they can’t grow now, and of coral mounts from the same period that are several feet above present sea level. Both are obvious signs that we couldn’t be in a warmer period now.

For other examples that totally debunk Schmidt’s statement that now is probably the hottest period in the Holocene – the past 11,500 years - we should add Alpine glaciers and tree lines. Prof. Gernot Patzelt, an internationally renowned glaciologist with numerous publications and lectures, authored (title translated from the German) “Glaciers: Climate Witnesses from the Ice Age to the Present.” Patzelt found that for 70% of the past 10,000 years, glaciers were smaller that now. This finding supports studies of Greenland ice cores (“The Two-Mile Time Machine,” Richard Alley) and a variety of ocean and lake sediment cores that indicate that 90% of the past 10,000 years were warmer than the present.

Concerning tree lines, Patzelt noted: “Around (10500 BP - Before Present) the temperatures were lower, from (10200 BP) they were already above the level of the present temperature conditions… the postglacial warm period reached a first peak shortly after (8000 BP), followed by a second peak around (6200 BP). During this time … the timberline was 100-130 meters (328-426 feet) higher than what is currently possible, which means that a summer temperature of 0.6-0.8 °C (1.0-1.3 °F) higher can be derived…” (Bolding added by me for emphasis; dates changed from BC to BP for clarity)

Trees, corals, glaciers, ice sheets – we can learn from them.

Earth's Experiment Continues

The Editor’s Reply to my “Earth’s experiment” letter emphasized the lack of precision and uncertainty of scientists’ estimates of ancient global temperatures. While I would strongly differ with you alleging imprecision in the two-mile Greenland ice cores that indicate that we now live in the coldest 1,000-year period of the past 10,000, the purpose of my letter was to show that tree-rings and other proxies of temperature are not relevant to the determination that Earth was much warmer and sea levels significantly higher during the Holocene Climatic Optimum (9,000 to 5,000 years before present). 

However, since you quoted NASA’s Gavin Schmidt speculating that “…the Earth as a whole is probably the hottest it has been during the Holocene – the past 11,500 years or so…”, so I Googled “Holocene Climatic Optimum” and clicked on the Wikipedia link. There I found many references to hotter periods than the present without the use of Schmidt’s “probably” to convey Holocene climate change. 

Getting back to the Earth’s experiment, many signs of earlier hotter periods in the last 10,000 years are scattered all over the Earth’s surface. In Northern Europe, Asia, and Canada scientists found and carbon-dated tree stumps that proved that forests advanced to or near the current arctic coastline between 9000 and 7000 years ago and retreated to their present positions by between 4000 and 3000 years ago as Earth cooled.

Changes in sea level serve as Earth’s thermometer. Studies of fossil corals worldwide show that sea levels were much higher during warmer periods. During the most recent past interglacial period (125,000 years ago), sea level was over 26 feet higher than now, proof that temperature was also much higher. 

The NOAA U.S Climate Reference Network shows no significant warming since NASA created it in 2005. Mr. Schmidt “probably” doesn’t want to know.

The Earth's Natural Climate Change Experiment

The Earth conducted an experiment over the past three million years that charted climate change against atmospheric CO2. After comparing glacial and interglacial periods to CO2 levels, Earth’s finding was that there was no correlation. Several interglacials were noted that were warmer with much higher sea levels than the Holocene interglacial with atmospheric CO2 levels of 280ppm. Slightly lower CO2 levels were noted during glacial periods which ended before CO2 levels increased moderately. For the past three million years interglacials began when CO2 was low and ended when CO2 was higher. 

The same proved true for shorter periods since 1900; temperature rose rapidly from 1920 to 1940 with little or no change in CO2 from 280ppm. Then as CO2 rose rapidly after 1940, global temperature fell rapidly until 1980. The rise in both temperature and CO2 from 1980 to 2000 was followed by a pause in temperature increase that persisted almost twenty years while CO2 continued to steadily rise. 

Looking at just the past 10,000 years, Greenland ice core and lake and ocean sediment cores show we now live in the coldest 1,000-year period of the past 10,000 years, and that the greatest warming and corresponding higher sea levels were found 6,000 to 8,000 years ago during the Holocene Climate Optimum. The following three warming periods before the present – Minoan, Roman, and Medieval – were each cooler than its predecessor and current warming is the coolest of all. 

Proof of warmer periods in the past 10,000 years are also evidenced by ancient tree lines further north and at higher altitudes, coral mounts several feet above current sea level, and ancient beaches above present ones. 

Thousands of studies exist that prove earlier warming was significantly higher and globally distributed. The Earth gives evidence that none of the models can refute.

Our 2019 Christmas Letter

Alice with packages of bale ties at the company she founded, Vulcan Wire

One of the many pleasures of my life is the annual rite of Christmas Card sending and receiving. After much experimentation over many decades I have finally arrived at an arrangement through the Costco Photo Center that is simple and straightforward: I compose the card on their site, order 300, then print and affix address labels and stamps, insert the cards, and admire a job well done. It has worked so well that I have felt immune to the machinations of Mr. Murphy and his law.

No more.

My order from Costco arrived December 2. A busy early December schedule of projects prevented starting work immediately. When I did get started I failed for several days to notice that the stack of 300 cards seemed small beside the 300 envelopes. It was then I realized that Costco had only sent me 80 cards to go in the 312 envelopes. I then phoned Costco and explained the problem. They said I would have the cards in three business days. UPS delivered the Costco parcel three business days later as promised. I opened it and found 130 more addressed envelopes. No cards. I phoned again. With luck - I'll update this soon - 220 cards will arrive on Monday, December 23, just in time for me to work hard all evening to get them in the mail the day before Christmas. 

Merry Christmas, with new respect for Murphy and his unyielding law.

We haven't planned next year's travel yet. Alice's memoir, The Lady With Balls, was published July 19 and Alice made her first book presentation to a full house at our local community owned bookstore, The Four-Eyed Frog. Since then our daily routines and travel planning includes consideration of book promotion activities. 

Watch out, we may appear soon at a bookstore or library near you!

On June 20, 2020, my Point Arena High School Class of 1960 will be hosting a reunion for the classes of 1964 back to the beginning of time at the Gualala Community Center. I'm hoping that we will have a big attendance and early commitment to help plan the menu, decorations, and all the rest. Send checks for $50 per person made out to me and mail them to PO Box 1639, Gualala, CA 95445. The $50 per person covers dinner and most drinks and all the costs associated with like decorations, hall rent, mailings, &etc. 

Alice was impressed by Amsterdam's Centraal train station, only a block from our hotel

It was very handy for our trip to Bonn, Germany, to board the riverboat cruise

Our 2019 travel was very ambitious. In April we went to a friend's beautiful wedding on a marvelous horse ranch in Virginia. 

We spent all of May in Europe starting with several days in Amsterdam, then boarding a Vantage riverboat for a 26-day cruise up the Rhein and then down the Danube. 

Fore view of our long, lean Vantage ship, River Splendor

Aft view of River Splendor

Along the way we visited a dozen cities in Germany, then Vienna, followed by Budapest and four other cities in Hungary, then onwards through Croatia, Serbia, Bulgaria, and ending in Rumania. Through it all we shared unforgettable sights with even more unforgettable new friends.

They don't build town halls like this one in Bamberg, Germany, anymore

We were really rocking in Markheidenfeld, Germany

Bike exploring was fun and vaguely reminded Alice and I of the four months we biked through Germany, the UK, and Ireland in 1998. Click on the link to find out more. 

Alice making a sheet of (recycled) paper in the ancient way and displaying the finished product to the delight of Bonnie and other observers

Here I get to lead a visiting band through a stirring rendition of German music

Bonnie's husband Tom thoughtfully videoed it for posterity 

 You meet wonderful people on long cruises that you're sad to say goodbye to. Above are Tom and Bonnie, he a former Major Leaguer and she a dancer. Both are dedicated to finding a cure for ALS.

Below are Terry and Diane. Terry's the first Air Force Major General I've met that I didn't have to tell all my good reasons for overspending the budget for my base (RAF Bentwaters, UK, 1970 to 1975)

The pictures below were taken at a wonderful concert in Vienna which was part of our cruise...

Vienna knows how to make you smile...

And keep smiling...

So does Budapest. We were guests to operatic arias presented on the staircase of the Budapest Opera House.

Budapest by night

Alice relaxing with a book...

 I tried to figure out selfies...

We saw exciting horsemanship in Hungary and here in Bulgaria. This fellow is "riding" a team of ten horses. Earlier they passed at a gallop and he was as calm as can be.

This was a marvelous piece of machinery in its day, undoubtedly better than the Eastern European products that followed under Communism

Taking a spin in Bucharest...

This is the Palace of the Parliament, or the People's House, in Bucharest, Romania. It's the heaviest building in the world and a fitting Cold War monument. And it's gorgeous inside and out.

In early August we spent three stimulating days at our annual attendance at the Mendocino Writers' Conference in Mendocino. It ended just before we celebrated out 30th Anniversary on August 5, by far the easiest thirty years of our lives.

Later we went to two Independent Bookseller conventions, first in Burlingame and then in Portland. My lasting impression is that there are far too many good books being written. The creativity and variety in children's books alone is astounding. So long, Dick and Jane, although I still remember how good I felt when I read "See Spot run" the first time. Alice too. She said that reading gave her a feeling of power, and she still reads a book a week (or more).

One of our trips only took us as far as the Gallery Bookshop in Mendocino for Alice to give a presentation, but it took Alice back over forty years to the early days of Vulcan Wire and the pivotal event in her memoir where she is dropped down a flight of stairs when she tried to collect a $5,000 debt owed her by an Oakland business owner. As Alice began her talk, a fellow in the front row informed her that he was in the room when Alice barged into the Board meeting to attempt to collect the debt.

When Alice and I went to the Hayward Library to arrange another book presentation, the fellow at the second floor desk, Hector, recognized her from when he worked for her in her Hayward office thirty years ago.

Small world, isn't it?

I'm still working on my deathless prose... What old movie did I steal that line from? And trying to help Alice on online projects opened a way for me to do what I've played around with for many years, publish my own books via direct Kindle e-book. So it may not be long before the world gets Strong as an Ox and Nearly as Smart, my coming of age story about growing up in Point Arena, and It Ain't Necessarily So, which clearly and completely destroys the myth of human-caused climate change. I've written hundreds of pages for each; now I need a little - maybe a lot - of organization and editing.

 Radar knows what's important. Playing ball on Cook's Beach...

And Cheryl's snacks.

Kelly Mason and I enjoying the fruits of our labors on Gualala Rotary's annual Oktoberfest fundraiser.

Our community's Christmas spirit blossomed again as the Gualala Lions, Rotary, Soroptimists, and neighbors completed Project Santa for another year: buying, wrapping, assembling, and delivering Christmas presents and food boxes to over 174 needy families. 

Merry Christmas to all, and to all a good night!

Every day, every night, all year long!