Asset Protection BLOG - Mark Nestmann

Big Brother Visits the Tattoo Parlor

Thinking about getting a tattoo?  If you are, better not pay cash!  If you do, the FBI has informed tattoo parlors in Los Angeles, and perhaps other cities, that you might be a terrorist. 

Yes, I'm serious.  You can read the FBI notice yourself by clicking here.  

Of course, paying cash at the tattoo parlor isn't the only thing that's suspicious.  The FBI helpfully warns that people who emit strange odors or who have missing hands or fingers might be suspicious.  So make sure to take a shower, and to wear your prosthesis, when you get your tattoo.

Another indicator of terrorism, apparently, are comments directed against the U.S. government.  So be sure to say nice things about Obama.  And for that matter, about George W. Bush as well.  That covers both political parties.  Also, be sure not to say anything about the blasting caps you recently procured, or about your plans to assassinate local politicians. 

It's also suspicious if a group of people all want the same tattoo.  God forbid you're a member of a fraternity or sorority in which pledges are encouraged to get "inked." 

So what's a tattoo parlor that wants to help the FBI fight terrorism to do?  If you show up with cash, smelling bad, missing limbs, or making vague threats against Obamacare, the tattoo parlor is encouraged to contact the City of Los Angeles Joint Regional Intelligence Center.  Also, it should
require valid identification from all customers and keep records of all purchases.  But my very favorite recommendations are straight out of the Stasi domestic spy manual:

• Talk to customers, ask questions, and listen to and observe their responses
• Watch for people and actions that are out of place
• Make note of suspicious statements, people, and vehicles.

I don't have any tattoos, and I've never spent any time in a tattoo parlor.  However, until it closed a few years ago, one of my favorite hangouts in Scottsdale was a little coffee shop next door to a tattoo parlor.  And every time I visited the coffee shop, I would briefly see some of the tattoo parlor's patrons, and even overhear snatches of conversation.

If anyone would be out of place visiting that parlor, it would be me.  After all, I don't have any tattoos, at least not yet.  Nor do I have piercings in my ears, nose, lips, tongue, or anywhere else, for that matter.  I don't have blue spiky hair, or any knowledge of "World of Warcraft." And, to the best of my knowledge, none of my clothes display Satanic symbols.

So I can just imagine what might transpire if I actually went in the door to inquire about a tattoo.  The patriotic proprietor would excuse himself, go to a back room, and pick up the telephone.

"There's a middle-aged guy carrying a briefcase who just came in to inquire about a tattoo.  He's 30 years older than most of our customers and he's babbling about something called 'limited government," whatever that is. He wants to pay cash, won't give us his Social Security number, and I don't think he took a shower today.  Can you send someone over to pick him up?"

Copyright © by Mark Nestmann

TSA Airport Security Personnel no Longer to Act as "Cash Police"

It's not often that I can report news that's actually favorable to financial privacy.  Today is a happy exception.  I'm pleased to report that the Transportation Security Administration has modified its rules regarding detaining and questioning airline passengers carrying large quantities of cash.

In March 2009, TSA officials in St. Louis detained Steven Bierfeldt after discovering US$4,700 in cash in his carry-on bag.  Bierfeldt, the Director of Development for the Campaign for Liberty (an offshoot of Congressman Ron Paul's presidential campaign), was about to board a domestic flight. 

TSA agents placed Bierfeldt in a small room and began to interrogate him.  Bierfeldt refused to answer the questions.  Instead, he repeatedly asked the agents to explain the scope of their authority to detain and interrogate him.  Not only did the agents refuse to do so, they also told Bierfeldt he was being arrested. 

Fortunately, Bierfeldt had the presence of mind to make an audio recording of the incident on his cellular telephone.  The recording reveals a series of threatening and expletive-laden questions relating to why Bierfeldt was carrying cash.  When he was finally released, Bierfeldt turned the recording over to the American Civil Liberties Union.  Shortly thereafter, the ACLU sued the Department of Homeland Security, which has authority over the TSA, on his behalf.   

TSA officials are authorized to conduct safety-related searches for weapons and explosives. They have no right to interrogate passengers about matters unrelated to passenger safety.  Carrying cash aboard a flight obviously poses no safety risk.  And it's perfectly legal to carry as much cash aboard an airplane as you want.  Unless you're transporting more than US$10,000 in cash across a U.S. border, no reporting is required. 

I anticipated a long and drawn-out lawsuit in this case.   Indeed, I thought the TSA might press for new rules providing explicit authority for agents to confiscate "suspicious" quantities of cash.  However, I was happily surprised to learn last week that the TSA has instead issued new rules that prohibit agents from interrogating passengers on matters unrelated to aircraft safety.  Transporting US$4,700 in your carry-on bag, or US$470,000, for that matter, doesn't qualify. 

However, I still don't recommend that you transport a large quantity of cash on an airplane departing and/or or arriving in a U.S. airport.  The reason is that at some airports, TSA screening may be supplemented by a separate inspection for narcotics.  Most U.S. and foreign currency contains minute traces of narcotics residues.  A drug-sniffing dog is likely to "alert" to any large quantity of cash you're carrying.  That alert may provide probable cause for police to then seize the cash under federal or state civil forfeiture laws.  You may or may not get the cash back, and you'll face an expensive and protracted court battle to prove it came from a legitimate source.

Copyright © 2009 by Mark Nestmann

Yes, Dorothy… Taxes DO Matter

Both congressional leaders and President Obama have suggested that raising tax rates on wealthy Americans will result in a corresponding increase in tax revenues. 

If people were robots, that might work.  However, people subject to sharply higher taxes don't like having to pay them.  And they will act accordingly.

This phenomenon has been known for, well, centuries.  But its most famous exponent is probably economist Arthur Laffer.  In the 1980s, Laffer once again demonstrated with his famous "Laffer Curve" analysis that both a 0% income tax rate and a 100% tax rate would generate zero revenue.  The optimal tax rate—the rate that will generate the greatest revenue for the government—must therefore lie somewhere in between.  And, as tax rates rise beyond a certain threshold—whatever that may be—revenues will actually decrease.

Another, more colorful way of putting the same concept came from Jean Baptiste Colbert, the Minister of Finance under King Louis XIV of France in the 17th century.  Colbert wrote: “The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing.”

But neither Laffer, nor Colbert, were the first economists to recognize the decreasing utility of increasing tax rates.  In 1377, the Islamic scholar Ibn Khaldun wrote:

"In the early stages of the state, taxes are light in their incidence, but fetch in a large revenue...As time passes and kings succeed each other, they lose their tribal habits in favor of more civilized ones. Their needs and exigencies grow...owing to the luxury in which they have been brought up. Hence they impose fresh taxes on their subjects...and sharply raise the rate of old taxes to increase their yield...But the effects on business of this rise in taxation make themselves felt. For businessmen are soon discouraged by the comparison of their profits with the burden of their taxes...Consequently production falls off, and with it the yield of taxation."

What's more, real world experience has demonstrated time and again the truth of the Khaldun's analysis.  Tax cuts in the 1920 and again during the Kennedy administration led to sharply increased revenues for the U.S. government.  The same phenomenon occurred in Eastern Europe when several countries in this region instituted a flat tax in the 1990s and early 2000s.

The opposite effect—that increasing tax rates too high lead to decreasing revenues—has also been repeatedly proven.  A recent example comes from the United Kingdom, where the government recently announced it would tax individuals earning more than £150,000 (about $250,000) annually at a 51% rate.  The unsurprising result?  Highly compensated U.K. residents are leaving the country in droves.  For instance, hedge funds managing an estimated $15 billion have already fled in response to the impending tax.  U.K. tax lawyers say that a large portion of their work is now devoted to counseling wealthy residents on how to leave the country.

What's the real reason, then, that Congress and Obama want higher tax rates?  To answer that question, you only need to recall Obama's campaign promises.  For instance, Obama promised to raise capital gains taxes, purportedly to lower the budget deficit.  But then, Obama made an incredible admission in response to a comment that increasing tax rates was likely to decrease revenues and make the deficit worse.  In that case, would Obama want to lower the rates? No, Obama answered, the real issue was fairness. Apart from revenue, apart from the deficit, he wanted to raise taxes because doing so would be "fair."

That, dear readers, is what we're dealing with here.  Barack Obama, now President of the United States, has no interest in reducing the budget deficit.  He only wants to do what he believes is "fair." 

And that means the budget deficit won't be reduced, unless investors stop buying Treasury debt.  It also means you can count on a continued erosion in the value of the U.S. dollar, and a corresponding increase in gold and other commodities. 

As an American, it pains me to see our currency devalued because of our reckless politicians.  But, since I can do nothing to stop Obama from increasing taxes in the name of "fairness," at least I can invest accordingly.  And so can you.

Copyright © 2009 by Mark Nestmann

If You Hire an Obese Worker, You May Have to Pay for Their Weight-Loss Surgery

Maybe it's the bad economy.  Or perhaps it's just bad karma.  But for whatever reason, there's been a huge spike recently in what I can only characterize as unbelievable lawsuits.

Let's say you operate a restaurant.  Now, restaurants fail at a high rate in even the best of times, but in an economic downturn, they fail in droves.  And if the following incident happened to your restaurant, I suspect you'd shut it down the next day.

A prospect applies for a job as a cook at your pizza shop.  Sure, he weighs 380 pounds, but since the Americans with Disabilities Act forbids discrimination against the "morbidly obese," you decide to hire him. 

All goes well for a time.  Then one day, a freezer door hits the cook in the back.  Your worker's compensation coverage is adequate to pay for the cook's back surgery.  But what happens next is classic American lawsuit mania. 

Naturally, the cook hires a lawyer.  A few days before the cook's surgery, his lawyer calls.  It seems the cook must undergo weight-loss surgery before the back surgery.  Doctors have advised him the weight-loss surgery is necessary to insure the success of the back operation.  And, the lawyer says, you must pay the $20,000 cost for the weight loss surgery, since it exceeds your worker's compensation insurance limits.

Now, you hire a lawyer.  Your lawyer tells you that you shouldn’t have to pay.  So the cook sues you and your business for $20,000.  You lose the case, but your lawyer tells you that you can appeal.  You appeal the decision, and lose again at the appellate court level.

In a nutshell, that's what's happened to an Indiana pizza shop earlier this year.  On August 6, the Indiana Court of Appeals ruled that a pizza shop must pay the cost of lap-band surgery for an obese cook injured at work.  And this trend isn't just occurring in Indiana.  Only three weeks later, the Oregon Supreme Court issued a similar ruling.

Advocates for the disabled—and especially their lawyers—are thrilled with these rulings.  But, in the real world, the results won't be so rosy.  Given court decisions like these, any rational employer will hesitate to hire any employee with a pre-existing health condition that may be aggravated in the workplace.  Assuming, of course, that the employer hasn't closed up shop already—and let all his employees go.

Copyright © 2009 by Mark Nestmann

You, Too, Can Sue Over Global Warming!

It’s time for another installment in my periodic postings on frivolous lawsuits.

This one comes from the U.S. Fifth Circuit Court of Appeals, which ruled last month that landowners in Mississippi have “standing” to sue oil and coal companies for emitting greenhouse gases.  In their class-action lawsuit, the landowners claim that these emissions contributed to global warming, which caused sea levels to rise.  That in turn, the lawsuit claims, exacerbated the damage caused by Hurricane Katrina.

If you think this is an isolated case—it’s not.  The U.S. Second Circuit Court of Appeals already reinstated a lawsuit against American Electric Power Co. based on similar claims.  That court ruled that since Congress hadn’t enacted legislation restricting greenhouse gas emissions, states, municipalities and certain private organizations can sue to force companies to cap emissions of greenhouse gas.

Two separate federal appeals courts—just one level below the U.S. Supreme Court—have now informed plaintiff’s attorneys throughout the United States that they now have “standing” to sue anyone that emits greenhouse gases.  Indeed, the Supreme Court in 2006 accepted "as plausible the link between greenhouse gas emissions and global warming" and that "rising ocean temperatures may contribute to the ferocity of hurricanes.”

These decisions are an open invitation to plaintiff’s attorneys to sue anyone who they allege contributed to global warming.  God forbid you own a business that emits greenhouse gases—the courthouse door is now wide open for enterprising attorneys to sue.  Indeed, if you’re wealthy and live in a home that is heated by fossil fuels (or by electricity produced by fossil fuels), or drive a fossil fuel powered vehicle, you just might have to defend yourself in court.  

Whether or not you believe global warming is real, and that if it is real, that it’s caused by human emissions of greenhouse gases, these cases cross an important legal threshold.  From the dawn of the republic to the present day, it’s perfectly legal to emit greenhouse gases.  For the courts to now declare that plaintiffs have standing to sue someone for doing something that is perfectly legal isn’t just unfair.  It could also turn our current economic debacle into the deepest depression in history.  Just wait until the United States completely de-industrializes due to attorneys suing every business in America that emits greenhouse gases. 

It’s possible, of course, that the plaintiffs in the cases before the Second and Fifth Circuit Courts of Appeal won’t be able to prove their case.  They’ve only been given the opportunity to do so.  Still, the defendants will have to spend money, time and effort defending themselves in what to me seems the penultimate of frivolous lawsuits.  And of course, every dollar they spend on legal fees won’t be invested in productive activity. 

I can only imagine that entrepreneurs in China, India and other countries that have so far rejected limits on greenhouse gas emissions are rejoicing over these decisions.  After all, the deindustrialization of America means more profits for them, and more jobs for the workers they employ. 

Is this insane, or what?  Am I missing something here? Please comment below!

Copyright © 2009 by Mark Nestmann

How to Stop Expatriation in its Tracks

My recent blog entry describing how easy it is to expatriate really hit a chord.  Most responses were very positive.  But a few were downright hostile.

“How can you in good conscience encourage someone to revoke all ties to the United States,?” one reader wrote.  “Don’t you have any patriotism?”  Another reader predicted, “I have no doubt that some people who take your advice to expatriate may come to regret it later.”

That may well be true.  But if these readers—or anyone else who thinks that expatriation is unpatriotic, unnecessary, or could lead to “buyer’s remorse"—really want to end expatriation, there’s something Congress to do, immediately, to shut it down.

I’m not talking about more stringent anti-expatriation laws, such as the “exit tax” Congress enacted last year.  Nor am I speaking of enforcement of  the arguably unconstitutional “Reed Amendment,” which purports to exclude persons who renounce their U.S. citizenship for “tax motivated” from ever returning to the United States.  (Fortunately, this law, enacted in 1996, has rarely, if ever, been enforced.)

No, I’m proposing something radically different: for Congress to stop taxing the approximately six million U.S. citizens and green card holders living outside the United States.  And it’s really not that radical, because the United States is one of only two countries that impose tax based on citizenship, rather than residence.  Millions of U.S. citizens, some of whom have never set foot in the United States, are subject to U.S. tax on their worldwide income.  These U.S. citizens not only must pay U.S. taxes, but also comply with U.S. offshore financial disclosure requirements.  If they’re wealthy, they must retain tax experts to avoid paying U.S. estate tax. 

America’s current tax policy also places its non-resident citizens at a disadvantage in the international marketplace.  A Canadian, British, or Japanese passport holder working in, say, Hong Kong, is only subject to Hong Kong tax on local income.  But the U.S. citizen competing for the same job must deal with U.S. tax as well. 

Congress could end this discrimination simply by amending the U.S. Tax Code.  For instance, it could stipulate that any U.S. citizen or green card holder who leaves the United States for at least one full year is no longer subject to tax on their non-U.S. income.  After a longer period—let’s say five years—they would no longer be subject to U.S. tax on capital gains.  And, should they establish a new domicile outside the United States, they would no longer be subject to U.S. gift and estate taxes.

Enacting these common sense reforms would eliminate the tax incentives for U.S. citizens to expatriate.  It would, quite literally, end expatriation overnight.  These reforms would also put U.S. tax policy back in the international mainstream.  Of course, when non-resident Americans returned to the United States under this plan, they’d have to start paying U.S. tax again on their worldwide income. 

President Obama campaigned on the promise of “Hope” and “Change.”  This simple change in U.S. tax policy would give hope to the more than five million Americans who live overseas. 

Obama, do you hear me?

Copyright © 2009 by Mark Nestmann