Miles for Tax Payments

Got kids in middle school or high school? Tomorrow: Vision Warrior!

Today . . .

YOU MENTION ONE LOUSY X-RAY . . .

. . . in passing, no less! I mean, I wasn’t even writing about X-rays, I was writing about mint Diet Coke; and suddenly, this becomes the History of Science. (And I must tell you: I love it.)

Mike Broderick: ‘The bit about Nikola Tesla discovering X-rays is an urban legend at best. Röntgen discovered the X-ray accidentally, published two papers on it, and never worked with X-rays again. Röntgen received the Nobel Prize for Physics in 1901 (very first Nobel Prize for physics!). Don’t take my word for it, check it out! The simplest way is probably the Encyclopedia Britannica. A telling bit of evidence is that ‘Röntgen’ is still a well-known measure of radiation exposure to this day, whereas Tesla’s name is attached to an obscure measurement (I believe of magnetic fields) that even I, with a degree in physics can’t explain without looking it up!

“Nikola Tesla was a very brilliant man and outstanding scientist. He did most of the preliminary work leading to alternating electrical current before a guy named George Westinghouse marketed it and made ‘AC’ a household name. For some reason over the past twenty years or so, there has been a movement to give Nikola Tesla credit for inventing essentially everything but sliced bread. I’m not sure of the motivation behind this. In any case, for X-rays, it is Röntgen who deserves and receives credit, not Tesla.

“Some minor asides: Röntgen took a number of X-ray pictures, the most famous being of his wife’s hand, including a huge (wedding?) ring. You can see it on the internet here. Thomas Edison saw big bucks in inventions derived from X-rays, and put his ‘top assistant’ to experimenting with an X-ray machine. Because the hazards of radiation were not understood at the time, doses to X-ray machine users were massive. As a result, Edison’s assistant quickly got cancer and died. Edison was no dummy, and had all work with X-rays stopped in his research lab.

“Last bit of trivia: It is generally accepted that at least one researcher observed the effects of X-rays before Röntgen did (ten years or so ahead), but he didn’t realize he had anything new, didn’t do anything with it, and even he agreed Röntgen should receive credit. I forget the name of the fellow now, but he’s not well-known even to science history geeks like me!

“The reason I can spew out emails about all this stuff, and even care about correcting the record, is that I am an avid history buff who needs to make a living, so works in a technical field – which just happens to be radiation safety! I don’t have any beef with Nikola Tesla at all. But the historical record is solidly clear that he didn’t discover X-rays.”

☞ Thanks, Mike.

YOU MENTION ONE LOUSY FLAT TAX . . .

Eric Delph: “All concepts I have heard about a flat tax include a generous income deduction, like $30,000 for a single filer and $50,000 for a joint filer. No one making under those amounts would pay any taxes. So if the flat tax is 20%, than someone making $30,000 has an effective tax of 0%. Someone making $60,000 has an effective rate of 10% . . . $120,000 is 15% . . . $240,000 is 17.5% . . . $480,000 is 18.75% . . . and $1 million is 19.4%. This looks progressive to me. Unless your definition of progressive is different from mine.”

☞ You’re right. And for someone making $154 million (e.g., Cisco’s CEO last year), it’s 19.996%. I just don’t think the incline from 10% on $60,000 to 19.996% on $154 million is steep enough.

To me, the 39.6% top bracket established in 1993 (without a single Republican vote) struck a good balance. The best-off still saw their after-tax income rise faster than everybody else, yet we raised enough revenue to balance the budget, get interest rates down (a terrific “tax cut” for business and consumers), and do things like increase the earned-income credit for the working poor.

I do totally agree, however, that we should lean toward simplifying the tax code wherever possible. That’s why, for example, raising the floor on taxable estates from the current $1 million to perhaps $3.5 million (and then indexing that to inflation), is so appealing. It would exempt nearly everybody, yet still raise a lot of money from the few fortunate enough to have to deal with it. For them, I’d like to couple a modest reduction in today’s 50% top rate with a significant tightening of the loopholes designed to avoid it.

(Congress closed no loopholes that I know of, but did cut the old 55% rate to 50% this year and slated it to fall gradually to 45% in 2009, by which time the $1 million exemption is slated to hit $3.5 million. The law then drops the tax rate to zero in 2010 . . . and snaps it back up to 50% in 2011. Presumably, there will be some very hot debates in 2009 or else a most macabre Palm Beach social season in 2010.)

YOU MENTION FREQUENT FLYER MILES . . .

The push is on to have you pay your income tax by credit card, via an outfit called Official Payments (800-2PAYTAX), in order to get your card’s frequent flyer miles. The TV pitchman describes “his friend” who paid his $100,000 tax bill on his credit card and used the 100,000 miles it brought him for a business class ticket to Australia. Yes, there is a 2.5% “convenience fee” for doing it this way, but, the pitchman concludes, “My friend got a heck of a return on his taxes, I’d say.” A female voice-over drives the point home: “Official Payments. The proven way to make paying taxes pay.”

Well, yes and no. The 2.5% fee means you’re paying $2,500 for 100,000 frequent flyer miles. It’s true that you may be able to get a business class ticket to Australia for 100,000 miles, which is a lot less than the full fare. But a couple of things to think through first:

Do you really need the miles? You don’t have a lot already?

Will your card’s mileage program allow you to earn this many in a year? Check first to be sure you aren’t already near the limit of how many you can earn?

Could you suck it up and fly coach? If so, it costs a lot less than $2,500 to go anywhere in the world. Basically, give the choice of spending $600 in coach or $2,500 in business, which would you choose?

(This is not a trick question. Those readers in the wealth-accumulation stage would be well advised to choose the $600 fare. Those relative few who have achieved financial security have only an opportunity cost in this – the opportunity to do something even more enjoyable, or even more meaningful with the extra money. I have one dear friend who was United Way’s Man of the Year not long ago – for the entire country, not some small town – and who has given away millions. He flies coach. Doesn’t bother him.)

Are the miles really worth 2.5 cents each to you? The basic award these days, a domestic round-trip in coach, is 25,000 miles. Paying 2.5 cents a mile, that works out to $625. If you normally pay less than that for a ticket, think twice about paying $625 to buy for 25,000 miles.

Will you have time to take the trip – and at a time when the miles will do you any good? If you think you’re going to use the miles around the holidays, forget it.

Would it be smarter to buy the miles direct from the airline, if and when you actually need them? American, for example, well sell you up to 15,000 miles per year for the same 2.5 cents.

Finally, is there any chance you have accidentally run a balance on your card? If so, in addition to the 2.5% fee, there’d be interest to pay as well.