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Remedial Tax Accounting for Mark Brown and Greg Hinz

John Powers 24 April 2010 2 Comments

I am not quite sure how anyone can reach adulthood without getting a basic understanding of taxation and accounting in the United States, but Mark Brown at the Sun-Times, and Greg Hinz of Crain’s Chicago Business have formed a vacuum of knowledge that is sucking in the rest of the Chicago media.  The release of Bill Brady’s tax returns has dumbfounded our two leading lights, who are completely flummoxed by the concept that money losing businesses, like Brady’s real estate companies over the last few years, don’t pay income tax.

Brown leads with the logical skills of a 3 year old, whining, “Why gripe about taxes when you don’t pay any?”  Well gee Mark, why does the Oncologist gripe about cancer if he doesn’t have a tumor?  Perhaps because Bill Brady realizes it is the Governor’s job to manage the finances of the State, rather than run the State into the financial cesspool, like the Blagojevich/Quinn team have done.

Hinz, who should know better, being one of the best business reporters in the country, tells us “Mr. Brady still is going to have to explain how he really can make $75,000 a year as a state senator and still pay nothing, or almost nothing, in federal income taxes in three of the past four years.”  So, Greg, you are the reporter/analyst/blogger person…why don’t you explain it?

Or I can explain it, in lieu of the intellectual vacuum, as it is pretty easy to understand.  You pay income taxes on profits.  You don’t pay income taxes on losses.  Sen. Brady’s businesses had years where they were loss making.  The profits or losses of these business rolled over into Brady’s personal tax return.  When the losses rolled over exceeded the threshold for taxable income, there is no personal income tax.

Business losses can be carried back or carried forward.  This from answers.com, (a resource that must be unavailable to the Chicago media)  ” A Taxpayer may carry a Net Operating Loss back to the two immediately preceding years for the purpose of obtaining a refund of taxes previously paid. After applying the carryback, a net operating loss may be carried forward up to 20 years”  So if Brady Homes lost money in 2009, but Bill paid taxes in 2007, Bill could offset his 2007 taxes with 2009 losses.

Brown whines again…”I don’t think I’ll be alone in believing there’s something unfair about a rich guy who also draws a nice government salary but doesn’t pay any income taxes”.  Well then, how could you fix that?  There is already a flat tax (FICA) on salaries that is non-refundable.  There is also property tax, gas tax, sales tax, telephone tax, and taxes on pretty much everything that moves (or sits still) that are not refunded regardless of the profitability of your business.

What Brown is calling for is more taxation for money losing businesses, which is one of the most deranged economic ideas imaginable.  GM lost Billions of dollars in 2008, would it have helped the economy if we upped GM’s taxes a bit to make Mark Brown happy?  I am quite sure Brady Homes and any other small business would rather be in the 52% tax bracket rather than taking a tax loss for 2008 and 2009, but it is an accounting fact that many businesses were not profitable.

To their (minimal) credit, Brown and Hinz are not accusing Brady of breaking the law.   But neither are they making much of an effort to understand the law, or the differences between the Giannoulias Broadway Bank failure and the downturn at Bill Brady’s real estate development companies.  Giannoulias’s Bank is being shut down, due to regulatory compliance issues, as deposit taking institutions are typically regulated by the FDIC.  Without the FDIC intrevention, there is a real danger of depositors losing money.  Brady’s businesses are reduced, but still alive, and are not about to be taken over by the Feds.

Giannoulias’s bank became insolvent due to many factors including the downturn in the housing market.  But the turning point for Broadway seems to have been the huge dividends paid to the Giannoulias family last year, so that they could pay the estate taxes due for the tragic and unexpected death of Alexi Giannoulias father.  Bill Brady has come out in favor of ending the Estate Tax, which if eliminated, could very well have saved Broadway Bank and the Giannoulias Senate campaign.

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John Powers is the President of the Chicago Daily Observer.   At last count, he has had 16 businesses operating in the last 15 years.

2 Comments »

  • Dan Kelley said:

    Greg Hinz has an agenda better suited to districts represented by Nancy Pelosi and Henry Waxman. He always wants more spending and bigger governmental programs.

  • Paul R. said:

    I figured that this was an uneducated smear campaign against Brady funded by Quinn.

    I had never heard of Brady when he was running, but am glad that he won. I think there is a very real chance that this man has integrity and is honest and that is saying alot about a politician in IL.

    Perhaps if he is a man of his word and makes things change, I may not have to move from this state that I can no longer afford to live in.

    Thanks for the TRUTH John.

    Paul

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