6 ms·

Why doesn't the author just call it depreciation, which is what it is? It's as if they're trying to make a story about some new mystery loophole....

missedthecue 5y ago
Every single one of these propublica articles has been preying on people's lack of financial knowledge to push a political agenda.
- Crontab 5y ago
  Has ProPublica actually shown anyone to have broken the law in these articles? If not, then they are just trying to stoke the fires of class warfare.
  - llbeansandrice 5y ago
    Whether or not it's legal isn't the point of the article though. It even highlights how they're using recent changes in the tax code to claim depreciation on assets that either don't actually depreciate or the value is highly subjective. It's a lot more than just "Oh boo boo is us our asset lost value last year so now we don't have to pay taxes".
    - kristjansson 5y ago
      Its not that its lost value, its when a capital expense is recognized as an operating expense... Also, capital gains are assessed relative to the depreciated price of the asset, so if there is a wild divergence between that and market value, the owner will pay a huge tax bill on sale.
  - burkaman 5y ago
    Legal behavior is often worth writing about. I read these stories as reporting on class warfare, not stoking it.
  - ianhawes 5y ago
    No. This is the problem with the post-Wikileaks concept of "leaked documents". By default, the reader is lead to believe that by a document being leaked it demonstrates something nefarious or shadowy. We saw this most notably with the Panama Papers and the Podesta emails. No one was directly prosecuted as a result of evidence derived from the wholesale publishing of the material. In the case of Podesta, it revealed absolutely nothing. So much so that a certain group of people became obsessed with innocuous messages about pizza. The ProPublica IRS hack, in my opinion, is doing nothing for journalism ethics.
    - kristofferR 5y ago
      This IRS leak clearly demonstrates something nefarious or shadowy. Nefarious things like using appreciating sports teams for claiming depreciation can be totally legal. Billions of tax dollars have been recovered due to the Panama Papers alone [1]. The Podesta emails were BS, but everyone in the know always have agreed on that. How you can claim that the ProPublica IRS leak isn't good journalism is unclear to me. In the few articles they've published, they've clearly exposed the nefarious practice of legal tax avoidance using specific leaked information that wasn't documented or widely known before. [1] https://www.icij.org/investigations/panama-papers/panama-papers-helps-recover-more-than-1-2-billion-around-the-world/ https://www.icij.org/investigations/panama-papers/panama-pap...
    - newfriend 5y ago
      > became obsessed with innocuous messages about pizza. Totally innocuous. I mean, who doesn't write vague messages about pizza and pasta? Who doesn't collect art depicting stylized child abuse? Who isn't friends with convicted child molesters? It's all merely a coincidence. Of course it's impossible to get direct prosecution from any leaks of vague messages. That doesn't mean they aren't nefarious or shadowy. Here's another totally innocuous message from a high-level "waste-management consultant" in New Jersey: "Hey Paulie, our friend with the hair needs to go".
  - 0goel0 5y ago
    If we as a society never questioned the validity of laws, we'd still be ruled by kings.
  - danso 5y ago
    ProPublica hasn't asserted illegality — or, at least, that's not the main focus of their stories so far? Genuine, partly-rhetorical: Which of the PRISM stories that came out after the Snowden revelations asserted and proved illegality? IIRC, no one from the government nor any of the C-suite tech executives who secretly approved the surveillance were charged or convicted with anything. Looking at the lengthy Wikipedia article [0], I see that foreign governments said "nightmarish if true". James Clapper and President Obama himself acknowledged the existence of the program and defended it as passionately and robustly as any of the rich people defending their tax situations. Should Snowden/Greenwald/Guardian/WaPo held off on publishing the PRISM revelations until they had proof of criminality in hand? [0] https://en.wikipedia.org/wiki/PRISM_(surveillance_program)#Media_disclosure_of_PRISM https://en.wikipedia.org/wiki/PRISM_(surveillance_program)#M...
xyzzyz 5y ago
This is almost always the case when you are reading about “the rich evading taxes” — the “loopholes” involves are typically just standard tax code tools that were put there for the reason (to incentivize certain behaviors), and the “evaders” typically just use them in exactly the way they were meant by legislators to be used.
- SV_BubbleTime 5y ago
  When reading these articles just replace “loophole“ with “totally legal process” and see if it still seems wrong. The word has a nearly constant emotional appeal now. I can think of another topic that it is used a ton and means less than nothing. It should be considered bad writing by now.
- KingOfCoders 5y ago
  Yes, but the question is: Is this because those people are buddies of politicians and so politicians reward that behaviour because those people want to own teams? It is often difficult to find out about what is the cause and what the effect.
  - deleted 5y ago
    [deleted]
  - xyzzyz 5y ago
    Depreciation was introduced to US tax code in 1909. If the legislators want to vindictively punish owners of sports teams, and deny them use of tool that’s available to everyone else, then they have to do it by new explicit rule making. However, it is beyond clear that it is not being “buddies” with politicians that allows sports team owners to depreciate them.
    - KingOfCoders 5y ago
      Depreciation for players in sports teams was introduced in 1909? Didn't know, I'm not from the US, so thank you.
avs733 5y ago
because the focus of the article is the social/societal context and impact of these rules not a technical description of how the wealthy use them. That is why negative semantic words are used as opposed to words that indicate a crime was committed. The point is specifically that these aren't a crime.
- apercu 5y ago
  They are not a crime because the representatives of the elite wrote the tax code in the USA. Let's be honest here.
  - throwaway210222 5y ago
    Huh? The depreciation of assets is a rich-unfriendly feature of the tax code. It explicitly prevents the rich (those buying big assets) from writing of the expense in a single tax year and therefore reducing their profit and so their tax. Unlike, say salary expenses, it forces them to defer most of the expense to future years, earning the tax collector more money earlier. So if you don't depreciation, are you arguing for no expensing of capital assets, ever? (Which makes no sense). Perhaps could you be precise how some mythical non-elite person would write this aspect of the tax code?
    - apercu 5y ago
      The conversation evolved in to "tax loopholes" generally.
- criddell 5y ago
  Is it even an abuse or unintended consequence of some rule?
  - avs733 5y ago
    I don't think that matters to the point of the article and I don't really see those as different. Abuse would, in this case, seem to be best defined as leveraging unintended consequences for personal gain?
tantalor 5y ago
It's super confusing: > the purchase price was composed of assets... that degrade over time ... in few industries is that tax treatment more detached from economic reality than in professional sports ... Ballmer still gets to deduct the value of those assets over time I'm reading this and thinking, wait are they just talking about depreciation? That's not something special about sports teams, it's also very common in real estate. Calling it a "financial magic trick" only makes the obfuscation worse.
- belorn 5y ago
  With a physical building, that make sense. They do get old, and in theory, should have its value degrade over time. I would hope that land ownership however does not get to enjoy the same tax cut. Do a sport team have it value degrade, and if so, by how much each year?
  - notahacker 5y ago
    Sports players need replacement much earlier than buildings...
- dalbasal 5y ago
  Depreciation related accounting standards vary quite a lot, depending on what's depreciating and how it's valued in the first place.
- treis 5y ago
  Yeah but they are depreciating things that aren't expected to depreciate. Like the brand and value of player contracts. Effectively, they are saying the value of the franchise nears 0 after 7 years or whatever that time frame is. Clearly that's not what's happening. It's just a hand out to rich people.
  - caminante 5y ago
    > Yeah but they are depreciating things that aren't expected to depreciate. You need to be more precise with "depreciate." These assets (tangible/intangible) have a limited useful life and generate revenues beyond the current period. For sports franchises, there's no guarantee that they'll be around forever, and they also require continuous working capital maintenance and capex to continue operating. There are limits to what can be depreciated. Generally, IP needs to be purchased (not self-built) in order to be depreciable.[0] [0] https://www.investopedia.com/ask/answers/061715/intellectual-property-considered-form-capital-asset-within-company.asp https://www.investopedia.com/ask/answers/061715/intellectual...
boomboomsubban 5y ago
They do. They even describe how Bill Veeck started the practice.
dalbasal 5y ago
Because depreciation is an accounting term, and a 101 understanding of it hides more than it reveals. Like anything accounting based, it's a collection of many little rules and norms that add up to something. Finding the operative level of abstraction is always a game of tricky compromise. It's either all forest or all trees, and to be more than a take-my-word approximation an article needs to become a multi part lesson in accounting standards and tax law. True for most tax "loopholes." All that said, I'd love to see the rolled up sleeves version actually going over the account... or a fictitious one. Let's be real though. It's more likely to get eyeball on HN than elsewhere, but 96.2% would not read it and we would still be discussing it based on a surface level, bias-ridden understanding.
acdha 5y ago
That is the exact term the author uses: > But Veeck dreamed up an innovation, a way to get a second tax deduction for the same players: depreciation. The way he accomplished this was by separately buying the contracts before the old company was liquidated, instead of transferring them to the new company as had been done before. That meant that the contracts were treated as a separate asset. They also discuss how the problem is not the concept of depreciation but the relatively recent changes allowing it to be used for things which don’t depreciate or where the valuations are highly subjective.
refurb 5y ago
I always figured the first thing a reporter would do, if not an expert in an area, is find someone who is to explain it to them. Either they don’t do that OR they do it and just dismiss the expert’s opinion (e.g. “oh depreciation, yeah that’s standard, every businesses uses that to properly account for the cost of capital investment”)

missedthecue 5y ago

Every single one of these propublica articles has been preying on people's lack of financial knowledge to push a political agenda.

Crontab 5y ago
Has ProPublica actually shown anyone to have broken the law in these articles? If not, then they are just trying to stoke the fires of class warfare.
- llbeansandrice 5y ago
  Whether or not it's legal isn't the point of the article though. It even highlights how they're using recent changes in the tax code to claim depreciation on assets that either don't actually depreciate or the value is highly subjective. It's a lot more than just "Oh boo boo is us our asset lost value last year so now we don't have to pay taxes".
  - kristjansson 5y ago
    Its not that its lost value, its when a capital expense is recognized as an operating expense... Also, capital gains are assessed relative to the depreciated price of the asset, so if there is a wild divergence between that and market value, the owner will pay a huge tax bill on sale.
- burkaman 5y ago
  Legal behavior is often worth writing about. I read these stories as reporting on class warfare, not stoking it.
- ianhawes 5y ago
  No. This is the problem with the post-Wikileaks concept of "leaked documents". By default, the reader is lead to believe that by a document being leaked it demonstrates something nefarious or shadowy. We saw this most notably with the Panama Papers and the Podesta emails. No one was directly prosecuted as a result of evidence derived from the wholesale publishing of the material. In the case of Podesta, it revealed absolutely nothing. So much so that a certain group of people became obsessed with innocuous messages about pizza. The ProPublica IRS hack, in my opinion, is doing nothing for journalism ethics.
  - kristofferR 5y ago
    This IRS leak clearly demonstrates something nefarious or shadowy. Nefarious things like using appreciating sports teams for claiming depreciation can be totally legal. Billions of tax dollars have been recovered due to the Panama Papers alone [1]. The Podesta emails were BS, but everyone in the know always have agreed on that. How you can claim that the ProPublica IRS leak isn't good journalism is unclear to me. In the few articles they've published, they've clearly exposed the nefarious practice of legal tax avoidance using specific leaked information that wasn't documented or widely known before. [1] https://www.icij.org/investigations/panama-papers/panama-papers-helps-recover-more-than-1-2-billion-around-the-world/ https://www.icij.org/investigations/panama-papers/panama-pap...
  - newfriend 5y ago
    > became obsessed with innocuous messages about pizza. Totally innocuous. I mean, who doesn't write vague messages about pizza and pasta? Who doesn't collect art depicting stylized child abuse? Who isn't friends with convicted child molesters? It's all merely a coincidence. Of course it's impossible to get direct prosecution from any leaks of vague messages. That doesn't mean they aren't nefarious or shadowy. Here's another totally innocuous message from a high-level "waste-management consultant" in New Jersey: "Hey Paulie, our friend with the hair needs to go".
- 0goel0 5y ago
  If we as a society never questioned the validity of laws, we'd still be ruled by kings.
- danso 5y ago
  ProPublica hasn't asserted illegality — or, at least, that's not the main focus of their stories so far? Genuine, partly-rhetorical: Which of the PRISM stories that came out after the Snowden revelations asserted and proved illegality? IIRC, no one from the government nor any of the C-suite tech executives who secretly approved the surveillance were charged or convicted with anything. Looking at the lengthy Wikipedia article [0], I see that foreign governments said "nightmarish if true". James Clapper and President Obama himself acknowledged the existence of the program and defended it as passionately and robustly as any of the rich people defending their tax situations. Should Snowden/Greenwald/Guardian/WaPo held off on publishing the PRISM revelations until they had proof of criminality in hand? [0] https://en.wikipedia.org/wiki/PRISM_(surveillance_program)#Media_disclosure_of_PRISM https://en.wikipedia.org/wiki/PRISM_(surveillance_program)#M...

xyzzyz 5y ago

This is almost always the case when you are reading about “the rich evading taxes” — the “loopholes” involves are typically just standard tax code tools that were put there for the reason (to incentivize certain behaviors), and the “evaders” typically just use them in exactly the way they were meant by legislators to be used.

SV_BubbleTime 5y ago
When reading these articles just replace “loophole“ with “totally legal process” and see if it still seems wrong. The word has a nearly constant emotional appeal now. I can think of another topic that it is used a ton and means less than nothing. It should be considered bad writing by now.
KingOfCoders 5y ago
Yes, but the question is: Is this because those people are buddies of politicians and so politicians reward that behaviour because those people want to own teams? It is often difficult to find out about what is the cause and what the effect.
- deleted 5y ago
  [deleted]
- xyzzyz 5y ago
  Depreciation was introduced to US tax code in 1909. If the legislators want to vindictively punish owners of sports teams, and deny them use of tool that’s available to everyone else, then they have to do it by new explicit rule making. However, it is beyond clear that it is not being “buddies” with politicians that allows sports team owners to depreciate them.
  - KingOfCoders 5y ago
    Depreciation for players in sports teams was introduced in 1909? Didn't know, I'm not from the US, so thank you.

avs733 5y ago

because the focus of the article is the social/societal context and impact of these rules not a technical description of how the wealthy use them. That is why negative semantic words are used as opposed to words that indicate a crime was committed. The point is specifically that these aren't a crime.

apercu 5y ago
They are not a crime because the representatives of the elite wrote the tax code in the USA. Let's be honest here.
- throwaway210222 5y ago
  Huh? The depreciation of assets is a rich-unfriendly feature of the tax code. It explicitly prevents the rich (those buying big assets) from writing of the expense in a single tax year and therefore reducing their profit and so their tax. Unlike, say salary expenses, it forces them to defer most of the expense to future years, earning the tax collector more money earlier. So if you don't depreciation, are you arguing for no expensing of capital assets, ever? (Which makes no sense). Perhaps could you be precise how some mythical non-elite person would write this aspect of the tax code?
  - apercu 5y ago
    The conversation evolved in to "tax loopholes" generally.
criddell 5y ago
Is it even an abuse or unintended consequence of some rule?
- avs733 5y ago
  I don't think that matters to the point of the article and I don't really see those as different. Abuse would, in this case, seem to be best defined as leveraging unintended consequences for personal gain?

tantalor 5y ago

It's super confusing: > the purchase price was composed of assets... that degrade over time ... in few industries is that tax treatment more detached from economic reality than in professional sports ... Ballmer still gets to deduct the value of those assets over time I'm reading this and thinking, wait are they just talking about depreciation? That's not something special about sports teams, it's also very common in real estate. Calling it a "financial magic trick" only makes the obfuscation worse.

belorn 5y ago
With a physical building, that make sense. They do get old, and in theory, should have its value degrade over time. I would hope that land ownership however does not get to enjoy the same tax cut. Do a sport team have it value degrade, and if so, by how much each year?
- notahacker 5y ago
  Sports players need replacement much earlier than buildings...
dalbasal 5y ago
Depreciation related accounting standards vary quite a lot, depending on what's depreciating and how it's valued in the first place.
treis 5y ago
Yeah but they are depreciating things that aren't expected to depreciate. Like the brand and value of player contracts. Effectively, they are saying the value of the franchise nears 0 after 7 years or whatever that time frame is. Clearly that's not what's happening. It's just a hand out to rich people.
- caminante 5y ago
  > Yeah but they are depreciating things that aren't expected to depreciate. You need to be more precise with "depreciate." These assets (tangible/intangible) have a limited useful life and generate revenues beyond the current period. For sports franchises, there's no guarantee that they'll be around forever, and they also require continuous working capital maintenance and capex to continue operating. There are limits to what can be depreciated. Generally, IP needs to be purchased (not self-built) in order to be depreciable.[0] [0] https://www.investopedia.com/ask/answers/061715/intellectual-property-considered-form-capital-asset-within-company.asp https://www.investopedia.com/ask/answers/061715/intellectual...

boomboomsubban 5y ago

They do. They even describe how Bill Veeck started the practice.

dalbasal 5y ago

Because depreciation is an accounting term, and a 101 understanding of it hides more than it reveals. Like anything accounting based, it's a collection of many little rules and norms that add up to something. Finding the operative level of abstraction is always a game of tricky compromise. It's either all forest or all trees, and to be more than a take-my-word approximation an article needs to become a multi part lesson in accounting standards and tax law. True for most tax "loopholes." All that said, I'd love to see the rolled up sleeves version actually going over the account... or a fictitious one. Let's be real though. It's more likely to get eyeball on HN than elsewhere, but 96.2% would not read it and we would still be discussing it based on a surface level, bias-ridden understanding.

acdha 5y ago

That is the exact term the author uses: > But Veeck dreamed up an innovation, a way to get a second tax deduction for the same players: depreciation. The way he accomplished this was by separately buying the contracts before the old company was liquidated, instead of transferring them to the new company as had been done before. That meant that the contracts were treated as a separate asset. They also discuss how the problem is not the concept of depreciation but the relatively recent changes allowing it to be used for things which don’t depreciate or where the valuations are highly subjective.

refurb 5y ago

I always figured the first thing a reporter would do, if not an expert in an area, is find someone who is to explain it to them. Either they don’t do that OR they do it and just dismiss the expert’s opinion (e.g. “oh depreciation, yeah that’s standard, every businesses uses that to properly account for the cost of capital investment”)