Purple squirrels and taxes

Peter Cappelli penned a book that is still relevant, although it’s no longer new: Why Good People Can’t Get Jobs: Chasing After the ‘Purple Squirrel’ by (Philadelphia: Wharton Digital Press, 2012). Capelli’s analysis is an important contribution to the subject of unemployment and human resources. He addresses various factors that keep people unemployed:

Too young, not enough experience;
Too old, too much experience;
Not enough training;
Not enough education;
Bad attitude;
Not an exact match for the position to be filled; and,
Too expensive.

Cappelli successfully argues that American business is harming itself by using the above excuses to avoid hiring qualified workers. He especially takes exception to employers’ assertions that there are not enough skilled, educated workers to fill the jobs that are open.

The author also points out that employers often will consciously forego filling a vacancy, believing that so doing saves them money. Instead of hiring a replacement, they will spread the work among existing employees (of course with no additional pay or benefits). And then wonder why morale is so low.

I recommend Cappelli’s book and am pleased he gained a national audience with his timely words. He forces management to share responsibility for long-term or chronic unemployment and challenges companies that are hiring to reconsider their processes.

Capelli’s emphasis on the destructive nature of automated job applications especially resonated with me. I embrace technology when it is helpful. But when that automated system fails, or falls short, as is often the case with companies’ reliance on ATS systems, as well as internal automated job application software, something is wrong.

I would add the following to Cappelli’s good words: The ongoing debate over income tax could be partially solved if income tax rates for very wealthy managers were tied to their company’s unemployment rate, or some other metric determining an executive’s specific contribution to the number of unemployed workers in the United States.

By way of specific example: I briefly worked as Controller for a plastics broker in Southern California. The $10 million company had five full-time office staff plus about eight full-time salaried sales reps, along with a dozen or so commission-only-based salesmen.

In the time that I worked there, that employer burned through personnel like dry tinder. After about a year , he “laid me off for financial reasons” – while giving himself a $300,000 bonus! He then hired one of his buddies to replace me at 50% more than I was earning.

But his layoff modus operandi would not stop with me. In less than a year from my layoff, he gutted the company’s employee roster, keeping only his daughter, that high-paid friend, and a person who was willing to work for about 60% below market rate ($50,000 only for the position of logistics manager for a $10 million company – in SoCal, no less). He also converted salaried salesmen to “independent contractors,” although he expected them to keep working exclusively for him as they did before.

That CEO’s salary, plus benefits and annual bonuses, soared. The worse the economy, the more he paid himself.

He would have been far less likely to lay off people if his rising unemployment taxes (at the time, “Obama’s fault,” of course) similarly affected his own personal tax rate. Instead of 15%, if he paid 45% of his income – the equivalent of the turnover rate in that company – he would think twice.

Conversely, executives who increase their staffing levels should be rewarded. It’s fine and dandy to give the company itself tax breaks. But unless the people making hiring decisions get an attaboy or attagrrl in their pocketbooks, they likely won’t care.

We tie other corporate matters to the C-Suite. If sales or payroll taxes are not filed timely and correctly, the C-Suite is individually liable. Why not use that precedent to incentivize full employment?

Say we (the United States of America) set the tax rate for incomes over $1 million at 35% – still below the rest of the civilized world, but higher than it is now. For every $1,000,000 in payroll added to the companies they manage, they get a 1/2% reduction in their tax rate. Don’t you think they would do the math and start hiring?

Would it be complicated? Of course. But not any more complicated or difficult than the tax returns currently filed by those in the millionaire and richer tax bracket.

Second, the audit rate should be much higher for those who earn more than $450,000 annually (and almost automatic for anyone earning more than $1 million). The same fellow mentioned above regularly deducted country club memberships. The company also reimbursed his medical copays and out of pocket expenses, $15,000 in one year alone, and of course he did not declare those reimbursements as income.

He would also eat lunch every day and put it on his expense report, even though the only people at the lunch were family. The company paid for his family’s Christmas dinner at the country club, no business friends in sight. And he had … quirky … notes receivable from the company. The company had reimbursed him around $700,000 for a $180,000 loan he made to the company in the 1980s, and the $180,000 principal was still intact.

That does not even address his paying his children to “work” for the company as independent contractors, deducting their “wages” but not issuing 1099s to them, and not paying payroll taxes. Or paying Christmas bonuses in cash. Or agreeing to pay a long-time employee under the table so she could continue to collect Social Security benefits tax-free. Or paying one of his wife’s friends to help his wife renovate their house and clean out the garage, all on the company’s dime.

If the IRS had ever audited him, really audited him, not just asked to see big-dollar inventory purchases (as they had done in the past), and if they had audited other business people just like him, we would be well on the way to a fully balanced budget with no need to speak of debt ceilings.

Third, the United States of America needs immigration reform, but not for the usual reasons cited. No, we must limit the number of well-heeled business executives who come here on EB- or L-Visas, and never leave. They are the ones taking jobs for which Americans are supremely well-qualified. They are the ones gaming the immigration system.

I genuinely love and enjoy most of my old co-workers who came here from Germany on those EB- or L-Visas. I had great fun with a lot of them.

But at the same time, they are taking jobs that I as an American am not allowed to fill in Germany. Their homeland blocks me from working in a management or high-level financial capacity, or at the very least, greatly limits my ability to do so. American companies with German subsidiaries must meet very tight guidelines for whom they may hire in their German branch offices.

Those same restrictions rarely apply to Germans (and other Western Europeans) working for American subsidiaries of German corporations. German management will generally send over a Controller and VP Finance and VP Administration, and of course CEO, COO, and CFO, to handle American operations.

How many of you want one of those jobs? At one point, I most certainly did! I speak, read, and write German fluently. I know how to explain American business practices and American law to a German board. I have done it, and done it well. But I could not so much as get an interview for any of those positions, because Germans filled them.

The United States also needs to enforce immigration law attached to those EB- and L-Visas. If the German corporation has something dreadfully unique about its product or service that does in fact require home office expertise, they should not be allowed to send German employees to the USA with the promise that it will be temporary, only to turn around and convert the EB- or L-Visa to a green card and keep the German employee in the States indefinitely.

And the employees who come over on EB- or L-Visas should be banned from seeking green card status for a minimum of fifteen years after the EB- or L-Visa is approved. They should not be allowed to stay in the United States once they have promised their employment will be temporary.

When Republicans yammer about Hispanic and Latino “illegals” (their term, not mine), they are targeting the wrong ethnic group. The people the GOP wishes to deport are not taking middle management and executive jobs away from American citizens. They are harvesting our food, cleaning our hotels, bussing our tables. Let them stay, and let their children stay, and let them join the American dream.

The immigrants whose employers can afford to shell out $10,000 – $15,000 (or more) for green cards are the ones who should leave, freeing up jobs for Americans; while laborers whose employers would never pay for one minute of an immigration attorney’s time are the ones who should be allowed to stay. I want people here who want a better life, not someone who’s simply out for adventure.

I therefore call on Immigration and Customs Enforcement to begin double- and triple-checking the green cards of all Western European immigrants. If they originally entered on an EB- or an L-visa, ICE should send them home. Let them work the system fairly, decently, and in order. They do not belong here. (Don’t even get me started on H1B visas!)

Finally, coming full circle to the first point above, the last few recessions, as the ones before, teach us that the trickle-down theory is a lie, a hoax perpetrated by the wealthy to entice voters to let them (the wealthy) keep their big bank accounts and nice houses, paying little to no tax into the Treasury.

The private sector is “doing fine,” especially management of the private sector. Corporate profits remain healthy. Clearly, management salaries (especially for large companies) have skyrocketed. But even with good profits, companies have not been hiring or handing out well-deserved payraises. Even with outsize bonus packages for the tip-top of the corporate pyramid, American business keeps on outsourcing, not hiring Americans when they could well afford to do so. Profits are up, but unemployment persists. Although thanks to President Biden, not as bad as it could be and was!

We need to – once and for all – stop chattering about trickle-down and admit that when we the people allow the very wealthy to keep their money by not taxing them, they do indeed keep their money. They do not spend it on new hires or better benefits for existing employees. They either put it into mutual or hedge funds (often overseas), or real estate, or spend it on themselves.

As noted in the first suggestion above, the very wealthy who do not behave in that manner should be rewarded. But we should stop pretending that the great majority of the 1% will voluntarily do what is best for the country. They won’t.

We need to get over that idealistic view of the glamorous upper crust and start putting tax law into place that will incentivize the 1% — and especially the 0.1% — to finally do what is right.

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