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More bad reporting
2004-07-20

Over the last week, I found a couple more examples of biased reporting. The first was from the NYTimes in an article about John Edwards earning release, where they tried to paint a picture of tax evasion by the use of a "so called S corporation". S Corporations aren't rocket science, they are one of several types of incorprations allowed under most states. These types include partnerships, sole proprietorships, LLC's (a relative new comer in the states), S Corporations and C Corporations. Most big companies are C Corps, and lots of small businesses are S Corps. Neotonic was actually a C corp, though we debated being an S Corp instead. An S corp is limited to 25 share holders, so it only works for small companies, but it allows you to "pass through" the income of the company to the shareholders, so you don't have to pay taxes twice (ie, the company and you pay taxes in a C corp, but only you have to pay taxes in an S corp). The main thrust of the NY Times article was that Edwards "avoided" paying about $500k in Medicaid taxes by using this scheme: he only took $360k in income and had the rest paid in dividends from the company. I didn't know that Medicaid taxes applied to your full income, I assumed that it stopped around $70k like FICA, but we'll assume they are correct. But, it seems perfectly reasonable to me to have a salary of $360k (I know, it sounds like a lot, but this is a personal injury lawyer), and then any profits of the company would be distributed as dividends, which are taxed at a lower rate (and apparently don't apply to FICA & Medicaid). That's not "tax avoidance", that's just following the tax rules and running a company, something a lot of people in the US do.

The second was from USA Today (I was in a hotel, of course), where an article about people still using P2P services called them "unauthorized services". There is no "authorizing" authority for software, unless you're talking about the "Made for WinXP" label or something. You might be able to use eDonkey and Kazaa to get unauthorized copies of movies, music, or software (or knitting patterns, for that matter), but that doesn't make the software itself "unauthorized".


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