TALKING HEAD IDIOTS 

Do you want evidence that some TV networks hire anchors on the basis of appearance rather than actual brains? You don't need evidence. We all know this is true. Any judge in any court would take judicial notice of this fact.

The beauty-over-brains anchor syndrome was on display yesterday afternoon on The Fox News Network. The beauty in question, Julie Banderas. No doubt she is smokin' hot. The issue was the news that neither Wells Fargo nor Bank of America will be paying any federal income taxes for 2009. Now I don't' have a tape, but I started taking notes as soon as this stupidity started to emerge from the lovely Ms. Banderas. She was questioning some expert about Wells Fargo and BOA.

Banderas says (paraphrasing here) "Well, I for one am outraged by this. Why aren't these banks paying income tax?"

Expert: "Well ... basically because they didn't make any money. They had losses. They weren't profitable."

They're called income taxes for a reason folks. You pay taxes on income .. and that income is measured by how much money you have left after you've paid all your expenses and made allowances for money you've lost. Well ... apparently Banderas can't wrap her head around this concept. Her next gem:

"Well what about all those businesses out there that didn't make money last year? They still have to pay their taxes!"

No, Julie dear, they don't. This isn't a special rule for Wells Fargo and BOA. If you don't make money you don't pay income taxes, and if your losses and expenses exceed your income then you don't owe any income taxes. I know it's a tough concept to grasp ... so maybe Fox could set up a special remedial session just for you. Lord knows they would rather do that than have to hire a homely anchor who knows her stuff.

This media ignorance on some of the basic issues relating to income tax is nothing new. Just a few more examples:

Income tax rates aren't so high right now. They used to be up there over 70%!

Well .. that's right, as far as it goes. But here's the rest of the story. Income tax rates, whether they're 70% or 15%, only apply to taxable income. While it is certainly true that at one time the rates were as high as 70% and more, the definition of taxable income was quite a bit different then as well. In those days of high tax rates there were many, many more deductions available to the income earner than there are now. Some of the tax loopholes were admittedly over the top .. but they were there nonetheless. There were other tax deductions that were quite reasonable; such as the taxpayer's opportunity to deduct ALL interest payments ... whether they were on credit cards, auto loans, or bank loans, not just home loans ... from their taxable income. Taxpayers were also allowed to deduct all sales taxes. Funny how news commentators don't mention these facts when they're talking about how high tax rates used to be. In the days of 70% tax rates people were actually paying less of their gross income in taxes than they are now.

Warren Buffet telling the media that his tax rate is lower than his secretary's

Oh how the media loved this .. they repeated it over and over. Something got lost in the translation though. First - it was not at all unusual to hear some talking head or read in a column that Buffet was actually paying more in taxes than his secretary. That's not what he said. He said his secretary was paying a higher tax rate, not paying more.

Now this sounds pretty damming, doesn't it? It sounds like rich people are getting away with financial murder by paying a lower income tax rate than their secretaries. But wait! That's not what Buffet said! He said he was paying a lower tax rate, not a lower income tax rate. So ... what' the difference? Simply put, Buffet doesn't have any (or very little) income that is taxable under income tax rates. He has investment income. He pays capital gains taxes, not income taxes .. and the capital gains tax rate Buffet pays is lower than the income tax rate on his secretary's income. He pays much more in taxes to the federal government than his secretary ... but at a lower tax rate, because he's paying capital gains taxes, not income taxes. Have you ever heard that explained before (except on my show)? Didn't think so.

I guess what we're left to discover or chose here is one of two possible options:

1. These media stars actually know the real story here but they write and present their articles, stories and columns in such a way as to hide the truth.
2. These media stars don't have a clue.

Chose one.