Tax Attic August 1, 2013

Jerry Coon

Jerry Coon

I opened one of my favorite sections of Sunday’s Grand Rapids Press, the Sports, and found an interesting article detailing the fact that three people were being posthumously inducted into the Baseball Hall of Fame. What is interesting is that for only the second time in the last 42 years, no currently eligible players who are alive were selected for inclusion into one of the most exclusive clubs on the face of the earth. Usually two or three currently eligible players are nominated but not this year. A Veteran’s Committee recommended the inclusion of the three old-timers.

Colonel Jacob Ruppert was the long-time owner of the New York Yankees and one of the most-hated men in Boston. Just owning the Yankees is enough to be hated by all Red Sox fans, but even worse for Ruppert, soon after buying the Yankees in 1915, he manufactured the trade that all of Boston and many other slightly more neutral baseball fans have bemoaned since, Babe Ruth went from being the Red Sox’ best player to being the Yankees’ best player. The Yankees have never looked back while I’m not sure the Red Sox have totally fully recovered.

Hank O’Day was a respected umpire who officiated in over 4,000 games. The term “respected” and “umpire” are not terms usually put into the same sentence so he must have been a good one.

James White, known for catching barehanded, batted lead-off in the first professional game on May 4, 1871 and hit a double. It was probably a legitimate hit but maybe the fielders weren’t wearing gloves either. However, as one who has caught more than my share of games, anyone who caught with his bare hands was one tough cookie. I’m sure these three are worthy of the honor. As the article detailed, many players eligible today are tainted by the usage of performance enhancing drugs, i.e. steroids or PEDs.

Apparently players such as Barry Bonds of the San Francisco Giants, Sammy Sosa of the Chicago Cubs, and Roger Clemens of various teams including both Boston and New York, “will be judged in a different light.” Each of these players has Hall of Fame statistics. Each was a marvelous player. Everyone likes to see players hit home runs with Bonds and Sosa among the best in the history of baseball at hitting them. Roger Clemens holds multiple pitching records. Until they got swept up in the steroid scandal, each was a first-round lock for Hall of Fame inclusion. In fact, many players of substantially lesser accomplishments are in the Hall of Fame right now. Today, however, steroids usage is changing the rules of inclusion. Baseball accomplishments are not enough. It appears right now the writers who elect players are not willing to allow those associated with steroids into the Hall of Fame. In baseball, this is not unprecedented in that those associated with gambling, such as Pete Rose, are not being allowed into the Hall of Fame either. There are a whole group of players with elite careers, such Alex Rodriguez of the Yankees, who will be finishing steroids-plagued careers soon. Once they retire and wait the mandatory five year period, they will be eligible for election to the Hall of Fame. It will be very interesting to see if the writers stay with the hard line or soften with the passage of time. Many traditional baseball fans, including me, believe the hard line is the right line.

The big news in the financial world last Thursday was the bankruptcy filing by the City of Detroit. By filing bankruptcy, Detroit Emergency Financial Manager, Kevyn Orr has taken the hard line to deal with Detroit’s debts. There is a lot at stake if Detroit is allowed to do what happens in a traditional bankruptcy filing, especially in the area of retiree pensions and retiree health insurance coverage. It is estimated that Detroit has $18 billion in total liabilities with $11.5 billion being unsecured debt, pension benefits owed to retirees, and healthcare coverage promised to retirees. Mr. Orr’s plan is to cut that debt to $3 billion. That means debtors, investors, and retirees will receive approximately 17% of what they were promised. Needless to say, the bankruptcy filing has been contested by a variety of people and organizations including every union that does business with Detroit. It’s important to remember that in the private sector, the federal government has the Pension Benefit Guaranty Corporation (PBGC) that steps in when a private company, a General Motors for example, files for bankruptcy. The PBGC then pays a percentage of the pension that General Motors, through the bankruptcy, was forgiven. In the public sector, there is no PBGC. Retirees will potentially just receive 17% of their pre-bankruptcy pension amount. Who knows what will happen with the health insurance but 17% of the coverage won’t go far, especially if you are only getting 17% of your pension. The unions will contend that Detroit or, alternatively, the State of Michigan is responsible for the pensions because the Michigan Constitution guarantees that a public pension cannot be cut.

I’ve got a feeling the United States Supreme Court will be deciding this issue with its immense nation-wide implications. One other important item to note is that public employees such as fire fighters and police officers do not qualify for Social Security unless they have worked a side job in the private sector. Unlike their private union brethren, the public union retirees have no fall back provision with neither the PBGC nor the Social Security Administration being of help. It appears that the mess created by Detroit’s bankruptcy filing will not be cleaned up for many years. This is Jerry Coon signing off.

 

Jerry Coon is an Enrolled Agent and

a Registered Tax Return Preparer.

He owns Action Tax Service on

Northland Dr. in Rockford.

Contact Jerry through his website:

www.actiontaxservice.com

 

 

 

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