After working at a pharmaceutical company for 34 years, Leanne Saedelle* is being packaged out. Her employer has given her three options: take early retirement; receive a lump-sum severance and retain her DB pension; or receive a lump-sum severance and commute her pension. Three experts weigh in on what makes the most financial sense for 56-year-old Leanne.

The situation

Leanne graduated with an honours chemistry degree from McGill in 1980 and has spent the last 34 years with the marketing arm of a private pharmaceutical company. She rose through the ranks and has been director of marketing for 10 years. The job requires extensive field sales work and comes with a $185,000 annual salary, plus annual bonus. Long hours and a travel schedule that kept her on the road for 234 days a year means she never married or had kids. She owns a studio apartment in Ottawa, Ont. free and clear, but has never thought of it as home since she’s rarely there. Her parents are dead and her closest family ties are her brother, sister-in-law and their two daughters. She dotes on her nieces, sending gifts from her travels, and says if there’s anything left to form an estate after she passes, it will go to the two of them. She’s never written a will.

One week ago, Leanne received severance notice from her employer, which included: an option to take early retirement; receive a lump-sum severance equal to 26 weeks salary and retain her DB pension (in which she’s fully vested), with a payout date starting at age 65; or receive a lump-sum severance payment and commute her pension. She was given a 60-day window to choose how she’ll be paid out.

The experts

Executive Director, Private Client Group & Portfolio Manager, HollisWealth

Paul Coleman

Partner, Tax Services, Grant Thornton LLP

Jill Wagman

Managing Principal at Eckler Ltd.

She also has significant vested stock options (6,000 shares) at a strike price well below what other executives sold the stock for recently. If she takes a lump-sum severance payout, her option to exercise the stock purchase times out in one year. If she takes retirement, that’s extended to two years. Her hectic working life meant she never had time to spend her earnings, so she has sufficient cash on hand to exercise on the options.

She also owns 2,000 shares outright, but has expressed ambivalence about increasing her share position because, she says, “the company kicked me to the curb.”

Read: Get the most for your laid-off clients

At her age, Leanne’s convinced she’ll never get another job. She met with three recruiting firms, had one job interview, and was consistently told her salary expectations vastly outstrip what’s being paid by companies today. So she’s frustrated, and presumes that what she gets from this package is all she’ll have to live on for the rest of her life.

She’s concerned about the tax implications of a lump-sum payout from both the severance and by commuting the DB plan, but is leaning toward that option because it provides the cleanest break from her former employer.

Planning for a longer life

GR: Let’s develop some assumptions. For instance, she might never go back to work. Or, perhaps, she works as an independent contractor so she can write off business expenses. All of this planning will help her think rationally.

JW: And since she can expect to live another 30 years, based on recent statistics, I’d suggest she hold on to her defined benefit (DB) pension, which will pay her for life. One of the concerns I think some people have with taking the DB pension is that, if they die early, there are no benefits for their survivors. But given that she’s single and has no direct dependents, she should take the pension. The question is whether she should start it now or wait until she’s 65. Most plans have a fairly punitive reduction, but not all do.

Let’s assume the plan has an early retirement reduction of 5% a year before age 65. If she collected early, she’d experience a 45% reduction in the pension she’d receive, which means she won’t have an adequate income replacement.

So she must find a way to postpone collecting her DB pension to age 65. If she does, she could probably get about 60% of her pre-retirement income from her DB plan—that’s taking the CRA pension cap into account.

Read: Help a professional who’s been laid-off

Add to that government benefits, including CPP and OAS, and she might end up with about 80% of her pre-retirement pay. The problem is, how does she get from 56 to 65? Since she’s barely spent most of her income, she must have some savings, perhaps unregistered, so she could use that.

Also, if all she ever did was work and she has no family or dependants, then the worst thing for her to do is stop working completely, since she’s so used to it. Aside from the psychological benefits of a career, she’ll get an income too. She may not find a full-time job somewhere, but she could set up a consulting firm or find contract work.

Tax concerns

PC: The tax issues are almost the same, irrespective of which option she takes. If she takes severance, there are provisions in the Income Tax Act to roll all, or a portion, of her retiring allowance into an RRSP. There are some rules around the mechanics. For instance, there’s a $2,000 limit she can transfer for each year of service before 1996. There’s also an additional $1,500 for each year prior to 1989, when her employer was not required by law to make vested contributions to a registered pension plan on her behalf.

If she transfers directly into an RRSP, she’ll be in a lower tax bracket, and she does not pay tax immediately on that severance amount. If she has the capacity to transfer her lump sum into an RRSP, then she could withdraw income from the RRSP over that nine-year period and spread the tax hit. Another issue is whether she has built-up RRSP contribution room. If she does, then in addition to the capacity to transfer all or a portion of the severance amount into an RRSP, she could also catch up on unused contribution room.

JW: But because interest rates are so low, CRA has capped how much you can actually transfer into your RRSP. So if she commuted her pension, there’d be a cap and she’d have to take part of it in cash, which would mean she’d have to pay tax. The tax rate is treated like income.

Stock options

PC: Since the company’s private, there are no income tax consequences until Leanne actually disposes of the shares. So she can exercise the option and acquire the shares, and she doesn’t have to include the proceeds in income until she actually disposes of the shares. That’s because while public company shares have easy access to liquidity, private company shares do not. The tax rules are built around the assumption that private companies have limited liquidity. When the shares are actually sold, the difference between the fair market value of the shares at the time the option was exercised and the option price, will be taxed as employment income. And then there is the capacity to reduce that benefit by 50%, so that it mirrors the taxation of capital gains.

GR: And what’s the magnitude of disposing of those stock options? It could be a $10,000 gain, or a $100,000 gain. If it’s big, she may want to time the execution, so that it straddles two tax years.

PC: Yes, and she may also have the opportunity to utilize the lifetime capital gains exemption, which is $800,000. But I’m a bit concerned about the concentration of wealth in the ownership of her 8,000 shares. If they’re worth a considerable amount, there are probably some restrictions in terms of liquidity. She can’t wake up one morning and decide to liquidate a share interest in a private company, unless there are provisions, say in a shareholder’s agreement, that allow for that. She also needs to separate her emotions when making this decision. The shares are worth more than the option price, so even though she doesn’t like the company, why wouldn’t she take the opportunity to acquire those shares?

Her legacy

PC: She might think that, just because she’s single and doesn’t have any dependants, she doesn’t need a will. But there are many implications of not having a will. In Ontario, if she doesn’t have a will and her brother survived her, her estate would flow to him upon her death. If her objective is to have her wealth pass to her nieces, she must have a will.

GR: And when creating the will, she should consider whether she wants any of her wealth disbursed to her brother and sister-in-law. Are there any marital issues between them? If so, she must consider that her wealth could be attacked under family law if they ever split.

And since she’s leaving money to her nieces, how should the trust be handled? Have they reached the age of majority? Half a million dollars in the hands of an 18-year-old can be positive or negative, depending on the individual.

Read: Advice for older, laid-off clients

There could be some advantages to the proposed changes in legislation to testamentary trusts. Leanne can now reach from the grave, so to speak, and continue to control the trust if she establishes proper provisions. For instance, she could have her brother and/or sister-in-law as trustees, and then set up some mechanical formulas to allow the nieces access. Say they go to university—they’d get funds for that.

PC: Under the 2014 federal budget, the changes for testamentary trusts limit access to the marginal tax rates. However, I wouldn’t allow these changes to dissuade Leanne. There’s still a three-year window where the marginal tax rates will apply.>

*This is a hypothetical client. Any resemblance to real persons, living or dead, is purely coincidental.

by Suzanne Sharma, associate managing editor of Advisor Group.

Originally published in Advisor's Edge Report

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San José, Costa Rica, since 1956
Please Send Coffee!

The measure of an expat: how many 'varas' in a mile?

See also: Going out on ‘un date’ – the cultural quirks of romance

A couple of years ago, my family and I took a road trip in the Deep South. We rented a car in the airport, entered the address on the GPS and set out to drive to our hearts’ content. That is, until the GPS started speaking in that cryptic language from the outskirts of reason: the U.S. system of measurement.

“In 400 feet, turn right.” We all looked at each other, quickly going over our rusty memories of the rules of conversion. “400 feet, that’s like 150 meters?” “No, I think it’s more than that. It should be the next one over.” “No, it’s this one, it’s this one.” “Turn now!” “Now?” “NOOOOW.” Tires squealing, people bouncing around like crash test dummies, the GPS indicating the next exit: “In 0.6 miles, turn left.” Are you kidding me? 60 percent of 1.6 kilometers…

We eventually managed to pull over and change the settings, but the experience was just one of countless examples of the cultural misalignment that occurs because the United States is one of only three countries in the world that have not adopted the International System of Units as their official metric system, the other two being Myanmar and Liberia (according to the CIA World Factbook, although the United Kingdom continues to use imperial units for certain measures).

This provides for all sorts of goofy interactions for me as a Costa Rican in the United States, like the day when I ordered the smallest beer on the menu (4 ounces) and got royally mad at the waiter for bringing me what appeared to be a shot-glass worth of alcohol, or the day someone told me her New York apartment was 350 square feet and I asked if it was a two bedroom. Not to mention the myriad times I have failed to wear appropriate clothing based on Fahrenheit forecasts or my failure to react when guys try to impress me by mentioning their height.

You might say this is my fault: I should have learned this by now. And in my defense, I have made some painstaking progress. But there are things that are simply hard to wrap your head around if they are not formally taught to you, especially – and this is the crucial part – if you already learned another system that was based on a different set of criteria (ahem, on mathematical logic).

I am normally non-judgmental when it comes to social norms and behaviors. In general, I refuse to categorize cultural variations as superior or inferior. Here is where my stern relativism gives way: There are eight ounces in a cup, two cups in a pint, two pints in a quart, and four quarts in a gallon. There are twelve inches in a foot, three feet in a yard and 5,280 feet in a mile (or 1,760 yards). There are also sixteen ounces in a pound and 2,000 pounds in a ton (a short ton). How am I expected to learn this?! Particularly when I keep translating it all in my head: “OK, so gas is $3.50 a gallon and a gallon is like 3.8 liters and we have 200 kilometers to go, so will someone please call my math teacher?”

It’s not surprising that the U.S. has a unique system; most countries have had their own methods at some point. Just ask anyone in the coffee business in Costa Rica what the volume of a cajuela is, or how much they can get for a quintal or a fanega. Many people still describe property in manzanas, while I suspect vara (the slang for “thing”) might derive from the unit that is roughly equivalent to the yard – also known for the venerated expression meterse en camisa de once varas, which basically means to get oneself into a mess.

These rare or discontinued units of measure must not be confused with the imprecise or inaccurate units that are prevalent in all languages, such as the culinary pinch of salt confusing novel cooks everywhere. In Costa Rica, we have the infamous Guanacaste kilometer, which is more like two kilometers or five, depending on who happens to be giving you directions.

It’s easy to see why metrification, the process of gradually converting to the international system, is slow and fraught with setbacks.  It’s taken other countries centuries to let go of their traditional units, and not just because it means learning new words: a system of units entails intuition, a complicated process of representation that takes place even without our awareness. I don’t have to picture a quarter of a liter to know what 250ml look like, the same way that no American has to calculate 60 percent of 1,760 yards to know when to take a left in 0.6 miles. Like with so many other social conventions, we end up believing that our system makes sense, although what we actually mean is that it makes sense to us.

Perhaps there’s a metaphor hidden in all of this. Perhaps our difficulty in learning new units of measure is a telltale sign of our aversion to change, even in the presence of an option we can rationally recognize as an improvement. Ways of thinking are sticky, for Americans, for Costa Ricans, for people all over the world. But one of the wonderful things about human beings is that, though we are conditioned by our past, we are not predestined by it. We can change, and for the better. We can reach consensus on new ways of thinking. In fact, it is not a minor feat of civilization that we pretty much universally use the decimal system for arithmetic calculations.

So, I’ll continue to get hopelessly lost when following directions in the United States. I’ll continue to get into a camisa de once varas when placing my orders at restaurants. I trust that my children, or my grandchildren, or my great-grandchildren, will be able to improvise a ball game with an American kid and that they will understand each other when drawing the field.

Read previous Please Send Coffee! columns here

Raquel Chanto is a lawyer and policy wonk trying to survive international bureaucracy in Washington, D.C. In her monthly column “Please Send Coffee!” she explores aspects of Costa Rican culture and how they contrast with life abroad.

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I was raised with the Imperial System of measurements and it is just as hard to adjust to the metric. I think many of us still mentally convert to imperial even after so many years with metric. It doesn’t help to know the kms/liter when we were brought up with miles/gallon as a measure of a car’s efficiency, and so on. When Hattie Jacques, a British comedienne, appeared on a Canadian TV quiz show to mark Britain’s change from their old currency to pounds and new pence, a Canadian speaker asked what all the fuss was about since their were 100 new pence in a pound. Hattie replied, “That is why I am here. You can tell me how it works and I will go back and explain it to the Brits.”

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Moving from the US to Costa Rica, I struggle with this daily, only in reverse. And it’s not just meters/feet, kilometers/miles…. it extends to cooking as well. Food items are typically packaged in grams so there is always conversions that need to be done when preparing my favorite recipes. After a year and half in Costa Rica it’s only a minor inconvenience now and I just take it in stride.

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Daniel Jackson

I can understand struggling for the first few days, but after that there is simply no excuse. That is you problem, doing conversions. That is the surest way to stay stupid. You need to immerse yourself in metric units and forget USC ever existed.

Maybe it is time to burn those old recipes and get some new metric ones.

So much for American superiority and exceptionalism.

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Jan Prusinski

As a Civil Engineer in the U.S. it was amusing to read your article on metric vs. Imperial units. I normally see it from the other side, where I have to convert to metric.

As an engineer, the metric system makes eminent sense…100 cm in a meter, 1000 g in a kg, etc. Why would a country want a system there are 5,280 feet in a mile (unless you wish to measure that in yards, and it’s 1,760 yards). And don’t get me started on multi-dimension numbers I use every day in engineering, e.g. pounds per cubic inch vs. tons per cubic yard…they are both a measure of “density” but you need to multiply the first by a factor of 46,656/2,000 to get the second! I really pity the poor mechanical engineers who have to struggle with the esoteric “British thermal unit” or “horsepower” (horsepower?…isn’t this 2015?) instead of “joules” and “megawatts.”

And, by the way, units of mass, such as grams and kilograms, are really not the same as our Imperial units of “force,” pounds and tons. My mass will still be 90 kg whether I’m on a Costa Rican beach, on top of Cerro Chirripó, or on the moon, but my 200 lbs will only weigh 33 lbs on the moon (I kind of like that!).

So I fully supported the efforts in the first Bush administration to “hard convert” the U.S. to metric. The Federal Highway Administration, and many other agencies, were preparing to do just that. Many state departments of transportation spent probably millions of dollars getting ready to convert. Then people, industry and Congress had second thoughts. Though the metric system made sense both numerically, and from a “get in sync with the rest of the world” point of view, the visceral reality was that metric was truly a different language that 300 million people would be forced to learn (as well as countless industries, where “hard conversion” actually meant “hard dollars.”). The government conversion was rescinded, years of preparatory efforts (and associated $’s) trashed, and it will be a cold day in Costa Rica before the U.S. tries that again.

I personally could feel that pain, too. I attend many engineering conferences with a strong international component. Often, technical presentations are given in SI (i.e. metric) units. When I see graphs that show, say, the time development of concrete strength from “3.5 to 35 megapascals in one month,” I’m trying to do the mental conversion (or now…a Google “translation” on my phone) to “500 to 5,000 pounds per square inch.” I can’t relate in a quick, instinctive way to metrics (even though in college, courses were taught in both systems). Sure after a few years I probably could, but really, it would take a generation of education, and kids being brought up/immersed in the system to really “convert” the nation (witness the British who still try to cling to THEIR old system). And in the interim, if we were to convert, you probably would see a lot of middle-aged people making a lot more U-turns when the GPS gave them metric instructions.

So, I’m traveling to Costa Rica this summer; I’ll have to get used to Spanish and metric, use the Google translator liberally for both, and be happy to live life for a time at a slower pace. Then I can return to Texas, 1,480 miles away (or 7.8 million feet, or 2.6 million yards), where you can legally travel 136.7 km/hr on some of our highways!

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It is correct that the U.S. does not use “Imperial” units, but a similar system, the U.S. Customary system. The term “Imperial” was casually being used as a catch-all, as they both derive from the British Empire.

Mr. Jackson is incorrect to say that I cannot “comprehend or visualize” metric units. I can both comprehend and visualize them perfectly well. However, when using one system nearly every day, but being exposed to the other system only occasionally, my “feel” for commonly used measurements is certainly more intuitive using the U.S. Customary system (however awkward that system may be).

As for his tirades on non-metric users, Americans and the U.S., it is unfortunate that light-hearted and self-deprecating comments would elicit such hostility.

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Daniel Jackson

Imperial units are illegal in the US. The US has their own version of pre-metric units that precedes imperial. Imperial was a British reform carried out in 1824 that the US never adopted. The version of pre-metric units used in the US is called United States Customary or USC.

It is hard to believe that anyone who calls themselves a professional can not comprehend or visualise metric units, especially one who attends conferences and is exposed to them. I can’t imagine what others may think when they know (if they know) you have to convert to Luddite units in order to give the dimension meaning. I’m sure even if something is not spoken, that the others have to think that those gringos are not as exceptional as they claim. If Americans are suppose to be the best at everything, then every American should at least be bilingual enough to be comfortable speaking and understand metric measurement and not clamouring for a translation.

It is no wonder that industry has to go to metric countries to get designs in metric built or even hire foreign engineers to do the metric design work. Who would trust an American to get it right? But as for the US metricating, it may be too late. Everyone knows the US’s days are numbered and it is just a matter of a short time before the US economy collapses entirely and nations with people who can adjust quickly, like China and Germany are at the top. So, continue to feel sorry for yourself and find excuses and maybe find someone to pity you for your situation, but it won’t help when you are starving and cold and your neighbour is hunting you for your last gram of hidden bread. The mistakes you made in the past, no matter how trivial you think they are do come back to haunt you and haunt you fiercely they will.

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James Baldwin

LOL! I remember moving to Costa Rica and having to learn everything in reverse of what you just mentioned, so, I feel your pain. I especially couldn’t get used to the language at first with everything having a feminine and masculine conotation. I wanted to change to rules of Spanish and make “el agua” be “la agua”. Just made more sense. If it ends in “a” it have a “la”. A veces es “un” problema.

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Ken Morris

Good article, as usual.

Many years ago, when there was a serious campaign on in the US to get everybody to switch to metric, I read an article opposing the change in (of all places) a liberal journal. The author conceded that, yes, metric is more logical and blah blah, but opposed it on the grounds that it is less humane. The foot, e.g., apparently had its origin in the length of a human foot. The march of modernity has been about standardizing and rationalizing every damn thing, and in the big picture you have to ask whether this is really good. Is it always good to standardize and rationalize everything?

I don’t have a strong opinion one way or another, but still see the author’s point.

And lest our metric friends become too smug, I invite them to read the ml. on a Coke can–355. Now, why choose this number? Because it corresponds to 12 ounces. Metric actually hasn’t won, although it has allowed drink manufacturers to sell 330 ml. cans that look like 355 ml. for the same price.

Or I invite them to Nicaragua, where varas and other such things really are used.

Or to Costa Rica, where any block, no matter how long or short, is considered 100 meters.

So this metric thing is rational? Yeah right.

And there is the puzzler from the old NPR “Car Talk”: Where in your household does 100 minus 50 equal 20?

It’s your microwave. Somebody forget to tell the clock makers that minutes needed to be divided by 100 instead of 60.

Or maybe years need a more rational division into days. Our 365 of them don’t exactly work.

Meanwhile, pi is one weird number, isn’t it? Like 3.14 and continuing . . .

So I say tone down the smugness, and when in doubt, order an imperial pint. You get more.

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I completely relate to your article. I have trouble calculating onzas y gramos as well at picturing manzanas y acres. My younger brother who visited me from CR struggled following the 400 feet warning from the GPS.

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Daniel Jackson

Why do you need to calculate anything. Stick with gram and metres only and the problem is solved. While you are struggling, the advanced metric world is moving ahead of you and waiting for the right moment to stomp on you and squash you like a bug.

Set your GPS to metric default and there is need to struggle with units that you don’t need to deal with.

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Actually 480 x4 = 1,920 varas in a mile, I was figuring for the standard 4 varas = 11 ft used in measuring lumber.

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Daniel Jackson

Unlike metric units, all pre-metric units like the vara as well as the “English” had thousands of variations, so it not uncommon for the number of varas in a mile to vary. This is due to the variations in the vara and the mile.

Only the International System is consistent and unvarying.

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480 varas in a mile. A manzana by the way is 100 varas x 100 varas. Varas is an old Spanish measurement, similar vintage to leagues. Thanks for the article!

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Calling America's institutions of higher education uniquely capable of producing "the people, ideas, tools, solutions, and knowledge infrastructure our economy needs to regain its momentum and to set a new trajectory," a group of public higher education leaders have issued an open letter to President-elect Obama and his incoming administration urging them to invest in higher education in general and in public higher education in particular, along with their sister private higher education institutions.

The open letter notes that this goal can be achieved by investing in the states and their educational systems. America's public higher education institutions have been among the nation's most dedicated and reliable partners in strengthening our society and our democracy. Now, they stand ready to continue this role by helping to rebuild our economy and to help meet our society's crucial need for an educated citizenry and a competent workforce.

The higher education leaders also highlighted the fact that times of crisis are also times of opportunity: for example in 1862, in the darkest days of the Civil War, Abraham Lincoln--who President-elect Obama has often referred to as his role model--took equally bold and decisive steps to strengthen education by working with Congress to pass the Morrill Land-Grant College Act, which set aside more than 17 million acres to the states to provide for the establishment of public agriculture and mechanical arts universities. At the same time, Lincoln established the National Academy of Science. His gaze was always on the future, even when the nation was in great jeopardy.

With a similar focus on America's future, in October, a select but representative group of public higher education leaders was convened by Vartan Gregorian, President of Carnegie Corporation of New York, to study the major challenges facing higher education institutions, both individually and collectively. One result of their discussion was the open letter, signed by leaders of public research universities, state colleges and community colleges. This letter is published in the Tuesday, December 16 editions of the New York TimesWashington Postand Boston Globe.

The proposed investment, initially in infrastructure in the form of essential classrooms and research facilities, would conform to current "green" standards and incorporate the latest technologies. In addition, since many public colleges and universities have long-planned and equally long-deferred projects that can be shovel-ready in 120-180 days, this investment has the potential of creating thousands of jobs. Said Gregorian, "This is an opportunity not only to reinvigorate our public higher education institutions and help to mobilize their resources and harness their capacity in the service of our nation, but also to have an immediate impact on economic growth in many states."

According to Gregorian, one of the most important points in the open letter--beyond the immediate economic stimulus and higher education's infrastructure needs--is a call for the Obama administration, in collaboration with states, the business community, and education stakeholders from all sectors, to develop a 20-year vision for educational attainment as part of an ambitious national strategy to ensure our continued competitiveness and security in the context of a global economy. Gregorian welcomed the fact that pub lic universities and colleges recognize the urgency of improving education outcomes, raising graduation rates, preparing more first-rate teachers, and building human capital in science, engineering, and mathematics. The present economic crisis requires an investment in human capital, and graduates of public universities historically have provided most of the workforce to meet the nation's needs.


  • Taxes are too low to finance the level of government people appear to demand. Federal revenues are just 15.8 percent of GDP. They have averaged 18.5 percent of GDP in the postwar era, but only reached that level once in the last 10 years; every other year revenues have been well below that level, contributing heavily to the budget deficit and growth of the national debt.

  • The tax code is getting harder and harder to understand and administer and desperately needs radical simplification. Yet Americans show no appetite for giving up cherished deductions and credits that clutter the tax code, overlap and duplicate each other, and often encourage inefficient and wasteful economic activities.

  • It is widely believed that the tax code, especially on the corporate side, is a drag on economic growth. While the idea that tax reform is essential to jumpstart growth is unrealistic, there is no question that there are potential reforms that would raise the long-term trend rate of growth if implemented properly.

People often point to the Tax Reform Act of 1986 (TRA 86) as an example to follow. It eliminated various tax preferences and lowered statutory tax rates. While in principle this would be worth doing again, there are a number of obstacles, both political and substantive, that make a simple reprise of TRA 86 unrealistic.

First, the Tax Reform Act of 1986 was the culmination of almost two decades of efforts to reform the tax system that previously produced budgets laden with tax expenditures and included the tax reform acts of 1969 and 1976. In many ways, there was an infrastructure in place at that time regarding knowledge of the tax system and a consensus on at least the general outlines of reform that does not exist today.

Second, in advance of the 1986 effort there were two important congressional tax reform proposals – a Democratic bill cosponsored by Sen. Bill Bradley of New Jersey and Rep. Dick Gephardt of Missouri, and a Republican plan cosponsored by Rep. Jack Kemp of New York and Sen. Bob Kasten of Wisconsin – which showed enough similarity that both sides recognized the potential for a bipartisan tax reform effort. Nothing remotely the same exists today, with the two parties deeply polarized on tax policy.

Finally, the ultimate impact of TRA 86 was disappointing, both politically and economically. As early as 1990, critical aspects of it were already unraveling: in particular, the top rate was raised without restoring tax preferences that were eliminated as part of a package deal, and the agreement to tax capital gains at the same rate as ordinary income was broken. Subsequent analysis of the real world economic effects of tax reform showed surprisingly little impact despite widespread expectations that the 1986 act would have large effects. The paucity of meaningful impact suggests that extravagant claims for how tax reform is all that is needed to jumpstart growth should be taken with many grains of salt.

Earlier tax reform efforts in the 1960s and 1970s were driven largely by liberals wishing to make the tax code more progressive by ending tax loopholes for the rich. This effort was joined in the 1980s by conservatives anxious to cut statutory tax rates, which they believed to be the key to growth, and they were willing to pay for rate reductions with base-broadening. Critically, the budget deficits of that decade imposed a hard constraint on tax reform: rate cuts had to be honestly paid for with real reforms that raised revenues to guarantee a revenue-neutral package.

Additionally, all previous tax reform efforts were strongly supported by the Treasury Department, which was really the central driver. The 1969 and 1976 tax reforms were essentially drafted by Treasury and the 1986 reform grew out of a three-volume report drafted by Treasury economists. However, since the 1990s, under both Republican and Democratic administrations, Treasury has been marginalized in terms of tax policy, with Congress taking the lead role. As a consequence, tax legislation has become increasingly unfocused, with tax bills being little more than random collections of various tax provisions that often overlap with existing law and may even conflict with each other. Restoring Treasury’s central role in tax policy is a necessary precondition for meaningful tax reform.

Another precondition is strong support by the president. Congress is too divided and heterogeneous to do tax reform by itself. Under the Constitution, tax bills must originate in the House of Representatives and then, if successful, the process must start all over again in the Senate. The president must be actively engaged to make sure they don’t go off in different directions, that the integrity of the effort is maintained, that unintentional subsidies or penalties aren’t inadvertently inserted, and to help overcome resistance through lobbying and political pressure.

Presently, the tax reform effort is in its infancy, with no strong leadership, no framework with the potential for bipartisan support, or even a consensus among tax experts on where to begin.

Bruce Bartlett


China plans security offices inside internet firms to stop 'illegal behaviour'

Move, which security minister says will ‘catch criminal behaviour at earliest possible point’, is latest attempt to tighten control over online activities

A man uses his mobile phone at the China internet conference in Beijing, July 2015.
A man uses his mobile phone at the China internet conference in Beijing, July 2015. Photograph: Wu Hong/EPA

China is planning to set up “network security offices” in major internet companies and for websites so authorities can move more quickly against illegal online behaviour, the ministry of public security said in a statement.

The government published a draft cybersecurity law last month consolidating its control over data, with significant potential consequences for internet service providers and multinational firms doing business in the country.

The law will strengthen user privacy protection from hackers and data resellers but elevates the government’s powers to obtain records on, and block dissemination of, private information deemed illegal.

The new measures would help protect personal information as well as helping prevent online theft, fraud and rumour spreading, it said.

Last month, the largely rubber-stamp parliament passed a sweeping national security law that tightened government control in politics, culture, the military, the economy, technology and the environment.

Cybersecurity has been an irksome area in relations with economic partners like the United States and the European Union, which see many recently proposed rules as unfair to foreign companies.


The Veil Nebula - Sharpless 103

Located 1,500 light-years away in the constellation Cygnus is a cloud of heated and ionized gas and dust known as the Veil Nebula. The Veil Nebula is the visible portion of a massive supernova that erupted around 7,000 years ago to form what is now known as the Cygnus Loop. The Veil Nebula has a diameter of 100 light-years which appears to be 6 times the diameter of the full moon in the night sky. Due to the scale of the Veil, astronomers often segment the nebula into western (Caldwell 34), eastern (Caldwell 33) and northern portions. This particular images shows the western portion of the nebula with NGC 6960 (the Witches Broom), NGC 6979 (Pickering’s Triangle), and other significant cataloged objects.

Credit: NASA/Digital Sky Survey

Seeing a supernovae within hours of the explosion

Hear more about this discovery →

Supernova explosion (artist’s impression)

One of the most massive cosmic explosive events in the universe is a supernova. A supernova is the violent death of a luminous supergiant star. These blindingly bright star bursts occur at the end of a star’s lifetime, when its nuclear fuel is exhausted and it is no longer supported by the release of nuclear energy.

If the star is particularly massive, then its core will collapse and in so doing will release a huge amount of energy. This will cause a blast wave that ejects the star’s envelope into interstellar space. Astronomers originally classified supernovae into two “types”, I and II. Type I had no hydrogen emission lines in their spectra whereas Type II exhibited hydrogen emission lines. Later it was realized that there were in fact three quite distinct Type I supernovae, now labelled Type Ia, Type Ib and Type Ic.

Supernovae play a fundamental role in a great cosmic recycling program. We believe that almost all of the elements in the Universe that are heavier than hydrogen and helium are created either in the centres of stars during their lifetimes or in the supernova explosions that mark the demise of larger stars.

Image Credit: freeara

Galactic Tides - The Whirlpool Galaxy And Its Companion

Astrophysicists were able to determine that the Whirlpool Galaxy (M51) and its small companion galaxy (NGC 5195) are tidally entwined by analyzing the light emitted from Supernova within M51. These Supernova have provided important clues about the structure and composition of these galaxies.

Credit: Cornell Astrophysics/NASA Hubble/IPAC

The Jellyfish Nebula - IC 443

Credit: NASA/ESA/Wikipedia

  • Supernovae are stellar explosions that are so powerful they briefly outshine entire galaxies, radiating as much energy as the Sun or any ordinary star is expected to emit over its entire life span
  • The Universe is so vast that it is estimated that a star explodes every second. In a galaxy the size of our Milky Way, a star will go supernova every 50 years on average.
  • A star can go supernova in one of two ways:
  • Supernovae play a key role in distributing elements throughout the universe. When the star explodes, it shoots elements and debris into space. Many of the elements we find here on Earth, including life, are made in the core of stars. These elements travel on to form new stars, planets and everything else in the universe.

Supernovae as seen by the Chandra X-Ray Observatory
Crab Nebula | Cassiopeia A  | Tycho’s Supernova Remnant  | G292.0+1.8


4.1.2 Overview of Graph Creation

For an example graph on how to create a graph, see Section 4.1.9, “Creating a New Graph: An Example”.

The XML elements for creating a graph are as follows:


The severe drought in the Midwest has caused complete crop failure in some areas; in others, yields are reduced to the point that it is not economical to harvest the grain.

Producers who are considering baling or chopping for silage have asked University of Illinois assistant professor Fabián Fernández how much nutrient would be removed if the stunted corn crop is taken out of the field.

“The condition of the drought-affected corn crop is so varied it would be difficult to establish a removal rate that represents every condition,” he said.

To determine total nutrient removal, the amount of biomass and nutrient concentrations must first be determined. Fernández notes that doing so is difficult because some crops died while they were still at vegetative stages, others are dying with barren ears, and others are hanging on trying to fill the kernels

“Normally, the first step in determining total nutrient removal in stover is to use a harvest index, also known as residue-to-corn grain ratio, to estimate how much stover has been produced,” he explained.

The most widely used dry weight ratio is one-to-one residue to grain. Using this ratio to calculate the pounds of dry residue, the grain yield in bushels per acre is multiplied by 47.3 (a 56-pound bushel of corn at 15.5 percent moisture contains 8.7 pounds of water). The value is divided by 2,000 to obtain the number of dry tons produced.

This approach will not work well this year.

“One could expect to remove up to about 1 ton of dry biomass per foot of corn height per acre if the stalk diameters are small,” Fernández explained. “If the stalks have a more typical diameter, I would estimate as much as 1.2 to 1.3 tons of dry biomass per acre per foot of corn height.”

The amount of biomass removed also depends on the cutting height: the higher the cutting height, the less stover is removed. Thus, the best way to determine total amount produced would be by weight of bales or silage loads adjusted for moisture content.

Nutrient concentration is the other piece of information needed to determine nutrient removal amounts.

In a normal growing season, phosphorus and potassium levels in biomass can vary considerably. Typical values for stover after grain harvest range from 5 to 8 pounds of P2O5/ton and from 5 to 40 pounds of K2O/ton, with 20 to 30 pounds K2O/ton being the normal range.

Low potassium levels are usually due to rain leaching it out of the plant after the crop starts dying — obviously not a problem this season.

Vary under normal conditions