top of page

Transparency, Populism & the IRS (1Q16 Newsletter)

April 15, 2016

To: Customers & Friends

From: Christopher Weil & Company, Inc.

Transparency Revisited

You may recall that in the CWC 4Q15 “Report and Commentary” I spoke of transparency not just as a morally attractive personal and institutional characteristic but as a fact of life to which those who have the good fortune to live and work in the 21st century will be expected as a matter of routine to conform their behaviors. Two thousand years ago the handwriting was on the wall (“There is nothing hidden that will not be revealed”). Two thousand years later some combination of democratization, technological advances in the area of data access, populist angst, curiosity (or nosiness) and envy has translated the handwriting on the wall to a reality in the marketplace. And as there is virtually no space, anywhere, that is not directly or indirectly a marketplace, transparency is fast becoming a precondition of any transaction: personal or communal, for-profit or not-for-profit, domestic or international.

Someone has said that sunlight is the best disinfectant. True, but only half the story. Insistence on transparency has the practical consequence of forestalling, at least in many cases, transactions that, if executed, could not stand up under the light of day. While not all non-transparent or hidden transactions are illicit, many are. So many would-be-illicit transactions simply won’t happen in a fully transparent world.

Which brings us to PanamaGate.

Talk about the “power of technological advances in the area of data access”...11.5 million documents and 2.6 terabytes of data are now available for viewing by everyone on the planet.

I don’t think there has ever been a “revelation” of this magnitude nor one that has put the fear of God into so many powerful breasts. Edward Snowden? Big, but not this big. PanamaGate is going to play out for years and will involve not just those named but also those associated with them and those who enabled them (advisors, lawyers, accountants, banks). Remember, this is just one law firm (among many) and just one tax haven (among many).

This revelation, by the way, could not have come at a worse time for those involved. First, think of the current populist revolt in which millions of people have come to believe that the system is rigged against them and that the political class, of whatever party or persuasion, cannot be trusted to pursue anything other than its own ideological and economic interests. Then, second, think of those hungry taxing authorities around the world who now believe they have discovered the mother lode of all potential revenue sources. Even if some of those involved actually manage to fend off the tax collector or the law, they will do so at material costs in legal fees, time, inconvenience and reputation.

And Speaking of Populism and its Discontents

Let me take you back to Psychology 101 and the famous Hierarchy of Needs created by Abraham Maslow. You will remember that Maslow identified six areas of human needs. He modeled these needs in the form of a hierarchy such that the satisfaction of the most basic needs was a precondition to the satisfaction of the next set of needs and so on to the top of the hierarchy.

Over simply, the hierarchy was based, first, on the satisfaction of physiological/survival needs (respiration, food, water, clothing, shelter); then, second, on the satisfaction of the needs for personal safety and security (financial security, safety nets in the case of accident or illness); then, third, the satisfaction of the needs for love, belonging, friendship, family; then, fourth, satisfaction of the needs for competence, esteem, mastery, independence; then, fifth, the needs for self-actualization and the realization of ones highest potential; and finally, sixth, the needs for self-transcendence (beyond self-actualization) and service to a higher goal.

Consider the following data points.

  • 21% of Americans do not have a savings account

  • 62% of Americans have less than $1,000 in cash reserves

  • 31% of Americans have no private retirement savings, including 24% of those over 45

  • for more than one-third of American retirees, Social Security represents over 90% of their incomes

So (as if we needed more evidence) a significant percentage of the U.S. population has not progressed past the second of the six “needs” in Maslow’s Hierarchy.

The so-called populist revolt is, I think, a consequence of large numbers of people (and not just angry white working-class males) wedged, or jammed, or stuck in a world of financial insecurity while all around them, as they are constantly being reminded, there are millions of their fellow citizens living (or at least appearing to be living) the good life “up the hierarchy.”

Mitt Romney may well have lost the presidency because of his comment about the “47%.” He may actually have been more or less right about the number, but he got there by looking through the wrong end of the telescope. Dependency, whether on government, parents, children or charity is an undesirable condition, without doubt. But what Governor Romney assumed, incorrectly, is that most people (or at least 47% of the people) would choose a state of dependency voluntarily, or would do so if given the choice.

If his assumption were really true there would be no populist revolt, no white working-class male anger. These “classes” would simply continue in their dependent states, spending their lives cashing welfare checks or otherwise cashing in.

Clearly, this is not what is going on. Nor is what is going on motored by demands for more charity. What we have here is a kind of uprising of those millions of people (“working people” remember) staking a claim on that share of the American Dream (economic, social, educational) that has eluded them and for which they are willing to work and have always been willing to work if given the opportunity.

If I were hired to write the marketing message for these folks—the message that they hope the rest of us will hear and respect—I would say something like this:

  • We have run out of patience with those politicians (of both parties) whose allegiances are elsewhere.

  • We have run out of patience with those politicians, pundits and business leaders who persist in ignoring or papering over our concerns. We understand that free enterprise has, as an inevitable by- product of its success, the creative destruction of existing assets, including human assets. But there has been too much talk and too little action about the salvaging and retraining of those of us who are the “victims” of creative destruction and capitalism’s success.

  • We have run out of patience with inflation-adjusted wages that have stagnated or gone backwards for forty years.

  • We have run out of patience with being lectured to and told to pick up our litters and walk, most particularly when those who are lecturing us (or their descendants) were so often instrumental in the creation of our condition. China and other low wage countries did not hold guns against the heads of U.S. business managers, investors and financiers when U.S. manufacturing capacity was gutted and moved offshore. Yes, this was a transformation that was necessary to maintain our international competitive position (and, not unimportantly, to sustain shareholder values), but the consequences to millions of working class people has been unemployment, underemployment and the pathologies (drug and alcohol addiction, impaired health, crime) associated therewith.

  • We have run out of patience with those who would keep us in line by appeals to our patriotism or our religious solidarity or our nativist or xenophobic impulses.

  • To tell the truth, many of us don’t much care for the spokespersons who have emerged and purport to speak for us. But if it takes these kind of people to get your attention, so be it.

  • We know that the cost of welfare provisions (housing, social services, food assistance, direct cash aid, health programs, etc.) is “huge” (to use a newly popular term) and we are not unmindful of the extent to which these “interventions” are keeping many of us from dying in the streets. But what we want is an economy where good jobs and the income earned therefrom supplant the unearned “income” from welfare provisions.

No one in their right mind would advocate for the welfare status quo versus expansion of job opportunities. But how to get there from here? There’s the rub.

Some of the best minds on the planet (academic, business, government) are engaged in exploring the questions of welfare costs, job opportunities, income inequality and so on and on. Without claiming “best mind” status for myself, I feel my perspective, however limited, does include a variety of relevant experiences. For example, I have been actively involved in job creation (albeit on a small scale) for many years. I have been actively involved in scholarship provision to college students from low-income families (albeit on a small scale) for many years and so have some understanding of the financial and other tensions and obstacles these families face. I hope to contribute what I can to this discussion in our next quarterly CWC “Report and Commentary.” I’d be happy to hear from you on your perspectives about this issue between now and our next quarterly newsletter in July 2016.

And A Final (Possibly Related) Thought

In a perfect world, all institutions (public and private sector) would function optimally. Each would pursue its properly articulated mission with maximum efficiency and minimum cost. Each would be fully accountable, each would provide fulfilling careers for its employees, each would run at a profit or a surplus for the benefit of its investors or funders and each would operate with complete transparency.

We do not live in a perfect world. In particular, we do not live in a perfect world when it comes to the functioning of government.

With this said, however, it is daylight madness for politicians to reduce the IRS budget, particularly its enforcement budget.

Credible estimates place foregone tax revenue from tax avoidance, 2000 to 2010, at $3.44 trillion.

Credible estimates have $4.00 of additional revenue collected for every additional IRS dollar spent an enforcement.

In an age of budgetary constraints, what can those responsible for funding the IRS budget be thinking?

Honest, hard working, tax-paying citizens of this country are paying a ridiculously high price for our refusal to fully fund IRS activities. (But, perhaps honest, hardworking, tax paying citizens, or those who represent them, are about to get religion. See PanamaGate above.)

Chris Weil

Information contained in this publication is obtained from sources believed to be reliable; however, no representation as to accuracy and completeness of this information/data can be provided. Data used may be based on historic returns/performance. There can be no assurance that future returns/performance will be comparable. Neither the information, nor any opinion expressed herein, constitutes a solicitation by us for the purchase or sale of any securities or commodities. This publication and any recommendation contained herein speak only as to the date hereof. Christopher Weil & Company, Inc., with its employees and/or affiliates, may own positions in these securities.

All investments involve risk, including the risk of losing principal. It is vitally important that you fully understand the risks of trading and investing. All securities trading is speculative in nature and involves substantial risk of loss. Further, the investment return and principal value of an investment will fluctuate; Upon liquidation, a security may be worth more or less than the original cost. Past results do not guarantee future performance.

Investment in mutual funds is also subject to market risk, investment style risk, investment adviser risk, market sector risk, equity securities risk, and portfolio turnover risks. More information about these risks and other risks can be found in the funds’ prospectus. You may obtain a prospectus for CWC's mutual funds by calling us toll-free at 800.355.9345 or visiting The prospectus should be read carefully before investing. CWC's mutual funds are distributed by Rafferty Capital Markets, LLC—Garden City, NY 11530. Nothing herein should be construed as legal or tax advice. You should consult an attorney or tax professional regarding your specific legal or tax situation. Christopher Weil & Company, Inc. may be contacted at 800.355.9345 or

536 views0 comments


bottom of page