Jack TenneyExtra Point

by Jack Tenney, Publisher

March 2001

Bernie Sanders is not a Texan

In case you need more proof that Bernie Sanders didn't come to Vermont via Texas, I think I have some evidence.

Lyndon Johnson was from Texas. He cut the top marginal income tax rate from 90% to 70%. At the time (1964), it didn't have a great impact on my life. But the next year, oh boy! See, I was a grunt in a CPA firm and among the scut work was proofing tax returns. I most enjoyed this process as it was somewhat social in that we performed the task in pairs.

Bob Carr, aka Rabbit, (prominent front teeth as a kid, I think) and I would sit in this little alcove and proof read masters that Hammering Hank the office boy would later run on the lithograph. Needless to say, our firm didn't do short forms nor did we compete with storefront guys, like Sam the taxman, I had worked for before I decided to become a real professional.

The highlight of every return was when the reader said to the catcher "EX yourself and EX your wife!" Rabbit and I couldn't get by those lines without trying to get the other to sneeze coffee though his nose. We were both quite professional.

One of the clients we worked on reportedly said to his secretary, "Your president bought me a boat." The boat, an ocean-going yacht with a captain and crew was purchased with 30% of the $684,372 he earned in excess of the $90,000 top tier not including capital gains (then taxed at the maximum rate of 25%, there was no AMT (Alternative minimum tax) in those good old days.) Did I mention that he was a Republican and Johnson was a Democrat? Well, they were.

The then-new boat owner who always made big bucks used to invest in oil well explorations but Johnson's tax cut persuaded him to go to sea instead. See, before, anyone with around $700,000 in excess income could either stick $70,000 in his pocket or wherever, or join other speculators and fund oil explorations (100% tax deductible), which typically grossed 6% cash on cash or $42,000 in this case. A quarter of the royalties would be tax-exempt and there was something like a 30-year time horizon on the royalty stream. That calced down to 19.5% net-on-net or as we professionals used to say, "Cool!"

The tax cut didn't change the gross cash on cash return but of course the net outlay tripled (divide 19.5% by 3 to get new net-on-net.) Not many Republicans looked for oil over the next few years, and, in 1972 or was it '73, we ran out. Oh well!

Now, a guy from Texas wants to cut the high margin tax payers a little slack. Bernie and his crowd don't understand. They want to give everyone a few hundred bucks, instead.

Congressman Sanders is clearly no friend of power boating. I doubt he's even got an energy program. Texas guys know oil. Bernie's no Texan.