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The Blackstone Group, the big buyout firm, has devised a way for its partners to effectively avoid paying taxes on $3.7 billion, the bulk of what it raised last month from selling shares to the public.

Although they will initially pay $553 million in taxes, the partners will get that back, and about $200 million more, from the government over the long term.

The plan, laid out in the fine print of Blackstone’s financial documents, comes as Congress debates how much managers at private equity firms like Blackstone and hedge funds should pay in taxes on their compensation.

Lee Sheppard, a tax lawyer who critiques deals for Tax Notes magazine and has studied the Blackstone arrangement, said it was a reminder of the disconnect between the tax debate in Congress and how the tax system actually operates at the highest levels of the economy.

“These guys have figured out how to turn paying taxes into an annuity,” Ms. Sheppard said. “What people don’t realize is that the private equity managers, the investment bankers, all the financial intermediaries, are in control of their own taxation and so the debate in Washington about what tax rate to pay misses the big picture.”

The debate in Congress is about whether most of the compensation that fund managers earn should be taxed at the 35 percent rate that applies to other highly paid Americans, or at the 15 percent rate for capital gains.

Questions in Congress about possibly raising taxes on such compensation were prompted in part by publicity about the rich rewards for people who run these firms. Stephen A. Schwarzman, the co-founder of the Blackstone Group, made nearly $400 million last year, for example.

The Blackstone partners’ tax deal, however, is for the sale of part of their stake in the management firm, which is why their profits were taxed at the usual 15 percent tax rate for capital gains. Over all, the company raised $4.75 billion in the initial public offering, but the benefits of the tax structure involve just $3.7 billion of that.

Other private equity firms and hedge funds that have gone public, or plan to, make use of similar techniques, their documents show.

The Fortress Investment Group, which went public in February, uses a form of this tax structure. Two funds that plan to go public soon, Kohlberg Kravis Roberts and Och-Ziff Capital Management, describe similar tax strategies in their preliminary disclosure documents.

All three firms declined to comment. However, several tax lawyers, who could not be quoted by name because their firms had restricted them from making public comments on these issues, agreed in principle with the analysis of the tax structure’s implications.

No Blackstone official would speak for attribution. A spokesman, who insisted on not being identified, said only that such an analysis of the tax implications of Blackstone’s deal was “totally flawed.”

A report issued this week by the Congressional Joint Committee on Taxation indicated that such deals had been done at other companies.

Victor Fleischer, a law professor at the University of Illinois, came to a similar conclusion as Ms. Sheppard after studying the Blackstone deal.

Blackstone’s tax maneuver hinges on its use of good will, an accounting term for the value of the intangible assets, like a well-known brand name, that are built up by a company over time. That value is part of the reason a company is worth more than the sum of its physical parts, like buildings and equipment.

Individuals who create good will cannot deduct it. But when good will is sold the new owners can because its value is assumed to erode. The Blackstone partners sold the good will from their left pocket to their right.

In simplest terms, the Blackstone partners paid a 15 percent capital gains rate on the shares they sold last month in the initial stock offering to outside investors (those shares represented a stake in the Blackstone management company, not its funds).

Blackstone then arranged to get deductions for itself for the $3.7 billion worth of good will at a 35 percent rate. This is a twist on the “buy low, sell high” stock market adage; in this case it would be “tax low, deduct high.”

The deductions must be spread out over 15 years. And the original Blackstone partners are getting just 85 percent of the tax savings, leaving the other 15 percent to outside investors. The deductions on the $3.7 billion to the partners are $1.1 billion over 15 years.

If these tax savings were paid as a lump sum this year, the partners would get about $751 million, which is $198 million more than the taxes the partners will pay on the $3.7 billion of good will.

The lump-sum value was done using the rate set by the Internal Revenue Service for deals lasting 15 years.

UPDATE: Andrew S. Taylor eviscerates CNN's expert on the braodcast, Dr. Sanjay Gupta, by doing some "fact-checking" of his own.

The other day I decide to make myself a nice, relaxing cup of tea. Crazy, I know. I'm spontaneous like that. So I filled one of our glass mugs up with water and stuck it in the microwave for two minutes (my standard tea-making, water-hottening unit of time), and then busied myself with other tasks.full post

In response to the beeping, sometime later, I walked over opened the door to the over. I was surprised to see that the water was completely undisturbed, as if it had not been warmed at all. Thinking that perhaps I had accidentally set the microwave for "1:00" instead of "2:00," I reached out and tapped the side of the glass with my finger, to see how hot it was.

Not the mug itself, just the contents. When jostled, the water went from looking like the placid surface of a calm lake to one filled with 4,000 piranhas and a cow. The water in the mug bubbled frenziedly for a fraction of a second, and then geysered upwards DIRECTLY INTO MY FACE OH GOD THE BURNING!!

Well, no. Actually, it mostly hit the top of the microwave, though some slopped over onto my hand and a few drops assailed my cheekbones. Still, I did what any red-blooded American male would do in this situation: shrieked like a 11 year-old girl at an Fall Out Boy concert and flung myself backwards as if a rabid stoat had just attached itself to my windpipe.

Behavioural experts have found that infants begin to lie from as young as six months. Simple fibs help to train them for more complex deceptions in later life.

Until now, psychologists had thought the developing brains were not capable of the difficult art of lying until four years old.
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Following studies of more than 50 children and interviews with parents, Dr Vasudevi Reddy, of the University of Portsmouth's psychology department, says she has identified seven categories of deception used between six months and three-years-old.

Infants quickly learnt that using tactics such as fake crying and pretend laughing could win them attention. By eight months, more difficult deceptions became apparent, such as concealing forbidden activities or trying to distract parents' attention.

By the age of two, toddlers could use far more devious techniques, such as bluffing when threatened with a punishment.

Dr Reddy said: "Fake crying is one of the earliest forms of deception to emerge, and infants use it to get attention even though nothing is wrong. You can tell, as they will then pause while they wait to hear if their mother is responding, before crying again.

"It demonstrates they're clearly able to distinguish that what they are doing will have an effect. This is essentially all adults do when they tell lies, except in adults it becomes more morally loaded."

She added: "Later it becomes more sophisticated by saying, 'I don't care' when threatened with a punishment - when they clearly do."

Dr Reddy thinks children use early fibs to discover what kinds of lie work in certain situations, and also learn the negative consequences of lying too much.

Though no surprise to anyone who knows, rather than preaches about drugs and alcohol, it's interesting to see an expert put it into such simple terms in a mainstream publication. From Newsweek:

Even if they don't become alcoholics, teens who drink too much may suffer impaired memory and other learning problems, says Aaron White of Duke University Medical Center, who studies adolescent alcohol use. He says parents should think twice about offering alcohol to teens because their brains are still developing and are more susceptible to damage than adult brains.

"If you're going to do that, I suggest you teach them to roll joints, too," he says, "because the science is clear that alcohol is more dangerous than marijuana."

Best short video clip, that is. Brilliantly shot and scored, and perfectly entitled Dramatic Chipmunk. Click on the image to view the clip.

France has traditionally been united in its fierce insistence that important domestic food and beverage products maintain both purity of ingredients and region. Now, large corporate interests (what else?) are threatening to degrade this proud heritage.

WHEN François Durand makes Camembert on his 200-acre farm here, it is a bit like dancing.

Standing erect, he fixes his left arm securely behind his back. Then he bends and sways as his right hand quickly ladles just the right amount of warm, curdled raw milk from a huge vat into hundreds of small white plastic cylindrical molds.

The ritual must be repeated four more times in each mold before the cheese rounds are filled, ready for ripening, and five weeks later, ready for eating.

Mr. Durand is an icon in Camembert country. He claims to be the last dairy farmer in Normandy to be commercially making Camembert from hand-ladled unpasteurized milk.

Each of the 400 nine-and-a-half-ounce rounds that he produces every day is stamped with the seal of “Appellation d’Origine Contrôlée” or “AOC” — a coveted certification that authenticates the content, method and origin of production of a French agricultural item.

But Camembert purists like Mr. Durand are infuriated these days because two of France’s largest dairy producers want to change the rules.

Citing health concerns, the two companies, Lactalis and the Isigny Sainte-Mère cooperative, which together made 90 percent of the traditional raw milk Camembert in Normandy, began earlier this year to treat the milk used for most of those cheeses.

In doing so, they were forced to sacrifice their A.O.C. status, the first time in French history that Camembert producers voluntarily did so.

But they also have asked the French governmental food board to grant that status to their new Camemberts, arguing that the processing they use — either filtering or gently heating the milk — does not sacrifice the traditional taste and character of the cheese.

Mr. Durand and his supporters beg to differ, claiming that the move is a ploy by the dairy giants to make more cheese and profits while destroying a crucial part of French heritage. If the companies’ petition is granted, they argue, raw milk cheese would be threatened.

“Camembert that is not made with raw milk may be cheese, but it’s not real Camembert,” said Mr. Durand, who took over the family farm when he was only 19 and has run it for 26 years. “To not know a real raw milk Camembert — what a loss that would be. The variety, the diversity, the flavor of cheese — the very heritage of our country — will disappear.”

The Jane Hamley Wells Capsule turntable room features a rotating base which allows the Capsule to move with the sun, keeping those seated and the table shaded throughout the day.

Christopher Hitchens, in his book God is Not Great, has conflated religion with tribalism. He lists his four "irreducible objections to religious faith". Faith, he writes, "wholly misrepresents the origins of man and the cosmos". It "manages to combine the maximum of servility with the maximum of solipsism". It is the "result and cause of dangerous sexual repression" and it is grounded on "wish-thinking". The book goes on to elaborate with some tedium these points with chapters such as "Religion Kills" or "Is Religion Child Abuse?"

Hitchens sees only one form of religion, the chauvinistic, bigoted and intolerant brand that was embodied in the idiotic pronouncements of evangelist figures such as the late Jerry Falwell or Pat Robertson. He assures us that religion "spoke its last intelligible or noble or inspiring words a long time ago". "It may speak about the bliss of the next world," he writes, "but it wants power in this one." Religion is a product of "the bawling and fearful infancy of our species", and all attempts, he assures us, "to reconcile faith with science and reason are consigned to failure and ridicule".

It is easy, increasingly popular, and apparently profitable, to attack this childish brand of religious belief. This book refuses to deal with the nuances of religious thought. It ignores the great moral and ethical struggle by theologians and religious leaders such as Paul Tillich or Karl Barth to root religion in contemporary society. It never confronts the anguish faced by those who recognise the impulses we carry within us for evil as well as good. Hitchens, unequipped to deal with other expressions of religious belief, tries vainly to argue against their authenticity. He writes of Dr Martin Luther King that "in no real as opposed to nominal sense, then, was he a Christian". He disparages the faith of Abraham Lincoln and assures us that Dietrich Bonhoeffer, the Lutheran pastor put to death by the Nazis for resistance, was the product of a religious belief that had "mutated into an admir able but nebulous humanism".

This is a cheap way to avoid the harder task of exploring the varieties of religious experience, of examining the motivations and beliefs of those who strive to live what even Hitchens would have to concede is the moral life. Hitchens is so determined to demonise religion that he would have us believe that self-professed religious leaders such as King or Bonhoeffer were not really religious. The sophistry of this attempt mirrors the sophistry of those he does attack, those who misuse the Bible to persecute homosexuals, Muslims, women, artists, intellectuals and those they brand with the curse "secular humanist".

The problem is not religion but religious orthodoxy and the form it takes in human institutions. Throughout history, most moral thinkers - from Socrates to Christ to Francis of Assisi - eschewed the written word. Once moral teachings are written down they become, in the wrong hands, codified and used to enforce conformity, subservience and repression. Writing, as George Steiner has recognised, freezes speech. The moment the writers of the gospels recorded Jesus's teachings, they began to kill their message. There is no room for prophets within religious institutions - indeed within any human institution. Tribal societies persecute prophets; open societies tolerate them at their fringes. Today, our prophets are usually found not within the church but among artists, poets and writers who follow, as Socrates or Jesus did, their inner authority, an authentic religious impulse.

With all of the confusing opinions recently expressed about evolution and Intelligent Design, you may find this editorial in The Onion to be the last word.

I consider myself a rational person. When I have a question, I turn to science and logic to find the answer. Regarding the origins of life, science tells us that humans evolved from single-celled organisms to our current form through a process of natural selection that took billions of years.

This much is clear to anyone with any background in modern thinking. We can look at the fossil record and trace many of our genetic traits back to ancient species. In fact, scientific reasoning can explain nearly every stage of life from the Big Bang to the present day. I say "nearly" because the period that scientists claim lasted from roughly 205 to 250 million years ago, commonly known as the Triassic period, was quite obviously the work of the Lord God Almighty.

Don't get me wrong: I'm not one of those religious nut cases who denies that evolution is real. Of course evolution is real, just not during the "Triassic period."

This so-called Triassic period saw the formation of scleractinian corals and a slight changeover from warm-blooded therapsids to cold-blooded archosauromorphs. Clearly, such breathtakingly subtle modifications could only have been achieved by an active intelligence.

The secular Triassicists would have you believe that these changes were just the result of millions of years of nature favoring certain genes over others in order to adapt, the same way evolution worked prior to the Triassic. Obviously, that doesn't make any sense. Think about it: I'm supposed to believe that the same process that we know slowly changed us from simple bacteria into highly advanced reptiles over the course of the Paleozoic era is also responsible for turning us into highly advanced reptiles with different body lengths? Do these people ever pause to think how ridiculous they sound as they advance these theories?

For a half-dozen million years, life advanced from prokaryotes to primitive fish to mammal-like reptiles via natural selection, and we're supposed to believe that that just continued happening? I don't think so. Isn't it much more likely that a formless, invisible deity intervened, temporarily stopped the course of evolution, and shaped each and every trilobite over a period of six days? Of course it is, at least to any objective observer.

So, if you follow my reasoning to its logical end, the only sound conclusion is that, at some point, God paused evolution and stepped in, made a few modifications, and boom! Pterosaurs. There is simply no way evolution alone could be responsible for the giant leap between archosaurs and other, different archosaurs with better developed hip joints and slightly differently shaped teeth.

Everything about the Triassic period points to divine involvement. Let me ask you this: Could some kind of random genetic chance make the population of shelled cephalopods grow significantly? No, of course not. So the only logical explanation is that there was an infinite and all-knowing cephalopod creator who modified their mollusk foot into a muscular hydrostat that eventually, on the sixth day, became a tentacle.

In today's excerpt--baseball mascots in the 1910s and 1920s, the heyday of baseball's biggest stars Ty Cobb and Babe Ruth, shows how much American societal norms have changed:

"Superstition flourished in baseball. Teams hired black children, hunchbacks, and mis-fits as good luck charms. The 1911 World Series had seen the clash of two of the most famous mascots, Charles "Victory' Faust, described by some as a lunatic, and Louis Van Zelst, a dwarf. (Faust's Giants lost; within three years, he was in an insane asylum.) The Tigers had a six- toed batboy in 1919. They adopted a mutt, nicknamed Victory, in 1923--a year after experimenting with a live tiger cub. The St. Louis Browns even toured with a monkey--until the team started losing.

"[Ty] Cobb himself had the exuberant Alex Rivers, who since 1908 had acted as his personal assistant and number-one devotee. Rivers, a five-foot-two black man from New Orleans, was a familiar sight at [Detroit's] Navin Field, bounding through the dugout to retrieve bats, flashing his toothy smile. 'I want Alex around,' Cobb said during a Detroit winning streak. 'I realize that the work of our players wins games, but just the same I wouldn't like to start one without Alex here. Superstitious? Well, maybe.' ...

"The Yankees employed the prize of all mascots. The much sought Eddie Bennett--a stunted, crippled orphan credited with helping the White Sox, Dodgers, and Yankees win pennants from 1919 to 1923--had joined the Yankees as a grinning, seventeen-year-old batboy in 1921. Before games, Ruth and Bennett sometimes entertained with a game of catch in which Ruth would continually hurl a ball just above Bennett's reach. Ruth wanted only Bennett to handle his bats."

Rosa can, and does, make tortillas in the dark. The ancient generator needs a new belt and a prayer and can’t always be counted on to power the light bulbs of Unión Victoria, the Guatemalan village where I live with Rosa and her two young daughters. Rosa’s husband works in Florida. In his absence Rosa carries on, feeding her pigs, hauling firewood, planting crops, and making three meals a day. In the midst of all this, she insisted on teaching me to make tortillas.

Guatemalan corn tortillas bear almost no resemblance to the machine-made flour variety sold in U.S. grocery stores. Each tortilla requires a careful process of patting and turning the dough by hand into a pliable disc approximately three inches in diameter. When this is done to satisfaction—no thick center, no cracked edges—Rosa places the dough on a comal, a hot clay griddle balanced on three stones above a wood fire. After thirty seconds or so, she flips the tortilla by pressing her calloused fingers into the dough until they stick, allowing for a quick inversion. The comal fills quickly as Rosa scoops another egg-sized ball of dough from the grinding stone with a practiced swipe and begins to slap it flat between her palms. She’s fast: the average Guatemalan woman prepares 170 tortillas each day. And she’s a patient teacher. After four months of minor burns, singed arm hairs, and irregular blobs suitable only for the pigs, I could produce—albeit slowly—a consistently circular and even stack of steaming tortillas.

Making the tortillas is only one in a cyclical series of tasks. Rosa plants the corn. She harvests and dries the cobs, tying the husks into pairs to dangle like ballet slippers under the tin roof blackened by years of smoke. Every afternoon, she shells corn into a pot of boiling water where it cooks for over an hour until it is soft enough to be ground into dough, or masa. The electric mill down the road grinds the corn in thirty seconds; otherwise, when the generator fails, Rosa bends over the grinding stone, passing over and over the kernels until she’s satisfied with the consistency. Finally, she begins to pat out the tortillas that give her strength to plant more corn for more tortillas.

I have come to the frightening conclusion that I am the decisive element. It is my personal approach that creates the climate. It is my daily mood that makes the weather. I possess tremendous power to make life miserable or joyous. I can be a tool of torture or an instrument of inspiration, I can humiliate or humor, hurt or heal. In all situations, it is my response that decides whether a crisis is escalated or de-escalated, and a person is humanized or de-humanized. If we treat people as they are, we make them worse. If we treat people as they ought to be, we help them become what they are capable of becoming.