Volume 19, Number 11 -- March 15, 2010

Mad Dog 21/21: The Teahad Pilot, the Sycophant Senator, and IBM

Published: March 15, 2010

by Hesh Wiener

Gerry Cullen watched the Piper Cherokee fly over his head and dive into a building where the Internal Revenue Service had offices. It was February 18, and Cullen was outside a Marie Callender's where he had gone for breakfast. A pilot as well as a pie lover, Cullen knew the Cherokee was going full throttle. What he couldn't tell is that the teahad pilot's deadly journey may have begun nearly 25 years earlier, when Senator Daniel Patrick Moynihan helped change the Federal tax code in an effort to save IBM $60 million while squeezing freelance computer programmers for a comparable sum.

In 1986, Vernon Hudson had long since wrapped up 20 years in the Army, service that included two tours in Vietnam. He was working in the private sector, according to his posthumous Facebook entry. He hadn't yet joined the IRS, where he would spend another 20 years before getting killed in his office one morning by a Cherokee.

Joseph Stack: The teahad pilot believed he wasn't off bass.

America was amidst one of the recurring financial crises it had experienced since the oil shocks of the 1970s, unknowingly preparing for a stock market crash that would occur in 1987. In an effort to keep the budget from exploding, Congress had, in 1985, passed a law called the Graham-Rudman Act. Basically it said that any other laws that affected the budget, such as changes to the Federal tax code, could not increase the deficit. The way it played out, all legislation that cut government intake by giving some taxpayers a break had to be offset by some additional legislation that boosted taxes elsewhere.

When New York Senator Daniel Patrick Moynihan used legislation to help one of his most prominent constituents, IBM, to cut the taxes it paid on overseas income, he had to also support a balancing law that attempted to get Uncle Sam at least as much as he gave up. The balancing law involved a couple of sections of the tax code and it had the effect of making it very difficult for freelance programmers to ply their trade. Before the tax law change, a programmer could freelance the way any other person could freelance. Withholding tax and Social Security contributions were up to the programmer, not the company that hired the programmer. The changed law made computer people an exception to the prevailing pattern. Companies that had hired freelancers were going to be pressed to put these programmers on the payroll. Freelancers would be forced to join companies, form corporate entities that would treat the programmers as regular employees or otherwise jump through hoops to please the tax authorities. The effect might have helped big consulting companies, but it sure hurt individuals and small firms, according to an analysis done more than a decade later by David Cay Johnston for The New York Times.

Halfway to Dellsville: The teahad plane attack took place about halfway between central Austin and Round Rock, where Dell makes its home.

Johnston is an economics reporter with an investigative bent whose work won a Pulitzer Prize in 1991. He never lets go of a story he once covered. When it emerged that the teahad pilot Joseph Stack had left a long suicide note on a Web site that talked about the IRS, Moynihan, and IBM and the events of 1986, Johnston produced a reflective news story for the Times and a reminder essay for the Huffington Post (that was originally published in the newsletter Tax Notes. Johnston's essay prods IBM to rise up and press for a repeal of a tax rule that, in Johnston's view, discourages entrepreneurial programmers. It may be hung on a peg created by teahadi Stack's note, but it doesn't delve into the wackiness of the pilot's final posting.

The teahad message bemoans the alleged greed of the Catholic Church, for instance, but fails to note that the CEO of IBM who figured so prominently in Stack's last plea was the last Protestant to run the company, which has been led (and, arguably, rescued) by Catholics since 1993. Johnston doesn't seem to feel that the teahad manifesto should get much careful reading, and anyone who struggles through it might well come to a similar conclusion.

David Cay Johnston: The Pulitzer Prize winner writes about the clash between what he thinks the U.S. economy needs and what U.S. tax laws yield.

While Johnston does try to explore the moral themes in the 25-year-long history of the anti-programmer tax rule, he has not yet seen the possibility that the sad, sad story of Stack and Hunter and Akers and Moynihan could be made into an opera. The media have almost stumbled over this opportunity, pointing out that one of the best photos of Stack that seems to be in circulation shows him playing an electric bass. Nor has there been extensive coverage of Stack's actual financial situation and the fate of his family.

On his way to the airport where he kept his Cherokee, Stack burned down his house, making life even more difficult for his wife and a daughter. Most of the coverage in presumably serious media doesn't explore Stack's life story, which includes a preposterous attempt to achieve tax exemption through the Universal Life Church. Vernon Hunter, Stack's victim, was reportedly a real member of a real church.

John Akers: When he was CEO and Pat Moynihan was a senator, IBM got great tax treatment.

Stack, John Akers, and Gerry Cullen have one thing in common: flying. There's no indication Stack took an interest in the Yale-educated executive who served as IBM's chief executive in 1986, but it turns out that John Akers had a military career as a Navy pilot assigned to an aircraft carrier. And Cullen, eyewitness to the crash of the teahad plane, might have given Stack a chance to do something positive and meaningful, had the two ever met. After he sold his most recent high tech venture a few months ago, Cullen refreshed himself in part by working as an air ambulance pilot covering parts of Northern Mexico. (Right now, Cullen seems to be ready to launch another high-tech project, so the medevac crowd will have to do without his gifts.)

Despite his many obligations, Cullen couldn't quite explain how Stack could be in tight financial straits and still have a private airplane. Stack didn't have to be a zillionaire. Cullen believes a used Cherokee in Austin costs about the same as a new Hyundai SUV, and it could go for less if fuel rises a lot. Any airplane, he adds, costs plenty to operate.

Welcome to 21st century America, where airplanes can be expensive and life can be cheap.

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Editor: Timothy Prickett Morgan
Contributing Editors: Dan Burger, Joe Hertvik, Brian Kelly, Shannon O'Donnell,
Mary Lou Roberts, Victor Rozek, Kevin Vandever, Hesh Wiener, Alex Woodie
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