Daily Archives: August 31, 2005

Lind: Swiss Model of Defense

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William S. Lind publishes some interesting thinking on the next model of US Defense Forces:

Two readers, Marion and Herbert, asked whether the Swiss militia model might be relevant. The answer is clearly yes. Switzerland’s defense has been based on a militia for a very long time, and it has enabled Switzerland to preserve its neutrality, maintain its liberties and decentralized political system (real power lies at the cantonal, not the federal level of government) and keep its defense expenditures down. The Swiss militia is an ideal basis for defending Switzerland from 4GW. In fact, Switzerland already has an arrangement other countries will need to move to in a 4GW world: the regular armed services support the militia, instead of the other way around.

Congress and KPMG

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Wall Street Journal:

The IRS’s standard in evaluating tax shelters is whether the transaction serves a “legitimate economic purpose,” or is crafted entirely to avoid taxes. Senators Carl Levin (D., Mich.) and Norm Coleman (R., Minn.) have proposed legislation that would enshrine that doctrine in law.
Speaking on the Senate floor last month, Mr. Levin described the distinction: “Abusive tax shelters are very different from legitimate tax shelters, such as deducting the interest paid on home mortgage or Congressionally approved tax deductions for building affordable housing. Abusive tax shelters are complicated transactions promoted to provide large tax benefits unintended by the tax code” (our emphasis). In other words, it’s OK to avoid taxes in any of the myriad ways Congress approves of. It’s abusive if Congress didn’t intend it — assuming anyone can ever figure out what Congress really intends.
Take the scheme known as SC2, one of those KPMG has come under fire for marketing. As reported in the Los Angeles Times, SC2 involved donating nonvoting shares in a Subchapter S corporation to a nonprofit entity; KPMG’s nonprofit of choice was the Los Angeles Fire and Police Pension System. The pension system would accept the shares, making them 90% owners of an S Corporation that would then retain the Corporation’s profits for several years. At that point, the pension fund would sell the shares back to the original owners. The pension plan pockets the proceeds while the S Corporation owners have converted the firm’s profits from regular income into long-term capital gains, taxed at a lower rate.
Does SC2 serve an “economic interest”? Well, the participant in the scheme does pay the pension system for the shares when he buys them back, benefiting the firemen and policemen’s pension fund. The fund adds money to its coffers, and the taxpayer lowers his tax bill. Whether that’s abuse is for a judge or jury to decide, but Mr. Levin’s test — that Congress didn’t intend S corporations to be used that way — doesn’t seem adequate here.

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“Trusted Computing” – Coming Soon to your PC

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Bruce Schneier on “Trusted” Computing:

The Trusted Computing Group (TCG) is an industry consortium that is trying to build more secure computers. They have a lot of members, although the board of directors consists of Microsoft, Sony, AMD, Intel, IBM, SUN, HP, and two smaller companies who are voted on in a rotating basis.

The basic idea is that you build a computer from the ground up securely, with a core hardware “root of trust” called a Trusted Platform Module (TPM). Applications can run securely on the computer, can communicate with other applications and their owners securely, and can be sure that no untrusted applications have access to their data or code.

This sounds great, but it’s a double-edged sword. The same system that prevents worms and viruses from running on your computer might also stop you from using any legitimate software that your hardware or operating system vendor simply doesn’t like. The same system that protects spyware from accessing your data files might also stop you from copying audio and video files. The same system that ensures that all the patches you download are legitimate might also prevent you from, well, doing pretty much anything.