Emergency Manager Kevyn Orr’s Nanny Factory

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When I wrote this post, describing Detroit Emergency Manager Kevyn Orr’s significant (and serial) tax lien in Maryland, I noted that the lien was very very high for just one nanny (which is the excuse Orr offered for the lien).

Using the numbers from the original Detroit News article, the average tax due from 2011 per delinquent Detroit property owner is about $1,790. Orr has been underpaying MD several times that every year, effectively asking the state to float his unemployment insurance obligations for two years until he gets around to paying them.

[snip]

Here’s another neat detail: The median household income in Detroit is $27,862. Orr consistently owes about $7,000 just in unemployment insurance for his nanny. It seems like most Detroit residents could get themselves a raise if only they tended Orr’s kids.

Scribe even did the math to show how high that lien was.

That’s a hell of a big paycheck to a nanny, to create UI liabilities in the $6500-9500/year range.

Calculating the actual tax rate can be a bit of a challenge, but this snip from a 10/14/2011 article (http://articles.baltimoresun.com/2011-10-14/business/bs-bz-unemployment-insurance-tax-rate-20111014_1_unemployment-insurance-maryland-employers-trust-fund ) says a lot: “Maryland has been stuck at “Table F” — rates ranging from 2.2 percent to 13.5 percent of the first $8,500 in wages paid, depending on an employer’s layoff history — since last year.”

Even assuming the worst layoff history, he’s paying a lot:
13.5 percent of 8500 is 850 + 255 + 42.50 = 1147.50
2.2 percent of 8500 is 170 + 17 = 187.00

It takes a lot more salary to get those liabilities up to where he’s finding himself. And I’m betting that, for the happiness of the kid(s) and parents who have to interview nannies, there is not much turnover and thus a lower layoff history, so his percentage is most likely toward the bottom of the scale.

Turns out Scribe was right.

Some, though, question how a baby sitter alone could be responsible for such a debt. The outstanding liens for unemployment taxes were for $6,595 for the 2010 tax year and another for $9,409 for the 2010-11 tax years.

“That’s an awful lot of taxes for a baby sitter. Are you sure he’s not running a day care?” joked Maryland tax attorney Jeffrey Katz.

He said the numbers don’t add up. In Maryland, unemployment taxes are capped at about $1,150 a year per employee, Katz said, so Orr would have to go through more than five baby sitters in one year to reach $6,500 in back taxes for one year.

[snip]

Orr said he doesn’t know why the tax bills were so high. The same baby sitter has watched his two children for a couple of years, arriving in the morning and leaving in the afternoon. No former employee has filed for jobless benefits, Orr said.

There is no way this lien is about Orr’s single nanny, who has never filed for jobless benefits.

Either Orr has far more staff members than he let on–more even than five, given that he hasn’t been laying them off. Which would itself be notable for a guy who is about to lay off a bunch of Detroit workers.

Or the lien is for something else entirely, and Orr just invented the nanny story because it’s the convenient excuse rich people always use for being tax deadbeats.

Governor Snyder is begging the press to move on now, so I’m guessing he has a pretty good sense that the nanny is just a cover story and that, at a minimum, Orr will soon have to admit he’s not just a tax deadbeat but also a fibber.

But the underlying excuse for the lien sure seems like it might be relevant to Orr’s fitness to fire a bunch of Detroit workers.

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4 replies
  1. klynn says:

    And there you go. Sittercity.com runs a banner ad as I view your page!

    I hope this story comes to light with the full facts. It is quite important. BTW and OT. UI in MD is messed up. My husband worked for a company that the IRS seized for the owner failing to pay his UI. The owner kept cutting checks to the employees that could not be cashed. The employees did not know what was going on. State would tell the employees they were “paid” because a check was cut even though it could not be cashed. No one helped the employees. They even hired a lawyer who basically told all the employees, “You are screwed. You will get no help from the state.” Because the accounts the checks were to be cashed from had balances that could handle the amount of the check but all the owners’ assets were frozen by the IRS, the bank could not call it a “bounced” check for 90 days. So, there was not even room for the employees to go after him for writing bad checks. Several families ended up homeless while the son of the owner drove around in a BMW. My understanding is that MD has tried to address these issues since our experience in the 90’s.

  3. scribe says:

    MWahahahaaaaa!

    Turns out being unemployed and having issues about how the employer didn’t pay their unemployment taxes has collateral benefits.

    Next point: the way an employer’s unemployment insurance rate is calculated (remember, the layoff history and the different rates?) is based upon their layoff history and their payroll. And, the payroll is determined by the wages the employers report to the government. Those reported wages count for something – the unemployment office calculates how much the unemployed person gets every week based upon the last 5 quarters of that person’s wages.

    So, for instance, let’s look at the case of an employee I know who worked a couple of jobs, when employee went for unemployment insurance after being laid off from the last job. Employee worked for Responsible Employer A in State X on Job 1. Then, when Job 1 ended went immediately to work for Less-Responsible Employer B in State Y on Job 2. Responsible Employer A reported Employee’s wages from Job 1 to State X as the law requires, and paid the required unemployment insurance premiums. No problem.

    Less-responsible Employer B neither reported Employee’s wages from Job 2 to State Y, nor paid the required unemployment insurance premiums to State Y.

    Not a big problem for B – they had the money in their pocket, plumping their bottom line.

    Big problem for our friend, Employee. When Employee went to the unemployment office in State Y to apply for unemployment compensation, the office told Employee that they had no record of Employee’s wages in Y and only a record of Employee’s wages in X. They also noted that B had not reported any wages of Employee, despite Employee working almost half a year in Y.

    Doubtless, the unemployment office went to B and with a letter whose meaning condensed to “WTF. Report and Pay up.” But, that didn’t help Employee.

    Employee was told by the office in Y that he could either (a) go to X (far from Employee’s home) and apply for compensation there at the much lower rate paid by X applied only to the pay earned on Job 1, (b) accept partial compensation from Y, based on only the wages earned in X with the caveat that if B didn’t report Employee’s wages in Y, Employee might have to pay Y back and go to X, or (c) wait until things got sorted out between the Y unemployment office and B, which might “take a while” and in the interim have to gut it out without any unemployment compensation but hopefully get full compensation.

    (Employee chose (c). Alternatives (a) and (b) were about 1/4 the amount actually due Employee. In Employee’s case, the complaints of Employee’s many co-workers on Job 2 and the threat of prosecution for non-payment – nasty folks in Y – got B’s collective thumbs out of their asses and the checks started coming only about a week late.)

    All of which means, in the context of the Detroit Dictator, that not only are his tax liens for unpaid-on-time unemployment insurance payments public records, but so too are (at a minimum) the amount of wages he reported and possibly also the amounts reported by employee. After all, the amount due is the product of the amount of wages multiplied by the rate, plus whatever penalties he may have incurred for being late (in his case, the cost of the loan Maryland extended him by covering his unemployment insurance until he got around to paying it).

    So, let’s find out just how much he’s paying the help and how many people he has taking care of his estate.

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