Institute for Truth in Accounting finds Florida can’t pay its bills!

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According to analysis by the Institute for Truth in Accounting (ITA), Florida does not have enough assets available ($59 billion), to pay the state’s bills, ($74 billion). The difference between assets and bills is $15 billion. That debt divided by the number of taxpayers reveals Florida’s per-taxpayer burden of $2,500 in 2012.  Only seven states–Alaska, Iowa, North Dakota, South Dakota, Utah, Nebraska, and Wyoming–achieved a per-taxpayer surplus in 2012.

“Florida lagged behind the 180 day goal time between the close of its fiscal year and release of its 2012 Comprehensive Annual Financial Report (CAFR), publishing the report 221 days after the fiscal year-end,” according to ITA.

SNAPSHOT BY THE NUMBERS

Florida’s Bills Exceed Its Assets:

  • Assets *$179.24
  • Less: Capital Assets *$94.96
  • Restricted Assets *$24.80
  • Assets Available to Pay Bills *$59.48
  • Less: Bills *$74.29
  • Money Needed to Pay Bills *$14.81
  • Each Taxpayer’s Burden$2,500.00

The Bills Florida has Accumulated:

  • State Bonds *$39.48
  • Other Liabilities *$34.18
  • Less: Debt Related to Capital Assets *$12.75
  • Unfunded Pension Benefits *$6.80
  • Unfunded Retirees’ Health Care Benefits *$6.59
  • Bills *$74.29

* Figures in billions

More detail on Florida’s assets and liabilities can be found in the Florida State of the State (2011). Link to FL CAFR: Florida Comprehensive Annual Financial Report. Publishing Entity:  Florida Chief Financial Officer. According to the ITA:

  • Florida’s per-taxpayer burden shrank to $2,500 in 2012, and the state’s rank remained 14th.
  • With an average personal income of $40,344, Florida’s taxpayer burden shrank marginally to 6.2% of a year’s income.
  • Florida’s unemployment rate was 8.6%, compared to a national average of 8.1% in 2012.
  • Outbound moves from Florida in 2012 were 45.3% of total moves, compared to inbound moves of 54.7%, meaning that the state attracted more people and businesses than the number that left.
  • Florida’s financial reports disclose only $1 billion of retirement liabilities, leaving $13.3 billion undisclosed.
  • Florida’s ‘Net Revenue’ (total general revenue less total net expenses) was positive in 2012 and was negative in only one of the past seven years (2009). This amount, however, does not include changes in liabilities not fully disclosed such as pensions and retiree health insurance. Read more on ‘Net Revenue‘.

ABOUT THE INSTITUTE FOR TRUTH IN ACCOUNTING

The Institute for Truth in Accounting has a unique, comprehensive methodology to analyze all state assets and liabilities, including unreported pension and retirement health liabilities.  The result is shown as the per-taxpayer surplus or liability, the difference in each state’s assets and liabilities divided by the number of taxpayers in the state. 

FL Rep. Buchanan votes to fund government by defunding America

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Floridians woke up on October 17th to learn the government shutdown had ended and the debt ceiling had been raised. One of the key votes cast to pass the US Senate Budget Agreement was from Rep. Vern Buchanan (R – FL District 16).

Governor Rick Scott regarding Washington’s short-term solution on the nation’s debt ceiling and the government shutdown stated,”Washington’s failure to reach a long-term agreement on the debt ceiling confirms our nation’s leaders have their heads in the sand about our economic future. America’s unchecked debt, along with the increase in inflation that follows, will only put us deeper in the hole we have been trying to climb out of since the national economic downturn.”

Buchanan is one of eighty-seven Republicans who voted to fund the government, raise the debt ceiling and allow the Patient Protection and Affordable Care Act to move forward. Buchanan is the only representative from Florida on the powerful House Committee on Ways & Means. He also co-Chairs the twenty-seven member Florida Congressional delegation with Rep. Alcee Hastings (D – FL District 20).

Some say by voting to raise the debt ceiling he insures the power of his position on the House Committee on Ways & Means. After all the ability to tax is the ability to destroy. The House Committee on Appropriations will continue to spend monies collected from taxes and obtained via borrowing to keep the government running.

In a press release Buchanan states, “Jeopardizing the full faith and credit of the United States by defaulting on our obligations was not an option. There is no question that we need to reduce spending and balance the budget, but not by degrading America’s credit rating and destroying our credibility.”

So how did Buchanan’s vote help save the full faith and credit of the United States?

The Chinese credit agency Dagong immediately after the vote “lowered its ratings for US local and foreign currency credit from A to A-, maintaining a negative outlook,” the agency said in a statement. “The fundamental situation that the debt growth rate significantly outpaces that of fiscal income and gross domestic product remains unchanged,” Dagong said in the statement, adding Washington’s solvency was vulnerable as old debts were still repaid through raising new debts.

What exactly is in the bill that Buchanan voted for?

RedState.com reports:

“Section 1002 of the bill provides for McConnell’s infamous resolution of disapproval. Basically, within three weeks of the President’s official request for a debt limit increase (until Feb 7, 2014 in this case), Congress can force a vote to disapprove of the request.  There’s one problem, though.  That resolution must pass with 2/3ds majorities in both houses.

So why slip in a vacuous resolution of disapproval if they are granting Obama the authority to raise the debt ceiling?

It’s what we call press release conservatism.  In three weeks from now, when everyone has forgotten the showdown, McConnell and his buddies will be able to send out press releases saying how they are fighting against Obama’s reckless requests to raise the debt ceiling.  A few of these guys might throw in a campaign ad for good measure.”

Buchanan is adept at using “press release conservatism”.

His press release states, “The Florida congressman also evoked the words of President Ronald Reagan who said “the United States has a special responsibility to itself and the world to meet its obligations.  It means we have a well-earned reputation for reliability and credibility – two things that set us apart from much of the world.” The Huffington Post reported Senator Jay Rockefeller (D – WV) used the very same Reagan quote when arguing for raising the debt ceiling.

Public obligations and government obligations are one in the same. The federal debt obligation is held by each and every US citizen. According to the US Debt Clock that is $53,556 per citizen or $148,227 per taxpayer. This does not include the $1,100,984 per taxpayer for all unfunded liabilities incurred by Congress for Social Security, Medicare and Medicaid.

Buchanan’s press release states, “Buchanan said Washington must now take serious steps to work together and rein in spending. ‘For too long both parties have turned a blind eye to our country’s budgetary mess,’ Buchanan said.  ‘It’s time we put an end to the irresponsible spending policies and enacted long-term policies that will keep the American Dream alive for future generations.’” With the “resolution of disapproval” spending will never be reigned in and the American dream will become ever increasing debt for future generations.

In December Buchanan will say he voted to disapprove raising the debt but it will be raised. It is fait accompli.

Buchanan holds the most expensive credit card in the world – a US House of Representatives voting card. It is with this card that Buchanan and eighty-six Republicans and two hundred one Democrats used to spend more, borrow more and cut nothing. Buchanan knows and understands all of this. He was a businessman before becoming a member of Congress. Now it appears he is in the business of growing government at the expense of businesses and the American people. He has effectively funded government, which slowly but surely defunds the American people.

Joe Dioguardi, former Representative from New York, in his book “Unaccountable Congress: It Doesn’t Add Up” calls Congress a “House of Ill Repute.” Mark Twain wrote, “There is no distinctly criminal class, except Congress.”

As Thomas Jefferson, who faced huge personal debt throughout his lifetime, wrote in a June 1807 letter to John Norvell, “I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.”

It appears that Rep. Buchanan, along with his eighty-six cohorts and every House Democrat have abandoned, “the first and most important republican virtue.”

RELATED VIDEO: Tea Party Express Sal Russo on 2013 Debt Ceiling/Continuing Resolution Bill

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The U.S. Default Risk May be Passing, but a Downgrade Could Still Lie Ahead

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The top twelve deficit gimmicks the President & Congress use to defraud the American people

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Joseph J. Dioguardi is a former member of Congress from New York and Certified Public Accountant. Dioguardi in his book “Unaccountable Congress: It Doesn’t Add Up” lists the top twelve gimmicks Congress uses to hide the true costs of government from the people. These gimmicks have been used for decades by both Republican and Democrat administrations, Congresses under both parties and government agencies.

The idea behind these gimmicks is to “[K]eep Americans in the dark (or – I should say – in the red!), writes, Dioguardi.

Dioguardi calls this “plastic budgeting”. As David A. Stockman, former Director of the Office of Management and Budget (OMB) under Ronald Reagan, stated, “As the fiscal crisis has worsened and the political conflict intensified we have increasingly resorted to squaring the circle with accounting gimmicks, evasions, half-truths and downright dishonesty in our budget numbers, debate and advocacy. Indeed, if the Securities and Exchange Commission had jurisdiction over the executive and legislative branches, many of us would be in jail.”

Fast forward to the 2013 “fiscal crisis” and “political conflict” in Washington, D.C. since October 1st.

Dioguardi characterizes the government budget as, “[F]ar from rock solid. It is metaphorically, plastic budgeting, approved by people with little plastic cards and elastic standards of fiscal integrity.” He lists the following “dirty dozen” methods of “budget chicanery developed over the years.” The following are taken from Chapter 2 of Dioguardi’s book. Readers can point to current examples of each gimmick being used today by the President and Congress.

GIMMICK 1: FUDGING THE ECONOMIC NUMBERS

When you project a federal budget for a future year, someone has to arrive at a set of crucial economic assumptions…But what are the “best” numbers and assumptions to use? That depends in large part upon for whom one works. The OMB, the Executive Office of the President, tends to generate numbers that will make the president look good –  usually low inflation, high real growth, low interest rates, and a shrinking budget deficit. For example, the 1982 budget resolution forecast a $1 billion surplus for fiscal year 1984; in fact, there was a $175 billion deficit.

GIMMICK 2: OFF-BUDGET TREATMENT

If your spending program threatens to increase the budget deficit, there is a very straightforward way of neutralizing it: Put it “off budget.” A recent example of this technique lies in the operation of the Strategic Petroleum Reserve (SPR). It takes tax dollars to fill up the SPR with purchased oil, and that exacerbates the deficit. So in 1989 the Bush Administration simply declared the reserve to be off budget. That reduced the expected deficit by $3.7 billion, but the Treasury had to go out and borrow the money to pay for it.

GIMMICK 3: THE CURRENT SERVICES BUDGET

The 1974 Budget Act requires the president to submit a “current services” budget showing what it would cost to keep government running another year if there were no changes in policy. Congress’ trick is to make a change in policy to restrain spending, then brag about a cut, when in fact the only cut is to the projected level of spending under existing policy.

GIMMICK 4: THE MAGIC ASTERISK

The magic asterisk is probably one of the most notorious budget gimmicks, and also one of the easiest to understand. In his book David Stockman describes its invention in the crucial 1981 budget very candidly. The [Reagan] Administrations “Chapter Two” reductions fell far short of the $130 billion needed to meet the budget target. “Bookkeeping invention this began its wondrous works. We invented the ‘magic asterisk.’ If we couldn’t find saving in time – and we couldn’t – we would issue an IOU. We would call it ‘future savings to be identified.’ It was marvelously creative. A magic asterisk item would cost a negative $30 billion … $40 billion … whatever it took to get a balanced budget in 1984 after we totaled up all the individual budget cuts we’d actually approved.” That year the magic asterisk came out to equal $44 billion.

GIMMICK 5: THE FRAUD, WASTE AND ABUSES EXCUSE

Since there are few if any defenders of fraud, waste and abuse, a member of Congress can denounce such things with impunity, and sound very good to the constituents back home. Actually achieving savings by rooting out these costly activities is a lot more difficult. For instance, in the fiscal 1982 budget, the House Budget Committee simply invented savings of $6 billion the expected benefit from finding and eliminating the terrible threesome.

GIMMICK 6: TRUST FUND DEFICIT MASKING

This is a dandy little scam because it produces big numbers – mainly because the biggest trust fund is Social Security…Now one of the most cherished Social Security fictions is that the trust fund balance is invested to accumulate at interest for 30 or 40 years, until it is needed to pay benefits to future retirees. Of course, nobody had the faintest idea where the fraud, waste and abuse could or would be found. Congress just declared that eliminating it would produce this amount of savings…[T]here is no such trust fund in any meaningful sense: it is just the accounting equivalent of a large cookie jar filled with notes reading “Ma, I’ll pay the missing cookies back later – honest.

GIMMICK 7: THE GIVE-AND-TAKE

The debt limit increase bill of 1972 contained a bold, unequivocal provision, section 201(a), which declared that not a penny more than $250 billion could be spent on federal programs in fiscal year 1973. Immediately below it came section 201(b), which said the ceiling imposed by section 201(a) would become null and void one day after the bill was signed into law, along with any action taken during that one day – presumably by President Nixon.

GIMMICK 8: PHONY LIABILITY VALUATIONS

What if you unwisely lend your shiftless brother-in-law $5,000 to buy a used car, and soon after he skips town for Mexico. You are later asked by your bank for a net-worth statement so you can get a loan for a new home. On your statement, under “Assets,” you put “Promissory note – $5,000″…Unfortunately Uncle Sam makes this kind of bluff all the time. For example, the Federal Deposit Insurance Corporation (FDIC), which insures your bank account to $100,000, collects premiums from banks to build up a reserve…But in the 1980s a massive contraction of agricultural land values and oil prices hit parts of the county… Banks started going under everywhere. The FDIC continued to value the loans of their insured banks at face value, even though the values obviously were plummeting.

GIMMICK 9: FRONT LOADING

A favorite trick of budgeteers is to front-load a new program – collecting taxes to pay for it for a year or so before the benefits begin to be paid out. Thus for a year or two the deficit is reduced by the new revenues. Only in the later years do the program costs overwhelm the revenues and add to the deficit – but, of course, that somebody else’s problem.

GIMMICK 10: RECONCILIATION SAVINGS

Some of the most creative work ever done by Congress comes in the statements by House committees as to how they propose to meet the guidelines of the first budget resolution. That resolution tells each authorizing committee of the House (and Senate) to adjust its program to meet a target number. “Bold face lying” would be too mild a term to describe the responses to this unwelcome instruction.

GIMMICK 11: SHIFTING SPENDING TO ANOTHER YEAR

This gimmick has been around for a long time and is very popular. If requires only changing the date of an expenditure to fall into a different fiscal year, so that the current fiscal year’s deficit objectives are more likely to be met.

GIMMICK 12: THE MONSTER BILL

The bigger and more impenetrable a spending bill is, the more likely it is to conceal lots of budgetary stinkers…The monster bill has another vice. Once passed by Congress, the bill either can be signed or vetoed by the president – there is no middle ground. Thus Congress is fond of throwing in lots of separate provisions that the president ordinarily would veto, but can’t, since he would have to veto the whole bill and shut down the government.

Americans are waking up to these gimmicks and others used to pull the wool over their eyes. Since Dioguardi wrote his book we have seen TARP, QE 1 and QE 2, massive fraud, waste and abuse in multiple government programs and bailouts of banks, investments in pet green projects and the auto industry. All gimmicks that cost taxpayers, not the members of Congress.

RELATED: The Most Expensive Credit Card in the World – A Congressman’s Voting Card

The Most Expensive Credit Card in the World – A Congressman’s Voting Card

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As the government shut down debate rages inside the Washington, D.C. beltway over the continuing resolution, as there has been no budget for five years, and the debt ceiling, Floridians and Americans in general are seeing the true nature of a dysfunctional federal government. Many are concerned that Congress is exceeding the ability of taxpayers to pay for government.

As Thomas Jefferson, who faced huge personal debt throughout his lifetime, wrote in a June 1807 letter to John Norvell, “I, however, place economy among the first and most important republican virtues, and public debt as the greatest of the dangers to be feared.”

When Congress fails to place economy as the first virtue, the economy suffers.

Terence P. Jeffrey from CNS News reported, “The U.S. Treasury needed to pay off a record of approximately $7,546,726,000,000 in maturing Treasury securities in fiscal 2013, which ended last Monday, according to Treasury’s official accounting. During the same period, the Treasury turned around and issued another $8,323,949,000,000 in new Treasury securities. The spread between the old debt held by the public that matured and was paid off during the fiscal year and the new debt that was sold to cover government spending over and above tax revenues, increased the net federal government debt held by the public by $777.223 billion during the fiscal year.”

This act by the US Treasury is the equivalent of paying off a credit card with a credit card. But how can Congress and the Executive Branch do this?

Simple according to Joseph J. Dioguardi, former member of Congress from New York and Certified Public Accountant. Dioguardi in his book “Unaccountable Congress: It Doesn’t Add Up” writes, “Now what if you had a charge card with no credit limit, one that sends you only one statement a year – and a confused one at that. And suppose that your weren’t required to pay the balance: you could postpone payment into next year or event to the next century. What would you say?”

US House of Representatives voting card

Dioguardi had one of these cards and so do 435 other Americans. It is a member of Congress’ voting card.

Dioguardi wrote, “And the best part of it: Once you’re a member of Congress, you never get the bill, and they don’t deduct the amount of your congressional spending votes from your paycheck…[I]ts the closest thing to financial Easy Street there is in America today.”

“There is one small annoyance with The Most Expensive Credit Card in the World. It’s called the debt limit or, more specifically, the Second Liberty Bond Act,” notes Dioguardi.

According to Dioguardi when the Congress, “borrows to finance the deficit, it never worries about paying it back. When its bond, notes and bills come due, the Treasury simply issues more bonds, notes and bills and uses the proceeds to redeem the old ones. This is the fiscal equivalent of what Ponce de Leon was looking for in the jungles of Florida – the Fountain of Youth.”

According to the Congressional Research Service, “Total debt of the federal government can increase in two ways. First, debt increases when the government sells debt to the public to finance budget deficits and acquire the financial resources needed to meet its obligations. This increases debt held by the public. Second, debt increases when the federal government issues debt to certain government accounts, such as the Social Security, Medicare, and Transportation trust funds, in exchange for their reported surpluses. This increases debt held by government accounts. The sum of debt held by the public and debt held by government accounts is the total federal debt.”

The public and the government are one in the same. The federal debt is held by every US citizen. According to the US Debt Clock that is $53,556 per citizen or $148,227 per taxpayer. This does not include the $1,100,984 per taxpayer for all unfunded liabilities incurred by Congress for Social Security, Medicare and Medicaid.

Dioguardi calls Congress a “House of Ill Repute.” It is difficult for WDW – FL to disagree with a CPA.

The waste, fraud and abuse in the Social Security administered disability program is highlighted in this CBS News 60 Minutes special investigative report:

A government shutdown is a good thing!

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shutdown if that is what it takes signThe government shutdown at midnight is a “sequester” of non-essential government employees. That is a good thing according to Brian S. Wesbury.

According to Brian S. Wesbury, Chief Economist for First Trust, “It looks like House and Senate won’t come to a budget agreement by midnight and, as a result, the federal government is going to partially shut down starting Tuesday morning. Run for the hills? Armageddon: right? Nope!”

Westbury notes, “As we said a few weeks ago, a shutdown is not as scary as it seems. Money still flows into the Treasury Department and money still flows out, for Social Security or to make interest payments on the debt, for example. The military, border control, food inspections, air traffic, prisons, weather service, and post office, all keep going. And, as long as the Treasury Department has room to continue its ‘extraordinary measures’ or if the debt limit goes up in the meantime, Treasury still pays the debt as it comes due, without missing a beat.”

There have been many government shutdowns.

“Some pundits and analysts say a shutdown will hurt the economy, but it’s hard to say that based on history. The Washington Post recently listed every shutdown from 1976 to 1996. There were 17 shutdowns totaling 110 days. Out of those 110 days, only 6 days were during recessions. That’s very few given that we were in recession about 14% of the time during that twenty–year period,” writes Wesbury.

The last and longest shutdown doesn’t appear to have hurt the economy either writes Wesbury.

“That was the three-week shutdown from mid-December 1995 to early January 1996 under President Clinton. Real GDP grew 2.3% in the year before the shutdown, a 2.9% annual rate in Q4-1995 and then at a 2.6% pace in Q1-1996, despite the shutdown and the East Coast Blizzard, a multiple day massive snowstorm in January that was followed by large floods,” states Wesbury.

So getting rid of the government fat is a good thing for the economy. Perhaps Washington, D.C. staffers and government workers will now understand what their Main Street counterparts are facing.

Florida’s 303 public pension systems are unsustainable

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Florida has the third highest number of public pension systems in the United States. According to the U.S. Census Bureau the states with the most public pension systems were Pennsylvania (1,425 systems), Illinois (457 systems) and Florida (303 systems).

The U.S. Census Bureau publishes The Annual Survey of Public Pensions: State- and Locally-Administered Defined Benefit Data, which is a census of all 222 state government pension systems and a sample of local government pension systems. The latest report was published in August 2013.

The six states with the largest amounts of total state and local cash and investment holdings in 2011 (the latest year data is available) were California ($600.0 billion), New York ($319.3 billion), Texas ($192.6 billion), Florida ($157.8 billion), Ohio ($152.4 billion) and Illinois ($127.7 billion) in total holdings and investments. Total holdings and investments in these states comprised just over half (51.2 percent) of total holdings and investments for the United States.

The Florida pension system is overseen by the State Board of Administration (SBA), which was created by the Florida Constitution and is governed by a three-member Board of Trustees (Trustees), comprised of the Governor as Chair, the Chief Financial Officer and the Attorney General.

The basic problem is there are fewer paying into public pensions with a growing number taking funds out of the systems. The report looks at active public pension members versus beneficiaries over time. The ratios of member to beneficiaries are: 1991 2.8 to 1, 2001 2.3 to 1 and 2011 1.7 to 1. Public pension systems are unsustainable.

For a larger view click on the chart.

The Florida Retirement System (FRS) carries the bulk of the public pension system load in the sunshine state. Cities, counties, school boards and public hospital employees pay into this system. According to the MyFRS website, “The FRS Pension Plan funding valuation takes place annually, available December 1st and was 86.9 percent funded, as of July 1, 2012. You can view a chart that compares the plan’s actuarial liabilities to the plan’s actuarial assets for the past five fiscal years. The annual benefit payments to FRS retirees and beneficiaries (shown in white on the chart) are a part of the overall plan liabilities. The market value of the total assets of the FRS Pension Plan is updated monthly.”

The Census Department reports the following public pension data for Florida (in thousands of dollars): Total contributions of $4,993,460, total employee contributions of $349,947, contributions from the state government $875,190, and from local government $3,768,323. Contributions from state and local government means from Florida taxpayers.

According to the report in 2011 Florida’s public pension systems payed out between $20,000 to $24,999 on average.

Defined benefit public pension programs are a growing financial burden for cities, counties, school boards and public hospitals. If one pension system fails Florida taxpayers will be left holding the bag.

RELATED: Florida’s public pensions still bleeding taxpayers

FL Rep. Grayson declares “Stealth Socialism” in America

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The New American reports, “Stealth socialism’s been created,” Grayson, a second-term congressman from Florida’s Ninth District, said in an interview with Salon.com on a range of political and economic issues. “We’ve had a government takeover of the bond market,” he said in describing what has happened since the financial industry crisis of 2008. He continued,

Government simply ends up owning more and more and more. If government had taken over the steel industry, maybe it would have been more noticeable. They’ve taken over the financing of housing industry as well, with a desired result. The result is now, finally, particularly in areas that were hard-hit, like mine in Central Florida, housing is ticking up again. So the Fed did in essence create an economic baseline that has led to something along the lines of 50,000-100,000 jobs created a month, setting a foundation for recovery for the U.S. economy.

Jorge Bonilla, Republican candidate for FL District 9.

Jorge Bonilla, the Republican candidate for FL District 9, states in an email, “Mr. Grayson touts current monetary policy as providing a baseline for recovery, yet fails to notice that current job creation does not keep up with population growth, and that labor participation continues to crater (312,000 alone dropped out of the labor force last month).”

The New American notes, “Grayson is far from alone in noting the socialist trends in federal economic policy. In February 2009, less than a month after the inauguration of Barack Obama, Newsweek magazine published a cover story with the title “We Are All Socialists Now.” The article was about the new president’s bailout and economic recovery plans, but noted “the U.S. government has already — under a conservative Republican administration — effectively nationalized the banking and mortgage industries.” Even the late Marxist President Hugo Chavez of Venezuela hailed the federal takeover of a number of U.S. financial institutions, taunting President George W. Bush with the jibe that Bush had become a bigger socialist than Chavez himself.”

Bonilla takes exception to the idea that we are all Socialist now. Bonilla’s email retort, “As Americans, we must continue to champion small business creation, which is the true engine of our economy and its  recovery, as well as continue our efforts to repeal Obamacare, and promote true healthcare reform. In addition, we must continue to oppose President Obama’s job-and-economy-killing policies that Mr. Grayson is content to champion.”

Has America become a Socialist state?

Study: Florida’s Marginal Tax Rate at 42.6% – Ouch!

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This week the Tax Foundation is featuring two new maps which pull data from a Fiscal Fact released last week, “Individual Tax Rates Impact Business Activity Due to High Number of Pass-Throughs,” and look at the top marginal tax rates for sole proprietorships and S-corporations throughout the states. In his study, economist Kyle Pomerleau explains that more than 30 million pass-through businesses file their taxes at the individual rate, and why a large percentage of those businesses have a marginal tax rate exceeding 40 percent.

According to the Tax Foundation: The map [above] is not examining the effective rates of businesses in the top bracket, but rather, the top marginal tax rate on (S-Corporations/Sole Proprietorships) in each state. A “marginal” rate is the amount that is taxed of the next dollar of income earned by pass-through businesses in each state’s highest tax bracket. These rates reflect the sum of federal, state, and local income taxes (minus the state and local tax deduction); self-employment taxes; and the limitation on itemized deductions.

View the Tax Foundation map archive here.

ABOUT THE TAX FOUNDATION:

Founded in 1937, the Tax Foundation is the nation’s leading independent, non-partisan organization providing sound research and analysis on federal and state tax policy. The Tax Foundation is a 501(c)(3) non-profit and our offices are located in the National Press Building in Washington, DC.

Message to “defund Obamacare” resonated with Florida grassroots

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Jim DeMint speaks at the “Defund Obamacare” town hall tour in Tampa on August 21, 2013. Photo courtesy of Eve Edelheit, Tampa Bay Times staff.

Heritage Foundation President and former Senator Jim DeMint and Raphael Cruz, father of Senator Ted Cruz, came to Tampa, Florida to bring their message that now is the time to defund the Affordable Care Act. The Heritage Action for America sponsored event was over booked. Tampa was the third stop on a nine city tour. Over 850 signed up for the event, with only 550 seats available.

Raphael Cruz gave the invocation and was greeted with a standing ovation when he was introduced by Karen Jaroch, Tampa Regional Coordinator for Heritage Action, as the father of Senator Ted Cruz. Cruz ended the event with a stirring call to action.

Senator DeMint then took the stage to a standing ovation. DeMint looked over a packed house of diverse concerned citizens, who traveled from across the state of Florida. DeMint then said in his soft southern voice, “We had you wait in line to get into this event so you can get used to standing in line to get medical care under the Patient Protection and Affordable Care Act. With the over 550 people jammed into this hall you now know what your doctor’s waiting room will look like very soon.” These comments were like throwing raw meat to the grassroots activists in the audience.

Senator DeMint then went into detail on how the Affordable Care Act can be defunded. DeMint explained defunding Obamacare means attaching a legislative rider to a “must pass” bill (e.g. debt limit, annual spending bill or continuing resolution to fund the government) that 1) prohibits any funds from being spent on any activities to implement or enforce Obamacare; 2) rescinds any unspent balances that have already been appropriated for implementation; and 3) turns off the exchange subsidy and new Medicaid spending that are on auto-pilot.

DeMint was then joined by Mike Needham, Chief Executive Officer for Heritage Action for America, to answer questions. The issue of what is the urgency to defund Obama care now was raised. According to DeMint and Needham on January 1, 2014, Obamacare’s new main entitlements – the Medicaid expansion and the exchange subsidies – are scheduled to take effect. Open enrollment for both programs begins on October 1, 2013, at the start of the new fiscal year. According to the Congressional Budget Office (CBO), the federal government will spend $48 billion in 2014 and nearly $1.8 trillion through 2023 on these new entitlement programs. Also on January 1, Americans will be forced by their government to buy a product, health insurance, for the first time in history. Individuals and families who don’t comply will be penalized by tax penalties administered through the Internal Revenue Service (IRS).

One Floridian asked Senator DeMint isn’t is mean to not provide the funding for healthcare. Senator DeMint replied that it is mean for the President to promise Americans that they can keep their current insurance and doctors under Obamacare. It is mean for the President to say that health insurance premiums will go down $2,000 when in fact they will go up over $2,000 or more in some states. It is mean for the President to say everyone will receive better health care when we know from the experiences of Canada and England that socialized medicine leads to rationing and poor care, even to patients dying for lack of attention..

The question of some House Republicans supporting the repeal of Obamacare but not defunding it came up.

DeMint noted that some fear if they take a stand on Obamacare it will hurt them in the 2014 elections. He then pointed out that same tactic of “first do no harm” lost Republicans the US Senate and White House twice. DeMint noted that when he was in the Senate, and since he has become President of the Heritage Foundation, he experienced a Republican leadership that will “cut the legs out from under any who oppose them”.

DeMint said that Republicans took the House of Representatives in 2010 and retained the majority in 2012 on the promise of repealing Obamacare. Either Republicans keep their promise or go home and explain why they lied. DeMint noted that repealing Obamacare is not enough. The House has had numerous votes to repeal the law, but the chances of statutorily repealing the law decreased once President Obama won a second term. Those who oppose Obamacare, he said, cannot wait another three and a half years to ” begin dismantling Obamacare; they need to leverage current opportunities to defund using ‘must-pass’ spending bills.” DeMint said time and again, it is now or never.

The Tampa Bay Times PolitiFact blog took exception to four of the things Senator DeMint said during his presentation. However, DeMint’s message clearly resonated with the audience. The devil is always in the details.

ABOUT HERITAGE ACTION FOR AMERICA:

RELATED:

Congressman Mark Meadows : Letter Encouraging House Leadership to Defund Obamacare

Should We Delay or Defund Obamacare?

Did you know Florida’s highest paid public employee is a basketball coach?

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Ruben Fisher-Baum from DeadSpin.com reports, “You may have heard that the highest-paid employee in each state is usually the football coach at the largest state school. This is actually a gross mischaracterization: Sometimes it is the basketball coach. Based on data drawn from media reports and state salary databases, the ranks of the highest-paid active public employees include 27 football coaches, 13 basketball coaches, one hockey coach, and 10 dorks who aren’t even in charge of a team.”

For a larger view click on the map.

To view how much in revenues college sports in Florida generated in 2012 click here.

So are Florida’s hard-earned tax dollars paying these coaches?

According to Fischer-Baum, “Probably not. The bulk of this coaching money—especially at the big football schools—is paid out of the revenue that the teams generate.”

So what’s the problem then? These guys make tons of money for Florida schools; shouldn’t they be paid accordingly?

Fischer-Baum says there are at least three problems.

  1. Coaches don’t generate revenue on their own; you could make the exact same case for the student-athletes who actually play the game and score the points and fracture their legs.
  2. It can be tough to attribute this revenue directly to the performance of the head coach. In 2011-2012, Mack Brown was paid $5 million to lead a mediocre 8-5 Texas team to the Holiday Bowl. The team still generated $103.8 million in revenue, the most in college football. You don’t have to pay someone $5 million to make college football profitable in Texas.
  3. This revenue rarely makes its way back to the general funds of these universities. Looking at data from 2011-2012, athletic departments at 99 major schools lost an average of $5 million once you take out revenue generated from “student fees” and “university subsidies.” If you take out “contributions and donations”—some of which might have gone to the universities had they not been lavished on the athletic departments—this drops to an average loss of $17 million, with just one school (Army) in the black. All this football/basketball revenue is sucked up by coach and AD salaries, by administrative and facility costs, and by the athletic department’s non-revenue generating sports; it’s not like it’s going to microscopes and Bunsen burners.

Did you know that  471 University of Florida employees pulling down over $200,000 a year. UF has the most high-salaried employees of any state university in Florida, according to figures taken from state data for Spring 2013. In fact, 2,031 of its employees made at least $100,000.

Gov. Rick Scott’s office has expanded its public records website — floridahasarighttoknow.com — to include the $2.66 billion in salaries for more than 52,000 workers at Florida’s 11 universities.

To find the salary of any employee working for the state of Florida click here.

Are welfare recipients becoming Florida’s “new middle class”?

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In 1995, the CATO Institute published a groundbreaking study, The Work vs. Welfare Trade-Off, which estimated the value of the full package of welfare benefits available to a typical recipient in each of the 50 states and the District of Columbia.

It found that not only did the value of such benefits greatly exceed the poverty level but, because welfare benefits are tax-free, their dollar value was greater than the amount of take-home income a worker would receive from an entry-level job.

Since then, many welfare programs have undergone significant change, including the 1996 welfare reform legislation that ended the Aid to Families with Dependent Children program and replaced it with the Temporary Assistance to Needy Families program administered by the US Department of Health and Human Services.

The CATO Institute examined the current welfare system in the same manner as the 1995 paper in their The Work vs. Welfare Trade-Off: 2013 report.

According to CATO, “Welfare benefits continue to outpace the income that most recipients can expect to earn from an entry-level job, and the balance between welfare and work may actually have grown worse in recent years.”

“The current [2013] welfare system provides such a high level of benefits that it acts as a disincentive for work,” states the CATO report.

CATO Institute Senior Fellow Michael D. Tanner discusses his latest report on welfare:

Welfare currently pays more than a minimum-wage job in 35 states, even after accounting for the Earned Income Tax Credit, and in 13 states it pays more than $15 per hour. If Congress and state legislatures are serious about reducing welfare dependence and rewarding work, they should consider strengthening welfare work requirements, removing exemptions, and narrowing the definition of work.

The top ten states where welfare payments have increased are: 1. Hawaii, 2. District of Columbia, 3. Massachusetts, 4. Connecticut, 5. New Jersey, 6. Rhode Island, 7. New York, 8. Vermont, 9. New Hampshire and 10. Maryland. For those wondering, California is ranked number eleven. Florida ranks 46th. Mississippi is ranked last.

CATO recommends, “[S]tates should consider ways to shrink the gap between the value of welfare and work by reducing current benefit levels and tightening eligibility requirements.”

In 1995 Florida ranked 30th in the nation with a pre-tax welfare wage equivalent of $18,200 or an hourly wage of $8.75. In 2013 Florida ranks 46th in the nation with a pre-tax welfare wage equivalent of $12,600 or an hourly wage of $6.06.

However, Florida ranks 9th in providing Supplemental Nutrition Assistance Program (SNAP) cards, with a monthly benefit of $526 or $6,312 annually. Florida is ranked 16th in providing housing benefits, with a urban monthly benefit of $1,095 and a non-urban benefit of $814. Florida housing benefits average monthly $955 or $11,455 annually.

In Medicaid benefits Florida ranks 48th with an annual expenditure of $6,196, which is the equivalent of an insurance premium of $6,408. Percent of TANF Households Receiving Housing Assistance in Florida in 1995 was 17.4%, today it is 7.7%. TANF adult recipients participating in work activities in Florida is 54.2%.

In terms of welfare benefits packages with housing included for all states Florida ranks 26th overall. In Florida for 2013 the benefits add up to $29,576 or an increase over the original 1995 package adjusted for inflation of $3,484. Florida is 45th in utilities assistance at $19 a month or $225 a year. For the Women, Infants, and Children Program Florida ranks 20th with a monthly payment of $90, annual payment of $1,077.

The bottom line:

Florida pays out in welfare benefits: TANF – $3,636, SNAP – $ 6,312, Housing – $11,455 (avg.), Medicaid – $6,196, WIC – $1,077, LIHEAP – $600, TEFAP – $300 for a total of $29,576. 

The median salary in Florida is $30,695.

Welfare is now a big government business paying more than entry level jobs in 70% of the states. Since Congress enacted welfare reform in 1994, America has become more of the welfare nation.

Milton Friedman wrote, “One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

Is Florida is on the path with the result that it will become a “welfare state”?

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Bipartisan coalition finds lack of transparency and accountability for Enterprise Florida bonus plan

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The independent government watchdog group Integrity Florida, Progress Florida and The Tea Party Network are raising concerns about the lack of transparency and accountability for a $700,000 bonus plan being considered by the board of directors of Enterprise Florida. Enterprise Florida is a taxpayer-funded entity created by the Florida Legislature that operates as the state’s commerce department.

In a letter to Governor Rick Scott, Attorney General Pam Bondi, Chief Financial Officer Jeff Atwater and Agriculture Commissioner Adam Putnam, who all serve on the board of directors of Enterprise Florida, the bipartisan group states:

“Secretary of Commerce Gray Swoope and his staff at Enterprise Florida are seeking your approval of a proposal to allow them to exceed one million dollars in bonus pay within the last twelve months. On September 13, 2012, the Enterprise Florida board of directors voted in favor of $497,500 in bonuses for Secretary Swoope and his staff.

On August 8, 2013, the Enterprise Florida board will consider a proposal for an additional $630,000 bonus pool just for the staff and a separate, yet to be disclosed, bonus package for Secretary Swoope. Secretary Swoope’s last bonus of $70,000 was approved at the September 2012 Enterprise Florida board meeting, despite the item never appearing on the board agenda. Secretary Swoope’s proposed 2013 bonus is not on your August 8 meeting agenda, which was just published online on August 2, less than a week before your upcoming vote on the bonus plan, an agenda item buried on page 26.”

The letter notes, “There are also major flaws in the Enterprise Florida bonus criteria, including allowing the staff to count jobs promised towards their jobs created goal. Basically, the Enterprise Florida staff negotiates agreements with companies promising jobs in exchange for subsidies, then counts pledges that companies might create jobs in the future as performance that merits bonuses. Jobs promised by Enterprise Florida board member companies who negotiate incentive deals with Enterprise Florida staff are also allowed to be counted towards the staff performance goals for their bonuses, which clearly presents a conflict of interest.”

The bipartisan coalition recommends the following remedies:

Ensure Enterprise Florida complies with the law. We urge you to consider delaying the August 8 vote on the Secretary of Commerce and Enterprise Florida staff bonuses until you are able to assure taxpayers that the organization’s operating budget is in compliance with the requirements of Florida Statutes Section 288.904(2)(a).

Increase transparency. We encourage the Enterprise Florida board of directors to be more transparent about its practices by posting online complete agendas of all meetings of the board and board committees at least a week in advance, posting online minutes immediately following meetings and providing online access to audio or video recordings of all committee and board meetings in a timely manner online.

Increase accountability. We encourage the Enterprise Florida board of directors to protect Florida taxpayers with a more accountable process for staff performance recognition and awards that avoids conflicts of interest. Any incentive compensation plan for the Secretary of Commerce and Enterprise Florida staff should be based on actual results that benefit Floridians rather than promises alone.

The letter is signed by Mark Ferrulo, Executive Director of Progress Florida, Dan Krassner, Executive Director of Integrity Florida and Catherine Baer, Chair of The TEA Party Network.

RELATED COLUMNS:

Enterprise Florida’s plan for $630K in staff bonuses catches flak

Florida leads the way in the use of cost-benefit analysis to support policymaking

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Pew Charitable Trusts in partnership with the MacArthur Foundation issued the States’ Use of Cost-Benefit Analysis: Improving Taxpayers Results (Results First) study in July.

The Results First study overview states, “In this age of fiscal stress for state governments, it is more important than ever that policy leaders direct public resources to the most cost-effective programs and policies while curbing spending on those programs that have proved ineffective. But to do this well, policy makers need reliable approaches that can help them assess budget choices and identify the best investments for taxpayers.”

Given the dire fiscal situation in Detroit and looming Congressional battles over the budget, a continuing resolution to fund the federal government and raising the debt ceiling votes, Results First study is a document all elected officials should read and reflect upon.

Results First’s research answers three critical questions: Are states conducting cost-benefit analyses? Do they use the results when making policy and budget decisions? And what challenges do states face in conducting and using these studies?

The analysis includes a systematic search and assessment of state cost benefit studies released between January 2008 and December 2011.

The top states [in alphabetical order]—Florida, Kansas, Minnesota, Missouri, New York, North Carolina, Utah, Virginia, Washington, and Wisconsin—each generally released more studies than mixed or trailing states, systematically assessed the costs and benefits of multiple program alternatives, and used results to inform policy or budget decisions. Two of these states, New York and Washington, were leaders on all three criteria.

Results First found:

  • Ten states led the way nationally in the production, scope, and use of cost-benefit analysis to support data-driven policymaking. These states were among the leaders in at least two of the three study criteria and trailed in none.
  • 11 states—California, Florida, Kansas, Minnesota, Missouri, New York, North Carolina, Ohio, Utah, Virginia, and Washington—led the way in the production of cost-benefit analyses, releasing at least 11 studies each, or an average of three or more per year.

Results First highlighted as an example of effective cost-benefit analysis that, “In 2003, the Florida Legislature directed its Office of Program Policy Analysis and Government Accountability to assess whether it would be cost-effective to create an alternative therapy-based program to serve nonviolent juvenile offenders in the community rather than in residential commitment facilities. The office’s report concluded that, based on national research on similar programs, implementing two pilots of a program called Redirection would save the state an estimated $1.7 million in the first year of operation.”

Results First notes that between 2008-2011, 50 states and the District of Columbia issued 348 cost-benefit studies, but their output varied widely. Florida issued 11 cost-benefit studies.

Barry Goldwater

Former US Senator and Presidential Candidate Barry Goldwater wrote in The Conscience of a Conservative (1960):

“I have little interest in streamlining government or in making it more efficient, for I mean to reduce its size.

I do not undertake to promote welfare, for I propose to extend freedom.

My aim is not to pass laws, but to repeal them. It is not to inaugurate new programs, but to cancel old ones that do violence to the Constitution, or that have failed their purpose, or that impose on the people an unwarranted financial burden.

I will not attempt to discover whether legislation is “needed” before I have first determined whether it is constitutionally permissible.

And if I should later be attacked for neglecting my constituents’ “interests,” I shall reply that I was informed that their main interest is liberty and that in that cause I am doing the very best I can.”

Prophetic words indeed.

Happy Birthday Milton Friedman, a classy and classical liberal!

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In 1962 Milton Friedman, with his wife Rose, wrote Capitalism and Freedom.  The book was rejected by both academia and the media. The ideas in “Capitalism and Freedom” were vindicated in 1980 when the Friedmans published Free to  Choose.

As Friedman wrote in his 2002 preface to Capitalism and Freedom, “I documented  a dramatic shift in the climate of opinion”. That climatic shift was “[P]artly because the role of government was exploding under the influence of [the] initial welfare state and Keynesian views … That change in the climate had its effect. It paved the way for the election of Margaret Thatcher in Britain and Ronald Reagan in the United States.”

Friedman wrote that Thatcher and Reagan, “Were able to curb Leviathan, though not to cut it down.”

Friedman was a liberal in the classical sense. In the introduction to Capitalism and Freedom he wrote, “It is extremely convenient to have a label for the political and economic viewpoint elaborated in this book. The rightful and proper label is liberalism. Unfortunately, ‘As a supreme, if unintended compliment, the enemies of the system of private enterprise have thought it wise to appropriate its label’, so that liberalism has, in the United States, come to have a very different meaning than it did in the nineteenth century or does today over much of the Continent of Europe.”

According to Friedman, “[T]he intellectual movement that went under the name of liberalism emphasized freedom as the ultimate goal and the individual as the ultimate entity in the society.”

The only thing in Capitalism and Freedom that Friedman said he would change is, “[I]t would be to replace the dichotomy of economic freedom and political freedom with the trichotomy of economic freedom, civil freedom, and political freedom.”

Friedman wrote, “Government can never duplicate the variety and diversity of individual action.” How prophetic given today’s events.

Milton and Rose Friedman created a foundation that lives on to further their ideal of “competitive capitalism.”

The worldwide celebration to remember Milton Friedman, founder of the Friedman Foundation along with his wife, Rose, to advance school choice. “Friedman Legacy Day” is held every July 31, Milton Friedman’s birthday.

This year, the Friedman Foundation is marking Friedman’s 101st birthday with the slogan “Milton 101.”

Although Friedman is credited with popularizing tax reform, prompting the development of an all-volunteer armed forces, and highlighting the importance of monetary policy as it relates to inflation, he and his wife wanted their legacy attached to school choice. In 1955, Milton’s essay titled “The Role of Government in Education” first established the voucher idea, encouraging public education funds to follow students to the schools of their parents’ choice.

Today, 23 states and Washington, D.C., have implemented some form of Milton Friedman’s school choice idea.

A list of “Friedman Legacy Day” events can be found at edchoice.org.

How do Americans with jobs get to work?

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I have reported on the growing costs of running publicly funded transportation systems (buses, light rail, AMTRAK). Public bus systems rarely pay for themselves. Rather they are heavily subsidized by federal, state and local governments. For example, in Sarasota County, FL government runs two bus services and both are monopolies. SCAT is run by the County and the other run by Sarasota County School Board. Both are paid for by county property taxpayers.

NPR’s Shiva Koohi portrays in two simple charts how Americans who have jobs get to work.

Since 1960 American workers get to work primarily, and in ever increasing numbers, via private transportation. Use of public transportation has declined by over half since 1960, while use of private transportation has increased by 20% (see below charts). The use of bikes, taxis and walking by workers have all declined since 1960 and 1980. The number of those working at home has doubled since 1980 but remains a small number of total workers. Telecommuting has not yet caught on.

Click on the chart for a larger view.

Koohi reports, “More than ever, Americans are getting to work by driving alone. As the graph above shows, the share of Americans driving to work rose sharply in the second half of the 20th century, as the nation became more suburban. The rate has been flat for the past few decades — but during that time the percentage of people who carpool fell (even as carpool lanes proliferated).”

Koohi notes:

Today, only 5 percent of workers take public transportation, down from 11 percent in 1960; only 4 percent walk to work, down from 7 percent in 1960.

One surprising detail in the numbers: The share of workers who work at home is actually lower today than it was 50 years ago (4 percent today versus 7 percent in 1960). A 1998 Census report pointed to “the steep decline in the number of family farmers and the growing tendency of professionals, such as doctors and lawyers, to leave their home and join group practices resulted in a loss each decade of the number of at-home workers.” The share of people working at home has been rising for the past few decades, as telecommuting has become more popular, but the rise hasn’t been nearly enough to make up for the earlier decline.

In October, 2009 Catherine Rampell posted the below map on Economix. It shows the percentages of workers who drove to work alone by state and is based on U.S. Census data.

 

Richard Florida noted patterns in Rampell’s map. Florida reported:

Income and Economic Output: The richer the state, the less likely people were to drive alone. Driving alone was negatively correlated with state income levels (-.46) and output per capita (-.41).

Class and Human Capital: States with higher percentages of college graduates (-.47) and the creative class (-.43) were less likely to have people driving alone. Driving alone was much more likely in states with large working class concentrations (.62).

Professional and Creative Jobs: Driving alone was less likely in states with high concentrations of virtually every type of professional, knowledge-based and creative jobs. But it was least likely in states with large concentrations of artists, designers, and entertainers (-.63), architects and engineers (-.61), scientists (-.56 ), and lawyers (-.55).