Tag Archive for: taxes

Rep. Vern Buchanan (R-FL 16) Busts the Budget — Votes for Amnesty and Obamacare

The Republican co-Chair of the Florida delegation is Congressman Vern Buchanan representing District 16. Buchanan’s campaign website states, “Washington’s irresponsible pattern of borrowing and spending has put our country on a road to bankruptcy.  Unbelievably, America borrows $188 million every hour.  This is simply unacceptable.”

In a December 6th email to constituents Buchanan wrote, “The national debt this week surpassed $18 trillion for the first time in our nation’s history. Since President Obama took office six years ago, the debt has ballooned by nearly $7.5 trillion. Washington’s addiction to spending is putting our nation on the path to bankruptcy.”

In a December 7th InstaPoll Buchanan asked constituents: What action do you think Congress should take to reduce the federal debt, which surpassed $18 trillion this week? Sixty-nine percent of those responding answered “reduce spending.

Buchanan wants a balanced budget amendment to reign in Congress, but in October 2013 Buchanan voted to raise the debt ceiling and now has given President Obama a victory. The victory is passing a bill that busts the budget, continues to fund pork projects, Obamnesty, Obamacare and will increase the national debt.

The Conservative Review reports:

“This 1700+ page, $1.1 trillion Omnibus spending bill granted President Obama full funding for 11 of 12 federal departments for the remainder of the fiscal year – without any congressional restrictions on his unilateral action on amnesty, Obamacare, and environmental regulations. Worse, this bill actually provided Obama with an additional $2.5 billion in funds to facilitate his executive amnesty. Most egregiously, this 1700-page bill was crafted as a backroom deal by lame duck senators who were rejected by the American public in the November election. Speaker Boehner placed the bill on the floor with only 48 hours to read all 1700 pages.” [Emphasis added]

The Conservative Review gives Buchanan an “F” rating on fiscal responsibility with a score of 53%.”

Did Congressman Buchanan read the bill or did he vote for it first to see what was in it?

Buchanan sits on the House Ways and Means Committee. Does he not understand what he did by voting for this omnibus spending bill? Is Buchanan exhibiting the very “irresponsible pattern of borrowing and spending” that he campaigned against?

Buchanan’s campaign website states, “As a businessman for 30 years, and past Chairman of the Florida Chamber of Commerce, I know what it means to balance a budget, meet a payroll, and exercise the fiscal discipline necessary to keep a business moving forward.” But Buchanan is no longer a businessman. He is a member of Congress. The only payroll he is now meeting is that of the federal bureaucrats in Washington, D.C., at the taxpayers expense.

Buchanan has not exercised “fiscal discipline”. The only thing he is moving forward is President Obama’s agenda. Is that why those in his district re-elected him? Is Buchanan “grubering” those who elected him?

Buchanan’s campaign website rightly states, “Government does not create jobs, small businesses like the thousands located in Southwest Florida create the jobs.” Buchanan has a jobs plan, but it does not help small businesses. Rather it is to provide jobs to even more Washington bureaucrats and Congressional staffers while his constituents pay higher taxes. Small businesses are harmed by Obamacare’s healthcare mandate, which kicks in in 2015. Florida continues to suffer because of omnibus spending bills like the one Buchanan and many of his fellow Republicans helped passed.

Perhaps it is time to hold the Vern Buchanan’s responsible for their irresponsibility! Buchanan ends emails to constituents with “tell me what you think.” Perhaps those who voted for him should?

Here’s a Couple Of Charts That Might Explain Why Congressmen Voted For The ‘CRomnibus’ Spending Bill from IJReview’s Kevin Boyd:

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RELATED ARTICLES:

What the $1.1 trillion spending bill contains

FL Rep. Buchanan votes to fund government by defunding America

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Why is Rep. Vern Buchanan (R-FL 16) worried about the West African black rhino?

Illegal aliens get Social Security Benefits thanks to Boehner and his RINOs

Text and Analysis of Florida Amendment 1: “The Water and Land Conservation Initiative”

Dan Peterson, Executive Director of the Coalition for Property Rights, provides the following detailed analysis of Florida Amendment 1:

BALLOT TITLE:

Water and Land Conservation – Dedicates funds to acquire and restore Florida conservation and recreation lands.

BALLOT SUMMARY:

Funds the Land Acquisition Trust Fund to acquire, restore, improve, and manage conservation lands including wetlands and forests; fish and wildlife habitat; lands protecting water resources and drinking water sources, including the Everglades, and the water quality of rivers, lakes, and streams; beaches and shores; outdoor recreational lands; working farms and ranches; and historic or geologic sites, by dedicating 33 percent of net revenues from the existing excise tax on documents for 20 years.

Amendment 1 alters SECTION 28. Land Acquisition Trust Fund to include:

a) Effective on July 1 of the year following passage of this amendment by the voters, and for a period of 20 years after that effective date, the Land Acquisition Trust Fund shall receive no less than 33 percent of net revenues derived from the existing excise tax on documents, as defined in the statutes in effect on January 1, 2012, as amended from time to time, or any successor or replacement tax, after the Department of Revenue first deducts a service charge to pay the costs of the collection and enforcement of the excise tax on documents. b) Funds in the Land Acquisition Trust Fund shall be expended only for the following purposes: 1) As provided by law, to finance or refinance: the acquisition and improvement of land, water areas, and related property interests, including conservation easements, and resources for conservation lands including wetlands, forests, and fish and wildlife habitat; wildlife management areas; lands that protect water resources and drinking water sources, including lands protecting the water quality and quantity of rivers, lakes, streams, springsheds, and lands providing recharge for groundwater and aquifer systems; lands in the Everglades Agricultural Area and the Everglades Protection Area, as defined in Article II, Section 7(b); beaches and shores; outdoor recreation lands, including recreational trails, parks, and urban open space; rural landscapes; working farms and ranches; historic or geologic sites; together with management, restoration of natural systems, and the enhancement of public access or recreational enjoyment of conservation lands. 2) To pay the debt service on bonds issued pursuant to Article VII, Section 11(e). c) The moneys deposited into the Land Acquisition Trust Fund, as defined by the statutes in effect on January 1, 2012, shall not be or become commingled with the General Revenue Fund of the state.

IMPACT ON PRIVATE PROPERTY

Amendment One departs From a Historical Philosophical Perspective of Private Property

In the first half of our nation’s history, it was the practice of the government to encourage private ownership through land grants and other such vehicles. This amendment reverses that tradition. It seems to embrace a philosophy found in this quote (a philosophy which is supported by many of the pro-conservation/sustainable development organizations):

“Land…cannot be treated as an ordinary asset, controlled by individuals and subject to the pressures and inefficiencies of the market.

Private land ownership is also a principal instrument of accumulation and concentration of wealth and therefore contributes to social injustice; if unchecked, it may become a major obstacle…

Public control of land use is therefore indispensable to its protection as an asset…”

From the Preamble, UN Conference, Vancouver, Canada, 1976

Amendment One Departs From Our Founding Fathers’ Intent For Private Property

Our Founding Fathers placed safeguards into our Constitution as a hedge or safeguard against government tyranny. As a result, America became an exceptional and unique place on earth by virtue of being founded upon the right of private citizens to own and use property.

Amendment One dangerously opens the door for government to own and control more land. That means less land is owned and control by private property owners. This amendment presents an alternative view to that intended by our founding fathers.

Today, more than 50% of the American west is owned by government. In the state of Utah, 87% of the land is owned and controlled by the federal government. Despite efforts by the state to reclaim their land, the federal government refuses to return it.

Giving government large sums of money to buy land puts Florida on a trajectory similar to Utah. The intent of this amendment is primarily land acquisition for the purpose of conservation.

IMPACT ON LOCAL GOVERNMENT BUDGETS

As the amount of government owned lands increases, two things happen fiscally:

First, the amount of private lands on the tax rolls will be decreased. Therefore, tax revenues will decrease making less funding available for things like law enforcement, first responders, local services, infrastructure maintenance, and local education. Local governments will have to raise property taxes or take the rarely seen step of cutting their budgets.

Second, more taxpayer money will need to be diverted to pay for increased maintenance costs of ever increasing amounts of conservation lands. Currently, the state lacks money to maintain the properties owned by government.

Counties with the most land in government owned conservation lands, have the highest tax rates.

IMPACT ON THE STATE BUDGET

It is the Florida Legislature’s constitutional responsibility to work with the Governor to craft an annual balanced budget to meet the needs of our state. Through the Legislature, all the needs of the state are considered, debated, and approved by elected representatives. This is designed to address in a balanced way, the comprehensive state needs.

Amendment One restricts the Legislature’s ability and flexibility to budget or allocate funding for an array of state-wide critical needs such as transportation, education, affordable housing, and economic development, etc.

The purchase of land by government is a one-time expense. But, the maintenance of government property is a growing, on-going expense to also be remembered. As government ownership of land increases, so maintenance costs increase requiring more employees (and their pensions) , more facilities, and more equipment.

IMPACT ON THE STATE ECONOMY

Nearly one-third of Florida land is used for agriculture. Agriculture, including farming and ranching, is the backbone of our state’s economy providing jobs and produce. Amendment One names both for acquisition. The majority of lands put into conservation make little to no contribution to the economy.

As private land, with its real or potential contribution to our state’s economy, is removed from production, it moves from being a producer of revenue to becoming a user of revenue. Thus, the state’s economy is weakened. Less land in production means our state is less productive and less competitive in the world.

IMPACT ON THE ENVIRONMENT

Today, more than 27% of Florida is already in conservation according to The Florida Natural Areas Inventory. Add lands for government facilities and the amount of land owned by government is more than 30%.

Florida has more land per square mile under government ownership than any other state east of the Mississippi River. The amount of government owned land will be greatly increased if a projected $18 B were to become available for additional land purchases.

Environmentalist groups have plans to purchase millions of additional acres for additional parks, wildlife refuges, wildlife corridors, forests and conservation areas, just to name a few. Amendment One supplies the cash to do so.

SUMMARY

Amendment One would be bad for Florida because it is an unneeded and harmful addition to the Florida Constitution. It will reduce the amount of privately owned property and negatively impact local revenues. It also intrudes on the legislature’s fiduciary responsibility to allocate our state’s revenues in the interests of our entire state.

Nearly one-third of our state is owned by government. Approximately another third is in agriculture. Documentary transaction stamps are already used to fund a number or environmental programs. The Florida Forever program continues to receive millions of dollars annually through the legislature to acquire conservation land. A growing economy already allows for more money to be allocated for government land purchases.

A more radical option should be considered. Doc stamps are expensive, adding significantly to the transaction costs of real estate. Why not reduce or eliminate the Doc Stamp tax altogether to help, in no small way, all Floridians to exercise their rights of property ownership?

Rave reviews for the Wealth Building Home Loan

The Wealth Building Home Loan (WBHL), a new approach to home finance, opened to rave reviews at the American Mortgage Conference held September 8-10.  Six leaders of national stature made favorable comments from the podium.

Lewis Ranieri, considered the “godfather” of mortgage finance, in his keynote address praised the WBHL:  “Fundamentally, what I find exciting is the wealth building nature of the product.  Anyone who knows me knows how concerned I am that too often the mortgage has been utilized as an ATM for a boat or big screen TV, as opposed to building equity; if we’re to meet the needs of Americans who desire a home, this type of SAFE experimentation will be critical.”

Carol Galante, FHA commissioner,David Stevens, Mortgage Bankers Association CEO and former FHA commissioner, Joseph Smith, monitor of the National Mortgage Settlement of the State Attorneys General and Lenders, and James Lockhart, former director of the Federal Housing Finance Agency also made note of the innovative approach taken by the WBHL.

Bruce Marks, CEO of the Neighborhood Assistance Corporation of America (NACA), announced that the WBHL, which provides low-income borrowers a straight, broad highway to building wealth based on a 15-year, fully amortizing, fixed-rate loan, will be available in an initial rollout undertaken by NACA and the Bank of America within 60 days.

Long-time industry observer Tom LaMalfa, in an email, stated:

“In an industry in which few agree on much, there was remarkable agreement on the value of the WBHL among an array of industry leaders speaking at the AMC this week.”

Stephen Oliner (codirector of AEI’s International Center on Housing Risk) and I announced that additional WBHL pilots are in the works with lenders around the country.

Smith spoke extensively about the challenge in providing access to credit and home ownership, particularly among low- and moderate-income borrowers.  He asked:

“[I]s the thirty year fixed-rate mortgage what we need?  Contrary to the opinion of many people whom I admire and respect, the thirty year fixed rate mortgage is neither a Constitutional nor human right…. While it is a proven ‘affordability product’ of long standing, the thirty-year fixed-rate mortgage does not build equity very quickly. Further, a lot of things can happen to a borrower over those thirty years – job loss, health problems, divorce. [a]s Monitor of the National Mortgage Settlement, I have done a lot of listening in the last two and a half years; including to distressed borrowers, the people who represent them, and public officials who deal with the fallout from increased foreclosures and bankruptcies. What I have heard confirms what I know from prior experience: that one or two of those life issues – or, in many, many cases, the trifecta – have resulted in real financial crisis on a large scale. Absent substantial home equity at the outset, the thirty-year fixed rate mortgage increases the fragility of a borrower’s overall financial position and puts the borrower at risk for a very long time.”

Smith went on:

“The traditional answer to the concerns I have just expressed is to require a substantial down payment. That’s certainly effective – for the people who can afford it. But it reduces access to credit and home ownership, particularly among low- and moderate-income borrowers.  If we want to keep homeownership an option for an expanding portion of the population, we should build some additional features into the mortgage product to reduce fragility. At the very least, we should consider the inclusion of product features that allow and even encourage early equity build-up. In that regard, I am pleased to note AEI’s Wealth Building Home Loan.”

Steve and I created the WBHL to serve the twin goals of providing a broad range of homebuyers – including low-income, minority, and first-time buyers – a more reliable and effective means of building wealth than currently available under existing policies, while maintaining buying power similar to a 30-year loan.

A WBHL has a much lower foreclosure risk because of faster amortization and common-sense underwriting. Its monthly payment is almost as low as 30-year, fixed-rate loan while providing the buyer with more than 90 percent of the buying power. It requires little or no down payment and has a broad credit box, meaning sustainable lending for a wide range of prospective homebuyers. While the WBHL is designed to reduce default risk for all borrowers, this is a critical importance for borrowers with FICO scores in the range of 600-660.

The WBHL will help these borrowers reliably and sustainably build wealth.

EDITORS NOTE: The featured image is courtesy of SNMC.

Happy Capital Day? Why not? by Lawrence W. Reed

Any good economist will tell you that as complementary factors of production, labor and capital are not only indispensable but hugely dependent upon each other as well.

Capital without labor means machines with no operators, or financial resources without the manpower to invest in. Labor without capital looks like Haiti or North Korea: plenty of people working but doing it with sticks instead of bulldozers, or starting a small enterprise with pocket change instead of a bank loan.

Capital can refer to either the tools of production or the funds that finance them. There may be no place in the world where there’s a shortage of labor but every inch of the planet is short of capital. There is no worker who couldn’t become more productive and better himself and society in the process if he had a more powerful labor-saving machine or a little more venture funding behind him. It ought to be abundantly clear that the vast improvement in standards of living over the past century is not explained by physical labor (we actually do less of that), but rather to the application of capital.

Harmony of Interest

This is not class warfare. I’m not “taking sides” between labor and capital. I don’t see them as natural antagonists in spite of some people’s attempts to make them so. Don’t think of capital as something possessed and deployed only by bankers, the college-educated, the rich, or the elite. We workers of all income levels are “capital-ists” too—every time we save and invest, buy a share of stock, fix a machine, or start a business.

And yet, we have a “Labor Day” in America but not a “Capital Day.”

Perhaps subconsciously, Americans do understand to some extent that those who invest and deploy capital are important. After all, most people would surely have an easier time naming the “top ten capitalists” in our history than the “top ten workers.” We take pride in the kids in our neighborhoods when they put up a sidewalk lemonade stand. President Obama continues to be roundly excoriated for his demeaning remark, “You didn’t build that; somebody else made that happen.”

Bad Eggs

That’s not to say there aren’t bad eggs in the capitalist basket. Some use political connections to get special advantages from government. Others cut corners, cheat some customers or pollute a stream. But those are the exception, not the rule, in a society that values character. Workers are not all saints either—who among us doesn’t know of one who stole from his employer, called in sick when he wasn’t, or abused the disability or unemployment compensation rules? Those exceptions shouldn’t diminish the importance of work or the nobility of most workers.

Like most Americans, I’ve traditionally celebrated labor on Labor Day weekend—not organized labor or compulsory labor unions, mind you, but the noble act of physical labor to produce the things we want and need. Nothing at all wrong about that!

But this year on Labor Day weekend, I’ll also be thinking about the remarkable achievements of inventors of labor-saving devices, the risk-taking venture capitalists who put their own money (not your tax money) on the line and the fact that nobody in America has to dig a ditch with a spoon or cut his lawn with a knife. Indeed, what could possibly be wrong about having a “Capital Day” in odd numbered years and a “Labor Day” in the even-numbered ones?

Labor Day and Capital Day. I know of no good reason why we should have just one and not the other.

EDITORS NOTE: This article first ran on September 3, 2012.

larry reed new thumbABOUT LAWRENCE W. REED

Lawrence W. (“Larry”) Reed became president of FEE in 2008 after serving as chairman of its board of trustees in the 1990s and both writing and speaking for FEE since the late 1970s. Prior to becoming FEE’s president, he served for 20 years as president of the Mackinac Center for Public Policy in Midland, Michigan. He also taught economics full-time from 1977 to 1984 at Northwood University in Michigan and chaired its department of economics from 1982 to 1984.

INFOGRAPHIC: How Unions Are Chewing Through Taxpayer Dollars

Nicole Rusenko and Kelsey Harris write and graphically display on The Daily Signal:

Did you know your tax dollars are financing unions?

Thanks to what the federal government calls “official time,” government workers spent 2.4 million hours on union work in 2010. In fact, the Internal Revenue Service alone has 286 full-time employees who work exclusively for the National Treasury Employees Union.

Check out the infographic below for more details on whose special interests (and pockets) your money is going.

WARNING: This infographic may upset your stomach and shrink your wallet.

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COMMENTARY BY

Portrait of Nicole Rusenko Nicole Rusenko@ncrusen20

Nicole Rusenko is a senior designer at The Heritage Foundation.

 

Portrait of Kelsey Harris

Kelsey Harris
Kelsey Harris is the visual editor at The Daily Signal and digital media associate at The Heritage Foundation.

Tragedy of the Healthcare Commons: The Affordable Care Act contributes to an already unsustainable situation by D.W. MacKenzie

Recent difficulties with implementing the Affordable Care Act have increased opposition to the program. A majority of Americans now oppose it. Problems with the healthcare.gov website are in all likelihood temporary. However, there are serious long-term problems, particularly considering long-term finance and labor-supply issues. Give the mounting difficulties with and growing concerns about the ACA, it is worthwhile to reconsider the main issues regarding this program.

The Congressional Budget Office (CBO) recently published a report examining some of these problems. It contains nothing new. Many commentators have discussed the projection of lower labor-force participation. Obamacare subsidies will allow lower-income Americans to work less. People do in fact work less if their costs are shared. The tendency of people to withhold work from collective undertakings is known among economists as a tragedy of the commons.

Reduced labor-force participation means both lower total tax revenue and higher spending on government benefits. The CBO’s long-term forecasts report serious imbalances between tax revenues and federal spending. Federal deficits are projected to remain high, but “manageable,” for about a decade.

The costs of entitlements, along with regular budget items (defense and non-defense), are relevant to any discussion of the ACA’s affordability. The retirement of the baby boomers, though, will result in steadily rising costs for older entitlement programs. Taxpayers are already legally responsible for a national debt of $17 trillion (which  will hit $20 trillion by the time Obama leaves office). Interest payments on the national debt are low for the time being, but they won’t stay that way forever. The Medicare trustees have admitted to a long-term deficit of $34 trillion, but independent estimates run much higher. Social Security has an unfunded liability of more than $12 trillion. These costs pile on top of the current regular budget of $3.5 trillion, not to mention projected growth in this budget. Taxpayers are also responsible for the ACA’s cost overruns. Section 1342 of the ACA makes taxpayers responsible for bailing out insurance companies if the need arises.

Taxpayers are legally obligated to finance all of the above-mentioned expenditures, debts, and unfunded liabilities. People who believe in individual liberty reject the idea that people are morally obliged to fund ever-rising Federal expenditures. But the dispute over whether American taxpayers should fund projected federal spending is rendered academic by the fact that younger Americans will not be able to afford to pay for all of it. The commons created out of the New Deal and the Great Society is collapsing.

Economist Larry Kotlikoff estimates that average rates of taxation would have to rise 56 percent to cover projected increases in federal expenditures. Kotlikoff’s estimate may be high, but even a lower figure would leave Americans in dire financial straits. Taxpayers simply will not be able to fund all projected increases in all current federal programs. Bond investors will not finance our rising national debt in unlimited amounts. The ACA’s increased spending and lower labor-force participation, on top of these increases, makes national bankruptcy that much more likely.

National bankruptcy is not inevitable. The U.S. government is heading toward bankruptcy superficially because politicians have failed to set rational budget priorities, and fundamentally because citizens expect far too much of the public sector. The ACA was created out of concern that financial considerations bar access to healthcare to many people. And Americans do spend a large percentage of national income on healthcare.

The good news is that “we” have a substantial amount of leeway to save money on healthcare. Data on the overall effectiveness of public healthcare spending is clear, but not nearly as well known among voters. For example, The RAND Corporation conducted a health insurance experiment from 1974 to 1982, which showed that making healthcare “free,” or available at no personal marginal cost, does lead people to buy more. Much of this extra healthcare is inappropriate or largely unneeded, however. When people pay for more of their healthcare out of pocket, they tend to waste less money. The RAND study concluded, “In general, the reduction in services induced by cost sharing had no adverse effect on participants’ health.” Many other studies cast doubt on the effectiveness of providing healthcare at no private cost. According to another study, “Medicare enrollees in higher-spending regions receive more care than those in lower-spending regions but do not have better health outcomes or satisfaction with care.” Studies of people with health savings accounts (HSAs), as compared with people with plans like PPOs, show HSA holders control premium inflation better than their PPO counterparts.

Having people pay deductibles or bear other out-of-pocket costs causes us to economize on healthcare. Health insurance pools risks and creates a type of commons, whether done privately or publicly. The private commons of insurance companies does, however, have limits. Private insurance companies deny some types of coverage, depending on how much insurance people contract for in the first place. In other words, private insurance is not an open commons—it specifies the extent to which each policy holder can draw out of the insurance pool.

Public insurance programs lure people in by promising more benefits than private insurance plans offer. Yet public programs ultimately run into the basic problem of scarcity. The ACA pushes people out of very basic insurance plans into plans with higher levels of coverage, but excessive coverage is a major source of high healthcare costs. Americans spend a sizable portion of GDP on health expenses (17.9 percent in 2011). The overconsumption of healthcare by overinsured Americans is both a major source of excessive costs and a cost that can be cut with little adverse effect.

The tendency of people to waste money in open-access healthcare financing is simply going to produce another tragedy of the commons. Too few young people have been signing up at Healthcare.gov because younger Americans are mostly smart enough to avoid paying into a commons. Americans are signing up mainly because they expect to draw subsidies out of this commons.

Problems with managing a commons in healthcare financing are serious. Once someone enters into a life-threatening medical condition, they and their family will want every possible available step taken to save this person—provided that “someone else” pays. Passing costs onto someone else is, aside from being morally dubious, unworkable in the aggregate because we are each “someone else” to everyone else.

There are many costs associated with government intervention into the healthcare industry: administrative and regulatory compliance costs, elevated costs of litigation and court rulings, lobbying costs, costs of perverse incentives. The perversities associated with treating health as an open-access and politicized commons have, along with other, government spending programs, created an unsustainable fiscal situation. The unaffordability of the Affordable Care Act leaves us with two main options: Congress can repeal the ACA immediately through the legislative process, or we can all wait for the repeal process of national bankruptcy.

ABOUT D.W. MACKENZIE

D. W. MacKenzie is an assistant professor of economics at Carroll College in Helena, Montana.

EPA Still Wants to Garnish Your Wages Without a Court Order

A few weeks ago, EPA quietly tried to reinterpret its authority and wanted to garnish wages from those who owe it a debt. After a storm of criticism from Members of Congress and the public, EPA pulled back.

However, the agency is still trying to grant itself this power, only this time it’s going through the standard notice-and-comment process that most federal regulations go through.

What’s is the problem EPA wants to solve by having the ability to dig to go after your wallet? Will this stop polluters? Is EPA inundated with deadbeats?

Apparently not, according to Catrina Rorke and Sam Batkins at the American Action Forum who looked at EPA’s data.

They point out that, over the past six years, EPA has imposed more than $2.3 billion in “non-major” fines against companies and individuals that committed “infractions that do not involve large facilities emitting tons of toxic pollutants annually.”

However, Rorke and Batkins found, “the majority of fines for individuals involve paperwork infractions – not environmental contamination.” Individuals or businesses were fined for failing to file notification or reports with EPA.

And as for a delinquency problem, here’s their key finding:

[T]he average length of time that individuals were delinquent paying EPA was zero quarters. In other words, people generally pay their fines on time.

So why does EPA want to be able to garnish an individual’s wages? Based on its data, it’s not to ensure a cleaner environment nor solve delinquency problems. Roark and Batkins conclude (correctly in my view):

EPA’s proposal to grant itself wage garnishment authority more closely resembles a power grab than an appropriate administrative step to rectify an observed issue in their fine repayment process.

Stay tuned.

CLICHES OF PROGRESSIVISM #5 – Warren Buffett’s Federal Tax Rate Is Less than His Secretary’s

The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

The antecedents to this collection are two classic FEE publications that YAF helped distribute in the past: Clichés of Politics, published in 1994, and the more influential Clichés of Socialism, which made its first appearance in 1962. Indeed, this new collection will contain a number of essays from those two earlier works, updated for the present day where necessary. Other entries first appeared in some version in FEE’s journal, The Freeman. Still others are brand new, never having appeared in print anywhere. They will be published weekly on the websites of both YAF and FEE: www.yaf.org and www.FEE.org until the series runs its course. A book will then be released in 2015 featuring the best of the essays, and will be widely distributed in schools and on college campuses.

See the index of the published chapters here.

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#5 – Warren Buffett’s Federal Tax Rate Is Less than His Secretary’s

In August 2011, Warren Buffett wrote an opinion piece in the New York Times in which he made the assertion that his 2010 “federal tax rate” of 17.4 percent was 18.6 percentage points less than the 36.0 percent average rate paid by the 20 other workers in his office.

Buffett’s piece garnered substantial media attention and, in the months since its publication, his “federal tax rate” assertion has been woven into the fabric of American politics. His analysis was the basis for the “Buffett Rule,” a tax plan proposed by President Obama that would implement measures under which everyone making more than $1 million in income per year would pay a minimum effective tax rate of 30 percent.

Clearly, given Buffett’s status as a legendary businessman and investor (the “Oracle of Omaha”), his tax analysis carried a great deal of credibility and, as such, it was never challenged. Adding to the unchallenged acceptance of Buffett’s assertion was the fact that Buffett never released (a) his 2010 federal tax return, (b) the federal tax returns of his office workers, or (c) the analysis underlying his “federal tax rate” assertion.

In truth, Buffett’s assertion is completely inaccurate and is based on a fundamentally flawed analysis of basic federal taxation principles. In reality, he pays a much higher relevant “federal tax rate” than any of his office workers.

First of all, payroll taxes (Social Security and Medicare) are totally irrelevant for this type of analysis. Because these taxes were not assessed on non-wage income (prior to 2013), and because Social Security taxes were only assessed on the first $106,800 of wage income in 2010, the amount Buffett paid into these programs was very close, in dollar terms, to the amounts paid into them by each of his office workers. But because Buffett had total taxable income of almost $40 million, the amount of Social Security and Medicare taxes he paid in 2010 represented only a tiny fraction of his total taxable income. For most of his office workers, these taxes represented 7.65 percent of their taxable income (even though they paid roughly the same amount as Buffett did in dollar terms). This 7.65 percent payroll tax differential is part of the 18.6 percent differential cited by Buffett in his op-ed piece.

But what Buffett failed to mention is that Social Security and Medicare benefits are capped as well. Upon retirement, Buffett will receive almost exactly the same Social Security and Medicare benefits (in dollar terms) that his office workers will receive. There is very little differential between Buffett and his office workers in terms of what they pay into the Social Security and Medicare programs and what they will receive in benefits. As such, the 7.65 percentage point “federal tax rate” differential between Buffett and his co-workers arising from the existing Social Security and Medicare taxing mechanism is simply not relevant and is a mirage.

A second flaw in Buffett’s analysis has to do with the fact that he included employer-paid payroll taxes in coming up with his and his office workers’ “federal tax rates.” The obvious problem here is that Buffett’s coworkers do not pay these taxes. Rather, Buffett does as a partial owner of their employer, Berkshire Hathaway. Buffett’s inclusion of these taxes in his analysis was clearly incorrect, and it distorts the rates he cited. Of course, he included employer-paid payroll taxes to double the 7.65 percent “federal tax rate” differential mirage identified in the previous paragraph.

Buffett himself owns 33.9 percent of Berkshire Hathaway, a publicly traded corporation with taxable income of $19.1 billion in 2010. Assuming a very conservative corporate federal tax rate of 25 percent, Berkshire will ultimately pay $4.76 billion in federal corporate income taxes on this taxable income. Corporate taxes are borne by shareholders of the corporation, in that these taxes reduce the amount of cash available for (a) dividend payments (Berkshire has not historically paid dividends to its shareholders), or (b) reinvestment into the corporation in order to increase shareholder value.

Given his ownership stake in Berkshire, Buffett bore 33.9 percent of the $4.77 billion in federal corporate taxes, or $1.61 billion. Buffett ignored this tax amount in compiling his “federal tax rate” analysis. If Buffett’s share of corporate taxable income and corporate taxes paid are factored into his analysis, his overall 2010 “federal tax rate” increases by 7.56 percentage points, from 17.4 percent to 24.96 percent.

As an employer, Berkshire matches the Social Security and Medicare taxes paid by its employees. These taxes are borne by the shareholders of Berkshire for the same reasons corporate income taxes are. Using reasonable assumptions and data gleaned from the company’s 2010 SEC filings, Buffett’s share of these taxes was approximately $400 million in 2010. If these taxes are included (and they certainly should be), his 2010 “federal tax rate” increases by 6.16 percentage points to 31.12 percent.

Let’s do the math. Buffett, in his analysis, overstated his office workers’ “federal tax rate” by including irrelevant payroll taxes (7.65 percent) and employer-paid payroll taxes (7.65 percent). In actuality, his office workers’ relevant 2010 “federal tax rate” was 20.7 percent, not 36.0 percent, while Buffett’s was actually 31.12 percent, not 17.4 percent.

Bottom line: Buffett’s 2010 relevant “federal tax rate” was actually at least 10.4 percentage points higher than the average rate paid by his office workers.

Who knew?

It is quite troubling that Buffett’s original Times op-ed piece, based upon such a flawed and incomplete analysis, has gained such unchallenged visibility and credibility within the landscape of American politics. While Buffett should be chastised for putting out such an inaccurate and misleading analysis, political commentators on the right should be faulted for not doing their research and for not effectively raising a challenge against the flawed thinking underlying Buffett’s op-ed.

George P. Harbison

Executive Vice President and Chief Financial Officer
Trident University International, LLC
Cypress, California

Summary

  • Warren Buffett created a new tax metric by combining individual income taxes and payroll taxes into one “federal tax rate.”  He then asserted that his 2010 “federal tax rate” of 17.4 percent was 18.6 percentage points lower than the 36.0 percent average “federal tax rate” paid by his office workers.
  • The Social Security and Medicare taxing mechanisms in place in 2010 were inherently fair.  Ascribing a “federal tax rate” differential to employee-paid payroll taxes, as Buffett did, is analytically incorrect. This 7.65 percentage point “federal tax rate” differential is a mirage.
  • Incredibly, Buffett included employer-paid (matching) payroll taxes in his calculations as well, thus doubling the 7.65 percentage point differential.
  • Buffett ignored, in his calculations, the roughly $1.6 billion in corporate income taxes he bore in 2010 as a one-third owner of Berkshire Hathaway. He also ignored his share (roughly $400 million) of Social Security and Medicare matching taxes that Berkshire Hathaway paid to employees.
  • The analytically correct comparison, excluding individual payroll taxes and including corporate income and payroll taxes, shows that Buffett’s “federal tax rate” was actually over 10 percentage points higher than the average rate of his office workers in 2010.
  • For further information, see http://tinyurl.com/mn4z9rrhttp://tinyurl.com/kt8kcds,http://tinyurl.com/lzdg7ym, and http://tinyurl.com/lxdrfac.

Editor’s Note: This essay originally appeared on Forbes.com in October 2013.

ABOUT GEORGE P. HARBISON

George P. Harbison is the Executive Vice President and Chief Financial Officer of Trident University International, LLC.

For the Love of Money? by Gary M. Galles

Money at the margin, not everything for money.

It’s not unusual to hear market systems criticized for relying too much on money, as if this comes at the expense of the altruistic relationships that would otherwise prevail. Ever heard the phrase “only in it for the money”? It’s as if self-interest has a stink that can corrupt transactions that generate benefits for others, turning them into offenses. So this line of thinking suggests reliance on market systems based in self-ownership would be tantamount to creating a world where people only do things for money, and lose the ability to relate to one another on any other terms.

People Don’t Do Everything for Money

One need not go far to see the falsity of the claim that everything is done for money in market systems. My situation is but one example: I have a Ph.D. in economics from a top graduate program. It is true that, as a result, I have an above-average income. But I did not do it all for the money. One of my major fields was finance, but if all I cared about was money—as my wife reminds me when budgets are particularly tight—I would have gone into finance rather than academia and made far more. But I like university students. I think what I teach is important, and I value the ability to pass on whatever wisdom I have to offer. I like the freedom and time to pursue avenues of research I find interesting. I enjoy the ability to tell and write the truth as I see it (particularly since I see things differently from most) and I prefer a “steady job” to one with far more variability.

Every one of those things I value has cost me money. Yet I chose to be a professor (and would do it again). While it’s true that the need to support my family means that I must acquire sufficient resources, many things beyond just money go into choosing what I do for a living. And the same is true for everyone.

Ask any acquaintances of yours who they know that only does things for money. What would they say? They would certainly deny it about themselves. While they might apply this characterization to people they don’t know, beyond Dickens’s Ebenezer Scrooge and his comic book namesake, Scrooge McDuck, they would be unable to provide a single convincing example. If market critics performed that same experiment, they would recognize that they are condemning a mirage, not market arrangements.

Confusing Ends and Means

Beyond the fact that all of us forego some money we could earn for other things we value, the fact that every one of us gives up money we have earned for a vast multitude of goods, services, and causes also reveals that individuals don’t just do things for the money. Each of us willingly gives up money up to further many different purposes we care about. Money is not the ultimate end sought, but a means to a vast variety of possible ends. Mistakenly treating money as the end for which “people do everything” is fundamentally flawed—both for critics of the market and for the participants in it.

To do things for money is nothing more than to advance what we care about. In markets, we do for others as an indirect way of doing for ourselves. This logic even applies to Scrooge. His nephew Fred’s assertion that he doesn’t do any good with his wealth is false; he lends to willing borrowers at terms they find worth meeting, expanding the capital stock and the options of others.

That an end of our efforts is to benefit ourselves, in and of itself, merits neither calumny nor congratulations. Money’s role is that of an amoral servant that can help us advance whatever ends we ultimately pursue, while private property rights restrict that pursuit to purely voluntary arrangements. Moral criticism cannot attach to the universal desire to be able to better pursue our ends or to the requirement that we refrain from violating others’ rights, only to the ends we pursue.

To do things for money in order to achieve world domination could justify moral condemnation. But the problem is that your intended end will harm others, not the fact that you did some things for money, benefitting those you dealt with in that way, to do so. Using money to build a leprosarium, as Mother Teresa did with her Nobel Prize award, does not justify moral condemnation. Similarly, using money to support your family, to live up to agreements you made with others, and to try not to burden others is being responsible, not reprehensible. Further, there is nothing about voluntary arrangements that worsens the ends individuals choose. But by definition, they place limits on ends that require harming others to achieve them.

It is true that money represents purchasing power that can be directed to ends others object to. Money is nothing more than a particularly powerful tool, and all tools can be used to cause harm. Just as we shouldn’t have to forego the benefits of hammers because somebody could cause harm with one, there’s no reason to think society would be better off without money or the market arrangements it makes possible just because some people can use those things for harmful ends. And if the ends aren’t actually causing harm, then the objections over them come down to nothing more than disagreements about inherently subjective valuations. Enabling a small class of people to decide which of these can be pursued and which can’t makes everyone worse off.

Those who criticize people for doing everything for money also do a great deal for money themselves. How many campaigns have religious groups and nonprofit organizations run to get more money? How much of government action is focused on getting more money? Why do the individuals involved not apply the same criticism to themselves? Because they say they will “do good” with it. But every individual doing things for money also intends to do good, as he or she sees it, with that money. And if we accept that people are owners of themselves, there is no obvious reason why another’s claims about what is “good” should trump any “good” that you hold dear, or provide for another in service through exchange.

Criticizing a Straw Man

Given that the charge that “people do everything for money” in market systems is both factually wrong and logically lame, why do some keep repeating it? It creates a straw man easier to argue against than reality, by misrepresenting alternatives at both the individual and societal level.

At the individual level, this assertion arises when people disagree about how to spend “public” resources (when we respect private property, this dispute disappears, because the owner has the right to do as he or she chooses with it, but cannot force others to go along with or allow it; “public” resources are obtained by force). The people who wish to spend other people’s confiscated resources in ways the original owners disagree with claim a laundry list of caring benefits their choice would provide, but foreclose similar consideration of the harms that would be caused to those they claim care only about money. That, in turn, is used to imply that the purportedly selfish person’s claims are unworthy of serious attention. (Something similar happens when politicians count “multiplier effects” where government money is spent, but ignore the symmetrical negative “multiplier effects” radiating from where the resources are taken.)

This general line draws support from a misquotation of the Bible. While more than one recent translation of 1 Tim 6:10 renders it “the love of money is a root of all sorts of evils,” the far less accurate King James Version rendered it, “the love of money is the root of all evil.” When one simply omits or forgets the first three words, it becomes something very different—“money is the root of all evil.” Portray those who disagree with your “caring” ends as simply loving money more than other people, and they lose every argument by default. Naturally, it’s a seductive strategy.

At the societal level, criticizing market systems as tainted by the love of money implies that an alternate system would escape that taint and therefore be morally preferable. By focusing attention only on an imaginary failing of market systems that would be avoided, it allows the implication of superiority to be made without having to demonstrate it. This is a version of the Nirvana fallacy.

By blaming monetary relationships for people’s failings, “reformers” imply that taking away markets’ monetary nexus will somehow make people better. But no system makes people angels; all systems must confront human flaws and failings. That means a far different question must be addressed: How well will a given system do with real, imperfect, mostly self-interested people? And it shouldn’t be necessary, but most political rhetoric makes a second question nearly as important: Does the given system assume that people are not imperfect and self-interested when they have power?

Given that the utopian alternatives offered always involve some sort of socialism or other form of tyranny, an affirmative case for them cannot be made. Only by holding the imaginary “sins” of market systems to impossible standards, while holding alternatives to no real standards except the imagination of self-proclaimed reformers, can that fact be dodged. But there’s nothing in history or theory that demonstrates that overwriting markets with expanded coercion makes people more likely to do things for others. As Anatole France noted, “Those who have given themselves the most concern about the happiness of peoples have made their neighbors very miserable.” And as economist Paul Heyne wrote, “Market systems do not produce heaven on earth. But attempts by governments to repress market systems have produced . . . something very close to hell on earth.”

Money at the Margin

Money is not everything. But changes in the amounts of money to be earned or foregone as a result of decisions change our incentives at the many margins of choice we face, and so change our behavior. Such changes—money at the margin—are the primary means of adjusting our behavior in the direction of social coordination in a market system.

Changes in monetary incentives are how we adapt to changing circumstances, because whatever their ultimate ends, everyone cares about commanding more resources for those purposes they care about. It is how we rebalance arrangements when people’s plans get out of synch, which is inevitable in our complex, dynamic world. In such cases, changing money prices allow each individual to provide added incentives to all who might offer him assistance in achieving his ends, even if he doesn’t know them, doesn’t know how they would do so, and doesn’t think about their wellbeing (in fact, it applies even if he dislikes those he deals with, as long as the benefits of the arrangements exceed his perceived personal cost of doing so).

For instance, consider a retail gas station faced with lengthy lines of cars. That reflects a failure of social cooperation between the buyers and the seller. Those in line are revealing by their actions that they are willing to bear extra costs beyond the current price to get gas, but their costs of waiting do not provide benefits to the gas station owner. So the owner will convert those costs of waiting in line, which are going to waste, into higher prices (unless prevented by government price ceilings or antigouging directives) that benefit him. That use of money at the margin benefits both buyers and sellers and results in increased amounts of gasoline supplied to buyers.

Further, people can change their behavior in response to price changes in far more ways than “outsiders,” unfamiliar with all the local circumstances, realize. This makes prices, in turn, far more powerful than anyone recognizes.

Consider water prices. If water prices rose, your first thought might well be that you had no choice but to pay them. You might very well not know how many different responses people have already had to spikes (ranging from putting different plants in front yards to building sophisticated desalinization plants). Similarly, when airline fuel prices rose sharply, few recognized in advance the number of changes that airlines could make in response: using more fuel-efficient planes, changing route structures, reducing carry-on allowances, lightening seats, removing paint, and more.

If people recognized how powerful altered market prices are in inducing appropriate changes in behavior, demonstrated by a vast range of examples, they would recognize that the cost of abandoning money at the margin, which enables these responses by offering appropriate incentives to everyone who could be of assistance in addressing the problem faced, would enormously exceed any benefit.

Massive Improvements in Social Cooperation

If we could just presume that individuals know everyone and all the things they care about and the entirety of their circumstances, we could imagine a society more focused on doing things directly for others. But in any extensive society, there is no way people could acquire that much information about the large number of people involved. Instead, this would extend the impossible information problem that Hayek’s “The Use of Knowledge in Society” laid out in regard to central planners. You can care all you want, but that won’t give you the information you need. Beyond that insuperable problem, we would also have to assume that people cared far more about strangers than human history has evidenced.

Those information and other-interestedness requirements would necessarily dictate a very small society. But the costs of those limitations, if people recognized them, would be greater than virtually anyone would be willing to bear.

Without a broad society, the gains from cross-pollination of ideas and different ways of doing things would be hamstrung. The gains from comparative advantage (areas and groups focusing on what they do best, and trading with others doing the same thing) would similarly be sharply curtailed. A very small society would eliminate the incentive for large-scale specialization (requiring more extensive markets) and division of labor that makes our standard of living possible. Virtually every product that involves a large number of separate arrangements—such as producing cars or the gasoline to power them—would disappear, because the arrangements would be overwhelmed by the costs of making them without money as the balance-tipper. As Paul Heyne once put it,

The impersonal transactions that constitute the market system . . . have, over the course of a few centuries, enormously expanded our ability to provide [for] one another . . . while at the same time vastly extending our freedom both by offering us a multitude of options and by freeing us from arbitrary restrictions on our choice of life goals and on the means to further those goals. To reject impersonal transactions as unethical amounts to rejecting the foundation of modern life.

Conclusion

A pastiche of false premises leads many to reject out of hand what Hayek recognized as the “marvel” of market systems, which, if they had arisen from deliberate human design, “would have been acclaimed as one of the greatest triumphs of the human mind.” This is great for those who seek power over others—they have an endless supply of bogeymen to promise to fight.

But it’s a disaster for social coordination. The record of disasters inflicted on society demonstrates what follows when voluntary arrangements are replaced by someone else’s purportedly superior vision.

But it’s often forgotten. We must continue to make the case.

ABOUT GARY M. GALLES

Gary M. Galles is a professor of economics at Pepperdine University.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Petroleum exports: good for consumers, coffers, companies by Paul Driessen

Eliminating prohibition on exporting US oil and gas will help families, security, allies.

America’s crude petroleum export ban is an antiquated byproduct of the 1973 Arab oil embargo. Repeal is long overdue.

Hydraulic fracturing (fracking) has sent U.S. oil, natural gas, and propane production soaring. Natural gas output is up 36% since 2005. Oil output is expected to increase another 780,000 barrels per day (BOPD) in 2014 and reach 9.6 million BOPD by 2019. The United States is now importing half of what it did in 2005.

All this activity has created millions of oil patch and downstream jobs. Royalty and tax revenues have skyrocketed, and cheaper natural gas fuels and feed stocks have fostered a manufacturing and petrochemical renaissance.

Expanding natural gas use has also reduced carbon dioxide emissions, which should encourage people who still worry about “dangerous manmade climate change.”

petroleumbyproducts

For a larger view click on the pie chart.

Increased production has also enabled companies to export more gasoline, kerosene, jet fuel, lubricants, and other finished products, since refined product exports were never prohibited. Indeed, U.S. refining capacity is at record levels.

However, because they were designed to process heavier crude oils, refineries are limited in how much domestic sweet crude they can handle. Exports would provide an important outlet for excess crude supplies. That in turn would encourage additional exploration and production, protecting jobs, further revitalizing our economy, and multiplying royalty and tax revenues.

That exploration and production must go beyond state and private lands, though. Opening more federal onshore and offshore lands to leasing and drilling is essential and would magnify these benefits many times over. These resources belong to all Americans, not only to those who oppose fossil fuel use.

In many cases, adding fracking to the equation would expand supplies even further, by making otherwise marginal plays more economic to produce, reinvigorating old oil and gas fields, prolonging oil field life, and leaving fewer energy resources behind in rock formations.

Asia needs the energy to fuel its growing economy and support its still inadequate petroleum production infrastructure. Most of Europe’s natural gas comes from Russia, which charges high prices, engages in energy blackmail, and is rattling sabers in Crimea, Moldova, and Ukraine.

Right now, many European countries prohibit fracking, and EU climate and renewable energy policies have sent business and family energy prices into the stratosphere, killing jobs and preventing families from heating their homes properly.

Expanding domestic U.S. oil and gas production and exports would aid EU workers and families, while also improving America’s gross domestic product, balance of trade, national security, job growth, and prestige. Contrary to what some have argued, American consumers would also benefit, because exports would help stabilize global supplies and prices, keep OPEC and Russian price hikers at bay, and make the United States less reliant on imports and less vulnerable to supply disruptions.

What actually hurts consumers are government and environmentalist opposition to leasing, drilling, fracking, pipelines, and hydrocarbons – and their support for expensive, land-intensive, water-hungry, lower-energy-content ethanol and biofuel “alternatives.”

It is possible that the current $9 per barrel difference between U.S. and global oil prices could shrink slightly if some oil is exported. Barclays Bank says eliminating the export ban could add $10 billion a year to overall national gasoline costs.

However, this potential increase is just 3% of an average household’s annual $2,912 gasoline outlay. That’s $87 a year or $1.68 a week – half the price of pumpinggasone Starbucks Latte Grande.

The consumer impact of America’s massive land and petroleum resource lockdowns is much higher.

Of course, realizing these benefits requires producing more, ending the export ban, and building more pipelines, natural gas liquefaction plants, and shipping facilities. That can and should be expedited.

Europe can and should produce more of its own oil and gas. It has vast petroleum potential waiting to be tapped via fracking. Opposition to producing this petroleum is no more ethical than environmentalist demands that the United States keep its own enormous untapped petroleum supplies locked up, while we deplete other countries’ assets and put their wildlife habitats at risk from production-related accidents.

Nor is it ethical or sensible for President Obama to ask Saudi Arabia to send us more oil, rather than telling his energy and environment regulators to foster more production here at home.

In short, America should produce more here at home, export both crude and refined petroleum to Europe and Asia, and support companies that want to take their fracking technology and expertise overseas.

These actions will benefit American companies, workers, families, consumers, balance of trade, environmental quality, and government revenues. We must not let anti-hydrocarbon ideologies or misinformed policy positions perpetuate this antiquated ban.

NOTE: This article first appeared in Investor’s Business Daily.

About Paul Driessen

Paul Driessen

Paul Driessen is senior policy adviser for the Committee For A Constructive Tomorrow (CFACT), which is sponsoring the All Pain No Gain petition against global-warming hype. He also is a senior policy adviser to the Congress of Racial Equality and author of Eco-Imperialism: Green Power – Black Death.

An Open Letter To Ways And Means

Welcome back to Washington and Happy New Year

As you return to the business of the House Committee on Ways and Means, you and your colleagues will, in many ways, determine the direction of our nation by the decisions you will soon make on fundamental tax reform.

You have a clear and distinct choice to make. You can continue to pander to the special interests that will forever hold you hostage to their gluttonous demands, or you can break from this insidious cycle and fully represent the will of the people who elected you.

If you choose to continue in the bondage of special interest slavery, the demands they exact will rise to levels that even you cannot imagine. Once the fatted calf becomes addicted to the feed trough, its’ appetite becomes insatiable.

Contrast this to the people who elected you who simply want to pay their fair share of taxes without the fear and intimidation of an agency that continues to be used as a political weapon.

Even the IRS’s own watchdog, Nina Olson, stated in her just published annual report, “Public trust in [IRS] fairness and impartiality was called into question because of reports the IRS subjected certain applicants for tax exempt status to greater review based on political-sounding games.”

Sadly, Olson’s only remedy is an IRS generated U.S. taxpayer Bill of Rights. By the way, didn’t you already try this in 1988 when Congress passed the first of three Taxpayer Bill of Rights?

To Olson’s suggestion, ladies and gentlemen, isn’t this a little like the fox guarding the hen house; just like the U.S. Justice Department appointing Barbara Bosserman to lead the IRS targeting investigation?

fox guards henhouse

Silly me, I am sure any individual who shelled out over $6,000 in donations to the Obama campaign will show total impartiality during a criminal probe involving conservative organizations.

The bottom line is this – the American people want a simple and fair system of taxation without all the drama, theatrics and corruption. They want the fox to leave the hen house and they want their representatives to put a stop to the longstanding reign of terror by the IRS.

The FairTax® Plan does this and more.

Reduced to its most basic terms, the FairTax eliminates taxes on wages while taxing wealth and borrowing when spent. It eliminates the income/payroll tax system and replaces it with a single rate tax on consumption.

More importantly, it is fair, simple and universal in application – no exceptions, no exclusions, and no more special interests feeding at the trough.  And, it fosters economic growth and efficiency while fully funding the government. 

You will soon have a decision to make on fundamental tax reform.

Option 1: You tinker with the current system, call it major reform and continue in the bondage of special interests.  With this option the American people continue as the losers.

Option 2: You represent the will of the people who elected you and enact HR 25, The FairTax Act, freeing them from the bondage of an out-of-control IRS and a gobbledygook tax code that is fast approaching 100,000 pages. With this option, the American people have a fair and simple tax code that also eliminates the yearly tax return nightmare that has already begun.

Which decision will you make? Perhaps you can draw inspiration from General Robert E. Lee who once said, “You have only always to do what is right. It will become easier by practice, and you enjoy in the midst of your trials the pleasure of an approving conscience.”

Your electorate awaits your decision. Remember, they too have decisions to make in November 2014.

Coalition formed to repeal the 16th Amendment

A broad coalition of national organizations, hosted and managed by Competitive Governance Action, whose initial members include Americans For Fair Taxation®, Tea Party Patriots, Free Market America and Americans for Limited Government, announced a joint effort called “Repeal 16: A Coalition to Repeal the 16th Amendment.”

The coalition’s message to Washington lawmakers is straightforward: End the current corrupting tax system and the IRS.

Cynthia T. Canevaro, Executive Director Americans For Fair Taxation

Cynthia T. Canevaro, Executive Director, Americans For Fair Taxation, in an email states, “As FairTax supporters we know how the current tax code has corrupted our economy, our political system, small businesses and the livelihood of countless American citizens.  This summer’s scandalous revelations of IRS abuses are just the latest example of how the IRS, for 100 years, has systematically violated the fiduciary trust given to it by the American people.”

“Although there have been numerous hearings and calls for action, it has turned out to be much ado about nothing because the current tax code is, in reality, an incumbent Member’s delight.  Why? Because it enables the status quo to maintain complete control over you the taxpayer,” notes CGA.

According to CGA, “Repealing the 16th Amendment will allow citizens from all political perspectives to finally have an open, transparent and honest debate about comprehensive tax reform, without getting bogged down on which plan is best. Repeal 16 will finally give supporters of fundamental tax reform a neutral vehicle to address the most pressing issue of the day – eliminating the IRS and Repealing the 16th Amendment.”

Canevaro states, “While supporting the coalition, Americans For Fair Taxation will continue to proudly and aggressively advocate the FairTax Plan as the only viable choice for fundamental tax reform.  With a successful Repeal 16 campaign, we know the FairTax Plan will now be in a position to be the tax reform plan of choice for elected officials and the American people who want jobs and economic growth.”

repeal petition has been posted at www.Repeal16.org for those who see the IRS and income tax as a a threat to American prosperity. The coalition’s initial goal is to recruit 10,000 Americans to sign the petition. “With Congress coming back into session this week, timing is of the essence”, notes Canevaro.

Canevaro, states, “We are excited about the opportunities the new Repeal 16 coalition will bring to the FairTax, and look forward to being on coalition team.”

ABOUT COMPETITIVE GOVERNANCE ACTION

Competitive Governance Action is a 501(C)(4) organization committed to education and advocacy to manifest the concept that problems should be solved by the smallest, least centralized, most local authority that may effectively address the matter. Central to the concept is the devolution of political power from the federal government to state and local governments, to individuals and to non-government community and religious institutions.

Tax Collector answers questions about taxes in Florida

Barbara Ford-Coates

April is National Tax Burden Month. WDW – Florida has asked a tax collector to answer some questions about taxes in Florida. We want to thank Barbara Ford-Coates, Florida Tax Collector serving Sarasota County, for providing answers to our tax questions. Since property taxes comprise the largest dollar amount collected, the below answers from Barbara Ford-Coates address those taxes.

1. What kind of role do you play in shaping or implementing Florida’s tax policy?

The Florida Legislature has the primary responsibility for the state’s tax policy. The Tax Collector’s role is to advise the State on the most efficient way to implement the final law. [E.G.  Florida Tax Collectors recently worked to give taxpayers the option of receiving their tax bill(s) electronically.]

2. What are some of the most common misconceptions citizens have about Florida state taxes?  What are some of the most common mistakes you see citizens make when filing their tax returns?

One misconception we hear about relates to the time period. Since Florida taxes are collected in arrears, taxpayers sometimes believe they are paying the following year’s taxes. As an example, the 2012 tax bills were mailed around November 1st of 2012 and were payable through March of 2013.   A taxpayer who paid the bill in March of 2013 may have thought they were paying the 2013, rather than 2012 tax bill. The most common mistake we see is sending the wrong amount.

3.  How do incentives work? Credits? Sales tax holidays? Do you think these help Florida?

Tax collectors have no involvement in incentives, credits or sales tax holidays.

4.  How can we make Florida’s tax code simpler and more citizen-friendly? What changes would you suggest?

I think the concept of a locally elected official (Tax Collector, Property Appraiser etc.) working to implement State tax laws provides the best opportunity for citizen-friendly administration.  As an elected official, I have both a duty to the state and the taxpayer. As such, I must always work to make paying taxes as simple and easy as possible for the taxpayer.  In that role I can and do advise the state how to improve the process.

5.  Is your agency doing all it can to collect the taxes it is owed?  What is the consequence for not paying Florida taxes on time?

Within a year of receiving the property tax roll from the Property Appraiser and the non-ad valorem districts, we collect over 99.5% of the roll. Of the remaining unpaid taxes, we continue our focused efforts (selling tax certificates, field visits) to collect the rest.

Failure to pay real estate taxes on time results in additional costs to the taxpayer. If the taxes remain unpaid two years after the date of delinquency, the taxpayer is at risk of losing their property. Delinquent real estate taxes are primarily collected through the sale of tax certificates (tax liens) to investors who pay the tax in exchange for having a lien on the property. Unpaid tangible taxes also result in additional penalties and interest to the taxpayer.  Delinquencies are collected through a variety of enforcement efforts that include the issuance of warrants, field visits, contacts by phone, email and correspondence, and the sale and seizure of assets.

The state agency that deals most with Florida taxes is the Department of Revenue.

WDW- Florida provided James McAdams, Director Property Tax Oversight, these same questions. Director McAdams provided this reply, “Thank you for the opportunity to participate in your article about tax administration. Since the Department of Revenue does not play a role in the development of tax policy your invitation would be more properly directed to members or staff of the Florida Legislature.”

A copy of this column has been sent to Governor Rick Scott, the Florida Cabinet and all Florida legislators.

Former Mayor Responds to Sarasota County School Board Raising Taxes

David Merrill, businessman and the former Mayor of the City of Sarasota, Florida, sent the below email to all Sarasota County School Board members.

School Board Members,

I urge you to reject the proposed increase in property taxes for schools. You can eliminate the need for the extra taxes by cutting wasteful policies and programs, and you have failed to make the case that the money will actually improve the education of our children.

Instead of looking to more taxes, you can find more than enough savings to eliminate the need for the taxes by replacing your credential-based compensation system for teachers.  Arne Duncan, the Secretary of Education, and Bill Gates have said we need to find the money to improve our schools by eliminating the waste and inefficiency from the type of compensation system that you use. Yet, other than perhaps for some new-hires, Sarasota’s teachers’ salaries are set from a salary table with two variables: advanced degrees and years of teaching.

In 2010 Arne Duncan said, ”There is little evidence teachers with masters degrees improve student achievement more than other teachers.” Despite this information, Sarasota pays for more advanced and special degrees than any other district in Florida. A full 67% of Sarasota’s teachers have a degree above a bachelor’s degree.  While some advanced degrees may be appropriate, does giving two-thirds of the teachers at Phillipi Shores Elementary School higher salaries because they have advanced degrees really do anything to help our children learn the alphabet and the multiplication tables?

When it comes to teacher longevity, Sarasota’s teachers have the 7th highest average longevity out of the state’s 67 school districts. However Harvard Professor Paul E Peterson’s study titled “It’s Easier to Pick a Good Teacher than to Train One: Familiar and New Results on the Correlates on Teacher Effectiveness” reports that there is little increase in a teacher’s effectiveness after the first three years of teaching.  But you continue to increase teachers’ salaries based solely upon the number of years that they’ve been teaching, when, instead, we should pay them based on a performance evaluation like other professionals.

Some of you may say that you know these arguments, but politically you can’t cut teachers’ pay.  Therefore, in the absence of courage to confront the teachers union, your argument is that you have no choice but to increase taxes.  But, based on FCAT and EOC Assessment scores, you can’t show that you have been good stewards of the half-billion dollars you have collected from the referendum-initiated school tax since 2002.

Looking at our FCAT history, Sarasota’s ranking among Florida’s school districts on the high-school Reading FCAT and Math FCAT are lower today than they were a dozen years ago.  For the first three years of the high-school Math FCAT back in 2000, 2001, and 2002, Sarasota’s score was either the second or the third highest in the state. Likewise, for the first two years of the high school Reading FCAT in 2000 and 2001, Sarasota’s scores were either second or third in the state.  When the school-tax referendum passed in 2002, everyone looked forward to new and innovative educational strategies to build on our excellent school district, but, instead, the school district immediately went into an inexplicable funk, from which you’ve not yet recovered.

(I use the FCAT scores from the highest grade in high school that the test is given because they include the cumulative learning from lower grades, and they are the closest measure of the performance of your finished product, the high school graduate.)

Sarasota’s Ranking on High School FCAT among 67 Districts

2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
Math
3
2
3
10
11
12
9
10
11
12
6
6
Reading
2
3
6
16
12
16
9
13
12
12
6
9
Science
n.a.
n.a.
n.a.
n.a.
n.a.
11
8
11
12
10
11
9

 

Fortunately, we’ve begun to regain some of our former glory.  On the recent Algebra EOC Assessment, Sarasota had the second highest score, which may be the beginning of getting back to where we were 11 years ago.

Unfortunately, despite the hundreds of millions of dollars of supplemental taxes that taxpayers have given you since 2002, Sarasota’s high school student’s FCAT scores are still determined more by Sarasota’s favorable demographics than the school district’s extra efforts.  As you know, demographic factors such as adult personal income, percentage of free and reduced lunch, adult educational levels, and student racial composition are good predictors of a district’s FCAT scores when considered together.  In fact, there is a good argument that our county and city commissioners are more responsible for Sarasota’s FCAT scores than the school board since the commissioners’ policies have had the most influence on our demographics.

If you were to chart these demographic factors for Florida’s school districts, most school districts’ FCAT scores would fall within a narrow band of where one would expect to find them based on their demographics.  However, when districts deviate from their demographic prediction, it’s possible that their school district is doing something different from the other districts.

Accordingly, there are three districts on the high school FCATs who have challenged Sarasota’s scores, but who shouldn’t be able to based on their demographics alone. These districts, Sumter, Gilchrist, and Wakulla, all have less attractive demographics for adult income and educational levels compared to Sarasota, and their free and reduced lunch percentages are either similar to or higher than Sarasota’s.  Even with these unfavorable demographic characteristics, and along with having less money per student, fewer teachers with advanced degrees, less teacher experience, and lower teacher pay than Sarasota, these lower-income districts have achieved some impressive FCAT scores. They are obviously doing something right given what they have to work with.

District
County Adult Data
2011 11th Grade Science FCAT Students
Teacher Data
2011 High School FCAT Scores
Personal Income
% College
% High School
% Free-Lunch
% White
Advanced Degrees
Median Salary
Science
Math
Reading
GILCHRIST
$29,682
15%
72%
48%
92%
33%
$42,829
322
339
324
SARASOTA
$52,331
34%
87%
38%
72%
67%
$55,264
317
339
322
WAKULLA
$28,711
22%
78%
35%
82%
37%
$37,042
317
338
322
SUMTER
$24,836
17%
77%
45%
71%
33%
$42,365
320
334
317
FLORIDA
$38,210
23%
76%
45%
47%
41%
$45,723
307
329
309

 

If you could show a similar pattern of consistently having higher test scores than our demographics alone would predict, you could make an argument that you are efficiently and effectively using your resources, and that giving you more resources could lead to even higher test scores. However, you can’t make the argument because our high school students don’t consistently outscore the districts with similar or more favorable demographics.

On the 2011 FCAT tests, there were six districts that outscored Sarasota’s combined test scores and who also have demographics at least as favorable as Sarasota’s.  (I’ve excluded Gilchrist, which is shown above.) The districts are St. Johns, Okaloosa, Brevard, Seminole, Martin, and Santa Rosa. Each district has its favorable and unfavorable demographic factors, but they would all be considered similar.

Some key characteristics for these districts are shown on the table below.

District
County Adult Data
2011 11th Grade Science FCAT Students
District Data
2011 High School FCAT Scores
Personal Income
% College & Prof. Degree
% Free-Lunch
% White
Teacher Advanced Degrees
Teacher Median Salary
All Gov. Revenue Per Student
Science
Math
Reading
ST. JOHNS
$ 48,640
40%
13%
84%
41%
$44,370
$        9,360
324
344
332
OKALOOSA
$ 41,024
33%
23%
74%
42%
$48,779
$        9,245
328
342
330
BREVARD
$ 37,284
33%
25%
67%
43%
$42,421
$        9,226
326
341
326
SEMINOLE
$ 40,133
40%
31%
60%
48%
$43,301
$        8,910
318
343
327
MARTIN
$ 51,723
33%
25%
71%
41%
$43,677
$      10,739
321
340
326
SANTA ROSA
$ 34,838
32%
28%
80%
37%
$42,729
$        8,791
317
338
331
SARASOTA
$ 52,331
34%
38%
72%
67%
$55,264
$      11,961
317
339
322

 

Although the demographics are similar, as the chart shows, the Sarasota’s median teacher pay is 25% higher than the average of the other districts, and Sarasota takes in 28% more tax revenue per student than the other districts on average, or about $2,500 per student.  And, yet, with more lower-paid teachers and far fewer financial resources, these other districts have typically outscored us.

To put a better perspective on the magnitude of this disparity in revenues between districts, Sarasota has about 40,000 students, so a difference of $2,500 per student amounts to $100,000,000.  That’s how much Sarasota could save each and every year if we matched the average budget of the other six districts above.  Or, said another way, that’s how much money we could save if our school district were as efficient and effective in delivering high-scoring high-school graduates as other top districts – like we used to be a decade ago.

The table below summarizes the calculation for the extra tax burden that Sarasota taxpayers must fund annually above what the other top districts on average must pay.

Calculation of Sarasota’s Extra Tax Burden Relative to Top-Scoring Districts
Sarasota’s Per-Student Tax Revenues
Avg. Tax Revenue of 6 Higher-Scoring Districts
Higher Tax Burden for Sarasota Per Student
Sarasota’s Student Enrollment
Sarasota’s Total Extra Tax Burden
$11,961
$9,379
$2,583
41,076
$106,078,770

 

So, the questions before us are whether or not Sarasota has the potential to be the top school district in Florida, and whether we need to collect an extra $100,000,000 in taxes to do it.  And I’ll answer the first question with an unequivocal “Yes!”  And I’ll answer the second question with a “Hopefully not”.

The first question is easy to answer because we right there at the cusp a decade ago.  Back then, before the extra taxes started gushing in, our high school kids were just shy of having the highest scores on the FCAT.  In fact, it was the promise of being the top school district that got the voters to rally behind the property-tax increase in 2002 after having voted down a similar referendum in 2000.  Our recent 2nd-place score on the Algebra EOCA shows that we still have the potential, and it’s not unusual in the lower grades for us to have top FCAT scores.  By effectively using the financial resources that the public has given you, you can overcome any demographic advantages that even a district like St. Johns enjoys, and our high school students can be the very best in the state.

However, the reason I don’t support a continuation of the extra $100,000,000 in taxes is because the need for it is purely remedial. There are only two reasons that the extra taxes are needed.  One possibility is that you have failed to develop a school district that is as efficient and effective the school districts that are currently at the top of the FCAT rankings.  The other possibility is that our city and county commissioners have failed to create an economy that provides enough jobs for high income, college educated workers.  After all, it’s their children who get the top scores.

But continuing the extra $100,000,000 in taxes drains our economy of productive resources and makes our community-development plans more difficult. Other districts that don’t have to pay it are gaining a competitive advantage over Sarasota.  Over a decade, the cumulative impact of draining this much money from our economy is huge.

In less than two years you will have another vote to extend the property tax for schools.  (It only provides about half of the extra $100,000,000 in taxes that you collect.)  I predict that you will fail unless you do two things.  First, you must develop a compensation system that rewards our many excellent teachers and eliminates the bad ones.  (Ever read RateMyTeachers.com?  We still have bad teachers.  My 7th grade son just got one of the worst ones at his school.  Why is Ms. Friedland still allowed to teach?)  Secondly, you must restore Sarasota’s high-school test scores to their rightful place at the top of all districts.  Unlike a decade ago when we were Number 2, with all your extra resources, we need to be Number 1.

Finally, with $100,000,000 more than the average of the other top districts, you don’t need more money.  You need a better plan.  Arne Duncan has said that schools need to do more with less.  I suggest you show your understanding of the new reality by voting down your proposed tax increase.

Best regards,

David Merrill
Arox Land Development, Inc
700 Bell Road
Sarasota, Fl  34240