Thursday, May 30, 2013
The metaphor of yelling “fire” in a crowded theatre is a paraphrase of Oliver Wendell Holmes Jr.’s opinion on the Supreme Court case which outlawed “dangerous and false speech.” The Boy Who Cried Wolf is one of Aesop’s Fables which is about giving a false alarm. Today’s news (traditional, cable and internet) hyperbole is histrionic on nearly everything – so that when there’s a real issue that comes up, it can’t be distinguished through the noise. Each outlet in their own way hyperventilate stories to the point that it’s surprising anybody has any nerve endings left. Fox News in particular has become the #1 cable news network by shouting about every perceived injustice. So when they whine and cry that the Obama administration is out to get them, it’s quite natural to think that it’s more of the same. The problem is that it’s now actually true.
I wish that there was a more sympathetic target so more people would be wound up. But that’s putting the cart way before the horse. First we need to flash back to 2009 when the Justice Department subpoenaed the phone records and the emails of James Rosen, a reporter for Fox News. There’s been a lot of back-and-forth as to whether the government informed the network as it’s required to – that’s a different (and legitimate) issue. The fact is that a Rosen was reporting on North Korea, one of the “axes of evil” and he was legitimately in and out of the State Department.
Journalism only is effective when people talk to reporters and give information that otherwise might not be revealed. This is how Anderson Cooper “keeps ‘em honest” and how the Fourth Estate keeps a check and balance on power regardless of which party may be in office. Government has every right, and indeed in many cases has the obligation, to keep certain facts secret. The tension between these two needs is what makes this a great country, (and often makes for the best stories) and what distinguishes American democracy.
The media has been quite respectful when the administration asks for stories to be held or modified for National Security reasons. In its war on leakers, the Obama administration is now criminalizing the work of a reporter. As the actual subpoena states on page 4, Rosen is: “an aider and abettor and/or co-conspirator.” That is stunning. A reporter searching for facts for a story is a considered a criminal co-conspirator by a Democratic President and his administration. And since the subpoena was granted allowing law enforcement to examine his personal and work emails and phones, the Justice system agrees. Now it’s precedent, so when a President (fill in horrible name here) wants to see what a reporter is working on, the law now supports it.
The irony, of course, is that President Obama is perhaps the most media savvy President we’ve had. As this week's Ramirez cartoon below shows, he's quite up front about how he learns of actions that his administration takes – from the very media that he abhors. As an astute politician he has made all of the right speeches – even ordering a review of recent inquiries including the DOJ’s obtaining phone records from 100 AP different reporters.
The very idea that a free press must be ‘reviewed’ should send chills through every American citizen regardless of one's political affiliation. You don’t have to like the media but they are part of the fabric of a free nation. If George W. Bush had gotten a judge to agree that a New York Times reporter was “aiding and abetting” the enemy just for talking with sources and reporting facts (their job) the response would have been what it should be when President Obama does it: fire! The wolf is at the door! The world is coming to an end! Government has no place whatsoever in putting any restriction on the gathering and dissemination of news. Period.
Thursday, May 23, 2013
Saturday Night Live since 1975 has been a leader in comedy thanks to their ability to do spot-on parodies. The cultural shift against Sarah Palin can be tied to Tina Fey‘s imitation of the former VP candidate. It’s rare that real-world events are a parody in and of themselves. Thankfully, however, we have an example. Congress just bailed out the helium industry once again.
According to the Washington Post (not The Onion or late night comedians) The Federal Helium program was introduced as a temporary measure in 1925. Inflatable airships were being built in Europe after World War I and the U.S. was afraid of falling behind, so Congress ordered a stockpile of helium to make sure American dirigibles weren’t left behind. Private companies do produce helium, but the U.S. Government continues to have a reserve – enough to fill 33 billion party balloons.
President Reagan tried to dismantle the program. President Clinton’s reinventing Government in 1996 got Congress to pass a law that the reserve had to sell $1 billion in helium to pay off its debt back to the government and then it needed to shut down. The final payment is imminent, and under the law the program should finally shut down.
Scientists use helium in their experiments and research (in liquid form). MRI machines and semiconductor plants use helium. 40% of all helium sales come from the U.S. reserve – which still has five years’ worth of supply. So on Friday, April 26, 2013 the U.S. Congress in a resounding show of bipartisanship voted 394 to 1 to keep the program alive. The fear was that if the government stops selling helium that market conditions might change resulting added costs for research. It’s an industry that has been propped up by taxpayers, making that whole concept of capitalism bravado?
Where to begin? 88 years the United States Government has been in the hot air business. Literally. Right at the moment of it closing down after a 17 year transition, Republicans and Democrats who demagogue spending issues until there’s no oxygen left couldn’t figure out a way to spin off this successful enterprise to private industry. Congressman Hank Johnson (D-GA) mocked the program on the floor of Congress and the proceeded to vote for its continuation. When asked how much longer the taxpayer would be underwriting the program he said: “Five years? We don’t know. It could be shorter, it could be longer.”
There seems to be nothing that the Congress is willing to actually cut. It shouldn’t surprise me. It shouldn’t get me fired up. But it does. Whoa. I am becoming a parody of myself.
Thursday, May 16, 2013
Last week the IRS disclosed that in evaluating an application for tax-exempt status, ‘low level’ staffers had used search words such as “tea-party” and “patriot” to single out organizations for further review. Conservatives are outraged at the McCarthy-style tactics, seemingly immune to the irony that McCarthy was a Republican conservative. No mention in the reporting (or ranting) is what happened in 2006 when (under a Republican President) the IRS went after All Saints Episcopal Church and tried to rescind its tax exempt status over a sermon. (Church and State?) Heads are starting to roll, but it's a bit of a head scratcher.
When it comes to charities, the IRS has specific rules. In exchange for not having to pay income tax organizations must have a purpose and mission that is for the public good. They must also disclose donor lists, contributors, etc. The government then gets groups that are doing things that are beneficial to many (public benefit). Feeding the homeless, for example, is something that without private not-for-profit organizations would ultimately become a government program…or so goes the theory. These organizations are exempt under 501(c)3 of the IRS code.
Political groups and lobbying fall under a different section of the non-profit code 501(c)4…and that’s what these groups fell within. From all of the reporting thus far, none of these groups were DENIED tax-exempt status, they were just required to go through additional screening. There are rules about disclosure and purpose for those groups – and because they are overtly political in nature they are more carefully evaluated since they are exempt from having to pay into the tax system. The fact that “code words” were used is stupid, partisan and not at all surprising…but totally understandable since the IRS job is to determine if a group is political, charitable or lobbying. People will be fired, and that's appropriate.
The kerfuffle over the IRS’s latest embarrassment is further evidence that the entire tax code is rigged. By having incentives for individuals to give to charities (less tax burden) the government is incentivizing certain behavior patterns. This exists all over the code: think mortgages, child care deductions, eco-friendly cars --- there are thousands of ways the tax code is used to drive individual behavior in a way that the government encourages...or alternatively discourages like smoking and drinking and buying yachts.
The best solution, of course, is to eliminate the tax code altogether. It would require government to make stark choices about the handful of things that it could fund. (The Constitution is a good guide for what should be funded.) It would require Americans to be really clear about those things they are willing to fund for themselves and their neighbors, and what things they wanted to fund personally.
It’ll never happen. Republicans and Democrats agree that the existing tax code works. They each want to adjust the code for their own agenda and drive behavior to their thinking. The underlying philosophy of a government collecting funds and reallocating those dollars to others is where both parties agree. It’s quite a charitable government if you’re part of the agenda.
Thursday, May 9, 2013
For 247 years the argument between Federalists and States-Rights has been going on. Jefferson vs. Hamilton. Roosevelt vs. Wilson (or Wilkie or Dewey). Reagan vs. Carter or now Obama vs. any Republican. The role of the Federal Government and the role of State Government has never been agreed on, let alone how to fund it. The battle continued this week with the majority of the senate voting for federalism and further eradicating states rights.
The Senate approved a massive tax increase in a 69-27 vote. Online purchases under the bill would be subject to individual state sales taxes. Proponents say that it’s only fair that if brick-and-mortar stores have to collect and distribute taxes to the state then so should their competitors. Opponents say that sales taxes are designed to cover the costs of local and state government to support the brick-and-mortar stores, and for businesses with no physical presence in the state the collection and payment of a tax that they get no benefit from is unnecessary and unfair. There is also little cost differential between online sales and in person sales when considering shipping costs, so with the tax it may kill the fastest growing part of retail sales. It's also unclear how to determine which state tax gets collected - is it billing address or shipping address? It’s unlikely that a middle-ground exists between these perspectives.
According to the U.S. Census ecommerce sales in 2012 were $145 billion versus retail sales of $3.6 trillion. Forrester Research projects online sales growing to $327 billion by 2016. That would still be less than 10% of total commerce. Using an average sales tax of 5% this tax would generate some $16 billion in revenue (under the optimistic assumption that sales stay consistent with an increased overall cost.)
I hope that the Internet remains a tax-free zone. A number of states have bullied Amazon and other online retailers into concessions so that the battle has already largely been lost. The larger issue is why should a product cost one thing in Massachusetts and another in New Hampshire just because of the local tax code? In California the sales tax changes by up to 2 percent based on which county or city you buy the product in. Border state commerce is always bustling when one state charges a higher tax than its neighbor for the same product.
Increasing the U.S. tariff is part of the solution. A 0.7% increase in the rate – from 1.3% to 2.0% would yield the exact same dollars, $16 billion. Tariffs generated the bulk of revenue to the US Treasury for the first 137 years before the introduction of the Income tax in 1913 and then the introduction of the payroll tax in 1940 which together generate nearly 300 times tariff income. Today’s 1.3% average tariff rate is the lowest in US history. Returning to the Reagan era rate of 3.6% would generate over $100 billion dollars directly – and indirectly would spur US manufacturing by making everything just a little more expensive to import, justifying cost savings by producing products in the US.
A tariff 2% higher than today’s rate would not eradicate free-trade, it would help balance it. The US trade deficit was reported last week at $38 billion and has run as high as $55 billion under this Administration’s tariff policy.
Hitting the consumer with an internet tax won’t grow the economy, spark manufacturing or help retailers. Too bad that’s something Federalists and States Rights advocates can’t agree on.
Thursday, May 2, 2013
Everybody who likes paying taxes please raise your hand. Other than Barney Frank and Warren Buffet it’s a safe bet that there aren’t a whole lot of extended arms. Most people I know see taxes as a necessary part of life and have various philosophies on them. This is not an essay on the evils of taxes – instead in my tradition of pointing out irony – my own situation is this week’s case study.
I dutifully went through the arduous process of reporting every part of my life where funds were expended to the IRS and various state entities as for 2012. I had to report to three different states! My political (and financial) distaste for taxes gets reinforced more and more each time I go through the process. In order to benefit from various incentives the cost is providing additional bits of information. Before I digress into a diatribe about the tax code – back to the story. I finished the process, double, triple and quintuple checked the information. Submit.
An error. Tried again. And again. And again. OK, tech support – here we go. 45 minutes on hold, and I got a very helpful young man who over the course of the next hour was able to confirm that I had already filed my tax return, and my oh my, wasn’t it a nice big refund! Uh – no, not really. I am due a refund, and for me a reasonable one – but it’s not a 5-figure refund.
He gave me the number for the IRS Fraud Department. An hour long hold led me to a seasoned agent. Did I file form 14039? Uh, no – I’m calling to find out what I need to do to get my refund. File the form. And then wait. 180 days. Ok, so after 6 months this will be resolved? She laughed. A real laugh. An oh-my-god-I’m-talking-to-an-idiot laugh. No, they have 6 months to acknowledge that I submitted form 14039. No promise or guarantee when or even IF it will be resolved. If the refund I think I'm due and I don't have causes me a financial hardship there’s a whole other series of forms I can file. After 180 days. And, no, I won’t be getting the same level of interest as what the IRS charges if you pay late.
I regularly check my credit score, such that it is. Somebody borrowed my identity over 20 years ago before it became popular, so I’m really quite protective of my data. The United States Postal Service – not the model of efficiency or innovation – does a double-check whenever somebody moves to make sure that the request is authentic. You’d think the IRS might have some sort of flag like that. You'd think that when somebody’s address and bank information changes after it’s been constant for years and years and YEARS they too might want to verify it? You’d think they’d raise a flag that somebody who’s never gotten a 5-figure refund before is suddenly getting one. You’d think that the person asking for an investigation for a small refund might have some legitimacy versus the guy who got a huge payday. You’d be wrong, just like me.
“Oh, hon – it’s really easy! Much easier to do fraud with the IRS than them credit cards – that’s hard.” My new IRS friend remarked as we ended our call.
The irony is not so much that somebody who abhors taxes has been defrauded with the IRS and my hard earned money is in the government coffers. No, the real irony is that once you file form 14039 your name and social security number is flagged FOR LIFE. So after having gone through (and won) 2 audits (nothing found) and my philosophical and political objection to the tax code – I will now have the privilege of having my return reviewed by a human being for the rest of my life. A taxing situation indeed.