Tag: tax

Balancing Both Sides Against the Middle

Seth Anderson0 comment

Self Sacrifice Zealot

The political journalism canard that if both left and right are complaining about your coverage, you are doing something right is punctured, again, by Eric Alterman:1

This journalistic calculus is partly why so much of our political discourse is artificially colored by he said, she said reporting that is of little use to our democracy. Why it rarely weighs facts, draws conclusions and exposes the dissemblers, prevaricators and liars. Why it more often than not resembles a referee, yes, but one at a pro wrestling match, purporting to be a fair watchdog but completely ineffectual and easily rolled (if not totally in on the joke) when faced with a party who simply refuses to play by the rules. Why a supposedly preeminent member of the Washington press corps like the Washington Post’s Dana Milbank could write the following five years ago:

[A 2004 survey] found that 75 percent of Bush voters believed that Iraq either gave al Qaeda ‘substantial support’ or was directly involved in the Sept. 11, 2001, attacks…

This is not to pick on Bush followers. Many on the left harbor their own fantasies that they consider fact—about how Bush knew of 9/11 in advance, or how he was coached during one of the presidential debates via a transmitter between his shoulder blades.

I’ll set aside any confusion possibly caused by this inconvenient memo to state unequivocally that I’m no crazy 9/11 truther. Nevertheless, it’s still amazing that, in Dana Milbank’s mind as well as his editors, an erroneous belief held by 46.5 million Bush voters, one of whom at the time of the survey was also our Vice President, constitutes as big a threat to democratic discourse as a minority of fringe conspiracy theorists on the left, none of whom have ever gained so much as a toehold within legitimately respected circles of intellectual or political discourse.

In fact, it took an astute reader to later corner Milbank on his baldly false equivalence in a subsequent Post webchat, where Milbank’s response cast aside his righteous anger at so much political spin and instead became an object lesson about Nietzsche’s abyss: “Let’s for now leave aside the question of the % on each side that believe a falsehood. I think the examples cited are actually quite similar.” Wow, wholly abandoning any attempt to defend the logic behind one’s assertion while at the same time confidently re-asserting its veracity.  Ari Fleischer, eat your heart out.

(click to continue reading Our Editor-in-Chief President | Eric Alterman – The Nation.)

President Obama has seemingly been subsumed by this same adage, asserting that since both liberals and Tea Baggers don’t like the Give Millionaires Tax Breaks They Don’t Need policy, the tax policy must be good. Uhh, no. Guess again!

Jerk City

Ari Berman writes:

In his press conference yesterday2 , President Obama testily defended his tax cut deal with Republicans and labeled Democratic opponents of the plan “sanctimonious” and “purist.”

So do Obama supporters agree with the president’s assessment that this was the best compromise he could get and he did all he could to fight for middle-class tax cuts and not those for the wealthy?

The answer seems to be a pretty resounding no. A poll commissioned by MoveOn.org yesterday found that 74 percent of Obama volunteers or financial backers in ’08 oppose the deal. More than half said they’d be less likely to support Democrats in 2012 who back the compromise and would be less likely to donate to Obama’s re-election campaign. Pretty sobering statistics for the president and his team.

(click to continue reading Obama Supporters ‘Dismayed, Betrayed, Insulted’ by Tax Deal | The Nation.)

Footnotes:
  1. or someone sitting in for him. Who is Reed? [↩]
  2. December 7,2010 [↩]

Democratic and Republican tax plans compared

Seth Anderson0 comment

(click graphic to embiggen)

Comparing Democratic and Republican tax plans. The Republicans’ plan to extend the Bush administration tax cuts for the wealthy would cost $36.6 billion more than the Democrats’ plan, which extends cuts only for families making less than $250,000 a year and individuals making less than $200,000.

(click to continue reading Comparing Democratic and Republican tax plans.)

Easy way to tell whose side each party is on, no? Republicans earnestly believe those downtrodden millionaires need more money, because somebody has to purchase all those luxuries…like Republicans in the House

A Republican plan to extend tax cuts for the rich would add more than $36 billion to the federal deficit next year — and transfer the bulk of that cash into the pockets of the nation’s millionaires, according to a congressional analysis released Wednesday.

GOP tax plan would add billions to deficit Comparing Democratic and Republican tax plans New data from the nonpartisan Joint Committee on Taxation show that households earning more than $1 million a year would reap nearly $31 billion in tax breaks under the GOP plan in 2011, for an average tax cut per household of about $100,000.

The analysis, requested by Democrats on the tax-writing House Ways and Means Committee, comes as debate heats up over tax cuts enacted during the Bush administration, most of which are scheduled to expire at the end of this year. Republicans want to extend all the cuts, which would cost the Treasury Department $238 billion in 2011, according to the taxation committee. President Obama and congressional Democrats have vowed to extend the cuts only for families making less than $250,000 a year and individuals making less than $200,000 — 98 percent of American taxpayers — in a plan that would add about $202 billion to next year’s deficit.

 

(click to continue reading GOP plan to extend tax cuts for rich adds $36 billion to deficit, panel finds.)

Most Wealthy OK with Tax Increases

Seth Anderson0 comment

For all the gnashing of teeth about restoring taxes to what they were before Bush temporarily lowered them, turns out most of those in the upper brackets actually wouldn’t mind the increase. Unfortunately, the one-third is louder than the two-third majority…

Lloyds Bank Ltd Law Courts Branch

As Congress and President Obama fight over the Bush tax cuts, a small number of left-leaning rich people have come out in support of paying higher taxes. The most famous are the members of the Responsible Wealth Project, who say they pay too little in taxes and want to address inequality.

They may be an eccentric minority, or (in the view of conservatives) a lunatic fringe. But a Quinnipiac University poll this year showed nearly two-thirds of those with household incomes of more than $250,000 a year support raising their own taxes to reduce the federal deficit.

(click to continue reading ‘Tax Me More’ Says Wealthy Entrepreneur – The Wealth Report – WSJ.)

Garrett Gruener recently wrote:

For nearly the last decade, I’ve paid income taxes at the lowest rates of my professional career. Before that, I paid at higher rates. And if you want the simple, honest truth, from my perspective as an entrepreneur, the fluctuation didn’t affect what I did with my money. None of my investments has ever been motivated by the rate at which I would have to pay personal income tax.

As history demonstrates, modest changes in the tax rate for wealthy taxpayers don’t make much of a difference if the goal is to build new companies, drive technological development and stimulate new industries.

(click to continue reading The Bush tax cuts: an entrepreneur’s perspective – latimes.com.)

and a little historical perspective:

When inequality gets too far out of balance, as it did over the course of the last decade, the wealthy end up saving too much while members of the middle class can’t afford to spend much unless they borrow excessively. Eventually, the economy stalls for lack of demand, and we see the kind of deflationary spiral we find ourselves in now. I believe it is no coincidence that the two highest peaks in American income inequality came in 1929 and 2008, and that the following years were marked by low economic activity and significant unemployment.

What American businesspeople know, and have known since Henry Ford insisted that his employees be able to afford to buy the cars they made, is that a thriving economy doesn’t just need investors; it needs people who can buy the goods and services businesses create. For the overall economy to do well, everyday Americans have to do well.

Now that the Bush tax cuts are about to expire, Republicans are again arguing that taxes should remain low for the wealthy. The idea is that this will spur people like me to put more capital to work and start more ventures, which will create new jobs, power the economy and ultimately produce more tax revenues. It’s a beguiling theory, but it’s one that hasn’t worked before and won’t work now.

Instead, Congress should let the Bush tax cuts expire for the wealthiest Americans and use the additional tax revenues that are generated to invest in infrastructure and research. “Invest” is the right word. Putting money into infrastructure — such as roads, bridges, broadband, the smart grid and public transit — as well as carefully chosen research initiatives provides a foundation for future growth. As important, it puts funds in the hands of those who will spend them, generating demand that will pull us out of our economic crisis and toward a new cycle of growth.

Job growth, especially of the small business and micro business size is not predicated on personal tax rates. If you are an entrepreneur and you have a good idea for a start-up, you aren’t going to wait for favorable tax rates, or be discouraged by unfavorable tax rates.

And Mr. Gruener’s larger point is exactly correct: the government should be investing in infrastructure (fiber optics, efficient energy, transportation), not hoarding pennies.1

Footnotes:
  1. Especially not pennies, remember? [↩]

Typical really

Seth Anderson0 comment

A microcosm of most of the country, I believe. The GOP has confused rural voters into supporting GOP policies, despite what those policies, if ever enacted, would do to rural areas.

Not Tonight Dear

SACRAMENTO — A new report on who supplies — and who spends — California’s public dollars shows an interesting disparity between the givers and the takers: Counties that provide most of the state’s revenue streams like income and sales taxes reliably elect Democrats, who traditionally want to take more of your money. And counties whose Republican representatives argue most vociferously for social services cuts draw, per capita, the most state aid.

The breakdown, prepared by the Legislative Analyst’s Office for the office of Assemblywoman Noreen Evans, D-Santa Rosa, puts another spin on what’s emerged as the central issue in this year’s fight over a $19 billion deficit. It also adds new color to the prevailing portrait of poverty for many Californians — it’s not fundamentally an urban problem.

Instead, experts say, rural residents would be most affected by the drastic cuts being considered to health and human services programs. The report shows the Bay Area’s blue counties are, in many ways, a revenue lifeline for the rural Republican red. “Is there a disconnect here between political sentiments in rural areas and the demand or desire or need for public expenditures? I think there is,” said Al Sokolow, a retired professor at UC Davis. “Leaders in these rural areas, while wanting more from the state, are also less reluctant to give in on the tax front.”

(click to continue reading Report: Bay Area counties give so rural counties can receive – San Jose Mercury News.)

And a few specifics of what the money pays for:

While budget cuts would affect all Californians, experts say the fallout is compounded in rural districts.
Rural residents already struggle with a shortage of doctors who accept MediCal clients. Cuts to in-home care for seniors might force many into nursing homes in bigger cities. And sheriff’s departments, patrolling massive counties, already lack staffing to personally handle every call.

But because some rural counties tend to lean libertarian, or because many of those affected can’t afford the time or money to engage in the political process, that reality isn’t always apparent.

“People don’t understand how much they get for the money they pay. It starts with making communities more aware,” said Connie Stewart, a former mayor of Arcata and the executive director of Humboldt State’s California Center for Rural Policy.

Bush Tax Cuts for 120,000 select taxpayers

Seth Anderson0 comment

Yikes. And yet the Deficit Hawks are still arguing about deficit reduction being so damn important that the unemployed should lose their benefits

Heading East - Polapan Blue

I gather that some people are claiming that my numbers in Monday’s column were wrong. They weren’t.

The Tax Policy Center estimates (pdf) say that the budget cost of making all the Bush tax cuts permanent, as opposed to only the middle class cuts, is $680 billion over the next decade. It also says that 55 percent of the benefit flows to 120,000 taxpayers. That’s $374 billion divided by 120,000; TPC expresses it as a per year gain of $310,000, but it is more than $3 million per member of the top .1% over the course of the decade.

(click to continue reading Yes, $3 Million – Paul Krugman Blog – NYTimes.com.)

Legal Tender

and from the original column published 8-23-2010:

What’s at stake here? According to the nonpartisan Tax Policy Center, making all of the Bush tax cuts permanent, as opposed to following the Obama proposal, would cost the federal government $680 billion in revenue over the next 10 years. For the sake of comparison, it took months of hard negotiations to get Congressional approval for a mere $26 billion in desperately needed aid to state and local governments.

And where would this $680 billion go? Nearly all of it would go to the richest 1 percent of Americans, people with incomes of more than $500,000 a year. But that’s the least of it: the policy center’s estimates say that the majority of the tax cuts would go to the richest one-tenth of 1 percent. Take a group of 1,000 randomly selected Americans, and pick the one with the highest income; he’s going to get the majority of that group’s tax break. And the average tax break for those lucky few — the poorest members of the group have annual incomes of more than $2 million, and the average member makes more than $7 million a year — would be $3 million over the course of the next decade.

How can this kind of giveaway be justified at a time when politicians claim to care about budget deficits? Well, history is repeating itself. The original campaign for the Bush tax cuts relied on deception and dishonesty. In fact, my first suspicions that we were being misled into invading Iraq were based on the resemblance between the campaign for war and the campaign for tax cuts the previous year. And sure enough, that same trademark deception and dishonesty is being deployed on behalf of tax cuts for the wealthiest Americans.

So, for example, we’re told that it’s all about helping small business; but only a tiny fraction of small-business owners would receive any tax break at all. And how many small-business owners do you know making several million a year?

Or we’re told that it’s about helping the economy recover. But it’s hard to think of a less cost-effective way to help the economy than giving money to people who already have plenty, and aren’t likely to spend a windfall.

No, this has nothing to do with sound economic policy. Instead, as I said, it’s about a dysfunctional and corrupt political culture, in which Congress won’t take action to revive the economy, pleads poverty when it comes to protecting the jobs of schoolteachers and firefighters, but declares cost no object when it comes to sparing the already wealthy even the slightest financial inconvenience.

So far, the Obama administration is standing firm against this outrage. Let’s hope that it prevails in its fight. Otherwise, it will be hard not to lose all faith in America’s future.

(click to continue reading Paul Krugman- Bush Tax Cuts – Now That’s Rich – NYTimes.com.)

Top 5 Social Security Myths

Seth Anderson0 comment

I’ve heard some of these assertions dozens of times, mostly from loud-mouthed, small brained Republicans. Helpful to have response handy…

Myth: Social Security is going broke.

Reality: There is no Social Security crisis. By 2023, Social Security will have a $4.3 trillion surplus (yes, trillion with a ‘T’). It can pay out all scheduled benefits for the next quarter-century with no changes whatsoever. After 2037, it’ll still be able to pay out 75% of scheduled benefits–and again, that’s without any changes. The program started preparing for the Baby Boomers retirement decades ago. Anyone who insists Social Security is broke probably wants to break it themselves.

Myth: We have to raise the retirement age because people are living longer.

Reality: This is red-herring to trick you into agreeing to benefit cuts. Retirees are living about the same amount of time as they were in the 1930s. The reason average life expectancy is higher is mostly because many fewer people die as children than did 70 years ago.3 What’s more, what gains there have been are distributed very unevenly–since 1972, life expectancy increased by 6.5 years for workers in the top half of the income brackets, but by less than 2 years for those in the bottom half.4 But those intent on cutting Social Security love this argument because raising the retirement age is the same as an across-the-board benefit cut.

Myth: Benefit cuts are the only way to fix Social Security.

Reality: Social Security doesn’t need to be fixed. But if we want to strengthen it, here’s a better way: Make the rich pay their fair share. If the very rich paid taxes on all of their income, Social Security would be sustainable for decades to come.5 Right now, high earners only pay Social Security taxes on the first $106,000 of their income.6 But conservatives insist benefit cuts are the only way because they want to protect the super-rich from paying their fair share.

Myth: The Social Security Trust Fund has been raided and is full of IOUs

Reality: Not even close to true. The Social Security Trust Fund isn’t full of IOUs, it’s full of U.S. Treasury Bonds. And those bonds are backed by the full faith and credit of the United States.7 The reason Social Security holds only treasury bonds is the same reason many Americans do: The federal government has never missed a single interest payment on its debts. President Bush wanted to put Social Security funds in the stock market–which would have been disastrous–but luckily, he failed. So the trillions of dollars in the Social Security Trust Fund, which are separate from the regular budget, are as safe as can be.

Myth: Social Security adds to the deficit

Reality: It’s not just wrong — it’s impossible! By law, Social Security funds are separate from the budget, and it must pay its own way. That means that Social Security can’t add one penny to the deficit.1

(click to continue reading MoveOn.org Political Action: Democracy in Action.)

 

Tax Cuts For the RIch Means Asphalt Roads Return to Gravel

Seth Anderson2 Comments

If the knuckle-draggers in Washington1 hadn’t pissed away gazillions of dollars fighting three2 concurrent wars – Iraq, Afghanistan, and the so-called War on Terror – while simultaneously reducing the taxes for the wealthy individuals and corporations, perhaps places like North Dakota and Michigan would be able to keep their highways and roads paved.

Trail

Paved roads, historical emblems of American achievement, are being torn up across rural America and replaced with gravel or other rough surfaces as counties struggle with tight budgets and dwindling state and federal revenue. State money for local roads was cut in many places amid budget shortfalls.

In Michigan, at least 38 of the 83 counties have converted some asphalt roads to gravel in recent years. Last year, South Dakota turned at least 100 miles of asphalt road surfaces to gravel. Counties in Al

abama and Pennsylvania have begun downgrading asphalt roads to cheaper chip-and-seal road, also known as “poor man’s pavement.” Some counties in Ohio are simply letting roads erode to gravel.

The moves have angered some residents because of the choking dust and windshield-cracking stones that gravel roads can kick up, not to mention the jarring “washboard” effect of driving on rutted gravel.

But higher taxes for road maintenance are equally unpopular. In June, Stutsman County residents rejected a measure that would have generated more money for roads by increasing property and sales taxes.

(click to continue reading Economic Crisis Forces Local Governments to Let Asphalt Roads Return to Gravel – WSJ.com.)

Exiled and Wandering
[South Dakota]

On the other hand, presumedly, gravel roads reflect less sun, and thus have some sort of effect upon the temperature of the planet. Maybe it’s a good thing to move away from the American love of automobiles.

Footnotes:
  1. of both “parties” [↩]
  2. or four, if you include the Drug War [↩]

Keep Your Financial Records No Longer Than You Must

Seth Anderson0 comment

Easier said than done, we are buried in mounds of paper from years past. Shredding documents takes effort, and time, and it is usually easier to box papers up, and stash them somewhere. Still, there is compelling reasons to act, and clean up.

Darth Vader

According to Catherine M. Williams, vice president for financial literacy at the credit counseling firm Money Management International, there are two main reasons to keep financial records. “It’s either for backup to a tax issue or for proof that you did something like make a payment,” Ms. Williams said.

The Internal Revenue Service requires that individuals be able to produce records proving any income, deductions or credit claimed for at least three years from the date of a return, the statute of limitations for how long the I.R.S. has to assess additional tax if all income was reported correctly. In addition, the I.R.S. requires that individuals be able to produce such records for six years if they fail to report income that is more than 25 percent of their gross income. There is no statute of limitation for failure to file or tax fraud.

Therefore, experts generally recommend keeping anything that verifies the information in your tax return for at least six to seven years. “My recommendation would be never throw away copies of your tax returns and checks made out to the government — anything else, I would say keep for at least six years,” said Jude Coard, a tax partner at accounting firm Berdon L.L.P.

[Click to continue reading Keep Your Financial Records No Longer Than You Must – NYTimes.com]

Maybe we need an intern, one that can be trusted to make judgement calls about sensitive financial information.

Caterpillar Lying about Health Care

Seth Anderson0 comment

Caterpillar, that bastion of Republican largesse1, lying about health care? How could that be? Did John Boehner write the letter? or his staff?

Winch

Caterpillar Inc. of Peoria has jumped to the forefront of manufacturing companies complaining about the cost of the federal health care overhaul. On March 18 the company sent a letter to Speaker Nancy Pelosi and Representative John A. Boehner, the Republican leader, saying mandated changes would cost it “$100 million in the first year alone.”

…

According to a regulatory filing by the company last week, the $100 million figure is Caterpillar’s estimated total cost for as long as the newly enacted Patient Protection and Affordable Care Act remains in effect. And the $100 million charge is an accounting change, a noncash cost that has no affect on the company’s operations.

In addition, the $100 million figure does not arise from changes to decades-long practices at Caterpillar. Rather, it comes about because the new law removes a tax break codified in 2003.

No company sneezes at the elimination of a $100 million tax break. But in 2008, Caterpillar had $51 billion in sales, and profits topped $3.5 billion for the third straight year. The projected profits for 2010 are a relatively weak $1.56 billion, and the $100 million tax charge would mean an additional 6 percent reduction.

[Click to continue reading Chicago News Cooperative – The Pulse – Scrutinizing the Numbers in Caterpillar’s Complaint – NYTimes.com]

Remove

So really Caterpillar’s complaint boils down to whining about a removal of a tax break enacted when Republicans controlled the Congress and the White House. Cry me a river…

Footnotes:
  1. 2010 contributions- 24% to Democrats, 76% to Republicans, 2004 contributions -11% to Democrats, 89% to Republicans [↩]

Health Care Reform Will Affect Your Wallet

Seth Anderson3 Comments

Seems like a reasonably non-partisan analysis. The new, welcomed Health Care Reform might have a small effect on a few of our unreimbursed deductions it seems. For years, our business has paid for our health insurance out of our heretofore1 meager profits, and despite nobody actually using the insurance to pay for anything, our premiums have skyrocketed each and every year. Last year alone, our Blue Cross Blue Shield premiums went up over 30%. Yikes.

Calvary Cemetery

  • Couples earning more than $250,000 a year, and individuals earning more than $200,000 a year, will see an increase from 1.45% Medicare tax to 2.35% starting in 2013.
  • Those with the higher income listed above would also see a 2.8% tax on unearned income (interest and dividends).
  • Starting in 2018, a 40% excise tax would be imposed on the portion of employer-sponsored “Cadillac plans” that exceeds $10,200 a year for individuals and $27,500 for families.
  • The threshold for deducting medical expenses (unreimbursed) would be raised to 10% of income from 7.5%, so many will lose the current tax deductions they tax advantage of.
  • Starting this year, those who make use of indoor tanning facilities will pay a 10% tax.
  • Starting in 2013, your tax-advantaged flexible spending account contributions will be limited to $2,500 for medical expenses.

[Click to continue reading How Will Health Care Reform Affect Your Wallet?]

the only real change I see is the 2.5% reduction in deducting health care costs we pay ourselves, which doesn’t translate to much real money, at least in our case, but I’m still scouring the details to see if there is anything else to worry about.

Footnotes:
  1. we are still optimists – this year will the year we can set some aside for a rainy day. Yeah, this year [↩]

Health Reform Bill Instant Provisions

Seth Anderson0 comment

From Nancy Pelosi’s blog:

Killing People Is Rude

Under the legislative package the House passed on Sunday (the Senate-passed health bill as amended by the reconciliation bill) many key provisions take effect this year – here are some of them:

IF YOU ARE A SMALL BUSINESSES OWNER:

SMALL BUSINESS TAX CREDITS—Offers tax credits to small businesses to make employee coverage more affordable. Tax credits of up to 35 percent of premiums will be immediately available. Effective beginning for calendar year 2010. (Beginning in 2014, small business tax credits will cover 50 percent of premiums.)

[Click to continue reading The Gavel » Blog Archive » What’s In The Health Reform Bill For You Right Away?]

A bunch more that don’t affect me, but might be of interest to you. Also an implementation timeline [PDF]

Looking to Taxes as Solution to a Crisis

Seth Anderson0 comment

More on the Illinois budget woes we mentioned earlier.

So are Illinois residents taxed at a higher rate than other states would tax? Always a bit hard to measure, because there are so many kinds of taxes, and some apply to residents and some to businesses. And more importantly, would companies move away from Illinois if the taxes increased?

Interstate

Illinois could raise about $6 billion, covering roughly half the expected 2011 budget deficit, by increasing the Illinois income tax rate on individuals to 5 percent, from the current 3 percent, and raising the corporate tax rate to 6.4 percent, from 4.8 percent, the Civic Federation’s said.

But higher taxes also affect how employers view the state’s business climate, a calculation that factors in state and local taxes on retail sales and business income, too. The Tax Foundation, a nonprofit and nonpartisan organization that measures federal and state taxes, said Illinois’s business climate suffers because low income tax rates are offset by the high rates on retail sales and property transactions.

As of September 2009, Illinois’s combined state and local sales taxes averaged 8.4 percent, making the state the sixth-biggest taxer, just ahead of New York, said Justin Higgenbottom, a Tax Foundation analyst. Illinois’s high taxes on property earn it sixth place in that category.

In addition to the corporate rate of 4.8 percent, other taxes bring the effective Illinois corporate rate to 7.3 percent, Mr. Higgenbottom said. That means the Civic Federation proposal would in effect take the state’s top corporate rate in Illinois to 8.9 percent.

Once the analysts add it all up, the Tax Foundation said Illinois’s state and local taxes in the 2008 fiscal year represented 9.3 percent of the state’s income. That ranks Illinois below the national average of 9.7 percent and roughly the same as surrounding states except Wisconsin, which is higher.

[Click to continue reading Chicago News Cooperative – Looking to Taxes as Solution to a Crisis – NYTimes.com]

Don't Even Bother

Will facts be compelling enough to convince Illinois legislators to push tax increases? Depends if fear of being labelled a tax-and-spender in the next election cycle trumps being fiscally responsible. I’d be surprised mightily, if the corporate tax rate went up, and moderately surprised if the income tax rate went up.

Illinois Airs Plan on Deficit

Seth Anderson1 Comment

It is a bit of a problem: Illinois is not exactly flush with cash, and either services have to be cut, or taxes raised. Neither is politically viable, but ignoring the deficit is not good long-term strategy. Of course, just like in Washington, D.C., deferring decisions until later is a bi-partisan sport.

Radical reinventions

Illinois Gov. Pat Quinn has proposed cutting spending and raising taxes to deal with one of the biggest state budget crises in the nation, but his plan will likely be unpopular with some voters and lawmakers during a tough election year.

Illinois’s deficit through mid-2011 is estimated at $11 billion to $13 billion—close to 50% of the expected $26.7 billion in available revenue for the coming fiscal year, which begins July 1. That is among the worst such percentages among states. Health-care and social-service agencies routinely wait three months or more for the state to pay its bills.

The state pension system also is the worst-funded in the U.S. Illinois borrowed nearly $3.5 billion last year to make its annual pension payment. State auditors estimate that the pension systems are underfunded by $62 billion.

Warning residents that the state faces a fiscal crisis, Mr. Quinn’s office on Wednesday posted his proposals, along with preliminary budget figures, on a state Web site. He isn’t set to deliver his formal budget speech—which kicks off the legislative process—until March 10. Law

[Click to continue reading Illinois Airs Plan on Deficit – WSJ.com]

Division Street Bridge

and even cutting the obvious fat from the budget is not enough

The problem is that Illinois needs billions, not millions, of dollars in increased revenue, lowered spending or both. Many citizen suggestions are prohibited by state or federal law, or make no meaningful dent in the deficit.

In fact, Mr. Quinn’s proposed cuts and revenue increases, if passed, wouldn’t fully resolve the deficit. The governor also wants the state to borrow more and to request more federal assistance. States have been using federal stimulus money to prop up their budgets, particularly in education and health care, but that funding is set to largely disappear by the end of the year.

One of these days the accounting trickery will have to end, both in Illinois, and other similarly strapped for cash states, and on the federal level. But not this year presumedly.

Mr. Quinn and research groups that have analyzed Illinois’s budget say the state consistently spends more than it collects in revenue. For years, lawmakers and governors have relied on borrowing and one-time accounting moves to make up the difference.

but as James O’Shea reports in the NYT:

With a fiscal crisis looming in Illinois, some influential people concerned about the dismal condition of the state’s finances are proposing that lawmakers increase the individual income tax rate by two-thirds and the corporate rate by one-third.

Taxes are a hot political issue. Illinois has the lowest income tax rate of the 41 states that tax wage income, so the low rate on income makes the tax a juicy target during a tough budget fight. But since governments also impose taxes on sales, property and other transactions, getting a handle on where Illinois stands is not simple.

[Click to continue reading Chicago News Cooperative – Looking to Taxes as Solution to a Crisis – NYTimes.com]

Soda tax and Corn Subsidy

Seth Anderson2 Comments

There is talk of soda and other sugary drinks being publicly identified as being a culprit in our nation’s worsening health

Storing Corn - Agfa Scala 200

In their critics’ eyes, producers of sugar-sweetened drinks are acting a lot like the tobacco industry of old: marketing heavily to children, claiming their products are healthy or at worst benign, and lobbying to prevent change. The industry says there are critical differences: in moderate quantities soda isn’t harmful, nor is it addictive.

The problem is that at roughly 50 gallons per person per year, our consumption of soda, not to mention other sugar-sweetened beverages, is far from moderate, and appears to be an important factor in the rise in childhood obesity. This increase is at least partly responsible for a rise in what can no longer be called “adult onset” diabetes — because more and more children are now developing it.

[Click to continue reading Is Soda the New Tobacco? – NYTimes.com]

Dance of the Devil Corn

So what to do? Well, in the best Washington manner, the answer is to tax the offending party and hope this changes behavior:

A tax on soda was one option considered to help pay for health care reform (the Joint Committee on Taxation calculated that a 3-cent tax on each 12-ounce sugared soda would raise $51.6 billion over a decade), and President Obama told Men’s Health magazine last fall that such a tax is “an idea that we should be exploring. There’s no doubt that our kids drink way too much soda.”

…

Small excise taxes on soda are already in place in Arkansas, Tennessee, Virginia, Washington and West Virginia, and Chicago imposes a 3 percent retail tax on soft drinks. Soda taxes were proposed in at least 12 other states in 2009, though none were approved. Mississippi is considering legislation that would tax the syrup used to sweeten soda; the mayor of Philadelphia is weighing a tax on soda and other sugar-sweetened drinks, and Gov. David Paterson of New York has indicated that he will recommend a penny-per-ounce tax on sugared beverages in his 2011 budget.

The penny-per-ounce tax, favored by Dr. Brownell and others, would produce a significant increase in retail costs: the 12-pack of Coke on sale for $2.99 would go for $4.43 and a 75-cent can would rise to 87 cents. These increases, Dr. Brownell estimates, would reduce the annual per capita consumption of soda by more than 11 gallons, to 38.5 gallons. “And the revenue,” he says, “could be used to subsidize fruits and vegetables, fund obesity prevention programs for children and home economic classes in schools, and more.”

corn_porn.jpg

A couple of points in response. One, I’ve heard the 50 gallons per person a year claim before. That’s a hell of a lot of soda. Especially when household’s like my own are considered. Even if you add in cocktail ingredients like tonic water, ginger ale and tomato juice, we probably drink ten 12 ounce containers, which is 1 gallon a year in our entire household. But the oft cited average is 500 12 ounce containers annually, or nearly 1.5 cans a day. That’s a lot, and of course, this is only the average person.

Two, Mark Bittman’s article doesn’t mention a topic that Michael Pollan and others have argued quite compellingly, namely that the US Government is complicit in soda remaining so cheap because of the Federal Farm Subsidies to high fructose corn syrup producers like ADM and Cargill. On the one hand, the government gives tax money to agribusinesses to grow corn, and on the other, the government taxes products like soda made with the byproduct. Of course, PepsiCo and other cpgs1 depend upon cheap ingredients as part of their business model, so they cannot talk too loudly about the injustice of it all.

Footnotes:
  1. consumer package goods [↩]

Reading Around on July 20th

swanksalot0 comment

Some additional reading July 20th from 09:53 to 19:30:

  • The Return of the Pay Wall | The Big Money – The summer of 2009 is a terrible time to start charging for what was free. …

    So is this really the best time to start charging for online news? No. The best time was back in 1994, when the Web made online publishing to the masses a snap. And now that newspapers are finally making the move, they're applying a 1994 solution to the 2009 Web. Today, online publishers are seeing more and more traffic coming through blogs, aggregators like Google News, and social sites like Facebook and Twitter. Ignoring them is even more perilous to a paper's image than it was two years ago, when the New York Times tore down its Times Select pay walls. The hypertext link that made the Web unique is even more powerful today, and pay walls that break those links send would-be readers a clear message: Don't bother.

  • pandagon.net – these things don't just blame themselves – Harvard professor Henry Louis Gates Jr., one of the nation’s pre-eminent African-American scholars, was arrested Thursday afternoon at his home by Cambridge police investigating a possible break-in.. Gates, director of the W.E.B. Du Bois Institute for African and African American Research at Harvard, had trouble unlocking his door after it became jammed.
    He was booked for disorderly conduct after “exhibiting loud and tumultuous behavior,” according to a police report. …
    Now, I can understand why the police might think that a middle-aged black man was breaking into a home during lunchtime by trying to ram the front door with his shoulder, because it’s what many middle-aged black men do with their time, between Young and the Restless commercial breaks.
    … I’m sure that a significant number of people will read this and think that this is just a black man screaming racism because he handled a situation poorly, because a significant number of people like being dead fucking wrong.
  • The Return of the Pay Wall | The Big Money – The summer of 2009 is a terrible time to start charging for what was free. …

    So is this really the best time to start charging for online news? No. The best time was back in 1994, when the Web made online publishing to the masses a snap. And now that newspapers are finally making the move, they're applying a 1994 solution to the 2009 Web. Today, online publishers are seeing more and more traffic coming through blogs, aggregators like Google News, and social sites like Facebook and Twitter. Ignoring them is even more perilous to a paper's image than it was two years ago, when the New York Times tore down its Times Select pay walls. The hypertext link that made the Web unique is even more powerful today, and pay walls that break those links send would-be readers a clear message: Don't bother.

  • Hullabaloo – Wrecking Ball – Davis really had only bumped the fee back to its historic level: to 2% of a vehicle's value, rather than a recently enacted 0.65%.

    Schwarzenegger's canceling of the fee hike actually amounted to the single biggest spending increase of his reign. That's because all the revenue from the vehicle license fee had gone to local governments, and Schwarzenegger generously agreed to make up their losses by shipping them money from the state general fund.

    The annual drain on the state treasury was $6.3 billion until February. Then the governor and Legislature raised the fee to 1.15% of vehicle value, saving the state $1.7 billion.

  • Kennedy ’suicide ramp’ improvements to increase suicide rates | The Daily Blank – "According to an official Illinois Department of Transportation report, the notorious “suicide ramps” on Chicago’s downtown Kennedy Expressway will undergo much-needed improvements in order to bring the annual number of suicide deaths back up from what has been a startling decline in the past decade."