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May 31, 2015

Virginia's $250 Million Road to Nowhere

The Washington Post reported yesterday that " Virginia paid more than $250 million for a road that never got built," which was posted yesterday by Michael Laris.

According to the Post's Michael Laris:

"Virginia officials are trying to get back tens of millions of dollars from a private company that was supposed to build a 55-mile toll road in southeastern Virginia.

"State officials had been sending the company multimillion-dollar installments each month to build the road. But the state lacked federal construction permits, so the road wasn’t built.

"And now the commonwealth is out about $256 million.

"The problems help explain why top officials in Gov. Terry McAuliffe’s administration have recently increased scrutiny of public-private partnership deals, a sharp shift in tone in a state that has for 20 years been a national leader in pushing such projects. The changing views could have a major impact on one of the most important transportation initiatives in the state: a vast project to add toll and carpool lanes along 25 miles of Interstate 66 west of the Capital Beltway in Northern Virginia.

"Transportation Secretary Aubrey Layne said this month that the I-66 project should not be ceded to private investors for “ideological” reasons, as might have happened in the past. Keeping the construction of toll and carpool lanes under state control could generate hundreds of millions of dollars for additional transportation projects, he said, and avoid a repeat of cases in which the state was left 'holding the bag.'"

Laris writes that Layne and Governor McAuliffe have "an unavoidable conclusion: State officials have at times failed spectacularly to protect the interests of the commonwealth and its taxpayers." Duh! Do you think?

Read the rest of Laris's reporting for more of the gritty details.

Readers of Growls are urged to contact Governor Terry McAuliffe and/or Senators and Delegates of the Virginia General Assembly who represent Arlington County to express their outrage at how their tax dollars are being handled by the Virginia Department of Transportation bureaucrats.

  • Contact information for members of the General Assembly can be found here (use one of the "quick links").

And tell them ACTA sent you.

May 30, 2015

IRS Admits Tax Code is Biased Against the Successful

In an op-ed, posted yesterday at CNS News, Dan Mitchell of the Cato Institute, writes:

"When I debate class warfare issues, here’s something that happens with depressing regularity.

"I’ll cite research from a group like the Tax Foundation on how an overwhelming share of the income tax is borne by upper-income taxpayers.

"The statist I’m arguing with will then scoff and say the Tax Foundation is biased, thus implying that I’m sharing bogus data.

"I’ll then respond that the group has a very good reputation and that their analysis is directly based on IRS data, but I may as well be talking to a brick wall. It seems leftists immediately close their minds if information doesn’t come directly from a group that they like.

"So I was rather happy to see that the Internal Revenue Service, in the Spring 2015 Statistics of Income Bulletin, published a bunch of data on how much of the income tax is paid by different types of taxpayers.

"I’ll be very curious to see how they respond when I point out that their favorite government agency admits that the bottom 50 percent of earners only pay 2.8 percent of all income tax. And I’ll be even more curious to see how they react when I point out that more than half of all income taxes are paid by the top 3 percent of taxpayers."

Read the remainder of the op-ed here. Mitchell also provides a clearly-presented video explaining five key reasons to reject class-warfare tax policy from the Center for Freedom and Prosperity.

May 29, 2015

A Thought on the Minimum Wage

"Right now, we are embroiled in a deeply, deeply stupid debate over whether to raise the statutory minimum wage to $15 an hour. (I write “statutory minimum wage” because the real minimum wage is always and everywhere $0.00 an hour, as any unemployed person can confirm for you.) Because everything in the economy is in reality priced relative to everything else, using the machinery of government to monkey around with the number of little green pieces of paper that attaches to an hour’s labor manning the register at 7-Eleven or taking orders at Burger King is, necessarily, an exercise in futility. The underlying hierarchy of values — the relative weighting between six months’ work washing dishes and six months’ tuition at the University of Texas — is not going to change. Prices in markets are not arbitrary — they are reflections of how real people actually value certain goods and services in the real world. Arbitrarily changing the dollar numbers attached to those preferences does not change the underlying reality any more than trimming Cleveland off a map of the United States actually makes Cleveland disappear."

~ Kevin D. Williamson

Source: His May 27, 2015 column, posted at National Review Online.

May 28, 2015

A Thought about Welfare

“It might help if Americans called welfare programs — current benefits for select populations, paid for by current taxes — by their proper name, rather than by the soothing (and misleading) labels of “entitlements” and “social insurance.” That way, we might ask ourself who deserves welfare and why.”

~ Robert J. Samuelson

Source: page 58, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

May 27, 2015

A Thought about Big Government

"The multiplication of public offices, increase of expense beyond income, growth and entailment of a public debt, are indications soliciting the employment of the pruning knife."

~ Thomas Jefferson

Source: The Patriot Post's Founders' Quotes Database.

May 26, 2015

Arlington Board Flunks Transparency with Additional Item

At the end of their May 19, 2015 recessed meeting, the Arlington County Board heard a so-called "additional item," labelled, "Disposition of a Limited Portion of the Real Property and Improvements at 400 North Manchester Street (RPC#12-030-043) in Bluemont Park (A Portion of the Reevesland Property)." (Item #34 on the County Board's May 19, 2015 Recessed Meeting Agenda).

The Manager's report to the Board for the additional item included this summary:

"After repeated efforts to determine the final disposition of the historic Reeves Farmhouse, staff is recommending that the best approach to maintain the integrity of the farmhouse structure is to create a new legal parcel for the limited portion of land surrounding the house and pursue the sale of that parcel that could ensure the historical integrity of the structure and leave the majority of the land available for Bluemont Park."

For the record, the Manager's report says, "The County purchased the 2.4 acre property for $1.8 million in 2001 to expand Bluemont Park." However, the country encountered various expenses, including hiring a consultant on two separate occasions "to develop (and update) an historical, architectural and archeogical survey of the property and explore potential reuse of the farmhouse."

By their nature, unless it represents an actual emergency, so-called additional items warrant taxpayers' attention, especially so in this case since the County has owned the property since 2001. Consequently, it is not surprising this Board action has caught the attention of Arlington residents.

Last Friday, as many residents were leaving for a three-day Memorial Day weekend, the Arlington Sun Gazette carried two news items. In one item, the newspaper reported that Reevesland supporters are angry because of the Board decision. The newspaper reported:

"The May 19 County Board decision to start  the ball rolling on sale of the historic, though dilapidated Reeves farmhouse has left advocates for the property bewildered and outraged.

"Board members voted 3-2 to give County Manager Barbara Donnellan power to prepare a portion of the property, including the farmhouse, for sale. The remainder of the 2.4-acre property, adjacent to Bluemont Park, would be retained by the government.

"Board members Mary Hynes, John Vihstadt and Libby Garvey voted to approve the request, with board members Walter Tejada and Jay Fisette voting against it.

"The staff position: Having failed to find a prospective partner with the financial resources to upgrade the property, a sale is the best course of action.

“With the sale of the Fraber House at Oakgrove Park in 2013, the county has demonstrated that there are potential willing buyers with an interest in purchasing and renovating historic properties,” county officials said in a memo to County Board members.

"County officials say they have tried – and tried, and tried – to find possible partners who would restore the farmhouse, which was purchased by the county government for $1.8 million in 2001, but was left to deteriorate when county officials couldn’t determine what to do with it."

The entire article is worth reading in order to understand the complete context, e.g., the following exchange:

"County staff continued to meet with Reevesland volunteers, but on May 18 the group was informed of the proposal to sell the property. Joan Horwitt, who has helped spearhead efforts of the Reevesland group, called it a “hurtful slap in the face.”

“Virtually nobody in Arlington, including the civic associations that support the renovation of the farmhouse, was informed of this possible vote in a timely fashion,” Horwitt said. “That is not fair, it is not transparent, it is not democratic.”

"County officials counter that funds raised by the sale of the property could be used to improve the adjoining raised-garden beds, where the Lawns2Lettuce4Lunch program grows produce and teaches local schoolchildren about nutrition and the property’s past."

In a second article posted on Friday, the Arlington Sun Gazette reported that "Arlington County Board candidates rip decision to sell off Reevesland." Here's how the Sun Gazette introduced the report:

"Democratic County Board candidates reacted angrily to the Arlington government’s plan to sell off the Reevesland farmhouse, rather than turn it into a community center or learning emporium.

“It is a shameful decision, and the way the decision was made was shameful,” said Katie Cristol, one of six Democratic candidates vying for the County Board seats of Walter Tejada and Mary Hynes.

Five of the six candidates converged on Glebe Elementary School May 21 to debate (School Board Chairman James Lander was at a meeting of his own body). And while there was some disagreement over the merits of unloading the historic, but dilapidated, farmhouse, there was unanimity that the process was seriously flawed."

Growls readers planning to vote in the June 9 primary election should read the entire Sun Gazette article for the candidates positions on his issue as well as other issues affecting Arlington County. For more information about the July 9 primary, visit Arlington County's Office of Voter Registration website.

The ARLnow.com news site has Reevesland reporting here.

Not surprisingly, today's online Arlington Sun Gazette includes a lengthy letter "penned" by Arlington County Board chairman Mary Hynes "to those who have voiced anger at the decision," and reprinted by  the newspaper. In the letter, Hynes says the Board's decision "accomplished several important community goals." Unfortunately, I could not find an explanation in the letter, which explained the necessity of making the Board's May 19 action an additional item; consequently flunking any effort toward transparency.

Looks like we can now add the Reevesland property to the list of projects that includes $1 million bus stops, $75 million swimming pools, and Columbia Pike streetcars.

Arlington residents, who want transparency in their local government, are urged to take a few minutes to tell Arlington County Board members the importance of transparency in everything the Board does. If there had been transparency, the Board would be taking a lot less hear.

  • Call the County Board office at (703) 228-3130.

And tell them ACTA sent you.

If this lack of transparency by the Arlington County Board remains an issue, we will update this Growls.

UPDATE (5/29/15): In his weekly column, The Right Note, at ARLnow, former County Board candidate Mark Kelly devotes a portion of the column to this issue, including the following:

"This decision very well may make financial sense. But driving by the million dollar bus stop on Columbia Pike again the other day, I could not help but think of all the money wasted over the years by our elected officials. So newfound urgent fiscal concerns, particularly by our current Board Chair, ring a little bit hollow.

"A four month delay to proceed with the sale may not have been in order, but clearly the Board’s intent to consider decision could have been noticed for the June meeting at little additional cost to the taxpayer. It would have given the community ample time to plead their case."

May 25, 2015

Some Thoughts on Memorial Day 2015

"Memorial Day is a time each year to remember those who died for our nation in war against our enemies.  In honoring these good men, it is just as important to remember what they were fighting and dying to defend and to preserve.  These days, it seems as if politicians of every stripe prattle on about the economy and restoring prosperity to the middle class and similar appeals to material self-interest.

"But men did not die on the bloody beaches of distant lands for material gains, and the men who founded our nation did not fight for our independence for commercial reasons.  One of the earliest expressions of this purpose was made by the Scots in their own war of independence against the British.  The 1320 Declaration of Arbroath states that “[i]t is in truth not for glory, nor riches, nor honors that we are fighting, but for freedom — for that alone, which no honest man gives up but with life itself.”

"Our own Declaration of Independence states that the purpose of government is the protection of:  “Life, Liberty and the Pursuit of Happiness” and then, significantly, at the end of that document, states that the signers pledge “our lives, our Fortunes and our sacred Honor.”  The Preamble to the Constitution that followed eleven years later notes the purposes of the Constitution as “to form a more perfect Union, establish Justice, insure Domestic Tranquility, provide for the common defence and secure the Blessings of Liberty to ourselves and our Posterity[.]”

~ Bruce Walker

Source: Introduction to "What Memorial Day Means," posted at The American Thinker.

May 24, 2015

A Thought about Government Waste

"Government programs are about waste not because all government officials are crooks, inept, or both. The problem is that government programs are funded regardless of their effectiveness. Every day poorly run businesses fail. Just how many government programs does Congress shut down annually? Is it conceivable that the politicians who fund government programs have a better rate of success then private investors? The answer is obvious: of course not. Incentives matter. Administrators of government programs, enjoying endless funding, feel no urgency to adapt to new realities in the marketplace. Waste is the natural result of such an arrangement.”

~ John Tamny, page 22, “Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics”

Source: Barnes & Noble.

May 23, 2015

Some Thoughts on the 'War on Poverty'

"In 2014, the Census Bureau reported that the American poverty rate was 14.5%.  In 1965, the very first year the War on Poverty programs began, it was 17.3%.  In sum, $22 trillion purchased not even a 3% reduction in real poverty.  Even this “reduction” is illusory, because the poverty rate fluctuates year by year with the rate of the economy growing or slowing.

"This, the greatest erasure of wealth in the history of humankind, was all the more tragic because when the programs began to be implemented in 1965, the U.S. poverty rate had already been cut in half.  In 1950, as Robert Rector of the Heritage Foundation recently pointed out, the poverty rate was 32.2%.  Basically, the gigantic War on Poverty stopped the decline of poverty and froze the rate in place.

"The federal and state governments collectively spent almost one trillion dollars in 2013, averaging a tab of $9,000 per recipient on anti-poverty programs, not including Social Security and Medicare.  It is important to note, as Dr. Rector has, that when the Census Bureau defines the poverty rate, it does not include the government transfer payments.  This means that the “poor” are not nearly as poor as one might think, but it also means that without the transfer payments, the poor would still be with us in the same ratio as they were in the 1960s.

"In other words, what the War on Poverty accomplished was that it kept the underclass frozen in place, with no reduction in the ratio of people climbing out of poverty.  If the goal of welfare transfer payments was to give people a chance to climb out of their straightened circumstances, the War had no effect.  If the goal was to artificially inflate poor people’s income at the expense of taxpayers, then President Obama’s claim this month at Georgetown was correct – a 40% reduction was indeed accomplished, if you call that an accomplishment at the inconceivable expense of $22 trillion.

"With the all the transfer payments, the poor today are much richer than the middle classes were in 1965 . . . .

~ Christopher S. Carson

Source: His article, "No Progress Since the War on Poverty began a Half Century Ago, posted at American Thinker.

May 22, 2015

CAGW Names May 2015 Porker of the Month

Porker of the Month is a dubious honor given to lawmakers, government officials, and political candidates who have shown a blatant disregard for the interests of taxpayers.

Citizens Against Government Waste (CAGW), which grew out of President Reagan's Grace Commission, has "named Rep. Sam Graves (R-Mo.) its May Porker of the Month for his misguided and costly proposal to gut the Center for Medicare and Medicaid Services’ (CMS) Recovery Audit Contractor (RAC) program." Here is how CAGW justifies its award:

"Medicare improper payments have been a chronic fiscal scourge.  In fiscal year (FY) 2014 alone, $46 billion was lost in the program’s fee-for-service improper payments, the most of any federal program.  In an effort to stem the tide of these improper payments, Congress approved the nationwide adoption of the RAC program in January 2010; it has returned more than $9.7 billion to the Medicare Trust Fund with a 96 percent average accuracy rate.  Those savings become even more impressive since auditors are allowed to review no more than 2 percent of claims from a given provider.  Under pressure from hospitals and other providers, Congress and CMS have collaborated to sideline the RAC program since October 2013.  It is no coincidence that the Medicare improper payment rate jumped by 49 percent from 8.5 percent in FY 2012 to 12.7 percent in FY 2014.

"There are few bills so wrongheadedly and laughably named as H.R. 2156, Rep. Graves’s Medicare Audit Improvement Act of 2015.  The bill takes direct aim at the RAC programs’ most positive feature: its contingency fee based compensation model, which operates at no expense to taxpayers.  RACs are paid only for when improper Medicare payments are identified and the overpayments are recovered to replenish the Medicare Trust Fund.  This same payment system is used by private sector insurers to recover improper payments from the same providers that serve Medicare patients.  Removing it would lead to appropriations of substantial sums of taxpayer money to pay contractors to perform the audit function.  The funds to conduct audits would have to compete with other expenditures or be offset with spending cuts, and there is no assurance that any recovered money would go into the Medicare Trust Fund.

"In addition, Rep. Graves is relying on flawed and exaggerated claims to make his case against the RACs.  Allegations that RAC judgments are overturned on appeal at a dramatically high rate are simply untrue.  CMS’s most recent data from FY 2013 shows that 9.3 percent of claims were overturned at the administrative law judge (ALJ) level, the third tier of the appeals process.  Anti-RAC forces also claim that the program puts an onerous burden on providers.  That assertion is ludicrous on its face since it cannot possibly require more than a few employees to assist RACs in their review of no more than 2 percent of claims from any one provider, and RACs must pay providers for any additional document requests.  On the other hand, the cost of appealing RAC audits is so low that a few hospitals have become “frequent filers” by appealing every denied claim and are responsible for vast majority of the appeals to the ALJ level.

"CAGW President Tom Schatz said, “If Rep. Graves’s bill is signed into law, it will do irreparable damage to the Medicare post-payment process by opening the floodgates to a tidal wave of new waste in the form of billions of dollars in improper payments.  Congress should reinstate and expand the RAC program, not cause it to be permanently paralyzed.  Instead of attacking the RAC program and flooding the appeals process, providers should direct their resources toward better compliance with CMS rules for accurate Medicare claims.”

Instead of trying "to destroy the most successful auditing tool that Medicare – and perhaps the entire federal government – has ever had," Rep. Graves should be working to expand the concept of RAC audits to every possible government agency experiencing significant amounts of improper payments.

Kudos to Citizens Against Government Waste (CAGW) for their efforts on behalf of America's taxpayers.

We urge Growls readers to ask their members of Congress what they are doing to bring federal spending under control. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376

Ask for a written response, and tell them ACTA sent you.

May 21, 2015

Maryland Taxpayers Win "Broad Victory" at U.S. Supreme Court

Under a story entitled, "In Landmark Case, Supreme Court Finds Maryland's Tax Scheme Unconstitutional,"  Kelly Phillips Erb, contributor to Forbes magazine, wrote on Monday, May 18:

"Last May, Dominic Perella, argued that the way that the State of Maryland treated tax credits was wrong, arguing, “Maryland’s approach is unfair to people who make money in more than one state.”

"As it turns out, the Supreme Court agrees, holding in Comptroller v. Wynne that Maryland’s tax scheme is unconstitutional because it doesn’t offer credit to its residents for taxes paid in other states.

"This – as it applies both to state and local tax policy – is a big deal. To understand the case, we need to understand the context. How did this case find its way to the Supreme Court? Here are the details:

"A married couple (the Wynnes) reported taxable net income of approximately $2.7 million to the State of Maryland. More than half of that amount represented a share of earnings in an S corporation with operations in several states. The Wynnes claimed a credit on their Maryland tax returns for taxes paid to 39 other states. The State of Maryland denied the credits and issued a notice of deficiency. The Wynnes appealed. At a hearing, the assessment was affirmed, meaning that the Wynnes were stuck paying the tax.

"The Wynnes disagreed with the finding and amended their petition, claiming that the tax credit statute, as written, was in violation of the Commerce Clause of the United State Constitution. That claim was rejected.

"So the Wynnes tried again, arguing this time that the State of Maryland was constitutionally required to extend the credit for taxes paid to other states to the county as well as the state. Their bigger question was whether a state had the unconditional right to tax all income based on residency (they, of course, said no). This time, the Circuit Court agreed with the Wynnes."

Read the remainder of Ms. Erb's story here; there is a link to her 5/28/14 story, which reported tjat SCOTUS had agreed to her the Wynne's case.

A press release from Fagre Baker Daniels is here.

At SCOTUSblog, Bradley Joondeph provides an analysis of the opinion. Here's his "plain English" summary:

"In Comptroller v. Wynne, the Supreme Court invalidated the county component of Maryland’s personal income tax as violating the Commerce Clause because it discriminated against interstate commerce. The Court applied its “internal consistency” test for state taxes: If every state in the Union adopted an identical tax scheme, would commerce that crosses state lines be taxed the same as commerce staying entirely within one state? Because Maryland failed to offer a credit to Maryland residents against the county tax for taxes paid to other states – and Maryland nonetheless imposed the county tax on non-residents earning income in Maryland – the tax scheme was internally inconsistent. Were every state to adopt the same tax scheme, commerce crossing state lines would be taxed more heavily than commerce occurring exclusively in one state."

Meanwhile, at Reason magazine's Hit&Run Blog, Damon Room notes  that Justice Alito wrote the majority opinion, and then adds:

" . . . Chief Justice John Roberts and Justices Anthony Kennedy, Stephen Breyer, and Sonia Sotomayor all joined Alito’s opinion.

"Alito’s sharpest critics proved to be two of his most conservative colleagues, Justices Antonin Scalia and Clarence Thomas. Scalia and Thomas each filed separate dissenting opinions, as did Justice Ruth Bader Ginsburg, whose dissent was joined by Justice Elena Kagan. According to Scalia, the dormant Commerce Clause is a “judicial fraud” that allows federal judges to rewrite state laws according to their own preferences. Thomas, meanwhile, argued that Alito’s take was totally at odds with constitutional history. “It seems highly implausible that those who ratified the Commerce Clause understood it to conflict with the income tax laws of their States and nonetheless adopted it without a word of concern,” Thomas wrote."

At the Tax Foundation's Tax Policy Blog, Joseph Henchman, Vice President, wrote:

"This is a broad victory for taxpayers. Today’s 5-4 decision upholds what should be noncontroversial: state tax powers do not extend to harming interstate commerce by levying multiple taxes on it. This is important not just for one Maryland business, but for anyone who does business in more than one state, travels in more than one state, or lives in one state and works in another. The court also held that these protections apply not only to businesses, but to individuals as well.

"As explained in the Tax Foundation’s brief in the case, state tax practitioners knew these were the rules even though the Supreme Court never explicitly said so. Today, the Supreme Court explicitly said so. Anyone who thought that a state’s tax power extends to all income earned by its residents anywhere in the world, now knows they were wrong."

Patrice Lee, writes at Independent Women's Forum:

"Some 55,000 Maryland taxpayers have in essence been double taxed. One couple learned that the hard way paying an estimated $25,000 in taxation which the Supreme Court now says are not legal. The Wynnes owned half of a homecare and medical staffing company that does business in more than 36 states and reported an income of $2.7 million in 2006.

"The state is nervous; they are on the hook for an estimated $200 million in refunds and interest to taxpayers like the Wynnes. They are also losing an estimated $42 million a year in revenue going forward.

< . . . >

"State officials are balking at the lost revenue, especially in Montgomery County, one of the nation’s wealthiest counties, which stands to lose big from the busted piggyback tax."

Click here for Google's "full coverage" of Maryland v. Wynne.

Given the justices who jointed in the majority opinion, anyone wish to venture how the Justices will rule in the ObamaCare exchanges case?

Congratulations to the Maryland taxpayers for taking this case to the Supreme Court.

May 20, 2015

Some Thoughts on the Size of the Welfare State

"Four years ago I wrote a book about modern American liberalism: Never Enough: America’s Limitless Welfare State. It addressed the fact that America’s welfare state has been growing steadily for almost a century, and is now much bigger than it was at the start of the New Deal in 1932, or at the beginning of the Great Society in 1964. In 2013 the federal government spent $2.279 trillion—$7,200 per American, two-thirds of all federal outlays, and 14 percent of the Gross Domestic Product—on the five big program areas that make up our welfare state: 1. Social Security; 2. All other income support programs, such as disability insurance or unemployment compensation; 3. Medicare; 4. All other health programs, such as Medicaid; and 5. All programs for education, job training, and social services. (emphasis added)

"That amount has increased steadily, under Democrats and Republicans, during booms and recessions. Adjusted for inflation and population growth, federal welfare state spending was 58 percent larger in 1993 when Bill Clinton became president than it had been 16 years before when Jimmy Carter took the oath of office. By 2009, when Barack Obama was inaugurated, it was 59 percent larger than it had been in 1993. Overall, the outlays were more than two-and-a-half times as large in 2013 as they had been in 1977. The latest Census Bureau data, from 2011, regarding state and local programs for “social services and income maintenance,” show additional spending of $728 billion beyond the federal amount. Thus the total works out to some $3 trillion for all government welfare state expenditures in the U.S., or just under $10,000 per American. That figure does not include the cost, considerable but harder to reckon, of the policies meant to enhance welfare without the government first borrowing or taxing money and then spending it. I refer to laws and regulations that require some citizens to help others directly, such as minimum wages, maximum hours, and mandatory benefits for employees, or rent control for tenants. (emphasis added)

"All along, while the welfare state was growing constantly, liberals were insisting constantly it wasn’t big enough or growing fast enough. So I wondered, five years ago, whether there is a Platonic ideal when it comes to the size of the welfare state—whether there is a point at which the welfare state has all the money, programs, personnel, and political support it needs, thereby rendering any further additions pointless. The answer, I concluded, is that there is no answer—the welfare state is a permanent work-in-progress, and its liberal advocates believe that however many resources it has, it always needs a great deal more." (emphasis added)

~ William Voegeli, Senior Editor, Claremont Review of Books, and Visiting Scholar, Claremont McKenna College’s Henry Salvatori Center

Source: Imprimis speech digest, October 2014.

May 19, 2015

Are Flat Taxes Really Flat

At the Tax Foundation's Tax Policy Blog today, Kyle Pomerleau writes. "Several Republican presidential hopefuls have stated their support of the “Flat Tax.” Ted Cruz, Ben Carson, and Rand Paul have all expressed interest in a tax reform plan that moves our current code to a new “Flat Tax.” As a result, there is renewed interest in what a Flat Tax is, what its pros and cons are, and how it could impact different taxpayers.

He first provides a definition of a flat tax, saying:

"When most people hear “Flat Tax,” they usually think a tax system with one, flat tax rate on all income. They also imagine a tax system with little or no deductions or credits. While this is a possible way to design a flat tax, it is not what makes a flat tax a flat tax. The key to a flat tax goes beyond its rates. The key is that it is a consumption tax. You would not call a low-rate tax on all transactions in an economy a flat tax, even though it had one, flat rate.

"A consumption tax is a tax on what people spend, rather than what people earn. Economists like consumption taxes because they are what is called “temporally neutral.” They are neutral with respect to consumption today and consumption tomorrow (saving). Another way to think about a consumption tax is that it taxes, one-time, all the money people spend today plus the money people save, either when they save it, or when they spend it in the future."

Pomerleau then describes the types of flat or consumption taxes. He goes on to explain why economists like flat taxes. He also answers the question of whether flat tax raises taxes on the poor and whether flat taxes reduce revenues. He ends by answering the question can the flat tax abolish the IRS.

For a more indepth treatment, David R. Burton, a senior fellow at the Heritage Foundation has written a "backgrounder" entitled "Four Conservative Tax Plans with Equivalent Economic Results" (No. 2979, December 15, 2014). Here's the abstract:

"The four leading conservative tax reform plans are the Hall–Rabushka flat tax, the new flat tax, a national sales tax, and a business transfer tax. Each is a consumption tax with an equivalent tax base. Except for secondary design choices and the choice of which taxes to replace, each would apply the same tax rate to raise a given amount of tax revenue. They would also have the same economic effects. The choice among them, therefore, rests on non-economic grounds."

In a Cato Institute "policy analysis" paper (No. 536, February 24, 2005), Chris Edwards examines a flat tax, a national sales tax, and a savings-exempt tax. And at the Center for Freedom & Prosperity, among other papers, Dan Mitchell posted a paper April 18, 2014 that compares the flat tax and a national sales tax.

Finally, in a search of about the first 50 'hits' at the leftist Center on Budget and Policy Priorities, your humble scribe found no papers or studies discussing a flat tax. Although I wouldn't expect CBPP to advocate for the flat tax, I expected at least a paper or two criticizing the flat tax.

May 18, 2015

Arlington County Board Jacks Up Parking Meter Rates

ARLnow.com, the online local news site, reported this afternoon that the Arlington County Board approved an increase in parking meter rates of $0.25 per hour,, which will result in increases ranging from 12 1/2% to 25% per hour.

According to the ARLnow.com story:

"The Arlington County Board on Saturday approved a 25 cent-per-hour rise in metered parking rates. The rate increase is expected to be implemented in September and bring in nearly $1 million per year in extra revenue.

"(The increase won’t apply to some reduced-rate meters, currently priced between $0.50-0.75 an hour.)

"The Board unanimously approved the rate increase and also voted unanimously to delay action on a proposed extension of metered parking hours from 6:00 to 8:00 p.m. A public hearing on parking hours is now planned for September."

As if to make good with county residents so they know the county's parking meter rates are the lowest in the region, the Manager provided the following background in their report to the County Board (report for Agenda Item 33, May 16, 2015 Agenda):

"Parking meter rates have remained unchanged since 2011. However, during the four year period, parking pressures have increased and parking operating costs have increased. The proposed increase in maximum rates is $0.25 per hour. On-street parking rates in Arlington lag behind those in the region (rates as of April 2015):

District of Columbia -- $2.00/hour in premium demand; $0.75/hour in remote areas

Alexandria -- $1.75/hour; $1.25/hour at older single space meters

Bethesda -- $2.00/hour on-street; $1.25 in off-street lots


Leesburg -- $1.50/hour on-street

Arlington -- $1.50/hour short term; $1.25/hour long term (Proposed)"

So let's see. When the Board adopted the FY 2016 budget, it was balanced. Consequently the estimated $950,000 from jacking up the parking meter rate wasn't needed to balance the budget. Therefore, it must be a windfall for the county coffers, and will add to the Board's slush fund. Is there a vanity project in the wings waiting for this windfall? Or is the county raising the rate because it hasn't done so in four years?

Alternatively, if the increased rate is intended to more fully recover the cost of providing, administering, and maintaining curb-side metered parking, then why isn't the Manager providing program cost so that Arlington County taxpayers can know and compare the cost and benefits of this program?
 
The Board also deferred action on extending parking meter hours by two hours, a staff recommendation. You can read the press release here.

Growls readers who haven't recently told members of the Arlington County Board that taxpayers in Arlington County are overtaxed and expect better from a county government that self-identifies itself as a world-class community are urged to take a few minutes to tell the County Board that they and the Manager need to do better. Just click-on the link below:
  • Call the County Board office at (703) 228-3130
And tell them ACTA sent you.

May 17, 2015

A Thought on Tax Fairness

"The government may impose heavy taxes on the rich in the name of fairness, but that “fairness” comes at the expense of the economy and those not yet rich.”

~ John Tamny, page 10, "Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics”

Source: Barnes & Noble.

May 16, 2015

A Thought on Income Inequality

 “Income inequality in a capitalist system is truly beautiful. It provides the incentives for creative people to gamble on new ideas, and it turns luxuries into common goods. Income inequality nurses sick companies back to health. It rewards hard work, talent, and achievement regardless of pedigree. And it’s a signal that some of the world’s worst problems will disappear in our lifetimes.”

~ John Tamny, page 47, "Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics"

Source: Barnes & Noble.

May 15, 2015

A Thought on Taxes and Economic Growth

"All taxes are a drag on economic growth. It's only a question of degree."

~ Alan Greenspan

Source: page 36, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

May 14, 2015

Bureaucrats Want Smokers' Butts, or at least their Taxes

In a Watchdog.org story yesterday, Kathryn Watson of their Virginia Bureau reports, "Government officials from Hampton, Virginia, to Topeka, Kansas, are looking to boost cigarette taxes to bolster revenues, but critics say bureaucrats should keep their hands off smokers’ butts." (HT Townhall.com)

Watson develops that lede, reporting:

"Plenty of unsympathetic non-smokers — especially those representing tobacco-free campaigns and organizations — fully support the movement, emphasizing the importance of discouraging harmful habits.

"It’s the coalition of the bootleggers and the Baptists. Both want to tax vice,” said Michael D. Thomas, an economist with the Mercatus Center at George Mason University and assistant professor in the Economics and Finance Department at Creighton University in Omaha, Nebraska.

"Putting aside the problem of allowing government officials to tax one industry or product rather than another, studies show that levying and increasing this so-called “sin tax” doesn’t generally curb smoking or even lower health care costs, and it disproportionately affects the poor and encourages black-market sales."

On the question of whether higher taxes deter smoking, she reports:

"The most consistent argument for higher cigarette taxes is they curb smoking, but the National Bureau of Economic Research says with a substance as addictive as nicotine evidence of that is “relatively sparse.”

“We’re not really seeing much change,” Thomas said. “People just kind of do what they do. What happens is if you raise prices on people who don’t change their behavior, it’s just a big tax.”

"The NBER found that increases in cigarette taxes are associated with only small decreases in cigarette consumption, and it takes a massive increase of 100 percent in a tax to decrease smoking by as much as 5 percent.

“Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small and not usually statistically significant,” the group’s research found.

"Polling suggests taxes and price tags aren’t the biggest factors in getting people to change their smoking habits. Of the smokers Gallup polled in 2002 and 2014, 71 percent said higher taxes are not leading them to smoke less. Of those who tried to quit, only 14 percent said the high cost of cigarettes was a significant factor."

Ms. Watson covers a great deal more, including health care costs, unintended consequences, and the motivations of money, which you can read here.

Watchdog.org is a project of the Franklin Center for Government & Public Integrity, a non-profit organization that promotes a well-informed electorate and a more transparent government. Through state-based investigative reporters in more than 40 states, Watchdog.org exposes government waste, fraud and abuse of power.

Laurels to the Franklin Center for Government & Public Integrity for their support of Watchdog.org.

May 13, 2015

A Thought on Taxes, the Rich, and the Non-Rich

“Taxes are not only a price on work. They are also a price on the productive use of wealth. Great Britain’s political leaders in the 1970s apparently forgot what goes into producing a record album. The Rolling Stones needed sound engineers, backup instrumentalists and singers, gofers and personal assistants, not to mention catering companies, drivers, public relations specialists, and many others who achieve employment when the rich deploy their capital. High tax rates gave all those jobs to the French and later, when post-production of Exile on Main St. moved to Los Angeles, to the Americans. The rich are highly mobile, and they will put their capital to work in the most favorable environment. When the government hits them with high taxes, it’s the non-rich who feel the most pain.”

~ John Tamny, pages 5-6, "Popular Economics: What the Rolling Stones, Downton Abbey, and LeBron James Can Teach You about Economics"

Source: Barnes & Noble


 

May 12, 2015

Cost of New Homeless Center Increases

In a story posted at noon today the Arlington Sun Gazette reports that "Arlington (County) to cut bigger check due to delays at homeless facility." What gives? Is our supposedly world-class county just an ordinary government bureaucracy after all?

According to the Sun Gazette:

"Construction delays related to the Arlington County government’s new homeless-services facility mean the firm handling administration of the project will be getting more cash.

"County Board members on May 16 are expected to add nearly $117,000 to the contract with MTFA Architecture, which has been overseeing construction design and administration for the renovation of the building at 2020 14th St. North.

"The increase will allow continuity as the project is completed, county staff said in making the recommendation. The firm’s work through the project has been satisfactory, staff said.

"Counting the additional funding and a contingency, the total contract authorization for MTFA will rise to $930,000."

The County Manager is recommending the Arlington County Board to "(a)pprove an increase of $116,842.00 to Contract 594-14 with MTFA for additional construction administration services needed to complete the construction of the Homeless Services Center, and Authorize an additional allocation of $25,000.00 as a contingency, for a revised total contract authorization amount of $930,513.00," according to the Manager's report to the Board (Item No. 25 on the Board's May 16, 2015 agenda). Here's the Manager's entire explanation in the staff report:

"The comprehensive Homeless Services Center project was to have been substantially complete on February 27, 2015 with final completion 30 days thereafter, representing a total time for completion of 284 days. These dates have been exceeded due to the construction contractor’s inability to meet their contractual delivery date. Therefore, continued construction administration services are required throughout the remaining construction duration. Given the construction delays experienced to date on this project, an additional three (3) months of construction administration, site visits, and support services are anticipated. The requested contingency amount allows for continuing the contractor’s services for another month should there be further construction delays. It is in the best interest of the County to maintain continuity of effort with the design and construction administration contractor staff familiar with the renovation work of this project. Thus, an increase is requested to Contract 594-14 with MTFA to complete the remaining construction administration services for the Homeless Services Center."

Here's the "fiscal impact" to Arlington County taxpayers, according to the Manager's staff report:

"The additional amount needed for construction administration services will be funded from the existing project contingency and be offset by the liquidated (spelling corrected) damages being assessed to the construction contractor at $1,250 per calendar day until substantial completion is achieved. Funding for construction administration services are available in account 313.480001.43563.2020.0000.0000."

Instead of worrying about "the best interest of the County," it seems the Arlington County Board should be working to ensure the Manager and staff are providing clear and understandable explanations of why it has taken until now to bring the construction delays to the attention of the Manager and Arlington County Board to resolve. The facility was "to have been substantially complete on February 27, 2015." What has staff been doing the past three months? For example, has the county's welfare department been submitting weekly staff reports to the Manager since February 27, 2015? Sounds like another department that needs the attention of the County Auditor when the Auditor is finally hired and is fully-staffed. Today's it's a problem of construction delays. Last year it was the costly Columbia Pike transit project. The year before that it was the infamous $1 million bus stop. The County Auditor may need an army of hundreds.

Growls readers who haven't recently told members of the Arlington County Board that taxpayers in Arlington County are overtaxed and expect better from a county government that self-identifies itself as a world-class community are urged to take a few minutes to tell the County Board that they and the Manager need to do better. Just click-on the link below:

  • Call the County Board office at (703) 228-3130

And tell them ACTA sent you.

UPDATE (5/18/15): In addition to changing the title of this Growls from "Contingencies, Liquidated Damanges, and Cost to Taxpayers", I'm adding a link to the ARLnow's reporting of the Arlington County Board's action this past Saturday, which provides the following information:

"Miller Brothers, Inc., the contractor, was awarded a $6.6 million contract in Feb. 2014 to convert two-and-a-half floors of offices space at 2020 14th Street N. into a comprehensive facility for serving the county’s homeless population.

"The additional funds for the architecture firm will be at least partially offset by a $1,250 per day charge being assessed by the county against Miller Brothers. The county allocated $116,842 plus a $25,000 contingency for MTFA.

“Given the construction delays experienced to date on this project, an additional three (3) months of construction administration, site visits, and support services are anticipated,” according to the staff report. “The requested contingency amount allows for continuing the contractor’s services for another month should there be further construction delays.”

"The County Board approved the allocation without public testimony as part of its Consent Agenda.

The new homeless services center will have up to 80 beds and will replace the county’s emergency winter shelter, located two blocks away in Courthouse."

May 11, 2015

A Thought About Taxes and Capitalism

“There is only one way to kill capitalism — by taxes, taxes, and more taxes.”

~ Karl Marx

Source: page 113, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

May 10, 2015

Another $5.6 Billion of Your Tax Dollars Down the Rathole

On Tuesday, May 5, 2015, the Washington Times reported the "IRS wasted $5.6B on bogus Obama stimulus tax credits, audit finds" In an article written by Stephen Dinan, the report begins:

"The IRS doled out more than $5 billion in potentially bogus college aid payments in 2012 under an Obama stimulus tax credit, according to a report Tuesday from the agency’s inspector general that said the administration still doesn’t have a good handle on how to root out erroneous claims.

"Nearly 4 million students had questionable claims, totaling more than $5.6 billion in that one year alone, the Treasury Inspector General for Tax Administration said. At least half of the students never provided tuition statements showing what they paid, while others attended schools that didn’t qualify them for the tax credit.

"Other students claimed the credit for more than four years, which should have automatically earned a rejection, the investigators said.

“The IRS still does not have effective processes to identify erroneous claims for education credits,” said Treasury Inspector General for Tax Administration J. Russell George, who said he has warned the IRS repeatedly about the problem, but “many of the deficiencies TIGTA previously identified still exist.”

"IRS officials insisted they have taken some steps and said the inspector general was overestimating the total lost to bogus payments — but the officials did acknowledge more needs to be done.

"It’s not just the administration that takes blame. The inspector general and the IRS said Congress could easily tweak a few laws that would give the tax agency power to automatically correct tax returns that are clearly in error, such as those asking for a fifth or sixth year of the tax credit."

In the report issued March 27, 2014 (Reference Number 2015-40-027), the Treasury IG for Tax Administration (TIGTA) explained in the report's highlights why they did the audit:

"Prior TIGTA audits have reported that taxpayers have claimed billions of dollars of erroneous education credits. TIGTA has made a number of recommendations to the IRS to help reduce the number of these erroneous claims. This audit was initiated to assess the IRS’s efforts to improve the detection and prevention of questionable education credit claims."

You can find additional reports about the IRS at the TIGTA website.

At the Daily Caller, Blake Neff summarized the report this way:

"The Internal Revenue Service let more than $5 billion in bogus education tax credits be claimed under an Obama administration 2012 stimulus effort, according to a report released Tuesday by the agency’s inspector general.

"A whopping 3.8 million students were allowed to claim about $5.6 billion in tax credits that, in hindsight, appear to have been questionable or outright fraudulent, the report found. That’s hardly a small figure, as $5.6 billion amounts to more than 25 percent of all education credits given out by the government, an extraordinarily high level of inefficiency and waste. Not only that, but the IRS still hasn’t found an effective way to stop more faulty credits from being claimed in the future."

The Washington Free Beacon's Elizabeth Harrington included a portion of an Association Press report, posted at Yahoo News, which pointed out that:

"The IRS issued $5.6 billion in potentially bogus education tax credits in a single year — more than a quarter of all education credits claimed by taxpayers, a government watchdog said Tuesday. (emphasis added)

"A new report by the agency’s inspector general says questionable credits were issued to more than 3.6 million taxpayers in 2012. Most of them went to students even though the IRS never received a tuition statement from the school. (emphasis added)

"The report noted that tax credits of up to $2,500 a year went to schools that were not eligible to receive federal funding and to students who did not take enough classes." (emphasis added)

The Minneapolis Star-Tribune also carried the Associated Press story.

I'll close with the comments of Rick Moran in a blog post at American Thinker:

"The Obama stimulus bill – the $900-billion payoff to his campaign supporters in 2009 – is the gift that keeps on giving...at least, to crooks, fraudsters, and charlatans.

"The IRS inspector general issued a blistering report on how $5.6 billion of the education tax credit, funded by the stim bill, has been wasted."

If the TIGTA's report got your blood boiling -- and hopefully it did -- write to your favorite member of Congress. You can find links to their Capitol Hill offices here. And tell them ACTA sent you.

May 09, 2015

Laurels to 80% of Michigan's Voters

Earlier this week, on Tuesday, May 5, voters in Michigan voted down Proposal 1, which "would have hiked the state sales tax to 7% from 6%, taken the sales tax off fuel sales, and hiked fuel taxes — raising close to $1.3 billion extra for roads." As the Detroit Free Press's Paul Egan and Kathleen Ryan reported Tuesday evening:

"Proposal 1, likely one of the most complicated and confusing questions ever placed on a Michigan ballot, was soundly rejected Tuesday as many voters expressed anger at lawmakers and state government for failing to come up with a better solution to the sorry state of the roads.

"With all counties reporting, 1.4 million Michiganders voted no on Proposal 1 while less than 351,000 voted yes, according to the Michigan Secretary of State's office. The 80-20 rejection was the most one-sided loss ever for a proposed amendment to the state constitution of 1963, records show."

At the Tax Foundation's tax policy blog on Wednesday, Jared Walczak wrote, "Originally proposed as an alternative to a defeated proposal to raise the gas tax to fund transportation maintenance and improvements, the voters’ verdict on this tax increase sends legislators back to the drawing board."

Tim Carney's column for the Washington Examiner on Thursday, carried the headline, "Michigan conservatives defeat Big Business, Big Money, tax hikes and higher spending."

After pointing out, "A government that robs Peter to pay Paul, the fabled quote goes, can count on the support of Paul. Michigan Gov. Rick Snyder learned this week, though, that millions of dollars in "support" from Paul is no good if you still let Peter vote on the robbery," Carney reports the "money trail:"

"About $10 million was spent on the ballot measure according to analyses by Michigan media — almost all of it in favor of higher taxes and spending. The largest force in the election, which raised at least $8 million to spend on the campaign according to the Center for Public Integrity, was "Safe Roads Yes."

"Who could be against safe roads, right? "Safe Roads Yes" was mostly a front group for the road-building industry. As of SRY's May 4 campaign filing, $5.19 million of its money came from the Michigan Infrastructure and Transportation Association. MITA is a lobby group representing Michigan Paving & Materials Company, Kaltz Excavating Co., Action Traffic Maintenance, Florence Cement Company and Cadillac Asphalt LLC.

"Separately, the Michigan Concrete Association gave $148,000 to SRY, and the Asphalt Pavement Association of Michigan gave $200,000.

"Of all the arguments for raising taxes for highway funding, the worst is that the concrete and asphalt suppliers, and the excavating and paving contractors, want the business. When the support for the tax and spending hikes comes mostly from the industries that would pocket the money, it ought to make observers wonder: Is this serving the public interest, or merely special interests?"

In an editorial, also on Thursday evening, Investor's Business Daily had a political slant, writing:

"Taxes: The left often argues Americans will gladly pay more taxes for education, infrastructure, climate change, poverty alleviation and other grandiose social justice dreams. In fact, voters just keep saying no.

"Another "no" happened in Michigan on Tuesday, with just shy of 80% of voters — four out of five — clobbering a ballot measure that would have raised the sales tax from 6% to 7% and other fees on cars to pay for more roads, highways, schools, etc.

"No other ballot initiative in at least a generation and perhaps ever in the state of Michigan has been so thoroughly routed. You think the voters might have been sending a message to Lansing?

"There's lots of speculation about why voters of both parties en masse revolted against the political class.

"But the folks at the conservative Mackinac Institute provided the best explanation we've heard: "We've already seen state revenues surge by $3.7 billion over five years," says Mackinac President Joe Lehman. "Why should Michiganders think you'd spend this new money any better than the billions you already have?"

Finally, Jonathan Oosting, reporting for Michigan Live on Tuesday evening, includes reporting about one of the three groups that opposed the tax increases:

"Proposal 1 would have eventually generated at least that amount for state and local road agencies, but it would have also produced another $600 million a year in new money for schools, cities, mass transit and the state's general fund.

"Paul Mitchell, chairman of the Coalition Against Higher Taxes and Special Interest Deals, celebrated the election day results with Proposal 1 opponents at a gathering in Troy.

"I said repeatedly that Proposal 1 was the poster child for bad politics and bad policy," Mitchell said. "Today the people of Michigan agreed with that perspective."

"Mitchell, whose group was one of three ballot committees opposing the measure, has called the proposal bloated and overly complicated. Several voters echoed those comments as they hit the polls on Tuesday.

"I really feel the proposal was too convoluted, too many pieces," said Margaret Poort of Muskegon. "If they would have put it, half a percent (sales tax increase) for roads only, I would have voted yes."

Carney concludes his column with something important for those of us who side with taxpayers, writing, "This points towards the way to sell limited government: When government has more power, it empowers those with connections to government. Michigan reminds us that these powerful insiders are beatable, as long as the people have a say."

May 08, 2015

A Thought on the Protection of Freedom

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States where men were free."

~ Ronald Reagan, 40th United States President

Source: The 40 Best Quotes from Ronald Reagan, posted at Townhall.com.  Remarks at the Annual Convention of Kiwanis International, July 6, 1987, posted at the Ronald Reagan Presidential Library.

May 07, 2015

A Thought on the Collapse of Civilizations

"Why did Rome and Byzantium fall apart after centuries of success? What causes civilizations to collapse, from a dysfunctional 4th-century-B.C. Athens to contemporary bankrupt Greece?

"The answer is usually not enemies at the gates, but the pathologies inside them.

"What ruins societies is well known: too much consumption and not enough production, a debased currency and endemic corruption."

~ Victor Davis Hanson

Source: His May 7, 2015 column, posted at Investor's Business Daily.

May 06, 2015

Small Businesses and their Taxes

America has celebrated National Small business Week since 1963 when the President signed the first proclamation. According to the Small Business Administration (SBA), "More than half of Americans either own or work for a small business, and they create about two out of every three new jobs in the U.S. each year."

The Tax Foundation also took time today to commemorate the nation's small businesses, At their Tax Policy blog today, Andrew Lundeen talked about some facts about small business, writing:

"Most small businesses are pass-through businesses. A pass-through business is a type of business where the owner pay(sic) the tax on his or her individual income tax return.

"According to 2011 Census data, pass-through businesses employ 55.3 percent of the private sector work force of 119 million people. This represents approximately 65.8 million workers and business owners.

"Employment by pass-through businesses varies by state. However, pass-through businesses employ most of the private sector workforce in 48 states. In eight states, pass-through businesses account for more than 60 percent of employment. Pass-through businesses employ 67.9 percent of the private work force in Montana, 64.7 percent in South Dakota, and 64 percent in Idaho.

"Hawaii (48 percent) and Delaware (49.5 percent) are the only states where corporations employ more workers than pass-through businesses."

He also provides a map of the United States, color-coded to show "pass-thru business employment as a share of total private sector employment" in 2011. He also links to Kyle Pomerleau's post yesterday, which discusses small businesses and their income tax burden; the post includes a map showing states where the marginal tax rate is over over 50%.

Lundeen also links to an 18-page overview of pass-through businesses in the United States (Special Report No. 227, 1/21/15). The overview includes this conclusion:

"In the last thirty years, the number of pass-through businesses has greatly increased while the number of C corporations has declined. As a result, pass-through businesses now account for 94 percent of all businesses, earn more than 64 percent of total business net income, and employ more than half of the private sector workforce in the United States. In addition, they pay more than $1.6 trillion in wages and salaries and operate in every U.S. industry.

"One of the main goals of fundamental tax reform is to make U.S. businesses more competitive and to increase economic growth. This requires a reduction in taxes on businesses and investment. Most attention is given to traditional C corporations because they face high tax burdens by international standards and account for a large amount of economic activity. As a result, less attention has been given to pass-through businesses. Since pass-through businesses now account for more than half of the business income and employment in the United States, any business tax reform needs to address the individual income tax code as well as the corporate income tax code."

So if you have an opportunity this week, take a moment to personally thank a small business owner.

May 05, 2015

A Thought About Tax Rates

"The fairer and lower tax rates are, the less tax evasion, avoidance and noncompliance there will be."

~ Arthur B. Laffer

Source: page 234, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

May 04, 2015

Growth of Social Security Benefits in 2 Charts

As economist Laurence Kotlikoff recently said, "The US is bankrupt -- not in 30 years, 20 years, or 10 days. It's bankrupt today" -- see our December 13, 2013 Growls.

Consequently, we were not surprised to learn three weeks ago that GOP presidential hopeful Governor Chris Christie had proposed to reform Social Security, Medicare and Medicaid benefits. According to Heather Haddon and Nick Timiraos in the April 14, 2015 Wall Street Journal (behind paywall):

"Gov. Chris Christie called for reduced Social Security benefits for retired seniors earning more than $80,000 and eliminating the benefit entirely for individuals making $200,000 and up in other income, along with raising the retirement age to 69 from 67.

"The changes would not apply to current retirees or those near retirement, but could help keep Social Security sustainable for future generations, Mr. Christie said. Not acting would jeopardize longevity of Social Security and other entitlement programs, he said, and potentially lead to massive tax increases to prop them up.

“Every other national priority will be sacrificed, our economic growth will grind to a complete halt and our national security will be put at even graver risk,” Mr. Christie said during a 40-minute speech Tuesday."

The Wall Street Journal article is accompanied by a very helpful chart, below, that projects when the three fund balances -- Social Security, Medicare, and Medicaid -- will peak, and when the program will be unable to make full benefit payments. For example, Haddon and Timiraos explain it by saying, "Current estimates show that the Social Security program will be unable to make full benefit payments by 2034, which means at some point before then lawmakers could be forced to contemplate raising Social Security taxes or reducing benefit payments."

Incidentally, one basis for Laurence Kotlikoff's observation about national bankfuptcy is generational accounting, which you can find described at the Tax Policy Center here.

Now let's take a look at how rapidly Social Security benefits are growing. According to the Heritage Foundation's 2015 Federal Budget in Pictures feature:

"Since 1990, total Social Security benefit payments have more than doubled after adjusting for inflation. Disability benefits have been the fastest-growing segment, while Old Age benefits are the largest and had the most growth in dollars. Total benefit payments are expected to continue growing rapidly as the large baby boomer generation enters retirement age, straining Social Security's financial resources."

And, here is the Heritage Foundation chart that shows how fast Social Security benefits are growing:

Take another look at the first chart, and you will notice the Social Security Administration will be unable to make full payments to SSDI recipients before 2020 while full benefits will have to be limited for Social Security in less than 20 years. As another chart in the Heritage Foundation budget series explains, the three major entitlement programs "are on track to consume an even greater share of spending in future years, while the portion of federal spending dedicated to other national priorities will decline."

What are your Congressional representatives doing to resolve the problems associated with the nation's major entitlement programs? We urge Growls readers to contact their members of Congress to ask them to become part of the solution to making Social Security, Medicare, and Medicaid sustainable. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, can contact:

  • Senator Mark Warner (D) -  write to him or call (202) 224-2023
  • Senator Tim Kaine (D) -- write to him or call (202) 224-4024
  • Representative Don Beyer (D) -- write to him or call (202) 225-4376.

Ask for a written response, and tell them ACTA sent you.

May 03, 2015

A Thought on the Burden of Taxation

"The mounting burden of taxation not only undermines individual incentives to increased work and earnings, but in a score of ways discourages capital accumulation and distorts, unbalances, and shrinks production."

~ Henry Hazlitt

Source: page 17, "As Certain as Death: Quotations About Taxes," 2010, compiled by Jeffrey L. Yablon, TaxAnalysts.com.

May 02, 2015

A Thought About Liberal Policies, Baltimore, and the Poor

"Dating back to the Kerner Commission after the riots of the 1960s, the left’s go-to solution to urban problems has been more social programs. Since then, we’ve gotten more social programs — and just as many urban problems.

"Exhibit A is Baltimore itself. The city hasn’t been “neglected.” It has been misgoverned into the ground.

"It is a Great Society city that bought fully into the big-government vision of the 1960s, and the bitter fruit has been corruption, violence and despair.

< . . . >

"The city has been shedding jobs and people for decades, including in the 1990s when the rest of the country was booming.

"Baltimore is a high-tax city, with malice aforethought.

"“Officials raised property taxes 21 times between 1950 and 1985,” Steve Hanke and Stephen Walters of Johns Hopkins University write in The Wall Street Journal, “channeling the proceeds to favored voting blocs and causing many homeowners and entrepreneurs — disproportionately Republicans — to flee.

“It was brilliant politics, as Democrats now enjoy an eight-to-one voter registration advantage.”

"To counterbalance the taxes, they note, developers need to be lured to the city with subsidies, and the developers, in turn, contribute to politicians to stay in their good graces. This makes for fertile ground for the city’s traditional corruption.

"Baltimore’s preferred driver of growth has been government. Urban experts Fred Siegel and Van Smith write in City Journal that Baltimore has “emphasized a state-sponsored capitalism that relies almost entirely on federal and state subsidies, rather than market investments.”

"The model makes for high-profile development projects, but trickle-down crony capitalism hasn’t worked for everyone else.

"At the same time, the city has failed at the basic functions of government."

~ Rich Lowry, Editor, National Review

Source:  Originally appeared in the NY Post on May 1, 2015, but posted at RealClearPolitics.com.

May 01, 2015

NTU Urges Support of Mulvaney-Van Hollen OCO Amendment

Our friends at the National Taxpayers Union (NTU) have joined with the more liberal Taxpayers for Common Sense( (TCS) urging support of this amendment to the Military Construction and Veterans Affairs Appropriations Bill.

Presidents of the two organizations prepared the following letter, and signed it yesterday:

"Dear Representative,

"Representatives Mulvaney (R-SC) and Van Hollen (D-MD) are sponsoring amendments to cut several overseas military construction projects from the Overseas Contingency Operations (OCO) portion of the Appropriations bill funding Military Construction and the Department of Veterans Affairs. We hope these amendments can be the beginning of a healthy debate over proper uses of the OCO account.

"Putting more than half a billion in military construction projects in the OCO part of the budget is exactly the kind of thing our organizations believe must be stopped. If these projects in Bahrain, Djibouti, Italy, Oman, Poland and Niger are important to our national defense, the Pentagon should fund them out of its “base” budget where they are subject to the Budget Control Act (BCA) caps.

"Putting them in the OCO accounts, simply because they are overseas, is an unacceptable attempt to build them with “free” money from the slush fund. Military construction has been squeezed in the last few years – the FY15 appropriations level was $4.7 billion. Adding a greater than 10% bump in the OCO slush fund may be the easy way out…but that doesn’t make it right.

"It is clear that military construction is not a contingency; military construction is carefully planned for in advance.

"Placing overseas military construction in the OCO account is a transparent dodge to avoid the BCA caps. We are asking the House leadership to allow straightforward votes on these amendments so we can see who is serious about cutting spending and adhering to the BCA – the only way to avoid sequestration.

"Sincerely,"

In addition to the full text of the letter, TCS includes here this brief explanation:

"In a letter to the House on Thursday, TCS and the National Taxpayers Union (NTU) urged members to support the amendments offered by Rep.s Mick Mulvaney (R-SC) and Chris Van Hollen (D-MD) to the FY2016 Military Construction and Veterans Affairs appropriations bill (H.R. 2029) that would remove several overseas military construction projects from the Overseas Contingency Operations (OCO) portion of the bill. Unlike the Dept. of Defense's "base" budget, the OCO account is not subject to the budget caps imposed by the Budget Control Act (BCA) of 2011. Stuffing OCO full of the projects in Bahrain, Djibouti, Italy, Oman, Poland and Niger as a way to avoid those caps demonstrates a blatant disregard for fiscal responsibility and an unwillingness to make the hard choices necessary to prioritize investments."

Do members of Congress understand  the federal government is broke? Growls readers are urged to contact their member of the House of Representatives to ask her or him to support the Mulvaney-Van Hollen OCO amendment. Only when they see a sufficient number of their "pitchfork-carrying constituents" will they act to reduce waste and duplication in the federal government. Contact information is available at Thomas (use left-hand column). Taxpayers living in Virginia's Arlington County, should contact:

  • Representative Don Beyer (D) -- write to him or call (202) 225-4376.

And tell them ACTA sent you!