Issues
Income inequality grows
– The Eugene Register Guard, December 27, 2015
As the United States has moved further away from the recession it has become painfully clear that, for some, things are far from getting back to “normal.”
The recession deepened, or accelerated, economic divisions in the United States — widening the gap between not just rich and poor, but rich and middle class.
The shares of income and wealth in the United States held by the most affluent families “are at modern historically high levels,” a 2013 study by the Federal Reserve System found.
While average family income in the United States overall rose 4 percent from 2010 to 2013 after falling 7 percent during the recession, that increase in average income was tugged upward by gains among the wealthiest Americans, not the middle class or poor, according to the Fed’s study…
We Respond & Your Comments
“Progressive” politicians bemoan “income inequality.” But there’s a secret they don’t want you to know. It’s called “income mobility.” If people knew about it, taxing the rich to reduce income inequality would be a tougher sell.
Here it is: people move up and down the income scale. They graduate and take low paying entry level jobs. As they gain experience they move up the scale. Incomes peak in their later working years and typically fall when they retire.
A Treasury Dept. study on income mobility from 1996-2005 (the most recent study we could find) revealed that:
- Over 50% of taxpayers moved to a different income quintile over the period;
- About half of those who were in the bottom quintile in 1996 moved to a higher quintile by 2005;
- 75% of those in the top .001% of earners in 1996 dropped out of this group by 2005.
Now you know it: income inequality isn’t the catastrophe the taxing class says it is, because incomes aren’t static. Lots of people toward the bottom of the income scale move to lower middle class and higher. And many at or near the top move the other way.
Tip Of Our Hat – Issue 106
Today we tip our hat to Oregon Senator Ron Wyden for leading the fight for a tax free Internet!
Along with then-Senator Chris Cox (R-CA) Ron co-sponsored the original temporary ban on Internet taxes. Now he’s worked with Republicans Bob Goodllatte and Mitch McConnell to make it permanent. Ron – Our hat’s off to you on this one!
Solyndra times five: What’s up with the $2.65 billion in federal loans to Abengoa?
– Ron Ninkolewski, Watchdog.org
…Renewable energy company Abengoa has received a combined $2.65 billion in loan guarantees…. But with the company teetering on the verge of bankruptcy, it’s unclear if taxpayers will get stuck paying off the loans…
Based in Spain, Abengoa SA is teetering on the verge of insolvency…
The renewable giant got — from the U.S. Department of Energy — loan guarantees of $1.45 billion to build the Solana solar plant in Arizona…
… William Yeatman, senior fellow…at Competitive Enterprise Institute… (said) “The total amount of these loans is something like five times bigger than what Solyndra got.”…
Solyndra…received $535 million in a loan guarantee from the Department of Energy in 2010. The next year Solyndra filed for Chapter 11, with taxpayers getting almost none of the money back. ..
President Obama…cited the DOE loan guarantee to Abengoa… saying, “After years of watching companies build things and create jobs overseas, it’s good news that we’ve attracted a company to our shores to build a plant and create jobs right here in America.”…
We Respond & Your Comments
In previous issues we’ve detailed the billions of dollars lost to Oregon and other taxpayers thanks to governments’ obsession with green energy. So here we’ll just summarize why these loans are a lousy idea:
- Governments do a bad job of picking winners because they do so based on their personal preferences, vote-grubbing potential or campaign finance needs;
- The loans they make/guarantee or, worse, their outright grants aren’t made with their own money, so they’re less discriminating in their choices;
- They often make loans to entities that can’t get favorable treatment at banks because they’re bad credit risks.
- In the Obama Administration bureaucrats follow the lead of the boss, who’s chasing green energy like Captain Ahab obsessively pursued the Great White Whale.
Memo to all city, county and state politicos: You don’t do loans for a living. You’re not good at it. Leave it to those who are – they’re called banks.
Portland lawmaker takes on escalating prescription drug prices
– Elizabeth Hayes, Portland Business Journal
Oregon State Rep. Rob Nosse has convened a work group to tackle one of the most hot-button issues in health care: prescription drug prices…
…the ultimate goal is to craft legislation addressing the problem for the 2017 long session…
The idea for the group came about after two bills failed during the 2015 session. One would have capped copays for specialty drugs at $100 a month and the other would have increased transparency around drug pricing….
The issue has heated up all over the country. U.S. Sen. Ron Wyden also weighed in last week with results of an investigation into Sovaldi, the $1,000-a-pill hepatitis C drug…
We Respond & Your Comments
Today we make our first prediction for 2016: Rep. Rob Nosse (D-Portland) will start out saying he doesn’t want to do anything to disrupt the pharmaceutical industry; but he and other “Progressives” will quickly move to asking the Feds to do something to control prescription drug prices.
They can’t help it: it’s in their political DNA.
A major contributor to drug prices are the hoops the Federal Drug Administration (FDA) forces drug companies to jump through. That’s why it takes 10 years and $2.6 billion to bring a new drug to market.
Prescription drugs comprise about 10% of U.S. health care costs – the same as in 1960. 20 years ago a Hepatitis C diagnosis was a death sentence. Today a course of Solvadi costs about $84,000. Its cure rate is 90%.
How much expensive treatment and hospitalization is saved thanks to Sovaldi? And what’s a human life worth?
Health Care Law Forces Businesses to Consider Growth’s Costs
– Stacy Cowley, newyorktimes.com, reprinted in the Eugene Register Guard
When LaRonda Hunter opened a Fantastic Sams hair salon 10 years ago in Saginaw, Tex., a suburb of Fort Worth, she envisioned it as the first of what would eventually be a small regional collection of salons. As her sales grew, so did her business, which now encompases four locations — but her plans for a fifth salon are frozen, perhaps permanently.
Starting in January, the Affordable Care Act requires businesses with 50 or more full-time-equivalent employees to offer workers health insurance or face penalties that can exceed $2,000 per employee. Ms. Hunter, who has 45 employees, is determined not to cross that threshold. Paying for health insurance would wipe out her company’s profit and the five-figure salary she pays herself from it, she said…
We Respond & Your Comments
Here’s a thought that seldom occurs to government wizards: When you give people an incentive not to do something, they’re likely not to do it.
In the case above our Washington brainiacs wanted to incent employers to give employees health insurance by stuffing a $2,000 per employee fine down their throats if they refused. Instead the law incented them to avoid hiring 50 employees because doing so would cost them more than the fine! Brilliant!
Whenever our “public servants” in Salem or Washington come out with a new law or regulation we ask ourselves “What does it incent people to do or not to do?” We wish they’d ask themselves before voting on it.
Pfizer, Allergan Confirm $160 Billion Merger Deal
– Geoffrey Smith, Claire Groden, fortune.com
Pharmaceutical giants Pfizer and Allergan confirmed Monday they will merge…in a deal that is mostly, if not exclusively, about tax.
The deal…is structured in such a way as to reduce Pfizer’s tax bill by moving its domicile out of the U.S. to Ireland. The companies said they expect…to have an effective tax rate of 17% to 18% in the first full year after closing, compared to around 25% for Pfizer at present…
“Congress has been aware of the inversion virus for a long time. In fact, it passed legislation purporting to solve the problem a decade ago. But the underlying sickness continues to gnaw away at the American economy with increasing intensity…” – Senator Ron Wyden
“For too long, powerful corporations have exploited loopholes that allow them to hide earnings abroad to lower their tax rate…Now Pfizer is trying to reduce its tax bill even further.” – Hillary Clinton
“The company that Charles Walgreen started is reportedly considering a renunciation of its American citizenship and a move to Switzerland, just to avoid paying its fair share of taxes.” -Sen. Harry Reid (D-NEV)
“…nobody owes any public duty to pay more than the law demands” – Judge Learned Hand
We Respond & Your Comments
U.S. companies move abroad via inversions and mergers because liberals have imposed on them the highest corporate tax rates in the developed world!
Before the merger Pfizer could invest $.65 of every profit dollar in the U.S. Afterwards they can invest $.88. Not a bad deal for workers – but rat poison to Hillary and Harry, who think a company’s purpose is to generate as much money as possible for the government. No – the purpose of a company is to legally return to shareholders the highest possible profits.
Here’s how to stop inversions and mergers – lower our tax rate to make it competitive with other countries.
To Sen. Wyden’s credit, he also calls for “comprehensive tax reform.” But only after inversions and mergers have been stopped. Hey, Ron – once they’re stopped, what’s your incentive to lower taxes? Maybe we should do that first.
State program helps Oregon businesses grow exports
– Elon Glucklich, The Register-Guard
Sales at Lesli Larson’s Eugene business, Archival Clothing, have risen a modest 10 to 15 percent each year since its 2009 founding. But 4,000 miles and an ocean separate Larson from some of her most loyal customers.
Japanese shoppers have flocked to Archival’s line of canvas and twill bags, wool caps and shawl sweaters in recent years…
In April, Larson joined seven Portland companies on a weeklong business expo to Tokyo to promote their companies — a trip she wouldn’t have made without help from an Oregon program seeking to boost exports of locally made goods.
Attending an international trade show typically costs a business $8,000 to $20,000, a price out of reach for some small businesses, said Ryan Frank, a spokesman for Business Oregon, the state’s economic development agency….
We Respond & Your Comments
How nice! Business Oregon, AKA“The government,” gave thousands to Lesli so she could go to Japan! But we know who “the government” is – it’s you, us and our neighbors.
Do you own a business? Did “the government” ever pay for you to go to Japan to find new customers?
This program depends on “the government” picking winners like Leslie and leaving losing applicants to pay their own way. And we know how great governments are at picking winners and losers (think Solyndra). “The government” picks winners and losers with all the skill of a fall down drunk at a Vegas sportsbook.
What’s happening here is that “the government” is confiscating money from tax paying businesses which might otherwise spend it on expansion. Worse yet, they’re taking it from businesses that might be Lesli’s competitors and giving it to her! Why is she more deserving than businesses who paid their own way to Japan?
Let us have your thoughts on this.
Companies warn Oregon: Tax us and we might move
– Jeff Mapes, The Oregonian/OregonLive
John North, the vice president of finance for Ashland-based Lithia Motors, said the auto retailer would see almost all its profits from Oregon stores wiped out under a tax measure headed toward the November 2016 ballot….
Oregon’s business community is ratcheting up its rhetoric against the union-backed corporate tax measure that would raise an estimated $2.6 billion a year for schools and other services, far more than any tax hike in modern Oregon history…
“We have this burgeoning software business in Oregon that I think would be significantly affected,” said Ken Thrasher, a former Fred Meyer CEO and board chairman of Portland-based Compli. “We run the risk of these jobs being located somewhere else where we don’t have to pay the tax.”…
… Our Oregon has assembled a coalition – ranging from teacher unions to a small-business group that frequently supports left-of-center causes – and is working to gather the 88,184 signatures needed by July 8 to qualify for the ballot…
… because of a long-standing provision in Oregon tax laws, companies that mostly provide services would pay the tax based on their worldwide sales…
We Respond & Your Comments
There’s an iron law of economics: “If you want more of something, subsidize it. If you want less, tax it.” So if Oregonians want fewer businesses in Oregon they’ll pass this tax.
We know the tax is “for the children” and that we don’t spend enough on education. But we all know who it’s really for – the teachers’ unions. That’s why they support it.
We also know taxes inevitably rake in less money than predicted. That’s because the predictors assume everyone who might pay it will do so. Jacking up the estimate makes the tax more attractive.
But people aren’t stupid. They find ways to avoid paying taxes. In this case they’ll avoid it by voting with their feet and moving to another state – probably one that doesn’t:
- have a 9.9% personal income tax;
- treat capital gains as ordinary income;
- reach into your coffin to grab a big chunk of your wealth when you die.
To all Oregonians who want fewer businesses and jobs: go ahead and sign onto Our Oregon’s latest brainstorm.
Campaign reform activists look to curb Oregon contribution limits
SALEM — Activists looking to reform campaign finance in Oregon are taking steps to get a measure limiting contributions on the November 2016 ballot…
Daniel Lewkow of Common Cause Oregon said if the Legislature does not pass a bill putting a constitutional amendment on the ballot to curb campaign contributions his group will work to collect the 177,000 signatures to do it themselves.
“People like legislators to act on issues, not to ignore issues,” Lewkow said last week, adding that voters “cannot be more clear that they want them to act on money in politics.”…
We Respond & Your Comments
Here we go again…howling about “money in politics.” Herewith our observations:
- 2012 election spending for all Federal offices (President, Senate, House) totaled $6.285 Billion. That’s about what we spend every year on potato chips;
- Nobody likes writing out checks to politicians. But we do it. Here’s why…
Government constantly intrudes into our lives. It tells us what kind of lightbulbs to use, how much water we can run through our showers and toilets, what kind of grocery bags are permissible, etc., etc.
So here’s the answer to a campaign reformer’s prayer: If you want to reduce money spent on
politics, reduce government intrusion into our lives. Otherwise you might just as well try to
stop flowing water. But like money in politics, it’ll always find its way out.
Assaulting “Corporate Profits” Will Hit Average Oregonians
– Steve Buckstein, Cascade Policy Institute
A union-backed group is planning to put an initiative on Oregon’s 2016 General Election ballot that would result in the largest tax increase in Oregon history. Designed to tax sales of large corporations doing business in Oregon, Initiative Petition 28 may raise more than $5 billion every biennium…
…neither large nor small corporations have a magic pot of money from which they can painlessly bestow more to government…
The tax measure in question basically will impose a 2.5 percent gross receipts tax on most corporate sales above $25 million in the state, on top of other business taxes…
We Respond & Your Comments
Governor Brown Comes a’Calling
Business owner looking to relocate: Thanks for coming, Governor Brown.
Gov. Brown: Glad to be here. We want you to re-locate to Oregon.
Owner: Governor Brown, look: Oregon has the third highest capital gains tax rate in America and may impose a 2.5% gross receipts tax on my sales above $25 million.
Gov. Brown: But we have a great transportation system!
Owner: So does Nevada. And they don’t have Oregon’s 9.9 percent personal income tax.
Gov. Brown: But Oregon has a wonderful quality of life!
Owner: Ever put that in the bank, Governor? And Nevada’s a right to work state.
Gov. Brown: But we have great schools!
Owner: Look: I own this company. Oregon has one of the few death taxes left. Nevada doesn’t. When I die I won’t give you ten percent of the money I’ve worked for.
Gov. Brown: Don’t you think you should pay your fair share?
Owner: To paraphrase economist Thomas Sowell, what’s someone else’s “fair share” of money I worked for? Thanks again for coming. If you’ll excuse me, I’m late for a meeting with Governor Sandoval. He’s just in from Reno.