A frequently repeated claim is that loopholes in the tax code are ‘inefficient.’ A more efficient tax, economists say, is a flat and all-encompassing tax that is inescapable. Why? Because this means no one will waste resources on tax planning and thus tax avoidance. In other words, more resources will be used in production, which is better for the ‘economy.’ Leaving the moral and ethical argument about tax avoidance aside, the efficiency argument too is completely wrong. It shows how much economists have deviated from understanding what they supposedly try to learn about: the market. The loophole inefficiency argument is based on the view that seemingly unproductive uses of resources are a waste because they don’t contribute to the overall economy. But this is a backward argument, and in fact the same argument as that against ‘hoarding’ of funds. And it assumes that people (or, more specifically, their owned resources) are for the economy, rather than the economy for people.
The Special Inspector General for Afghan Reconstruction (SIGAR), John Sopko, in an interview with Breitbart News, said the U. S. has been ‘drowning’ Afghanistan in money, wasting millions and creating conditions for corruption. ‘You can drown somebody in goodness,’ Sopko told Breitbart. ‘It’s the comedy of the absurd when it comes down to [American] assistance [to Afghanistan] and we are just drowning Afghans in money. And when you drown somebody in money, you can’t be surprised that some of it gets wasted.’ Sopko said the American people should care about the Afghan war as a natural security issue, but should also demand accountability for their government’s reckless use of tax dollars in the conflict. The office of the SIGAR is charged with overseeing reconstruction projects in Afghanistan, conducting audits and investigations to prevent waste, fraud and abuse. To date, the U. S. has appropriated a total of some $700 billion for the war, including the $120 billion spent on ‘reconstruction’ which Sopko’s office is tasked to track and account for.
This sort of rank corruption should lead to trials, followed by hangings. But it doesn’t. Tesla will soon hit the limit of the federal tax rebates, which are good for the first 200,000 EVs sold in the US per manufacturer beginning in December 2009 (IRS explanation). In the second quarter after the manufacturer hits the limit, the subsidy gets cut in half, from $7,500 to $3,750; two quarters later, it gets cut to $1,875. Two quarters later, it goes to zero. Given Tesla’s ambitious US sales forecast for its Model 3, it will hit the 200,000 vehicle limit in 2018, after which the phase-out begins. A year later, the subsidies are gone. Losing a $7,500 subsidy on a $35,000 car is a huge deal. Tesla will sell near-zero cars without the subsidies. They know this. So does California, and guess where Tesla sells more cars than anywhere else? What California is contemplating doing is subsidizing the difference in price between an EV and a car of “equivalent features” that is not an EV. This could wind up costing $30,000 per vehicle, and not as a tax credit either — as a direct rebate.
Crackpot Schemes POITOU, FRANCE – ‘Nothing really changes.’ Sitting next to us at breakfast, a companion was reading an article written by the No. 2 man in France, douard Philippe, in Le Monde. The headline promised to tell us how the country was going to ‘deblock’ itself. But upon inspection, the proposals were the same old claptrap about favoring ‘green’ energy… changing the tax code to reward one group and punish another… and spending more money on various humbug initiatives. *** Subsidized green energy scams are mainly creating eyesores – other than that, they add up to nothing but cronyism writ large. After the one of the biggest solar company bankruptcies ever happened in Spain, a detailed economic study found that for every subsidized renewable energy job the government ‘created’ (at a cost of nearly $2 million per job!) 2.2 jobs were lost elsewhere. It is a good bet that the math isn’t much different elsewhere. To add insult to injury, there is precisely zero evidence that carbon emissions are reduced by even one iota due to these efforts. It is an apodictic certainty that no economy can possibly be ‘rescued’ by the subsidization of this nonsense. There is a widespread belief in government circles that ‘economic growth’ can somehow be conjured up by bureaucrats. That is a costly error that increasingly endangers the future of Western civilization. [PT]
This post was published at Acting-Man on July 12, 2017.
When the parties do finally implode, the general mood will be: good riddance. History informs us that once something is obsolete, it can disappear far faster than anyone expected. While we generally think of obsoleted technologies vanishing, social and political systems can become obsolete as well. Should a poor soul who entered a deep coma a year ago awaken today, we must forgive his/her astonishment at the political wreckage left by the 2016 election. The Democratic Party, a mere year ago an absurdly over-funded machine confident in an easy victory in the presidential race, is now a complete shambles: its leadership in free-fall, its Fat-Cat donors disgusted, and its demented intoxication with pinning collaboration with Russia on the Trump camp eroding whatever feeble legacy legitimacy it still holds. What the party stands for is a mystery, as its Elites are clearly beholden to insiders, special interests and Corporate donors while glorifying the worst excesses of globalism and the National Security State’s endless war on civil liberties. The newly awakened citizen would also marvel at the chaotic war zone of the Republican Party, in which the Insider Warlords are battling insurgent Outsiders, while the same Elites that fund the Democratic machine are wondering what they’re buying with their millions of dollars in contributions, for it’s unclear what the Republican Party stands for: it’s for Small Government, except when it’s for Bigger Government, which is 95% of the time; it’s for more law enforcement and the militarization of local police, and more intrusion into the lives of the citizenry; it’s for stricter standards for welfare, except for Corporate Welfare; it’s for tax reform, except the thousands of pages of give-aways, loopholes and tax breaks for the wealthy and corporations all remain untouched, and so on: a smelly tangle of special interests masked by a few sprays of PR air freshener to the millions left behind by the globalization that has so enriched Corporate America and the class of financier-owners, bankers, insiders and technocrats–the same group that funds and controls both political parties.
With Illinois facing a Friday night deadline by which it has to come up with its first fiscal budget in three years or face a downgrade to junk resulting in what a policymaker called a “death spiral“, another mini drama is taking place in Connecticut, which is also facing big budget problems as wealthy residents, hedge funds and major corporations flee the state’s high taxes and its fiscal future gets murkier by the day. Just today, we reported that Aetna, the insurance giant founded in Hartford where it has been for the past 164 years, announced it would move its headquarters to New York City despite intensive lobbying efforts by Connecticut officials. The move, which followed a departure by GE of its Fairfield HQ of 40 years, is a blow to the company’s hometown, which is facing severe financial problems. Hartford’s problems are a representation of the troubles facing the entire state: while Illinois’ story is familiar, Connecticut has the distinction of the third-worst ratings in the country, only behind Illinois and New Jersey after S&P, Moody’s and Fitch all downgraded the state last month in what officials described as a “call to action” for state leaders. ‘We’ve been downgraded by everybody in the last six months, and in the last year two or three times,’ Senate Republican President Len Fasano said cited by Fox news. ‘If we don’t pass a budget, I think we will see a further downward spiral.’ And, just like Illinois (and 14 other states), Connecticut faces a Friday day of reckoning: the state has yet to pass a fiscal 2018 budget by the June 30 deadline. ‘We must immediately take the necessary steps to mitigate the current year deficit and then balance the … budget with recurring measures to reduce spending and structural solutions to our long-term problems,’ a spokesperson for the Connecticut Office of Policy and Management said in response to Moody’s downgrade.
This post was published at Zero Hedge on Jun 30, 2017.
While the public’s attention is keenly focused on whether Illinois will reach a budget deal in the next 2 days ahead of the next fiscal year which begins on July 1, avoiding the first ever downgrade to junk for a US state as the state piles up some $15 billion in unpaid bills and now oews more than $800 million in interest on the unpaid balances alone, the financial peril facing Connecticut is just as dire. We laid out the big picture one month ago in “Connecticut State Capital Prepares For Bankruptcy Amid Collapse In Hedge Fund Revenue.” And now, as the state rushes to iron out its own budget deal ahead of the June 30 deadline, another major hit for the fiscally challenged state has emerged because one of the state’s most reliable sources of corporate tax revenue, Aetna, is leaving Hartford and moving to New York. According to the NYT, Aetna, the insurance giant founded in Hartford, where it has been for the past 164 years, announced Thursday that it would move its headquarters to New York City despite intensive lobbying efforts by Connecticut officials. The move is a blow to the company’s hometown, which is facing severe financial problems, and a potential boon for Aetna, which stands to receive $24 million in tax breaks over the next decade, among other benefits, for its new headquarters in the Chelsea neighborhood of Manhattan.
This post was published at Zero Hedge on Jun 29, 2017.
Centrally issued money optimizes inequality, monopoly, cronyism, stagnation and systemic instability. Everyone who wants to reduce wealth and income inequality with more regulations and taxes is missing the key dynamic: central banks’ monopoly on creating and issuing money widens wealth inequality, as those with access to newly issued money can always outbid the rest of us to buy the engines of wealth creation. History informs us that rising wealth and income inequality generate social disorder. Access to low-cost credit issued by central banks creates financial and political power. Those with access to low-cost credit have a monopoly as valuable as the one to create money. I explain why in my book A Radically Beneficial World: Automation, Technology and Creating Jobs for All. Compare the limited power of an individual with cash and the enormous power of unlimited cheap credit. Let’s say an individual has saved $100,000 in cash. He keeps the money in the bank, which pays him less than 1% interest. Rather than earn this low rate, he decides to loan the cash to an individual who wants to buy a rental home at 4% interest.
David Stockman joined Boom Bust to discuss the massive storm that is building and about to slam into Wall Street. During the discussion Stockman reveals what he believes is ahead for the stocks in the market and the economy. The interview began with the Boom Bust host asking the acclaimed author about his concern surrounding a government shutdown. David Stockman began ‘we’re in the midst of the biggest political train wreck in modern history… There will be no governance in Washington. There will be no tax bill, stimulus or infrastructure.’ ‘We’re heading for an expiration of the debt ceiling and running out of cash that will create an enormous crisis by August or September. They’re not going to be able to cope with it.’
Economic impact studies are everywhere. Whether it’s to support a new highway project, special tax breaks for solar energy, the building of a civic center or sports complex, or to promote subsidies for Hollywood film producers, you can find an economic impact study, often touting how great the project will be for the state or local economy. The formula is simple, predictable, and effective. A special interest group that stands to benefit from the project funds an economic impact study that purports to provide hard numbers on the number of jobs, the increase in wages, and the additional output that will be generated by the project or subsidy, and it will do this on an industry-by-industry basis. It makes grandiose claims about how much overall economic growth will be enhanced for the state or region generally. Once the report is completed, the special interest group that paid for the study will tout these results in press releases that will be picked up by the largely uncritical media establishment, ensuring that the political decision makers and others who determine the fate of the project receive political cover. These studies all have several things in common. First, they typically use proprietary, off-the-shelf models with acronym names like IMPLAN (Impact Analysis for Planning), CUM (Capacity Utilization Model), or REMI (Regional Economic Model, Inc.). Rights to use the models are purchased by professional consulting firms who are hired by the interest groups to do the studies. Furthermore, seldom do those who actually perform the studies have formal training in economics. Instead, their expertise is in using one or more of the aforementioned proprietary models. And finally, all of these studies ignore basic principles of economics and, as a result, do not meaningfully measure what they claim to be measuring – the economic impact of the public policies and projects that they are assessing.
While tense trade negotiations between the US and Mexico over the price and quota for U. S. imports of Mexican sugar continue (a happy ending appears unlikely, especially after a Mexican sugar company on Friday called on the government to take action against American fructose producers and protect the local industry from US deals), a new protectionist measure involving sugar half way around the globe was unveiled on Monday when China – the world’s biggest importer of the sweet substance – said it will impose significant penalties on sugar imports following lobbying by domestic mills. According to the ruling first described by Reuters, up to a third of China’s annual sugar imports will be impacted by an extra tariff for the next three years on shipments that the government said had “seriously damaged” the domestic industry. The details: China currently allows just over 1.9 million tonnes of imports at a tariff of 15% as part of its commitment to the World Trade Organization. All imports above this amount are slapped with a 50% levy. After Monday’s ruling, the total sugar duty will nearly double, with Beijing imposing an additional 45% tax to these imports in the current fiscal year taking the total to 95%. This will fall to 90% next year and 85% a year later, China’s Commerce Ministry said in a statement. The ruling exempted 190 smaller countries and regions from the new duty, including smaller producers such as the Philippines, Pakistan and Myanmar.
This post was published at Zero Hedge on May 22, 2017.
Macron’s funding reveals that elite Socialists were really behind him changing the label to sell a centrist agenda, but in reality, to maintain their agenda. Macron was able to raise funds from French abroad with the promises of change, and this targeted particularly the French who fled Hollande living in London and New York. He did a photo-op with Nobel Prize laureate Joseph E. Stiglitz before journalists who is critical of the management of globalization, against laissez-faire economists who he classifies a ‘free market fundamentalists’, as well as international institutions such as the International Monetary Fund (IMF) and the World Bank. Stiglitz is an American economist and a professor at Columbia University and is a former senior vice president and chief economist of the World Bank. He was also a former member and chairman of the Council of Economic Advisers under Bill Clinton and supported Hillary over Obama saying she is more ‘liberal’ (socialist) than Obama. Stiglitz believes in Georgism, which is a variety of Marxism whereby the State should own all the resources derived from land, which is an old Physicocrat(French) idea that wealth is derived from land. In this way, all natural resources should belong to government from mining to energy just for starters as if government operated industries ever ran efficient or were free from corruption. He also supported a single tax for all and believes that, while people should own the value what they produce themselves with everything derived from land should belong to government characterized as belonging equally to all members of society (government).
Debt is serfdom, capital in all its forms is freedom. If we accept that our financial system is nothing but a wealth-transfer mechanism from the productive elements of our economy to parasitic, neofeudal rentier-cartels and self-serving state fiefdoms, that raises a question: what do we do about it? The typical answer seems to be: deny it, ignore it, get distracted by carefully choreographed culture wars or shrug fatalistically and put one’s shoulder to the debt-serf grindstone. There is another response, one that very few pursue: fanatic frugality in service of financial-political independence. Debt-serfs and dependents of the state have no effective political power, as noted yesterday in It Isn’t What You Earn and Owe, It’s What You Own That Generates Income. There are only three ways to accumulate productive capital/assets: marry someone with money, inherit money or accumulate capital/savings and invest it in productive assets. (We’ll leave out lobbying the Federal government for a fat contract or tax break, selling derivatives designed to default and the rest of the criminal financial skims and scams used so effectively by the New Nobility financial elites.)
President Trump, as part of his ‘America First’ program, has proposed lowering the US corporate tax rate to 15 percent and to close a myriad of loopholes in an effort to simplify the tax code, and to also encourage the nation’s largest businesses to bring production back home. The proposal represents a tangible shift in the relationship between Washington and big business. In 2014, President Obama’s Treasury Department introduced new measures to crack down on corporate tax inversions, a strategy companies utilized to exploit gaping tax differentials between the United States and other countries. Burger King’s acquisition of Canada’s Tim Hortons, a coffee and doughnut chain, for example, was motivated in large part by Canada’s more hospitable tax environment.
When “socialist” states have to impose finance-capital extremes that even exceed the financialization of nominally capitalist economies, it gives the lie to their claims of “socialism.” OK, so our collective eyes start glazing over when we see Marx and Orwell in the subject line, but refill your beverage and stay with me on this. We’re going to explore the premise that what’s called “socialism”–yes, Scandinavian-style socialism and its variants–is really nothing more than finance-capital state-cartel elitism that has done a better job of co-opting its debt-serfs than its state-cartel “capitalist” cronies. We have to start with the question “what is socialism”? The standard definition is: a political and economic theory of social organization that advocates that the means of production, distribution, and exchange should be owned or regulated by the community as a whole. In practice, the community as a whole is the state. Either the state owns a controlling interest in the enterprise, or it controls the surplus (profits), labor rules, etc. via taxation and regulation.
Taxpayers are forced to cover much of the costs of defense attorneys for highly-paid federal managers facing termination or criminal charges, thanks to a cozy deal engineered in part by a law firm whose lobbyists helped draft and gain passage of legislation requiring it, The Daily Caller News Foundation’s Investigative Group (TheDCNF) has found. Lobbyists for the Washington, D. C., law firm Shaw, Bransford & Roth (Roth) – which earns its money representing federal employees who are being disciplined – ‘proposed’ and secured passage of the obscure bill Congress passed in 1996, according to the website of a group connected to the firm. That bill requires taxpayers to pay for legal insurance for management-level employees. Roth lawyer Anthony Vergnetti then left the firm to launch the Federal Employee Defense Services (FEDS), just such a legal insurance business that, Vergnetti acknowledges, primarily steers clients to Roth when they have insurance claims, and profits off their premiums when they don’t. Roth got its legislative sway by operating through the Senior Executives Association (SEA), which is ostensibly an organic group representing managers, but which is actually founded and run by the law firm’s partners and employees, as TheDCNF showed last year. SEA collects dues from members and pays lobbyists from Roth to conduct legislative advocacy, according to lobbying disclosures.
I claim no special power here, nor any inside information. This is simply arithmetic coupled with logic. I’ll give you a “decision tree” sort of format with the critical points outlined. Note that if you’re going to mitigate any of what I see coming around the bend you need to do it right damn now, not wait. By the time you get to those critical points it’s too late. For many people it’s already too late, but if you’re not in that batch then you need to make your lifestyle changes today. I am operating on the premise that the rank corruption that I outlined in the Ticker here will not be addressed. It will not be addressed for the same reason the 17th Amendment will be cited as the reason the American political experiment failed when the book on America is finally closed, as that Amendment permanently removed the ability of the States to call a hard-stop on any expansion of Federal Power they did not consent to. That was designed in to our government by the founders and it was removed intentionally by the 17th Amendment. That balance of power can never be restored absent a Revolution because to do so The Senate would have to literally vote themselves out of a job at a supermajority level which they will never do and there is no means to compel them to do so. For the same reason the 30-year trend in Medicare and Medicaid spending will not be stopped. It may be tinkered with around the edges but it won’t be stopped because to stop it without literally throwing people into the street and letting them die you have to break the medical monopolies and in doing so you will inevitably (1) destroy the graft machine that drives a huge part of DC and at least half of the jobs inside the Beltway, along with the asset values they support, (2) create an immediate and deep (15% of GDP, but temporary) recession on purpose which neither Congress or Trump will ever voluntarily initiate as it would cause a guaranteed 70% stock market crash along with the immediate detonation of about 1/3rd of all in-debt corporations in the United States and (3) expose the outrageous theft of trillions of dollars from taxpayers over the last several decades to fund the medical scam machine at all levels.
This is a syndicated repost courtesy of Confounded Interest. To view original, click here. Reposted with permission. Bloomberg has nice piece on the battle between JPMorganChase’s Jamie Dimon and the Minneapolis Fed’s Neel Kashkari. (Bloomberg) Jamie Dimon is America’s most famous banker, and Neel Kashkari is its most outspoken bank regulator, so it’s not a shock that they would eventually come to blows. What’s interesting is that their contretemps is over an acronym that most Americans have never heard of, but one that may be central to preventing another recession. TLAC, which is pronounced TEE-lack, is something you need to know about if you want to judge the sparring between Dimon, the well-coiffed chief executive of JPMorgan Chase & Co., and Kashkari, the very bald man who ran for governor of California on the Republican ticket and is now president of the Federal Reserve Bank of Minneapolis. On April 6, Kashkari went after Dimon in a way that circumspect central bankers ordinarily don’t. In an essay published on Medium and republished on the Minneapolis Fed website, he challenged Dimon’s assertion in his annual letter to shareholders that 1) there’s no longer a risk that taxpayers will be stuck with the bill if a big bank fails, and 2) banks have too much capital (meaning an unnecessarily thick safety cushion). Wrote Kashkari: ‘Both of these assertions are demonstrably false.’
Yesterday the NFL granted Mark Davis his request to move the Raiders from Oakland to Las Vegas. The move creates multiple losers: Las Vegas hotel customers who will see room taxes rise to pay for the $750 million in subsidies for the new stadium, the city of Oakland who still carries debt from the Raiders old venue, and the infamous fans that made up the Raiders’ iconic ‘Black Hole’ who are losing their football team just after witnessing their first playoff performance in almost 15 years. Beyond the blatant crony capitalism of government-financed stadiums, there are many reasons to doubt the wisdom of the team’s decision. After all, unlike the Rams and Chargers move to Los Angeles, Las Vegas has no history of supporting professional football. The most significant attempt, the Las Vegas Outlaws of the XFL, only averaged 22,619 fans, ranking 5th out of the league’s 8 teams. Other attempts, including multiple Arena League teams and the short lived UFL, were financial flops. Of course, none of these products have the power of the National Football League, so perhaps this time will be different. At league meetings, a key part to selling relocation was the idea that fans of other teams would travel to Las Vegas to enjoy the city’s attractions along with the game. Of course, if the market had faith in this business model, investment wouldn’t have needed politicians to find investment. It is worth noting that the new Las Vegas NHL team will be playing at a facility backed entirely by private investment. Maxing out at 20,000 seats, it has one-third of the capacity of the Raiders venue – but cost less than a quarter of the projected costs of the Raiders’ future facility.
Lengthy standing ovation from the Freedom Caucus when @POTUS walked into the Cabinet Room just now. Big momentum toward #RepealAndReplace. pic.twitter.com/N1FLGAVFMN — Cliff Sims (@CSims45) March 23, 2017
Summary of the chaotic day’s key events: GOP House leaders delayed their planned vote Thursday to repeal and replace “Obamacare,” which as AP put it was a “stinging defeat” for Paul Ryan and President Trump in their first major legislative test. The decision came after Trump failed to reach agreement with a bloc of rebellious conservatives. Moderate-leaning Republican lawmakers were also bailing on the legislation, leaving it short of votes. At least 30 Republicans said they opposed the bill, enough to defeat the measure. But the number was in constant flux amid the eleventh-hour lobbying. The bill could still come to a vote in coming days, but canceling Thursday’s vote is a significant defeat. It came on the seven-year anniversary of President Barack Obama signing the Affordable Care Act, years that Republicans have devoted to promising repeal. “No deal,” House Freedom Caucus Chairman Mark Meadows, R-N. C., said after he and his group of more than two dozen rebellious conservatives met with Trump to try to get more concessions to reduce requirements on insurance companies. The Republican legislation would halt Obama’s tax penalties against people who don’t buy coverage and cut the federal-state Medicaid program for low earners, which the Obama statute had expanded. It would provide tax credits to help people pay medical bills, though generally skimpier than Obama’s statute provides. It also would allow insurers to charge older Americans more and repeal tax boosts the law imposed on high-income people and health industry companies. The measure would also block federal payments to Planned Parenthood for a year, another stumbling block for GOP moderates.
This post was published at Zero Hedge on Mar 23, 2017.