How Will Non-Fossil-Fuel Cars Pay Their Way?

© 2017 Steve Feinstein. All rights reserved.

Federal and state gasoline taxes provide a very substantial amount of revenue. In fiscal 2014, the Federal gasoline tax of 18.4 cents/gallon delivered over $25 billion dollars to Federal coffers. State gasoline taxes vary from a low of 12.25 cents/gal in AK to 43.88 cents/gal in NY and a whopping 58.20/gal in PA and are balanced as part of the overall state tax ‘pie’ against that state’s property, income, sales and excise taxes. Regardless, the states’ gasoline tax represents a substantial portion of every state budget. Revenues from these local fuel taxes are supposedly earmarked for road/bridge/infrastructure maintenance and improvements, although like all taxes—Federal or local— they simply go into the General Fund, to be dispersed as the Federal or local lawmakers see fit.

No one likes paying taxes, but the gasoline tax was a relatively straightforward, uncomplicated affair from the time state gasoline tax was instituted in 1919 in Oregon and in the Federal 1932 Revenue Act right through the present day. Cars ran on gasoline; taxes were imposed on gasoline to bring in revenue. Unpopular, perhaps, but straightforward and understandable in its implementation.

Now the United States is on the cusp of a revolutionary change in the means of personal and commercial ground-based transportation. In the near-term (25-50 years, at most, according to most experts), cars and trucks not powered by fossil fuels will become a very significant portion of the transportation fleet of the country.

As that happens, the obvious, most oft-discussed effects will be a paradigm shift in the way the United States conducts its foreign policy (no longer beholden to unstable, hostile foreign entities simply as a way to preserve our unfettered access to their crude oil reserves) and the manner in which the absence of oil-derived environmental damage and pollution no longer affect domestic American environmental policies and historical political alliances to anywhere near the same degree as they do now.

Less discussed—if discussed at all—is the dramatic structural change to the mechanism by which both Federal and state governments collect a very major portion of their respective revenue. With no change to the current system of tax collection, oil-based tax revenues will fall precipitously as fossil fuel-powered cars comprise an ever-smaller percentage of the nation’s fleet.

One vague proposal afoot in some states is an unspecified “user” tax, a way of charging drivers for the miles they’ve actually driven, as opposed to the amount of fossil fuel they consume. Currently, drivers of fossil fuel cars subsidize the upkeep of roads and bridges completely for non-fossil-fuel drivers. Those cars use no gasoline; hence their drivers pay no gasoline tax and get a figurative “free ride.”

But how would a miles-based user tax be implemented? Would it be a Federal tax, a State tax or some combination of both? How would the percentages/proportion of user tax vs. gasoline tax be determined? Ostensibly, the total tax on motor vehicles would need to be kept at least equal to what it is now, so states could develop a dependable budget with known revenue sources. What would be the timeframe for bringing mileage user taxes on line and could taxpayers be assured of a commensurate rolling back of gasoline taxes as non-fossil-fuel cars began to dominate?

From a logistical/practical standpoint, how would a mileage user tax be implemented? Would it be similar to the current “Easy Pass” system whereby electronic sensors read a specific car’s transponder and assess the correct fee? Would road tolls be separate from electric fuel-based “road use” taxes or all rolled into one? Would a given car’s transponder indicate that it was a gasoline or non-fossil-fuel vehicle and the toll sensor would automatically dole out the correct fee? An extraordinary increase in the number and location of sensors would be required in order to capture the actual mileage driven by all drivers, even on back roads and side streets. One can only imagine the complexity of such widespread sensor deployment and the opportunity for fraud, unfairness and outright inaccuracy.

What about the relationship between Federal and state “user” fees? Right now, gasoline has a very specific, easily-determined amount of Federal and state taxation: 18.4 cents/gal Federal and whatever amount that particular State charges its motorists. Would a mileage-based user fee work the same way?

Other questions remain: If each state and the federal Government implemented the sensors at a different pace—complete coverage in some states, spotty in others, a highly likely scenario in the short run—how could there be an accurate fee assessment from one state to another as motorists embark on inter-state excursions? If sensor-based fees are tied into credit or debit cards, and are not cash-based, how does such a system allow for delinquent payers, poor credit, and individuals who eschew the use of credit/debit cards altogether?

This entire situation poses huge legislative challenges, many of which are simply unknowable in advance. If a per-mile use tax is deemed to be the way to go, design and installation of that sensor network needs to be put into place now, as opposed to waiting until non-fossil-fuel cars become numerically significant. Given our government’s propensity for being after-the-fact reactive instead of proactively preventative, the probability is extremely high that a huge bureaucratic revenue boondoggle awaits, one that will make the otherwise agreeable transition to non-fossil-fuel-powered transportation quite painful indeed. One thing is for sure: The gasoline tax is soon going to be the wrong way to raise revenue for infrastructure maintenance.

Electric Cars Will Revolutionize Politics, Too

© 2017 Steve Feinstein. All rights reserved.

 

Electric vehicles (EVs) are poised to have a major influence on the automotive market in the near-term future. We’re talking about pure electric vehicles, not stop-gap gasoline-battery “hybrids.” Like any paradigm-shifting technology, electric cars have started out with significant shortcomings. To date, they have been marked by exorbitantly high selling prices and driving ranges that are too short to be viable for daily, carefree use. But this is changing for the better, quite rapidly. Driven by the potential of huge market demand, R&D has dropped battery pricing very quickly and driving range is increasing to a point where EVs will soon be a workable alternative to internal combustion engine (ICE) cars.

In the opinion of many, the range needed for electric cars to be accepted by Joe/Jill Average Consumer without undue driving range anxiety is 350-400 miles. That’s a full work week’s driving with some safety margin built in, assuming an average 25-mile each way commute. That comes to 50 mi/day x 5 days = 250 miles. If you’re stuck in traffic because of an accident or unplanned construction, you still have 100-150 miles of ‘idle time’ safety margin. Looking at it another way, the drive from Boston to NYC is about 225 miles and LA to Las Vegas is about 260 miles, so a 350-400 mile range is just fine.

Electric cars are getting really close. This recent article (Aug 2017) from Ward’s Automotive

thinks by 2022, in about 5 very short years, they will be fully viable. Let’s paint that as overly optimistic and say 10 years. That’s still essentially immediate. We all remember ten short years ago—2007—like it was yesterday.

In the near term, the uncertainty/incompleteness of a nationwide charging station infrastructure will limit EV use to around town/commuter use, and restrict their use for cross-country treks and inter-state car-based vacations. In the early stages of widespread EV market penetration, it’s likely that two-car households will have one EV for short-range trips (where at-home, overnight recharging is possible) and one ICE vehicle for longer-range trips where the absolutely certain availability of remote refueling is a requirement.

For anyone under 65 or so, there’s a very good chance they will own an EV in their lifetime. For people simply going to work, an EV would be fine. They’d drive it every day and recharge it at home overnight one night a week. The idea of a remote “charging station” wouldn’t even enter the picture for them—and I suspect that’s the way a lot of people would use EVs early on.

Other than the inability of the Liberal/Green sect to be emotionally/intellectually capable of taking “yes” for an answer (reducing the oil companies’ stranglehold on their current dominant energy-providing position will rob the Green lobby of their most prized bogeyman), there is not really any net downside to anyone to the EV revolution. It’s not a perfect solution, but the prospects are quite good for a very solid Won-Lost record in upcoming seasons. Far more upside than down.

While there can be no disagreement that ICE cars are getting remarkably clean and efficient (the 2018 Accord—a full-sized, 5-passenger car—gets the remarkable mileage of 30/38 city/hwy and accelerates 0-60 in around 7 seconds!), the emotional/political tide of the younger buying generations is against them, and the thrust of that tide is inexorable. Much like scenario where the early flat-screen TVs had pictures that were inferior to the day’s best CRTs, the flat-screens took over anyway. The emotional pivot-point for EVs has been reached and the days of the 100% market dominance of the ICE are numbered.

Although much attention and publicity has been showered on the flamboyant, attention-seeking CEO/Founder of Tesla, Elon Musk, “Tesla” as a company is simply not part of this calculus. They’ve assumed the lead role and paved the way in people’s minds to the realistic possibility of actually owning an EV, and that’s a worthy contribution, but focusing on one man or one company misses the forest for the trees. Tesla’s eventual profitability or total demise is a minor aspect–very minor–of this story.

This is the story: EVs—from whatever sources—are coming in big numbers. Will it be 2022 like Ward’s says? 2030? 2040? Who knows. But with their lower maintenance and the fewer moving parts of electric drive vs. internal combustion engines, EVs are particularly well-suited to the coming expansion of driverless car-for-hire fleets, when individual car ownership is no longer the accepted business model that it is today. Make no mistake—a large, fancy, status-laden car or SUV is not the material goal for Millennials that it was for Baby Boomers and to a somewhat lesser—but still meaningful—degree for Gen X-ers. Today’s 27-year-old simply has other material/social things on their mind besides a Cadillac XTS or a BMW 7 Series. For many Millennials, a car is simply a “transportation appliance,” carrying no more emotional or egotistical importance to them than a lightbulb. It simply does a job they need done, whether that job is providing light or getting from Point A to Point B.

The flat screen TV vs. CRT analogy is essentially spot-on accurate. EVs may not be as “good” yet as ICE cars—just as early flat screens weren’t as good as CRTs—but the genie is out of the bottle and people will want a car free of petro-politics and petro-pollution. The supposed advantages of EVs in the consumer’s mind (whether totally accurate at this point or not) are just too appealing and therefore, the market is headed electric.

Here’s the political impact that EVs will have: When EVs become a significant portion of the on-the-road fleet, oil will be displaced as a primary land-based transportation fuel. OPEC will not be anything close to being as major a factor on the world stage as they are today, from either an economic or political standpoint. There will not be anywhere near as many millions of polluting ICE cars on the road. “Warming” will cease to be a dominant, divisive issue since car-produced CO2 pollution will decline precipitously. Foreign policy based on oil and access to foreign-held oil reserves will end. “Drilling” and “spills” as political/economic/environmental wedge issues will disappear.

The EV vs. ICE analysis is a complex subject, with emotions, false perceptions, and the Government’s thumb on the scale (in favor of EVs to the detriment of oil-based transportation) all playing a part.  But once there is widespread EV market penetration, be that in 5, 10, or 30+ years, the social/political issues of climate change, foreign policy strategy and alliances, environmental stewardship, and social/economic buying patterns/marketing/ownership will change in a big way. Forever.

Global Warming: The Classic Liberal vs. Conservative Argument

 

© 2017 Steve Feinstein. All rights reserved.

Here is the classic Liberal vs. Conservative Global Warming argument. I started it off with this shot across the bow:

“Global Warming is an irrelevant non-issue. One can believe the Warming alarmists at face value or believe it to be a made-up bunch of politically-driven junk science as you want.

But the fact remains that long before any man-caused “warming” has a permanent negative impact on the world. we’ll be well on our way to using non-CO2-producing energy on a large enough scale that any minuscule amount of “warming” or “higher sea levels” that have occurred in the next few decades will stop and be reversed.

The anti-business, anti-conservative, anti-Western crowd is going to have to fabricate a new boogeyman, because “warming” isn’t it. By the way, the non-CO2-producing energy that solves and eliminates the threat of “warming” is being discovered and developed by conservative Western businessmen. Deliciously ironic, no?”

To which my liberal friend replied:

“For an ‘irrelevant non-issue,’ you’ve written thousands of words on the topic over the years!  Something doesn’t quite compute.  

I know of no evidence supporting your “global warming reversal” conclusion, but I hope you’re right.

Also, what’s “deliciously ironic” about a businessperson, regardless of political affiliation, doing a 180 when there’s a buck to be made?  It’s the oldest game in the book! Thanks.”

I replied—

“It’s Irrelevant in terms of the actuality of it happening, not irrelevant in terms of how significant and emotional a topic it is to many.

The actuality of Global Warming’s long-term permanent negative effects is irrelevant. All the worst-case studies—if you even can believe them at all—say things like, ‘By the end of the century….’ or, ‘In the next few hundred years….’ etc. The Big Cure of non-CO2-emitting energy is coming fast, real fast. A major chunk of car fuel will be non-CO2 within 10-30 years. There are dozens of new technologies or refined existing technologies that are coming on-line in the next few decades and will be deployed/distributed on a widespread enough basis to displace a big portion of fossil fuels and their greenhouse gas emissions. As I said in a recent article, it’s estimated that electric cars alone will replace the equivalent of Saudi Arabia’s entire oil output by 2040. That’s 23 measly years from now.

2040 is pretty far away from ‘next century,’ no? The Warming ‘problem’ goes away, for good, very soon. That’s the absolute definition of ‘irrelevant in actuality.’

Not irrelevant emotionally, however. The Warmers/NY Times/CNN/anti-conservatives love this topic and try to hang every weather-related calamity that happens on conservatives. It’s just that all their dire predictions have failed to come true. Manhattan is not under water like they said in 2008 it would be by 2015, they have no explanation for the 20-year ‘pause’ in the rise in global temperatures, the supposed rise in temps was going to give rise to a wave of pests and bugs that would decimate our food production but that hasn’t happened, the polar bears were going extinct but in fact, their numbers have increased, and the numerous scandals and faulty/fraudulent data put forth by the IPCC is truly staggering. The liberal press covers none of this, of course, but the facts are the facts. Still, I’m not disputing the existence of anthropogenic warming, nor protesting your right to believe it. Knock yourself out. It’s merely irrelevant.

To answer your doubt about my ‘it will reverse’ assertion: When it rains for 3 days straight, the ground is soaked. When it stops raining, the situation reverses and the ground reverts to being dry. When it’s really, really cold, ice forms and precipitation takes the form of snow, not rain. When the situation reverses and it becomes warm again, it doesn’t continue to snow. It rains. But ok, just for the sake of this conversation, let’s posit two things:

  1. Measurable, actual warming has occurred thus far.
  2. When the warming stops, the thus-far effects will not

Well, as we’ve seen from the missed predictions of disaster and the fraudulent data (not all of it has been fraudulent, but a significant amount has been, enough to cast doubt on the ‘unquestionable objectivity’ of the IPCC) that’s been foisted upon us for 15 years, the actual effects of warming have been extremely moderate to date, so moderate that even if those effects were cemented in place for all time, it wouldn’t amount to a hill of beans in terms of negatively impacting anyone’s life here on earth.

And don’t you love how the liberal snoberati live such hysterically hypocritical lives, as they luxuriate in their 3000 sq. ft. air-conditioned homes with multiple big-screen TVs, driving their gasoline-powered vehicles (maybe even SUVs!) and buying all manner of the latest gadgets and fashions, while jetting off on vacation on polluting 737s owned by big corporations. I have yet to encounter a liberal in my life who walks the energy/warming walk, but they sure do love to talk the talk. Talk is cheap.

So, have I written a lot about it? Yup, I have. I have the ability to put forth exceptionally well-worded arguments that infuriate the other side and are close to being unarguable. It’s kind of like rubbing a Yankees fan’s nose in the memory of them being up 3 games to none vs. the Red Sox in 2004 and us coming back to humiliate them, 4 games to 3. It never gets old and I never get tired of doing it.

As for the irony, I think you misinterpret where the irony is. Warmers hate conservative (read: Republican) businessmen, because they (the Warmers) think that conservative businessmen (yes, men) are the cause of all the warming problems because of their ruthless pursuit of immoral profits while willfully ignoring the harm they’re inflicting on the environment.

The irony comes from the fact that it is the very pursuit of these horrible, immoral profits that is producing the cure for Warming. The Warmers’ sworn enemy is solving the problem. Ironic indeed.

My gut feel is that the Warmers would rather some permanent harmful effects be inflicted on the earth than have to admit that 1) Warming was never that big a deal in the first place and 2) Conservative Republicans solved it.

I am 97% sure I’m correct about everything.”

This was a fun dialogue.

Global Warming Is Irrelevant

© 2017 Steve Feinstein. All rights reserved.

 

There is probably no subject (outside of abortion) that has engendered more passion for a longer period of time—decades now—than Global Warming. Here are some of the issues and talking points:

  • Settled Science or Junk Science
  • Warmest Year on Record vs. hiding faulty or contradictory evidence
  • The threat of actually jailing Deniers (they even have a name, complete with a capital letter)
  • International conferences and accords
  • New regulations for businesses and equipment
  • Complicated Carbon Trading schemes
  • Dramatic declarations by politicians of Warming being a greater threat than ISIS
  • Photographic “evidence” of impending doom and impact on nature/wildlife
  • The routine, unquestioned conflation of daily weather events and long-term climate change

All of these are examples of the highly-charged, deeply-held views on the subject. I recognize and appreciate the intensity and vehemence with which the respective parties hold to their positions.

However, for the purposes of this article, let’s simply concede that anthropogenic Global Warming is real, not just a coincidental occurrence of cyclical climate patterns on earth and the relationship of those patterns to solar activity and the like. Let’s take the “Is man-caused Global Warming real?” question off the table and admit its existence.

However, even if there is certainty regarding the reality of man-caused Global Warming, it probably doesn’t matter.

Here’s why: The very same profit-driven capitalistic Western businesspeople who seem to stoke the ire of the Warmists so intensely are the ones who are well on their way to ending Warming—and long before it becomes any kind of permanent threat to mankind’s well-being.

Fossil-based fuels are simultaneously the most economically-efficient source of energy and the most politically-troublesome and ecologically-controversial source of energy. Historic relationships between nations, current foreign policy and military decisions, ecological impacts, everything is tied up in a convoluted, indecipherable cause-and-effect Gordian Knot because of fossil fuels.

Yet it is the popularly-maligned free-market capitalistic system, with its unsavory profits, rewards and unapologetic income inequality, that is the key driver to finding the eventual solution to our reliance on ecologically-detrimental carbon-based fuels. A veritable free-market fortune awaits the individual or company that delivers the first viable alternative energy system, one that is easily deployable on a mass scale across large geographic areas.

That promise of capitalistic reward has many companies feverishly pursuing different solutions. The potential of virtually unlimited free-market profits and a superior competitive market position are spurring private for-profit companies to find a viable alternative to carbon fuels. That’s undeniably true, and it’s happening primarily here in the U.S., primarily because of our freest-of-all-markets system.

An example is Lockheed Martin Corporation and their work in developing a new compact fusion reactor. L-M says a reactor small enough to fit on the back of a truck could produce 100 megawatts of electricity—enough to power a small city, without any carbon emissions. L-M estimates they’ll have a workable prototype within five years. Let’s double their likely-overly-optimistic estimate and say within ten years.

Electric cars, battery technology and solar panels are also improving all the time. They may not be totally economically-feasible in the free market at this time without Government tax subsidies and, yes, there is the undeniable irony that the electricity needed to recharge a Tesla or Chevy Volt usually comes from a greenhouse gas-producing fossil-fuel power source, but things in the battery/solar area are improving all the time. The percentage of U.S. energy provided by these “alternative” sources has increased from less than 5% before 1990 to over 13% in 2014 and will continue to increase in the future.

The Answer is out there and it’ll happen pretty soon, likely within 50-100 years, I’d confidently guess. Companies and individuals are working day and night to find The Answer—because of the rewards they’ll reap.

50-100 years is a nanosecond in terms of earth-geological-climactic time. A fraction of a nanosecond. When The Answer comes along 39 or 64 or 97 years hence, whatever minor “warming” has actually taken place, whatever small amount the seas have “risen” will all be halted and reversed.

The argument against that position is that we’ll soon reach some irreversible “tipping point,” after which no cure or remedy to the permanent destructive effects of Warming is possible. Yet there is no scientific proof of that, nor is any “proof” possible. That’s merely a totally unsubstantiated talking point, designed to rally the Believers and scare the Deniers. This, however, is scientific fact: 50-100 years is a nanosecond in terms of earth-geological-climactic time. And the practical, usable, non-carbon, non-warming Answer will certainly be discovered and deployed on a significant scale within that timespan.

Therefore, the entire anthropogenic Warming issue—whether real or imagined—is a non-issue. Profit-driven technology will solve it. As ironic as it seems, the Western capitalist economic system will be the savior of the earth.

It is fitting that as the Davos forum in the secluded luxury of Switzerland unites the global elites – even if some of the attendees would never self-identify as such – we have Rush Limbaugh pronouncing that the inevitable rise of populism in America has finally taken hold. Precisely as a result of Davos man and his (and her) way of viewing and shaping the world.

Trump’s rise seen through the prism of the post-iron-curtain world order is a logical imperative, according to this view. And while the end of history as preached by Fukuyama some 25 years ago has proven rather messy and, well, even historical, the fact is that increased connectivity, trade, and the global reach of large corporations is seen as far more sinister to their own local lives by many working families in America. Even if Davos benefits American corporations like no one else.

But holding onto your Coke and MacDonalds shares in your retirement funds is not a very convincing reply to a paretn of two kids who is about to have his or her job outsourced.

That’s a natural suspicion to have on the part of those whose jobs have been placed at risk. And wonks and pundits may occasionally – less so with each passing year it seems – worry what to do about displaced workers, but it is seen as inevitable collateral damage to an otherwise robust and worthy system of economics, and of politics.

But – as is the case with coders – what if the “bug” of disposable mid-skilled and high-skilled workers is, in fact, a feature of this program? What if increased investment in tech and connectivity is seen as a way to shift a wage and profit economy to the gig-and-even-more-profit economy? Where you don’t have A job, you have a series of little jobs that you scurry to gather up in competition with an increasing percentage of the world’s labor force who only need a laptop and a modem to compete with you?

Yes, that’s only part of the picture. Crushing regulation and high taxes do wonders at killing off jobs. So nowadays, we get the worst of both worlds. Ever increasing pressure to work harder for lower wages, and employers so bound up in red tape that they have no choice but to lay off full time employees and enter the gig economy – contracting out part-time help that sometimes delivers and sometimes doesn’t.

There are few safe harbors from this pincer-like crush on working families. But high-value professionals tend to do better in a gig economy, because we are not yet at the point where you will have your surgery done by remote control by an intern in Bangladesh. And lawyers will make sure that smart contracts need lots of lawyers to make them stand up in court. Or sue you to death if you actually dispense with their legal wisdom.

Is it any surprise then that many are drawn towards Trump in today’s world? Even if The Donald would be quite at home shaking hands, doing a little skiing, and checking out the Eurotrash nightlife. Like any Davos man worth his (or her) salt.

How long does it take new highway construction to pay for itself? And how do you tax those who presumably use it? Toll roads are not overwhelmingly popular and since Eisenhower’s Highway Act in 1956, the federal government has shouldered an important part of the burden. That means gas taxes of course. But less toll booths as the years have passed.

It should be remembered that the prime motivation was General Eisenhower’s military experience, and his observation of Germany’s infamous and famous autobahn system, which was a way to move military material around Germany in an efficient manner. Yes, the highway system is essentially a Nazi invention.

So carefully measuring internal rates of return based on the expected time it takes to return the cost of a project were not the drivers of America’s massive roadway project. It was rather a case of providing a durable and robust series of connections between military – especially Air Force – facilities in case the nation faced a soviet ground invasion.

And the beneficiaries were Americans in general, both consumers and businesses, who could trade and travel at far more efficient levels than before. Imagine Wal-Mart without the current highway system.

So highways have often come to us often by the heavy hand of a protective state. From the King’s highways in England to your local stretch of interstate, that’s being redone at a hefty cost that needs financing on terms the private sector would be reluctant to offer without revenue streams like toll booths.

And the heavy hand of government tends to take care of it’s other hand, as well as other grasping hands. So it is almost a categorical imperative that highway bills shall be leavened with K Street goodies like farm subsidies. This is not a sneaky detail snuck into a worthwhile bill in the dead of the night. This is the raison d’Atre of any hard working senator worth his or her salt.

You want federal funding for that stretch of interstate? Sure, you bet! And we’ll make sure that America benefits from protected farm production. Or at least the targeted constituency that has bent our ears.

Or instead, you could have a smaller more focused set of farm subsidies flowing to those small family farms that really need them.

America could follow that giant of capitalism and freedom, New Zealand. Where they cut farm subsidies – very substantial farm subsidies – 30 years ago. Guess what? The overwhelming majority of farmers adapted, and are thriving, diversified entrepreneurs today.

It may be a while before America’s mobile consumer economy can prosper without a subsidized highway system – even with those annoying gas taxes. But the time is long past due for a shakeout of the goodies forged by beltway insiders. And dispensed by the federal government.

It will be Tax Time Tuesday on Fox Business. Here’s what the GOP candidates who will be debating all things economic and fiscal, as well hopefully as personal finances, have said about their tax plans. All courtesy of the taxfoundation.org.

On income taxes it’s Senators Cruz and Paul who battle it out to see who has the lowest flat tax. Cruz actually is proposing a 10% flat rate while Paul favors a 14.5% flat rate but with better deductions and exemptions. Carson’s flat tax is to be between 10% and 15%, but is to be phased in over time, which may mean “we’re working on it folks.”

Rubio and Bush’s plans are structured almost identically – but Bush’s rates are a little more taxpayer friendly. Rubio’s rates, in fact, are not that much lower than what Americans pay right now. Trump has a more flexible version of the other two’s progressive rate structures, with top rates kicking in at much higher income levels.

For capital gains and dividends, Bush and Trump have very similar plans with both promising to eliminate the net investment income surtax. Carson has no details, and Cruz and Paul both propose capital gains and dividend income taxes identical to their flat income tax rates. Fair ‘n square all round, as they might say.

Rubio is the one who stands out here. He would eliminate both the capital gains and dividend income taxes. A bold step towards encouraging investment again in America. Will it fly? Will it cause corporations to start spending their countless billions of cash balances in plant, equipment and people again?

On corporate taxes, Bush and Rubio are in near-lockstep again with Bush favoring slightly lower rates (20% vs. 25%). Again. Carson? No details. Rand and Cruz? The senate former-still-kinda-bros-in-arms have very similar proposals. They both propose a business transfer tax which basically is a value added tax on stuff that actually gets consumed or sold by businesses.

Estate taxes would be eliminated by Jeb Bush, that patriarch! He clearly favors letting families – wealthy and not so wealthy – keep the money. Just like every other GOP candidate. At least among the front runners.

Carly Fiorina is an anomaly here. According to taxfoundation.org, she has no specific policy plans on any of the taxes mentioned above. It’s time for some convincing from the former CEO. Unless some of the fight has gone out of her. It might be premature to say that, however. Tuesday Tax Time will tell.

Amendment 3 in Tennessee would permanently enshrine their no-income-tax policy and is being pushed by various groups after an opinion by their AG suggested the state could at some point reimpose an income tax to meet budgetary needs. Aside from some worries about voting “no” when seeing the word “tax” on the ballot, the measure seems to have a good chance of passing. And Tennessee has one of the lowest overall state tax burdens despite having a relatively high sales tax rate of 7%. The average per capita state and local tax paid was $2.777 according to the Tax Foundation and that’s the 2nd lowest in the country. They do have a tax on dividend and interest income however, not good for retirees who depend on that income to meet monthly expenses.

More generally, the problem of spending by state governments, and by the federal government as well in each individual state, presents interesting evidence. A study of the net federal contribution of each state as a percentage of individual gross state products produces something of a contradiction. States that raise less money in federal taxes than that spent by the federal government in their state, tend to want to reduce the size of government at the same time that they benefit from overall transfers from Washington. Tennessee for example, contributes 18.7% of it’s GSP to federal revenue and receives 24.4% of it’s GSP in federal spending, for a 5.7% shortfall, coming between Hawaii at a shortfall of 4.3% and Lousiana at a shortfall of 5.8%. Now Hawaii is no red state so the contradiction of net contributors voting Democrat is not always the case. But assuming there is this contradiction in some cases – Mississippi and Kentucky have shortfalls of 13.3% and 17.9% – then is it hypocritical for them to wish to reduce the size of government? Salon ran an article gleefully pointing out 10 offending states, Mississippi and Kentucky are on the list. But all states are captive to federal welfare policies and must spend money that they perhaps would rather not, on policies like Obamacare for example. The real test is how willing voters in Tennessee, for example, would be to cut back all government spending until taxes balance out what they receive from Washington. I suspect that many in Tennessee would be willing, but I also suspect that Washington will never allow them that freedom. Is there fiscal hypocrisy on the part of low-tax states? Sure, but they operate within the constraints that the federal government imposes on them.

The US Chamber of Commerce likes Washington so much that they spent over $35 million on federal elections in 2012 according to the Center for Responsive Politics. That’s hardly surprising seeing they represent companies in the world’s largest economy. No the Chamber of Commerce is not a government department, it’s a lobby group. How conservative the Chamber of Commerce actually is, is open to debate. They supported the Clinton’s failed health care reform and lost a few members as a result. Since the early 90’s they have apparently shifted back to the right, but last fall, Bloomberg News declared that a civil war had erupted between Tea Party stalwarts like Ted Cruz and the USCC over it’s opposition to government shutdowns as a negotiating tactic. They did not support Obamacare but now a key decision is coming if Obama uses an executive order to grant amnesty to illegal immigrants. USCC members like the National Restaurant Association are in favor of amnesty and business groups worked with the gang of eight in the Senate in its attempt at immigration reform.

Assuming Obama does issue that executive order – some are beginning to doubt it because blanket amnesty would anger some labor groups as well as African Americans – there could be a further split between Tea Party members and some conservatives and big business. There is a curious confluence between those on the left who argue that illegals help keep wages low because of their vulnerable status, and those on the right who say illegals take jobs away from those Americans as well as keep wages low. Their solutions are diametrically opposed; Amnesty or Deportation. Amnesty is uncomfortable at a certain level for big labor as well; they would love to increase latino participation in union membership and turn back a steadily declining trend, but also are aware that a large pool of illegals will inevitably keep wages under pressure for their members. Whether business has thought through the consequences of a large scale amnesty and how it likely would encourage further illegal immigration on an even larger scale is uncertain. A low wage economy is hardly the recipe for future prosperity. An economy where the rule of law is respected, and where labor markets have the freedom to be flexible within that very rule of law, is something else.

Everytime I hear it, I cringe, the same way I cringe when I think of chewing aluminum foil: “The problem of income equality.” What on Earth does that mean?
There are rich people and there are poor people. A good Christian (or Jew or Muslim or Hindu) offers a portion of their money for charity, helping those in need. There’s nothing wrong with that. But the declaration of “income inequality” as a global problem makes me cringe. I have the image of bureaucratic fingers digging into our bank accounts, angry that we were able to manage and save our money well over the years.

As far as a global problem, I can understand that. You have countries with per capita income of less than $100 a year in Africa, and the despotic leaders lounging in gold bathtubs. That’s wrong, but that’s also a problem for the UN. My money has nothing to do with that scenario. But in the U.S.?

The phrase itself conjures differing mindsets of money. When I think of my savings account, 401k, 403b, pension fund and checking account, I consider the time and effort I put into building them up. Reading books on finance, advice from my father, even attending a workshop by Dave Ramsey…It’s not simply an account but a construction of patience and forward thinking. Those who believe that all people should have equal income see it as a fattened sow waiting to be butchered. THAT makes me nervous.

I don’t mind helping the poor. Really, I don’t. Show me commercials, solicit outside the grocery stores and Walgreens, that’s all fine. I’ve never been able to pass up a Humane Society stand without dropping in at least a $10.

Categorizing my financial stability as a problem tells me that if I happened to pass a Salvation Army stand and don’t drop in my change, they have every right to stop me, yank open my wallet and take the money. The oddest thing is that’s not an exaggeration. That’s exactly what liberals want as a solution for “income inequality.” If you don’t donate as much as we think you should, we’ll just take it.

To say that Detroit is economically a mess is an understatement. The large, once thriving city is under duress financially and is struggling to make ends meet. The result was a filing of bankruptcy and cry for bail out that continues to plague the citizens of the city. Millions upon millions in debt, creative new ways to pay back what is owed are being identified. Unfortunately for those workers counting on the pensions, retirement plans for public employees are on the chopping block.

The idea of cutting pensions, potentially bloated ones, may seem appealing to those that want less government and more private sector. The truth is, though, that there are people behind those pensions that may face a retirement and a financial future that is uncertain. Unions and public representatives of the workers are angered by the prospect but this highlights and important part of working for the government: what it gives it can take away.

The government is bloated across the United States. From the larger bureaucracy that sits in Washington, DC making life changing decisions that affect everyone outside the bubble to state governments steeped in corruption and even the localities that are struggling to get by, the government is a huge enterprise with millions upon millions of workers (many of which are put into unnecessary roles). The result when you have a large government and poor money management is that something has to give. Often, the fat cats at the top of the list are not the ones taking the hit. It is the workers that, right or wrong, were counting on the government to provide some type of compensation that they would stick to. Unfortunately, they are learning the lesson that small government proponents have known: the government is interested in sustaining one thing…itself, not its workers livelihoods.

Economics and Our Future

By

Filed Under Economy on Jul 17 

There is no doubt that the economy has been improving at a slow pace. Ebbing and flowing of economic success has left the United States, and the world, in a state of constant fear, confusion, or denial of just how bad the financial picture is. Gas prices continue to rise and unemployment rates vary from bad to really bad and back to bad again. In a nation with so much to offer and so much potential, it is amazing that the mismanagement of funds, lack of personal responsibility, or overall policy failures has taken a bad situation and helped to make it worse.

Military cutbacks are one area where this failure can be seen. While the sequester has said to be the reason for many funding cuts in the military, arguably in some areas where some leaning needed to be undertaken, monies are being restricted in order to cover debts and place financial resources elsewhere. Restricting the budget is necessary in trying to balance the economic future and if these were thought through and rational, it would make sense. But, while the military sees cuts that have led to meal restrictions and the loss of fireworks on military bases to celebrate the 4th, gophers are being saved in lands near bases in California. That’s right, millions of dollars are being used to save the gopher while our military goes without some of the basic necessities and without adequate pay, though this last problem has persisted for some time.

Further, it is our children that are being hurt by the joblessness and unemployment of this generation. The poverty rate among children, as assessed by a recent study, suggests that the number of children living in poverty has increased an astonishing 23% since 2011. Underemployment and joblessness continues to rise while the wide reach of entitlement continues, leaving a generation of children seeing their parents struggle and their parents becoming ever reliant on the government’s help. The impact this will have on this younger generation as they themselves age and enter the workforce is not yet known. One could guess, however, that the lasting effects of living in poverty could have detrimental effects on future policies and values in the United States.

Reports have surfaced that TimeGate, the development company behind gaming titles such as Aliens: Colonial Marines and FEAR Files, have released several members of their staff recently. The move is not completely shocking as the company was forced into bankruptcy proceedings just a week ago and it became public knowledge of the debt issues the company was having. Not much detail is known at this time about who was directly impacted by the employment cuts or whether the move was purely fiscal or creatively linked.

In early March of 2013, TimeGate had another round of layoffs. Noting the switch from current to more modern gaming consoles and the streamlining of financial holdings as the motives, the first round of layoffs were a clear sign of stress and, sadly, more things to come from the company. It is still, however, unknown just how many developers and staff were affected and if the TimeGate company will be able to continue developing games in the future.

As aforementioned, consumers and game aficionados are not all shocked, or disappointed, by the news, while others are questioning the move with a bit more scrutiny. Recent craftsmanship of the TimesGate developed games has been called into question with some clients believing that an overhaul would be a revitalization of the business for the better. Owing millions of dollars in debt, however, could place the TimeGate franchise on a path of fiscal restraint and concern that may be difficult to overcome. Time will be the greatest predictor of the longevity of the company and if TimeGate can bounce back from its current fiscal situation.

There is an old joke about communism muses about what would happen if the desert ever became communist. The answer is, “nothing for a while, and then there would be a shortage of sand.”  Communism and Socialism have failed spectacularly every single place they’ve been implemented and yet there remains a school of thought that government can run economies better than markets can.

Today’s example of a failed government command economy is found in Venezuela. This Latin American country sits on vast reserves of one of the hottest commodities in the world right now – Oil. The world runs on oil. Demand for this commodity causes people to go literally to the ends of the earth in search of it. Find yourself a patch of oil to sell and there will be buyers lining up at your door with barrels.

So, one would think that a country sitting on such wealth would have enough cash to provide basic necessities for its population. I don’t know about you, but one thing I never buy off the discount rack or bottom shelf is toilet paper. It’s a basic necessity of life. TP is right up there with alcohol, cigarettes, and booze in the hierarchy of things to hoard in the coming Zombie Apocalypse.

But I digress. Where was I? Oh yeah, Venezuela. There’s a nationwide shortage of toilet paper. That’s right, Dear Reader. Toilet paper.

The laws of supply and demand are not subject to the whims of government price controls. I submit that the demand for toilet paper is about as elastic as a steel rod. People want what they need and they need toilet paper in Venezuela.

President Nicolas Maduro, successor to Hugo Chavez, is now getting a lesson in basic economics. He blames “anti-government forces, including the private sector” for causing the shortages in an effort to destabilize the country.

Sound familiar?

Well, Dear Reader, this coming Thursday marks the end of the world. Forget the phony Mayan Apocalypse. Sequestration is coming. Yeah, that’s a big word and nobody seems to actually know what it means. I’d say its unprecedented when truthfully it’s really inconceivable.

The One refers to the “sequestration” cuts as a “meat cleaver”   approach to trimming the budget. While this may be true, let’s also remember that this whole meat cleaver idea was hatched in The One’s brainpan. It was his dizzying intellect that came up with this idea. Had he not put his pen to paper on the bill that became law with his signature, his government would not be in this situation.

Ladies and Gentlemen, this country has operated without an annual budget for the entire administration of Barack Obama. His government has run TRILLION dollar deficits every single day of its existence and projects to run those same deficits for as far as futurists care to predict. Here’s the biggest joke: even with the “sequestration” meat cleaver, the Federal Government will spend more money this year than it did last year. Don’t take my word for it, the big brained people over at George Mason University have run the numbers.

But, never mind the facts and figures. At midnight on Thursday the world will stop spinning on its axis and everything and everyone will be hurled into space. Mayan Apocalypse? Hell, ancient predictions of fire and brimstone ain’t got nothin’ on big bad Sequestration.  Here’s a preview of The One’s upcoming press conference:

The idea has been floating around this week and Carney refuses to rule out. What say ye, PD?

Following the fiscal cliff debacle? Try WaPa’s live feed.

Happy New Year, America. Enjoy the ball dropping and the taxes rising…

CNBC is reporting French Industry Minister Arnaud Montebourg’s comments in regard to the potential nationalizing of an Indian company that has threatened to leave France:

“It’s a very good sign to send out (to investors). Nationalizing is a very modern step to take. Especially when you not only nationalize losses but profits as well, when you make public/private partnerships. This is our strategy.

“The strategy we’re putting forward is extremely modern and adapted to the current times of crisis. It’s a way of making the economy work in the interests of industry, more than just helping the financial sector,” he added.

Apparently in France, the nationalization of industries is a good thing for investors and will lead to automatic profits. If this is the case, why aren’t all industries nationalized?

Dr. Mark Perry, an economist at the University of Michigan calculates ‘Equal Occupational Fatality Day‘ each year. Yesterday was the latest release of the next ‘Equal Occupational Fatality Day’. Perry summarizes his data in the chart to the left (note: click twice to enlarge) from his blog and his commentary follows.

Every year the National Committee on Pay Equity (NCPE) publicizes its “Equal Pay Day” to bring public attention to the gender pay gap. “Equal Pay Day” this year fell on April 17, and represents how far into 2012 the average woman had to continue working to earn the same income that the average man earned last year.  Inspired by Equal Pay Day, I introduced “Equal Occupational Fatality Day” in 2010 to bring public attention to the huge gender disparity in work-related deaths every year in the United States.  “Equal Occupational Fatality Day” tells us how many years into the future women would have to work before they would experience the same number of occupational fatalities that occurred in the previous year for men.

Read more

Since there was so much interest in yesterday’s post quoting Professor Don Boudreaux, here are Milton Friedman’s comments on the issue including: ‘The actual effect of requiring equal pay for equal work will harm women.’

HT: Raúl Ramírez for digging this up and posting in the comments yesterday.