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Archive for April, 2015

Seven years ago the Caesar Rodney Institute was officially incorporated in Delaware as a 501c(3) with the goal of speaking out against government excesses, whether in terms of control or taxation. We celebrated our seventh annual dinner at the Wilmington Country Club,and each year the number of attendees grows exponentially. All of our photos are available on our Facebook page,but below are some shots of the crowd with different camera angles.

We hope the eight annual dinner continues to grow. We thank all of our dinner attendees and all of our donors who support CRI, whether it’s by sending in money, reading our policy papers, or taking the time to educate a friend or neighbor about the policy issues which are impacting our state. You’re helping to bring back some common sense to Dover, and for that we are sincerely grateful.

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Today Delaware celebrated Tax Day on April 20, 2015 National Tax Day is April 24, so most of the rest of the country still has to work to make sure all levels of government have access to your money so they can “invest” it in whatever causes those charged with “managing” our money have decided to use it for.

If you’re unfamiliar with Tax Freedom Day, it’s a day set by the Tax Foundation to mark when wage-earning Americans have made enough money to pay their total tax bill for the year. For some lucky Americans, their tax day comes in early April. For others, like in our neighbor states Maryland and New Jersey, tax freedom day doesn’t come until May. Last year Tax Freedom day was April 21, and we aren’t even counting our federal borrowing obligation. That is basically another tax but it’s a “future tax” so it doesn’t get counted for the purposes of our day.

Delaware’s top rate was “cut” in 2013 from 6.75% to 6.6%, despite being 5.95% as recently as 2009, applying to incomes of just $60,000 per household. You pay 5.55% of your wages to the state if you make as little as $25,000. In comparison, Connecticut which is tied for the latest Tax Freedom Day, takes 6% of pay starting at $100,000 for single earners or $200,000 for couples filing together. Even New Jersey doesn’t grab taxes as high an amount for as low an income as Delaware.

This year Americans will spend more money on taxes than on Housing, clothing, and food, according to the Foundation. Some of this is due to the modestly improving national economy, which means more money is being earned, spent, and thus taxed, bringing in record amounts of money into the federal treasury, who incredibly still manages to run budget deficits.

Meanwhile, our politicians in Dover have finally realized that there really is a tax collection problem in this state: while our overall business climate is still good (the Tax Foundation ranks us at #14 for best places for business and many corporations still choose to incorporate in Delaware), personal and corporate income tax dollar collection has decreased for the second straight year, meaning there are going to have to be tough decisions made when it comes to voting on this year’s budget. Our three casinos continue to struggle due to increased out-of-state competition, yet the state continues to tax slot machine revenue at 43%. Incredibly, some in Dover think the solution is to add more casinos to the state, in the short-sighted hopes of grabbing immediate licensing fees. Never mind that if the casinos stop providing revenue, then the state will have to make serious budget cuts and there is not the stomach in Dover to do that right now.

Delaware has been a low-cost place to retire to, and we have seen a massive influx of retirees move to the state, particularly to Sussex County. These retirees require services but are not paying income taxes to the state, our number one source of revenue collection. And we haven’t even addressed the upcoming challenge of paying for the Medicaid expansion which came with ACA. Let’s hope eventually our elected officials accept reality, preferably sooner rather than later, and make the right moves to keep Delaware free and open for business.

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As of April 1, 2015, CMS stopped payments to doctors for Medicare beneficiaries. As of April 13, CMS announced that it would begin processing claims, as required by law, but at an average 21% reduction across the board. The net effect for many physicians offices is that certain services, such as injections and medications are now being reimbursed by CMS less than the wholesale cost to the providers. Quite obviously, those treatments are no longer going to be offered to Medicare patients.

This is the long predicted adverse and unintended consequence of a poorly designed law known as SGR, past almost 2 decades ago but only now being implemented as of April 1. While the Congress has past by part ascending supported legislation to fix the problem, the United States Senate went on an extended Easter vacation for 2 weeks in yet another shocking demonstration of dysfunctional government.

The rationing of of healthcare to the Medicare population has begun in earnest.

-Dr. Casscells, Director

Center for Healthcare Policy

From Reuters, April 15:

“Congress on Tuesday approved a bill to repair the formula for reimbursing Medicare physicians, marking a rare bipartisan achievement just in time to head off a 21 percent cut in the doctors’ pay.

The bill would replace a 1990s formula that linked Medicare doctor pay to economic growth, with a new formula more focused on quality of care. It also would require means-testing of Medicare beneficiaries so higher income people pay higher premiums.

One of the government’s largest social safety net programs, Medicare is health insurance that serves 54 million elderly and disabled people.

The old formula for paying Medicare doctors has been a problem for years as health care costs outpaced economic growth. Congress had repeatedly addressed the problem with a long series of temporary “doc fix” patches. The new formula is intended to be a lasting change.

The federal government warned Congress last week that it must act before April 15 or thousands of Medicare doctors nationwide would face a 21 percent pay cut under the old reimbursement formula.

The measure passed the House overwhelmingly in March but because it expands the federal deficit, it was greeted skeptically by deficit hawks in the Senate.

They labeled the bill irresponsible because it would add an estimated $141 billion to the U.S. debt over the next 10 years, according to the Congressional Budget Office (CBO).”

What does this mean for healthcare, particularly for the elderly? For the longest time, Congress has been forced to pass the annual “doc fix” because they decided the way to “cut spending” on Medicare was not to means-test the program, ensure that only qualified persons were using the program, and ensure that actual spending was kept under control, they decided to cut the reimbursement to healthcare providers.

Medicare and Medicaid pay far below what a provider can get from a health insurance company or from a fee-based service. This is why patients who use these services consistently have trouble getting great care.

Consider this hypothetical scenario: a general practitioner owns a small clinic. He generally expects to earn $100 an hour for his own salary and for his business. A Medicare or Medicaid patient walks in and he realizes that to spend an hour on this patient will net him only $25 per patient. He has, for argument’s sake, one hour right now. Given the low reimbursement, instead of charging two patients $50 each for a half hour each, he needs to see four patients an hour at $25 in order to earn his income. The doctor must now  choose: give less time to the Medicare patients, or accept a lower fee per hour.

There are those who will say the doctor is “greedy” if he doesn’t accept the fee cut, and point to the Hippocratic Oath and the part which says, “I will remember that I remain a member of society, with special obligations to all my fellow human beings, those sound of mind and body as well as the infirm.” This will be used to say they should consider it a privilege to help their fellow human being, even if the doctor derives no benefit from doing so.

Let’s remember that doctors are people too; they have families, bills, expenses, debt, and other obligations like everyone else. Pretty much every doctor would agree that treating patients without regard to difference or ability to pay is fundamental, which is why many doctors perform charity care for the poor. However, this attitude that doctor should be lucky to treat people is arrogant, and usually put forth by non-providers who think they are entitled to things.

Thus, the problem with the fix is that every single year this charade happens: Congress ‘patches up’ the gap, to stave off already-harsh cuts to reimbursements for providers, who can make more money if they don’t treat Medicare and Medicaid patients, and have the benefit of not having the wrath of government on them if they err in filing paperwork (they feel the hassle of dealing with the insurance companies, but at least the insurance companies can’t give out fines or prison sentences for paperwork filing violations or ‘over-billing’ scenarios).

CRI, together with the Medical Society of Delaware, are the only Delaware organizations advocating for physician and patient driven health care, in opposition to socialized medicine. We want to see the power of healthcare decisions shift towards  the patients and their immediate providers, as well as the immediate costs. Doing this will mean a big step forward in getting healthcare costs under control and improve quality by encouraging innovations and cost-lowering for providers to offer patients. We see this in other sectors of our economy, so why not healthcare?

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rightwisconsin.com

Today’s News Journal article “Seeking Delaware manufacturing jobs, GOP targets unions” talks about the concept of a “right to work zone”, which differs from Right to Work in that RTW laws covers whole state while a RTW zone covers only a specific geographic area. Senator Greg Lavelle has proposed one this year; he did the same last year.

As expected, the unions were out in full force against it:

“Sam Lathem, president of the Delaware AFL-CIO, the umbrella organization representing Delaware unions, called Lavelle’s legislation a “desperate reach” that would lead to lower wages.

“We need to find a way to re-create and grow the middle class. Right-to-work isn’t going to do that,” Lathem said.”

The News Journal article pointed out the problem, though whether John Starkey intended to do so is another idea.

“Now Republicans are reviving a proposal they hope will revitalize Delaware manufacturing. But the plan, which would make it harder for unions to organize, is controversial and deeply polarizing in a state where the governor’s office and the General Assembly are controlled by Democrats, who still count union members among their staunchest base supporters.

Markell, a Democrat, appears poised to oppose the legislation. A spokeswoman said available studies on whether right-to-work legislation creates jobs are “inconclusive at best.”

“Gov. Markell remains focused on efforts that employers tell him are most important for job and economic growth, such as providing training for a skilled workforce and spurring innovation,” spokeswoman Kelly Bachman said.”

To quote from Hamlet, “Ay, there’s the rub.” You can see very quickly why even just a zone- not the whole state, but an area to try this idea out- is considered a threat to organized labor and those who benefit from it.

Here’s the summary of the Law, SB 54:

“This Act allows the Director of the Delaware Economic Development Office to create right-to-work zones as part of its inducements to bring new businesses to Delaware and requires these zones to be offered for manufacturing businesses hiring at least 20 employees. It also exempts those manufacturing businesses from their gross receipts taxes for their first 5 years.”

Let’s talk about these zones. Suppose GM’s former plant on Boxwood road was turned into a right to work zone, along with say 1000 square acres surrounding the plant’s legal boundaries. Only businesses locating in these zones would be able to receive the benefit, and with only 1000 square acres there would be a limit. However, those businesses which do receive a space in the RTW zone would be able to avoid the problems which modern day labor unions bring: namely, the political activity (including which many union members may not agree with) and the pressure to give workers more money and benefits even if the company is unprofitable or if doing so makes the company unprofitable. They can make an effort to grow manufacturing and if the effort succeeds, then more zones can be replicated, or perhaps if the General Assembly and Governor see the benefit of one, they can enact a RTW law for the entire state.

On the chance the law is not beneficial, or even proves detrimental, the zone can be removed and the rest of the state is unaffected or the law can be repealed if the zones are a failure.

Now, other factors will affect the success or failure of these zones. Notice that the gross receipts tax would not apply for five years. This is because our state’s gross receipts tax is a job-killer; businesses who meet a certain income threshold pay a tax on all revenue over the threshold, not counting profit and loss. So even if your business has a bad year, you still get socked with higher taxes.

Electricity is expensive in this state, about 23% higher than the national average. Plus, the crime reputation for Wilmington, and to a lesser extent Dover, absolutely gives a negative vibe to outsiders looking to relocate a business or build a new factory. Don’t let anyone tell you Wilmington’s crime problem isn’t hurting the reputation of the entire state.

But RTW zones might give the state a chance to attract capitalists without having to “invest” (subsidize) large businesses to move here, because most of the biggest “investments” go to major companies like Fisker, Bloom, Kraft, etc.. If you owned a casual sit-down restaurant, and the only way you could get customers is to pay them anywhere from $30-50 to get them into the store, who is going to look at customers coming in and say “yes, this is a successful restaurant” just because a few customers are inside your restaurant now?

We hope the state will look at ways to improve our economic climate, to attract businesses and “job creators” of all types, from start-ups to established companies, from sole proprietorships to multinational corporations, to anyone who has job opportunities for Delawareans and is willing to invest in our state for the long-term. These goals are achievable, they work, and they offer a new chance to get our economy going again.

By the way, the courts have found right to work zones are legal. What is not currently legal (and is being challenged) is right to work at the County/City level. This is due to how local government entities are structured.

Lastly, if you need more proof that manufacturing in Delaware is in serious trouble:

Delaware manufacturing employment

1990: 43,200

1991: 48,600

1992: 44,800

1993: 44,100

1994: 44,200

1995: 44,300

1996: 39,700

1997: 41,5002

1998: 43,100

1999: 44,400

2000: 41,300

2001: 39,000

2002: 38,300

2003: 35,000

2004: 34,900

2005: 33,500

2006: 35,000

2007: 33,700

2008: 32,300

2009: 29,900

2010: 26,800

2011: 25,600

2012: 25,600

2013: 25,600

2014: 25,600

2015: 25,800

Source: U.S. Department of Labor, Bureau of Labor Statistics

Yes, we have lost roughly 40% of our manufacturing jobs, and most of these workers are NOT in a private sector labor union, which has even lower numbers. Given the situation, what can and should unions do to keep their members supporting their unions? How could union leaders improve their offering which helps both workers and employers?

In our next blogpost, we’re going to introduce a new concept called “Union Economies”. This idea is pretty interesting, and it comes from our friends at the Mackinac Center.

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Just last week Sussex County officials made it clear they intend to rewrite local ordinances on how and where food vendors may operate in commercial zones. Basically, Sussex wants to make it easier for food vendors to file their paperwork and operate in the county.

From the Cape Gazette:

“Under the current county ordinance, it can take 10 months or more to acquire the proper approvals. Sussex County Administrator Todd Lawson said the process could be cut to a few days, and the cost dramatically reduced.”

Food vendor trucks face opposition from brick-and-mortar stores, who generally dislike the idea of food trucks moving around. A lot of this is regulation; restaurants are heavily regulated operations and the assumption is that food truck vendors are like “fly by night” salespeople who just show up and sell food without going through the same red tape and regulations as the stores. They, and folks who have a general mistrust of businesses perceived to be unregulated, frequently put pressure on local and county municipalities to make the cost of entry very high for food truck vendors. The result is protectionalism for brick-and-mortar stores and a loss of job opportunities for folks whose business might be a hot dog or vegetable stand by the beaches or off Route 1 during the summer tourist season.

A reasonable amount of regulation is necessary to make sure all businesses are playing by the rules. For example, checking to make sure a business is legally registered and has not been found to be using unsanitary conditions to produce or sell food is reasonable. However, we have more faith in the marketplace than in government administrators to determine the safety of a food product and a lot of government oversight is frankly unnecessary. The food vendor businesses should not be barred from entry, and we’re pleased to see Sussex County is making steps to ensure a uniform and simplified registration code for food truck and produce stand businesses to be able to sell their products.

photo: delawaretoday.com

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