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Archive for the ‘Taxes’ Category

Sometimes we have to go beyond Delaware’s borders to protect the pocket books of our residents.  CRI has become a resource in the national fight to oppose taxes and regulations that misrepresents bad policy as critical to improving the environment.  We joined AEA in petitioning Congress to pass this important resolution.

Illegal tactics used by the EPA in drafting the so-called Clean Power Plan have been stayed by the US Supreme Court following a legal strategy encouraged by the CRI team.  The EPA called for a tax on carbon dioxide emissions to gain the agencies approval for individual state compliance plans.  EPA Director Gina McCarthy, and past Department of Energy Assistant Energy Secretary Charles McConnell both have stated the Clean Power Plan will have no impact on global warming but could add billions in energy costs.  McConnell describes how the plan is “all pain, and no gain”, how electric rates could see double digit increases, impact the poor and middleclass the most, and how the emissions savings would be replaced by three weeks output from China.

The resolution opposes the misguided plan to impose these unnecessary taxes.

 

David T. Stevenson

Director, Center for Energy Competitiveness

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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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2015 will soon be upon us and for those who are passionate defenders of freedom and liberty our work just goes on when the clock strikes midnight. Here is CRI in review and our goals for 2015:

  • Dave Stevenson’s lawsuit against DNREC and former DNREC Secretary Collin O’Mara is still ongoing. Dave and the other three plaintiffs, including CRI Director John Moore, won standing to continue their lawsuit. We will refrain from making a prediction on a court ruling less we jinx the lawsuit but we are optimistic the Plaintiffs will win. This is because in order to get standing the Plaintiffs had to prove they had a valid reason to sue in the first place, such as being aggrieved by the Defendants actions. Winning means stopping DNREC from changing the rules on how many carbon permits can be sold at carbon auctions, saving Delaware taxpayers over $100 million a year in increases in utility bills.
  • We testified in favor of HB353, the Parent Empowerment Education Savings Account Act (PEESAA). Jim Hosley, our former CEE Director, spoke in favor as did a dozen Wilmington parents and grandparents (and one student!) and the leaders of Tall Oak Classical Academy. The bill was tabled in the House Education Committee, a move we are unfortunately not surprised by. However, we hope 2015 will be a better year as more and more people realize the need to improve Delaware’s education system, and the only effective way to make the changes our students need to be prepared for the future is to provide parents with school choice options to do what’s best for the child. CRI will always maintain the belief that parents and/or legal guardians can make a better choice about their children’s education than politicians and bureaucrats in the state Department of Education.
  • We brought in Dr. Bartley Danielsen, business and economics professor from North Carolina State University to keynote our Sixth Annual Dinner. Dr. Danielsen has proposed a theory tying in environmental benefits to school choice. The basic theory is, parents moved to the suburbs to flee poorly performing public schools which left a lot of people uneducated and unable to find respectable work, and many turned to crime as a result. His theory is if inner city schools were to improve their quality, many families would move back to the cities from the suburbs and the result would be a reduction in traffic and environmental pollution from people driving from the suburbs to the cities. View is presentation here and here

In addition to these challenges, we still have issues Delaware must resolve in order to improve our economy:

  • End to the prevailing wage which makes public construction costs so expensive many end up getting no work at all. See: Rockwood Museum.
  • A Right to Work law for Delaware. Union leaders are pushing the “scab” theory that somehow union members will drop out and reap all the benefits the union “works” to get. We have responded by noting that a) manufacturing businesses have responded by moving factories elsewhere, depriving Delawareans of job opportunities. See: loss of auto industry, Valero plant, Evraz Steel plant, Georgia Pacific plant. b) as a moral issue, should union bosses have the right to take someone’s money just because someone works at a particular location? What if the union bosses don’t serve their member’s needs, such as organizing or donating to political causes or candidates the members don’t support?

We wrote: “While in the short run unionization may force wages up for those involved, in the long run closed shops reduce capital spending and induce the out-migration of jobs and workers.”

Read HERE and HERE and HERE

  • tax reform. Delaware is one of just five states with a gross receipts tax (tax on sales, even before factoring in profit/loss and expenses). Three of the other four don’t have an income tax and the only state with both like Delaware is Virginia who has lower tax rates. Coupled with high corporate and personal income taxes while Nevada and North Dakota compete with us for corporate business, and without reforms we will see money and jobs leave the state at even higher numbers.

Merry Christmas, Happy Hanukkah, Happy Holidays, and a Happy New Year to all. Let’s be thankful for a good 2014 and hope for better things in 2015.

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CRI Turns Six Years Old

The Caesar Rodney Institute celebrates our 6th anniversary today.  All of us at CRI cannot thank you enough for all of your support that has enabled CRI to reach this milestone.

The founders of CRI sought to create a Delaware-focused policy think tank to provide non-partisan, constructive, detailed appraisal of state policies and to provide solutions to Delaware public policy issues, particularly those related to the State’s economy.   CRI was and remains unique in our mission, breadth and quality of research and analysis.  Simply put, no one else does what we do.

From its inception CRI has focused on policies, not personalities; this has allowed CRI to provide independent analysis, sometimes resulting in CRI standing as the only group standing against a wave of conventional “wisdom.”  The Bloom Energy debacle stands as one example of CRI providing prescient analysis to lawmakers, though they did not heed our predictions.  Policy Director David Stevenson explained clearly how the Bloom project would cost you hundreds of millions dollars more in energy bills than was alleged and he has been proven correct. CRI’s John Stapleford correctly predicted the demise of the Fisker project and the loss of over $20 million in taxpayers’ cash based on his objective analysis of the risks and likelihood of success of Fisker.

Just as much as CRI cautions against ill conceived policies, CRI promotes policy solutions that will improve Delaware for all citizens.  CRI has pushed for sound economic growth policies, like eliminating the tax paid by many businesses based on their revenue, regardless of profitability (the gross receipts tax is aptly named in every way).

CRI continues to educate policy makers about the need to make real education reforms, including eliminating paycheck deduction of union dues to free teachers from the state union orthodoxy, and more focus on improving education for Delaware’s students rather than protecting the status quo.  The lack of a high quality public education system remains the biggest drag on economic growth, particularly in New Castle County, as families and businesses move to Chester County for better schools, taking their income tax, spending power, home purchase dollars, etc. along with them.

CRI has accomplished a great deal in six years, starting from a great idea and moving to reality and daily results.  I would like to thank everyone at CRI: the staff, Board, and Advisory Board for all of their time and hard work that keeps CRI moving forward.

CRI has much more to do.  We continue to need your help to continue our work.   Please consider making a tax deductible donation of any size to CRI today by clicking here to donate.  From all of us at CRI, thank you.

Best regards.

Jim Ursomarso

Chairman & CEO

 

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Governor Markell released his budget for FY2015 and it includes new taxes, including a 10 cent per gallon increase in the gas tax. He also wants to increase taxes on businesses and move money from the Transportation Trust Fund to help offset the deficit.

Where are we going with this?

Much of this increase in spending is unnecessary and there are ways to pay for the spending without new taxes. For example, Delaware could save $90 million a year in the infrastructure category if they simply change their prevailing wage methodology from the state’s prevailing wage survey to the US Bureau of Labor & Statistics (BLS) survey. This is because Delaware’s survey is much more union-friendly and has caused public works projects to see an explosion in spending. The BLS survey includes more businesses and while still union-friendly is much less so than the state’s.

Delaware has $29 million sitting in bank accounts, unspent money collected from the Regional Greenhouse Gas Initiative. This is money polluting businesses pay to the state in order to “offset” their emission of CO2. The idea was that money would be spent on low-income weatherization projects (like installing energy-efficient windows or dishwashers in homes), but in reality most of the money spent was on administrative costs, with very little going to these projects (which had their own problems).

Delaware also makes the cost of business difficult, with electric prices 25% higher than the national average, the state with the worst gross receipts and corporate income tax rate together, and a personal income tax rate which make Delaware uncompetitive with Florida or Texas for jobs; in place the state has to essentially pay companies like ILC and Kraft Foods to keep jobs here. What we need is a natural gas pipeline to lower energy costs, a repeal or at least reduction in the tax rates mentioned above, and more support for existing firms. Delaware was last in the nation in terms of job expansion by existing in-state firms.

Let us hope that the General Assembly decides to move Delaware in a pro job-growth direction and away from punishing the middle class and small businesses of Delaware with onerous taxes and fees which are only encouraging the state to spend more.

*Note:This article will be updated when further details about the FY2015 budget are revealed.

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Whether you celebrate Christmas or another holiday this season, we wish you a Merry Christmas, a Happy Holiday, and a joyous New Year!

In the final post for the year 2013 we conclude our series of recapping what the Sea Level Rise Advisory:

“Any strategic plan about options to prepare a state for sea level rise must consider…the need for public investment and resources essential to the plan,” wrote one individual involved in the SLR process. Other requests include “broad-based revenue raising” (i.e. all Delawareans will be subject to some sort of tax or fee, someway, somehow). “Continued research, relevant capital, and infrastructure investments.”

“The Committee’s choice to characterize its deliberations and work on Sea Level Rise adaptations as ‘options’ for ‘potential’ inclusion into a state adaption plan…feeds into a public perception that the Committee’s work might be more of an academic exercise than a serious endeavor to move forward. To me it…makes it easier for decision-makers, including elected officials, to ‘opt out’ or play down action oriented strategies. programs, policies, and the necessary investments to investing required public funds.”

The author does not want to “encourage”  SLR preparatory planning. Rather, he/she wants Executive orders from the Governor to require SLR planning (p.72)

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“Passive Solar heating and cooling can save 50% of (sic) the cost of heating and cooling from a building. It is required by law for California.  The Legislature needs to copy this law for Delaware.” The author of this letter proposes going back to a 1990 EPA proposal to require companies with over 100 employees a a site to reduce the number of cars at the site;  ideas include requiring carpooling and charging employees for parking.

“The only real solution to shoreline erosion is to retreat, as has occurred for nearly 400 years of settlement of Delaware.” Ban beach replenishment and federal flood insurance, since “taxpayers put up $3 for every $1 that the homeowner puts up”. (p.78).

Pages 80-88 were blacked out. No idea what was in them; an attempt to obtain those pages will be made. The same is true of pages 121-122.

The League of Women Voters in Delaware are on record supporting the SLR planning agenda.  “Require SLR be considered in public and private sector regional planning.”

“Develop a statewide retreat plan and update it periodically.”

Their letter talks about “Transfer of Development Rights”-this is when landowners are incentivized to not develop their land. In terms of environmentalism, this means to steer land development away from rural areas or areas with natural resources.  As an example, suppose you own farmland in one of the “endangered” zones. You would agree to sell the rights to development to one of the “good” groups, say the Sierra Club, for example. You would still legally own the land, but not the rights to develop the land. The Sierra Club would own those rights. Given their track record of being against nearly all development of any kind, basically what you have agreed to do is to receive payment in exchange for stopping further development or unapproved use of your land. This is one way anti-growth people and organizations have proposed to halt future development-rather than use  the rule of law to halt you, they convince you to stop development, and give you some money as a bonus for your troubles.

What do they recommend the state do to combat this “crisis”?

1. Consider a “coastal security tax”-

2. increase taxes on hotels, motels, and “weekend” (also monthly and seasonal) homes and apartments.

3. increase real estate transfer taxes and building permit fees for coastal building properties and homes.

4. Carbon tax-$2 per ton of CO2, increased as costs from “recovering from storms” increases.

5. Add a surcharge to Route 1 traffic; the surcharge would pay for changes to transportation and roads due to SLR.

6. Require realtors to disclose the “risks” of SLR in Delaware. It says the state, not even just the coastal areas.

7. Set up a database, via the Insurance Commisioners’s office, with up to date info on storm and flood insurance availability and costs from both private and public sources.

8. “Social justice”-have equal redistribution of reimbursement resources for all residents affected by SLR, regardless of any factors.

A group called Dover Interfaith Power & Light is also mentioned, also supporting the conclusions of the Advisory Committee. Highlights:

-they want to, by the 8th grade, teach students the “underlying science and history of weather, climate, SLR, and coastal storms.” We can speculate how the information will be taught and how many viewpoints would be presented to the students.

-they agreed with all  of the LWV proposals listed above

This group believes SLR is being underestimated-will be more than 1.5 meters, and melting ice caps will continue for at least 1000 years. At current fossil fuel use trends, Delaware will be mostly underwater in a few centuries.

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The final respondent to the survey accused the scientists behind the original 57 inch SLR projection of “scientifically unsubstantiated claims” and asked the government to not “meddle and promote a counterproductive agenda.” The author calls for letting private investment “take responsibility for purchasing low lying land”.

“Since DNREC and the EPA don’t really know ‘best’, let industries and businesses develop their own coping plans if and when such become necessary.”

The author concludes his/her criticism of the government by saying that “property rights were being eroded” and that SLR appeared to be the “new public crisis.”

135 pages of documentation from the state on SLR reveals a truth we long suspected but only now is being confirmed: those who believe that humans are the primary factors behind global warming, who believe the Arctic ice has melted, and who believe the melting ice caps will cause a large amount of flooding, are going to insist the state begin a multifaceted campaign to counter SLR, including retreating from the shores, raising taxes on individuals, businesses, property owners, and land developers who live near the shore, and asking the state to further regulate different aspects of land use from building permits to septic tanks.

Many of these people have no problem with requiring others to do things against their will and do not want to have any opposing viewpoints presented. The fact that the state hired Dr. Katharine Hayhoe to provide alarmist predictions about the future of Delaware’s weather shows the state wants to consider  future punitive action against those who are “over-developing” by the shore. They use the worst-case scenarios not merely as a possibility but as a likelihood when planning for SLR. Stricter energy mandates and carbon taxes will be the wave of the future in Delaware if not challenged.

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From CNBC:

It’s doubtful most people will notice, let alone celebrate, Friday’s 100th anniversary of the U.S. income tax code. But, yes taxpayers, Oct. 4, 2013, is the centennial.

So, happy birthday income tax?

“Obviously, it depends on your perspective,” said Ajay Mehrotra, a history professor at Indiana University.

“But there’s one thing we can take from the period of time when the tax law passed,” he said. “And that is lawmakers got together and realized some permanent form of taxation was needed instead of having a political stalemate that got nowhere.”

One expert sees the 100 years as a system run amok.

(Read more: Five key questions for taxpayers)

“In 1913, the tax code consisted of 400 pages,” said Timothy Nash, a professor of free market economics at Northwood University.

“By 2012, the tax code was 73,608 pages,” he said. “We have gone from a simple tax system to a complex, unfriendly system.”

Taxed from the very beginning

Play Video
Now is the time to start tax planning
CNBC’s Sharon Epperson gets year-end tax planning advice from three leading financial advisors.

It was the 16th Amendment, adopted in February 1913, that gave Congress the legal right to levy an income tax. On the evening of Oct. 3, President Woodrow Wilson signed the Revenue Act of 1913 that allowed the collection of a federal income tax—starting the next day.

But having some sort of taxation goes back to the country’s beginning. From 1791 to 1802, the government was supported by tax revenue from the sale of such items as liquor, tobacco, sugar, property sold at auction and even through the sale of slaves.

The high cost of the War of 1812 saw the first sales tax on gold, silverware, jewelry and watches. But by 1817, Congress eliminated all taxes and relied on tariffs from imported goods for revenues.

It was in 1862, to fund the Civil War, that Congress enacted the first income tax. Anyone making between $300 to $10,000 a year paid a rate of 3 percent. That tax ended soon after the war.

Congress also established the Internal Revenue Service at the same time, which had much the same power and authority then as it does now.

Jumping to 1894, Congress passed the first peacetime income tax law, but a year later the Supreme Court declared it unconstitutional. The court said that taxes on rents and real estate income had to be divided among the states according to population, which the law did not allow.

But the court did make a crucial statement in its ruling. It said that Congress had the right to impose a direct income tax—and that led to the passage of the 16th Amendment.

People haven’t always hated taxes

As for most people’s seemingly contentious relationship with the taxman, Mehrotra said it wasn’t always that way.

“It’s a popular perception that Americans hate taxes, but that hasn’t been the case until recently,” he said.

“Taxes in the post-World War II era were very high at a 70 to 80 percent rate in some cases, and people were more or less willing to pay them,” he said.

“But our overall prosperity started to decline in the 1960s and ’70s, and people wanted to start paying less in taxes,” he said.

“We’ve had a real transformation of the economy and a loss of faith in the public sector over the years with Watergate, the Vietnam War, so people aren’t as supportive of the government and what it does as they used to be,” said Mehrotra.

Tax reform unlikely

The tax system has seen its share of changes over the years. In 1943, the withholding tax on wages was introduced for the first time. In 1981, Congress passed the largest tax cut in American history, some $750 billion in cuts over six years. That was partially offset in 1982 and 1984 when Congress raised taxes to the tune of $265 billion.

The Tax Reform Act of 1986 is considered the biggest reform measure since 1913. The top tax rate on individual income was lowered from 50 percent to 28 percent, the lowest it had been since 1916.

But along with the lower rate came the elimination of certain loopholes to make up the lost revenue. And the act put in a $120 billion increase in business taxes.

President George W. Bush signed several tax cuts into law in 2001 for the third-largest tax cut since World War II. President Barack Obama’s tax bill for 2013 kept some of the Bush tax cuts for lower incomes but raised levels for higher incomes, which had been reduced under Bush.

Among other moves, Obama restored the full amount of the payroll tax (6.3 percent) and raised the rates on capital gains and included a 3.8 percent surtax on incomes of $200,000 or more for single people to help fund the Affordable Care Act. The dreaded alternative minimum tax (AMT) received a permanent patch to try to keep thousands from having to pay it.

Calls for tax reform have led to recent hearings on Capitol Hill. Suggestions include going to a flat tax and eliminating deductions like mortgage interest and charitable giving.

“We need a national sales tax or flat rate tax,” said Nash. “Both would reduce the complexity and burden of our current system with a fair tax and the opportunity to abolish the IRS.”

“It all depends on what you call fair,” said Mehrotra, who also supports a national sales tax. “Medicare and Social Security aren’t going away, so we need to fund them.”

“We need taxation for progressive spending, but one thing that would be helpful is if we stopped trying to run every social policy through the IRS,” he added.

“But getting tax reform done won’t be easy,” he added. “Everyone has a special interest they want to protect.”

Hot button issue

Taxes are always a hot button issue. Depending on whose study you look at—or your political persuasion—the U.S. is either the most overtaxed nation on the planet, the least taxed (especially for the wealthy), or it’s somewhere in the middle, as some have said.

Wherever it is, taxes are money for government services, like Social Security. Medicare, defense, federal worker payrolls, veterans’ benefits, education and health care.

And the amount needed keeps growing. The Treasury Department will likely collect around $4.9 trillion from income and payroll taxes in 2014. That’s a huge jump from the $5.4 billion collected in 1920 and the $43 billion in 1945.

If Americans do circle their calendars for taxes, it’s usually April 15, the yearly filing day, not the 100th birthday of the federal income tax.

“One hundred years of what we’ve had has been plenty and it’s high time Congress did something about it,” said Nash.

—By CNBC’s Mark Koba.

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SO with only 12 days until the healthcare exchanges roll out nationwide and in Delaware, you are probably wondering what is going to happen in the Diamond State.

If you have signed up for the “Choose Health Delaware” e-mails, you probably have been getting many as the state gets more and more excited to bring us the “healthcare insurance exchange”. Of course, Delaware still hasn’t received approval for its pricing plans from the Federal government as of this writing (September 19), so if they don’t get it by October 1 then it is possible the state will begin rolling out coverage plans which have no price attached to them. Meaning, you will not be able to look through or choose any plan or compare any pricing because there won’t be any. Word is (from CRI’s secret sources) that today was the day Secretary Sebelius was supposed to announce the rates for the states with the federal exchanges, which clearly will not be ready by October 1.

A key component of the law is getting young people to enroll in the exchanges to offset the likihood of older people in the exchanges using more healthcare services. Here are some samples:

Malik’s story: I’m young and I need health insurance

Have you met Malik?

Malik is a 23 year old bartender and server who works in the restaurant industry.

He works on his feet all day and like millions of Americans, Malik does not have health insurance because he can’t afford it.

Can’t afford insurance. Can’t afford to miss work.

Malik shared his story with us:

“I hurt my foot pretty bad and I personally thought it was a fracture. I can’t afford to not go to work and not walk on it so I’ve just kind of struggled through it.

If I did have insurance, I would have gone to make sure that it wasn’t worse than I assumed it was.

Without insurance, a serious accident would pretty much turn my life upside down. It would probably set me back for life.

I feel like the Marketplace will help me achieve my goals. It’ll just be a load off my shoulders.”

Then there’s Alejandra:

Alejandra’s story: College students need coverage too!

http://1.usa.gov/18COX6t

How the Marketplace helps people like Alejandra

Clearly the $300 just “disappears” and becomes “free”. Maybe for her, but for the taxpayer, that means more money needs to come out of our pockets.

According to the Manhattan Institute, an associate of CRI, their map says if Alejandra lives in California, she will an extra $34 a month for an individual plan (most likely the silver plan). Which is an extra $408 a year-more than the $300 she paid with no insurance.

She doesn’t live there? Pricing is unfair? If she lives in Oregon, New York, Washington State, Washington DC, Virginia, Vermont, South Dakota, New Mexico, Connecticut, Or Maine, she will pay an increased rate. Even if she lives in New York, Ohio, Colorado, or Rhode Island where rates have decreased, she would still pay no less than $169 a month (Ohio) to get coverage. No Alejandra, who probably has little income, could attempt to enroll in Medicaid or qualify for lots of subsidies for health insurance-which then means her “free” checkup will be passed along to everyone else in the health exchange or the taxpayers.

Of course, the exchanges must be up and running by then to even give Malik and Alejandra a chance to succeed.

Expect glitches when the ACA rolls out Oct. 1

12 days is a long time. Stay tuned.

UPDATE****************************************

On Friday, September 20, the Delaware State News published the exchange rates for their Choose Health Delaware plan. Expect a future blog post/article from CRI with our response to the plans shortly.

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And why they do not work

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On May 16th, 2013, the UK Daily Mail reported a shortage of toilet paper was occurring in Venezuela, the home of  the late “Revolutionary” Hugo Chavez. Although many Venezuelans and people around the world do not understand how this is, we will explain here. From the article:

“First milk, butter, coffee and cornmeal ran short. Now Venezuela is running out of the most basic of necessities – toilet paper.
Blaming political opponents for the shortfall, as it does for other shortages, the government says it will import 50m rolls to boost supplies.

Economists say Venezuela’s shortages stem from price controls meant to make basic goods available to the poorest parts of society and the government’s controls on foreign currency.

“State-controlled prices – prices that are set below market-clearing price – always result in shortages. The shortage problem will only get worse, as it did over the years in the Soviet Union,” said Steve Hanke, professor of economics at Johns Hopkins University.

Prices of goods and services is THE basic determinant of value of a particular good or service. How do we know what value is? Some items will be valued more by some than others. For example, some people will not pay $60 for a brand new video game, but others will. Some would pay $90 for a brand new video game. Thus stores will set their prices based on what people are willing to pay, not on what the government tells them. If stores overcharge on an item, they will sell fewer units, and thus will be compelled to lower their prices in order to sell their items and stay in business. If even one enterprise charges a little less than its competitors for the same item and consumers react accordingly, then other enterprises will be compelled to follow suit. This rule does not hold true for cartels, monopolies, duopolies, or oligarchies-nearly all of which are either sanctioned by the government or actually run by it. From the article:
“President Nicolás Maduro, who was selected by the dying Hugo Chávez to carry on his “Bolivarian revolution”, claims that anti-government forces, including the private sector, are causing the shortages in an effort to destabilize the country.”

This is a classic socialist tactic. Most socialists, Keynesians, and Statists do not understand that people will act according to their best interests. They think they can run an economy from one location and everything will work well because they said so. Hugo Chavez, whose nation only made money due to oil reserves in Venezuela, “gave” people food, work, education, healthcare, affordable housing, but his people still became poorer and more dependent. The reason is obvious: The “free” goods were paid for by those who produced, and taxes went up and up until the producers either fled the country or bargained with Chavez so they could benefit from Cronyism.

Back to the accusation: as is usual for people who do not understand the problems, or who are deliberately trying to manipulate people, blame some boogeyman for the regime’s failures, so those who are less educated and informed will actually believe the government’s lies. From the article:

“The government this week announced it also would import 760,000 tonnes of food in addition to the 50m rolls of toilet paper.

Many factories operate at half capacity because the currency controls make it hard for them to pay for imported parts and materials. Business leaders say some companies verge on bankruptcy because they cannot extend lines of credit with foreign suppliers.

Merentes said the government had met the US dollar requests of some 1,500 small- and medium-sized companies facing supply problems, and was reviewing requests from a similar number of larger companies.

Chávez imposed currency controls a decade ago trying to stem capital flight as his government expropriated large land parcels and dozens of businesses.”

Instead of businesses paying for the parts and materials they needed based on a free flow of pricing, the government simply told people what they could pay for things. The problem is that if the price is unacceptable to those trying to sell, they will just walk away. They will not take a value they feel is less than they were looking for  unless forced to by government. This is EXACTLY what happens to nations with single-payer healthcare: the government dictates the prices to the providers, and they either accept it or else decide the prices paid is not equal to or greater than the services they provide. The result is fewer providers, many of whom will retire or change professions. Why do all the hard work of medical school or in this case trying to buy and sell goods or services if your value is dictated to you by people, most of whom have no experience in your field and whose goals and motivations differ significantly from yours?

This is the lesson we learn from big government supporters:Government cannot run industries because their objectives differ from those who seek profit or other compensation as reward. Free-market and free-enterprise economics supporters do not take into account the temperment of people or the intent. Rather, we acknowledge reality: that most people are incentivized to provide goods and services for an incentive, be it money, stocks, items, or whatever else that individual values, and each person’s exact values differ. There is no “one size fits all”, and forcing people to go along with that idea does not work. There is no delusion paradise which often exists in the minds of “progressives” that rich people will just pay more taxes, doctors will happily provide their services for whatever price the government thinks is “fair”, and people will all get paid high wages with full benefits.

In this case price controls did not make goods cheaper: they made goods scarce and now Madura, who most likely rigged the election over Capriles, will now have to choose between doing the right thing and eliminating price controls and government control of the economy, or doing the Chavez and blaming everyone and everything for his party’s failures.

Read the original article:http://www.guardian.co.uk/world/2013/may/16/venezuela-toilet-paper-shortage-50m

 

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Key Findings:

U.S. small and mid-sized business owners plan to delay hiring new employees or seek new loans amid cautious optimism about the economy, according to the latest findings of the PNC Economic Outlook survey.

Highlights:

Waiting to Hire, Seek Loans
The survey, which gauges the mood and sentiment of small and medium sized business owners, found that only 46 percent expect their sales to increase in the next six months, significantly lower than last spring (58 percent). Profits are also expected to be lower, as only 38 percent expect an increase compared to 43 percent in the spring. Only 23 percent expect to add new employees, lower than in spring (28 percent) but still higher than a year ago (20%).

Housing Rebound to Continue
Building on the dramatic turnaround first seen in PNC’s fall survey, 48 percent expect home prices in their local markets will rise over the coming year compared to 26 percent one year ago. This expected house price rebound is reinforced by sizable house price gains in 2012.

Consumer Spending Supports Price Hikes
One-third plan to raise their selling prices and only five percent intend to cut their prices, signaling potential pricing pressures.

PNC’s chief economist Stuart Hoffman discusses the spring findings of PNC’s biannual survey of U.S. small and mid-sized business owners.

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