Friday, December 21, 2007

No Taxes on Tips versus Taxes on Hedge Fund Managers

The tavern is back in business, with a new owner but the previous diverse customer mix. A recent topic of discussion was how money talks more than the people do. The following sequence of events is a perfect example.

Ron Paul entered HR 3664, the “No Taxes on Tips” Bill. His rational for the bill was as follows:

“It is an outrage that waiters, waitresses, and other service-sector employees have to pay taxes on the tips they earn. The IRS makes an estimate of how much service-sector workers will make in tips, and taxes them on it even if the taxpayer did not actually earn as much as the IRS' estimate!

Tips provide a substantial portion of the income of many service-sector employees, many of whom are young people just trying to make a few extra dollars to get through school, or single parents often balancing two jobs while trying to make enough to raise a family. This tax amounts to nothing more than the federal government punishing these employees for working hard and doing their jobs well.

I have introduced H.R. 3664 in Congress to end this problem. The Tax Free Tips Act of 2007 will exempt tips from federal income and payroll taxes. Ending taxes on tips will give workers an immediate pay raise, letting them keep more money to put toward things like a house or car payment, their retirement, or their own and/or their children's education.

When you give someone a tip, you should not have to simultaneously tip the federal government.”

A tip is pure free enterprise where the server provides a service and the recipient determines the price based upon satisfaction. It is not salary. This effort by Ron Paul to correct an unjust error received exactly zero coverage in the media. It is almost certain that no action will be taken by congress.

Now look at government money-guided treatment. It was provided to managers of hedge funds who are exploiting a loophole in the tax code that allows them to pay a 15% capital gains tax rate on their million dollar plus annual incomes. They should be paying the top 35% ordinary income tax rate. The fund managers get no sympathy from tax scholars, who point out that the current tax system inexplicably singles out fund managers for favorable treatment to the disadvantage of other workers and investment firms.

An attempt to fix this multi-billion dollar theft released a torrent of lobbying and misleading information from the financial community. President Bush himself has sanctimoniously come out against “raising taxes on hard working Americans.” There is now resistance from both parties to any change, including Senate Finance Committee Democrats John Kerry of Massachusetts and Charles Schumer of New York. Nothing has happened.

Government for the people? Now where should we go to get one of those? What do you say, Congressman?

Friday, August 24, 2007

Time Goes By

When this blog was initiated in December of 2005 it centered around the culture of a small rural 17th century Virginian town that was feeling the interface of growth from the Washington Metro area. A local tavern seemed to bring all of the factors behind this environment together in a blend of cultures that was a mix of commuters to the metro area, local service workers, businessmen and women, and many recently- turned-21 party people who were just beginning to feel their oats. Each evening there would be a mixed population wearing business clothes, scrubs, service work shirts, and Redskin tee shirts-all joking and enjoying themselves in discussions that crossed both age and social barriers.

Sadly, a convergence of forces became effective that gradually separated these groups. By the spring of 2007, the mix had changed to only a reduced number of local workers and young party people. The social and economic diversity disappeared. The tavern could not operate with that the only customer base. August 10 was its last day of operation.

The closing marked the end of an era. The change was seriously discussed on that last night. Although there were certainly many reasons for its demise the primary mover was that the town was now inside the Washington Metro area. Its citizens now have the increased choices associated with an urban environment. The number of new restaurants and bars has made it possible for anyone to spend happy hour at an establishment largely filled with people of their own age and social/economic status. The diverse mix that made the small town tavern so interesting has been separated into several groups with more focused backgrounds and tastes.

Those of us who have hung on to the end must now make a crossroads choice. Some of us intend to go to the west where the honky-tonk neighborhood bars are still found, while others intend to go to the new and more expensive places in town or to the east. In spite of the exchange of e-mail addresses and cell phone numbers, we, like the other customers, will end up in several separate reformed groups.

Hopefully, there will still be the warm feelings of friendship which were developed over the years at the small town tavern.

We do intend to keep this blog active.

Thursday, August 16, 2007

Biofuels Enemies Can't Back Up Economic Disinformation

The last year the media has been filled with establishment organizations criticizing the cost to the government of the tax exemption for distributors blending ethanol with their gasoline. I have heard representative of both The Heritage Foundation and the Cato Institute say that these provisions in the Energy Policy Act of 2005 are “disastrous” acts by the government and that they “distort the free market”. CNBC has been especially aggressive in promoting this view.
The “think tank experts” never provide any data to back up these statements but they do prefer that large incentives continue go to the oil companies so they will be encouraged to find more oil. They also apparently feel that we should ignore strategic costs of supporting the government owned oil industries of our enemies- in the name of global free enterprise. In short helping out oil companies (either local or foreign government owned) = “good” and helping out our American ethanol industry = “bad”!

Well, the economic impact data for ethanol movement in 2006 is in. Let us examine it.

The following is a summary from the report “Contribution of the Ethanol Industry to the Economy of the United States” The summary and full report are found at these two sites:

RFA - Media Center - RFA Press Releases - 2007 Archive -Ethanol Industry Providing Sound Returns on Investment

RFA - Resource Center - Reports & Studies.

The most important points are:

1. In 2006 the federal government received tax revenues of $2.7 billion simply from the construction and operation of biofuel refineries. This is in comparison to the $2.5 billion tax exemptions granted by the federal government to oil refiners who blend ethanol-and cited by naysayers as a “waste of money”. In addition, the ethanol industry will generate nearly $2.2billion of additional tax revenue for State and Local governments.

2. The American ethanol industry alone produced nearly five billion gallons of ethanol. This meant that the US needed to import 206 million fewer barrels of oil-valued at $11.2 billion. This is money that all stayed in the American economy instead of flowing out of the country. I have never heard this mentioned in the media.

3. The operation and construction of ethanol bio-refineries spurred the creation of 163,034 jobs in all sectors of the economy in 2006. These include nearly 20,000 jobs in America’s manufacturing sector -- American jobs making ethanol from grain produced by American farmers. How about that? An American manufacturing sector that is growing!

Not included in the report was the expected savings to the federal government in grain subsidies of several billion dollars because the price of corn now exceeds the supported price. We no longer need to pay farmers not to grow corn while buying its equivalent in oil from foreign nations.

To me this just does not sound like the “economic disaster” and “waste of taxpayer money” that I have heard expressed on both network and channel news programs. I have not heard these favorable numbers mentioned or challenged in the major media.

It would seem to be newsworthy-where are the reporters?

Monday, August 13, 2007

Agriculture and Biotech Sectors Provide Fuels While Defeatists Use Disinformation

The United States is by far the global leader in biological and agricultural technology. To this, you can add the existence of our vast land resources and the strategic advantage of providing more of our own fuel. You would think that there would be little resistance to applying these advantages to our fuel shortage problem. However, like the horse drawn buggy manufacturers fighting the automobile, the fossil fuel based energy companies have fought tooth and nail to prevent renewable fuels from becoming a reality. They have done this with a vengeance that leads one to believe that John Rockefeller’s ghost has returned and is directing their operations.

As each myth is proven false, a new one is invented. The media gives each headlines, but neglects to report on the proven falsity of the previous one. Surprisingly the economic elite are eager to chug-a-lug the false kool aid while the average average person has more common sense. For the benefit of everyone, however, we will examine the facts behind each myth over the next few posts.

Today we will look at the negative energy balance myth. Following days, we will look at the claims of cost to the economy, ethanol performance in an internal combustion engine, and finally we will address the food versus fuel myth.

For quite some time the TV, newspapers, and selected think tanks have been awash with reports that the production of biofuels, especially ethanol from corn, consumed much more energy than was present in the resulting product. This was confusing because almost all studies showed just the opposite. The U. S Department of Energy initiated a study by the Argonne National Laboratory to examine all studies, resolve the difference and finally put an end to the controversy.

The final report was issued on January 7, 2005. The fossil energy to produce one million Btu of fuel was

Ethanol 740,000 Btu
Gasoline 1,230,000 Btu

That is right; it actually takes more fossil energy to produce one million BTU of gasoline than one million BTU of ethanol. Has anyone seen this in the mainstream media?

This is not surprising. The second law of thermodynamics states that it is always necessary to add energy to move from a lower to a higher energy state. It is the price you pay for upgrading a material to a new level. In the case of ethanol from corn, however, the energy comes from a free, renewable outside source-the sun. For gasoline, it comes from burning some of the other crude oil components.

The report used existing dry milling technology for ethanol and did not consider the rapidly improving technology for producing biofuels.

A summary of the study and links to the full report is found at:

This report received essentially no publicity outside of the specialized ethanol sector. Reports of a mythical negative energy balance continue to in the media. One change I have noticed is that the “negative balance” has been changed to “barely positive” in some releases. I have yet to see a comparison with the energy to manufacture gasoline.

The next post will look at the overwhelming economic and strategic benefits of this “failed and expensive” movement

Monday, July 23, 2007

Virginia “Civil Remedial Fees” Legislation Shocks Citizens

A weird bill quietly passed by the Virginia Legislature and signed by the Governor has created uproar throughout the state. Its stated purpose is to finance new roads by imposing record-breaking fees and points on citizens cited for traffic violations. These fees only apply to Virginia residents and are in addition to the normal penalties. They are so severe that the state is paid in the form of three annual payments..

This site provides an explanation and listing of the fees.

For example any form of reckless driving requires that an additional fee of $350 per year be accessed for each of three years. If a suspended license is involved the law requires a fee of $1000 for each of the three years. This is in addition to the current penalties. I repeat that it only applies to residents of Virginia.

The first public reaction was a rush to find out who voted for the bill. I was shocked to see that my representative, whom I have supported in the past, was one of those who did. There is now a call for a special session for total repeal. The following site is active in the recall.

There is also rage directed to the numerous law firms who track down unresponsive traffic violators under contract to the state. Because a large portion of the poorer citizens will face jail because they just can’t pay fines of this magnitude the law will be a multi-million dollar bonanza for these firms. A member of the legislation who owns such a firm introduced the bill. Read this

and this:

Most infuriating is the blatant arrogance of those who pushed a bill of this magnitude through at the last minute. It has both Republican and Democratic support but is largely a Republican bill. The Democratic Governor signed it.

This site lists the voting records. It should be useful for the November elections.

To experience the full fury of the Virginia Internet users on this subject do a Google Search on “Virginia Civil Remedial Fees”. I got 728,000 hits. Not everyone is against it but defenders are hard to find. At last I did find a defender-the governor who signed it

So the battle to limit the ever-growing power of government continues. Maybe we still have some rebellious drive left in us. What do you think Tom Jefferson?

Wednesday, May 30, 2007

Do Think Tanks Really Think?

Without getting into both the philosophy and science of defining “thinking”, I believe most people would agree that it is associated with a minimum ability to take a variety of inputs and produce an output that has higher order than the individual inputs. My question is “What is it called when an organism always produces the same output no matter what the inputs?”

Evolution has seen that there is no such organism surviving in nature. But human institutions with that characteristic abound. They are very inappropriately called “think tanks.” You can identify them by the descriptor, which follows their name-- The Heritage Foundation “a conservative think tank”, The Brookings Institution, “a liberal think tank”, The Cato Institute, “a libertarian think tank” and so on...

It appears that someone incorrectly installed their analytical engine. They do not carefully process all available inputs to produce a logical output. They start with the always-predictable output and simply ignore the existence of any input that might support a different conclusion.

Unfortunately, shouting matches between representatives of institutions of this type have become the TV standard for so-called “balanced discussion”. When was the last time you witnessed objective reasoning by a thoughtful analyst? You remember the type-people who actually consider all of the facts before reaching their conclusions.

Sunday, May 13, 2007

Virginia Tech After Some Time

The shooting at Virginia Tech hit Northern Virginia so hard that no post can adequately describe the aftermath. VT is by far the school of choice for the middle class of this area. Almost everyone had a relative who had, or is attending VT. One statistic quoted by one teacher was that out of a recent graduating class of slightly more than 400 students from one Loudoun County high school 123 went on to Virginia Tech. .

The image of a cold-blooded killer calmly walking the hallway, entering classrooms and eventually killing 32 students was so horrible that it originally muted public discussion. The plea to wait for the facts to come in before reaching judgment on the VT administration seemed to be holding. That period has now ended and there is deep resentment on how VT was so ill prepared.

In a recent heated discussion among several people, the following questions were asked.

Why could the classrooms not be securely locked from the inside? This would have stopped the shooting after the first classroom. The students were forced to attempt to keep him out with tables and their bodies. Is VT correcting this immediately? This certainly does not need a commission’s recommendation. (Loudoun County has just announced it is installing a buzz to enter system with closed cameras on all schools).

How long are we going to tolerate the ridiculous “gun free” zones that end up as “victim disarmament zones”? If the pilots were armed on 9/11 that tragedy would have been stopped.

What did they mean saying the failure to call an emergency (with two people murdered and the gunman free) was “the right decisions given the information”? It should not have even been a decision up for discussion. A thoughtful standing policy should have made calling a full emergency designation immediate and automatic. The fact that it was even discussed shows how little forethought was given to security.

It was also noted that if the killer’s mental condition had been put into the system, he would have been denied a gun but he might have used a rental truck.

The discussion ended with great sadness.

Thursday, February 15, 2007

Socially Hip Things I Still Haven't Done

1. Read a Harry Potter book
2. Been snowboarding
3. Bought a $10 martini
4. Paid $100 for a Redskin ticket
5. Established a PayPal account
6. Checked myself out in a supermarket
7. Sold anything on eBay
8. Established a MySpace site