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The US Senate is about to vote on a bill deceptively titled“Marketplace Fairness bill of 2013” (S.743) which would create an entirely new tax that requires businesses that sell online to collect and pay sales taxes into every state that has a person make a purchase from that state.

We have read every word of this bill and it is a bad bill.

The bill is unfair, unwise, heavy-handed, detrimental to job creation in the still-fragile U.S. economy, provides awful incentives for small business, and is legally dubious. Proponents of the bill argue that it is about “fairness” and necessary to “level the playing field.” However, the bill purports to relieve one unfairness while merely introducing another, which we’ll highlight below. Also, if the bill were merely about fairness, it would be revenue neutral – but it is not. Instead it establishes a new tax intended to raise additional monies for governments, taking more funds from the already-stretched budgets of all U.S. citizens and using those funds to grow the public sector.

In short, this bill is a tax increase on the American people.

Moreover, it allows any of the 50 states’ tax collecting entities to edit any business from any other state that sells products online. Think about that. Every single state in the union can now perform a costly audit on an online business anywhere in the United States, potentially putting them out of business.

We understand why some feel the “fairness” argument to be compelling. However, there are several reason this bill is not fair.

1. It puts confusing and complex compliance requirements on businesses, and makes them responsible to pay into over 9,000 unique tax venues, even if they are collected by one entity in each state. Most states collect taxes monthly. That would require an online business to perform up to 50 filings each month – 600 tax forms and payments per year in addition to all other tax and regulatory forms and remittances they make!

2. It places significantly more tax compliance burdens on Internet businesses than it does on non-internet businesses. For example, it makes an Internet business in Oregon – a state that has no sales tax, incidentally – subject to audits from tax collectors in all other 49 states. (see section 2.a.i and 2.a.ii of the bill).

3. It disadvantages growing companies and penalizes them for said growth and job creation. In short, it picks winners and losers – with the biggest losers being the businesses that are most helping with job creation and economic growth.

The bill exempts businesses of $1M in revenue or less from collecting and paying any tax at all.

This means that a business with $999K in revenues pays zero tax, while a business with just $1000 more in sales pays $70K in tax.

eBay is currently lobbying to have the limit raised to $10M. If the limit is raised that would mean that any business that crosses the $10M threshold will be forced to impose a $700K cost on customers.

We want to punish growth? Punish success?

We oppose any exemption to the tax, if a tax is levied. It is simply unfair to exempt anyone.

The tax exemptions are actually a disincentive to job creation because they are progressive and punish growth. In fact, for many businesses it will provide an incentive to not just stall, but to shrink.

By moving from $10M+ in sales to $9.9M in sales, a business can capture $700K in cost savings for customers, which would increase a store’s conversion rates and therefore lower marketing costs, so there is an incentive to *shrink* one’s business by closing certain operations, slowing sales, or spinning off parts of the business and therefore pay less tax and make more profit.

This same behavior change will happen at all those businesses selling less than $1M right now. If you are below the $1M mark you’d freeze your growth because a move from $999K to $1M is a $70K punishment. That’s a huge deterrent for small business growth.

Don’t think eBay’s requested exemption is altruistic. By getting the exemption, it would mean that – by our estimates – 99.9% of eBay’s sellers would not pay any tax, so eBay would vastly increase its sales volume and capture a greater share of all Internet sales. Their exemptions request is an effort to capture more sales volume at the expense of other small and midsize online sellers.

Some have argued that an exemption is necessary because of compliance costs. The compliance costs for this bill will be extremely burdensome. But rather than implement unfair exemptions, we feel that any legislation should force state governments to make compliance easy and simple. Any legislation should force states to change their tax codes for online sellers and only require annual payments, and one unified tax rate for all online sales tax. Or, make the sales taxes that would otherwise be owed in other states payable to the home state. Not only would this help with the compliance burden, but it would also allow states to compete on sales tax rate for Internet businesses.

A tax that is so difficult to comply with, so convoluted and complex, that you have to exempt business selling under $1,000,000 from collecting and paying it is a BAD TAX and is BAD POLICY

If the bill is going to pass regardless, one way to deal with the cost of compliance for all businesses would be to exempt the first $1M in sales for every seller. There are some logistical issues that would have to be worked out with such, but that would treat businesses of differing size more fairly.

Or, alternatively, let there be a federal tax deduction – up to a certain reasonable amount – for compliance costs.

But all online sales must be taxed in order to not pick winners and losers nor create adverse incentives.

How can we call a bill “fair” that creates two classes of people merely because one is more successful than the other? This bill hurts all job creators and in fact favors those who don’t create jobs, giving them an unfair advantage.

Replacing one perceived unfairness with manifold others is not right.

In addition to the items we just mentioned, you consider the following negative consequences of the bill, many of which are completely antithetical to liberty:
- The bill undermines States Sovereignty by giving states the ability to levy taxes beyond their own borders.
- The bill creates a situation where there is taxation without representation, putting businesses into jurisdictions that can audit them while keeping those businesses outside representation in that jurisdiction.
- The bill damages consumer privacy by forcing retailers to turn over customer data to state governments.
- The bill hurts healthy tax competition between states.
- The bill faces legal issues regarding due process. (see http://cei.org/web-memo/facts-marketplace-fairness-act-s-743-formerly-s-336 )
- The bill creates a new definition of a small business, completely out of step with other definitions. For example, the Small Business Administration defines a small business in the online sales industry as $30 million in annual revenue. The Internal Revenue Service defines a small business at $20 million in annual revenue. The Marketplace Fairness bill arbitrarily defines a small online business as having $1 million in revenue.

Let your representatives, and right now especially Senators, know you oppose the online sales tax in its current form and that if they levy a tax, every company should have to collect it.

And now polls show just how bad she’s failing in her quest to grow big government in Arizona.

Her plan now has the support of only 41% of Arizonans, and only 25% of Republicans.

That should be enough cover to get the legislature to shoot down her plans. Good.

Let her know you oppose Obrewercare.

Not exactly, says the Washington Post.

“If the same percentage of adults were in the workforce today as when Barack Obama took office, the unemployment rate would be 11.1 percent. If the percentage was where it was when George W. Bush took office, the unemployment rate would be 13.1 percent.”

Oh, and about that $787 Billion Dollar Obama “stimulus” package?  No jobs.  But lots of debt!

Please subscribe to our RSS feed and join our Facebook group to stand with other small business people against Big Government.

Full details at Matt Salmon Obamacare.

Kirk Adams is a small businessman and supporter of SBABG’s mission.  He is running for Congress to represent Arizona’s 5th Congressional District.  We are excited to see him take on the entrenched Washington insiders.  We need more small businessmen to run for office!

His opponent, Washington insider Matt Salmon, has been attempting to reinvent himself as a small government conservative.  Adams is taking him to task (see full video below). After a decade of lobbying for energy mandates, public employee unions, and crony capitalist projects, Salmon finally moved back to Arizona (from Washington), bought a cowboy hat, and is attempting to reacquaint himself with some conservative principles (such as don’t give money to liberal candidates like Ed Pastor and Joe Baca).

Yesterday, in pursuit of his new image, lobbyist Salmon released an opinion piece condemning congressional insider trading.  He’s right, politicians should never use their positions to enrich themselves, whether it’s through insider trading while in office or through lucrative lobby…err…other careers once they leave office.

What made his piece laughable is the fact that Salmon personally donated money liberal Congressman Ed Pastor, who was featured last month in a New York Times article about–you guessed it–congressional insider trading!

“When Ed Pastor was first elected to congress two decades ago, he was comfortably ensconced in the middle class.  Mr. Pastor, a Democrat from Arizona, held $100,000 or so in savings in the mid-1990s and had a retirement pension, but like many Americans, he also owed nearly as much in loans.  Today, Mr. Pastor, a miner’s son and a former high school teacher, is a member of a not-so-exclusive club:  Capitol Hill millionaires.”

So, what gives?  The Kirk Adams for Congress campaign asked Arizona voters, “Why would a former Republican U.S. congressman, turned lobbyist, donate money to a liberal Democrat campaign.” A few answers:

“They would give money to any campaign that served their particular needs.”

“Wasn’t principled in the first place and now he’s out for the money.”

There sure is something fishy about Matt Salmon.

UPDATE: It gets fishier.  Apparently, Matt Salmon didn’t just financially support liberals.  He also appears to have aided the passage of Obamacare in his lobbyist work.  See Matt Salmon Obamacare.

So who is right? Will these bills potentially hurt open content creation online? Or will they still allow creative content, but truly stop violations of copyright laws? It is hard to know without looking at the wording of the bill itself. It is a bit daunting to read a bill and try to understand its wording.

Luckily Sal Khan from the Khan Academy has made a video walking through some of the wording in the bill that has raised the most concern. He puts it into language that is easy to understand. It gives a clear picture of the possible problems that could arise if these bills pass as they stand January 18, 2012.

Click on the link below to watch the video and tell us what you think. Don’t forget to tell your elected representatives how you feel as well.

SOPA and PIPA Explained

Here are some definitions of Big Government from a few online dictionaries.

“Government perceived as being excessively big-spending and attempting to control too many aspects of people’s lives.” MSN Encarta

“Government that seems to have too much control over people’s lives.” Macmillan

“Any government wielding excessive control over its citizens or interfering with their lives.” Dictionary.com

You see the themes – control, interference, wasteful, big-spending.

That’s true, of course, but we’d like to be a little more specific and thought-provoking in our definition.

Big Government, in its most raw form, is a group of individuals that through coercion turns human beings into either beasts of burden or perpetual children.

It is that group which preaches entitlement over responsibility, dependency over self-sufficiency.  It purports that people are incapable of caring for themselves through free and voluntary choices, and therefore must be coerced into “doing the right thing.” It prevents human beings from being fully actualized, keeps them in a form of subjection and – in its most extreme form – slavery.

Does it do this deliberately and willfully?  Not in the beginning.  Isabel Paterson, in her book The God of the Machine, said:

“Most of the harm in the world is done by good people, and not by accident, lapse, or omission. It is the result of their deliberate actions, long persevered in, which they hold to be motivated by high ideals toward virtuous ends… …[W]hen millions are slaughtered, when torture is practiced, starvation enforced, oppression made a policy, as at present over a large part of the world, and as it has often been in the past, it must be at the behest of very many good people, and even by their direct action, for what they consider a worthy object.”

Even the alleviation of suffering, so long as it is done through plundering third parties, will result in more total suffering induced than ever relieved.  The total amount of suffering in the world cannot be reduced by forcing one group of human beings to relieve it in the way the tyrant desires.  The tyrant’s coercion makes more of mankind miserable, turns them away from productive endeavors.  In its extreme forms, Big Government paradoxically kills innocents in order to save lives.

Seen in this way, Big Government can either be a Tyrant or a Nanny, or a combination of both.  Either it enslaves you and coercively makes you work on its behalf, or it “protects” you from yourself, restricting your freedom while promising to care for your every need, in exchange for your agreement to keep it in power.

Either way, it treats you as either an animal to be burdened, or a scolded child to be suckled forever at its teat.

How you are treated often depends on whether or not you are willing to keep the ruling cadre in power.  If you do, you may lose your freedom but win the privilege of being coddled.  If you don’t, you may lose your freedom and be burdened.

So Big Government divides people into two groups: one group is the animals burdened with the task of producing the mothers milk forever; the other is that group which forever – or so it’s promised – drinks the mothers milk.

Now, in pointing this out, we’re not talking about any specific group that is favored by government and eats from the labor of others, we’re talking about all such group, from bailed out banks and companies, to subsidized farmers, to protected unions, to groups that benefit from tariffs, to the ever-growing unproductive government bureaucracy; in short, any form of corporate or public dependency program.

One of the central features of Big Government is that it encourages bad behavior in order to remain in power.  It bails out those who have made bad decisions in order to gain their support.

The individuals that comprise Big Government, of course, play god, determining which group of human beings will be the beasts of burden, and which will be the bailed out, dependent children.

Over time, people learn that it does not pay to behave responsibly.  In fact, the consequences for poor judgment will be so lessened as to have no moral authority over behavior.  People learn that they can live life however irresponsibly they want and some one else will be forced to pick up the tab … that is, until there’s no one left with any money or productive resources.

At that point, the system collapses soviet-style.  The beasts of burden decide that it’s easier to be suckled infants and then there are no longer enough producers to support the dependents.

One interesting phenomenon that we have noticed over the past decades is how Americans have behaved regarding debt and savings, and how the past decisions they made are now affecting them.

Look at what has happened in the U.S. over the last few decades.

This first graph shows the U.S. Savings rate (what percentage of their incomes Americans saved) over the past 50 years.

Notice that, for whatever reason, over the last 30 years people have been putting less and less money away for a rainy day.

Now, look at this graph of household debt as a percentage of disposable income over the last 30 years.

Despite saving less money, people are using more borrowed money to support their lifestyles, especially over the last decade.

Low savings rate + high and increasing debt load = people living beyond their means

At some point, the gig is up.

Now, look at this graph of the number of food stamp recipients over the last decade.  In the decades prior to 2000, the number of food-stamp recipients had been trending down.

So here’s the questions:

Are these events merely correlated or is there an element of causation?  That is, do government bailout promises encourage people to not take responsibility for their own lives, to prepare for “unforeseen” – yet predictable – misfortunes in the future?

Understand that we’re not arguing for or against this particular social program, just merely asking questions about whether or not Government Dependency Programs create Moral Hazard.

What do you think?  Do government handout programs enable bad behavior?

Does the knowledge that someone will be there to give you food, coupled with the knowledge that the government has the capacity to forever force someone else to pay for your livelihood, make you take less responsibility for your own well being, live on borrowed money, not save for a rainy day?

By asking these questions, of course we’re not advocating for letting the hungry starve.  We advocate for the support of voluntary charities, and lots of it, and we believe that each of us has a personal responsibility to responsibly care for the poor among us in ways that do not create dependency and thereby rob recipients of their dignity.

If you reward bad behavior, you’ll get more of it.  If you punish responsible behavior, you’ll get less of it.

Big Government must be opposed.  If we don’t oppose it immediately, over time in its most extreme forms it reduces people to animals or infants.

As Cato’s Letter #38 taught:

“What is government, but a trust … which ought to be bounded with many and strong restraints, because power renders men wanton, insolent to others, and fond of themselves.”

So what can you do? 

Sign up for our RSS feed and become a fan of our Facebook Page. We’ll continually send you information about how you can help keep government in its place.

Then, Join DownsizeDC.org and participate in it’s campaigns.  It takes less than five minutes per day, and you just participate in the campaigns you like.  In our opinion, it is the best project around for reducing the size and scope of Big Government.

originally published May 21, 2010.

WASHINGTON, D.C., Monday, May 23, 2011 — National Federation of Independent Business (NFIB) president and CEO Dan Danner and small business owner Earl Hall joined U.S. Senator Jon Kyl (R-AZ) today to unveil a bill that will address some of the most costly and egregious mandates in the new health care law. The bill, called the Small Business Health Relief Act, will make health care coverage more affordable for small businesses, which, according to NFIB research, is a top priority for small-business owners.

“The policies in the health care law will crush small businesses with new costs and uncertainty. The small-business community would like to thank Senator Kyl for introducing the Small Business Health Relief Act to help fix some of the worst parts of the law,” said NFIB president and CEO Dan Danner. “This bill addresses the top concerns of small businesses, and it will help them get back to creating jobs and investing in their businesses.”

The bill eliminates a new tax on health insurers that will drive up the cost of coverage and will repeal the employer mandate, which not only requires small businesses to buy insurance, but dictates how much they must purchase.  These repeals will lowers costs for small-business owners and provide Americans more choices and freedom in their health care coverage.

“It’s a day-to-day struggle to survive against competition from the big box stores regardless of the economy,” said Earl Hall, owner of Hometown Printing and Office Supply in Bordentown, N.J. “It’s been even more difficult in a weak economy that experts don’t see improving anytime soon. The health care law imposes heavy new costs on my business that we may not be able to absorb.”

U.S. Senators John Barrasso (R-WY), Richard Burr (R-NC) and Tom Coburn (R-OK) co-sponsored the Kyl bill, introduced on Monday.

Complexities in the code and a labyrinth of rules to obtain credits mean tax compliance costs are unacceptably high for small businesses.

Small businesses want simplicity in the tax code and they want rates for individual taxpayers kept low. Close to 75 percent of small businesses pay tax on their business income at the individual level, making it imperative that the 2001 tax cuts be made permanent.

Unduly burdensome regulations disproportionately affect the small-business community costing them around 36 percent more per employee than their larger counterparts.

In FY 2010, federal agencies unleashed 43 major new rules’  and the costs of implementing these rules was $28 billion.

According to the Congressional Budget Office, the budget deficits in 2009 and 2010, as measured as a share of GDP, were the largest since 1945. They represent almost 10 percent of the GDP and the estimated budget deficit for 2011 is going to stay in that range.

The businesses that face potential penalties are those with 50 or more full-timers or full-time equivalents (FTEs) as well as owners with multiple businesses totaling 50 or more full-timers or FTEs

The penalties are steep.  For employers that do not provide health insurance coverage, the penalty is $2,000 per year per employee (minus the first 30 employees).  For employers that do provide coverage, if one or more of its employees receive insurance subsidies, then the business will pay $3,000 per subsidized employee or $2,000 per employee (minus the first 30) – whichever is less.

Readers of this site know that we always look at incentive structures.  We know that changing the rules of the game, the rewards and the punishments, will change economic behavior.

NFIB economists predict that the mandate will affect the economy in the following ways.

Businesses will spend real resources determining how many employees they have with respect to the employer mandate. They will face time-consuming, arbitrary administrative burdens associated with employees seeking insurance subsidies in the new insurance exchanges.

The mandate makes it extremely expensive to cross the 50-employee threshold. For example, a mid-sized restaurant that goes from 49 to 50 employees will face a $40,000 per year penalty. A business can avoid the penalties by firing employees, by not hiring new ones, or by outsourcing. Estimating the costs of hiring and expanding will be complex and confusing.

Businesses subject to the employer mandate will receive monthly government reports on subsidized employees that inadvertently reveal personal financial data on employees’ spouses and families. This raises discomforting privacy concerns and exposure to liability for employers.

For some firms, the employer mandate will result in large fines when there are private changes in their employees’ households. For example, an employee’s spouse losing a job or an employee’s spouse’s elderly relative moving into their house could trigger thousands of dollars in annual penalties. Employers will not be entitled to know the details of what caused their penalty – unless they challenge the employee’s honesty before a government agency.

The employer mandate will increase costs, and producers will pass them along to consumers.

Health Care Funding Reform – A Proposal

ObamaCare really does nothing to correct the underlying problems in our health care delivery system.  In fact, the new regulations will make problems worse.  Most of the current problems are actually the result of government intervention in the system we had before the mandate for “managed care.”  It is not really managed care, but managed cost to 3^rd party payer.  The result is higher cost to consumer.

I would like to begin with a hypothetical.  If I sold a card, on an annual contract, for $500 a month that allowed the holder to shop and buy almost anything for a $20 co-pay, it would be heavily used.  Next year, I would have to increase the cost of the card.  That is where our health care system is, today.  It is the Federal Government which caused our current problem when “managed care” was mandated in about 1984.

I propose:

Save money – increase the efficiency of health care utilization:

1. Have people pay for a percentage of whatever health care they consume, up to a predetermined maximum, when insurance will cover expenses at 100%.  Before “managed care”, patients were wise shoppers when purchasing medical tests or treatments.  Not now!

Save money – reduce the number of tests:

2. Tort reform is essential.  It works fairly well in Texas.  Texas caps awards on non-economic damages at $250 thousand.  Perhaps, the loser should also bear legal the expenses of the winner.  The necessity of practicing “defensive medicine” is expensive and inhibits good medical judgment.

Incentivize purchase of health insurance:

3. Give employees a tax credit for what they spend on health insurance premiums.  That way, the employee is revenue neutral and has insurance.  Also, the employee owns the policy and is not dependent on an employer.  Also, if younger healthy people have an incentive to join the risk pool, insurance companies have no great excuse to increase premiums because they are only insuring sick people.  If this were the law, who cares if an illegal alien has insurance.  He paid for it.

Provide portability:

4. Bar employers from buying health insurance, but give employers a tax deduction for whatever they give employees for the employee to purchase health insurance.  The employee needs to own the policy.  Portability is achieved.

Make health insurance premiums competitive:

5. Require health insurance carriers to publish an audited report as to what percent of the premium dollars are actually spent on health care.  Clinical audits are not health care.  Help purchasers see what they get for their money.  I am aware of one HSA policy that only spent 9% of the premium income on health care and still demanded a double digit increase in the premium payment the following year.

Make health insurance premiums competitive:

6. Allow sale of health insurance across state lines.  That will increase the risk pool for insurance companies, and make it more profitable to lower their premium rates.  In return, they must be required to pay a “clean claim” within 30 days, and not hold on to the payment for several months.  Penalties for not paying claims in a timely fashion should be significant.  In Texas, the insurance company which delays claim payment loses part or its entire “negotiated” discount from billed rate.  Physicians should not be forced to provide interest free loans to multi-million dollar companies.  Prompt pay works in Texas where a “clean claim” is defined by law.  Also, deny insurance companies the ability to wait more than 180 days to demand repayment of what they perceive to be an over payment or in appropriate payment.  There is no way for a physician to recover a loss and the insurance companies can surely discover their own mistakes before that time expires.

Assure availability of health insurance coverage:

7. Prohibit denial of coverage on pre-existing conditions and cancellation of a policy for illness.  The larger risk pool will help decrease the risk of coverage.

Provide for the few who still cannot afford health insurance premiums:

8. Provide Federal subsidy for free or part pay clinics for the indigent, and those who still do not have health insurance.  If someone makes enough money to buy insurance and does not, he/she pays more than someone who still cannot afford the premiums. Provide tax deductions or credits for hospitals, imaging centers and laboratories which donate facilities to provide care for the indigent.  We had a system similar to this before “managed care”.  Most hospitals were operated by local government, under terms of a bequest with charitable contributions, or faith based organizations.  Give the same inducements to pharmaceutical companies to provide medications.  They already provide samples of newer medications and have programs for those who cannot afford to pay for prescriptions

Provide for those who still cannot afford health insurance premiums:

9. Give physicians who volunteer time to work in the clinics described in item 8 a tax deduction or tax credit for their services.  The amount of the tax break should be the average billed rate for the service in the area being served.

Protect physician-patient relationship:

10. Remove third party intrusion into the physician-patient relationship.  Today, when people call to potentially schedule a new patient appointment, they do not ask about training or experience of the physician.  They do not ask about cost or fees.  They ask, “Is the doctor on my plan?”  If they do not have to pay more than a small co-pay, all that matters is the insurance coverage and not value of service rendered.  To repeat, patients need to be wise shoppers for health care, like everything else they buy.

Give volume buying power to reduce premium rates for individuals:

11. Allow membership stores like Costco and Sam’s Club to become outlets for health insurers.  Insurers should bid for the right to market to club members.  The result is expected to be rates for individuals in line with what large corporations currently pay for their employees, and attract more members to the stores.

In closing and summary, instead of using a stick to try to beat the American public into submission, use a carrot as an inducement.  Taken as a total package, the above recommendations seem to address the problems existing in our current health care funding.  Don’t cripple health care delivery to attempt to accomplish that goal.

The Republican party has no alternative.  For those of you who missed the original post, or have forgotten it, I have repeated it.  If you agree with the proposals, PLEASE contact your Representative and Senators.  Urge them to bring it before the Congress for debate and possible approval.

Dr.  Barry Jacobs is a Reproductive Endocrinologist, practicing in Carrollton, Texas, a northern suburb of Dallas. He completed his residency training in obstetrics and gynecology at Baylor College of Medicine in Houston, and remained at that institution to become its first fellow once Baylor achieved accreditation for an advanced training program in Reproductive Endocrinology and Infertility. Dr. Jacobs has served on the faculty of several medical schools and was director of Reproductive Endocrinology at Texas Tech Health Science Center in Amarillo. Currently, in addition to his clinical activities caring for infertile patients and those with recurrent pregnancy loss, he is Chairman of the IVF committee at Baylor Medical Center in Carrollton.

On one hand, the whole notion of earmarks and pork barrel spending encourages many impractical pet projects from doofy legislators. To see their ban would send a message to the fiscally irresponsible politicians, on both sides of the aisle, who misuse (our) federal tax dollars. On the other hand,eliminating 100 percent of earmarks in fiscal 2010 would have cut the federal budget by less than one-half of one percent.  In other words, earmarks are close to the least of our worries.

She’s actually mistaken, and she’s making a common mistake because she doesn’t understand the role earmarks play in the legislative process.  They are a lever whose spending impact is far greater than what they appear to be.

Look at this issue from another angle.  For just .5% of government spending, why is there such resistance from Congressional Leadership (on both sides of the aisle) against getting rid of them?  That’s the question to ask.  Once you ask it and look closely, you see why.

Earmarks are an effective tool to manipulate Congressional voting blocks.

Take “Legislation A” that does not stand-alone well and cannot muster majority support.

Then take “Project B” that a single legislator wants in his district.  It favors one group of people (say, a state or city) at the expense of all others.  As a stand-alone project B could never pass legislatively if introduced alone.

You’d think that because the legislation and the project don’t stand well on their own that combining them would also result in something that doesn’t stand alone well.

You’d be wrong.

What if I told you that the way Congress does business now often leads to Legislation A passing while (and because) it includes project B?

It happens all the time and earmarks are what makes it possible.

Congressional Leadership can pass legislation that otherwise could not garner a majority if they will throw in pet projects (in the form of earmarks) to buy votes.  See, they are giving a bribe to a legislator so that the legislator can go back home and tout the fact that his district got project B funded and put in place (a targeted benefit) while refusing to call attention to the bad legislation they passed (a dispersed cost).

When costs are dispersed but benefits targeted, that’s where corruption and vote buying will most emerge and where special interests most come to play.

So – because of earmarks – you end up with the combination of bad legislation that includes bad and wasteful projects.

Votes are bought through earmarking grants.

It’s like logrolling, but unlike traditional logrolling, it’s a crack-cocaine version …

Without earmarks big, bad, costly legislation is less able to be forced through.

Get rid of earmarking, and you get rid of the “lever” through which some of our worst legislation has been passed.

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Competition is a by-product.  It’s not something desirable in itself – it’s just what happens when other desirable things happen.

Competition comes about when three conditions hold.

1. People are free to serve others.  That is, they are free to provide labor on behalf of other people, to make others lives better.  This condition contains the converse – that people are also free to receive service from others, without intervention/prevention from others.

2. People are free to exchange services with one another in ways that mutually benefit them.

3. People are free to decide between any number of servers/services offered the one that they prefer and feel will most benefit them.

When these conditions hold, what you have is groups of people working for the opportunity to serve one another and offering more and more in exchange for the privilege of being chosen to give the service.  In return for the service, they also receive service (or goods, usually in the form of money) in return.

When people who offer the same service make themselves available simultaneously, the person receiving service has the choice to choose the provider they believe will serve them best.  The two service providers will each work and improve to be able to provide the service.  The net result is that the person served will be able to exchange, perhaps, fewer services in return than may have been necessary.  This is a benefit to the receiver – it means he has that much more service to exchange later for additional services he otherwise might not have been able to “purchase”.

Competition is nothing more than the result of allowing people to freely serve one another and allowing those served the freedom to choose those servers/services that they feel will best serve them.

Any effort to reduce “competition” must NECESSARILY do one or more of the following to the three conditions.

1. Take away people’s freedom to serve one another; that is, to disallow or prohibit service
2. Take away people’s freedom to voluntarily trade service with each other
3. Take away people’s freedom to choose between providers of services and instead mandate that if they want the service at all they must use just one provider (which they did not choose).

People who want to do away with free markets or competition are really just people who want to eliminate service, freedom, prosperity, and choice.

Nice people!

A tough liability system does more than provide compensation for serious harms after the fact. It also sorts out the wheat from the chaff—so that in this case companies with weak safety profiles don’t get within a mile of an oil derrick. Solid insurance underwriting is likely to do a better job in pricing risk than any program of direct government oversight. Only strong players, highly incentivized and fully bonded, need apply for a permit to operate.

In an environment of unlimited liabilities for harmful externalities, insurance would be a must, and insurance companies will be far better regulators than the government.  After all, the government employee gets paid the same amount of money with the same amount of (never-ending) job security whether he actually assesses risk correctly or not.  The insurance company?  One wrong risk assessment, and it’s in the breadline.

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A few quick observations. Why is Vermont (by far) the state with the largest proportion of non-poor people signed up for welfare programs? I have no idea, but maybe this explains why they elect people like Bernie Sanders. But it’s not just Vermont. Four of the top five states on the Moocher Index are from the Northeast, as are six of the top nine. Mississippi also scores poorly, coming in second, but many other southern states do well. Indeed, if we reversed the ranking and did a Self-Reliance Index, Virginia, Florida, and Georgia would score in the top 10. Nevada, arguably the nation’s most libertarian state, is the state with the lowest number of non-poor people signed up for welfare.

Q: Why are there non-poor people who are net recipients of government income transfers?

A: Because they have votes that can be bought.

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Robust job growth requires boldness and risk-taking in the private sector. What we have now is boldness and risk-taking in the public sector. It is loading as much debt onto the balance sheet as possible, and creating the predicate for more regulation, spending, and taxes. We have active government and hesitant entrepreneurs.

Late in the Great Depression, Franklin Roosevelt’s Treasury secretary, Henry Morgenthau, told Congress, “We are spending more than we have ever spent before and it does not work.” Democrats have made Morgenthau’s plaint their governing ethic. In so doing, they are demonstrating their political and intellectual bankruptcy even faster than they are bankrupting the country.

Spending money does not create wealth.  Spending money does not raise the standard of living.

But it lets politicians feel like they’re “doing something” and gives their fat egos a boost.  Also, spending money buys votes  … even if it’s at the expense of what will soon be a bankrupted citizenry.

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Also contains information on Cap and Tax and Labor Law changes being pursued.

This Administration is BAD NEWS for Small Business.  Get informed by reading the report.  And then please share it with at least 5 other Small Businesses you know.   If we work together, we can push a lot of this stuff way back.  But we have to be willing to share, to talk, to raise our voices and speak out and educate.

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It shouldn’t surprise anyone that the nine states without an income tax are growing far faster and attracting more people than are the nine states with the highest income tax rates. People and businesses change the location of income based on incentives.

Likewise, who is gobsmacked when they are told that the two wealthiest Americans—Bill Gates and Warren Buffett—hold the bulk of their wealth in the non-taxed form of unrealized capital gains? The composition of wealth also responds to incentives. And it’s also simple enough for most people to understand that if the government taxes people who work and pays people not to work, fewer people will work. Incentives matter.

It’s a good piece, but take everything Laffer says with a grain of salt.  He was cheer-leading the housing bubble (contra Peter Schiff) in 06 through 08.

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U.S. small businesses are slightly more optimistic about their economic outlook than they have been in the last two years but are still not ready to expand staffs and boost capital spending, according to a survey released Tuesday.

“The recovery in optimism we are currently experiencing is very weak compared to recoveries after 1982 or 1975,” the survey concluded. “The May Optimism index is a shade better than April but remains well below the other recovery trajectories.”

The NFIB survey of 823 businesses through the end of May showed that more small businesses are experiencing weakening sales than are enjoying sales improvement. Widespread price cutting was also reported, it said. May was the 18th consecutive month in which more business owners reported cutting average selling prices than raising them.

Eighteen straight months of price cuts.  You’re not going to get expanded hiring and capital investment when your margins are compressing simultaneously with a sales decline.

Unfortunately, we look like we are on our way to having a double-dip recession.

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