Relevant and even prescient commentary on news, politics and the economy.

Republican Governors: Take from the Poor, Give to the Rich, and Suck the Federal Teat

These local stories in Louisiana, Kansas, Nebraska, and North Carolina speak quite eloquently for themselves.

Gov. Bobby Jindal is proposing to eliminate Louisiana’s income and corporate taxes and pay for those cuts with increased sales taxes

http://www.nola.com/politics/index.ssf/2013/01/gov_bobby_jindal_calls_for_eli.html

Gov. Dave Heineman made a bold proposal … end the income tax for working Nebraskans and corporations. It would also end the taxation of small business, Social Security and retirement income. … As a means to make up for the lost revenue, Heineman’s proposal would also end $5 billion in sales tax exemptions.

http://www.dailynebraskan.com/news/article_9e1bcc1c-5fa1-11e2-ba02-0019bb30f31a.html

State personal and corporate income taxes would be eliminated, sales taxes would be charged on services, and North Carolinians would pay state sales tax on groceries under a tax reform proposal with significant support in Raleigh.

http://www.news-record.com/home/589530-63/nc-tax-reform-plan-is

Brownback: Keep full sales tax, cut income taxes further

http://www.kansascity.com/2013/01/15/4012878/brownback-keep-full-sales-tax.html

These proposals all lower revenues collected. This will give these red states more bargaining power when they run into the inevitable fiscal crisis, so they can suck the Federal government teat even more effectively than they do now.

Fiendishly clever.

Cross-posted at Asymptosis.

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The future of YOUR health insurance premiums

by Maggie Mahar

run75441: Maggie Mahar writes on future insurance premium increases something consistently arises in the debate on the PPACA. The complete post can be found at healthinsurance.org

The future of YOUR health insurance premiums

Today, many Americans are asking, “Will my premiums go up in 2014?”

There is no simple answer.

According to Families USA, the Affordable Care Act (ACA) will have a positive effect on the typical family’s budget. Using an economic model that can factor in all provisions of the Act, Family’s USA estimates that by 2019, when the law is fully implemented, “the average household will be $1,571 better off.”
Even high-income families will save: thanks to rules that limit co-pays, and reward providers for becoming more efficient, “those earning $100,000 to $250,000″ will spend $779 less on medical care.”
But these are “averages.” They don’t tell you whether your premiums will rise or fall.

The answer will depend on: your income, your age, your gender, whether a past illness or injury has been labeled a pre-existing condition, who you work for, and what type of insurance you have now:

If you work for a large company:

The ACA will have a “negligible” effect on your premiums says the Congressional Budget Office (CBO).
This doesn’t mean that your costs won’t climb in 2014. As long as medical product-makers and providers continue to raise prices, premiums will edge up each year.

But in 2012 average premiums for employer-based insurance rose by just 3 percent for single coverage and 4 percent for families, a “modest increase” when compared to 8 percent to 12 percent jumps in past years. And on average, employee co-pays and deductibles remained flat.

Granted, a 3 percent to 4 percent increase still outpaces growth in workers’ wages (1.7 percent percent) and general inflation (2.3 percent) percent). But as reform reins in spending, annual increases for large groups could fall to 2 percent – or less.

If you work for a small company with more than 50 employees:

Your boss will be more likely to offer affordable benefits, in part because, if he doesn’t, he will have to pay a penalty.

Moreover, he will find insurance less expensive. Today, small businesses pay 18 percent more than large companies because the administrative costs of hand-selling plans to small groups are sky-high.
But starting in 2014, businesses with fewer than 100 employees will begin buying insurance in exchanges where they will become part of a large group, and eligible for lower rates.

Finally, some companies with fewer than 25 employees will receive subsidies that cover 50 percent of what they lay out for insurance.

If you work for a small firm where many employees are older, female, or suffer from a pre-existing condition:

Your premiums may well fall. Today, most states let insurers charge small firms more if many of their workers are older or are women.  They also can jack up premiums if just a few workers fall ill or are injured.

This post originally appeared on healthinsurance.org. To find out more about the importance of where you live, whether you are a woman, whether you are young (20-something to 30-something) or older (in your 50-65), your income, and your health status please click there.

Or if you like, you can return to HealthBeat to comment. run75411

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The Netherlands’ role as corporate tax haven a "stain on the nation’s reputation"

by Linda Beale

The Netherlands’ role as corporate tax haven a “stain on the nation’s reputation”

As Europe, the US, and other countries continue to face sluggish economies in the midst of extraordinarily high corporate profits, substantial accumulation of new wealth in the hands of even fewer people, and inordinate influence of corporatist approaches on democratic governance, a public backlash is growing and legislatures are beginning to notice.

Here in the US, President Obama’s second inauguration speech acknowledged the necessity of cooperative approaches to the dire problems we face today.  Those problems– poverty, limited opportunity due to lowerclass status, lack of educational access, climate change and infrastructure needs–all relate to the increasing inequality among our people, the ability of the wealthy to buy secure and safe lifestyles for themselves while the majority are left to struggle with potential loss of jobs, homes and health.  People are starting to notice the inordinate power of huge multinational corporations and their owners due to the influence of wealth and the way the wealthy have been able to capture almost all of the gains of the last few decades for themselves.  Perhaps we are on the cusp of a new populism that will reclaim the American economy and the American system for ordinary people.

In the Netherlands, the backlash against unfair tax policies may be happening even more clearly than here.  The Netherlands has become an infamous tax haven for corporate giants (renowned for using the “Dutch sandwich” structure to avoid taxation).  Yahoo’s arrangement, described by Jesse Drucker in a Bloomberg story today, illustrates the problem perfectly.

Inside Reindert Dooves’ home, a 17th century, three-story converted warehouse along the Zaan canal in suburban Amsterdam, a 21st-century Internet giant is avoiding taxes.  The bookkeeper’s home office doubles as the headquarters for a Yahoo! Inc. (YHOO) offshore unit. Through this sun-filled, white walled room, Yahoo has taken advantage of the law to quietly funnel hundreds of millions of dollars in global profits to island subsidiaries, cutting its worldwide tax bill.
The Yahoo arrangement illustrates that the Netherlands, in the heart of a continent better known for social welfare than corporate welfare, has emerged as one of the most important tax havens for multinational companies.

Jesse Drucker, Yahoo, Dell Swell Netherlands $13 Trillion Tax Haven, Bloomberg.com (Jan. 23, 2013).  Many of the Dutch companies created by MNEs like Yahoo, Google, Merck, and Dell are sham companies that “only exist on paper”.  $10.2 trillion dollars went through 14,300 of those sham companies in 2010. Id.  Merck has 54 subsidiaries in the Netherlands and routed more than 7 billion euros in royalties between 2002 and 2010 through an Amsterdam subsidiary that has no employees.  Id.

The Labour Party and People’s Party for Freedom and Democracy took power in November and are “fed up with these so-called PO Box companies”, according to a parliamentarian from Labour.  Id.  Another parliamentarian (from the Dutch Socialist Party) noted that while governments are cutting their budgets, multinationals are avoiding taxes, and the Netherlands is functioning as a connecter to the tax havens.

The anti-tax avoidance concern is growing across advanced nations. As the article notes, the European Commission, has also noted the problems with tax avoidance and evasion and has advised its member states to adopt anti-abuse rules.  Similarly, the OECD is discussing a proposal to make it harder for companies to use shams like the Dutch sandwich structure to shuffle profits into tax haven islands and avoid taxes in OECD countries.  And the UK has scheduled a second parliamentary hearing this month on the issue.  Id.

Tax treaties are supposed to protect companies from double taxation on the same income by two different jursidictions, but tax lawyers have developed sophisticated structures that allow companies to enjoy double non-taxation.  The article describes Dell’s use of a Netherlands subsidiary (with no Netherlands employees) to claim credit for about three-fourth’s of Dell’s worldwide income and achieve substantial tax savings–about $4 billion since 2004.  Id.  The US Is challenging Dell’s claim that it is appropriately using the Netherlands and Singapore arrangement to avoid US taxes.

And of course these same MNE giants are the ones that are accumulating billions overseas on which they are seeking special legislation to allow them to repatriate cash to the US at low (or negative) taxes. See earlier Angry Bear and ataxingmatter posts on this issue.

Hopefully, even the Republicans in Congress will realize that this corporate game of tax avoidance using international subsidiaries that have no employees is a sham and will take action to eliminate loopholes that permit hugely profitable companies to pay minimal corporate taxes.

cross posted with ataxingmatter

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Health Care Thoughts: PPACA Health Exchange Oops

by Tom aka Rusty Rustbelt

Health Care Thoughts: PPACA Health Exchange Oops

On March 1, 2013 employers were supposed to notify employees in writing of information relating to the health insurance exchanges, including a 1) description of services, 2) employee eligibility for a premium tax credit IF the employee purchases an exchange insurance product, and 3) the downside of the employee purchasing through the exchange.

On January 24th the Department of Labor announced the suspension of the notice rule, because there is very little guidance currently available, as the feds are behind on implementation actions and exchanges are still in a confused infancy.

It is possible the DOL will require the notices to be issued in late summer or fall, ahead of an October (?) startup.

I am now putting the probability of a major delay of exchange start ups at 30%.

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If Guns are Cheap, Criminals Will Have Guns

by Mike Kimel

If Guns are Cheap, Criminals Will Have Guns

If guns are outlawed, only outlaws will have guns. We’ve all heard that many times. But is it true? Well, it is certainly a tautology. But there is another way to ensure that outlaws have guns. Namely, keep them cheap.

From the 2009 Firearms Used in the Commission of Crimes focusing specifically on guns used in the commission of crimes in rural parts of California:

Of the 147 firearms examined, there were 120 (81.6
percent) handguns, 13 (8.8 percent) rifles, 11 (7.5 percent) shotguns,
and 3 (2 percent) machine guns.

The 2010 version of the same report paints a similar picture:

Of the 175 firearms reported, there were 158 (90.3 percent) handguns, 12 (6.9 percent) rifles, 4 (2.3 percent) shotguns, and 1 (0.6 percent) full-auto firearm.

The reason handguns are more often used in the commission of a crime than other types of weapons is not because the typical criminal doesn’t think it would be tres cool to use a belt fed machine gun or a shoulder launched missile. Its because those types of weapons are very, very hard to come by. With some digging, you can get your hands on a belt fed machine gun, but you are very unlikely to do it for less than $10K for a cheapo model. Instead, what often happens is that armed criminals are most often armed with what one can best be described as lousy guns. Don’t believe me? Here is a post from someone who clearly cannot be described as pro-gun control, commenting on the list of top ten guns used in crimes according to the ATF.

Descriptions include:

An absolute piece of crap that sells for less than $120 retail. No real shooter would even warrant this “gun” as a legitimate target to even shoot at.

Here’s another:

Another piece of shit that sells for less than $110 retail, and is worth less than the pipsqueak ammunition you can try to feed it.

And another:

The cheapest 12-guage on the market, designed for people who cannot afford a real shotgun. Not even close to being considered a “fighting” shotgun. No offense to Mossberg, but there is a reason that  these Wal-Mart grade firepoles are given away at Ducks Unlimited as door prizes. Most do (and should) end up being traded up at gun shops for real shotguns.

Some of the other descriptions are even more creative. My favorite is number ten on the list:

This one takes the cake as the “most prone to never fire, ever” firearm that was ever produced. Apparently they had a street price of $60 in Miami at one point, which would have been better spent on a wristrocket or a billyclub if you planned to actually use one in a legitimate crime. They eventually had to fight lawsuits from prosecutors and criminals at the same time because of their inherent defectiveness.

To quote that post further:

Though most teenage gangbangers wouldn’t be caught dead with a Smith and Wesson .38 revolver, an old fashioned six shooter, it nonetheless claims the lead on the top ten list. That’s because there are literally millions in existence; Smith and Wesson introduced the .38 in 1899, and since then, models have proliferated, transforming the name “Smith and Wesson .38” into a generic label for a particular style of gun, even clones that aren’t made by Smith and Wesson. Similarly, the Smith and Wesson .357 revolver, which was introduced in 1935, and the venerable Mossberg shotgun made the list based on the sheer volume in circulation.

But street criminals are interested almost exclusively in semiautomatics, preferring their superior firepower. (Semiautomatics hold at least seven and often as many as ten or twelve rounds of ammunition. –Or 18 if you can spend the extra dinero made from a 7-11 heist on a Beretta)

Gun traffickers like to peddle cheap semiautomatics to teenagers because they can tack on a hefty mark-up (of ten bucks) and still offer a weapon that costs less than an upscale gun like a Ruger or Smith and Wesson semiautomatic. That’s why inexpensive semiautomatics dominate the top ten list. As it happens, many of the companies on that list have links to George Jennings, founder of the now-defunct Raven Arms and his clan. Jennings’ son Bruce founded Bryco in 1992. According to the ATF, Jennings’ son-in-law Jim Davis founded Davis Industries, and Lorcin Engineering was launched by Jim Waldorf, Bruce Jennings’ high school friend. These companies and several others also linked to Jennings are known in the trade as the “ring of fire.”

The point is, criminals use the guns they do because they’re available, and the guns that are available are usually available because they’re cheap.

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13 gigawatts of New Wind power in US in 2012, Renewables Half of all New Energy

by Juan Cole

13 gigawatts of New Wind power in US in 2012, Renewables Half of all New Energy

Michigan voters recently rejected a state constitutional amendment requiring the addition of renewable energy of up to 25% in the future. While the state constitution may have been the wrong place to put it, there does not seem to be much interest in the Republican dominated legislature to tackle renewable energy other than where it is placed.  run754411

Juan Cole at Informed Comment writes on Wind generated electricity and how it is quickly becoming a major source (updated 1/27…dan):

The US put in 13 gigawatts of new wind energy capacity in 2012, 5 of it in December alone, according to a Bloomberg study. The Office of Energy Projects report was a bit more conservative, but confirmed the general trend.

h/t Grist

Wind alone now accounts for 6% of US electricity generation!
Even the government figures showed that about half of all new energy generation in the US came from renewables in 2012, mostly wind turbines.
The US also put in about 1.5 gigawatts of new solar power last year.

In some markets, such as Texas, installing wind turbines for electricity generation is now actually cheaper than building natural gas plants! Reflecting this trend toward wind grid parity, more new wind capacity was added to the US electrical grid than natural gas, which was itself no mean shakes. Gas puts out less carbon dioxide than coal, but fracturing it from underground rock formations may release so much methane (a very potent greenhouse gas) that it is a wash with coal. Both coal and gas plants need to be mothballed as quickly as possible.

The bad news is that the US still generated 5 billion metric tons of carbon dioxide in 2012, the highest per capita in the OECD nations! We are poisoning the world and provoking catastrophic climate change, and all the good news about wind and solar doesn’t offset our massive contribution to looming environmental disaster.

Specially bad news is that 1.4 gigawatts of new, dirty coal power was brought online in 2012 in the US. That should be illegal! Coal is poisoning us and our world! Carbon dioxide in the quantities we are producing it is a toxin for the world. Not to mention that we are being mercury-poisoned by dirty coal emissions!

If you care about your children, call your state representative (look him or her up) and demand that building new coal plants be made illegal. Now! We don’t need it. Put in wind and solar instead. In many markets it wouldn’t even be more expensive, and if you count in the cost of nerve poisoning by mercury and loss of seaside real estate, wind is dirt cheap compared to coal!

Likewise, call your city council representative and demand that your city generate its own electricity with wind and solar, taking it off the coal grid (this is especially important in the Midwest, where typically 65 percent of electricity generation comes from coal). And if you can afford it, put solar panels on your roof. You can cut your electricity bill 20-40% even in the Midwest. And invest in crowdsourcing solar projects (Warren Buffett is investing in solar, why shouldn’t we?)

We can do this from the bottom up. We can’t wait for the backward Neanderthal tea partiers in our Congress, who practically eat lumps of coal for lunch and wash it down with a petroleum martini. There isn’t much time to bring the carbon down, America. 2020 is a deadline, and it is only 7 years off. Goals of being 20% green by 2020 won’t do it. We need a major national movement and transformation, on the scale of the Civil Rights movement. Because clean energy and a non-warming world are a basic civil and human right that we deserve and will only get it if we demand it.

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$6.6 Trillion Retirement Saving Shortfall Shows Failure of 401(k)’s

Last week the Washington Post ran a story on the weaknesses of 401(k) retirement accounts, focusing on the the fact that 1/4 of Americans with 401(k)’s have used them to meet current income needs. Among people in their forties, the share rises to 1/3,  an astounding figure considering how close this group is to retirement. In the wake of the Great Recession and continuing job market problems, it is perhaps not surprising that 28% of 401(k) account holders presently have loans against their accounts.

As the Post delicately puts it,

Many employers have embraced 401(k) and other defined-contribution accounts as a way of helping workers save for retirement while relieving themselves of the financial risks that come with managing a traditional pension plan. In theory, 401(k) accounts are better suited to an economy in which workers are changing jobs more frequently than ever because the accounts can be rolled over from previous employers.

A more accurate way of saying this would be that employers have embraced 401(k) plans because they are less expensive than providing pensions, thereby “cut(ting) overall employee compensation,” and that 401(k) plans don’t take into account the stagnation of real wages, points well made by commenter “Sean2020.”

Moreover, as I reported before, 49% of private sector worker have neither a 401(k) or a defined benefit pension plan. Thus, they have no supplement to their eventual Social Security benefits unless they are able to save outside of a 401(k).

And they aren’t saving. At least, they’re aren’t saving nearly enough to maintain their standard of living after retirement. As a report from the Senate’s Health, Education, Labor, and Pension (HELP) committee states, there is a  $6.6 trillion gap (methodology here) between what people need to maintain their current standard of living and what they’ve actually saved for retirement. This is equal to the combined assets of defined benefit pensions and 401(k) type plans, more than total state/local/federal government retirement plans, and more than twice as much as the Social Security Trust Fund. There’s a reason I’ve been using the word “crisis”!

Total Assets

Social Security Trust Fund      $2.7 trillion (12/31/2012)
Defined benefit pensions         $2.3 trillion (9/30/2012)
Defined contribution 401(k)    $4.3 trillion (9/30/2012)
State/local gov’t employee      $3.1 trillion (9/30/2012)
Federal employee retirement  $1.5 trillion (9/30/2012)
IRA’s                                    $4.9 trillion (6/30/2011)

Sources: Social Security Administration; Federal Reserve, tables L-116, L-117, and L-118 (financial assets only), for DB, DC, and government employee programs; Investment Company Institute for IRAs

This gigantic hole shows that the current model, based on 401(k)’s rather than true pensions, is not working. In a future post I will discuss ways to fix the crisis.

Cross-posted from Middle Class Political Economist.

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