by | ARTICLES, BLOG, GOVERNMENT, NEW YORK, POLITICS, TAXES
New York’s state budget director, Robert F. Mujica, Jr., wrote an anemic, laughable Letter to the Editor (printed in the Wall Street Journal) trying to defend New York’s fiscal record in an effort to get a federal bailout. Those of us who live in New York couldn’t help but notice it was full of half-truths. For instance, Mr. Mujica boasted lowering income-tax rates, but neglected to include the fact that Florida doesn’t even have an income tax yet still manages to operate on a budget of $93 million vs NY’s $177 million — in a state with 2 million more people!
Furthermore, he talks about a 20% increase of private-sector jobs, but leaves out the fact that “private job growth in Florida has been about 60% higher than in New York from Jan 2010 to Jan 2020.”
Likewise, he claims that New Yorkers send $29 billion more in taxes to the federal government than it gets back, but fails to mention that the reason for this is New York’s tax code punishes high income earners by adding extra taxes, so much that some earners pay nearly 50% of their earnings in taxes! Nor does he mention that many wealthy New Yorkers have wised up to being fleeced over the last decade, making New York one of the top ten out-migration states in order for earners to try to keep their own income — some going to Florida, no less. This loss undoubtedly contributes to the $6 billion budget shortfall that existed before Coronavirus even hit, something that was also conveniently left out of his defense.
Finally, Mr. Mujica tries to suggest that the $29 billion New Yorkers send to the federal government somehow subsidizes Florida’s budget because Florida receives $30 billion more from the federal government than Floridians send. But he leaves out the fact that New York’s budget contains 35.9% of federal money compared to Florida’s 32.8%. With a budget of $177 billion, that’s $63 billion of spending from federal dollars compared to $30 billion in Florida. Who is more fiscally irresponsible?
If states like New York are not willing to take any of the economic risk going forward, they should not get any money. They have willfully chosen to engage in a prolonged economic lockdown in hopes that someone else pays for it. Florida was one of the last states to shut down and has begun opening up once again, understanding the need for economic recovery. If New York wants to continue to take the economic risk of staying closed while other localities choose to reopen, they should be the ones to pay for it.
by | BLOG, FREEDOM, MEDIA
Alan Dlugash is a member of the New York State Society of CPAs (NYSSCPAs) serving on the Individual Tax Committee (and a previous chair), and is currently also a member of the IRS Relations Committee. He has also served on the Society’s Task Force on Tax Simplification as well as on the Special Committee for Reform of the Tax System whose report had been widely circulated. Additionally, he is a member of the American Institute of CPAs (AICPA) and its Tax Division.
Mr. Dlugash has over 40 years of accounting and taxation experience and recently gave an interview to the Atlas Society talking about taxes, bailouts, and New York City. Here are some highlights.
On taxing the rich:
“The standard view of Robin Hood is that he stole from the rich to give to the poor. But that’s not really what happened. Robin Hood didn’t steal from the rich. He stole from the government, which was impoverishing the people with excessive and inappropriate taxes. He stole from tax collectors, not the rich. Robin Hood, read correctly, is a libertarian.
The rich are people who create things that people want to buy. The government, on the other hand, doesn’t do anything productive. It takes your money then redistributes it to special-interest groups.
Taxing wealthy people and giving it to poor people does not make people more equal. It does the exact opposite. High taxes mean less money reinvested in businesses, which means fewer jobs. Moreover the people who get the money transfers are less likely to risk those benefits, which keeps them dependent and relatively poor. The idea that we can tax the rich to solve our problems is just wrong. Taxing the rich is just a recipe for making everybody worse off.
There are many, many ways in which the tax code is ridiculously unfair, but because high earners are often the victims, no one cares. There hasn’t been an honest article written on taxes in the New York Times in 20 years.”
On bailouts:
“In 2008 – 2010, the need for the Treasury to get involved was legitimate. Once they determined that the economy wasn’t going to tank, however, and that the banking system wasn’t going to collapse, after the first week or ten days, that should have been the end of it. Their review showed that the banking system was safe.
But politics overruled logic. There were really only a handful of banks that were in trouble because of the mortgages that the banks were holding. Most of the banks were not in danger. They were able to quantify their situation. But the Treasury decided that they were going to force every bank to take a bailout as if it were failing. This way, people wouldn’t know which banks were in trouble but think that all the banks were in trouble instead. I don’t know what they were drinking, because it was the dumbest idea ever. And they lied. That was the other thing. The government forced the banks under threat of criminal prosecution. If anyone hasn’t read John Allison’s book, The Financial Crisis and the Free Market Cure, about his experience at BBT, then read it now.
To me, the ensuing Obama Stimulus was criminal. Either stupid or evil, I’m not sure which. Obama just called it a stimulus package, but it was nothing of the sort. A stimulus is a one-time deal. The money goes out and is spent, and the budget returns to what it was. The administrative state had grown so big, however, that nothing like a shovel-ready project was possible. What Obama did instead was increase welfare, increase teacher pay, lower the threshold for people to qualify for food stamps, and other things that would not disappear as a one-time stimulus outlay but rather remain in the budget, which created huge deficits during the rest of his Administration.
Now, with the coronavirus pandemic, things are going to get even worse. We’re in a horrific situation, because we do need to deal with the virus. And we will need to spend. The best we can hope for is that they decide on an amount to spend in that regard, then make a commitment that once the virus danger is over to cut the budget.
Without the virus problems, which are new and severe, most of the budget is Medicare, Medicaid, and Social Security. If those programs are not reformed, our budget deficits will be impossible, coronavirus or not. There will be a tipping point. For a long time people have said, “Yes, we have a massive deficit, but it hasn’t hurt us so far, so let’s keep spending.” They ignore Stein’s Law: “If something can’t go on forever, it won’t.”
Well, we will wake up one day, and the rest of the world will have decided not to buy our debt any more. Our ability to keep printing money will end. People will no longer be willing to buy our bonds. There will either be huge inflation, or we’ll be unable even to refinance our maturing bonds. When something like that happens, I don’t know how we will undo it. I think we need to practice fiscal restraint now. Deal with the virus, absolutely, but afterwards commit to cut entitlements.
And it isn’t just the responsibility of government. People have to stop electing irresponsible politicians, stop believing pie-in-the-sky promises. Government has never been the answer. It is individuals who will pay the consequences of these massive deficits, and individuals who need now to take responsibility for their own finances and their own well-being.”
The interview is worth to read in its entirety, which you can find here.
by | BLOG, BUSINESS, COVID, ECONOMY, GOVERNMENT
Charles Passy’s article in the WSJ was a veiled plea to save the culinary scene of New York City. With two specific outrageous proposals, Passy’s economic bias here is unbearable.
First, he describes how “bar and restaurant owners throughout the city say such claims are being denied at the present time because of policy exclusions, despite the businesses having paid thousands of dollars for their property and casualty insurance over the years.” As a result, Passy argues that insurance companies should be forced to cover things they never intended to cover (nor could it ever have been an insurable event).
Second, Passy endorses a “measure to prevent landlords of commercial properties from enforcing provisions that hold tenants, such as bar and restaurant owners, personally liable for rent should they be unable to pay because of the pandemic.” In other words, Passy wants to allow tenants to not be personally responsible for paying rents though they specifically agreed to it.
New York doesn’t have the right to pass such laws, giving money out and interfering in contractual relationships in which they are not a party. Not only is it illegal and immoral, but unconscionable. It is astounding that the WSJ would allow such an outrageous article.
by | ARTICLES, BLOG, HYPOCRISY
The New York Times continued its ludicrous partisan writing in its coverage of the Flynn affair, calling his position a “reckless gamble.” At the same time, note that the reason why Flynn was recently exonerated is not even mentioned! Of course, it was clear that there was no basis to start the questioning in the first place, which as a matter of law makes the “lie” irrelevant. Also, since at the time the prosecuting parties had all testified that there was no Flynn or Trump wrongdoing about Russia (the underlying crime being investigated), the “lie” could not possibly have been “material” – a factor necessary for the “lie” to have been a crime.
This was an intentional attempt to 1) create a lie, 2) threaten Flynn’s family to force him to admit to a crime, and 3), and have everyone from Schiff, Obama, etc. lie about it to the public to gain political advantage. For the NYT to completely omit any mention of the FBI’s ambush interview and its lack of protocol handling the Flynn case is journalistic malpractice.
by | BLOG, COVID, ECONOMY, GOVERNMENT
One of the burgeoning problems of opening the country back up is that many employers are struggling to properly restaff their businesses. It appears that many employees are refusing to go back to work because they prefer unemployment benefits. But workers are only entitled to these benefits if they cannot find work. They should legally lose the unemployment benefits if they refuse going back to work. Yet reporters covering this emerging situation seem ignorant of the concept.
I have been reading on far too many newspapers and websites regarding the inability of businesses (particularly restaurants) from all over the country unable to induce their employees to come back to work. The primary driver of this is the $600/week federal supplement to State unemployment insurance (“UI”) payments. This results, in many situations, in the employee being financially better off by being on unemployment than by working.
But this makes no sense. An employee is OBLIGATED to represent that he has no employment opportunity in order to get UI in the first place. Even asking his employer to not take him back is unethical, if not illegal. It is likewise unethical, if not illegal, for an employer to agree to such a request.
What were these writers thinking when they wrote these articles?
by | BLOG, ELECTIONS, POLITICS
For years I have been following the candidates that have been supported by the Club for Growth, contributing to both their campaigns and to the Club. Although overall they do a decent job finding and supporting candidates , there are two areas in which they are weak.
The Club For Growth has always been an advocate of the free market, limited government, and low taxes — the same thing that the Tea Party originally intended to be. However, within this realm, there are four things that the Club For Growth does not focus on, but they need to. These are: immigration, tariffs, the Jones Act, and ethanol. So you can have a good libertarian, free market candidate, but if that person turns out to also have unfavorable stances in one or more of those areas, they weaken their position. The Club For Growth needs to expand their vetting to include these four areas in their overall approach.
Additionally, the Club For Growth needs to continue to monitor those who have taken office. While it is understandable that with somewhat limited resources, they want to use most of those resources to find new candidates, it does no one any good if the people they have recommended end up going off the rails. There has to be some sort of follow up. For instance, Marco Rubio, Tom Cotton, and Josh Hawley are all examples of people elected in no small part by the Club, but for which we now have serious buyers remorse. These three have taken inexcusable positions on tariffs, free markets, big government, etc.
It is disappointing and unacceptable to see Club For Growth focus only on getting new people elected while neglecting to hold these and other candidates accountable for their changed positions. It would be wise for the Club For Growth to practice better vetting and consistent follow up if they want to maintain being a trusted voice in the political landscape.
by | BLOG, BUSINESS, COVID, ECONOMY, FREEDOM, GOVERNMENT
The WSJ had a thoughtful opinion piece a couple of days ago. The author wanted to “quantify how many deaths were caused by delayed shutdown orders on a state-by-state basis”as a means to examine the efficacy of quick shutdown. Below are some key takeaways, and you can read the piece in full here.
“To normalize for an unambiguous comparison of deaths between states at the midpoint of an epidemic, we counted deaths per million population for a fixed 21-day period, measured from when the death rate first hit 1 per million—e.g.,‒three deaths in Iowa or 19 in New York state. A state’s “days to shutdown” was the time after a state crossed the 1 per million threshold until it ordered businesses shut down.
We ran a simple one-variable correlation of deaths per million and days to shutdown, which ranged from minus-10 days (some states shut down before any sign of Covid-19) to 35 days for South Dakota, one of seven states with limited or no shutdown. The correlation coefficient was 5.5%—so low that the engineers I used to employ would have summarized it as “no correlation” and moved on to find the real cause of the problem. (The trendline sloped downward—states that delayed more tended to have lower death rates—but that’s also a meaningless result due to the low correlation coefficient.)
No conclusions can be drawn about the states that sheltered quickly, because their death rates ran the full gamut, from 20 per million in Oregon to 360 in New York. This wide variation means that other variables—like population density or subway use—were more important. Our correlation coefficient for per-capita death rates vs. the population density was 44%. That suggests New York City might have benefited from its shutdown—but blindly copying New York’s policies in places with low Covid-19 death rates, such as my native Wisconsin, doesn’t make sense.”
The author then went on to examine Sweden’s policies (less restrictive than ours) and integrated those into his analysis:
“How did the Swedes do? They suffered 80 deaths per million 21 days after crossing the 1 per million threshold level. With 10 million people, Sweden’s death rate‒without a shutdown and massive unemployment‒is lower than that of the seven hardest-hit U.S. states—Massachusetts, Rhode Island, Louisiana, Connecticut, Michigan, New Jersey and New York—all of which, except Louisiana, shut down in three days or less.
We should cheer for Sweden to succeed, not ghoulishly bash them. They may prove that many aspects of the U.S. shutdown were mistakes—ineffective but economically devastating—and point the way to correcting them.”
Only time will tell what methodologies worked and what didn’t, but this is an important conversation to have, especially since the economy continues to worsen.
by | BLOG, BUSINESS, COVID, ECONOMY, GOVERNMENT
It might not be so crazy after all for relatively young people who are going broke and having their lives torn out from under them to try to get back to normal in as careful a way as possible: going to gyms, salons, and other businesses. Might it be reasonable for some people to try it out to see if it can help with the infection rate? Can we trust people to be careful?
Some businesses such as FedEx, supermarkets, and medical practices are open and more are starting to or trying to open up, and yet they are not getting a lot of business because people are afraid, or told they need to be afraid. But why not open up and if people are willing to take the risk and practice social distancing and mask-wearing, we should let them.
The economy is horrific the way it is, and it just cannot remain like this. Many people’s lives are now devastated. For many, we have probably passed the point where the cure is worse than the disease.
We know by now that the virus does pose a risk of death, but we also know that in the vast majority of situations, the virus is more mild than it is lethal – especially for certain cohorts. People are well-educated enough to be able to make an informed decision as to what level of socializing they want to engage in for themselves. We should let them make that choice and start to get back to the business of doing business.
