Archive for the ‘mafia’ Category

I’m from the government and I’m here to deceive you

image credit: A Mina via flickr (cc)

image credit: A Mina via flickr (cc)

They call it “Factors Influencing Voluntary Compliance by Small Businesses[pdf],” and the report comes from IRS (actually “an independent organization within IRS,” whatever that means), and  so you know that it’s referring to compliance with Federal income tax laws and regulations.

The focus on small business makes sense, since folks on payrolls or pensions generally can’t hide much of their income, and large corporations can obtain legislative action or legal advice providing their own loopholes.  Two surveys were done, one of small businesspeople nationwide for whom, statistically, an audit would be expected to result in additional tax payments, and the other of small businesspeople in communities from which a high proportion of such returns was filed. (NOTE: When wooing their votes we call them “entrepreneurs” or “job creators,” but that would not be dainty when we are considering them “tax cheats.”) These “low compliance” folks were supplemented by a survey of those expected to be “high compliance.”

I see two surprising results in this report.  First, on most attitude measures there’s little difference between the “low compliance” and “high compliance” respondents.  For example, only 15% of the “low” group thought that federal tax laws were fair, and the same proportion of the “high” group agreed.   Differences that did appear were fairly small. “Wealthy taxpayers minimize their taxes in ways the average taxpayer cannot” was agreed with by 74% of the “low compliance”‘ group, and 69% of the “high compliance” people.

An even bigger surprise, to the IRS analysts as well as this blogger, is that “low compliance” seems to be associated with greater participation in their local communities, including churches, schools, volunteer organizations, and even were more likely to vote than “high compliance” people. I hesitate to speculate on what this means, but it is probably a positive for those of us who believe (along with most respondents) that federal government is not an appropriate way to deal with many of the areas it has become involved in.

The report acknowledges that the survey suffers from an indirect method: “Low compliance” merely indicates a statistical likelihood of same, not an actual lack of compliance by the respondent.   Because a random selection of taxpayers are audited simply to calibrate the compliance-prediction model, it would have been possible to target these particular taxpayers for the survey.  Of course they couldn’t be surveyed after their audits because they might be especially unhappy with IRS at that point.  But they could have been surveyed just before being notified on the audit.  IRS decided not to do that because they “deemed it overly deceptive.”  However, the actual survey (done over the phone by a contracted private company), did not reveal that this was an IRS project until the conclusion, after the data had been gathered.  That apparently was deemed just deceptive enough.

Not part of the published report is a list of “clusters of potential tax cheats” posted by AP but presumably originating with IRS. Apparently tabulated by zip code, here’s the Illinois portion of the list:

Bellwood, Calumet City, Dolton,  Grand Crossing, Hazel Crest, Matteson, Maywood, Ogden Park, Phoenix, Riverdale, Roseland, South Chicago Heights, South Holland, University Park.  I assume that folks in Oakbrook and Barrington Hills had already purchased their own loopholes.

Lobbyist vs. Lobbyist: How Chicago enterprise works.

Photo credit: Adam Greenfield via flickr (cc)

Earlier this week the Tribune carried a pretty good report on Chicago’s Uber vs. cab situation. Altho many of us transit-dependent mundanes may have missed the story, it seems that people who can afford cabs can also afford smartphones (or can text using dumb phones), and many of them prefer Uber as a way to get service without having to speak with a person. You can choose a taxi at regular taxi rates (but with a minimum 20% “gratuity” that the driver splits with Uber and the credit card processor), or a classier vehicle for considerably higher cost.  I am surprised that folks pay such high rates to avoid dealing with traditional taxi companies.  A few years ago I learned that, for those who pre-book and travel more than about ten miles, limousine service is likely to be much cheaper (even for a person traveling alone) than a conventional taxi; I suspect this is still the case.

Naturally, owners of medallions (and existing dispatch services) don’t particularly like this idea, so both sides are trying to improve their service to entice more customers have hired lobbyists to “persuade” the investment banker/politician who holds the Mayoralty to throw things their way.

I guess I’m surprised too that medallion prices are holding at high levels (most recent median price $345,000, up from $260,000 about a year before, based on data compiled by Chicago Dispatcher). Whether this is really an open market, or perhaps subject to manipulation by major owners, or another symptom of financial repression, I have no knowledge.

Of course Uber’s pickup zone doesn’t encompass the entire city of Chicago, missing much of the south side, but it does extend service beyond the City boundary into some relatively affluent suburbs.

 

 

Transaction taxes

photo credit: AutisticPsycho2 via Wikimedia (cc)

Proposals for a small tax on investment transactions seem to make some sense.  Ordinary investors, small or large, are likely to buy or sell a small percentage of their holdings each month or year, while high-frequency traders could turn over theirs dozens of times per day.  A tax of, say, 0.1% would hardly be noticed by investors, but could make high-frequency trading (HFT) unworkable.  If HFT helps destabilize financial markets, then taxing trades this way would raise some revenue while improving economic stability.

Though I don’t see such a tax as consistent with geoist principles, it seems a lot less damaging than many of the taxes we already face.  The problem is that it cannot be enforced.  Trades can always be done in some way “off the books,” probably legally but otherwise if necessary.  Since those who benefit from HFT also have resources to control relevant regulatory decisions, any such tax will have loopholes or other means to prevent effective enforcement.

Sure enough,

most investment banks offer significant UK traders “contracts-for-difference” which are contracts that precisely simulate equity ownership while circumventing UK taxes on transactions (“Stamp Duty”).

— J Doyne Farmer and Spyros Skouras
“An ecological perspective on the future of computer trading” (pdf)

 So what to do about HFT? If we consider what HFT deals in, which is largely securities issued by corporations, it may be appropriate to modify the privileges that government grants to corporations, in ways that would make HFT less damaging.

Value capture is different from collecting the land rent

Photo by Sean Munson via Flickr (cc)

Henry George phrased his main proposal in various ways, from “make land common property” to the more pragmatic “abolish all taxation save that upon land values.”  Certainly a land value tax is a practical way of capturing land rent, and to the extent land value figures in existing assessments and taxation we are already capturing some of it.

But it’s important to recognize that land value, or more properly the selling price of land,  is only a close relative, not an identical twin, to land rent. One difference is that selling price is affected by estimates of what the future rent will be.  And land selling price is much more directly affected by the cost and availability of credit than is land rent.  Use of credit, in turn means an opportunity for banksters to get involved, decreasing the likelihood of real public benefit from public investment.

Which brings us to the World Bank’s 2008 report on Unlocking land values to finance urban infrastructure.  This report really could be entitled “Worldwide Catalog of Methods More Complicated and Prone to Corruption than Collection of Land Rent, Which Could Be Used to Finance Some Infrastructure But More Importantly Involve Borrowing and Lending of Large Sums Which Is, After All, What The World Bank Does.” In addition to involving large loans, the outstanding feature of all of these methods is that none provide any resources for operation or maintenance, thus they can help bring about the need for new infrastructure in the not-too-distant future.

Tracking the payrollers*

While assisting the Public Revenue Education Council at the National Council of State Legislators convention, I couldn’t help photographing some of the federal employees in “action.” Census was there, BEA was there, but I wouldn’t want to embarrass those guys because they sometimes do some useful things.  We also had

Licensed Professional and Drug Patentholder Protection Administration

Office of Travel Prevention

Department of Making Jobs and Workers Difficult to Find

Forgetting for a moment the impediment to commerce and free association, how much money are we spending on these guys?  Thanks to Gannett’s  Asbury Park Press (h/t Bob Matter), taxpayers can access a database of reasonably current salary information for most Federal employees.   For state and local employees in Illinois, Wisconsin, Indiana, and Missouri, the Better Government Association has made similar information accessible.

Government employee pensions are also an issue, and Taxpayers United of America is building a database of this information.

Now, I’m not opposed to high salaries and liberal pensions. In fact, I think everyone should get them.  The problem is not that government compensation is too high, but that private compensation is too low. Some clear graphs here (based on data collected by government employees) illustrate the problem. Nongovernmental American workers’ productivity continues to increase, but for forty years little or none of this has been reflected in wages.  The best remedy involves displacing the rentiers.

*Payroller is a Chicago term for folks whose main function is to collect a government paycheck.  It appears that in some places, the word has a different meaning.

Planned office tower may take double subsidy

rendering of 444 W Lake St proposal

rendering from Chicago Sun-Times

Two or three developers (depending on which source you read) plan a new 45-story, 900K sq ft, $300 million office tower at 444 W Lake Street. In the world most of us were born into, this would mean they’d purchase the site, continue to pay taxes on it, and on the building when constructed. Thus the prior landowner would benefit from the transit and other infrastructure that we all provide, some part of this cost being offset by taxes resulting from the project.

This particular building, tho, may be a special case, to be built on air rights over the north approach to Union Station, tracks owned by either Metra or Amtrak. So public transportation would benefit, right?  It doesn’t appear so, because, I think pre-Amtrak, the old Chicago Union Station Co. sold off the air rights. The Sun-Times says Larry Levy owns the “site,” presumably including the air rights.

Still, the building will yield taxes which help the comunity pay, right? Not in today’s Chicago.  Blair Kamin says we’ll pay $29 million in real estate tax money to the developer, to build a park.  A commenter elsewhere suggests it might be $40 million. Whichever, of course, that’s on top of all the subsidies we pay to provide transit service and maintain infrastructure without which this building would be infeasible.

The Tribune helpfully notes that the project “is expected to generate … 3,400 permanent office jobs.”  Apparently those office jobs will be created to fill the building and would not otherwise exist in Chicago. The details of this mechanism are beyond me.

Bast drafts Henry George for Green Bay

image credit: freedigitalphotos.net

image credit: freedigitalphotos.net

Longtime HGS  supporter Joseph Bast, head of the Heartland Institute, has a new policy brief (pdf), with a podcast overview, recommending that fans of professional “sports” own the teams thru nonprofit corporations.  The only actual example of this is the Green Bay Packers, which originated as a for-profit organization but was bought out of bankruptcy by a fan-organized nonprofit.  They would never leave Green Bay since the owners cannot profit by moving them. Thus the main lever used by for-profit teams to extort new stadiums and other favors would be broken.

Pointing out that teams currently extract monopoly rents from the community, Bast mentions Henry George but rejects George’s idea that natural monopolies should be municipally-owned.  Of course, George never applied this concept to professional “sports,” which existed in his day but was nothing like what we see now. The closest I can think of is that George considered the idea of a publicly-subsidized theater to be so absurd, that he compared it to subsidy of various other industries to illustrate the absurdity of the latter.

So why don’t fans establish nonprofit teams?  My personal theory is that most fans of professional “sports” are masochists and like to be abused.  But perhaps I’m wrong.  Bast suggests routes around other barriers including opposition of major leagues, high cost of setting up a team, and existing taxpayer-subsidized facilities which are controlled by existing monopolies.

Gold vs. “real money”

Gold Mine

image credit: Kake Pugh via flickr (cc)

The basic function of money is as a medium of exchange.  Inevitably, a secondary function arises as a measure of value. Money can be paper, precious metals, shells, whatever people in a particular time and place use as a medium of exchange.  There’s no reason that it would need to have “intrinsic” value. If  people use U S currency to buy and sell, then it is “real money.”

So is gold “real money?” I don’t think so. Just about nobody uses it as a medium of exchange. Historically, gold coins have sometimes been used but for ordinary people silver, copper, or base metal fiat-type money would be much more common.

Certainly fiat money can depreciate, usually does, and for us in the U S that has been and will almost certainly continue to be the trend.  And gold might be a good investment, in the sense that it will be exhangeable in the future for more real wealth than it is now, or at least more in comparison to other kinds of investments available to ordinary people. Of course, gold can depreciate too, if large new deposits are discovered or folks decide they really don’t want gold after all.  Which isn’t to say that either of these things will happen any time soon.

Anyone who wishes to resurrect the “gold standard” might want to read the late Peter Bernstein’s “Power of Gold,” or some other history books. Somehow we end up electing people who don’t put a high priority on keeping the dollar strong (or at least, not too much weaker).  If that’s a problem, then maybe we should be electing other people, or finding ways to reduce the power of those who purchase elections. Making the U S dollar convertible into a fixed amount of gold is not going to bring prosperity, or even prevent further disruption. There are plenty of examples of economic collapse under a gold standard.

It might, however, benefit those who own gold, or gold mining stocks.

Somebody please disagree with me, or I will assume all of the above to be true.

Drug prohibition coordinates politicians and “gangs”

Pilsen

image credit: Rosalyn Davis via Flickr (cc)

David Bernstein and Noah Isackson have a pretty good article in Chicago Magazine, Gangs and Politicians in Chicago: An Unholy Alliance. Focusing mainly on Alderman but also including State and Federal legislators, they assert that “gangs” provide the money, votes, and workers that enable officials to attain and retain their office.  In exchange, the governments these legislators control provide funds and favors.

Isackson and Bernstein stop short of suggesting how to repair this problem, but reading thru the article it’s clear that the main way these “gangs” prosper is thru unauthorized distribution of drugs.  And one of the main favors aldermen provide is assistance in avoiding “law enforcement” efforts to arrest them. End the drug prohibition, most of the “gangs'” income will end, and candidates will no longer get “gang” money.  They’ll have to rely on crooked lawyers, lobbyists, etc.

Some of the drug money, of course, has gone into real estate, with “gang” members able to get favors such as rezoning and inspection waivers. A land value tax, by constraining real estate speculation, would be of assistance here.

 

2014 Business Report

image credit: Ged Carroll via Flickr (cc)

I used to be in the forecasting business; still am in a way.  So here’s a forecast:  Look for financial difficulties in the next few years at Sandisk, Yankees Entertainment and Sports (YES) Network, Louisville Arena Authority, and Harmony Oaks housing development in New Orleans. What kind of difficulties and when?

I don’t exactly know.  Sandisk has apparently survived sixteen years of Goldman Sachs help, and the smart parasite does not kill its host too quickly. Maybe not all four; in fact maybe these four have been selected for survival.