Farmers are doing okay.

The front page headline of the Des Moines Register on October 210, 2017 read: “Hoping To Break Even”  The sub-heading read, “Iowa farmers are facing their fourth year of possible losses as they head into this year’s harvest season”.  (See link below.)

The story mostly about the worries of some farmers.  It painted a picture of farmers on the brink of bankruptcy for reasons that were out of their control.The Register reported, “For a good number of farmers, it will be a fourth year of losses.”

I  don’t doubt that a “good number” of farmers will lose money, but it may be due to their own fault rather than factors that are out of their control… just like businesses in many other industries.  There was one telling fact that contradicted the mostly emotional report: “Since 2013 Iowa farm income has dropped from $5.72 billion to $2.6 billion in 2016…”  That fact  makes it pretty clear that a lot of farmers are still making a substantial profit, and are not losing money.

Farmers are working very hard to make sure that they don’t lose their federal subsidies, even though they have more wealth and higher incomes than most U.S. citizens.  When the current Farm Bill expires in 2018, we need to sharply reduce farm welfare subsidies.

Link to Register article: https://www.desmoinesregister.com/story/money/agriculture/2017/10/20/iowa-farmers-face-fourth-year-possible-losses-heading-into-harvest/775626001/

 

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Is our government responsible for the opioid crisis?

The Des Moines Register recently reported that 36 Iowa counties have joined in a law suit against opioid makers.  (See link to Register article below.)  Two law firms are enlisting counties across the country to go after drug manufacturers and others for the costs of the opioid crisis.  There is no cost to the counties.  If successful, the “Lawyers will  be awarded a portion of the settlement, …”  (Interesting that the word “settlement” is used instead of “judgment”.)

What is often missing in much of the opioid crisis discussion is how our government’s policy of prohibition has made a bad situation even worse.  When a person becomes physically addicted to opioids, they will do almost anything to get the drugs they want.  If the drugs are not available legally, or if legal drugs cost too much, addicts will find illegal alternatives. According to the CDC, 60% of opioid deaths do not involve prescription opioids.  That is, in 60% of opioid deaths the person who died was using illegal opioids.  (See CDC reference below.)  A significant problem with illegal drugs is that is no way to assure the quality and potency of the drugs.  In the case of opioids, that leads to inadvertent over-doses because the illegal drug was much more powerful than thought.

If opioid addicts were able to readily get prescription methadone or other FDA approved opioids at reasonable costs, many deaths would be prevented.  That would also take the profit out of the illegal opioid drug trade.  If opioid addicts were treated under a medical model rather than a criminal model, it is likely that more opioid addicts would seek help to solve their addiction problem.  But as it is, under our drug war, prohibition policy, addicts have good reason to not seek help.

CDC reference: https://www.cdc.gov/drugoverdose/data/overdose.html

Link to Register article: https://www.desmoinesregister.com/story/news/crime-and-courts/2018/01/05/iowa-counties-file-lawsuits-against-opioid-manufacturers/1008522001/

Some discrimination should be allowed.

The Des Moines Register recently published a nice essay by a gay couple who got married in Iowa without any discrimination issues to deal with. (See link to Register essay below.) It is fair and reasonable for government to prohibit discrimination against gay couples and others in the selling of standard goods and services that are offered to the public, like most products retail stores, rooms at hotels and motels, and meals at restaurants. But when the product or services needs to be customized or personalized by the seller, then discrimination by the seller should be allowed, and the buyer should not be able to enlist the force of government to require the seller to provide the product or service. So, for example, cake bakers should required to sell what is what is on their shelves and available for sale without discrimination, but they should not be required to create custom cakes against their will.  At the same time buyers are free to choose other sellers and to organize peaceful protests and boycotts against such discriminating sellers.  This way, everyone’s liberty is preserved, and no force needs to be used, by government or anyone else.
As readers of this blog may know, I am and atheist libertarian and support gay marriage.

Many Iowa licenses protect existing businesses more than public safety

In today’s Des Moines Register, the guest opinion by Kollan Kolthoff was very vague in his call for “common sense reform” of the licensing of cosmetologists.  (See link below.)  He wrote, “…leaders from within the industry are uniquely aware that there are problems that need to be addressed.”   I presume the industry leaders he refers to are existing licensed cosmetologists and  licensed schools of cosmetology.  After a person has completed the 2,100 required hours of education and paid as much as $20,000, it is very understandable that they would not want to see license requirements significantly lowered – thereby indirectly lowering the value of what they have already paid for.  Similarly, licensed schools of cosmetology have a very strong financial incentive to maximize the number or hours of schooling required for a license.
He also wrote Iowa needs reform that, “…protects consumers against the deregulation of licensed beauty professionals.”  Deregulation does not and should not mean a lessening of regulation to keep consumers safe.  Deregulation should focus on removing regulations that have the primary purpose of protecting the income of existing cosmetologists and schools of cosmetology.
The same issues apply to a large number of occupations that require a license from the state.  Most calls for licensing, and opposition to deregulation, come from existing businesses and licensees, not from the general public.  Our elective representatives should establish a process to review and reduce licensing requirements in Iowa so that only public safety is is taken into account when requiring Iowans to get a license from the state before being able to work in any particular job.

Some of the rich are getting poorer, and some of the poor are getting richer.

The Des Moines Sunday Register published a lead article (Page 1) titled, “The rich keep getting richer”.  (See link below.)  Included were a number of misleading statistics or misleading conclusions based on the statistics.  For example, according the think tank, Iowa Policy Project, the median hourly wage in 2016 was $16.04 per hour.  37 years ago, the average wage, adjusted for inflation, which is fair, was $15.91.  The Register concluded, “This means a typical wage earner  working 40 hours per week for a full year would have seen a real increase of $270.40 over a 37 year span.”  While the statistics are technically true, you cannot logically conclude and that any specific person or group of people did not move themselves from a lower wage to a significantly higher wage.  I’m sure it is true some people moved down while some people moved up.  An interesting study would be to see how wages correlate to the number of years in the employment market.  It would be interesting to know the median starting hourly rate for a young inexperienced worker versus and an experienced worker who has been in the labor market to 30 years.  The fact that the average stays about the same my be a problem, but almost no one stays at the average wage for 37 years.

Another statistic was that the number of people who earned $1 million or more during specific years increased from 5,031 in 2010 to 8,325 in 2015.  Their “slice” of the state’s total adjusted gross income grew 37%.  Meanwhile, the number of Iowans claiming gross incomes of $40,000 to $99,999 climbed by 23%  while their slice of the state’s total adjusted gross income fell 2%.  First, I would venture to guess that a significant majority of the $1 million+ earners are people who sold their businesses or had other one-time income.  So, again,there is no logical reason to presume that the $1 million+ club is made up of the same people year-after-year.  At the same time, from 2010 to 2015 the Iowa economy was generally continuing to improve, so values and prices of businesses likely climbed.  Also, in the case of an “expanding pie”, the fact that any group gets a smaller percentage of the total does not mean that their real income is not increasing.

Finally, the Register reported that their analysis of U.S. Census data showed that the bottom fifth of earners saw practically no growth in household income – going from $13,798 in 2006 to $13,848 in 2016, again adjusted for inflation.  Here again, there is no logical reason to believe that the specific group of people who were in the bottom 20% in 2006 are the same people who were in the bottom 20% 10 years later.  It would be interesting to know what percent of the people in the bottom 20% in 2006 were still in the bottom 20% 10 years later.   My guess is there would be some, but not a majority.

As a society we need to make sure we don’t put hurdles in front of people who are trying to improve their lot in life.  In many cases this means removing government created regulatory barriers to entry into certain jobs.  The Register has done very good work exposing job licensing regulations that are in place more to protect existing businesses from competition and to protect the profits of licensing education businesses, than to protect the public.  Yet, the Iowa Legislature has done precious little to address this real problem for low income workers who are trying to work their way up in our economy.

Link to Register article:  https://www.desmoinesregister.com/story/money/business/2017/11/25/most-iowa-wages-have-stagnated-but-rich-keep-getting-richer/818770001/

 

Is getting rid of a special interest loophole the same as raising taxes? When general tax rates are being reduced?

The title to an essay by  A.J. Spiker’s recently published in the Des Moines Register was, “Republicans must ignore pleas to raise our taxes”. (11/262017 – see link below.)  The essay advocated for not raising tax rates on carried interest income – bonuses earned by hedge fund managers and real estate development managers. He urged our Senators to make sure the tax bill did not get rid of the special low capital gains tax rate for carried interest.  Regular people who earn the same type of bonuses pay taxes at ordinary Earned Income tax rates.  For years, carried interest has been tax at this lower special rate and those who benefit from it simply don’t want to lose it.  (The same seems to be true for people in every special interest group that gets politically favored tax breaks.  The ask our elected representatives to get rid of all the special tax breaks… except for mine…  which is vitally important to job creation!)

I thought that a stated goal for tax reform is to simplify our 70,000+ page the tax code.  In large part, this means getting rid of the many many special interest tax breaks, and then lowering the tax rates for all.  If certain individuals lose their precious special interest tax breaks and actually have to pay more in taxes, so be it.  They should feel lucky for what they got in the past.  This is part of “draining the swam” that our President has called for.  I urge our elected federal representatives to resist the tremendous pressure that they are under from those who received the tax breaks and their lobbyists, and proceed to get rid of the carried interest and many other special interest tax breaks, and lower general tax rates for all.

Link: https://www.desmoinesregister.com/story/opinion/columnists/iowa-view/2017/11/24/gop-must-ignore-pleas-raise-taxes-carried-interest-capital-gains/887643001/

Trump’s proposed tax rate for “pass-through” businesses is unfair

President Trump has proposed a maximum 25% tax rate on income that individuals receive from “pass through entities”.  Pass through entities are businesses that don’t pay corporate income taxes, but rather pass their net income each year through to the owners to be taxed as part of the owners’ individual tax return.  These pass through entities include S-Corporations, partnerships, limited liability companies (LLCs), and sole proprietorships.  Currently, income from pass through entities is taxed at the same rate as any other ordinary income – up to a maximum rate of 39.5%.  (President Trump’s proposal for ordinary income for most taxpayers is a maximum tax rate of 35%.)  He justifies the lower tax rate for pass through entities because, he says, these pass through businesses are the job creators.

This begs at least two questions:  Do pass through entities really create more jobs than non-pass through entities?  Even if so, why should the income of an employer be taxed at a lower rate than an employee if they earn the same amount?  Tax fairness would dictate that two people with the same income would pay the same amount of tax, regardless of source.

Regarding job creation, it is important to know that pass through entities are not just manufacturers, wholesalers or retailers, who may or may not be job creators.  They are also professionals such as doctors, lawyers, accountants. Most hedge funds and private equity funds are pass through entities.  About 95% of all businesses are pass through entities.  Of those, about 99% have revenues of less than $10 million.  The 1% of pass through entities with revenues of more than $10 million earn about 83% of all profits!  So, some pass through entities are very large, and many owners of pass through entities have very high incomes.  Is it fair for business owners to pay at a 25% rate while regular workers with the same income pay at a 35% rate?  I don’t think so.

I expect to write several blog posts on President Trump’s tax proposal.  The idea of reducing tax rates is a good one – especially if the total plan is revenue neutral and doesn’t increase our $20 Trillion debt.  This means that tax reform that reduces rates must also reduce special tax breaks for politically favored groups and/or reduce spending.  I hope that Congress, which controls all tax legislation, will not “bet on the come” – that is assume future tax revenue will increase due to future growth in the economy.  Our government uses a 10 year look forward to determine the deficit/surplus effect of any change in taxing or spending.  In recent decades, it seems that all tax and spending changes have significant costs up front with the promise of savings toward the end the the 10 year period.  Let’s not keep doing that.

Source: https://www.brookings.edu/research/9-facts-about-pass-through-businesses/