Category Archives: Government Waste

The Challenge of Creating an Economically Sound, Simpler, and More Just Tax Code (Part 1 of 3)

If there is one positive thing Herman Cain has contributed to the national debate it would be this renewed discussion about tax reform. While I am skeptical of some of the specifics of his 9-9-9 plan, if nothing else, Cain has forced the other candidates to come out with proposals of their own. Gov. Rick Perry in a seemingly desperate move to remain relevant proposed an alternative 20% flat tax – a single rate that’s less than the sum of all of Cain’s 9’s.

Before I was aware of and became a supporter of the Fair Tax (a 23% consumption tax that would replace the income tax, payroll tax and all other federal taxes; Gary Johnson and Herman Cain* both support the Fair Tax) I was a supporter of the Flat Tax as proposed by Steve Forbes in his 2000 presidential bid. If we must be subject to an income tax, it seems only fair that everyone pay the same tax rate. None of these proposed plans are perfect but at least everyone is subject to the same rates.

But apparently my definition of “fair” differs quite a bit from those who think a “progressive” tax (i.e. the more you make, the more the government will take) is fair. Take this article from Politico for example:

Taxing the poor has become a badge of honor among conservatives. When Occupy Wall Street protesters launched their cry of “We are the 99 percent,” the right-wing blogosphere responded, “We are the 53 percent,” meaning the 53 percent of American households that they say pay federal income taxes.

Conservatives have become fixated on the notion that largely because of the Earned Income Tax Credit — passed under Ronald Reagan and expanded under Bill Clinton — almost half of all Americans pay no income taxes.

Perry launched his presidential campaign expressing dismay at the “injustice that nearly half of all Americans don’t even pay any income tax.” And he was not alone. Every major candidate — Rep. Michele Bachmann (R-Minn.), Mitt Romney and Cain — has suggested that too many of the working poor aren’t paying income taxes, a position The Wall Street Journal describes as “GOP doctrine.”


The argument is disingenuous. Working poor people do pay taxes. They pay a larger portion of their incomes in payroll taxes and sales taxes than the wealthy. And they pay property taxes indirectly in their rental costs. Poor workers pay about one-eighth of their incomes in taxes, on average.

For the sake of argument, I will assume that the author’s assertion is correct that the working poor pay a greater share of their incomes than the wealthy counting both direct and indirect taxes. Indeed there are all sorts of hidden taxes that are embedded in every good or service we all buy.

Regulations on business (which the author of this article undoubtedly supports) that contributes to the overall cost of employing a worker** are potential earnings the worker might otherwise be paid. » Read more

Solyndra: Delusions Of Grandeur, Or Just Colossal Balls?

Wow. It’s one thing to carry the necessary delusion that comes with most people in a startup… That self-delusion, the belief that you can’t fail (despite the high proportions of startups that fail), is what is required to overcome the often monumental odds most startups face. But is it merely delusion to submit THIS* to the House Energy & Commerce Committee’s Oversight and Investigations Subcommittee on June 23, 2011? No, I can’t think so. This is balls. Pure, shiny brass ones:

Solyndra does not publicly release quarterly results but is on track for this year. The ability to command a slight pricing premium as a result of substantial differentiation and product benefits continues and our cash production cost per watt is dropping rapidly at pace with the industry. In a highly competitive global marketplace Solyndra continues to win large projects on commercial rooftops around the world and we are confident we are competitive on the merits of our differentiated, lightweight, simple to install cylindrical rooftop and greenhouse products.

Evidence of Strong Momentum

  • 1166 employees and growing, 49 open jobs on website
  • Exporting more >50% of product
  • Over 1000 installations >20 countries
  • Over 100MW shipped
  • 2010 revenue ~$140M
  • 2011 shipments expected to double over 2010
  • Fab ramp to 300MW on target
  • 14th largest shipper from the Port of Oakland, more than 1000 containers this year
  • Doubled U.S. sales and marketing team in past 6 months

I can imagine Solyndra issuing mindless press releases like this — maybe in 2010 or 2009. I can even imagine them issuing such optimistic letters to the US Congress at that time — they still had enough free gov’t money in the coffers to at least try to justify themselves as an ongoing concern. But to do so in the middle of 2011, when you know you’re headed for the skids? That’s just asking for trouble! You have to think they’re going to wonder where all this optimism came from when the excrement hits the air circulation device.

Of course, there is no mention of profitability. Startups, when they have at least a hint of a viable road to profitability, would undoubtedly at least claim such. I have to think that whoever wrote this letter was deliberately focusing on revenue & jobs created, and not on profitability [not altogether unusual for a startup, to be sure] to deflect attention from the entity who had just loaned them $535M regarding when it might get paid back.

I note it’s titled “Exceeding Expectations”. I agree: I had no idea someone with barely money to keep the lights on would be capable of spewing out this much bullshit.

Hat Tip: Reason, who has a lot more of the timeline of the Solyndra saga at this link.
» Read more

Government: Shows A Loss While Selling Money

I was passed this story by a relative, and thought it was absolutely genius:

Would you take advantage of a federal loophole that gives you a free first-class flight anywhere on Earth?

That’s what hundreds — possibly thousands — of shrewd travel enthusiasts are doing, in light of a 2005 law that unwittingly created a weird case of supply and demand.

The law intended to push more $1 coins into circulation. Dollar coins are cheaper for the U.S. Mint to maintain because coins don’t need to be replaced as often as the $1 bill.

The U.S. Mint sells the coins at face value, using taxpayer money to cover shipping and handling costs. If you want to buy $1,000 in coins, you simply pay $1,000 on your credit card and wait for the shipment to arrive in the mail.

Credit card rewards enthusiasts leapt at the program. They use a simple strategy: Purchase coins. Wait for coins to arrive in mail. Deposit. Use deposit to pay credit card. Repeat.

Brilliant! It’s a bit of a hassle, but no more of a hassle than dealing with the TSA. At least if you’re in the middle of a government groping, you can bask in the solace that your flight is free.

Now, some may suggest that taxpayers paying the shipping & handling is worth it if the coins are making it into circulation, given that the coins themselves are a better deal for the US Mint. So what happens to those coins?

A spokesman for the U.S. Mint calls this an “abuse.” Depositing the coins directly in a bank doesn’t put the coins in circulation. The banks simply send that money back to the Federal Reserve — often still clad in its original U.S. Mint packaging.

Yep. The government doesn’t have the balls to discontinue the dollar bill, so they set up a “voluntary” (& subsidized through packing/shipping costs) circular trade that does nothing but increase costs on all aspects of our system and doesn’t even manage to put the coins in circulation.

Well done, Washington!

Too big to fail: Washington edition

From Megan McArdle, a list of reasons why the Federal Government is too big to fail (or even pause):

  • The nation’s nuclear arsenal is no longer being watched or maintained
  • The doors of federal prisons have been thrown open, because none of the guards will work without being paid, and the vendors will not deliver food, medical supplies, electricity,etc.
  • The border control stations are entirely unmanned, so anyone who can buy a plane ticket, or stroll across the Mexican border, is entering the country. All the illegal immigrants currently in detention are released, since we don’t have the money to put them on a plane, and we cannot actually simply leave them in a cell without electricity, sanitation, or food to see what happens.
  • All of our troops stationed abroad quickly run out of electricity or fuel. Many of them are sitting in a desert with billions worth of equipment, and no way to get themselves or their equipment back to the US.
  • Our embassies are no longer operating, which will make things difficult for foreign travellers
  • No federal emergency assistance, or help fighting things like wildfires or floods. Sorry, tornado people! Sorry, wildfire victims! Try to live in the northeast next time!
  • Housing projects shut down, and Section 8 vouchers are not paid. Families hit the streets.
  • The money your local school district was expecting at the October 1 commencement of the 2012 fiscal year does not materialize, making it unclear who’s going to be teaching your kids without a special property tax assessment.
  • The market for guaranteed student loans plunges into chaos. Hope your kid wasn’t going to college this year!
  • The mortgage market evaporates. Hope you didn’t need to buy or sell a house!
  • The FDIC and the PBGC suddenly don’t have a government backstop for their funds, which has all sorts of interesting implications for your bank account.
  • The TSA shuts down. Yay! But don’t worry about terrorist attacks, you TSA-lovers, because air traffic control shut down too. Hope you don’t have a vacation planned in August, much less any work travel.
  • Unemployment money is no longer going to the states, which means that pretty so, it won’t be going to the unemployed people.

Now, how many of the companies that leftists were screaming were “too big to fail” could have had one one-hundredth the impact of a Federal Government failure? Yet these same leftists who recognize too big to fail as a bad thing want to endow the Federal Government with ever more power. Amazing.

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